Social Security (Up-rating of Benefits) Bill

Lord Davies of Brixton Excerpts

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I echo the thanks offered to the Minister for the open way in which she has presented these proposals and for the extent to which she has been prepared to talk to us about them. It gives me great pleasure to follow the noble Baroness, Lady Altmann. She made a compelling case; not quite compelling enough for me to agree with it but, for the life of me, I do not understand why the Government do not agree with it. It seems a straightforward way for them to proceed. I hope that there will be further debate on this in Committee.

Other speakers have and will draw attention to the Government’s shameful decision to break their election manifesto promise to retain the triple lock, as my noble friend Lady Drake has made clear. I want to talk about what the triple lock is for, why we have it, why it is important and why it should apply to the increase to the state pension in 2022.

The triple lock was introduced by George Osborne in his Budget speech, following the formation of the coalition Government in 2010. He promised that, from 2011, the basic state pension would be linked to earnings. He went on to say that pensioners would

“be protected by our new triple lock, which will guarantee each and every year a rise in the basic state pension in line with earning or prices or a 2.5% increase, whichever is the greater.”—[Official Report, Commons, 22/6/10; col.180.]

This was the first time the phrase was used in Parliament.

This was not the Chancellor’s idea, as the noble Baroness, Lady Smith of Newnham, pointed out. We have to acknowledge that the structure of the triple lock was included in the coalition’s programme for government as an almost word-for-word lift from the Liberal Democrats’ 2010 manifesto. The link to earnings was in the Tory manifesto but the triple lock was not. Credit where credit is due to the Liberal Democrats, although I think it was probably as much of a surprise to them as it was to the rest of us that they turned out to have the opportunity to make good on their commitment. What is not clear from the manifesto, the coalition Government agreement or the Budget speech is what the triple lock was for, apart from general comments about fairness to pensioners or that pensioners deserved dignity and respect in old age.

The implication is clear: many thought of it in pragmatic terms of keeping pensioners’ income in line with those who are in work, while avoiding the embarrassment of an under-inflation increase or one of 75p. But any triple lock based on the highest of three separate figures is bound to result in what is described as the ratchet effect; in other words, over time, the pension covered by the triple lock is bound to increase by more than the increases determined by each of the individual elements, including earnings. In other words, the job of the triple lock is not just to protect pensioners in terms of earnings or prices: it is, over time, to achieve real increases in their incomes when measured against either of these indices. I argue that this ratchet effect is an inherent part of the triple lock which is enshrined in legislation. It is not an anomaly, a statistical quirk or something to be discarded when it is no longer convenient. It is an inherent feature of the triple lock—a feature, not a bug.

Whether you agree or not depends on whether you think that the state basic pension or the new state pension are currently high enough. If you think that they are, you do not need the triple lock, but if you want to see them increased, as I do, then the triple lock has a proven track record of gaining ground on that objective. It is not pretty but it appeared to work.

Again, some credit has to be given to Governments over the last 11 years, during which, because of the ratchet effect rather than any explicit policy decisions, there has been an increase in the state basic pension from 17% of average full-time earnings to 19% in 2020. That is too little and too slow, but it is real, nevertheless. Perhaps we could have a debate about what level of flat-rate state pension we need and what should be the target when we have a ratchet effect, but it is clear that 19% is not enough; it is well short of the 26% that was reached back in 1979. These benefits are not just inadequate; there is a long way to go before they become adequate. We definitely still need the triple lock. I am prepared to take something better and faster to replace it, but it is what we have got.

It is important to emphasise that the key advantage of the ratchet—of moving towards an adequate level of the flat-rate state pension—is that it is automatic. Until now at least, it has not been affected by short-term political considerations. I am afraid that the record of all Governments between 1979 and 2010 demonstrates that we cannot rely on ad hoc decisions to achieve increases in state flat-rate pensions. We need a mechanism that, like the triple lock, builds in a presumption that, over time, there will be increases in real terms.

This brings us to the increases due in 2022, as determined by this Bill. I believe that we can and should stick to the triple lock, as provided in legislation. Taking the increases to be made in 2021, 2022 and 2023 provides an ideal opportunity to achieve a significant increase in flat-rate pensions towards a more adequate level. This can be only a good thing. No doubt, it will be pointed out that this has to be paid for, but for today’s debate I will dodge that issue, although I understand that my noble friend Lord Sikka will touch on it. I would like to make clear, however, that I support increases in taxation for those with the broadest shoulders to meet clear social need and, in particular, the restoration of the Treasury supplement to the national insurance fund.

I want to direct a few remarks to another feature of the triple lock. Too often in these discussions there is the implication that it applies to the totality of state pensions—people have repeatedly said today that the triple lock applies to state pensions. That is not correct: it applies only to the flat-rate elements. The rest of each individual state pension—whether the additional pension, increases for deferment or the graduated pension—is increased only in line with CPI. In practice, this means that those pensioners with smaller state pensions, for whom the flat-rate pension is a larger proportion of income, get a higher percentage increase. Equally, those with higher state pensions get a smaller percentage increase. This effect is magnified when you take pensioners’ other incomes into account, where the increases that they receive tend to be in line with prices or less.

I have done some calculations of the impact on pensioners’ incomes if we stick with the existing triple lock. Using data on pensioners’ incomes and looking at single pensioners, I estimate that a pensioner at the lower end of the income scale—most of whom, of course, are women—on the first decile of income distribution will see an increase of about 7.5% if we stick with the triple lock. If we net off the expected increase in CPI of around 3.5%, the poorest pensioners get a 4% increase in price terms and less in earnings. Even after that increase, they will still be on only £170 a week total income.

