Social Security and Pensions

Baroness Winterton of Doncaster Excerpts

Monday 6th February 2023 Commons Chamber

[The Minister for Employment (Guy Opperman)]

I beg to move,

That the draft Social Security Benefits Up-rating Order 2023, which was laid before this House on 16 January, be approved.

[Madam Deputy Speaker]

With this we shall discuss the following motions:

That the draft Benefit Cap (Annual Limit) (Amendment) Regulations 2023, which were laid before this House on 16 January, be approved.

That the draft Guaranteed Minimum Pensions Increase Order 2023, which was laid before this House on 16 January, be approved.

[Guy Opperman]

This set of orders will increase state pensions and benefits and statutory payments by 10.1%, and the draft benefit cap regulations will increase each of the four benefit cap levels by the same 10.1% in April 2023. Lastly, the Guaranteed Minimum Pensions Increase Order sets out the yearly amount by which the GMP, part of an individual’s contracted-out occupational private pension earned by 1988 and 1997, must be increased.

We continue to protect the poorest pensioners through the pension credit standard minimum guarantee. There is also the basic state pension in place, which will increase to £156.20 for a single person, and the full rate of the new state pension will increase to £203.85. The pension credit standard minimum guarantee will increase by 10.1%. The Government understand the pressures people are facing with the cost of living, which is why, in addition to the £37 billion of support last year, we have provided support given the cost of living pressures in 2023 and are now acting to ensure that support continues between 2023 and 2024.

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[Guy Opperman]

My hon. Friend asks a legitimate question: how can we improve the situation for carers who wish to work more hours, long term? It would be wrong to give full disclosure of all discussions, but I will work out what I can say about that in my closing remarks, and I am happy to engage with him privately on the subject as well.

Under the benefit cap regulations, there will be an increase to the benefit cap of 10.1%. That will ensure that all households see an increase in their benefit following uprating. The national benefit cap will be £22,020 a year for couples and lone parents, and £14,753 for single people. For households living in Greater London, it will be £25,323 a year for couples and lone parents, and £16,967 for single people.

Under the Guaranteed Minimum Pensions Increase Order 2023, there will be an increase of 3% paid by occupational pension schemes, which means that that part of the GMP will increase by 3% from April 2023. The 3% cap strikes a balance, I suggest, between providing members with some protection against inflation and not increasing scheme costs beyond what can be afforded. I commend the regulations to the House.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

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[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate, and it is a bit of a pleasure that we are in a better position than we were a year ago, when we were looking at a welfare increase of 3% as we saw inflation forecast to hit 7% by April. We have—perhaps more by chance than judgment—a rise of 10% while inflation is actually 10%, so we at least have an uprating that looks to be the right number. However, the fact is that that is still a bit by chance, because we are still having to use information that will be six months out of date by the time we get there. It shows how strange the system we have is. When the Minister winds up, can they say whether any progress at all has been made in trying to get the systems in a position where we can use a more recent number, so that we do not end up with a repeat of last year, using an out-of-date number that is way below the level of inflation by the time we get into the year?

A 10% rise in benefits and the state pension is extremely welcome, and we should pay tribute to the Secretary of State and the ministerial team for getting that amount of money out of the Treasury, but I suspect that when the Chancellor sat down to do his emergency Budget, or several Budgets back in the autumn, he probably was not overly excited by having to find this amount of money. It was, however, clearly the right thing to do. The idea of putting up the incomes of people on fixed incomes or earning the lowest levels in the country by less than inflation would have been completely ridiculous. I think we have got to the right answer, and I welcome it. The timing of the changes has an unfortunate impact; by the time we get to April we will have had increases of just over 13% for the last two years, while inflation will have risen by about 17%, so people will still be 4% down on where they were before the crisis.

And it is worse than that. The basket of goods and services bought by most people on these benefits tends not to relate well to the consumer prices index. For example, food price inflation is much higher—more like 19%. There is no doubt that the Government have been extraordinarily generous with energy support, but if we factor in the changes to energy price support, what do we see for the coming year? The inflation figure that has been used is from September—before the move to the energy price cap, which started in October—and the price cap that drove that figure was an annual bill of £1,971. We are currently at £2,500, and the Government’s cap will mean that that number will rise to £3,000 from April, so the average household may well be £1,000 worse off on their energy bills. The rise in the state pension of about 10% is a little under that, so will only cover the rise in energy bills from the current financial year to the next.

The support will drop off quite considerably. If we add up the cost of living support, the £400 from the energy company and the £150 via council tax, the average household on the lowest incomes has had £1,200 of support this year. That will go down to £900, and the pensioner support will go down from £850 to £300. Although there will be a rise in the main benefits and pensions income, a cut to the other support and a rise in energy bills will mean that that is all gone, and most households will actually be worse off as we go into the next financial year. I am not sure that is what the Government intend.

