That this House regrets that the Social Security Benefits Up-rating Order 2022, and the decision by Her Majesty’s Government to suspend the triple lock on pensions, will result in benefit increases of 3.1 per cent in April 2022, compared to the Bank of England forecast of a 7¼ per cent increase in the Consumer Price Index for that month, and that this will result in a basic state pension for a single pensioner that will be worth £296 less in real terms compared to 2021/22, and £475 less for a couple.
My Lords, this debate has been a little time coming but I make no apology for making sure it takes place. Unfortunately, I was unable to take part when the order came before Grand Committee as I was active in the Chamber at the same time. However, I was happy to adopt the Government Whips’ idea of this separate debate on the regret Motion.
In the event, this has the advantage that we now know a lot more about where we are with the increase in social security benefits that will take place in two weeks’ time. The new information is not good. Inflation in February was higher than expected, at 6.2%, and is certain to be even higher at the beginning of April when the benefit increase comes into effect. The effect is spelled out—this is why it is good to have the debate today—in today’s economic and fiscal outlook from the OBR. This states that, because of lags in the CPI uprating of welfare benefits, benefits will fall by almost 5% in real terms. To be clear, the poorest in our society are facing a 5% reduction in their income when they are already in poverty.
Further, the OBR report states that £12 billion is being taken away from poor people and that it will take up to 18 months fully to catch up with that reduction. I could speak at length about what this means for individuals in human terms, but I will simply refer the Minister to the heartfelt contributions made in the Opposition day debate in the Commons yesterday. I urge her to take the time to read that debate if she has not already done so. That is the human cost.
I want to make three additional points, to which I invite the Minister to respond. I shall not dwell too much on the Labour Party’s position on the uprating—I look forward to my noble friend’s contribution from the Front Bench.
First, does the Minister recognise that it is no consolation to people who are already in poverty and suffering a further cut in their real income to be told that it all averages out over time? We are told, in effect, that the loss of income they are facing, and from which they will suffer in the coming year, is not that important because at some point in the future—the OBR estimates it to be in 18 months’ time—they will receive an increase that will make good the shortfall. They are already in poverty, and they will have to endure 18 months of even greater poverty because of a defect in our benefits system. For people in poverty that is simply not good enough. Eighteen months is too late, as even in the subsequent better year they will remain in poverty. They have already suffered the effect of poverty on their lives and they simply lack the resources to even out their income over the years.
My Lords, it is a pleasure to follow my noble friend Lord Davies of Brixton, who spoke with great passion and eloquence to put the Government to shame for the plight of our senior citizens, who continue to be treated very badly.
The state pension is the main or only source of income for the majority of our senior citizens—they rely upon it. The Government introduced the triple lock but, despite it, pensioner poverty has actually increased; it has not decreased. The statistics show that many of our pensioners continue to suffer. From next month, the pension will rise by 3.1%. Pensioners and others face RPI, not CPI: try buying broadband and you will be told that the price will increase by RPI-plus, not CPI. People face increases in line with RPI, which is already about 8%. Last October’s Treasury Red Book showed that by suspending the triple lock the Government were denying retirees £30.5 billion over the next five years. That is a vast sum. They will never be able to catch up or make good the lost purchasing power.
The Government do not treat our senior citizens with any equity or respect. The winter fuel payment has been unchanged since 2011. Even before the current rises that are coming our way, the winter fuel payment would have had to double simply to cope with price rises and rates of inflation—the Government never increased it. A Christmas bonus was the grand sum of £10 in 1972. If it had kept pace with inflation, it be about £150; it is still exactly £10. The Government removed the free TV licence from the over-75s. It is no good saying that there are some who will still qualify for it if they negotiate the bureaucratic maze; many will simply not be able to and will either pay or volunteer to go to prison, because the Government want to criminalise avoidance of the TV licence fee. At least some of our senior citizens will get warmth and some food there, and some may well take up that particular option.
The Government still do not like people getting old. There are no prescription charges in Scotland, but the Government here are raising the free prescription age from 60 to 66. Why England has to be an outlier, I do not know.
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Some 2.1 million retirees live in poverty—women in particular. There is no equality in the state pension age. The numbers given to me by the Minister in a response to a Written Question show that women’s state pension always lags behind that of men. If we are equalising the retirement age, why not the actual pension itself? Why is that lower? Women inevitably lose out because they are not only child-rearers but unpaid carers, and they then get penalised and condemned to a life of insecurity and poverty. That is unacceptable.
