Social Security (Up-rating of Benefits) Bill

Jonathan Reynolds Excerpts

2nd reading & 2nd reading: House of Commons & Money resolution & Money resolution: House of Commons
Thursday 1st October 2020 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Thank you very much, Madam Deputy Speaker, for calling me to speak on Second Reading of the Bill today. I would like to express my thanks to the Secretary of State and to the hon. Member for Glasgow South West (Chris Stephens) for the discussions the three Front Benchers have had in relation to this legislation.

As with so many things during the coronavirus pandemic, we find ourselves in an unusual situation that calls for an unusual course of action. It is an extremely sad and regrettable consequence of the pandemic that we expect that national earnings will be negative this year. That statistic tells its own story about the hardship many families are facing at the moment. However, the added complication this brings, as the Secretary of State explained, is that when earnings are negative, there is no legal power to increase state pensions at all, and this also affects the standard minimum guarantee in pension credit and some survivors’ benefits in industrial death benefit.

This is due to the drafting of the Social Security Administration Act 1992, and we need to correct that with the legislation before us today. As the Secretary of State said, there is a precedent for this. The previous Labour Government encountered a similar problem following the global financial crisis and brought forward similar legislation. I therefore believe that the correct and constructive course of action today is to ensure the passage of these powers through the House of Commons. It is clearly in the national interest and in the interests of Britain’s pensioners to address this problem.

The Bill is extremely limited in length and in scope, applying only to this financial year. However, I believe this is an appropriate opportunity to seek some information regarding the Department’s intentions in this area. I was pleased to see in the explanatory notes to the Bill that the Government stated they wanted the Bill passed

“to meet its commitment to the Triple Lock.”

In the comments the Secretary of State has made, she has reiterated that commitment, which I very much welcome. Labour believes that everyone deserves financial security in retirement, and we believe the cornerstone of that is a decent state pension, properly indexed to ensure it keeps its value for future generations of pensioners. That is why we will hold the Government to account to ensure that they keep their manifesto promises.

One of the things I find so frustrating in the national conversation about pensions is the way that rising longevity is sometimes presented as a public policy problem, rather than something to be celebrated. For many of us in the Chamber today, our grandparents worked very hard lives, yet had very little by way of retirement. My grandfather, for instance, worked 51 years down the same coalmine, yet never owned his own home or was able to travel abroad. So we should celebrate, as a country, that in a relatively short space of time our expectations of retirement have been transformed, and we should thank those who came before us who founded the national health service, raised the school leaving age and improved health and safety in the workplace, because that increased longevity. It is their legacy, and it is an achievement, rather than a problem.

We know and appreciate that the pandemic poses additional problems for the way in which we calculate how we should uprate pensions. The volatility of earnings in the crisis means that we are likely to be faced by the opposite problem when we are discussing this in future years—when it comes to the calculation, for instance, for 2022. Distortion in the earnings statistics as wages bounce back from their 2020 fall due to furlough and unemployment could create a significant one-off jump in earnings in 2021. I would like to know from the Secretary of State how her Department is planning for this eventuality when calculating the triple lock.

One suggestion, as outlined in a recent report by Lane Clark & Peacock, is that the disruption in earnings statistics could be smoothed by applying the principles of the triple lock over two years instead of one. Its conclusion is that, if this is applied, the most likely outcome would be that the triple lock could be delivered over two years by subsequent increases of 2.5% in both April 2021 and April 2022. I know many people are anxious to know what the Government are planning to do in this scenario. I wonder if the Government could elaborate on what options are being considered, and if there is an intention to continue the triple lock across future years of this Parliament in line with the manifesto commitment from the Government in December last year.

Finally, I would appreciate it if the Minister, when summing up, confirmed the Government’s intentions on the timeline for bringing forward proposals for the annual uprating of all social security benefits. At a time of such significant national economic insecurity, there is understandable anxiety about this. That is the point at which we will be able to have a full and involved debate on the Floor of the House on what is being proposed.

I would say, on behalf of myself and my hon. Friends, that when the Government themselves admit that a further 4 million jobs could be lost, any suggestion that benefits for unemployed people could be cut in April would be met with the strongest opposition from these Benches. Today, however, I welcome this Bill to ensure that the Government can fulfil their promise to pensioners. We want to make Britain the best country in the world for people to grow up and a place where retirement is a time of leisure, dignity and fulfilment, however that may come. There is no doubt that this legislation is a requirement of a pension system that can deliver that.