A pensioner at the higher end of the income scale, on the ninth decile, will see an increase of about 4.5% in their overall pension. If we net off the expected increase in CPI of about 3.5%, the poorest pensioners will get a 1% increase in price terms—in earnings terms it probably means a standstill—but the better-off pensioners are, if anything, still falling behind. So the triple lock gives the greatest proportionate help to the poorest pensioners.

I want to draw the attention of the House to a serious defect in the triple lock that needs to be addressed. There is not enough time today to go into the details, but it needs to be understood that the triple lock discriminates between pensioners like myself, who receive the basic state pension, and those who reached their state pension age on or after 6 April 2016 and are entitled to the new state pension. As the rule stands, we older pensioners will receive smaller increases than those who retired more recently, even where our rights are identical. It looks likely in the coming year that this will not be a problem, but in the longer term it is a real issue, and it will not go away.

Social Security (Up-rating of Benefits) Bill

Lord Davies of Brixton Excerpts

Committee stage
Tuesday 26th October 2021 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, there are two issues being discussed in Committee that I particularly want to address. First, what should be the provisions to determine the operation of the triple lock? Secondly—a distinct issue—what is the desirable level of the fixed-rate state pension, and how can we get there? These are clearly linked but distinct issues, which is why I sought to have them grouped apart. In this group, Amendments 1 to 4, we are dealing with the first issue. The question is: how should the triple lock work? We need to thank the noble Baroness, Lady Altmann, for her work in producing these amendments, as well as the Minister, for the immense amount of time and effort she has put into explaining the Government’s position.

On the clause stand part debate, I will say that I am in favour of the 8% increase; I will explain why at that stage. However, as I said at Second Reading, given the Government’s clear and unambiguous commitment in their election manifesto to sticking by the triple lock, I do not understand why they are not prepared to adopt one of the approaches proposed by the cross-party group of noble Baronesses before us today. Unfortunately, of course, we have a Government who are now in the habit of breaking their promises; in this case in a relatively blatant fashion and, as has been explained, unnecessarily.

The Minister should understand that her Government’s refusal to give any consideration to any of these proposals is why there is so much fear—in this House and more generally—that this is not a one-off, that a precedent will be set that will be attractive to austerity-minded Chancellors in future, and that other excuses for breaking the link will be found. This is clearly not a party-political point. No one could accuse Age UK of being partisan, but it has said that

“it’s asking a lot for older people to believe that any scaling back of the triple lock would only be temporary, rather than permanent.”

The organisation goes on to point out that

“some of the prominent voices arguing for a suspension of the triple lock in response to the pandemic, are the same people who have called for its abolition in the past.”

The only way for the Government to mitigate these widespread concerns is to demonstrate commitment, either by sticking to the current legislation or, more likely in practice, through an appropriate amendment to this Bill. Such an amendment is now necessary to demonstrate the Government’s continued commitment —in practice and not just in fine words—to the key earnings element of the triple lock.

We must thank the Minister for her letter—which eventually reached me—and her explanation of why the Government believe that it is so difficult to adopt another definition of the earnings increase that would satisfy Section 150A of the Social Security Administration Act 1992. I am also glad to have had meetings with the Minister, at her instigation, to discuss the issue in detail. I thank her. But the case essentially comes down to “legal risk”. Unfortunately, I still find the argument less than compelling. On the face of it, the choice of the index is a decision for the Secretary of State. Subsection (8) could not be more definitive:

“The Secretary of State shall estimate the general level of earnings in such manner as he thinks fit.”


This puts it in the hands of the Secretary of State, so long as, that is, she does it in a way that is not irrational.

In truth, it is the decision to drop any link to earnings that is irrational—and, anyway, if it were correct that the Secretary of State’s choice is so open to challenge, it would be surprising that it has not been challenged in the past. For example, the prices index is based on a single month, September, whereas earnings are based on the three-month average from May to July. What sense does that make and why has one or other choice not been challenged? Earnings indices, along with those for prices, are inherently a matter of judgment and interpretation. It is not as though there is one true earnings index buried under the data that might ultimately be revealed in the course of legal action. Is any court really going to substitute its judgment for that of the Secretary of State? I am afraid that the excuses being offered for why the Government are unwilling to accept the approach suggested in these amendments bear all the hallmarks of post hoc-ism, the sort of clutching-at-straws justification that is commonly introduced to justify a decision that has already been made. The Minister has to understand that this is exactly why so many people continue to doubt the Government’s protestations that this is simply a one-off.

For these reasons, I shall support Amendments 2 and 3, in the spirit of helping the Government out of a hole that they have dug for themselves. Unfortunately, although I often agree with the noble Baroness, I am against Amendment 4. Just to give a brief history lesson, the idea of predicting prices figures is fatally flawed. I criticised it back in 1975 when my pensions hero, Barbara Castle, tried it, and I am against it now. Unfortunately, we are not allowed to use visual aids in this Chamber, but those noble Lords who have to hand the House of Commons briefing document can turn to page 22 and see a graph of the real value of the basic pension against earnings. Noble Lords will see that in 1975, when Barbara Castle was Secretary of State, there was a sharp downward dip, which is when they decided to adopt a projected rather than a hard figure. I am against it—I am sorry, because I am sure that the intentions are the best, but it gives too much scope for the Government to adjust the figures.

[Baroness Lister of Burtersett (Lab)]

My Lords, at Second Reading I accepted the Government’s case for not increasing pensions by 8% or so, and I called for a review of the triple lock, because of the arbitrary nature of the triple element of the lock—that is, the 2.5%—while emphasising the importance of maintaining pensions and related benefits relative to average earnings as a general principle. I therefore support Amendments 1 and 2, which are consistent with that argument.

