Pensions and Benefits Uprating

Steve Webb Excerpts

Thursday 4th December 2014 Commons Chamber

[The Minister for Pensions (Steve Webb)]

With permission, Mr Speaker, I should like to make a statement about the uprating of pensions and social security benefits for 2015-16. I shall place in the Library full details of the new rates that are due to come into force from the week of 6 April 2015 for each pension and benefit. As part of his autumn statement yesterday, my right hon. Friend the Chancellor announced the rates of tax credits for 2015-16. Today, I shall announce the uprating of the pensions and social security benefits for which my Department is responsible.

The coalition Government continue to stand by our promise for those who have worked hard all their lives. We shall honour our commitment to the triple lock to increase the basic state pension by the greatest of earnings, prices or 2.5%. I can therefore confirm that the basic state pension for 2015-16 will increase by the value of the third element of the triple lock, 2.5%. Even at a time when earnings growth remains constrained, we will not repeat the mistakes of the past, such as the 75p rise in 2000.

From April 2015, the new basic state pension for a single person will be £115.95 a week, which is up by £2.85 a week, and we estimate that the basic state pension will be around 18% of average earnings—its highest comparative level for more than two decades. Thanks to the coalition commitment to the triple lock, a person on the full basic state pension will receive around £560 a year more in 2015-16 than if it had been uprated only by earnings during this Parliament. That commitment means that since coming to office, the coalition has increased the basic state pension by around £950 a year.

Let me turn to additional state pensions, which are often referred to as SERPS—state earnings-related pension schemes. Unlike the Labour party, which froze SERPS in 2010, the coalition has uprated them by the full value of the consumer prices index since 2011, and they will rise again by the full value of the CPI for 2015-16. For pension credit the statutory increase for the standard minimum guarantee is in line with average earnings, which on this occasion would mean an increase of just 0.6%. If left at that, pensioners on the lowest incomes would receive an increase of less than £1 a week, which we believe would be unacceptable. I am therefore pleased to announce that we shall over-index the standard minimum guarantee so that the increase for our poorest pensioners—those with least opportunity to increase their income in later life—will be in line with the cash value for the basic state pension.

From next year, the single person rate of the guarantee credit will rise by £2.85, which means that income from that safety net benefit will be worth £151.20 a week. For couples the increase will be £4.35, taking the new total to £230.85 a week. Of course, I look forward to a world where the new state pension is in payment, which will significantly reduce the number of people in the scope of means-tested pension top-ups.

As in previous years, resources needed to pay the above-earnings increase to the standard minimum guarantee will be found by increasing the savings credit threshold, meaning that those with higher levels of income may see less of an increase than they would otherwise have done. Measures in the Welfare Benefits Up-rating Act 2013 commit the Government to a 1% increase in the main rates of working-age benefits again this year, which includes jobseeker’s allowance, income support, and universal credit, as well as the main rate and work-related activity component of employment and support allowance. Those tough but important decisions were taken in the face of the ongoing challenge to our national economy, and debated during the passage of that Act.

This year, the coalition will again ensure that those who face additional costs because of their disability and have less opportunity to increase their income through paid employment, will see their benefits increase by the full value of the CPI. Personal independence payment, disability living allowance, attendance allowance, carer’s allowance and incapacity benefit will rise by the statutory minimum of 1.2% from April 2015, as will the ESA support group component and those disability-related premiums that are paid with pension credit and working- age benefits.

At a time when the nation’s finances remain under pressure, the Government will spend £2.5 billion extra in 2015-16. Around £2 billion, or 80% of the money, will be spent on state pensions, around £300 million will be spent on disabled people and their carers—we have over-indexed the earnings threshold for the carer’s allowance this year—and nearly £200 million will be spent on people who are unable to work because of sickness or unemployment.

The ongoing commitment to pensioners means that we have increased the state pension by around £950 during the course of this Parliament, which is £560 more than if we had uprated it by earnings alone. We have committed to spending £10 billion more on the basic state pension over this Parliament than would have been the case without our commitment to the triple lock, and we have protected our poorest pensioners with the over-indexation of the standard minimum guarantee, so that they too benefit from the triple lock. We have continued to ensure that benefits that cover the additional costs of disability maintain their value in line with the CPI. I have outlined the Government’s sustained commitment to ensuring that even in these difficult times, no one is left behind, and I commend this statement to the House.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Every year the Minister comes to the House and declares to what is supposed to be a grateful nation that the wisdom and generosity of the Government is reflected in the uprating of pensions and benefits. Sadly, the reality is rather different. The Minister said at the end of his statement that “no one is left behind”, and he rushed through the Government’s changes to working-age benefits. How do those who are working or looking for work feel about the fact that the benefits they rely on are being raised by only 1%? It is the price of economic failure. Those individuals are the same individuals who are suffering the consequences of the hated and ludicrous bedroom tax. Let us get this in context: the Government are not treating people equally. The statement makes that clear.