The Government have saved over £1.5 billion because thousands of retired people have died from Covid. The Government did not see fit to redistribute that £1.5 billion or more among the retired pensioners; they have simply kept it, or handed it out in various other forms of tax cuts to others. That again is utterly unfair.
We have to look at how pensioners are treated. No one can live on a state pension that is half the minimum wage. If Ministers think that is good enough, I invite them to try to live on it for a month and see how they get on—then they can recommend it to everyone else. I am willing to bet that no Minister would be able to survive. We have to aim to ensure that the state pension is not less than the living wage. If that is the minimum that people need, why is the state pension any lower? It is utterly unjust.
The Minister will say that pensioners can apply for pension credit and numerous other benefits, but the fact is that they do not because they cannot negotiate the bureaucratic maze. Trying to fill out the forms and access these things online is bad enough for many other people, but many seniors do not even have access to broadband because they cannot afford to pay for it or to buy a computer. You cannot go to your local library to use the computer there; many libraries have shut, and in many of the libraries I have visited their computers are too old—they are so slow that they seem to be steam-powered, and you cannot do the necessary work on them.
The Government have to rethink their priorities. The civility of a nation is judged by how well it treats its poor people and its senior citizens, and on that this Government would be pretty low in the league. The typical state pension in OECD countries is about 60% to 63% of the average wage; here it is 25% to 26%, and there is no justification for that. I sometimes wonder whether Ministers sit around the Cabinet table and say, “I have found a new way to hurt senior citizens. Can anyone think of anything else?”
In two years’ time, senior citizens trying to top up their meagre state pension will have to pay the extra 1.25% health and social care levy. At the same time, those who make billions from capital gains will pay zero. What is the logic in exempting those rich enough to receive capital gains from paying national insurance or a penny of the proposed health and social care levy when the Government will be charging senior citizens? If we taxed capital gains in exactly the same way as earned income and charged national insurance on that, it would raise at least £25 billion a year—more than enough to fund a massive increase in the state pension. That is assuming that Ministers do not really want to spend the money in the National Insurance Fund account, which, as my noble friend Lord Davies of Brixton pointed out, has a massive surplus.
There are numerous other ways of doing this. We could change the way that national insurance is levied. At the moment—although this is going to change next month—up to £50,300, national insurance is levied at the rate of 12%, but beyond that at only 2%, which is utterly regressive. If we said all of that were to be subject to a 12% national insurance charge, it would raise £14 billion, which would be more than enough to give our senior citizens dignity. I fully support my noble friend Lord Davies’s Motion.
My Lords, I am grateful to my noble friend Lord Davies of Brixton for tabling this regret Motion, and it is very well-timed given that today was the Spring Statement.
The Chancellor promised that he would stand by people in the face of the cost-of-living crisis, but it seems that this promise does not extend to parents struggling on social security benefits. Instead, I fear it is an attitude of “Let them stand on their own two feet”, and wait a year for “smoothing”, as benefits catch up with inflation—a year when some parents could go under with the strain. For all the talk of “security” in the Chancellor’s speech, there is nothing to address the insecurity experienced by social security recipients. Additional assistance to local authorities for discretionary help is no compensation for the security provided by weekly benefits that meet people’s needs. As the Women’s Budget Group points out in its very quickly produced Spring Statement analysis,
“The Chancellor has left women in the lurch”,
and raising social security would have done much more for those on low incomes than raising the national insurance threshold.
Since we debated the uprating order in Grand Committee two weeks ago—it feels like a lifetime, but it was two weeks ago—three research reports have been published that reinforce the arguments I put then for an additional uprating to match the inflation rate. I am not going to go over everything I said then, but the Trussell Trust pointed to a
“crisis of our social security system, which is failing to support people to keep their heads above water.”
A recent Carers UK survey found that, among carers in receipt of carers allowance or the UC carer element, nine out of 10 are already stressed and anxious about their finances, and generally carers’ financial situation has worsened considerably over the six months since it last did the survey. The findings of a new Covid Realities report published this week was summed up in the conclusion that
My Lords, I thank the noble Lord, Lord Davies, for his regret Motion, which I agree with.
It is estimated that one in five pensioners in the UK is living in poverty, that 1.3 million retirees are undernourished and that 25,000 pensioners die each year due to cold weather. As we know, the cost of energy has doubled, and older people are more susceptible to the cold, particularly if they are housebound or suffering from a disabling illness.
