Social Security Benefits

Stephen Timms Excerpts

Tuesday 4th February 2025 Commons Chamber

[The Minister for Social Security and Disability (Sir Stephen Timms)]

I beg to move,

That the draft Social Security Benefits Up-rating Order 2025, which was laid before this House on 15 January, be approved.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

With this it will be convenient to discuss the following motion:

That the draft Guaranteed Minimum Pensions Increase Order 2025, which was laid before this House on 16 January, be approved.

[Sir Stephen Timms]

In my view, the instruments are compatible with the European convention on human rights.

The draft Social Security Benefits Up-rating Order 2025 will increase relevant state pension rates by 4.1%, in line with the growth in average earnings in the year to May to July 2024. It will increase most other benefit rates by 1.7%, in line with the rise in the consumer prices index in the year to September 2024. The Government’s commitment to the triple lock means that the basic and full rate of the new state pension will be uprated by whichever is highest out of the growth in earnings, the growth in prices, or 2.5%. That will mean 4.1% for 2025-26. From April this year, the basic state pension will increase from £169.50 per week to £176.45, and the full rate of the new state pension will increase from £221.20 to £230.25.

We are fully committed to maintaining the pension triple lock. There is some confusion about the position of the Conservative party, and I hope that the shadow Minister will clarify the position when he speaks.

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

On clarification, can the Minister clarify for how much longer the state pension will be taxed? The Conservative Government stood for election on a commitment to the triple lock plus. We lost the election, but we were going to take out that fiscal drag. Can the Minister explain how long that tax will stay in place?

[Sir Stephen Timms]

My understanding, from what the Leader of the Opposition has said, is that the Conservative party is no longer committed to the triple lock, let alone the triple lock plus. I can tell the hon. Member that we do not have any plans to do what he suggests.

[Dr Evans]

I believe that under the Budget, the Government are not looking to review the position until 2028, so those on the state pension have to submit a tax return, because the state pension is being taxed.

[Dr Evans]

Agreed. That was brought in by a previous Government, and we in the Conservative party campaigned to remove it. Can the Minister confirm that the situation will remain in place until 2028?

[Sir Stephen Timms]

I simply point out to the hon. Gentleman that his party appears to no longer be committed to the triple lock. We look forward to clarification on that point from the shadow Minister.

Other components of state pension awards, such as those previously built up under earnings-related state pension schemes, including the additional state pension, will increase by 1.7% in line with prices. The Government are committed to supporting pensioners on the lowest incomes, so the safety net provided by the pension credit standard minimum guarantee will increase by 4.1%. For single pensioners, that means an increase from £218.15 to £227.10 per week; for couples, the increase is from £332.95 to £346.60 per week. We want everybody entitled to that support to receive it, which is why we launched the national pension credit campaign. We received around 150,000 pension credit applications in the 16 weeks after the winter fuel payment announcement.

[Dr Evans]

Will the Minister give way?

[Sir Stephen Timms]

I will give way one more time to the hon. Gentleman.

[Dr Evans]

I am very grateful. We do indeed want more people to take up pension credit. However, one of the biggest problems is the processing time. The response to a written question that I tabled before Christmas showed that there was a 75% success rate in getting that done within 50 days, which means that that did not happen for one in four. I later re-tabled the same question, and it turned out that the standard had got worse. What work are the Government doing to make sure that applications are processed within 50 days? Especially when it is cold and people have had their winter fuel payment taken away, it is important that those who need that support get it as soon as they can.

[Sir Stephen Timms]

The hon. Gentleman is quite right; it is important that applications are processed speedily, and I am pleased with the number of applications. I can confirm—I think he knows this—that everybody who applied before 21 December will receive, if they are successful, their winter fuel payment. We have also moved extra staff on to pension credit processing. However, the hon. Gentleman is quite right to raise that point.

Universal credit and the legacy means-tested benefits that it replaces provide support for people of working age. We have committed in our manifesto to reviewing universal credit, so that it makes work pay and tackles poverty, and we will set out shortly how we plan to fulfil that commitment. For those below state pension age, the order increases the personal and standard allowances of working-age benefits, including universal credit, by 1.7%, in line with the increase in prices in the year to September 2024. In the Budget last November, the Chancellor announced that the maximum repayment deduction from universal credit payments will be reduced from April, from 25% of the universal credit standard allowance to 15%—the fair repayment rate—and 1.2 million households are expected to benefit from that change by an average of £420 per year.

