Pensions and Benefits Uprating

Sheila Gilmore Excerpts

Tuesday 25th February 2014 Commons Chamber

[Gregg McClymont]

I am afraid to say to the hon. Gentleman that, although I understand where he is coming from, it is not the case that everyone will receive the single-tier pension; people must have made contributions for 35 years. He should speak to his colleague, the Minister, who everyone recognises is an expert on the state pension. There will be poor pensioners who will not receive the new pension, and they will depend on pension credit.

I asked the hon. Member for Argyll and Bute (Mr Reid) to reflect on the reality of the difference that pension credit made, particularly in a period after 1997 when there was genuine absolute pensioner poverty.

[Sheila Gilmore (Edinburgh East) (Lab)]

Is it not the case that if it had not been for the framework that was set up by the last Labour Government—particularly the introduction of pension credit, which is clearly already accounted for in budgets—it would have been far more difficult to move to the form of pension that the Minister has proposed?

[Gregg McClymont]

My hon. Friend makes an important point. The level at which the Minister appears set to place the new flat-rate state pension is just above pension credit. It is that framework, which was set for the poorest pensioners to ensure they would no longer live in poverty, that is so important. My argument is not that the hon. Member for Argyll and Bute is entirely wrong; it is that he must take account of the difference that pension credit made to the poorest pensioners in his constituency, my constituency and around the country.

That brings me to the question that I wanted to ask the Minister, which is about pension credit. Of course it is welcome that the basic state pension is rising by £2.95, and he was very clear that pension credit will also rise by £2.95, but of course as a percentage rise, the rise for pension credit is less. The danger is that those on pension credit will fall behind relative to those on the basic state pension.

The term that the Minister used was over-indexation. A little alarm goes off in my head when Ministers resort to using such terms. A more straightforward way to put things is to say that pension credit, which the poorest pensioners rely on, is not being uprated by the same percentage as the basic state pension. There may be an excellent reason for that, but I would like to hear it.

There is also a more fundamental point about the new pension system that the Minister and the Government are introducing, which relates to the point that my hon. Friend the Member for Edinburgh East (Sheila Gilmore) made. It is that, as the Pensions Bill proceeds, the new flat-rate state pension—as I understand it—is being set just above pension credit. If pension credit loses its value relative to the basic state pension in the run-up to the introduction of the new system, there is a danger that the flat-rate state pension will be pegged at a lower rate than would otherwise be the case. We must be clear not only about the implications for the poorest pensioners of a lag in the uprating of pension credit, but about the implications for the flat-rate state pension system for which the hon. Member for Argyll and Bute is such an enthusiast. We must ask these legitimate questions. If we are to have a reasonable debate, we need to recognise the progress that was made over the past decade—certainly until 2010—and consider how that will interact with the flat-rate state pension system that the Minister is so keen on creating.

--- Later in debate ---

[Steve Webb]

With the leave of the House, I shall be grateful for the chance to respond to the three speeches that we have heard. I cannot help reflecting on the fact that we cannot manage to talk for even an hour about spending £3.3 billion, but I take it from that that the House thinks that we are doing a good job.

Before I respond to the detailed points that have been raised, I want to be clear about what we mean by above inflation, real terms and all the rest of it. The April increase in the basic state pension will be in line with inflation at 2.7%. Of course, we now know that CPI is below 2%, so despite the population experiencing inflation at that rate, we are putting up the pension by 2.7%—

[Sheila Gilmore]

Will the Minister give way?

[Steve Webb]

In a second.

That explains the reference at the end of my speech to an above-inflation increase although, as we have discussed, there will be years in which the trend goes in the opposite direction.

[Sheila Gilmore]

The Minister anticipates the point I was about to make. The situation to which he refers could apply in any year. People suffered greatly in previous years because the uprating was set at a low point for inflation, yet they experienced real rising prices, so the increase is hardly a great virtue on the part of the Government.