The idea that we have to taper off the extra support for households that are earning money is right in principle, but the Government may need to keep a watching brief throughout the year on whether people living on a fixed income in retirement, on out-of-work benefits or on the very lowest incomes, can really absorb a change that could mean—by the time all the extra bills and the reduction in support have been factored in—that they are £1,000 worse off next year than they are this year. Is that what we really intend? Are we in danger of unravelling the incredibly generous support we have given in this financial year by taking it away next year, perhaps a bit too soon?

We all hope that inflation will fall considerably, and we see encouraging signs from the energy markets that prices are coming down. Perhaps by the time we get to April, the energy price forecasts for households for the next year will be a long way below the £3,000 or even below the current £2,500 cap, and this problem will go away. Perhaps the Government will be proven right in taking a more cautious approach to support for next year. Having gone to the effort to create a brand-new benefit for cost of living support, which I think is unprecedented, I hope the Minister can confirm that the Government will keep reviewing that rate to see whether we are giving households enough to get through the next financial year.

I wholeheartedly welcome today’s increases, which are clearly the right thing to do, but there are two things that the Government need to do on top of monitoring the situation. The first is to try to get this decision made on more recent, more relevant data. I accept that the systems are so old and steam-driven that we have to start doing the work in October based on the September number, and that if we do not start that early we cannot get the rises through, but it is a bit bizarre to bring to the House in February an order that we had to start programming the computer to do in November or October, and that we cannot change. If the House voted for something different tonight, it would be too late; this is plumbed into the system. We should either have this debate in November, when we can actually change it, or we should try to move the rise to a more relevant date. Given that we managed to get the £20 universal credit uplift through in a matter of weeks, I really cannot see why we could not be using more modern data. Now that we know that more of the legacy benefits will be continued on late into this decade, surely it is time to try to get a system that means we can do an uprating that reflects the real cost of living at the time that income comes in.

There is a second thing the Government should do, which the Select Committee recommended previously. We have had a slightly haphazard journey of welfare increases in the last 13 years, so it would be quite unlikely to have ended up in the right position, whereby the amount we are giving people in various household scenarios is equivalent to what they need in order to buy the goods and services that we think they ought to be able to buy. It is time to have a rebasing exercise: to go away and do the work, and work out whether we are giving the households of a single person, a couple, a couple with one child or two children, and so on, the amount of money we expect they need to live on—to be able to pay for all the essentials they ought to have. In some cases, perhaps we are. In some cases, we are probably not. But if we are, it is by fluke rather than any sort of planning, and if we are not, we are putting people in a really difficult position.

I hope Ministers can accept that there really needs to be a rebasing at the end of this crisis. If we have been through 17% or more inflation in the space of two years, that must suggest that the cost of living is in a very different position from where it was. Let us do the work. I will be very happy to find out that the benefits are in the right place and there is no need for any further increases. If they are too high—well, that is very generous, although I think it is very unlikely that they are too high. If they are too low, we need a plan to fix that. That would be the right thing to do. Let us do the work and find the evidence, and I hope we will then all be able to take an informed view when it comes to the uprating next year.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

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[Paul Maynard]

I am grateful to my hon. Friend for that intervention. He used the phrase “local welfare assistance scheme” which, sadly, could provoke me to speak for even longer than the hon. Member for Glasgow East (David Linden), because it is my specialist topic, but I ought not to go there—[Hon. Members: “More!”] Perhaps Members should wait for me and the hon. Member for North East Fife (Wendy Chamberlain) to finalise our report into emergency food aid, where they will be able to see exactly what I think.

To finish on perhaps a more fundamental point, one strength of our benefits system is that sufficient incentives are built into the structures of in-work benefits, along with conditionality—I am sorry to say that to the shadow Minister—to ensure that, as far as possible, work is seen to pay. However, that has been distorted through the more complex pattern of financial support that has emerged during covid and the wider cost of living crisis. Those living just below a particular threshold that qualifies them for extra state support get large payouts, but those just above the threshold feel greatly aggrieved. They regard it as unfair because they are being punished for being seen to do the right thing. The bedrock of our benefits system is a belief in its fairness, not just to those who need support at any one time, but to those who have to fund the system and may one day, of course, require it. Although I strongly welcome the Government’s decision to uprate benefits, we must bear in mind the needs of, and treat fairly and responsibly, not just those who are in receipt of benefits, but those who fund the system and are in work, day in, day out. They are two sides of the same coin.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Chair of the Work and Pensions Committee.