At Second Reading, as we have heard, the Minister argued that there was no robust methodology for establishing what the underlying increase in earnings had been this last year. But surely the ONS range of estimates, on which these amendments are based, is at least based on some kind of methodology, which is more than one can say about 2.5%, which can be used to increase pensions should it exceed earnings and prices. As it is, the jettisoning of earnings this year has given rise to understandable fears that the earnings link might be abandoned altogether in the longer term, just as it was by the Conservative Government in 1980, leading to a steady deterioration in the position of pensions relative to average earnings during the following two decades.

Moreover, the case for basing pensions on the underlying increase in earnings is the stronger, given what is happening to inflation, which is addressed by Amendment 4. All the indications are that inflation is going to rise above the 3.1% on which the uprating will be based. The Bank of England’s chief economist has warned that it could go as high as 5% in the next few months. For pensioners and others reliant on social security, the effective rate of inflation is likely to be higher still, given the differential impact of inflation when the increase in basics such as fuel and food, which constitute a disproportionate part of low-income budgets, is a key driver of inflation, as already mentioned. I raised this issue at Second Reading and asked the Minister whether she would undertake to look at how the problem might be addressed, but she did not respond then or in her subsequent letter.

The other day, the Chancellor said:

“I know that families here at home are feeling the pinch of higher prices and are worried about the months ahead. But I want you to know, we will continue to do whatever it takes, we will continue to have your backs—”


whatever that means—

“just like we did during the pandemic.”

The amendments we are debating here today would be one way of doing whatever it takes. I hope, therefore, that the Minister will take them seriously and, if she does not accept any of them, explain how the Government will do whatever it takes to protect those reliant on social security in the face of rising inflation.

Finally, on pension credit, the subject of Amendment 3, I believe that the uprating should be protected legally. But I would like to return briefly to the issue of take-up raised at Second Reading by the noble Baroness, Lady Bennett of Manor Castle, which also has implications for later amendments on pensioner poverty. I welcome the willingness of Ministers—and our Minister in particular—to discuss with Peers ways of improving the lamentably low take-up rate. I had understood that it had been agreed that one way of doing so was to include a suitably arresting and well-designed leaflet or similar in communications with pensioners. I have received a couple of communications from the DWP since then, neither of which has drawn my attention to pension credit. Just last week, the letter I received about the winter fuel allowance made no mention at all of pension credit. Could the Minister tell us whether the idea of such a leaflet has been abandoned and, if so, why?

--- Later in debate ---

[Baroness Altmann (Con)]

My Lords, very briefly, I have added my name to Amendments 5 and 6 and I support the thrust of these amendments. I urge my noble friend the Minister to look seriously at the merits of investigating the poverty levels that are rising among pensioners. Indeed, I urge her to accept some of these looking at the gender issues—so not just pensioner poverty but relative pensioner poverty between men and women—in her new role as Minister for Women, on which I congratulate her. I support these amendments and I look forward to hearing my noble friend’s comments.

[Lord Davies of Brixton (Lab)]

My Lords, I just want to add that we have a complete lack of information on these proposals. As a matter of law, when the regulations come, they have to be accompanied by a report from the Government Actuary. In effect, we are making the decision now—the regulations are just a carry-on of the Act—and it is really unfortunate that we do not have before us the information that Parliament has decided should be available to us when we deal with these regulations.

[Baroness Janke (LD)]

My Lords, I thank the noble Baroness, Lady Sherlock, for her amendments and for the information she has drawn to our attention. I share her concern at the lack of impact assessments of the proposed uplift on the most affected groups. The increasing pensioner poverty that we are all aware of and the poor take-up of pension credits, which are important as a passport to other benefits, are matters we are all extremely concerned about. I agree that pension increases are fast outstripped by rising costs, and I certainly fear a winter crisis, with increased energy prices and their effect on those who most need heat to keep their homes healthy and warm.

We heard from the noble Baroness, Lady Boycott, about how poor pensioners do not want to claim food —they do not want free food, they would rather starve than do that—and I believe that that is certainly an element in the uptake of pension credit. Again, we all worry that we are going to see more and more food banks and people unable to feed themselves as costs rise. The noble Baroness, Lady Drake, raised the whole issue of regional poverty and inequality. Certainly, when you look at the statistics across the regions, they are quite breath-taking. I believe we need much more information, as the noble Lord, Lord Davies, said, particularly about regional inequality. I wonder why we do not have this information when the Government have such a strong levelling-up agenda. How will they address these issues without adequate information on which to base decisions?

My amendment in this group highlights the unfairness experienced by many women as result of the pension gender gap. I will point out the current situation. The average pension pot for a woman aged 65 is one-fifth of that of a 65 year-old man. Women receive £29,000 less state pension than men over 20 years and this deficit is set to continue, closing by only 3% by 2060. Many women are wholly dependent on the state pension and as a result of this situation, we should take a particular interest in conducting impact assessments on the uprating of pensions on poverty. I support the measures proposed in this group and look forward to the Minister’s response.

--- Later in debate ---

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

My Lords, may I make it clear that this is not an amendment? We are debating a straight question of whether Clause 1 should stand part of the Bill or not: in other words, whether it is accepted or not.

[Lord Davies of Brixton (Lab)]

My Lords, I am pleased to speak in support of my noble friend Lord Sikka and in favour of retaining the existing legislative provisions by leaving out Clause 1 entirely. As the noble Baroness said, it is about whether Clause 1 should appear in the Bill at all. Clearly, to leave it out would vitiate the entire Bill but it would invite the House of Commons to think again, which is the primary role of this House. The intention now is to enable those of us who believe it would be reasonable and right to go for the full 8.3% increase that the Government have stated is the appropriate figure to debate it.

