Social Security

Debbie Abrahams Excerpts

Monday 5th February 2018 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I will focus initially on the draft Social Security Benefits Up-rating Order and then move on to the draft Guaranteed Minimum Pensions Increase Order.

The uprating order provides for the annual uprating of social security entitlements excluded from the Government’s freeze to levels of social security enacted in the Welfare Reform and Work Act 2016. As we have heard, that includes attendance allowance, carer’s allowance, disability living allowance, personal independence payment, industrial injuries disablement benefit, bereavement benefits, incapacity benefit and severe disablement allowance. This year, the Secretary of State proposes to uprate those limited social security entitlements by inflation under the consumer prices index measure, which currently stands at 3%, together with the new state pension in accordance with the triple lock, and pension credit.

We will not delay the measures to increase the new state pension and the adequacy of the social security provision provided by the uprating of payments in the order. However, although I welcome the upratings contained in the order, this needs to be seen in the context of the support that is not being provided or has not been uprated, as well as the Government’s wider approach to social security. The uprating order does not include child benefit, jobseeker’s allowance, employment and support allowance, income support, housing benefit, local housing allowance rates, child tax credit, working tax credit and the majority of comparable elements of universal credit.

The Government’s decision to limit the cap on uprating to 1% between 2013 and 2015 and the subsequent freeze on the vast majority of social security payments has seen low-income households suffer a significant deterioration in the adequacy of social security support. The freeze to payments and support is having an extremely detrimental impact upon millions of people on low incomes across the UK. Over the last year, inflation has more than doubled, hitting a five-year high of 3.1% in December 2017. It currently stands at 3%.

The payments subject to uprating were uprated by just 1% last year, with the vast majority of social security payments remaining frozen. To put that into context, research by the Joseph Rowntree Foundation shows that the price of essentials has risen three times faster than wages over the past 10 years. Food prices have increased by 4.1%, transport by 4.5% and clothing and footwear by 3%. People are suffering a continued increase in the cost of living, and that is being exacerbated by wage stagnation and the rise in insecure work caused by the Government’s inadequate economic policies. Last year, in-work families on the national living wage saw minimum costs rise faster than their net income because in-work payments were frozen and any rises in pay were clawed back by tax credit reductions. While millions of families are seeing their incomes fall in real terms, the wealth of the richest few continues to soar, with FTSE 250 bosses seeing their pay rise by 11% in the last two years alone.

Despite promises to tackle these burning injustices, the income gap between the richest and poorest in our society has almost doubled. Britain’s top bosses are paid, on average, 165 times more than a nurse, 140 times more than a teacher and 312 times more than a careworker. Research from the Resolution Foundation shows that the poorest families will see their incomes drop by an average of 2% by 2021, while the richest fifth of households will see their wealth increase by 5%. It is clear that the Government’s cuts to social security support are pushing more and more people into poverty. The Joseph Rowntree Foundation has called on the Government to end the freeze to social security payments, as has the Child Poverty Action Group, which states that

“the failure to uprate benefits in line with inflation is the single biggest driver behind child poverty”.

Following the 2015 summer Budget, the Government’s flagship universal credit programme saw cuts to the work allowance. That was on top of the scrapping of severe disability premiums, the imposition of the minimum income floor for the self-employed and the limiting of child tax credit support to the first two children. As a result of those cuts and the freeze, not only is universal credit failing to make work pay, but instead of reducing poverty it is actually exacerbating it.

[Kate Green]

My hon. Friend may also be aware of the difficulties people are having claiming the childcare element of universal credit—the bureaucratic burdens which are compounding the freezes and cuts she is talking about and which mean that families cannot get the childcare support they used to be able to fund relatively easily under the tax credit system.

[Debbie Abrahams]

My hon. Friend makes an excellent point. There are many different aspects to the Government’s still inadequate response on how they will fix universal credit. She has highlighted one, and we heard earlier in oral questions about the debacle of free school meals and how more children will be deprived of free school meals.

What is the Minister’s assessment of the impact of the social security uprating cap on poverty levels? Does he accept the Child Poverty Action Group’s analysis that 1 million more children will be pushed into poverty as a direct result of the cuts to universal credit? Does he accept the Equality and Human Rights Commission’s report on the cumulative impact on disabled people, which estimates that a disabled adult will have lost on average £2,500 a year since 2010?

