Social Security (Up-rating of Benefits) Bill Debate

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Department: Department for Work and Pensions
Stephen Timms Portrait Stephen Timms (East Ham) (Lab)
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I am pleased to follow the hon. Member for Amber Valley (Nigel Mills), who makes an important contribution to the work of the Work and Pensions Committee. I echo his words of appreciation and good wishes to the hon. Members for North Swindon (Justin Tomlinson) and for Colchester (Will Quince).

The Bill reduces an increase in the state pension that the Government’s triple lock policy would have delivered. I understand why it has been done, but let us not kid ourselves; we have a growing problem with pensioner poverty, after a quite long-sustained improvement following the introduction of pension credit 18 years ago. The charity Independent Age has analysed the Government’s households below average income statistics. Its analysis shows that pensioner poverty has started to increase again since 2012, with 18% of pensioners—more than 2 million people—in 2020 living in poverty after paying housing costs, of whom more than 1 million are in severe poverty. This is a significant challenge and it is getting worse. Of the English regions, the problem is particularly acute in London. There is no room for complacency about pensioner poverty.

The Bill will increase the standard minimum guarantee of pension credit by 2.5% or inflation—whichever is the greater—next April. When the Minister responds, will he tell us what the Department will do to increase take-up of pension credit so that more people can benefit from the increase? The most recent figures show that only six in 10 of those who are eligible for pension credit are claiming it, and that only 76% of the total amount of pension credit that could have been claimed is claimed. That is quite a significant reason why the problem of pensioner poverty is rising.

Jonathan Edwards Portrait Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
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I am extremely grateful to the right hon. Member for making that important point. In preparation for this debate, I read an incredible stat: in Wales alone, about £214 million of pension credit is not claimed. Increasing take-up would be an easy way to deal with the growing tides of pensioner poverty, but the key thing with pension credit is that it is also a gateway to other support.

Stephen Timms Portrait Stephen Timms
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The hon. Gentleman is absolutely right. That is why Independent Age has called on the Government properly to research who is not claiming pension credit, and to draw up a plan to increase take-up over five years.

Research by academics at Loughborough University found that maximising pension credit uptake could lift three in 10 pensioners out of poverty and reduce the number living in severe poverty by half. When the Secretary of State came to the Select Committee in July, I asked her whether the Department would bring forward an action plan. She replied that there had been a “media day of action” in June to encourage take-up of pension credit, and told the Committee:

“We will continue to advertise it in a different way but I am not anticipating a big action plan, no.”

That is disappointing. Given that the Bill will deny pensioners an increase that the Government’s policy appeared to promise, I ask the Minister to look again at further steps to increase pension credit take-up.

My name was also on the reasoned amendment tabled by the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), which, as he reminded the House, was not selected. However, I want to comment on the reasoned amendment that was selected, which states that we should reject the Bill because it

“fails to increase key benefits, such as making permanent the uplift to Universal Credit.”

Let me pick up that specific point. As the amendment drafted by the right hon. Member for Chingford and Woodford Green pointed out, the money that the Bill will save the Government next year would almost deliver the £20 a week uplift to universal credit next year. Many Members across the House are deeply worried by the plan to remove the uplift next month. The Select Committee’s call to at least postpone the removal of the uplift was unanimous. There are lots of different kinds of worry, which I will outline.

First, this is not the right time, because the furlough scheme is about to end. We are told that Ministers’ intention in introducing the uplift was to protect people who were becoming newly unemployed, but there will be a surge of newly unemployed people when furlough ends. Ministers told the Select Committee last week that the Government have no estimate of the number of redundancies that will follow the end of the furlough scheme, but the most recent figures showed that 1.6 million people were furloughed at the end of July. Surely the consideration given to people who became unemployed at the start of the first lockdown should be given to those losing their livelihood next week as well. What justification could there be for treating them differently?

Secondly, since the decision to introduce the uplift—especially in the past month—we have seen a surge of price rises. September’s inflation figure was a record, reflecting increased food prices in particular, and earlier this afternoon the House was considering the current steep increases in energy prices. This cannot be the right time to take £20 a week away from everyone receiving universal credit. The Select Committee recently heard evidence of people having to skip meals before the uplift was introduced. Well, their position will be a good deal worse if the uplift is taken away in a couple of weeks, because the prices they now face are so much higher, and have become so much higher in just the last few weeks.