The triple lock has come in for some criticism. It does not enjoy universal support. I understand some of those criticisms and perhaps, in a perfect world, it should not be necessary. We would like to live in a world where pensioners would simply share in the same increases in living standards as those enjoyed by the working population. This is not where we are. For me, the triple lock serves a dual purpose. First, it is needed to protect pensioners’ living standards. Secondly, and in some ways more importantly, it is a way of increasing the flat-rate benefits towards a more adequate level. I am glad to say that I do not have to expound at length on that point because the case has been made so clearly by my noble friend Lady Drake. It is an accelerator which will project the basic pension to a more adequate level.

What is clear is that it is not at an adequate level at present, which is why what is described as the “ratchet effect” of the triple lock is so important; of course, the same would be true of a double lock, based on prices and earnings, which is why we shall return in a moment to the important role of the 2.5% element. Introduced as a political fix at a time when inflation was somewhat higher than it has been for most of the last decade, it has turned out to be of real benefit to pensioners.

As was so clearly explained by my noble friend Lady Drake, the job of the triple lock is not just to protect pensioners in relation to earnings and prices; it is, over time, to achieve real increase in their incomes when measured against either of these indices. As I have said before, it is an inherent feature of the triple lock, not a bug. Whether you agree depends on whether you think the state basic pension or the new state pension are currently high enough. If you think they are, you might consider that we do not need the triple lock, but if you want to see them increase, as I do, the triple lock has a proven track record of gaining ground on that objective. The triple lock may not be pretty, but experience has shown us that it works. During periods when the triple lock—or, in the case in the long-distant past of the 1974-79 Labour Government, a double lock—has applied, we have seen a consistent incremental move of the state flat-rate pension towards a more adequate level.

The element of the triple lock that has attracted most criticism, not least from my noble friend Lady Lister, is the 2.5% minimum increase. It has been said that it is arbitrary and without any justification. Maybe, but so are many other figures in legislation. When we analyse the real increase that pensioners have benefited from since 2011 with the triple lock, almost half the improvement has been due to the 2.5% element. To me, that in itself justifies its inclusion. Does anyone here believe that the basic state pension should be 18% of earnings rather than 19%? It might not sound like much but, to the poorest pensioners, everything counts.

Perhaps we need a debate about what level of flat-rate state pension we need and what the target should be when we have a ratchet effect. I would favour a commission to address the issue, building on the work of the earlier Pensions Commission, which set out the present structure of pension provision in this country. The commission itself did not feel able to specify with any precision what the basic pension should be in earnings terms, but the structure it established depends as much on the level of the flat-rate element as it does on the pension produced by automatic enrolment. I am pleased, therefore, to see that more work is being done in this area, through initiatives such as those from the Living Wage Foundation and the Pension and Lifetime Savings Association, with its retirement living standards.

Particularly given the hour, now is not the time to have a full-scale debate on the conclusions of that work, although it would be valuable to do so when appropriate. What is clear from the work that has been undertaken is that 19% is not nearly enough; it is well short even of the 26% that was attained back in 1979. These benefits are not just inadequate; there is a long way to go before they can become adequate. Consequently, we definitely still need a triple lock and its ratchet effect, and I would be prepared to see something better and faster replace it. That brings us to the increases due in 2022, as determined by this Bill. I believe that we can and should stick to the triple lock, as provided in the legislation, which means the 8.3% increase. Taking the increases to be made in 2021, 2022 and 2023, this provides an ideal opportunity to achieve a significant increase in flat-rate pensions towards a more adequate level in the longer term, which can only be a good thing.

It will no doubt be pointed out that this would have to be paid for, with the figure of £5 billion per annum being quoted. My noble friend Lord Sikka has dealt with that but, for the purposes of today’s debate, I simply say that I support increases in general taxation on those with the broadest shoulders to meet this clear social need, with the obvious target of equalising what I still think of, in the old terminology, as unearned income, rather than earned income. I believe that this would best be done by the restoration of the Treasury’s supplement to the National Insurance Fund, for which there is already provision in legislation.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lords, Lord Sikka and Lord Davies of Brixton. Given the hour, I will be brief. I very much endorse the comments of the noble Lord, Lord Davies, about this Clause 1 stand part debate seeking to ask the other place to think again, and indeed to ask your Lordships’ House to debate this.

I would be more radical than either noble Lord who preceded me. I believe that the state pension should be set at a level where no pensioner is living in poverty—that is looking at the relative poverty levels, as outlined and widely discussed by the noble Baroness, Lady Lister. That would mean abolishing the contributory principle. Our debate tonight has demonstrated how discriminatory and actively massively unfair that is—because, as worked through now, it largely acknowledges only contributions through paid work. We know that many people, particularly women, make huge contributions to our entire society and future through care, community work and other activities which are simply not recognised in our pension system. This is leaving huge numbers, particularly of women, in a state of living that our whole society should regard as not acceptable.

I agree again with the noble Lord, Lord Davies, that the triple lock is far from perfect. We have talked about heating costs. Of course, another way in which we have very much failed our pensioners is the quality of the housing stock that they are living in. Reference has been made to the quality of council housing, but we also have a huge problem with more and more pensioners now living in private housing due to the huge privatisation of our housing stock through right to buy. Those people are living in extremely poor conditions and are placed in very difficult circumstances in that housing.

I agree with the noble Lord, Lord Sikka, that the cost of not going forward with ending the triple lock for this year—£4.7 billion—is very modest in the overall scheme of things. We have bailed out the banks. When Covid-19 hit, we bailed out many businesses. Surely we should look to bail out our pensioners.

