State Pension Triple Lock

David Linden Excerpts

Tuesday 8th November 2022 Commons Chamber

[Mel Stride]

I welcome the question from the Chair of the Work and Pensions Committee. As a former Pensions Minister, he will know that, in the situation we are in at the moment, right hard up against a major fiscal event that is about to set out major tax and spending decisions, it would simply not be right, as I have said on countless occasions, for any member of the Government to prejudge and pre-empt the measures that the Chancellor will be coming forward with.

[David Linden (Glasgow East) (SNP)]

The Secretary of State talks about prejudging, pre-empting and following due process, but he knows that, if the Department was intending to suspend the triple lock, his officials would already be preparing the relevant legislation, as was brought forward by then Pensions Minister, the hon. Member for Hexham (Guy Opperman), when the triple lock was last suspended. In the interests of being transparent and following process, can the Secretary of State see whether those officials have been instructed to draft that legislation?

--- Later in debate ---

[Mel Stride]

In a moment. That is a difficult situation, largely visited upon us through a major pandemic that shut down a substantial proportion of the economy, followed by a war between Ukraine and Russia. That, of course, has had a huge impact in terms of inflation, the cost of energy and people’s bills. It is only right that we are honest with the public and honest in the House about the ramifications of that situation. On 17 November, we will see some difficult choices brought forward by the Chancellor of the Exchequer on both tax and spending. We have to understand why that is. They will be brought forward because the country must demonstrate that it will live within its means and act fiscally responsibly. As a consequence, we see bond yields and interest rates softening, which will be good for mortgage holders, good for businesses who are borrowing and good for the servicing costs of the Government and their national debt.

Those hard choices must be made, but within them the Government have a core mission to look after the most vulnerable. Those who say that we do not do that are simply wrong. The evidence bears out my statement. The £650 cost of living payment that we have discussed is there for pensioners through pension credit and is there more widely for 8 million low-income households up and down the country. There is the £300 payment to all pensioner households. There is the £400 reduction in fuel bills, which comes through the bills themselves. There is a £150 reduction for those living in houses in council tax bands A to D—many of them will be pensioners—and a £150 payment to those who are disabled. That is on top of the household support fund administered by local authorities, who perhaps have a better grip of local need than those at the centre, which was recently expanded by £500 million to over £1 billion. Of course, there is also the energy price guarantee holding average fuel bills for the average family at £2,500, saving £700 across the winter. All those measures and more are clearly indicative that the Government care about those who have the least and are there to protect them at every turn.

[David Linden]

Going back to what the Secretary of State said earlier, one would think that before covid and the war in Ukraine everything was hunky-dory and there were no problems at all. The reality is that the cost of living crisis is not recent but a result of 12 years of Conservative austerity. [Interruption.] If only Conservative Members got so outraged about pensioner poverty. When he talks about the hard fiscal decisions that will have to be made on 17 November, does he understand that my pensioners in Belvidere are shocked that the Government are not doing enough while lifting the cap on bankers’ bonuses?

[Mel Stride]

I am surprised by the hon. Gentleman’s intervention. When a pandemic comes along and contracts the economy by a greater level than at any time since about 1709—the year of the great frost—and a war breaks out that has a huge impact on energy costs in electricity, oil and gas, very few of our constituents up and down the country would not accept that those have been major contributors to the inflation and other challenges that we face. Only yesterday, the International Monetary Fund stated that about a third of economies in the world will be going into recession. We are not an outlier; we are right in the middle of the pack of nations who are suffering the consequences of the events that I described.

--- Later in debate ---

[Alan Brown]

I agree wholeheartedly with my hon. Friend. The £100 payment to those off gas grid is almost an insult, because it does nothing to help them fill their oil tanks.

In a similar vein on inflation, petrol prices are still massively up compared with recent years. I drive an Insignia, which is not a huge car, but last week it still cost me over £100 to fill the petrol tank. That is clearly unaffordable for those on a fixed income, and it would account for 55% of one week’s full pension.

