Social Security Benefits Up-rating Order 2019

Motion to Approve

Moved by

That the draft Order laid before the House on 30 January be approved.

My Lords, in my view the provisions in this order are compatible with the European Convention on Human Rights.

The Social Security Benefits Up-rating Order 2019 reflects the Government’s continuing commitment to: increase the basic and full rate of the new state pensions by the triple lock; increase the pension credit standard minimum guarantee in line with earnings; and increase carers’ benefits and benefits intended to meet additional disability needs in line with prices.

On the basic state pension, the Government’s continuing commitment to the triple lock means that, this year, the basic state pension will continue to be uprated by the highest of: earnings, prices, or 2.5%. The triple lock has been an invaluable tool in combating pensioner poverty. Maintaining it ensures that pensioners receive the financial security and certainty that they deserve.

This year, the increase in average earnings was the highest of the triple lock figures. As a result, the basic state pension will increase by 2.6%, rising from £125.95 to £129.20 a week for a single person. Consequently, from April this year, the basic state pension will be over £1,600 a year higher than in April 2010. We estimate that the basic state pension will be around 18.4% of average earnings—one of its highest levels relative to earnings for over two decades.

Three years ago, the Government introduced the new state pension, which provides a transparent and sustainable foundation for private saving and retirement planning for people reaching state pension age on or after 6 April 2016. We have also committed to triple lock the full rate of the new state pension. Therefore, from April 2019, the full rate of the new state pension will increase from £164.35 to £168.60 a week. This is approximately 24% of average earnings.

On the additional state pension, this year state earnings-related pension schemes and the other state second pensions, as well as protected payments in the new state pension, will rise by 2.4%, in line with prices. In addition, we are continuing to take steps to protect the poorest pensioner households, including through the pension credit standard minimum guarantee—the means-tested threshold below which pensioner income should not fall. This will rise by 2.6%, in line with average earnings. From April 2019, the single person threshold will rise from £164.35 to £167.25 a week—more than £1,800 a year higher than it was in 2010. Pensioner poverty continues to stand at one of the lowest rates since comparable records began. These measures will help us keep it that way.

In the 2018 Autumn Budget Statement, the Chancellor announced additional assistance for those on universal credit. As such, universal credit work allowances will rise by £1,000 once they have been increased by prices. This measure raises the amount someone can earn before their universal credit payment is reduced and directs additional support to some of the most vulnerable, low-paid, working families.

My Lords, last week I received notification from the Pension Service of the increase in my pension from 8 April, under the triple lock. If I were a hard-pressed mother, claiming child benefit and most other working-age benefits, I would not have been so fortunate.

It has become something of a tradition in these uprating debates that some of us focus on the benefits that are not being uprated because of the benefits freeze. I am sure it will come as no surprise to the Minister that I do not plan to break the tradition. It is particularly pertinent this year, given the growing pressure from a number of quarters to end the freeze a year early. I welcome the real increase in the work allowance, after it was defrosted last year. I hope that the Government will start thinking about a second earner work allowance as a targeted way of addressing child poverty and encouraging more women into paid work.

As my noble friend Lady Sherlock spelled out in the earlier tax credit uprating debate, with her customary forensic skill, the freeze has had a much greater impact on working-age benefits than was originally anticipated at the time of the Welfare Reform and Work Act 2016. This is because of higher than expected inflation, due largely to the outcome of the referendum. According to the Resolution Foundation, the overall, cumulative, real cut in benefits will amount to around 6% by this coming benefit year. The total saving to the Treasury is around £4.4 billion. That is £4.4 billion being taken out of the purses and wallets of some of the poorest members of our society.

According to House of Commons Library calculations for Neil Gray MP, the higher than anticipated inflation rate means that around £1.2 billion is being cut this coming year over and above that originally budgeted for. The Joseph Rowntree Foundation has warned that maintaining the freeze for this final year will mean 10.7 million people living in poverty missing out on £220 to help cover the increased cost of living, and as many as 200,000 more being locked into poverty. The scenario will be even worse in the event of a no-deal Brexit.