I finish by noting that, when we talk about £14 a week, I agree with the noble Lord, Lord Sikka. There is a relatively small number of people in our society for whom £14 a week is small change, but there are very large numbers of people and pensioners for whom it is literally a matter of life and death. I invite noble Lords to consider our excess winter deaths, many of which occur among pensioners.

--- Later in debate ---

[Baroness Fookes (Con)]

My Lords, I find myself in a strange position tonight. I have made no secret of the fact that I believe it is a great error of judgment to end the uplift of universal credit or, at the very least, not to have brought it down by degrees. That said, I cannot agree with this method of trying to deal with the situation.

Perhaps I should explain that I spent many years in the House of Commons as a member of what was then called the Speaker’s panel of chairmen and as a Deputy Speaker there, as well as being a Deputy Speaker in this House, so I became very conscious of amendments and whether they were in or out of scope. It is important that those rules are observed, for the very good reason that, if you start to break them, anything can be added to any Bill and you can soon get into a real muddle. It does not always work in people’s favour, either.

I am very conscious of the fact that I believe that this amendment is outside the scope. We have certainly been advised so by the Legislation Office, but it was a conclusion that I came to on my own after many years’ experience of looking at amendments and seeing whether they were or were not admissible or out of scope. It is important to look at the Long Title of the Bill as the well as the short one; it is not a very long title, because it is not a very long Bill, but it makes provision

“relating to the up-rating of certain social security benefits”.

They are listed in this short Bill, and they do not cover universal credit.

For that reason, although I share many of the doubts and worries about universal credit—my noble friend Lord Freud made a most powerful case—my point is that this is not the way to deal with the situation. As we are a self-regulating House, if it comes to the point, I shall do my little bit of self-regulation and vote against any such amendment.

[Lord Davies of Brixton (Lab)]

My Lords, I am as keen to get home as anybody, and I was looking forward to leaving, but I would not have missed this for the world. It has been the most gripping sitting that we have had.

I have a question for the Leader of the House. I cannot add anything to the substance of the debate, and I very much agree with what has been said about universal credit, but I am concerned about what the noble Baroness said about what counts as being in scope. What was said appeared to discount the significance of the Long Title; we were told that we could amend only in terms of what was already in the Bill. Potentially, that seems extremely restrictive; in future, we could be told that something is not provided for in the Bill so we cannot introduce an amendment on that subject. In her role as speaking on behalf of the House, and not as a Minister, can I ask the Leader of the House whether it is the case that nothing has been said that is intended to restrict, now or in future, what amendments can be laid, and whether the Long Title has an important role in determining the scope of a Bill?

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, it is very late and I have not participated in the Bill before, so I shall be extremely brief. My interest is not so much in the matter we are debating; I understand that people feel very strongly about it, on both sides, but I have no particular dog in that fight. My intervention comes because I am chairman of the Secondary Legislation Scrutiny Committee of your Lordships’ House. As is well known, we produce a report every week where we try to provide a commentary on the instruments that are coming up through the process so that your Lordships have some guide—some thoughts, some suggestions—about areas that might usefully be probed as we undertake our primary role, which is of scrutiny and the ability to hold the Government to account.

I have read my noble friend the Leader’s letter with great care and I recognise and accept the seriousness of the points she makes and has spoken about this evening; that we are a self-regulating House and how this amendment, if I may summarise what she is saying, is pushing the envelope too far. I introduce to the House the concept of Isaac Newton’s third law of motion: for every action, there is an equal and opposite reaction. I think Newton’s third law of motion may explain some of the background to the issues that we are debating so strongly tonight.

The SLSC, along with many other Members of your Lordships’ House, is increasingly concerned about the use—some might say misuse or misapplication—of secondary legislation, which, as all Members of your Lordships’ House know, and the Government very conveniently find, has a very much lower level of scrutiny. So, in summary, while my noble friend may be pushing the envelope, I think the Government have been pushing the envelope in recent months and years a great deal. What do I mean? I shall give just two examples which I think are of particular relevance to our debate this evening.

Permanent changes to our laws, which probably should be introduced by primary legislation, are being rushed through in regulations, and sometimes being rushed through under the excuse that they are needed for the pandemic. Planning regulations have nothing to do with what we are discussing today but are something that may change our high streets, perhaps for ever. They have nothing to do with the pandemic, yet are now law because of regulations made under a pandemic regulation. The noble Lord, Lord Davies of Brixton, made a point about impact assessments. Regulations with sunset clauses have no impact assessments because they are going to last for less a year, and then—surprise, surprise—they are extended, they go over the year, but still no impact assessment is produced; or impact assessments are introduced long after the debate in your Lordships’ House, when regulations are in place, and are of no real value, therefore, in influencing the way the House decides.

Last week, we looked at the Motor Vehicles (Driving Licences) (Amendment) (No. 2) Regulations 2021: these concern critical issues about road safety and no impact assessment has yet been provided. If debate and scrutiny are stifled, as they are by not providing this information, the Government must expect Members of your Lordships’ House to try to find ways to get round the point, and that is what brings us to the issue we are facing tonight. The system for scrutiny has not provided a way for a proper extent of looking at and considering issues which mean so much to people on both sides of the argument that we have been discussing for the last couple of hours.

I will not go on but will conclude by saying that while of course I understand my noble friend the Leader’s concerns and worries, I say to her gently that I think there is a view in your Lordships’ House, and outside in academia, within the Hansard Society and elsewhere, that the Government, the Executive, have made a grab for power at the expense of Parliament, the legislature, and that these actions have led to the equal and opposite reaction that we are debating tonight.

