Social Security (Up-rating of Benefits) Bill

Jonathan Reynolds Excerpts

2nd reading
Monday 20th September 2021 Commons Chamber

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

Thank you, Madam Deputy Speaker, for calling me to close the Bill’s Second Reading for the Opposition. We have heard many good speeches, but, before I turn to them, I want first to deal with the central case that the Government have made for the legislation.

As my hon. Friend the Member for Reading East (Matt Rodda) set out in opening for Labour, Opposition Members accept that there has been an anomaly in the earnings data due to the pandemic, and we recognise that a solution is required. I have listened carefully to passionate speeches from colleagues across the House, but I simply do not believe that anyone in the UK believes that wages are rising at 8.3% in real terms across the board. If I were to put that case to my constituents, I think they would very much question my judgment. However, as we said since the announcement was made, the duty is on the Government to explain why their preferred solution—a move to uprating by inflation or 2.5%—is the right one. That duty is particularly important because the triple lock was a Conservative manifesto commitment and, as many hon. Members pointed out, the announcement to break it has come after a series of decisions to break other Conservative manifesto commitments. It is therefore reasonable that the burden of proof lies on the Government and that the threshold for support should be high.

We have had some valuable contributions. The hon. Member for Glasgow East (David Linden) was right to highlight the trust in the Government stemming from the decisions of the last few months. He was also right to point out figures that show that the number of pensioners living in poverty taken by the measurement that he indicated—those living with an income below 60% of the median after their housing costs—is rising. Given that we know overall spending on pensions is going up every year by quite considerable numbers, why are we also seeing that rise in poverty? That is a question for us all and one on which we may need more time in future.

The hon. Member favours auto-enrolment, and I very much agree. The question is about how to do that in a post-pandemic environment. He will understand, however, that I cannot agree when he posits that Scottish independence might be the solution to some of those problems, because an independent Scotland would clearly face some difficult economic decisions in its own right. I do not think it is necessarily helpful to put that across.

[David Linden]

Yes, an independent Scotland would face difficult economic decisions, but does the hon. Member accept that the central point of independence is about people in Scotland—the people who live and work there—making those economic decisions?

--- Later in debate ---

[Jonathan Reynolds]

I understand the basis of any nationalist claim for any sense of self-determination, but—this debate may be taking us a little away from the pensions uprating discussion, Madam Deputy Speaker—we all live on these islands together and, when we look at difficult economic decisions, the strength that we have by being a Union is of benefit to us all. [Interruption.] I will come to the speech by the hon. Member for North Ayrshire and Arran (Patricia Gibson), but I do not think there is time for a debate on Scottish independence as part of our discussion of pension upratings.

The hon. Member for Runnymede and Weybridge (Dr Spencer) made a brave case that the Government might actually lose trust if they held to their manifesto commitments, and I admired the style in which he did it. He wanted a wider debate on the earnings lock, but I would respectfully have to disagree with him on that. I do believe there is a need to maintain the value of the state pension and the objectives of the triple lock are ones we should keep to—many of the reforms in Parliament since I have been here have been based on a provision for the triple lock to take place—but I did appreciate his speech.

The hon. Member for Amber Valley (Nigel Mills) made, as ever, a thoughtful contribution. He questioned the ability—my hon. Friend the Member for Reading East raised this in his opening remarks—to analyse the underlying wage trend taking away the impact of the pandemic. The hon. Member for Amber Valley will know that that has been an open question, and several organisations have tried to do a piece of work on it. Ultimately, I do agree that it is challenging to do so in a way that is unchallengeable, and that is a fair point to make when looking at possible alternatives.

My right hon. Friend the Member for East Ham (Stephen Timms), the Chair of the Select Committee, pointed out that pensioner poverty is rising, as the hon. Member for Glasgow East did, and I think that has to be central to our discussions. My right hon. Friend the Member for East Ham made the point repeatedly that the question must be how we can increase the take-up of pension credit. He has raised this point consistently, and I know there has been some engagement with the Government Front Bench on it, but I think there is strong support for his words from all sides whenever he raises it. Of course, I believe he was absolutely right to raise the juxtaposition of the decision today with the cut to universal credit, and I believe the case is getting stronger every single day not to proceed with the Government’s cut.

The hon. Member for Wantage (David Johnston) raised pension upratings in the past. He will not, I think, mind my saying that if we look at the position say in 1997, when the Labour Government came to power, we see that a third of all pensioners back then lived in poverty. There was a very strong correlation in those days between growing old and being in poverty, and that was reduced to record low levels by the end of that Labour Government, so the record has to be considered in the round. However, I do agree with him, and I have said this myself, that I reject discussion of pension uprating as an issue of intergenerational conflict. I think it is very much about the value of the state pension when today’s workers do retire, and we should never forget that.

