My Lords, in my opinion, the provisions in the instrument are compatible with the European Convention on Human Rights. The Social Security Benefits Up-rating Order increases relevant state pension rates by 8.5%, in line with the growth in average earnings in the year to May-July 2023. It will also increase most other benefit rates by 6.7%, in line with the rise in the consumer prices index in the year to September 2023.
The order commits the Government to increased expenditure of £19 billion in 2024-25. It ensures that state benefits maintain their value relative to the increase in the cost of goods and services. It means that most state pensions will gain value relative to that increase. Indeed, the proposed increase to state pensions would be the second highest on record—second only to the increase last April.
This will meet the Government’s commitment to the triple lock, benefiting pensioners who are already in receipt of basic and new state pensions, and younger people who are building up future entitlements as a foundation for private saving. It will raise the level of the safety net in pension credit beyond the increase in prices, and it will maintain the purchasing power of benefits to help with additional costs arising from disability.
For those receiving support linked to participation in the labour market, the Government announced a range of employment and conditionality measures at the Autumn Statement. These measures maintain and improve work incentives. This allows us now to strike a balance in support of those who are in low-paid work, who are looking for work or who are unable to work by linking the increase in the rates of universal credit to the increase in prices.
I will now address state pensions in more detail. The Government’s commitment to the triple lock means that the basic and full rate of the new state pension are uprated by the highest of the growth in average earnings, the growth in prices or 2.5%. This will be 8.5% for 2024-25, in line with the conventional average earnings growth measure. As a result, from April 2024, the basic state pension will increase from £156.20 to £169.50 a week, and the full rate of the new state pension will increase from £203.85 to £221.20 a week. All additional elements of the state pension will rise by 6.7%.
The Government are committed to supporting pensioners on the lowest incomes. The order therefore also increases the safety net provided by the pension credit standard minimum guarantee by 8.5% from April 2024. For single pensioners, this means it will increase from £201.05 to £218.15 a week, and for couples it will increase from £306.85 to £332.95 a week.
I turn now to universal credit, jobseeker’s allowance and employment and support allowance. The Social Security Administration Act 1992 gives the Secretary of State discretion on whether to increase the rates of benefits such as these, which are linked to participation in the labour market. Given the employment and conditionality measures I mentioned earlier, he has decided to strike a balance in support by also increasing the rates of these benefits by 6.7%, in line with the increase in the consumer prices index.
My Lords, I of course welcome the inflation-proofing of benefits and the temporary lifting of the local housing allowance freeze in April, but—I fear this speech is a series of “but”s—I find it, frankly, insulting to those affected. I should say that the Minister is not included in this but, from the Prime Minister down, the uprating is constantly lauded by Ministers as a record amount, an additional support, as if it represents a great act of generosity which somehow justifies the lack of action on a number of other fronts. The inflation-proofing of benefits should be the default position, avoiding the months of speculation, fuelled by government sources, that have caused considerable uncertainty and anxiety for benefit recipients in and out of work.
Moreover, there is a number of reasons why the increase in line with inflation is far from generous. The Resolution Foundation points out that the uprating will do no more than restore benefits to their real value on the eve of the pandemic. While there were flaws in the cost of living payments, which we discussed last year, their loss now means that many households on universal credit will be worse off in cash terms. The foundation estimates that the typical household in the poorest quarter of the working-age population could face an income fall of 2% next year. The following year, on current assumptions, private renters will face a further freeze in the local housing allowance, which, according to Citizens Advice, is an important factor in the increase in the number facing a negative budget—that is, where income does not cover essential spending.
There is also the prospect that the uprating could coincide with the abolition of the household support fund, which has acted as both a lifeline and a sticking plaster for the holes in the social security safety net. I know that the Minister can say nothing more than that this is kept under review, but local authorities, charities and potential beneficiaries need a bit of certainty, rather than to wait for the Budget, which is only a month before the outcome of this review takes effect. I really do not understand how he can tell me in a Written Answer that the Government do not have robust data on the number of English local authorities that have closed their local welfare assistance schemes which, in his answer to my earlier Oral Question, he prayed in aid, should the household support fund be scrapped. Surely, such data should inform any review of the future of the fund. As it is, we know from End Furniture Poverty that at least 37 authorities have closed their scheme.
In another Written Question, I asked whether the benefit cap would rise in line with inflation in April and, if not, why not. This was the response:
“The Secretary of State has a statutory obligation to review the levels at least once every five years. There is no requirement until November 2027”.