Social Security (Up-rating of Benefits) Bill

Lord Davies of Brixton Excerpts

Report stage
Tuesday 2nd November 2021 Lords Chamber

Moved by

[Lord Davies of Brixton]

2: Clause 1, page 1, line 6, leave out from “if” to end of line 8 and insert “the Secretary of State had determined that the general level of earnings obtaining in Great Britain had increased by 8.1%.”
Member’s explanatory statement
This amendment would remove the provision substituting “prices” for “earnings” and retain the earnings link for the 2022-23 year by stipulating the Government will assume earnings have risen by 8.1% for the purposes of uprating. This reflects the annual increase in the index of average weekly earnings following the practice adopted by the Secretary of State in recent years.

[Lord Davies of Brixton (Lab)]

My Lords, I should first mention a non-pecuniary interest as an unpaid adviser to the National Pensioners Convention. I do not want to detain the House for too long on this amendment, not because it is not important but because I want it to start a debate rather than reach a firm conclusion.

This Bill is about the increase in state pension benefits next April—more specifically, the increases in the flat-rate basic and new state pensions. But I think such a debate makes sense only in the context of what our long-term objective is for these flat-rate elements of the state system.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

My Lords, I thank the noble Lord, Lord Davies, for his amendment. I understand his passion for retaining the link between state pension uprating and earnings growth. This passion applies even in the exceptional circumstances generated by the Covid-19 pandemic, when earnings declined by 1% one year then rebounded by 8.3% the next. By contrast, the Government increased the state pension by 2.5% last year and intend to do so by 3.1% this year. This is in view of protecting the value of the state pension despite a decline in earnings last year, protecting its purchasing power next year and having due regard to the current fiscal situation and the effects on younger taxpayers. The Bill, therefore, replaces the link with earnings for one year only with a requirement to increase these rates at least in line with the increase in prices or by 2.5%, whichever is higher.

It has been agreed by many in this House and the other place that 8.3% is an anomalous figure distorted by the slump of wages at the start of the Covid-19 pandemic and by the effects of millions of people moving off furlough back into work. The noble Lord’s suggestion of 8.1% would generate a cost of more than £4.25 billion in the year April 2022-23, relative to increasing the state pension in line with the provisions in the Bill. The Government do not believe it would be fair to younger taxpayers to increase these rates by such a high percentage on top of the 2.5% increase last year, when earnings slumped by 1% and inflation stood at 0.5%. After this year, the legislation will revert to the existing requirement to uprate at least by earnings growth, as per the Government’s triple lock manifesto commitment, and it still remains in place.

The noble Lord, Lord Sikka, raised the issue of how pensioners can access their entitlements. Noble Lords will see with the letter that has gone out today that we are committed to making sure that pensioners can access their full entitlement under pension credit. The difficulty seems to be persuading them to make a claim. We offer various ways of accruing benefits, including by telephone and post. Where necessary, the department can offer home visits. We also work with partners and stakeholders such as Age UK to help people claim, and we will continue to do so. I therefore ask the noble Lord, Lord Davies, to withdraw his amendment.

[Lord Davies of Brixton (Lab)]

I do not think the Minister really responded to my request to initiate a debate about the structure of pension provision. But I am not going away. I will raise this issue at every opportunity, and I hope that at some stage we will be able to have a productive discussion about what to me is the key issue. The technical details of the uprating basis are important but the structure is crucial. With the leave of the House I will withdraw my amendment, but the issue is not withdrawn.

Amendment 2 withdrawn.

--- Later in debate ---

[Baroness Greengross (CB)]

My Lords, I support the amendment in the name of the noble Baroness, Lady Altmann. I share with her the many years that we have been working on these issues, and I am anxious that we get the balance right on pension policy.

Amendment 3, which would restore the link between pension uprating and earnings, is essential. This link was removed back in 1980. It resulted in many years of pension rates failing to increase at the same rate as average earnings. At that time, I was at Age Concern England, where we ran campaigns calling for an end to pensioner poverty and for the link with wage movement to be restored. Sadly, when this link was finally restored, in 2011, it was done as part of the triple lock, whereby pensions would increase by average earnings increases, inflation or 2.5%, whichever of the three was the higher. For the last decade, wage movement has been stagnant, and the rate of inflation also quite low. At a time when wages were not increasing, we called on workers to pay for the triple lock, creating, in my view, intergenerational unfairness.

At Second Reading, I spoke about the Intergenerational Fairness Forum report, which made a number of recommendations, including that the triple lock be replaced with a double lock, whereby pensions increase at the rate of average earnings or inflation, whichever is the greater. I refer to my interests as stated in the register, and in particular to my role as president of the Pensions Policy Institute. In 2019, this organisation released a report entitled Generation veXed, which found that people born between 1966 and 1980, who entered the workforce before automatic enrolment and who have worked during a challenging economic climate, have poorer levels of retirement savings when compared with the generation that went before them. This Generation X cohort have been asked to fund the current triple lock, while their ability to save for their own retirement has been, sadly, rather poor.

Retirement policy requires a balance and should not change with each electoral cycle. The situation we find ourselves in today, with the Covid-19 pandemic, is that the Government expect significant wage movement. Of course, this is due not only to the pandemic; it is due also to rising prices caused by Brexit, which will put pressure on employers to increase wages.

Amendment 3 would ensure that the link between pensions and earnings was retained, but it would allow the Secretary of State to make adjustments in situations like the one we face this year. I support the amendment as a sensible solution to the situation we are facing at the present time, but I reiterate my belief that, in future, we should abandon the triple lock and specifically the 2.5% uplift, and instead have a double lock based on earnings and inflation. If in future there is concern that earnings are again not increasing, rather than implement a 2.5% increase for pensions the Government should instead look at their economic and employment policies to ensure that earnings and pensions are both increasing at a decent rate.