In addition, the order increases statutory payments by 1.7%. That includes statutory maternity pay, statutory paternity pay, statutory shared parental pay and statutory sick pay. Benefits for those who have additional costs as a result of disability or health impairments will also increase by 1.7%. That includes disability living allowance, attendance allowance and personal independence payment. The order will also increase carer’s allowance by 1.7%. The Chancellor announced in the Budget that, from April, the weekly carer’s allowance earnings threshold will be pegged to the level of 16 hours’ work at the national living wage. That means that, from April, unpaid carers will be able to earn up to £196 per week net earnings and still receive carer’s allowance, compared with £151 now. I am pleased to say that that move has been very widely welcomed, and we expect it to bring an additional 60,000 unpaid carers into eligibility for the benefit, and, crucially, to reduce the likelihood that carers who manage to combine some work with their caring responsibilities will inadvertently fall foul of the earnings limit, because, in future, that threshold will keep up with changes in the national living wage.

On disability and carer’s benefits, we will continue to ensure that carers, and people who face additional costs because of disability or health impairment, get the support that they need, and we will set out proposals for reform of health and disability benefits in a Green Paper in the spring.

[John Milne (Horsham) (LD)]

In my constituency of Horsham, food bank usage increased by 25% last year, and it has increased by 700% over six years. In the light of that evidence of the pressures, will the Government consider putting a minimum level on universal credit?

[Sir Stephen Timms]

I have seen representations along those lines. It is not something that we are considering at the moment, but we are, as I have mentioned, committed to reviewing universal credit, and we will do so over the course of this year. I imagine that we will be looking at a very wide variety of representations, and the hon. Gentleman and others will be very welcome to make submissions to us along those lines. Lastly, let me say a word about the draft Guaranteed Minimum Pensions Increase Order 2025.

[Jeremy Corbyn (Islington North) (Ind)]

Before the Minister gets on to the pension issue, may I just say that the order requires the Secretary of State to examine the effects of benefit uprating and the effects of the existing payment of benefits? What studies has he done on the effect of the two-child benefit cap? Secondly, last week we passed a welfare spending cap—a cap that, obviously, could be breached in the future. Will the Government revisit the whole idea of the welfare cap, with a view to abolishing it, so that we ensure that the motive force in deciding on benefits is the level of need, rather than an arbitrary figure decided by the Treasury?

[Sir Stephen Timms]

On the two-child limit, as the right hon. Member knows, we very quickly set up after the general election the child poverty taskforce, which is looking in a very ambitious way at the whole range of levers that the Government have at their disposal for tackling the problem of child poverty. We would very much like to repeat the success of the last Labour Government in reducing child poverty so dramatically in when in office. I say that with particularly strong feeling, having taken the Child Poverty Act 2010 through the House towards the end of that Government’s term. Under consideration certainly will be social security changes—we will look at what changes might be appropriate. We are not able to say whether the two-child limit will be removed, but all those things will be considered carefully during production of the report, which the taskforce will bring forward.

We are not looking, I do not think, at changing the arrangements around the overall welfare cap. Of course, there is always some confusion between the individual benefit cap and the overall welfare cap. As the right hon. Member said, there was a debate last week on the overall cap. There is certainly scope for debate about that and, indeed, the benefit cap as well, but we are not proposing any changes to those arrangements in the short term.

The draft Guaranteed Minimum Pensions Increase Order sets out the yearly amount by which the GMP part of an individual’s contracted-out occupational pension earned between April 1988 and April 1997 must be increased if it is in payment. The increases paid by occupational pension schemes help to provide a measure of inflation protection to people who are in receipt of GMPs earned between those two years. Legislation requires that GMPs earned between those two dates must be increased by the percentage increase in the general level of prices, as measured the previous September, capped at 3%. This year, it means that the order will increase the relevant part of the GMP by the September 2024 consumer prices index figure, which is 1.7%.

