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?

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[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.

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[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.

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[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.