However, that is not a reason but a simple statement of fact. Why has the Secretary of State chosen not to review the level again, given the inflation levels governing the benefit uprating? The CPAG, of which I am honorary president, warns that the numbers capped could increase significantly to as many as 100,000 households, containing 300,000 children. It observed:
“It is illogical for the government to (rightly) uprate benefits by September CPI and unfreeze LHA, but then freeze the cap threshold, so the families who are living in the deepest poverty do not see any impact from benefit uprating”.
Instead, their poverty will deepen further.
According to the National Institute of Economic and Social Research, the living standards of households in the lowest decile since 2019-20 have suffered a fall of nearly 20%, meaning a shortfall in disposable income of around £4,500 on average. A spokesperson is quoted as saying:
“They have taken a larger hit because as a proportion of their budget they spend a lot more on energy, food and housing [than wealthier households]”.
This brings us to another reason why, despite the Government’s boasts, the uprating is not generous in its effects. A number of organisations, including Policy in Practice, the Resolution Foundation and the Joseph Rowntree Foundation, have noted that the actual inflation rate experienced by social security recipients has been significantly higher than the general rate in recent years. Morgan Wild of Citizens Advice has undertaken detailed analysis of the differential impact of inflation and the systemic problems with the way inflation is calculated. He concluded that the outcome means that policy is failing to achieve its aim because benefit levels are not being increased in line with the actual rate of inflation as it affects recipients—so, in effect, their income is being cut in real terms.
In a recent briefing, Citizens Advice called for working-age benefits to be uprated using inflation data from the ONS’s household costs index. Inflation, as measured by this index, was 8.2% in September 2023 and 8.4% for households with children, compared with the 6.7% by which benefits are being uprated. Can the Minister tell us what thought the department has given to the potential use of the household costs index as a basis for uprating benefits?
Not only have social security benefits lost out due to the failure of CPI to measure the true impact of inflation on them; current benefit levels reflect the series of cuts and freezes made over the past decade or so. According to Policy in Practice, benefits have lost 8.8% of their real-terms value since 2012. According to the CPAG, these cuts in the real value of benefits, combined with other so-called reforms, mean that
“the UK government now spends £42 billion a year less on social security than”
in 2010. Yet the siren voices are to be heard again calling for further cuts.
This brings us to the question of benefit adequacy. I touched on this in last week’s poverty debate when I quoted from the recent Financial Fairness Trust briefing paper by my former colleague Professor Donald Hirsch. He concluded:
“The level of working-age benefits in the UK today is denying claimants access to the most fundamental … resources needed to function day to day and have healthy lives … benefits are falling woefully and systematically short of protecting citizens against hard times”.
This echoes an analysis undertaken by the Trussell Trust and JRF, which showed that the universal credit standard allowance is woefully insufficient to meet basic essentials, and the conclusions of an inquiry carried out by the All-Party Parliamentary Group on Poverty, which I co-chair. This reported that
“all witnesses … agreed that current benefit levels are too low”
and that this is
“driving claimants into poverty”.
It pointed out that inadequate benefit levels are
“counterproductive to the government’s aim of getting more people into work”
because, as witnesses explained,
“the mental toll and stress that accompanies life on a low income, makes it harder for people to escape poverty”.
What consideration has the department given to this when pursuing its work-first policies?
The inquiry also called for the carer’s allowance, to which the Minister referred, to be raised to the level of equivalent benefits, noting the additional help given to carers by the devolved Governments of Scotland and Wales.
The result of having inadequate benefits was made clear in last week’s poverty debate. It deepens poverty and even destitution, as documented by research and experience on the ground. Just last week, the Trussell Trust published survey findings showing that 55%—over half—of universal credit recipients had run out of food in the past month and could not afford any more. A quarter missed an essential appointment, such as with a doctor or getting to work, because they could not afford the cost of transport.
Further evidence of the hardship experienced during the cost of living crisis, which is far from over for those on low incomes, is provided by the co-produced Changing Realities project. Its briefing called for long-term preventive investment in social security, starting with a clear statutory duty to uprate benefits in line with inflation and a systematic review of benefit adequacy.
There is also the question raised by Nigel Mills MP in the Commons of the long gap between September’s inflation rate and the April uprating. We discussed this last year and, I think, the year before. The Parliamentary Under-Secretary there suggested that there might be some movement on this front, and I wonder whether the Minister could say more.