--- Later in debate ---

[Jonathan Reynolds]

With the leave of the House, I will briefly respond to the debate on behalf of the Opposition. It is not often that we have more speakers than clauses in the legislation before us, but I very much appreciate Members’ contributions. The hon. Member for Delyn (Rob Roberts) was right to highlight the impact of the pandemic on older people. I do not like the intergenerational aspect that is sometimes put on this crisis. It has affected all groups in society in different ways, and in particular, we all feel strongly about the burden in relation to care homes. Indeed, many of us would quite like to see parents and grandparents when the opportunity hopefully arises again.

The hon. Member for Glasgow South West (Chris Stephens) made many good points. I agree with him on the take-up of pension credit and the issues around that. Longer term, my preference would be that the new state pension apparatus that was set up in the last Parliament becomes such a satisfactory minimum that pension credit becomes a residual benefit and we do not have the issues that we do around pensioner poverty.

I also very much recognise and agree with the hon. Gentleman’s comments on legacy benefits. As my right hon. Friend the Member for East Ham (Stephen Timms), the Chair of the Select Committee, said, the issue was always given as the time it would take to do the uprating. We are now well into the pandemic and beyond the point where that could have come online had the Government chosen to act.

The wider comments from my right hon. Friend were very welcome. He spoke about pension credit, and it is important to say that it was a conscious choice of the Government post-1997 to address the huge issue of pensioner poverty that had built up; that is what the majority of resources at that point went into. There should not be an automatic linkage between retirement and poverty, as was the case at the end of the 1990s. As ever, I very much welcome all the work the Select Committee has done into the impact of the current crisis on the social security system, and the wider points that have been made.

The hon. Member for North East Fife (Wendy Chamberlain) strongly supported the triple lock, which I agree with. She made a crucial point on intergenerational fairness, and it was one I was going to make at Committee stage, but I will make it now. Often, in the media commentary around this issue, the intergenerational point is made without reference to the fact that we are not just talking about the level of increase for pensioners today, although someone who has just entered retirement will hopefully, in a very good way, now experience that uprating for several years. We are really talking about what the level of the state pension will be by the time today’s workers retire. That was very much the modelling behind the changes that were made to the single-tier basic state pension. The increase in the retirement age made the overall package of spending on the state pension a reduction overall in order to make it, in the words of the coalition Government at the time, more sustainable. That is an important point to remember when we are talking about cost and the impact on different generations of the changes we are talking about today.

Overall, however, there is rightly a clear consensus in the Chamber for Second Reading to proceed, and I very much welcome the contributions that have been made.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I would like to begin by thanking everyone who has spoken in the debate, which has been wide ranging and consensual and has covered a number of topics.

Because this is my first appearance back at the Dispatch Box, Madam Deputy Speaker, I just want to raise a personal matter. This is my first appearance since the demise of my twin boys in late June, and I was genuinely struck by the amazing words of commiseration and support that I received across the House from all colleagues. I am deeply grateful, and I know I speak for my wife on that particular point as well.

Moving on, I was struck by the opening point from the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) on the shadow Front Bench, and it is one I think we should all celebrate in this House: rising longevity is a fantastically good thing, and it is a wonderful problem to have. Clearly, there are policy and fiscal issues that follow it, but it is a genuinely good thing that we are addressing.

Even though the House is not well populated today, I am conscious that before me I have a former Pensions Minister from the Department for Work and Pensions—the right hon. Member for East Ham (Stephen Timms), who now chairs the Select Committee. I also think that the hon. Member for Stalybridge and Hyde was a special adviser—

[Jonathan Reynolds]

Not quite.

[Guy Opperman]

He was an adviser—let’s put it that way—to the previous Labour Government, and he is acutely conscious of the issues that we are dealing with today.

Clearly, there is a delightful sense of a cross-party consensus, but I want to address some of the key points that were raised. People clearly wish to make the case on pensioner poverty, and I will address that. One can trade statistics, but material deprivation for pensioners fell from 10% in 2009-10 to 6% in 2018-19. There are 100,000 fewer pensioners in absolute poverty before and after housing costs than in 2009-10. Average pensioner incomes have grown significantly in real terms over the past two decades. Average weekly income in 1994-95 was £165 a week after housing costs; that compared with £320 a week in 2018-19. For 2020-21, we are forecast to spend £126 billion a year on pensioners, including £102 billion on state pension. Colleagues will know that that is a record sum spent by any Government in this House in respect of pensioners.