[Steve Webb]

It is interesting to look at what has happened to benefit rates over the long run. In the seven years since the 2008 crash, the rate of jobseeker’s allowance has increased by more than the growth in earnings. While people with jobs—people would obviously far rather have jobs than not—have seen their wages grow over that period, the rate of JSA, which I still quaintly think of as unemployment benefit, has risen by more than that growth.

The hon. Member for North Ayrshire and Arran (Katy Clark) talked about pitiful increases and slashing benefits, but I can tell her that the Labour Government spent £181 billion on tax credits, benefits and pensions in their final year in office, yet in the first year of the next Parliament, we envisage spending not £181 billion, but £211 billion. Spending £30 billion more than six years previously is an odd definition of “slashing”, so we need to keep a bit of perspective in the debate. I respect the hon. Lady’s sincerity and clearly she wishes that the increases were greater but, as she well knows, her Front-Bench colleagues will not vote against the orders, and that is not because of a technicality, but because they would not allocate money for larger increases. I know that she disagrees with her Front Benchers. If she ruled the world, she would put in place greater increases—she would tax people more and spend more—but that is not her party’s position.

--- Later in debate ---

[Steve Webb]

I did not hear the hon. Gentleman say where the extra cash would come from—the bankers’ bonus tax, perhaps? Is he saying that it should be 2.7% or not? As a debating point he is saying that it should, but he has no idea where the money would come from. [Interruption.] He says from a sedentary position that he wants me to be straight about this. Being straight with the electorate means that if he stands up in Parliament and says that the increase should be bigger, which he has every right to do, he must say where the money would come from. That is the nature of choice in government.

The right hon. Member for East Ham (Stephen Timms) asked about tax credit. Tax credit rates will be set out in affirmative statutory instruments in the usual way and debated in the usual way, so there is no difference there. He talked about the triple lock, which we are very proud of. In fact, we understand that the Opposition are going to copy it. On one level he was mocking and deriding it, but when the Prime Minister said that he would continue it in the next Parliament if re-elected, the leader of the Labour party said that

“nobody should be in any doubt about our commitment to the triple lock”.

The right hon. Gentleman ought to have a word with his leader, who thinks that the triple lock is really a rather good thing.

I want to respond to the right hon. Gentleman’s attempted demolition job on the triple lock that is now his policy. He implied that had Labour been in office, pensions would have gone up by more. There are two possible ways that could have happened. One is if Labour had continued the RPI link. We all know that the statisticians do not think that RPI is a particularly good measure of inflation, and I refer to what the hon. Member for North Ayrshire and Arran said earlier. I entirely accept that RPI is generally, although not always, bigger than CPI, but we are not trying simply to pick a bigger or smaller number. In having these annual debates, we are trying to compensate for average inflation. If society thinks that benefit rates are too low, we can do something about benefit rates. What we do not do is just pick an inflation measure because it is bigger or smaller.

We chose CPI because it is a robust and internationally standard definition. The statisticians have dropped RPI as a national statistic because they do not think that it is a good measure of inflation. When the Secretary of State looked at the increase in the general price level this year, CPI was the only number he could realistically have used because RPI is no longer regarded as an official statistic and the other new measures have not even been properly implemented yet. It is entirely open to the hon. Member for North Ayrshire and Arran to persuade her Front Benchers that we should tax people more and increase benefits, but that should be done by making a decision, not by using a measure of inflation that even the statisticians no longer think works.

[Sheila Gilmore]

I suspect that the Minister will therefore be disappointed to learn that landlords appear to think that RPI is an appropriate measure for calculating their tenants’ rent increases.

[Steve Webb]

Clearly a whole raft of decisions are made about increases. The right hon. Member for East Ham mentioned rail fares, for example, and the train operators’ revenues and some of their costs are determined by RPI. The task that the Department for Work and Pensions has once a year is to look at what has happened to the general price level, and I have not heard a single argument in this debate that CPI is not the best single measure to use for that purpose.