The hon. Member for North Ayrshire and Arran also highlighted the lack of trust stemming from recent Government decisions to break successive manifesto commitments. She obviously strongly opposes this measure. I think what is required is more engagement with the issue of whether the data we have before us is a true and accurate reflection of what we believe is happening in our constituencies. I have said very clearly to her that I do not believe that level of wage growth is the real picture, certainly in a constituency such as mine. Where I do agree with her is that coming, as this decision has, after other manifesto commitments have been broken, that is the context in which our constituents will look at what is happening.

My hon. Friend the Member for Birkenhead (Mick Whitley) also reflected on the run of broken promises and how this has come across to the public. He is absolutely right on pensioner poverty and absolutely right to demand transparency from the Government on this decision and commitments to reassure his constituents.

The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) raised the cost of living, and I think that case is getting stronger every day. Again, we will not dwell on it, but I do not believe his analysis of independence as the answer to that is the right way forward.

The hon. Member for Strangford (Jim Shannon) was not convinced of the Government’s case either. He was also right to raise particular issues in Northern Ireland about the post-Brexit trading situation and the impact on his people as a result—something about which I think all the House shares concerns. Of course, he is again absolutely right about the impact of the universal credit cut.

However, there is no doubt that the most valuable contribution and perhaps the one of most interest was from the former Secretary of State for Work and Pensions the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith). Again, we have heard in the debate, and it is something I have said myself, that the triple lock is not a straightforward question of an intergenerational clash, and I know some people have concerns about linking the two issues together. However, I do believe he was right to raise—and to attempt to have his own amendment on—the impact of that universal credit cut, which we discussed in depth last week. I believe that the case against it gets stronger with every single day, and I would appeal to noble Lords in the other place to give this matter the due consideration that has not quite been possible today, but is still very valid.

On the reasoned amendment moved by the hon. Member for North East Fife (Wendy Chamberlain), this is an opportunity to discuss the wider context in which this decision has been taken and it makes reference to the universal credit cut that is imminent. However, while the amendment makes passing reference to that, its main argument is that there has been no anomaly, which is not the position of the Labour Front Bench. I can tell the House that I have had my own discussions with the Office for National Statistics, and I am very satisfied that the case for the 8.3% figure is, frankly, unsound.

I know there is an argument for simply insisting on a rise of 8.3%, but I do not believe that that is a responsible course of action. We make the case for the Government to change course on the universal credit cut, but that is because the Government can do so, it is the right decision and it is very much in the national interest, but I do not think, frankly, that the same factors apply to the decision before us today. Again, it goes back to whether we ultimately believe that that is the correct rate of wage growth or earnings growth across the economy as a whole.

For that reason, I will not be supporting the reasoned amendment, and I do not see much merit in dividing the House on Second Reading. However, we will be seeking to interrogate the Minister during future stages of the Bill, and we will be looking for the reassurances and that transparency we have sought since the original decision and announcement were made. Therefore, we look forward to the remaining stages of the Bill.

Social Security (Up-rating of Benefits) Bill

Jonathan Reynolds Excerpts

Consideration of Lords amendments
Monday 15th November 2021 Commons Chamber

[Guy Opperman]

I will make some progress.

It is right that I address these Lords amendments, Madam Deputy Speaker, because, as you rightly outlined, they engage financial privilege in that they interfere with the financial arrangements made by the elected House of Commons. That alone, I respectfully submit, is sufficient reason to disagree with the Lords amendments. However, it is also right that I address directly the point that was made by the House of Lords that invites the Secretary of State to measure earnings as if they were not actually growing by 8.3%. I assure the House that there is no robust way of calculating them as if they were not.

The independent Office for National Statistics has responsibility for producing economic statistics to the highest possible standards. ONS experts investigated whether it was possible to produce a single robust figure for underlying earnings growth that stripped out impacts from the pandemic, and concluded that it was not possible. Alongside the actual earnings growth figures, the ONS suggested a possible indicative range of 3.6% to 5.1%. These figures do not have national statistics status. Indeed, the ONS itself includes heavy caveats on the issue and advises caution in approaching it. The Bank of England also cast doubt on identifying a figure that could be relied on. The ONS said:

“There are a number of ways you can try to strip out these base effects, but no single method everyone would agree on. We have tried a couple of simple approaches…Neither approach is perfect…Our calculations of an underlying rate are there to help users understand base and compositional effects, but…there remains a lot of uncertainty about how best to control for these effects.”