I will attempt to answer some of the particular points that were fairly made on pension credit. It is again the case, and I should put this on record, that pension credit increased significantly under the coalition and then under this Government, from £132.60 to £173.75 for a single person and from £202.40 to £265.20 for a couple. The take-up of pension credit is something that all would like to see increased. I echo my hon. Friend the Member for Delyn (Rob Roberts) on that; this is the first chance I have had to respond to him in this House, and it is delightful that he is here. He makes the fair point that it is in all our interests that pension credit be increased.

One of my colleagues asked what had been the impact of the BBC decision. There is no totally granular data on that, but I can assist to a degree: the claims for pension credit, which is what we want to see, were dramatically increased as of July 2020 compared with January 2020. There is definitely a massive increase in claims and clearly a filtering through of the acceptance of said claims. I refer hon. Members to the parliamentary question asked by the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron), PQ 82024. I will ensure that I put a note of the issue on the record in the Library to answer that particular point and expand upon it.

In respect of pension credit, the Secretary of State was right to identify that we had a significant nationwide campaign in the spring of this year, and that the combination of that and the impact of the BBC decision clearly had an impact on greater take-up. The specific causes of the increase in take-up are hard to assess, but there is no doubt that the take-up has been larger.

In respect of the point raised by various hon. Members about working-age benefits, it is right to say that the Government are proud of the fact that they have provided support during the pandemic for those below state pension age, whether through the plan for jobs, with Kickstart now open for bids across Great Britain and doing very well, increasing the standard allowance in universal credit and working tax credit by £1,040 this year, benefiting 4 million families, investing approximately £9 billion of extra support to protect people’s incomes through the pandemic, removing the seven-day waiting requirement for employment and support allowance claims linked to covid-19, or relaxing the universal credit minimum income floor for self-employed people.

As the Secretary of State said to the right hon. Member for East Ham and the Work and Pensions Committee yesterday, that is a matter that is clearly in her mind and that is to be considered by the Secretary of State. I cannot really add or expand upon the answer that she gave, and it would not be appropriate to comment further, because clearly she has to conduct a review and then return to this House to respond to that review.

Having dealt with the specifics, all colleagues have identified that this is an important piece of legislation, without which the state pension would be frozen for a year from April 2021. It makes technical changes to ensure that state pensions can be uprated, providing peace of mind to pensioners regarding their financial health. It is a one-year Bill, so it is not the case that we are considering the matter beyond the first year. Clearly, this arises out of the covid emergency and its impact on earnings, and it would not be appropriate to address the future at this stage. I believe this Bill is a further demonstration of this Government’s action in support of pensioners, and provides them with financial peace of mind in the face of the coronavirus pandemic. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Committee of the whole House (Order, this day).

SOCIAL SECURITY (UP-RATING OF BENEFITS) BILL (MONEY)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Social Security (Up-rating of Benefits) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(David T.C. Davies.)

Question agreed to.

Social Security (Up-rating of Benefits) Bill

Jonathan Reynolds Excerpts

Committee stage & Committee: 1st sitting & Committee: 1st sitting: House of Commons & Report stage & Report stage: House of Commons
Thursday 1st October 2020 Commons Chamber

[Chris Stephens]

It is good to see that social distancing is being applied at all times. It was remiss of me not to welcome the Pensions Minister back to his place. I did send him a private message, and thoughts of him and his wife and family are very much with us all in this House. I do welcome him back.

These are five non-controversial amendments, which I hope— [Interruption.] We seem to have a laugh already from the Minister. I do not know why. He has obviously not read these non-controversial amendments. We have tabled some probing amendments and look forward to his response.

The first amendment is a theme that was picked up on Second Reading by the hon. Member for North East Fife (Wendy Chamberlain), which is to ensure that the triple lock is applied in legislation. The Government would have to give an explicit commitment to maintain the triple lock for the year ahead. The amendment seems to speak very much for itself.

Amendment 2 asks for an assessment on poverty, which again was picked up on Second Reading. It is certainly our view that the Government are overseeing some brutal benefit cuts, which have exacerbated poverty, and we require a proper impact assessment of the proposed uprating and the impact that has on poverty levels in each of the devolved nations.