Thirdly, what justification can there be for reducing universal credit to a historically low level? If the uplift is taken away, support for unemployed families will be the lowest in real terms for more than 30 years. The economy has grown by more than 50% in real terms over that period, but we are being asked to agree that support for unemployed families should be no higher at all in real terms than it was 30 years ago. As a proportion of average earnings, support for unemployed families will be the lowest since the modern welfare state was introduced in 1948. The Library tells me that it will be lower as a proportion of average earnings than it was when unemployment benefit was first introduced in 1911.

We are told that the Government’s priority is levelling up. This policy is not levelling up; this is a policy of grinding down. Social security has a job to do—an important job that we all recognise needs to be done. Pushing it inexorably downwards when prices are surging upwards means that it cannot do that job. People cannot focus on getting a job if they are worrying about whether they can afford to eat their next meal.

Speaking to the Committee last week, Ministers from the Department could give no reason at all for the Government choosing to set the rate of universal credit so low, other than as a consequence of historical accidents. They said that the Government had made no assessment of the impact of ending the £20 a week uplift on people claiming, nor of how many people would be pushed into poverty as a result. The Legatum Institute has today published research suggesting that the number of people in poverty will go up by 840,000, including 290,000 children, if the uplift is removed. The Government have also made no new estimate of the annual cost of keeping the uplift.

Iain Duncan Smith Portrait Sir Iain Duncan Smith
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Does the right hon. Gentleman agree that often in the briefings used there is a kind of mistake in that they talk about this as being an unemployment benefit? It is not, because it combines tax credits, so putting investment into this is more likely to get people through and into work than taking it out. That is the point I was going to make but was not able to.

Stephen Timms Portrait Stephen Timms
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The right hon. Gentleman makes a very important point that I agree with. It is a vital fact, often not understood, that universal credit is an in-work benefit as well as an out-of-work benefit. I think that 40% of universal credit claimants are in work. We have taken evidence in the Select Committee from working parents receiving universal credit who are having quite a hard time at the moment and are going to have a very hard time indeed if they lose the £86 a month that they will if the uplift is removed.

The cost of keeping the uplift, the figure that we are given, is £6 billion a year, but—the hon. Member for Amber Valley drew attention to this in the Select Committee last week—that figure was calculated when lockdown was still in place and job vacancies were much lower, so presumably the cost would be less if the uplift was kept.

The Bill misses the chance—the Liberal Democrats’ reasoned amendment gives us the opportunity to reflect on this—to address this very serious flaw in the Government’s current intentions. We are heading into an extremely difficult period for both working families and unemployed families who depend on universal credit, because of price rises across the board.

--- Later in debate ---
Guy Opperman Portrait The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
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I thank the 13 colleagues who have contributed to a wide-ranging debate. The Bill makes technical changes to set aside the earnings link for 2022-23. We will instead increase the relevant pensions and benefits by at least the higher of inflation or 2.5%. This approach will ensure that pensioners’ spending power is preserved and that they are protected from the higher cost of living, but it will also take into account the difficult decisions elsewhere across public spending.

The practical reality is that many issues were raised tonight, not least pensioner poverty. I would respectfully remind the House that pensioner poverty is going down, not up. As a result of the triple lock since 2010, the full yearly basic state pension has increased by £2,050 in cash terms. There are 200,000 fewer pensioners in absolute poverty, both before and after housing costs, as compared with 2009-10, and material deprivation—an alternative way of measuring poverty—is at an all-time low of 6% of pensioners.

Stephen Timms Portrait Stephen Timms
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Will the Minister give way?

Guy Opperman Portrait Guy Opperman
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One second.

It is worth reminding ourselves that the spending on state pension used to be £99 per person, and less than £60 billion in total—when in fact the right hon. Gentleman was the Pensions Minister under the Labour Government. Those figures are now up to £137 or to £179, and to £105 billion.

Stephen Timms Portrait Stephen Timms
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I am very grateful to the Minister for giving way, and I am delighted he is still in his post. He talked about pensioner poverty, but rather idiosyncratically, he is using the absolute measure. The much more widely used measure is the relative measure of poverty, on which the analysis of Independent Age is based, and on that much more widely used measure, pensioner poverty is of course going up.

Guy Opperman Portrait Guy Opperman
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I am not going to repeat the points I have made, but I manifestly disagree with the right hon. Gentleman. I would point out that we could add on the £24 billion of top-ups that this Government put forward over and above the £105 billion of state pension, so with respect we are in disagreement. There is also a significant degree of support for winter fuel, NHS prescriptions, free eye tests, the over-75s free TV licence and a variety of other matters.