Social Security and Pensions

Stephen Timms Excerpts

Monday 7th February 2022 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

I am pleased to follow the hon. Member for Amber Valley (Nigel Mills), who makes an important contribution to the work of the Select Committee. I agree with much of what he says.

May I start by acknowledging—as the shadow Secretary of State, my right hon. Friend the Member for Leicester South (Jonathan Ashworth), did at Question Time—the generous tribute that the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman), gave in this House to our late colleague Jack Dromey? I often heard each of them privately singing the praises of the other when Jack was the Pensions Minister’s shadow, perhaps particularly when they were both working on the plans from Royal Mail and the Communication Workers Union for the combined defined contribution pension scheme that I think is due to be launched later this year. Jointly, they have set a great example to the House. I would be grateful if the Minister present communicated that point to his hon. Friend.

This is a very singular year for social security uprating. Households, as we have been reminded, are feeling acutely the pressures of rising food and energy prices. From 2016 to 2020, as my hon. Friend the Member for Westminster North (Ms Buck) pointed out, about half the benefits covered by the draft order were frozen. Benefit incomes became completely disconnected from the real cost of living. Last September, as we have been reminded, the temporary increase of £20 a week to universal credit and working tax credit ended. Last February, a year ago, the Select Committee unanimously called on the Chancellor to extend that increase for at least a year—that view has been expressed this afternoon by the hon. Member for Waveney (Peter Aldous), too—but the call was rejected. For some people in work, the loss was mitigated, in part, by the welcome changes to work allowances and the universal credit taper rate, but others who are struggling with rapidly rising prices and with an income just from universal credit have a much lower income than a year ago.

The chief executive of the Resolution Foundation told the Treasury Committee a week ago that, taking into account the removal of the £20 a week uplift and the improvements to the taper rate and work allowances

“around three quarters of Universal Credit claimants will lose out”.

The other quarter will have a higher income, but they

“will probably have that all taken away from them in higher energy bills and in the national insurance rise… It will be particularly grim for those who did not benefit from the change because they are out of work or on very low earnings”.

Benefits are uprated each April in line with the CPI rate of the previous September, which this year is 3.1%, but, as we have been reminded, the Bank of England expects inflation to be over 7% by April. As the hon. Member for Waveney said, inflation will not be far short of the 8% by which pensions would have risen if the triple lock had been left in place last year.

Robert Joyce, the deputy director of the Institute for Fiscal Studies, argues that increasing benefits each April based on inflation in the previous September—this point was powerfully made by the hon. Member for Amber Valley—is

“not fit for the period of high and rising inflation we now face…the poorest are heading for a 3% year-on-year cut in their real benefit levels and living standards.”

The Government’s protocol on social research requires that commissioned social research should be published within 12 weeks of being received. The DWP refused to publish the NatCen report on disabled people’s experience of the benefits system. Not only did they not publish it within 12 weeks; they did not publish it at all. That is completely in breach of the clear requirement of the Government’s protocol on social research, which was adopted in 2015.

Instead the Work and Pensions Committee had to obtain the report and publish it, as we did last week. The report says that disabled people

“reported that they were often unable to meet essential day to day living costs”.

These include food, rent and heating. This 3% real-terms cut in their income will make it a great deal worse.

The IFS also points out that universal credit, as we saw in the pandemic—again, the hon. Member for Amber Valley made this point—can be changed at short notice and could be uprated at more recent inflation rates. I hope the Department will also reconsider our 2020 recommendation to

“increase the speed with which changes can be made to legacy benefit rates.”

At the start of the pandemic, local housing allowance was reset to the 30th percentile of local rents, but it has now been frozen again, as my hon. Friend the Member for Westminster North said. In our report on the five-week wait for the first payment of universal credit, we recommended keeping it at the 30th percentile, with an annual review to keep rates appropriate for each area. That has not been done, which, as my hon. Friend said, will make things progressively harder for people who depend on the local housing allowance rate.

The standard minimum guarantee in pension credit will be increased by only 3.1%, but pension credit take-up remains low. On the most recent figures: six in 10 of those entitled to pension credit actually claimed it; 76% of the total amount of pension credit that could have been claimed was claimed; and up to £1.8 billion of pension credit was unclaimed. Independent Age, the charity, has called on the Government to research who is not claiming pension credit—I hope the Government will publish the research this time—and to draw up an ambitious plan for much higher take-up over five years. Researchers at Loughborough University found that maximising pension credit take-up could lift three in 10 pensioners out of poverty and reduce the number in severe poverty by half. In July I asked the Secretary of State whether the Department would bring forward an action plan. She replied:

“I am not anticipating a big action plan, no.”

Given that pensioners on low incomes are being particularly hard hit by rising energy costs—as we will be reminded more and more frequently in the next few weeks—will the Minister reconsider?

The Guaranteed Minimum Pensions Increase Order gives pension schemes the percentage by which they need to uprate GMPs built up between 1988 and 1997. This year, as the Minister has explained, it is 3%. Some people with long periods of contracting out—and therefore large GMPs—lost out under the new state pension in 2016. The ombudsman concluded in August 2019 that

“when communicating this change, DWP did not explain that people with long periods of contracting out could be significantly worse off. It instead chose to focus only on the benefits of the new State Pension and other separate pension changes.”

It recommended that the DWP should

“review and report back its learning from our investigations…In particular, it should ensure that its literature clearly and appropriately points out that some individuals who have large GMPs and reach State Pension Age in the early years may be negatively affected by the changes. It should explicitly tell people to check their circumstances and should provide details to the public about how they can do this.”

In response—it responded rather reluctantly, but it did respond in the end—the Department produced a factsheet last August, entitled “Guaranteed Minimum Pension (GMP) and the effect of the new State Pension”. That falls a long way short of the Committee’s call in 2016 for the Government to

“focus on identifying the individuals affected, assessing their potential losses, and communicating with them”,

but at least it was something.

The Department said that it would review the factsheet after six months. The Committee wrote to the permanent secretary recently, setting out points that we would like to be covered in the review, including what steps had been taken to promote the factsheet and how many people had contacted DWP as a result. In a response last month, the permanent secretary said that nobody had so far applied for compensation as a result of reading the factsheet, and that the Department had received only four letters in response to it.

I am puzzled by that, because I received two emails just last week about this very issue. Let me read one of them to the Minister:

“I had personally been searching unsuccessfully for the GMP factsheet for months on gov.uk using a range of search terms since you spoke in parliament about this issue in February 2021…How anyone affected was expected to know it was there I will never know. There was no press release or other publicity to encourage the large numbers of people affected to look at the gov.uk site factsheet.

I was shocked to read the factsheet. It completely failed to properly inform people about the Ombudsman’s ruling that there had been maladministration or that they could claim compensation.”

The other emailer complained that the information on his company pension scheme website was misleading: that it made no reference to the factsheet so he had no way of knowing about it, and it gave him no hint that he could apply for compensation. The fact that few people have referred to the factsheet may well mean that they do not know about it, and I hope that a serious effort will now be made to draw attention to it.

I very much welcome the debate we have had this afternoon about what is the appropriate level for increasing benefits at this very difficult time. Like others, I say to the Government. “You are going to have to go further.”