The draft Social Security Benefits Up-rating Order, if Parliament approves it this afternoon, commits the Government to increased expenditure of £6.9 billion in 2025-26. The changes will mainly come into effect from 7 April and will apply for the tax year 2025-26. The order maintains the triple lock, benefiting pensioners who are in receipt of the basic and new state pensions; raises the level of the safety net in pension credit beyond the increase in prices; increases the rate of benefits for people in the labour market; and increases the rate of carer’s benefits and support to help with additional costs arising from disability or health impairment.

The draft Guaranteed Minimum Pensions Increase Order requires formerly contracted-out occupational pension schemes to pay an increase of 1.7% on GMPs in payment earned between April 1988 and April 1997, providing people with a measure of protection against inflation, paid for by their scheme. I commend to the House the draft Social Security Benefits Up-rating Order 2025 and the draft Guaranteed Minimum Pensions Increase Order 2025.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

--- Later in debate ---

[Danny Kruger]

Clearly, there are questions about the long-term sustainability of our pensions system and our national insurance fund, but I think the shadow Chancellor was talking about the very long term, rather than the immediate situation that we are in. There is no intention, on the Conservative Benches anyway, to review the triple lock at this stage.

[Sir Stephen Timms]

To clarify the position further, what happened was that the leader of the hon. Gentleman’s party was asked on LBC whether she would look at the triple lock, and her reply was,

“we’re going to look at means testing. Means testing is something which we don’t do properly here.”

What did she mean by that?

[Danny Kruger]

My right hon. Friend replied, “No”, to the interviewer. We are not looking at means-testing the triple lock. She was talking more generally about the challenge of means-testing in our social security system, which is a legitimate question for us all to consider, as I shall go on to discuss.

I did not want to get too partisan in this debate, but—[Interruption.] Here we go! No, I won’t, genuinely, because the challenge of our welfare system is a shared problem that we face across the House. I will note in passing that our party’s record on welfare is a good one. We introduced universal credit, rationalising the spaghetti web of benefits that we inherited from the right hon. Gentleman when he was last in office. We made work pay and helped people off welfare and into work, and we succeeded in that, with 4 million more people in employment in 2024 than in 2010.

Let me point out that we had another mess to sort out in the public finances. When we took office, the Government were running a deficit of 9% and the Treasury was spending way more than it was earning. By the time the pandemic struck, the deficit was down to less than 1%. We were living within our means and were able to afford the generous uplifts made to benefits and pensions in the last Parliament, as well as the huge package of support that we provided during the pandemic.

I want to be fair and admit that, as the Minister suggested, the welfare system is not working properly at the moment. Too many people are being consigned to a life of inactivity and dependency, especially via the categories of sickness benefit. It is bad for those people, their communities and the country as a whole, including the taxpayer, who spends £65 billion a year on incapacity and disability benefits, rising to £100 billion a year unless reforms are made by the end of this Parliament.

So what is going on? Those terrible figures reflect the fact that we have bad rates of physical ill health, including obesity and, as is strongly evidenced in the statistics, bad backs because we simply do not move around enough in the day. The figures also reflect a rise in mental ill health, which we see in alarming rates in schools and among young people. We have to do more on those issues through all sorts of interventions that lie more with the Department for Education and the Department of Health and Social Care than with the Department for Work and Pensions. However, as the Lords Economic Affairs Committee reported last week, the rise in welfare claims cannot be attributed to worsening health or longer NHS waiting lists; the problem is growing far faster than that.

Perhaps the problem is low wages that do not attract people into employment, and that is certainly a reality. Low wages have driven demand for the immigration that we have seen get so out of control in recent years. Profound changes are under way in the world of work, away from secure employment towards a more precarious jobs market. Labour is destroying jobs, taxing employment and discouraging new hires with its new Employment Rights Bill. However, the fact is that wages have risen sharply above inflation in recent years, which is why pensions are going up by earnings this year. Employers are offering good wages but are not filling vacancies.

The issue is not health, although we have problems in health; the issue is not work, although we have big problems there—the issue is welfare. People are not being incentivised to take jobs because the offer from the welfare system is better. When I say welfare, I do not mean unemployment support. Thanks to universal credit and the last Government’s reforms, we saw record numbers of people move off unemployment benefit and into work. That is because we offered support to people to find work and imposed strict conditions that meant people had to actively look for a job. If they did not, they lost the benefit. That worked for a lot of people, but we found—here is the issue—that for a lot of other people, the incentives made them go the other way, further away from work into the sickness category, because that is where the good money is. In some cases, the money is double what they can get on unemployment benefit, and sometimes £3,000 more than the minimum wage. People almost certainly get it because the approval rates are high at over 90% for the limited capacity for work category.