In conclusion, I have raised the question of benefit adequacy every year in which I have participated in these uprating debates. It is encouraging that it is no longer a niche issue, but the Government have yet to acknowledge the case for a review of benefits adequacy and restrictions. I just hope that they or a future Government will do so; otherwise, we will continue, in future uprating debates, to wring our hands over the hardship experienced by too many of our fellow citizens.
It is a great pleasure to follow my noble friend Lady Lister of Burtersett. In her usual meticulous manner, she made a series of detailed points. I will just make a couple of relatively straightforward points on pensions.
There is a touch of unreality about this discussion, because I received notification of my increased state pension last week and there was nothing in there to suggest that it was subject to any further parliamentary process. Should we vote it down today, my hopes based on the notification that I had from the noble Lord’s department will be shattered. However, I suspect that we are not going to turn this down today.
I have two points. First, a lot of the coverage of this increase said that state pensions would be increased by 8.5%. I discovered that it was not actually 8.5% and might be something else only from reading the small print. The press are mainly at fault for that. I found no significant story in a national paper explaining the distinction between the 8.5% increase for the new and basic state pensions and the 6.7% for everything else.
The everything else is not trivial: it is all the additional pensions that people earned while they were in the state second pension, the retained rights that they received when the new state pension was introduced and the additional pensions that people gained because they deferred their state pension. A particular surprise to me was the 10% increase that pre-2016 retirees receive. The additional pension, the 10%, is increased by only the lower figure rather than, as I would have logically thought, the higher figure. It includes the graduated retirement pension from the Boyd-Carpenter scheme. So significant amounts are increasing and, I dare say, by only 6.5%. I say “only” because that reflects the rate of inflation. I think saying it is increasing only in line with inflation is a fair assessment of the situation.
To a certain extent, it is the fault of the press, but I think the department has a responsibility to produce greater clarity on this issue. In moving these regulations in the Commons, the Parliamentary Under-Secretary for Work and Pensions said:
My Lords, we too welcome the uprating of benefits and will support today’s SI but, as the noble Baroness, Lady Lister, has said, there are ever-rising numbers in poverty, as drawn to our attention by the Joseph Rowntree Foundation’s 2024 report on poverty, published a short while ago. According to its previous report, around 20% of the population were in poverty in 2020-21—around 13.4 million—of whom 7.9 million were working adults, 3.9 million were children and 1.7 million were pensioners. Poverty among people on universal credit remained high at the same time at 46%, it said,
“despite the temporary £20-a-week uplift and a resetting of Local Housing Allowance”
to better reflect the level of rents in an area. Poverty rates remained highest in the social and private rented sectors
“and much higher for households including a disabled person or an informal carer”.
The cost of living crisis is having a major effect on poorer families. The Joseph Rowntree Foundation’s cost of living tracker found the following shocking results in October 2022, across the poorest fifth of families: six in 10 families were unable to afford an unexpected expense; over half were in arrears; around a quarter were using credit to pay bills; and more than seven in 10 were going without essentials. The report found that there are elements in the benefit system that increase poverty, such as the two-child limit on income-related benefits, the benefit cap, the five-week wait for the first payment of universal credit and unrealistic debt repayment deductions. Will the Minister say what plans there are to reassess the impact of these measures? I have not been doing my job in this area for some time, yet I recall that, when I was, these measures were constantly raised as causes of poverty that need to be addressed.
The report finds that the level of benefits is inadequate for people to afford the basic essentials, which is a damning finding. It also urges a resetting of benefits that would ensure that income cannot fall below these levels through debt repayment deductions or repayment of advances. This is essential for people on benefits as a proper safety net, not just during the cost of living crisis but for anyone who is on benefits. When will a full assessment take place of the efficacy of universal credit as an adequate safety net for those who need it? What is the Minister’s response to these findings?
My Lords, I thank the Minister for introducing this order and all noble Lords who have spoken. As he has explained, the Social Security Benefits Up-rating Order will increase most working-age benefits in line with CPI. We too welcome this instrument, because of course we want to see social security keep pace with prices, particularly at a time of spiking inflation and economic instability. That used to be the norm among both Labour and Conservative Governments, of course, but the past decade has seen a marked change.
There were of course the years of shame between 2013 and 2020, when most working-age benefits and tax credits were either frozen or uprated by small amounts, such as just 1%. Although today we are back to uprating mostly by CPI and occasionally by earnings, as my noble friend Lady Lister said, once again that uprating has been preceded by a period of speculation, which is deeply unhelpful. I can assume only that this is driven from somewhere inside the Government, because it happens too regularly. The speculation suggests that maybe this year the uprating will not be by the full amount or maybe will not happen at all.