When we look at the UK in the round, we see that it is one of the most unequal countries in the world. Unfortunately, that inequality continues during retirement. The Gini coefficient shows that the UK is 14th out of 14 north-west European countries. It is the same for the S80:S20 quintile share ratio; when we compare the ratio of the poorest to the richest, the UK has by far the worst ratio and is again 14th out of 14. Scandinavian countries—all small, independent countries—lead the way on these measures.

Poorer pay and lower incomes for those struggling also means that later on in life they are less likely to have private pensions and so are reliant on the UK state pension. Again, the UK state pension fails in comparison with those of other countries. When we look at the proportion of earnings derived from state pensions, the UK sits 30th out of 37 OECD countries. I understand that there is an argument that it can be good to move away from dependence on state pensions, but the UK is clearly among outlier countries near the bottom of the pile, and way below the OECD average. Many people are using occupational pensions and capital as sources of income, but that increases inequality in pension age for those without access to such means.

If we look at the UK’s flat pension rate and compare it with other countries that pay a flat rate—Ireland, Denmark and the Netherlands—we see that the UK rate is again lower and fails in comparison. If we look at state pension expenditure compared to a country’s GDP, we see that the UK is again way below the OECD average and is ranked 28th out of 38 countries. Ministers might say that those measures can be somewhat subjective, but the UK trails in each one, so there is a common theme. One other measure is the replacement rate that compares all sources of pension income versus previous earnings. On this measure, the UK, with an average over 10% less than those of the EU27 and the OECD, is ranked 19th out of 37, so still in the bottom half of the table.

As I have stated, this means that inequality in the UK continues into retirement and the UK has the 12th highest pensioner poverty rate out of 35 countries measured by the OECD. What that means, if we turn that around, is that in terms of disposable income to support a standard of living for those aged 66-plus, the UK is ranked 24th out of 35 countries, while Iceland, Denmark and Norway occupy the top spots. Ireland is in eighth place. And those statistics are based on comparisons before the UK broke the triple lock and the link to earnings last year. It is absolutely critical that the triple lock is restored. Independent Age emphasises that:

“With more than 2 million pensioners already living in poverty and the cost-of-living crisis hitting hard, we know people are being forced to make impossible choices on how to cut back to be able to afford heating, electricity and food”.

One additional income support measure is pension credit, but we know that take-up levels are still too low—the Secretary of State acknowledged that. Previous research commissioned by Independent Age estimated that full take-up of pension credit could lift 440,000 older people out of poverty. So when will that be tackled by the Government? The unclaimed £4 billion in pension credit could make the lives of hundreds of thousands of pensioners more bearable. It is also money that would then be recirculated within local economies as it is spent on vital household needs.

[David Linden]

Does my hon. Friend think that banks have a role to play? Given that the vast majority of pensioners receive their pension payments from the Department for Work and Pensions into their bank accounts, banks have the ability to identify where payments are coming from and the amount. Does he agree that there is an opportunity for banks to play a role in promoting pension credit?

[Alan Brown]

That is a very good point. I agree with my hon. Friend that that is an ideal way of managing that. I urge the Secretary of State to take heed of that intervention and work with banks and other organisations to try to increase pension credit take-up.

In terms of pension policies, of course I have to refer to the WASPI—Women Against State Pension Inequality Campaign—scandal and the fact that the Government are still not moving forward on fast and fair compensation, given that the Parliamentary and Health Service Ombudsman found there was maladministration. The PHSO made it clear that the Government do not have to wait for the end of its investigation to take action to remedy this injustice.

There is also the frozen pensions scandal, whereby whether your pension gets uprated or not is arbitrary, depending on which country you reside in. It is also scandalous that the UK Government have yet again rejected offers from the Canadian Government to enter into reciprocal arrangements. I urge the Secretary of State to reconsider that and engage in meaningful talks with the Canadian Government.

All those aspects show that the state pension in the UK is not the safety net we are told it is. It shows clearly that the Better Together mantra of staying in the UK to protect pensions in Scotland was a cruelly false premise. Indeed, with private pensions nearly collapsing after the Tory mini-Budget, that claim looks even more ridiculous. It also shows that when Gordon Brown, at a Better Together event, said:

“Our UK welfare state offers better protection for pensioners, disabled and the unemployed”,

he was, frankly, lying.