Some £25 billion extra has been spent on social security since 2010 because of the Government’s failures. In the end, Government spending on the most vulnerable in our society—pensioners, those looking for work and those who rely on other benefits—depends on how the economy is performing. The Government have borrowed £219 billion more than they predicted they would in 2010. Is it any surprise that those in need are not seeing the benefit?

May I pick the Minister up on his wonderful use of the term “over-indexing”? In the context in which he uses the term, “over-indexing” means simply that earnings growth has been so weak and paltry under the Government that, to ensure that those relying on benefits that would have been uprated by average earnings have some sort of reasonable increase, he is forced to increase benefits by a measure other than average earnings. That was an Orwellian use of the term “over-indexing”.

Let us put the statement in context. The Government expect the nation to be grateful for their generous and munificent benefits uprating, but they are working within a narrow economic framework imposed by their own policies. People who depend on help to get into work and help to make ends meet will not be grateful for the paltry increases.

Interestingly, universal credit is included in working-age benefits in the statement. The Chancellor claimed yesterday that the welfare cap will be met, but is that because of the excessive delays in the introduction of universal credit rather than because the Government have got to grips with the underlying drivers of welfare spending—high rents drive up costs and low pay drives up tax credit claims? The welfare cap is related fundamentally, among other things, to the progress of universal credit. Will the Minister comment on that?

The context of the statement is that the Government have been forced to borrow much more than they believed they would have to borrow. Their failing economic policy means that those in most need are paying the price. The Minister trumpets the increases to pensioner benefits and the state pension, but let us not forget—[Interruption.] From a sedentary position, the Minister says, “Questions.” The question is this: why has his economic plan failed so badly that those who depend on help from the Government are not getting it?

The context is clear: the Government’s economic plan has failed, Government borrowing is so much higher than they expected, and, in the end, those who pay the price are those most in need.

[Steve Webb]

The House is not clear whether the hon. Gentleman is saying that we should spend more or less on welfare. As far as I could tell, he was arguing for both at the same time.

The hon. Gentleman referred to a failed economic policy. Is that an economy that is growing faster than any other developed economy in the western world, and an economy in which unemployment has fallen for 24 consecutive months? If that is failure, I am not sure what success looks like.

The hon. Gentleman asked about getting to grips with underlying economic issues. Worklessness is, of course, the most fundamental underlying economic problem, and worklessness is down substantially on 2010. Unemployment is down. Full-time and part-time work are up. Those are the things that helped us to announce yesterday that welfare spending is lower than had previously been forecast.

The hon. Gentleman mocked the term “over-indexing”, which means putting something up by more than one is legally obliged to. We have done that for the poorest pensioners. I am not sure whether he opposes or supports that, but I can tell the House one thing: we have looked at what the Opposition would have done had they been in our position and had put the state pension up in line with their announced policy. We assume their policy would have been RPI until 2012 and earnings thereafter, as that is what their manifesto said. We have discovered that had Labour been in office the state pension would now be £7 a week lower than the coalition is paying. I do not think we have any questions to answer from the Opposition.

[Alistair Burt (North East Bedfordshire) (Con)]

As a former Minister for people with disabilities, I welcome the protection given to the benefits that my right hon. Friend has announced this morning. It is an object lesson in the fact that it is only a strong economy that can provide that degree of protection, in stark contrast to what we saw before. Will he say from the Dispatch Box whether is he confident that the degree of protection offered by the Chancellor is likely to continue in the future if the Government are returned in due course?

[Steve Webb]

I am grateful to my right hon. Friend. He is right that our ability to afford the substantial increases in the state pension in particular depends on a sound economic strategy. He will know that what we have been seeking to do is make sure that we have both a strong economy and a fair society, as delivered through this statement today. In terms of what happens post-2015, my right hon. Friend the Prime Minister has indicated that he wants to see the triple lock continued and I certainly want to see it continued. Indeed, I would like to see it as the law of the land after the next election.

[Mr Alan Reid (Argyll and Bute) (LD)]

I congratulate my right hon. Friend on his statement and on the tremendous work he has done over the past four and a half years after inheriting economic disaster from the Labour party. Will he confirm that the rise in the state pension next year will be more than double the rate of inflation as measured at the end of September as normal?

[Steve Webb]

Indeed. Those who follow our proceedings will note that we have had two consecutive questions from Government Members, because not a single Labour Back Bencher has any views on this subject. My hon. Friend is right. The increase of 2.5% is double the rate of inflation and quadruple our statutory duty to increase in line with earnings. Four times the statutory minimum seems like a fair deal to me.

