Social Security (Up-rating of Benefits) Bill

Thérèse Coffey Excerpts

2nd reading
Monday 20th September 2021 Commons Chamber

[The Secretary of State for Work and Pensions (Dr Thérèse Coffey)]

I beg to move, That the Bill be now read a Second time.

Each year I am required to undertake a review of social security rates to consider whether benefits have kept pace with inflation or an increase in earnings. I will undertake that review shortly, and will report to Parliament in November. The Bill refers to how I will undertake the review.

As set out in the Social Security Administration Act 1992, there are four benefits for which there is a direct link with earnings: the basic state pension, the new state pension, the standard minimum guarantee in pension credit, and survivors’ benefits in industrial death benefit. That last benefit is devolved to Scotland, and I can confirm that we have received the legislative consent motion that is necessary. I must emphasise that the Bill does not extend to other benefits, including universal credit, where the uprating review is linked to prices.

Normally, I have a specific reference period to consider earnings growth as part of my review. That same earnings reference period has been used for the last decade. In preparing for the review last year, with regard to that reference period, we anticipated and saw an unprecedented fall in average earnings as a result of the covid restrictions that we introduced to protect lives—especially those of the most vulnerable, including many pensioners—and to protect the NHS. That was why we changed the law for one year to set aside the earnings link. Otherwise, state pensions would have remain frozen. I then made the assessment, and awarded an uprating of 2.5%, which was higher than the then inflation rate of 0.5%.

As I prepare for this year’s review, the economic context is very different from last year’s, as our economy and businesses have reopened following our successful vaccination programme and unprecedented support for businesses and households. Millions of people have moved off furlough and back into work, and we are witnessing a surge in the labour market, with over a million job vacancies. The combination of those factors has resulted in a distorting effect on wages, with a statistical anomaly.

Confirmed figures will be published in October, but provisional figures from the Office for National Statistics show an increase in earnings of 8.3%, more than two percentage points higher than at any time over the last two decades. Given that this statistical spike in earnings is due to a covid-related distortion, I am seeking the agreement of Parliament to again set aside the earnings link for just one more year, 2022-23. I have put provision in the Bill to award the higher of inflation or 2.5%, applying in effect, again, a double-lock policy. The triple-lock policy will be applied in the usual way from next year for the remainder of the Parliament. This approach has been strongly recommended by external commentators, including Sir Steve Webb, who was the Liberal Democrat Pensions Minister for the lifetime of the coalition Government. While it has come as no surprise to most of us in the House, I was disappointed by the amendment tabled by the Liberal Democrats, finding their latest bandwagon to jump on. They really should listen to Sir Steve, who probably knows more about pensions than anybody in the Liberal Democrats.

This Government are committed to ensuring that older people can enjoy their retirement with security, dignity and respect, and since 2010 the full yearly basic state pension has increased by more than £2,050 in cash terms. There are now 200,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10. I am proud of our record on support for pensioners and of the action we took last year to ensure that pensioners’ incomes continue to increase. This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions, while also preserving the spending power of pensioners and protecting them from increases in the cost of living. I commend the Bill to the House.