Social Security Benefits Up-rating Order 2011

Lord Beecham Excerpts

Monday 14th March 2011 Lords Chamber

I express my regret at the switch to the CPI because it will mean a further deterioration in the living standards that are achievable on benefits that are already inadequate for healthy living and for ensuring human dignity.

[Lord Beecham]

My Lords, it is a pleasure to follow my noble friend Lady Lister, who has for many years been a leading advocate of improving living conditions for many people and who has made a distinguished contribution to national debate.

Like perhaps only a few noble Lords present, but like perhaps many more who are not present, I ought to declare an interest in the Guaranteed Minimum Pensions Increase Order, as I am entitled to claim a state pension although I have not yet done so; it is temporarily deferred. Having said that, I enjoyed the speech, or economics lecture, given by the Minister. I would have enjoyed it more if I had understood it more, but I suspect that, even so, I am slightly ahead of many of those who will be subjected to the effects of these orders. The Minister and the Government have claimed enormous credit for advancing the date by which earnings related payments will be made, but they have done so at a time when average earnings are not increasing. They have made a fairly safe bet because, had they relied on the earnings index, I suspect that there would have been no increase at all. They are therefore making the provision a little earlier, but its effect will be felt at probably about the time it would have been under the previous Government. We should remember that when the RPI fell, the previous Government ensured that a 2.5 per cent increase applied.

Mention has been made of a number of distinguished bodies that have commented on the RPI. We can all choose arguments from what they have said and written that advance our own side in the debate. I hope your Lordships will bear with me if I cite selectively, just as the Minister did. The Royal Statistical Society has said that the CPI fails to reflect the spending patterns of pensioners and the rising costs that they face. The Institute for Fiscal Studies has shown that most pensioner households are not shielded from many of the costs excluded from the CPI. The UK Statistics Authority has said that it does not believe that the CPI should become the primary measure of price inflation until housing costs are included. Other costs are not included, for example changes to council tax.

The Minister will no doubt point out that council tax is frozen and indeed it is—for three years in most cases. That freezing has been affected by top-slicing the grant to local government in the first place, but I leave that aside. There will be a temporary benefit in terms of council tax increases not bearing on the incomes of families, although the elasticity of their demand is extremely limited in any event, as both my noble friends have pointed out. However, while that is the case for the time being for council tax, it should be borne in mind that council tax benefit will be cut by 10 per cent in two years’ time. The Government, in an Answer by the Minister to my Written Question of some time ago, made it clear that they had no intention of promoting the take-up of council tax benefit, despite the fact that £1.8 billion of council tax benefit is unclaimed, largely, although not exclusively, by the very pensioners to whom this measure applies and by other low-income families. In fact, under the new index, the changes and reductions to council tax benefit, the failure to promote take-up, and the apparent reinvention of the 19th century Poor Law—because council tax will eventually be determined not on a national basis but by individual local authorities—it seems that pensioners and others in low-income groups face an onslaught on their living standards.

As both my noble friends have pointed out, the geometric mean will not signify very much to people living on very limited incomes. They feel that they will fall behind many in their communities, and that will certainly be the case nationally. It is particularly disturbing, as my noble friend Lord McKenzie pointed out, that this is not just a temporary measure designed to help tackle the deficit but a permanent change at the expense of many of the poorest in this country that will also affect those on modest fixed incomes in their later years.

I very much regret that the Government have seen fit to bring forward these proposals. As my noble friend said, we shall not oppose them tonight, but their impact will be serious and will certainly reduce the quality of life of far too many people in this country.