[Lord Davies of Brixton (Lab)]

My Lords, I support the amendments in the name of the noble Baroness, Lady Altmann. As I made clear earlier, I am in favour of a somewhat greater increase, but I am glad to have whatever is available. I want to make two additional points.

First, there is a lack of trust in the Government. The one way in which they could assuage that lack of trust is by accepting the noble Baroness’s amendment. They really need to explain to us what the downside is of accepting the amendment. One can understand that they do not want to do it, but they need to tell us the disadvantages of adopting the approach.

My second point is a sort of response to the noble Baroness, Lady Greengross. Characterising this as between generations is a category mistake. It is between people on low incomes and people on high incomes; it is between people without much money and people with wealth. That is the redistribution required. To characterise it in terms of generations is simply wrong.

[Baroness Janke (LD)]

My Lords, I again thank the noble Baroness, Lady Altmann, for all her work on this issue and the comprehensive briefing that she produced—it must have taken her a very long time, but it was extremely interesting. The issue of the uplift is cogently challenged by her presentation. I know that support for the triple lock has been from all parties in this House, but we are told that it must be suspended for another year in view of the anomalous rise in average weekly earnings, as presented by the Secretary of State in the other place. As the noble Baroness said, there was little scrutiny there. Not only that, but since the Bill went through the other place, lots of developments have occurred, such as a massive increase in energy prices, pressures on supply chains and inflation predictions, which together seem a strong reason for reconsideration of the decision taken. Having signed the amendment, I too will support it today and hope that it succeeds for that reason.

--- Later in debate ---

I beg to move.

[Lord Davies of Brixton (Lab)]

My Lords, first, I congratulate the noble Baroness, Lady Altmann, on her success in getting her amendment through. I very much hope that the Government will take the opportunity to respond positively with an amendment in lieu. However, I think it is still important to continue the debate on this amendment in the name of my noble friend Lord Sikka—to which I was pleased to add my name—as evidenced by his powerful speech introducing it.

I have already spoken so my position is clear, but I want to make three brief points. First, in all humility as a new Member, I believe that this amendment is this House doing its job. We did not vote against the Bill at Second Reading, which would have killed it. This amendment effectively sends a blank sheet back to the Commons, asking it to think again, as is our constitutional right.

Secondly, the amendment makes the point that the Bill constitutes a clear abrogation of a voluntary election promise. We must keep on repeating the point; time spent doing so is not wasted. This Government have too often broken promises—every opportunity should be taken to remind people of that.

Thirdly, the pensioners who I have worked with for decades do not understand fully the workings of the legislative process. They would find it incomprehensible if I and others did not vote against this legislation when we had the opportunity to do so. When we disagree with what is being done, it is our duty as well as our right to send the Bill back to the Commons saying clearly, “Think again.”

[Baroness Blower (Lab)]

My Lords, like the noble Baroness, Lady Ritchie, I was unable to join the debate on the Bill at an earlier stage. At this late stage, I will not, of course, be giving anything like a technical speech; I leave that to my noble friends Lord Sikka and Lord Davies. However, I have received a volume of correspondence on this matter. In this brief intervention, I will summarise the arguments in that correspondence.

All of the correspondence provides evidence, albeit anecdotal, that the removal of the triple lock will cause serious and significant financial problems. As my noble friend Lord Sikka has said, even if the triple lock is withheld only for this year, the fact is that it will have an effect in years to come. I made the point as general secretary of the National Union of Teachers that teachers’ pay being held down affects their future incomes. We know that that happens.

I will summarise the arguments, but using my own words. Growing old, many of them said, is hard enough, as we have seen from the impact of Covid-19, without having to find extra money for food and energy bills. Nationwide, millions of current and future pensioners are being condemned to a life of poverty and even, possibly, early death. Of course, these remarks do not apply to those of us above pension age in your Lordships’ House. But, as we all know, we are not typical of the pensioner population, many of whom will suffer in a very serious way if we do not uphold the triple lock; many will be faced with significant hardship. The triple lock was, after all, a guarantee, a promise, a manifesto commitment—and it ill behoves any politician to break manifesto commitments.

--- Later in debate ---

Why are the senior citizens being penalised by the Government? Why are their potential pension benefits being used to pay the national debt? I am not at all satisfied with the Government’s explanation of the use of the National Insurance Fund accounts and urge them to submit a detailed report to the House. I beg to move.

[Lord Davies of Brixton (Lab)]

My Lords, perhaps the Minister could clarify what I complained about on Second Reading and in Committee, which is the way this has worked. We have not had a report from the Government Actuary, even though one on the regulations will be required. The Minister has said that there will be an impact assessment. Will it effectively include all the material that would be in the Government Actuary’s report on the regulations?

Social Security (Up-rating of Benefits) Bill

Lord Davies of Brixton Excerpts

Consideration of Commons amendments
Tuesday 16th November 2021 Lords Chamber

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

My Lords, I know it will be a disappointment to my noble friend Lady Altmann and others in this House that the Commons has disagreed with Lords Amendments 1 and 2. I ask that this House does not insist on its amendment for two reasons.

First, we have discussed at length the reason why the Government do not believe that they should set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus. That would be the position with an adjusted measure of earnings growth, which is why the Government decided to apply a double lock, underpinned by the established consumer prices index, which is published by the ONS. This approach was also recommended by the Social Market Foundation.

Secondly, Royal Assent is needed by 22 November 2021. This will allow the Secretary of State to conduct her statutory review using the new powers in time for the DWP to meet its hard deadline of 26 November for reprogramming its computer systems. This will ensure that the new rates of benefits and pensions are payable from April 2022. While I welcome the intentions behind the amendment, we cannot accept it. That is why I ask that the House does not insist on Amendments 1 or 2. I beg to move.