The Government failed to accept that inflation was going to rise at an alarming rate when benefits and the state pension were uprated for this April. They insisted on basing the uprating on September’s inflation figure of 3.1%, as usual. The Motion of the noble Lord, Lord Davies of Brixton, quotes the Bank of England’s prediction of 7.25%, but that is now being fast overtaken by events, and a figure of nearer 10% is now forecast during the year. It is unthinkable that poor pensioners, at the end of their lives, should have to experience such a sudden change in circumstances. Up to now, they have been protected by the triple lock but, because of what was seen as a one-off adjustment in incomes as a result of a recovery from the pandemic, the Government abandoned the triple lock. Had it still been in place, a rise of 8% would have equalled the predicted rate of inflation in April, when the uprating comes into effect.
Age UK has estimated that soaring energy prices will plunge 150,000 older households into fuel poverty this winter. It has said that the number of fuel poor older households could reach more than 1.1 million by the spring, unless the Government take urgent action.
We have one of the least generous state pensions of any country in Europe, and it is still below its 1979 value. The triple lock was introduced in 2010 in the light of a hugely devalued state pension. Some recovery has taken place since then, but the state pension still does not provide enough support to keep 2.1 million pensioners out of poverty.
My Lords, I rise to make a short point. Noble Lords have set out the human cost of the cut to social security earlier in the year, the failure to uprate it and to maintain the triple lock on pensions. As I understand it, the Treasury has saved £12 billion in so doing. The Minister will correct me if that figure is wrong but, whatever it is, billions have been saved.
I want to look at the other side of the equation. Those billions that have not gone to the poor people who have been described this evening is money that would otherwise have been spent, because poor people spend everything they receive: on food, on heating, on rent, and so forth. None of it is sorted away in the Cayman Islands; it is all spent money, and spent in the places where poor people live.
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The impact of not uprating the benefits that we are talking about, and the pensions and so forth, will fall on diminishing demand in the most impoverished places in our country. The impact of that will be great: it will cause more shops to close, more pubs to close, more facilities to be ended. Councils will recover even less in rateable value and so forth. The impact is magnified by the failure to maintain the levels of income that my noble friends have described.
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The question is what can be done about it. The Minister told the Grand Committee that
“It is not possible to undertake the uprating exercise any later than currently timetabled.”
But she also told the Committee that
“All benefit uprating since April 1987 has been based on the increase in the relevant price inflation index in the 12 months to the previous September.”—[Official Report, 9/3/22; col. GC 484.]
In truth, the seven-month delay goes back even longer. I recall discussing this with the relevant department back in the 1970s. I find this less than impressive. Seven months is too long when inflation can change so rapidly. Despite all the advances there have been in handling and processing data in the past 35 years, it appears that we still cannot do any better.
I quite understand the department’s resistance to making any change, but faced with the suffering caused for the poorest in our society, we must find some way to achieve a closer alignment of increases in prices and benefits. For sure the index we use could be more up to date, and I refuse to believe that this cannot be done through greater use of modern technology. The department simply needs to invest more in computerising its records. I also suggest, more radically, that where an increase falls short, an adjustment should be made during the course of the year when it becomes apparent, plus provision for back pay to cover the gap that has arisen because of the shortfall increase.
My second point is that the resources are there in the National Insurance Fund to pay higher pension increases. We have the advantage on this occasion of the welcome report by the Government Actuary that is attached to the draft order. This tells us that, for the next five fiscal years, the balance in the National Insurance Fund will increase from £53 billion at present to £76 billion in 2027. In percentage terms, that is an increase when expressed as a percentage of benefit outgo from 48% to 55%. It is worth comparing those figures with the 16.7% that the Government Actuary recommends as the minimum fund balance. It is also worth emphasising that that is without allowing for the possible Treasury grant, which is an integral part of national insurance as originally conceived. This can amount to 17% of benefit payments. It is simply untrue to say that the money is not available. It is not that the money is not there; it is that there is a political choice not to pay.
I had the benefit of a letter this morning from the Treasury Minister, the noble Baroness, Lady Scott of Bybrook—the other Baroness Scott—referring to the Government Actuary’s quinquennial review, which was presented to Parliament last week. In her letter, she states:
“Increasing spending on today’s pensioners would pass the costs onto future generations of taxpayers.”