Despite announcing a small amount of additional investment in the autumn Budget to prop up universal credit, in reality, the Chancellor has only reintroduced £1 for every £10 cut by his predecessor. Why are the Government choosing not to uprate social security payments in a way that reflects the economic reality for those in most need? I remind hon. Members that the Child Poverty Action Group estimates that cuts to universal credit will force 1 million additional children into poverty by 2020. The social security system should prevent people from getting into debt and poverty, not make things worse.

By continuing the freeze on social security payments not included in this order, the Government are subjecting 10.5 million households to an average cut of £450 a year up to 2020. The order was a chance for the Government to recognise the desperate reality for many of the poorest and most vulnerable people in our society, but they have failed to do so. As charities across the sector have been asking, will the Minister ensure the end of the freeze on other social security payments in next month’s Budget statement?

The order allows for discretionary upratings to be made by the Minister where he deems it necessary and appropriate. I want to be clear that we welcome the Minister’s decision to include a 3% uprating to the work allowance element of universal credit in the list of discretionary upratings in these measures, but the reality of people’s lives demands more. This again raises questions about the consistency of the Government’s argument to uprate some social security payments and not others. If he believes that the work allowance element of universal credit should be uprated, as the Opposition do, will he explain why tax credits are not also being uprated by the same amount? Why the disparity?

The Government cut the work allowance element of universal credit in 2015, yet subsequently have recognised the need to uprate it through the discretionary element in the order—although not to a level that reflects the reality of the rising costs of living and previous cuts. Is that an admission that they were wrong to cut work allowances in 2015?

Moving on to the pensions element of this uprating, I welcome the uprating of the state pension via the triple lock. I am glad to see that has survived, given the Government’s indifference to it last year, but I want to put on the record concerns about the public’s levels of understanding of the new single-tier pension and the paucity of information the Government have made available. As we know, there are both winners and losers as a result of the Government’s changes and most new pensioners will not receive the full single-tier pension. Before its introduction, it was estimated that only around 22% of women and half of men reaching state pension age would be entitled to the full single-tier pension. Will the Minister update the House on that?

In addition to the numerous social security payments subject to the Government’s benefits freeze and not uprated in this order, there are some very significant further omissions. Although the state pension is being uprated, people who have frozen pensions are excluded from the uprating and will not see an increase in their state pension in line with inflation. Pensioners living abroad face very different circumstances depending on whether their country of residence has a reciprocal agreement with the UK for the uprating of state pensions. Pensioners in countries without this arrangement see their pensions frozen at their initial retirement level, which means that the value of their pension falls in real terms every single year.

More than half a million people currently have their pensions frozen, mostly in Commonwealth countries such as India, Australia, Canada, parts of the Caribbean and New Zealand, and in countries with strong family and historical links to the UK such as Pakistan and parts of Africa. The Opposition believe that their pensions should be protected in the same way that the pensions of other UK citizens living abroad are in the future, yet the Government are choosing to withhold the pension uprating in this order from 550,000 recipients living outside the UK. This is a chance for the Government to make an historic change to our pension system and support our policy to end future arbitrary discrimination against some British pensioners living overseas by uprating in line with inflation from this point. Will the Minister look again at that issue and take action to address that inequality?

Not only have the Government failed to support pensioners living abroad; they have failed to address the current injustice faced by many millions of women born in the 1950s. It is important that the Government not only recognise the real injustice that women born in the 1950s have been dealt as a result of Government changes to pensions policy, but take action to remedy this injustice.

[Mr Jim Cunningham (Coventry South) (Lab)]

I agree totally with my hon. Friend. Millions of people living in this country have suffered discrimination because of the Government’s policies, particularly the women born in the early 1950s. The Government could do something about it and I can say this to them: as long as they refuse to do something about it, we will keep raising it.

[Debbie Abrahams]

My hon. Friend speaks strongly on behalf of his constituents and women born in the 1950s, given what they are going through, and long may he continue to do so.

There can be no doubt that women have borne the brunt of the Government’s cuts over the past seven years, but that applies particularly to women born in the 1950s, who have been dealt a real injustice through the accelerated increase in their state pension age. The Government have no excuse not to bring forward retirement for women born in the 1950s and early drawdown of their pension, as it is entirely cost-neutral. Alongside our proposals for the extension of pension credit, these additional measures would mean that people affected by the Government’s chaotic mismanagement of state pension equalisation would have the option to retire earlier, and would allow for much-needed financial support. The Government are in a position to implement proposals for early drawdown immediately, but they refuse to do so. I should be grateful if the Minister could explain exactly why that is.