[Lord Davies of Brixton (Lab)]

My Lords, it is a matter of real regret that the Commons has not accepted the amendments to the Bill proposed by your Lordships’ House, but it is worth taking this opportunity to stress that not only have the Government broken a freely given promise to the electorate but, as has been clearly explained, they have done so totally unnecessarily. They could have lessened, if not avoided, the concern caused by breaking their promise by taking this opportunity to reaffirm clearly their commitment to the earnings element of the triple lock. It baffles me why they failed to do so.

I will not repeat all the arguments, despite the importance of the issue, but I have one more question for the Minister. The problem is that the Government are trying to have it both ways. On the one hand, they say they remain committed to all three elements of the triple lock—prices as measured by the CPI, average earnings and the 2.5% minimum. They want us to believe that this was an exceptional case that justified special rules being applied, and that they still deserve the electoral kudos that comes from standing by their promises. On the other hand, they have in practice made it clear that there are exceptional circumstances in which they can break the commitment.

We know they are prepared to break the triple lock, but we do not know under what conditions. We know what they were in this case; Ministers in this House and in the Commons have explained on several occasions the special circumstances which they believe applied. The noble Baroness the Minister said at Second Reading that

“the effects of the Covid-19 pandemic have caused distortions in the labour market, which have been reflected over two years in highly atypical trends in earnings growth.”—[Official Report, 13/10/21; col. 1847.]

We know the Government believe that highly atypical trends in earnings growth are sufficient justification for breaking the earnings link. We do not know how atypical earnings growth needs to be in future before they decide again to break the link. Can the Minister tell us more about what counts as atypical earnings growth? How atypical does it need to be to justify breaking the promise?

However, it is not just earnings growth that might be considered atypical. What counts as atypical growth in prices? This is not a hypothetical issue. Most of us here have become familiar with what many in this House might regard as consistently low rates of inflation, but who knows what is to come, with the unwinding of quantitative easing and other pressures on the economy? How do we know that the Government, when faced with a significantly higher rate of inflation than we have experienced in the last 25 years, will not decide that this too is atypical?

As I say, this is not hypothetical. Based on the OBR forecast for the Budget, it looks likely that the state pension increase in April 2023, which we will discuss next November, will be based on price increases rather than earnings or the fixed 2.5%. The latest Bank of England forecast, released earlier this month, suggests that next September—the relevant month for measuring the CPI—the increase will nudge 5%. Perhaps it will be higher, given this Government’s lack of economic competence. We do not know. In any event, an increase of this order would be significantly higher than the experience of the last few years. Earlier this year, not long ago, the September 2022 increase was expected to be only around 2%—it could be argued that this is more typical. I do not want to put ideas in the Minister’s mind, but I must ask how atypical the CPI increase next September has to be before it too will be considered atypical enough for the Government to decide that it justifies breaking the Conservative Party’s manifesto commitment to the triple lock?

The Minister needs to tell us that this year’s broken promise is truly a one-off and that the commitment to the CPI-linked increase will be adhered to, whatever next September’s increase. If we are not given such a commitment—which I suspect we will not be—then, in truth, we must conclude that we have a return to decisions about increases in the state pension being made on an ad hoc annual basis. History tells us that the inevitable outcome is that pensioners will suffer.

[Lord Sikka (Lab)]

My Lords, the outcome of the vote in the Commons is immensely disappointing. It condemns millions of retirees to a life of poverty and misery. At around 25% of average earnings, the UK state pension is already the worst in the industrialised world. It is the main or only source of income for the majority of retirees, and their lives will be even harder, especially those of women. Women never got pension equality: the retirement age was increased but their pension was never equalised with that of men. Thousands will die this winter because people will have to make the harsh choice between eating and heating, and the first statistics will be emerging fairly soon. Our retirees are being hammered from every corner, whether it is on pensions or winter fuel payments, which are unchanged since 2011, or the Christmas bonus, which is unchanged since 1972, or the loss of the free TV licence for the over-75s.

In 2021-22, the state pension increased by 2.5%, and the rate of inflation, we are now told, turned out to be 3.1%—that is the way it works. For 2023, the Government are proposing an increase in the state pension of 3.1%, and the rate of inflation is, as my noble friend Lord Davies of Brixton said, likely to be 5%. That means that there is a real erosion of the purchasing power of the state pension. Pensioners are not catching up; they are being left even further behind, and all that awaits them is a life of poverty.

The Government’s arguments about affordability were comprehensively debunked in this House. It was shown that there are numerous ways—not least a £37 billion surplus in the national insurance account. A Government which claimed not to be able to afford the triple lock two weeks ago gave away £54 billion in tax cuts, including a £4 billion tax cut to the banks, which are already awash with money and do not know what to do with the £895 billion of quantitative easing either.

The Government have really skewed priorities. Personally, I would have liked to see the state pension increase by 8.3%, which would have enabled a bit of a catch-up, but I was happy to support the amendments of the noble Baroness, Lady Altmann. Yesterday, the Minister in the other place said—and the noble Baroness the Minister referred to this again—that the figure for wage growth is not “robust”. The Minister has never told us what the characteristics of a robust statistic are. In social sciences, there is no such thing which cannot be refuted. What characteristics does she assign to the word “robust”? Is the government data on unemployment robust? Is it not contestable? Is the government data on inflation not contestable? Are the Government’s claims about levelling up not contestable? I do not know what she means by that.

We were told that wage growth data were not really reliable. Lots of resources are available to the ONS and it has come up with a number between 3.6% and 5%. It says that underlying wage growth is in that range. Why is that number not considered to be robust? If the ONS is deemed to be incapable of producing a robust number for wages, why should we trust any of its other numbers which inform government policies?