Previous UK Budgets have introduced some fairly punitive cuts to social security—certainly the most punitive in recent memory—and we are starting to see an active reversal of reducing and fighting poverty. The Social Metrics Commission report, which was referred to at an earlier stage, notes that prior to the outbreak 14.4 million people in the UK were already living in poverty, including 33% of children, 22% of all working-age adults and 11% of pension-age adults. The largest employment impacts of covid have been felt by those in the deepest poverty, with many at risk of falling deeper into poverty as a result of job losses, reduced hours or reduced pay. We have tabled amendment 2 to provide for that impact assessment.

Amendments 3 and 4 deal with the issue of frozen pensions. UK pensioners deserve a full uprated state pension, wherever they choose to live. Due to the historical arbitrary bilateral agreements between the UK and other countries around the world, some UK pensioners who live overseas do not have their state pension payments uprated every year. That means that their pension is frozen at the level at which they first received it for the rest of their lives abroad. As of August 2019, that affected over 5,110 UK pensioners, who we believe are being adversely affected by the UK Government’s frozen pension policy. Pensioners who have paid the required national insurance contributions during their working lives in expectation of a decent basic pension and retirement find themselves on incomes that fall in real terms year on year. Pensioners will now face ending their days in poverty because they choose to live in the wrong country, in most cases without any knowledge of the implications of their choice for their pension.

In our view the state pension is a right, not a privilege. UK pensioners who have paid their fair share of national insurance contributions should not have to suffer simply because successive Governments have failed to establish bilateral agreements with certain countries. Therefore, we are asking that amendments 3 and 4 be agreed. I also refer hon. Members to the frozen pensions campaign, of which many hon. Members are members.

Amendment 5 relates to 1950s-born women, an issue that I am sure the Pensions Minister would be disappointed if I did not mention. As a previous Speaker of this House advised in 2015, persistence is not a vice. The amendment would require the Government to publish an assessment of the impact of uprating on those whose state pension age was changed by the Pensions Acts 1995 and 2011, including in particular 1950s-born women, or WASPI—Women Against State Pension Inequality Campaign—women, as they are known.

The numbers of ’50s-born women and men claiming working-age benefits has rocketed, and they should have been receiving their state pension. This is a double whammy, with those with occupational defined-contribution pensions to fill the gap being squeezed even further. Those claiming benefits find themselves having lost Government support in many cases, excluded either due to gaps in national insurance contributions, because of low-paid, precarious work, or because of other parts of household income. We are very aware of the history of 1950s-born women and the inequality they have faced throughout many parts of their lives. They now find themselves discriminated against on the basis of so-called equality, while those losing their jobs or seeking work are being further disadvantaged by an unequal playing field and a shrinking job market.

I look forward to hearing the Minister’s response to our amendments.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank the hon. Member for Glasgow South West (Chris Stephens) for tabling these amendments, which I would describe as probing amendments to have a wider conversation—perhaps “uncontroversial” is too dramatic a description of what we are discussing today.

On amendment 1, to be fair, the Government have given a clear indication in the opening remarks to this debate of their direction of travel and their commitment to the triple lock this year. It is perhaps worth putting on record the figures from the Library, because I see so much commentary on social media and in the press about affordability. As the Minister said earlier, rounded to the nearest billion, this year this country will spend £102 billion on the state pension—not benefits for pensioners, but the state pension. If we had not operated triple lock from 2011, but had just a double lock of prices or earnings, that figure would be around £100 billion. No one would describe a couple of billion pounds as an insignificant amount of money, but in the context of the UK pensions bill it is 1.2% less. If we had no lock and had simply increased the state pension by earnings since 2011, the bill would be £96 billion, which is £5.5 billion less. However, the crucial point is that that is in the context of the worst earnings growth over the last decade that this country has really ever seen—certainly the worst in modern times. Crucially, that would have meant pensioners becoming worse off, because pensions would not have kept up with prices—something that I think no one here would have been happy to see.

I think we all have to acknowledge that the UK state pension is relatively low by international standards. I am not taking a cheap political pop, and it is appropriate to say that the system is obviously much better when we consider it alongside the NHS, because in some pension systems people have to cover their healthcare costs, and we also have top-ups such as pension credit. The overall system is also clearly much better when we factor in private pensions. However, our basic state pension is relatively low compared with other countries. For instance, a typical woman retiring today will still look to the state pension for over half her retirement income. That is a significant point to bear in mind.

As we have heard, when the coalition Government introduced the pensions reforms that came into effect in 2016, the triple lock was a fundamental part of the calculations for the system. The deal was that people would have to retire later and that some people would not be able to create a state pension that was as high as they could previously have done, but that everyone would get a proper index-linked pension at 67, 68 or 69.