Let me make it clear that the proposals are a “starter”. They do not in any way preclude further action, or even compensation, for this group of women. Will the Minister commit himself to reviewing the Government’s approach to pensions provision for women born in the 1950s, and will he release the original legal opinion contained in the “pink files”?

In the context that I have set out, a 3% uprating of some social security entitlements is unlikely to do much for those who are “just about managing”. As a matter of principle, the uprating should apply to all entitlements, not just the ones that the Government have cherry-picked. In the meantime, although we regret the limit on the groups who will benefit from the uprating, we must support the order, because otherwise those identified will lose out.

Let me now turn to the draft Guaranteed Minimum Pensions Increase Order 2018. We support the uprating of the guaranteed minimum pension in line with inflation, but we believe that some of the issues that were raised last year about the new state pension arrangements that came into effect in April 2016 remain unresolved.

The old state pension had two main components: a basic state pension; and a state earnings-related pension. People who made national insurance contributions at the full rate built up a basic state pension, but an option created in 1978 enabled people to contract out into another pension scheme, either voluntarily or via their employer on their behalf, on the basis that the other scheme met certain criteria. Between 1978 and 1997, schemes that took on such new members were required to provide a “guaranteed minimum pension”. The guaranteed minimum pension system was discontinued by the then Government in 1997.

In 2016, the Government’s introduction of the new state pension ended contracting out by replacing the additional state pension with a single tier. Working-age people now have their existing state pension entitlement adjusted for previous periods of contracting out and transferred to the new state pension scheme. For people who have guaranteed minimum pensions rights under an old pension scheme but who reached retirement age after April 2016, the Government no longer take account of inflation increases in guaranteed minimum pensions when uprating people’s new state pensions. The changes mean that any guaranteed minimum pensions accrued between 1978 and 1988 will not be uprated, and the scheme provider will uprate guaranteed minimum pensions built up between 1988 and 1997 only to a maximum of 3% each year.

When the National Audit Office investigated the impact of the changes, it concluded that there would be some winners and some losers under the new arrangements, depending on the time for which people were contracted into a scheme. Those whose state pensions have been pushed back because of the rise in state pension age will lose out on guaranteed minimum pensions inflation-linked increases that would have been received under the old rules. However, those who lose under the new rules may be able to build up additional entitlement to the state pension. The issue here is a lack of clear information, as is too often the case with the Government.

The NAO report stated:

“Some people are likely to lose out and they have not been able to find the information they need.”

Why did the Government fail to provide information that would enable people to make informed decisions? The NAO also said that it was

“concerned that the Department has limited information about who is affected by the impact of pension reforms on Guaranteed Minimum Pensions.”

Will the Minister provide a much-needed update on the number of people who have been affected since the relevant legislation came into effect? What support is available to help people to understand the changes?

I hope that the Minister will address all the issues that I have raised in respect of both orders.

--- Later in debate ---

[Kit Malthouse]

This has been a lively debate—certainly more lively than it has been in the past. Doubtless many of the arguments made—not least as much of the debate was about what is not in the order rather than what is in it—were exactly the same as those made last year. Therefore, I do not propose to detain the House for too long. A number of Members raised a series of detailed points, which I will try to address in writing, if I may, should I fail to address them in my speech.

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) raised a couple of issues I want to address. First, she asked when the Government will produce a cumulative impact assessment of all welfare reforms. The Treasury published a cumulative distributional analysis alongside the Budget, in November last year, showing the impacts on household income of tax, welfare and expenditure, so I would point her to that. She also asked about the new state pension communications, as did a number of other hon. Members. She will be pleased to know that, following the National Audit Office report last year, from which she quoted, the Department for Work and Pensions launched an online “Check your State Pension” service.

[Debbie Abrahams]

rose—

[Kit Malthouse]

I will carry on. The service has had 7 million views since February 2016. Notwithstanding that, there is obviously more work to do on communications.

The hon. Member for Airdrie and Shotts (Neil Gray) asked why bereavement support payments have not been uprated. A bereavement support payment is not a cost-of-living benefit and is paid in addition to means-tested benefits to protect the least well off, so it is not necessary to uprate it in line with the cost of living. Unlike bereavement allowance and widowed parent’s allowance, bereavement support payment is paid in addition to other benefits to which the recipient is entitled, helping those on the lowest incomes the most. The hon. Gentleman will know that the up-front payment for those with children has been increased from £2,000 to £3,500.