It said that the statistics therefore “need to be” treated “with caution”.

We believe it would be reckless in procedure and in law for this or any other Government to set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus. That is why the Government have decided to suspend the earnings link in this year of exceptional and anomalous earnings growth. Instead, we decided to apply a double lock underpinned by the established consumer prices index published and approved by the ONS. This approach was also recommended by the Social Market Foundation and other commentators, and very strongly by this House on Second Reading, Report and Third Reading. That is the legislation that this House passed to the Lords, and that is the legislation I would urge this House to send back to the Lords.

I remind the House that over the two years of the pandemic the Government will have ensured that the pensions covered by this Bill will have increased by much more than prices, by reason of the 2.5% increase last year and the link to CPI this year. In those circumstances, I commend this House to reject the House of Lords amendments and agree that we proceed with this one-year Bill by reason of the pandemic.

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

Whatever else could be said about the House of Lords, it is a place that genuinely contains a great deal of expertise on the subject of pensions. We are fortunate to have that expertise in Parliament and we should be prepared to listen to it. Having studied the exchanges in the Lords, I feel that the Government’s positions on this matter have not held up well under scrutiny, and the debate has moved on considerably since we last discussed it here.

Labour will therefore vote to accept the amendment put forward by the former Conservative Pensions Minister Baroness Altmann, which was well argued and handsomely carried, but which also most closely reflects our own position on these matters. That is to say, we accept, as I have said clearly and repeatedly, the Government’s case that the true figure of earnings growth in the UK is not 8.3%. It would be absurd to maintain that that is what is happening to our constituents’ wages right now. Labour supports the triple lock. We believe the Government’s manifesto commitment should be binding and that the connection to earnings in the uprating decision for this year should remain.

In her remarks, Baroness Altmann made it clear that she was not proposing a specific uprating figure by proposing this amendment. That is important. It seems to me that all Conservative MPs could vote for this amendment, honour their own manifesto commitment, and still address the problem of how the pandemic has distorted the earnings data. It would just require the Government to effectively make an assessment of whether real wage growth is higher or lower than CPI inflation, and, if higher, use that figure.

When we last held a debate on this in the Commons, the Government said that that would not be legally sound, but the Lords debate knocked that down fairly easily. As Baroness Altmann said, for a judicial review to occur, the figure the Government used would have to be found to have been brought about by the Government acting irrationally. That is something we can never rule out with this Government, but it should be more than possible to avoid that. If I may say so, one of the reasons the Government lost this vote so badly in the Lords was their tendency to rely on short-term, inconsistent arguments to bounce from one day’s headlines to another’s.

[Guy Opperman]

The hon. Gentleman criticises the Government for not coming up with a solution, when he is unable in any way to come up with a solution or figure himself, as are the Office for National Statistics, the Bank of England and all other reputable organisations. In fact, the House of Lords did not come up with a figure, so what, pray, if he would enlighten the House, is the precise figure that he would see pensions increase by?

[Jonathan Reynolds]

I am grateful for the Minister’s intervention. I am about to explain why he has got himself and the Government into this position.

[Guy Opperman]

What figure?

[Jonathan Reynolds]

With respect, the Minister just needs to listen to this point. He stands at the Dispatch Box and, like all Ministers, tells us that black is white. For instance, when the Government reacted to the crisis of their own making—when we saw the pumps run dry and the shelves go sparse—they claimed to the country that this was a secret masterplan towards a high-wage economy that they had had all along. Now, we are having to see the Minister and the Government tie themselves in knots again, because he has been sent here to make the case, which we have heard him put very well, that the figure is too distorted and therefore we need this primary legislation, yet—and this is the problem, Minister—according to the Prime Minister, wages are up, workers have never had it so good and that is why the Government can cut £20 a week from universal credit. They are making two completely opposing arguments. We do not even know whether the Government believe that wages are rising faster than inflation. I politely say to the Minister that they cannot expect to have it both ways.

I will repeat a number of points that colleagues may have heard me say before, but I feel they need to be repeated in light of some of the media comments on the Bill. The uprating of the state pension is relevant to millions of pensioners in this country, but it is wrong to present it as an issue of intergenerational unfairness. That is because these decisions are also fundamentally about how we ensure that the state pension is indexed and retains real value for people who are in work today when they come to retire. This Government have been grossly unfair on people of working age, but frankly that is due to the burden of taxes they have inflicted on workers, rather than through the operation of policies such as the triple lock.

