Pensions and Benefits Uprating

Eilidh Whiteford Excerpts

Tuesday 25th February 2014 Commons Chamber

[Stephen Timms]

If the arrangements in place before the last election had been maintained, the increases would have been at RPI. If they had been at RPI, we would be debating today a higher value for the basic state pension than the one in the order in front of us.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

When we have debated such issues in the past, I have been quick to highlight the fact that both CPI and RPI are not particularly good methods of measuring inflation, especially its impact on low-income groups, including pensioners. Does the right hon. Gentleman agree that the real issue at stake here is that energy prices have increased by 37% in the past 10 years and that food inflation has grown ahead of inflation every year for the past eight years? We should be talking about the impact of inflation on low-income groups and not the technical measure. We should be finding technical measures that reflect that impact of inflation.

[Stephen Timms]

The hon. Lady makes an important point. I hope she will support Labour’s energy price freeze, which will have an important benefit for people on low incomes. She is also right to draw attention to the particular difficulties of pensioners on low incomes. It is for that reason that pension credit is so important. Pension credit, which is in the order in front of us—I believe that my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) will say more about that when he responds to the debate later—is being uprated at a significantly lower rate in percentage terms than the basic state pension.

I was talking about the history of the triple lock. In the first year, it was overridden, so it failed. In its second year, it was implemented and delivered an increase in line with CPI, along with working age benefits. Last year, it was applied again and, for the first time, it delivered something better than CPI, but that was only by 0.3 percentage points. This year, the Government propose to uprate the basic state pension by CPI, which, as of September last year, was 2.7%. That is only a 0.2 percentage point increase on the absolute bare minimum that would be possible under the triple lock. Had the previous uprating RPI mechanism been in place, there would have been a larger pension increase this year, and in the last two years, than has been delivered.

It was in 2011 that the Government first uprated pensions by CPI rather than RPI. In the debate then I pointed out that this was a direct hit on the income of pensioners, and it still is. In 2011, a contributory deal, understood and signed up to by pensioners, was broken. That was compounded last year, and the Government want to do it again this year. On the other side of the coin, it is worth noting that RPI will continue to be used for the uprating of a great many other things. The Minister has correctly quoted my comments on that in the past. There could well have been a case to uprate by CPI as a deficit reducing measure for a period. However, we do not accept that Ministers should have tied themselves to CPI indefinitely, and that remains our view.

As announced in 2010, the Government have also made a permanent switch to CPI uprating. Thanks to the Welfare Benefits Up-rating Act 2013, most working age benefits were capped at 1%, with provisions for them also to be capped at 1% for the following two years, and so are outside the scope of this order. As we have said in previous years, there would have been a reasonable case for the Government to make a temporary change to the methodology, but unfortunately they went further.