Pensions and Social Security

Gregg McClymont Excerpts

Thursday 23rd February 2012 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

I shall not detain the House for long, I hope. We have had an interesting debate, which was begun by the Minister and my right hon. Friend the Member for East Ham (Stephen Timms), who discussed some of the technicalities and complexities of uprating. I shall confine my remarks largely to the most controversial of the motions—the motion on the draft Social Security Benefits Up-rating Order 2012.

The contributions from Back Benchers have illuminated some of the issues at hand. The hon. Member for Truro and Falmouth (Sarah Newton), who is no longer in her place, made a heartfelt defence of what she described as the coalition’s sense of national mission. “Our great nation is in great peril,” she declared, although I am glad she cautioned that she is not doing cartwheels. I would never have made such a claim. She suggested that there has been a constant and very upsetting misrepresentation of the Government’s wider policy in this area, which she sought to correct by sharing the experience in her constituency. Not content with her party being in government, she was also keen to give the Opposition the benefit of her wisdom on how they should proceed on these and other matters.

My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) emphasised the great concern there is outside the House regarding the permanent switch from RPI to CPI and declared her support for an immediate return to RPI indexing. She emphasised that CPI indexing means a smaller rise for pensioners and out-of-work citizens over time. My right hon. Friend the Member for East Ham referred to the 0.7% average difference between an RPI and a CPI measure and my hon. Friend the Member for North Ayrshire and Arran emphasised from the Back Benches that if we had been using the RPI measure this year, the increase would have been 5.6% rather than 5.2%. She set out the real cumulative impact that the switch in indexing will have over time on the pensions and benefits of some of the more vulnerable members of our society.

The hon. Member for Bury St Edmunds (Mr Ruffley), in what he described as a spirit of honest inquiry, set out some challenges for those on the Government Front Bench. He emphasised the public spending implications of a 5.2% rise based on a CPI measure in September. If I understood his argument correctly, he would have preferred to use either a six month figure, which he calculates would save the Treasury £780 million, or an average over 12 months until April 2012 using a forecast for this current quarter. That would have created an overall indexing figure of 4.4% and saved £1 billion, according to him. He put that in context by explaining that the real cost of living increase in the coming year will be 2.8%, which, if applied, would save the Treasury £3 billion, based on his calculations.

[Mr Ruffley]

The hon. Gentleman is reciting the argument brilliantly, but those are not my figures; they are my figures checked with the House of Commons Library.

[Gregg McClymont]

I thank the hon. Gentleman for that clarification. As a public spending hawk, as he described himself, he would much prefer one of those figures to be used, although he indicated that pensioners should receive 4.4% and those out of work should receive 2.8%, which would lead to an overall saving of £1.7 billion, based on the figures he cites. I am sure that the Minister will be happy to deal with this matter. The hon. Gentleman also emphasises the overall issue of work incentives. If people are in work but seeing a real squeeze on their incomes and living standards, in his view there is an issue of work incentives.

The hon. Member for Eastbourne (Stephen Lloyd), from the Back Benches of the second coalition party, described himself as hawkish, but not as hawkish as the hon. Member for Bury St Edmunds. He was particularly pleased that DLA, GSA and other out-of-work benefits are receiving the full uprating and described the pension increase as the highest ever—perhaps I can come back to that later. He praised the shadow Minister in particular for his work on pensions. Alas, I suspect that he was referring to my right hon. Friend the Member for East Ham, rather than me. My right hon. Friend is indeed an impressive parliamentarian, and I join the hon. Gentleman in his praise. The hon. Gentleman also said that he had sympathy with Labour’s position on RPI but was prepared to reflect over the coming years on how CPI operates and is keen for the Minister to give a little more detail on how CPI will operate.

The Minister set out the Government’s position clearly: they are spending money via this uprating to protect some of the most vulnerable in society. There will be a CPI increase of 5.2% on the basic state pension and the additional state pension—SERPS—and a 5.2% increase in most out-of-work benefits. They will also raise the pension credit minimum income guarantee above earnings to 3.9%, rather than 2.8%, to be paid for, as was discussed earlier, by raising the threshold for those eligible for savings credit by 8.4% and reducing the maximum savings credit payable per week from £20.52 to £18.54.

The Minister also set out his view that CPI is a better measure of pensioners’ cost of living. That is contestable, as the debate so far has suggested. In particular, my right hon. Friend the Member for East Ham raised the issue of housing costs, among other things, and the Minister has undertaken to look at the work of the Consumer Prices Advisory Committee on integrating housing costs into the CPI index.

The hon. Members for Banff and Buchan (Dr Whiteford) and for North Antrim (Ian Paisley) contributed to the debate in interventions. They noted that, if we are looking at the cost of living for pensioners, we must emphasise the cut in winter fuel allowance in the round and heating costs more widely. Those are things that the Minister will be aware of as he goes forward.

The Minister and the hon. Member for Eastbourne emphasised that this was the largest real-terms increase in the pension for about 10 years. There was an interesting exchange between the Minister and my right hon. Friend the Member for East Ham on what exactly that amounted to. The Minister’s explanation, as I understood it, was that by the time the increases work through the system to the recipients, inflation will have fallen. My right hon. Friend rightly suggested that the Government should perhaps not take too much credit for inflation being so high and then falling—perhaps that was a quirk of timing, rather than the result of Government policy.

However, it is clear that, with a Backbench Business Committee debate on the switch from RPI to CPI scheduled for next week, this remains a live issue, and I am sure that it will be articulated in greater detail next week. As my right hon. Friend the Member for East Ham indicated, the official Opposition could have looked closely at a temporary switch to CPI, but we cannot support a permanent switch from RPI when there is so much doubt about CPI as an accurate measure of the cost of living. There is merit in an earnings underpinning, but it has been noted more than once that in the first year of its existence the Minister picked his own lock, so to speak, and there was a greater increase in the state pension than there would have been with the triple lock. Although there is merit in an earnings underpinning, the fact remains that if RPI had been used last year and this year the increase would have been greater.

That said, and given that we cannot support a permanent switch from RPI, we support certain things in these uprating orders, but we cannot support the Government today.