[Robert Halfon (Harlow) (Con)]

I welcome the statement. Will my right hon. Friend confirm that the Government have a relentless focus on helping poorer pensioners? Contrary to what was said by the shadow Minister, the single room supplement does not apply to pensioners. Does he also agree that the poorer pensioners in my constituency will be on average roughly £800 better off thanks to this Government’s polices and help on pensions?

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[Steve Webb]

Yes, my hon. Friend is right that the measures we have applied to those with spare rooms in social housing do not apply to pensioners. We have specifically prioritised the poorest pensioners. Under the law, the link to earnings would have meant relatively small cash increases. We did not feel that a rise of less than £1 a week was acceptable and that is why we have passed through the full value of the cash increase in the basic state pension to the poorest pensioners—those only on the guaranteed credit.

[Richard Graham (Gloucester) (Con)]

I absolutely welcome what the Minister has had to say about the increase in the basic state pension: £950 more than in 2010 is a remarkable achievement by the Government. As he points out, it is £7 a week more than Labour policy would have paid.

In terms of some of the other remarkable comments made by the shadow Minister, the Minister might be interested to know that I was in Hammersmith Jobcentre Plus this morning. Paul, who has worked in benefits for 27 years, told me that this is the real deal. Dawn, who works there, says that what is happening is a revolution—it is the best thing happening. Does the Minister agree that there is a wonderful opportunity for the shadow Minister and all four of his Back-Bench colleagues present to visit Hammersmith Jobcentre Plus and learn for themselves what universal credit is doing for the country?

[Steve Webb]

My hon. Friend is highly expert in these matters, and he will know that the Hammersmith jobcentre has become something of a tourist attraction in demonstrating the excellence of universal credit. What is so exciting is that in previous years we would talk about something hypothetical, whereas now we are talking about something real that thousands of people are already receiving. We are rolling it out more extensively as the months and years go by. It is a very profound change in our welfare state—one that we can all be proud of.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

rose—

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[Steve Webb]

My hon. Friend is quite right that when the previous Government paid 75p, they were sufficiently embarrassed that they had to put the pension up by £5 the following year—almost to apologise. That is no way to treat pensioners. My hon. Friend is right about the triple lock, too. This morning, I did one of the many radio phone-ins I have been doing, and people have been asking me why the pension is not more. I pointed out that we had 30 years of decline to reverse from when the earnings link was broken in 1980 through to 2010, and that we are now starting to restore the real value of the pension to give pensioners some dignity and security.

[Mr Philip Hollobone (Kettering) (Con)]

There was so much good news in the Minister’s statement that I was struggling to write it all down. So that I get it right for my Kettering constituents, will he confirm that what he has just announced is a 2.5% increase in the basic state pension, which is equivalent to an increase of £2.85 a week for a single person; that the basic state pension is now 18% of average earnings, the highest comparative level for 20 years; and that since the start of this Parliament, pensions have gone up by £950 a year, which is £560 a year more than if they had simply been increased in line with inflation?

[Steve Webb]

Indeed. My hon. Friend obviously writes very quickly, and he was correct in every particular. The increase in the pension rate for a single person is £2.85 a week and it is £4.55 a week for those on what we loosely call the couples rate. I can confirm that all the figures he gave were correct.

[Henry Smith (Crawley) (Con)]

Pensioners in Crawley will very much welcome what is a generous and fair increase in the state pension. What is my hon. Friend’s observation on the fact that barely more than half a dozen Labour Members have attended this statement, particularly given the fact that this is clearly good news for pensioners up and down the country?

[Steve Webb]

My hon. Friend puts his finger on it. The Opposition have struggled to find anything to criticise in the statement. So few of them have turned up because it is a positive measure both for pensioners and for vulnerable people in our society.

[Roger Williams (Brecon and Radnorshire) (LD)]

I, too, congratulate my right hon. Friend on his statement, which will be warmly received by pensioners in my constituency and throughout the country. Some time ago, my right hon. Friend was kind enough to meet representatives of the community from Coelbren, who were concerned that they rarely qualified for the severe weather payment. The Minister explained that it was due to the postcode, but I think he realised that qualifying for that payment was a fairly rough and ready matter. Has he been able to reflect further on that, and can I give the people of Coelbren some good news?

[Steve Webb]

I well remember our meeting, poring over maps of the Welsh valleys with my hon. Friend and his constituents. As he knows, the trigger for the cold weather payment of £25 a week—let me confirm that we are retaining that payment, not the cut to £8.50 a week that Labour had planned—is linked to postcode sectors. We use just under 100 of those. We review the scheme each year, and where there are fresh representations from hon. Members, we look at them afresh. Although the system is up and running for this year, if my hon. Friend wanted to make further representations, we would of course continue to look at them.