I hope the Minister took on board the comments made about pensioner poverty in this House and the other place. The Government’s use of what they call absolute poverty, which in reality is a measure of poverty relative to a fixed line in 2010, is unsatisfactory because not only does it ignore the statistical evidence, which is that pensioner poverty is now rising after it fell considerably under Labour, it also limits a serious debate on the drivers of that rise. The big picture is that the OBR predicts that as a country we will be spending an extra £6 billion a year, year-on-year, on pension-age benefits every year up until 2024-25. That is the year that the forecasts in the welfare trends report go up to, so it will likely continue to rise after that. Pensioner poverty is going up as spending rises substantially. We should be having a much more substantive debate about that, looking at housing costs, energy prices, food and access to good financial and investment advice. The way in which the Government present their own progress means that any real wage growth over the last decade allows them to claim that poverty has declined, so when the Minister says that 200,000 pensioners have been lifted out of poverty since 2010, the reality is that that is a very poor level of performance compared with all previous Governments. Poverty is always relative, because it is a measure of whether someone has the means to live a fulfilling life in the society of which they are a member. That is not just a left-of-centre viewpoint, but one that until recently was accepted by Conservatives, too.

However, to return to the matter at hand, the House of Lords has sent us an amendment that should genuinely command the support of the whole House. It requires the Government to maintain the earnings link in their manifesto promise, while still making allowance for the pandemic. This Government have dragged politics through the gutter in recent weeks, with stories of sleaze, corruption, contracts for donors and second jobs from Caribbean islands. I could go on, but the point is that public trust in this place matters. When the Government muddy our democracy in the way that they have, they cannot then turn to the public and ask voters to simply take them at their word. For public trust to return, the first step has to be for the Government to keep their promises. Today, Labour will therefore support the amendment that would allow the Government to keep their promise on the pensions triple lock.

The Lords have sent us a very reasonable set of measures, and frankly I see no logical reason not to support them if we want to protect the link between earnings and pensions. If the Government are unable to do so, they should admit what is really going on: they are using the pandemic as a smokescreen to scrap the triple lock and pocket the savings. They should cut the obfuscation, keep their promises and vote for the Lords amendments.

[Duncan Baker (North Norfolk) (Con)]

As the MP for North Norfolk, which has some of the highest numbers of older people in the country, you can understand, Madam Deputy Speaker, why I want to speak briefly in this debate. First, we have come back to basics. I was a finance director and a chartered accountant before I came into this place, so I have a reasonable grasp of statistics, and it is fair to say that this Government have, to the tune of around £400 billion, safeguarded the country through a pandemic that no one ever expected. Not only that, but the national debt sits at some £2.2 trillion, so it is understandable that we are sitting here this evening being extremely careful and prudent about what we do with our public finances.

The electorate, as we have seen many times before, will forgive a Government many things, but they will not forgive a Government being reckless with the public finances. We have to understand that, much as we would like to increase pensioners’ pay, every 1% increase costs the Exchequer a billion pounds. To put that in perspective, with an increase of some 8% to 9%, we are looking at an increase of some £8 billion to £9 billion. I can therefore see entirely how that would sit when we have to look in the eye of a prison officer, a police officer, a teacher, a firefighter or any other public sector worker who has seen their pay frozen for the past year. That is the real context. It is about fairness and a statistical anomaly caused by the dip, coming off furlough on to 100% pay and when the ONS statistics were taken. It has given rise to this one-off statistical anomaly.

What the House of Lords has proposed is sensible, and I took that to the Secretary of State to ask whether we could do something to still honour the framework of the triple lock, while ensuring that we have a sensible parameter to measure it by. The answer that came back was exactly the same as the one the excellent Minister just gave: we need a robust metric. We cannot just move the goalposts and cherry-pick a point in time because the argument does not fit at the moment. Many of my constituents have written to me about this issue, and when a detailed reply has gone back to them, a great number understand why we have this one-off double lock.

In summing up, I say two things to the Minister. First, woe betide us if we do not honour the triple lock next year. We have some of the best public finances recovery in the G7, as the Chancellor said the other week, so we must get back to giving our pensioners the pay increases they absolutely deserve, because they have paid in all their lives. Secondly, it would be wonderful to go into the next election with the resounding message that our pensions are good, honest pensions that people have earned all their lives, at a level that people can be proud of compared with Europe. Too often, our pensioners feel that is not necessarily the case. I would like the Minister to ensure that we put our pensioners at the front of the queue as we come out of this pandemic. I wholly understand what he has said this evening. I will be rejecting the Lords amendment, because it is sensible to maintain the public purse in the best possible way at a time like this, so that our country can rebound from where we are at the moment.