The freezes have been identified as a key driver of the increase in poverty projected by independent think tanks such as the Resolution Foundation and the IFS. The foundation’s Living Standards Outlook 2019 projects a shocking increase in child poverty of more than 1 million by 2023-24, with the figure on course to hit a record high of nearly two-fifths of children. The proportion of parents in poverty is also projected to hit a record high of nearly three in 10. While it raises questions about the actual statistics, it stresses that they do not affect the trends identified.

As well as the numbers in poverty, the impact on the depth of poverty should also concern us. The depth of poverty was highlighted in the Social Metrics Commission report on poverty measurement. Given that many of those affected by the benefits freeze will already be living in poverty, its impact is more likely to show up in poverty depth or gap statistics than in incidence statistics. I raised this issue in a QSD on the commission’s report, pointing out that the experience of poverty is very different if you are one of the more than 4 million estimated by the report to be living at 50% or more below the poverty line from that if you are one of the 1.3 million living within 5% below it. My plea that the Government should undertake to publish regular poverty depth statistics received no response from the Minister, so perhaps she could respond today.

The latest ONS statistics indicate that inequality is also starting to rise again as living standards at the bottom are squeezed by social security cuts. Housing charities have warned of the impact on homelessness of the freeze in local housing allowances. Indeed, research by Shelter suggests that by the coming financial year, four-fifths of areas in England will be unaffordable to those receiving LHAs. Even the HCLG Secretary has now acknowledged that there may be a link between the increase in rough sleeping and social security cuts.

As we traditionally use the uprating order debate to highlight the benefits freeze, Ministers traditionally respond to our concerns with a familiar set of arguments. It is disappointing that the Minister in the Commons did not engage with the arguments made across that House yesterday. I hope our Minister will do so. I will not list them all, but we are told, for instance, that the freeze was necessary because social security spending was out of control. Yet the OBR’s 2014 Welfare Trends report noted:

“The proportion of national income devoted to welfare spending has not shown a significant upward or downward trend over time”.

More recently, it estimates that on current trends, spending on the support of children and working-age people would be at its lowest share of GDP since 1990-91. That is not something to be proud of. Relevant to this is a recent addition to the ministerial quiver of arguments that the,

“UK provides more benefits for families than any other advanced nation”.

Leaving aside that the statistic includes services as well as benefits, a Question for Written Answer elicited that it relates to 2013—six years ago and before the Government’s full onslaught on social security benefits.

Also relevant is the argument that the cuts were necessary to get the public finances into order, but analysis by the LSE’s Centre for Analysis of Social Exclusion, cited by my noble friend Lady Sherlock in the tax credits uprating debate, showed that in effect social security cuts have paid for increases in tax allowances. A number of commentators, including the UN special rapporteur on poverty, have pointed out that it was a political choice in last autumn’s Budget to prioritise raising tax allowances over ending the benefits freeze, which would, in his words, have helped to “move the needle on poverty”.

Ministers are also always keen to point out that the freeze is only part of the picture and that we should also take into account policies such as the increase in tax allowances and the introduction of the national living wage. Fair enough, but raising tax allowances is regressive in its impact, providing no benefit to those whose incomes are too low to pay income tax and of limited benefit to taxpayers in receipt of universal credit. Welcome as improvements in the living wage are, they do not compensate. As the IFS explains,

“only a minority of those who are likely to gain most from the NLW are in the low-income households that stand to lose the most from the benefit reforms since July 2015. In other words, minimum wages are far less tightly targeted on those with low household incomes than are working-age benefits”.

When taking account of the whole picture, remember that the current freeze is just one of many cuts euphemistically called reforms, notably the two-child limit, the benefit cap and the cuts in real value that preceded the freeze. According to the House of Commons Library, cited by the Work and Pensions Committee, this coming year affected households will have to live on,

“incomes that are between £888 and £1,845 lower in real terms than if benefits had been consistently uprated”,