Well, I would welcome an opportunity to discuss the quinquennial review, and perhaps the Government Whips would provide the time. However, given the limited time available this evening, I say simply that the review, while commendable, tells us only part of the story. Taking the figures from the OBR, along with those from the Government Actuary, there will be the resources available in 2085 for everyone to be better off, even if national insurance contributions reach the level suggested in the Government Actuary’s report.
My final point relates to the triple lock. How much credence can we give to the Government’s repeated promises to keep to the triple lock for the basic state pension and the new state pension? On Monday in the Commons, after some confusion on the part of the Secretary of State, she said:
“I am again happy to put on record that the triple lock will be honoured in the future”.—[Official Report, Commons, 21/3/22; col. 99.]
But she said the same thing back in 2020, and subsequently broke the promise. The Minister here made a similar commitment in Grand Committee. The truth is that we already know that this Government are prepared to break their promise to maintain the triple lock, which was given voluntarily in the election manifesto and subsequently repeated by the Prime Minister.
The explanation given by the Minister here when this was discussed in Grand Committee was that
“setting aside the earnings link in the state pension triple lock for the year 2022-23 … was in response to exceptional circumstances”.—[Official Report, 9/3/22; col. GC 475.]
The problem is that we do not know what counts as the exceptional circumstances in which this Government will break their promise again. On this occasion, with the current uprating that we are talking about, we are told that the exceptional circumstances are the effect that coming out of the Covid measures has had on the earnings index.
So the question is not whether the Government will break their promise. We know that they are capable of breaking their promises. What we do not know about is the possibility that they will break their promise for further exceptional circumstances.
We simply cannot rule out the possibility that, come next November, when a decision is taken on next year’s uprating, it will be decided that this coming September’s CPI index is exceptional or anomalous. To be honest, with the prospect of it being more than 8%, according to the OBR, I hope that it is exceptional. I return to the OBR report and the nice graph—I cannot show it to noble Lords because that is against the conventions of the House—in which there is a leap up to the September figure, when it could be in excess of 9%, which is exceptional. What promise can the Government give that they will not say that these are again exceptional circumstances?
To conclude, can the Minister give us an unequivocal commitment, now, that whatever the CPI increase in September—8% or 9%—this will be applied to the 2023 increases?
In the last Budget, the Government handed £4 billion of tax cuts to banks. They took money away from pensioners and instead gave it to banks, which are absolutely awash with cash. Banks offer you a measly 1% interest on your savings and charge you 40% on your overdraft, but they are bailed out by the state, which acts as a lender of last resort. If that were not enough, it also handed £895 billion of quantitative easing to speculators, including banks, which made vast profits from that. But the Government do not want to pay our senior citizens a decent pension. That is a huge wealth transfer, which tells us something about the Government’s value system.
“‘There is nothing left to cut back’ - people have reached the limits of their budgeting practices and resourcefulness.”
with implications for their physical and mental health. The report commented on the
“disbelief at the perceived lack of understanding among policy-makers of the scale and severity of the difficulties people were facing.”
I am afraid we have seen all too many examples of this in the last few weeks. When, in an OQ last week, I asked the Minister’s colleague, the noble Baroness, Lady Scott of Bybrook, what are parents on benefit, who have already cut back to the bone, supposed to do if benefits are uprated at a fraction of the inflation rate, in response she intoned what the Government are spending in total on benefits but did not answer the question. Following the very disappointing Spring Statement, I ask again: when there is nothing left to cut back, what are parents struggling on an inadequate benefit supposed to do over the coming year? How are they supposed to get by?
I believe that this Minister does understand, to some degree, the difficulties faced, and she cares. Unfortunately, she can do no more, it appears, than take messages back to the department and the Treasury. But she can at least today answer the question. Indeed, I ask her to tell us: what would she do if she had to get by on inadequate benefits that are being eaten away by inflation?
For women pensioners, the situation continues to get worse, with one in five now in poverty. Analysis of government figures shows that, in 2012-13, 14% of female pensioners across the UK were living in relative poverty—that is, they were living in households with less than 60% of median average household income, after housing costs. By 2019-20, this had increased to about 20%. That increase comes despite increases in women’s state pension age, meaning that the number of female pensioners in the UK has fallen by about 800,000 since 2012-13.
On these Benches, we think it is essential to protect the poorest pensioners who depend on the state pension and that it is crucial to bring the value of the state pension to a realistic level in relation to earnings and living costs. It is vital to make sure that those already in poverty and dependent on benefits do not become poorer than they already are. As has been said, it is not enough to claim that an upward adjustment will be made next year, because the problem exists now.