This is big and unconditional money. There is no expectation to do anything about the health conditions that mean someone is signed off sick. There is no expectation of being reassessed any time soon or, indeed, ever. That is the challenge, and I hope the Government will rise to it in the same way that we rose to the crisis in unemployment benefit in the last decade.

--- Later in debate ---

[Sir Stephen Timms]

With the leave of the House, I thank everyone who has contributed to the debate. There have been some helpful contributions on important issues. I am grateful for the support expressed for the measures in the orders, and for the kind things said about me, which I will enjoy while they last. Let me thank in particular the shadow Minister, the hon. Member for East Wiltshire (Danny Kruger), for drawing attention to the contributions of others who spoke in such debates in the past. He named Paul Maynard, David Linden and Nigel Mills, and he was absolutely right to do so.

I am particularly grateful to Nigel Mills for his help in the work of the Work and Pensions Committee, and I am delighted that the Committee is now in the good hands of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). She made an important contribution to the work of the Committee in the last Parliament, and had an important and positive influence over the whole direction of the Committee. She highlighted, as she often does, the position of vulnerable benefit claimants and how they are looked after. I look forward to giving evidence to her in the Committee next week as work resumes on an inquiry of the Committee from the last Parliament.

I am grateful to the hon. Member for Torbay (Steve Darling), who called for a taper in carer’s allowance. As he will have heard, the Chancellor announced in the Budget in November that we would look at the case for a taper. I hope to be able to update the House on that reasonably soon.

I am grateful to my hon. Friend the Member for Chipping Barnet (Dan Tomlinson) for what he said. He was right to draw attention to the high level of support among young people for the triple lock policy, which matters right across the age range.

The hon. Member for Aberdeenshire North and Moray East (Seamus Logan) was right to call for certainty about pensions. People need to know what the position will be when they reach retirement age. The last Labour Government reduced the number of pensioners below the poverty line by a million. Sadly, as we have been reminded in this debate, it has gone up again over the last few years. We want to get back on the better track that we were on before. That was picked up in the remarks of the hon. Member for Leicester South (Shockat Adam).

[Seamus Logan]

Does the Minister agree that two measures that the Government could take that would make a serious impact on the levels of poverty would be to restore the winter fuel payment and abolish the two-child cap?

[Sir Stephen Timms]

I have already spoken in the debate about the two-child cap, and we will be coming forward with the report and strategy proposed by the child poverty taskforce. On pensioner poverty, I think that substantial measures will be needed, and we will come forward with those in due course.

[Dr Luke Evans]

I am grateful to the Minister for taking another intervention. He talked about planning for the future and people understanding what is going on with their pensions. We have the WASPI example where that was not seen to be the case. The new Government are making changes to inheritance tax and where pensions fall, but much of the public do not realise that that will have big implications for them as their pensions will be subject to tax and inheritance tax. Would he consider a campaign to let people know that that change is coming in the next year or so?

[Sir Stephen Timms]

I am not quite sure what change the hon. Gentleman is referring to, but I certainly agree that people need to be confident about what the arrangements will be in the future so that they can plan accordingly. That is the one of the reasons why the pensions triple lock is important, as it gives people confidence about how things will be in the future.

We are: increasing the basic state pension and the new state pension in line with earnings growth by 4.1%, meeting our commitment to the triple lock; increasing the pension credit standard minimum guarantee in line with earnings growth by 4.1%; increasing benefits to meet additional disability needs and carers’ benefits in line with prices; and increasing working-age benefits in line with prices as well, at 1.7%. This year, GMPs accrued between 1988 and 1997 must by law be increased by 1.7%, which is the increase in the consumer prices index in the year up to September 2024. The GMP is important in giving people assurance about a level below which their scheme pension cannot fall. I commend both orders to the House.

Question put and agreed to.

Resolved,

That the draft Social Security Benefits Up-rating Order 2025, which was laid before this House on 15 January, be approved.

Pensions

Resolved,

That the draft Guaranteed Minimum Pensions Increase Order 2025, which was laid before this House on 16 January, be approved.—(Martin McCluskey.)