Social Security (Up-rating of Benefits) Bill

Debate between Lord Russell of Liverpool and Baroness Wheatcroft

Committee stage
Tuesday 26th October 2021 Lords Chamber

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

I should point out to the Committee that if Amendment 1 is agreed to, I cannot call Amendment 2 by reason of pre-emption.

[Baroness Wheatcroft (CB)]

My Lords, I have put my name to the first three amendments because I believe that doing away with the earnings link would be a really dangerous step. I am grateful to my noble friend Lady Altmann for doing such a lot of work on these amendments and providing the Government with a percentage, 3.8%, which should of course be acceptable. Nobody in this House knows more about pensions than the noble Baroness, and she has introduced this measure so effectively that I can be relatively brief.

Relying on CPI inflation, which would happen if we did away with the earnings link, will act to the detriment of pensioners, as it does not accurately reflect how those pensioners who rely most heavily on their state pensions spend their money. Last month, for instance, the greatest downward pressure on inflation came from hotels and restaurants. It is the basics of life which absorb pensioner incomes, though, not hotels and restaurants. Their money goes on food, fuel and housing, yet we know that the September CPI figure, which would be used to determine the inflation figure for pensions, does not and cannot take account of the increases that are going to dawn on food, fuel and housing prices over the next few months. Earnings are a good guide to where basic costs will go, and we should maintain the link for pensions.

Pensioner poverty is on the rise again. In June this year, Age UK reported that more than 2 million pensioners were living in poverty. We know that very many of those might qualify for extra benefits but do not apply for them, either through too little knowledge or too much pride, so it is crucial that the basic pension—currently, shamefully, the lowest in the OECD in relation to earnings—should rise significantly. There will be some who do not need the extra cash—members of that ever-reducing band with the benefit of a defined benefit pension, or those with an investment income—but the fact that they have more money does not mean that the basic state pension should not rise at a reasonable level: the tax system can claw back the excess. Would it not have been sensible to have made sure that the levy to pay for NHS and social care reform would come from income tax rather than from national insurance, which pensioners do not pay at the moment? I believe that those pensioners who are in work should pay.

However, these amendments make sense. They work as a package and therefore I support them.