Social Security Benefits Up-rating Order 2015

Lord Rooker Excerpts

Wednesday 25th February 2015 Grand Committee

[Lord Bourne of Aberystwyth (Con)]

My Lords, the Guaranteed Minimum Pensions Increase Order 2015 and the Social Security Benefits Up-rating Order 2015 were laid before the House on 19 January 2015, and I am satisfied that they are compatible with the European Convention on Human Rights.

I start by touching briefly on the Guaranteed Minimum Pensions Increase Order. The order provides for contracted-out defined benefits schemes to increase their members’ guaranteed minimum pensions which accrued between 1988 and 1997 by 1.2%, in line with price inflation as at September 2014. As the Committee will be aware, we are not here to discuss the Welfare Benefits Up-rating Order 2015, which was made on 14 January. The rates increased under that order, by 1%, were debated in Parliament during the passage of what became the Welfare Benefits Up-rating Act 2013.

Turning to the Social Security Benefits Up-rating Order, I start with the increase in the basic state pension. One of this Government’s first acts was to restore the earnings link to the basic state pension. Indeed, we went a step further and provided for a triple lock for pensioners: a commitment from the Government to increase the basic state pension each year by earnings, prices or 2.5%, whichever is the highest. This year, as 2.5% is greater than the increases in prices and average earnings, the basic state pension will increase by 2.5%, twice the increase in prices and four times the increase in earnings, which is the minimum required by law. The new rate of basic state pension will be £115.95 a week for a single person, an increase of £2.85 from last year. We estimate this means that the basic state pension will be around 18% of average earnings, its highest comparative level for more than two decades.

Our triple-lock commitment means that someone on a full basic state pension can expect to receive £560 a year more than if it had been uprated by earnings since the start of this Parliament. This commitment also means that, since coming into office, the coalition has increased the basic state pension by around £950 a year.

On pension credit, we have taken an important decision to ensure that the poorest pensioners are able to benefit from the effects of our triple lock. That means that rather than rising in line with earnings at 0.6%, the minimum required by legislation, the standard minimum guarantee credit in pension credit will be increased by 1.9%, so that the poorest pensioners benefit from the full cash value of the increase in basic state pension. Single people will therefore receive an increase of £2.85 a week, while couples will receive an increase of £4.35 a week. Consistent with our approach last year, the resources needed to pay for that above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase.

Turning to additional state pensions, I can confirm that these will again rise in line with price inflation in 2015-16 and so will be increased by 1.2%, which is the CPI level. The decisions we have taken on pensioners reflect the Government’s belief that even in difficult economic times, it is important to protect those who are less able to increase their spending power. This belief is reflected in our decision to ensure that those benefits that reflect the additional costs because of disability will be protected, too, and will be increased by the full value of CPI at 1.2%. These payments are the personal independence payment, disability living allowance, attendance allowance, incapacity benefit, the disability-related premia paid with pension credit and working-age benefits, the support component of the employment and support allowance, and the limited capability for work and work-related activity element of universal credit. Carer’s allowance and carer premia paid with pension credit and working-age benefits will also be protected and increased by the full value of CPI at 1.2%.

I ask noble Lords to note that, at a time when the nation’s finances remain under real pressure, this Government will be spending an extra £2.5 billion in 2015-16. Of that, about £2 billion is for state pensions, including an above inflation increase for the basic state pension, around £300 million will go to disabled people and their carers, and nearly £200 million will go to people who are unable to work because of sickness and unemployment.

The up-rating commitment that I have outlined today provides for increases above both inflation and earnings in the basic state pension and the standard minimum guarantee credit in pension credit. It also protects benefits that reflect the additional costs that disabled people face against increases in the cost of living. On that basis, I commend these orders to the Committee. I beg to move.

[Lord Rooker (Lab)]

My Lords, I suppose that I should declare an interest as a recipient of one of the pension benefits that the Minister has just announced. I should get that on the record. When he read out the increases, I was reminded that I was the 75p Pensions Minister. He took me back down memory lane as he spoke.

[Lord Kirkwood of Kirkhope (LD)]

I remember it well.

[Lord Rooker]

I remember it well, too.

I want to raise a very narrow point on this order. Article 10 under Part 2 concerns the rates of the personal independence payment. Within the PIP is the mobility component, which enables people to access the mobility scheme for the lease of vehicles. I was in the Commons in the 1970s when the scheme replaced the old invalid trike, so I am well aware of the positive change. I make no comment on the scheme, save to say that it has given safe access to mobility for many thousands—indeed, millions—over the years, and I hope that it will for years to come. Given that it is public money that we are dealing with, I want to call now for a full inquiry in the next Parliament by the National Audit Office, the Public Accounts Committee and the Work and Pensions Select Committee into the finances of the scheme and particularly the banker-sized salaries paid to certain individuals.

The DWP is paying the Motability charity around £20 million per annum. The charity receives about £7 million in lease levy from the vehicles used. It has a total income of about £30 million. The £20 million from the DWP is paid to a company in respect of advance payments and adaptations. The charity itself—I will come to another one in a moment—is dependent on the money in this order. The chief executive of the charity, which is over 60% dependent on public funds—the money paid from the DWP—was paid £160,000-plus in 2013.

However, the main vehicle scheme is operated by Motability Operations Group plc, a company owned by four banks—Barclays, Lloyds, HSBC and RBS. It operates as a contractor to, and is overseen by, the charity. This point is crucial because it is the link with the money in this order. The revenue of the operations company is broadly £4 billion: £2 billion from operating leases and £2 billion from the sale of vehicles at the end of the three-year lease. Six hundred cars a day are placed on the second-hand car market, and I am aware that one in my family was once such a car.

The company, Motability Operations Group, claims, on page 4 of its report, that it gets no money from the Government, but the £2 billion for leases is in fact the DWP payment—now, the PIP—paid to over half a million people. Because the people receiving the PIP have agreed to assign the DWP allowance to the scheme, it is paid directly to the operations company and it is clearly government funding. I call that public money.