As my noble friend mentioned, that speculation causes real stress and worry for people who depend on benefits and tax credits to survive. I begin to wonder: is it a strategy to allow Ministers the option of either freezing benefits or not uprating them fully so that, if they then finally do the right thing, people are supposed to be suitably grateful? As my noble friend Lady Lister pointed out, it is good that benefits are being uprated, but it is not an act of unusual generosity; it is simply a decision not to cut the value of benefits during a cost of living crisis.
This instrument, as we have heard, also increases the state pension by earnings in line with the triple lock. I accept the distinction that my noble friend Lord Davies helpfully made. The rates of basic and new state pensions will rise by 8.5%, as will the standard minimum guarantee in pension credit and the higher rate of widows’ and widowers’ pensions in industrial death benefit. However, this does not apply to a number of the others. I will be interested in the Minister’s response to that. In particular, can he explain the position on the deferred state pension? If someone chooses to defer their state pension and the pattern is that the deferred amount is uprated by CPI rather than the triple lock, are they made aware of that? When people make a decision about deferral, do they understand the consequences?
My Lords, I thank all those who have spoken in this short debate. Before I attend to the number of questions asked and subjects raised, I would like to say at the outset—I normally do this but, today, I give special feeling and meaning to it—that this Government really do fully recognise the challenges facing people across the country due to the higher cost of living.
Although inflation is trending in the right direction, with the Bank of England now forecasting a fall to a target rate of around 2% in three months’ time, I acknowledge that pressures on household budgets very much persist. I saw this for myself in a recent visit to the Earlsfield Foodbank. The Government are not complacent about such matters; I hope noble Lords will recognise that the Government have taken action on a number of fronts to address these concerns, which were raised by a number of Peers—four, to be precise—this afternoon. I may not be able to answer all the questions but I will do my very best.
Let me start at the outset—I do not think I have done this before—by saying that, although I acknowledge the remarks made by the noble Baroness, Lady Lister, I am generally disappointed that every single item was a negative. I am disappointed that nothing she said seemed to support what we have done in these regulations or what we are trying to do. We really are trying. There was a long litany of faults coming from the Government: that the uprating was not enough; on the loss of the cost of living payments; on the freeze in the LHA, which is all for the future as we do not like where we stand on that yet; on the household support fund; and on the benefits cap review, including why it was not being done.
The noble Baroness is right to ask questions but I say gently that there is no mention of the genuine headwinds that all Governments have been facing. This Government have not been alone in the experiences of the pandemic and coming out of it, as well as of the war in Ukraine. There was no indication of these whatever. It is a bit disappointing. I know that the noble Baroness will understand why I have said these things but I thought it would be worth mentioning them.
I am sorry to interrupt but I started by saying that I welcomed the inflation-proofing. That is a positive. I then warned him by saying, “All the ‘buts’ are coming, I am afraid”, but it was in the context of welcoming.
I appreciate that from the noble Baroness. We have undertaken a number of debates together; I hope that she did not mind me mentioning it.
However, questions are questions; I will start by attempting to answer one of them. After each uprating, household income will go down by 2% because of the ending of the cost of living payments. At the moment, the Government have no plans to extend the cost of living payments past the 2023-24 round of payments. Responding swiftly and decisively to the cost of living pressures has been a key priority for the Government. Over the past two years, the Government have demonstrated their commitment to supporting the most vulnerable by providing one of the largest support packages in Europe. Taken together, support to households to help with the high cost of living is worth £104 billion over the period 2022-23 to 2024-25.
As was mentioned earlier, reducing inflation and growing the economy are the most effective ways to build a more prosperous future for all. This Government are committed to halving the rate of inflation; they have pretty well achieved that. However, to be helpful to the noble Baroness, an evaluation of the cost of living payments is under way. This seeks to understand their effectiveness as a means of support for low-income and vulnerable households. This will be made public when it is ready.
The noble Baroness mentioned the household support fund. She probably second-guessed my answer, which is that this is kept under review in the usual way. It has been used to support millions of households in need with the cost of essentials. For example, 26 million awards were made to households in need between 1 October 2021 and 31 March 2023. More than £2 billion in funding has been provided to local authorities via the household support fund since it began—that is, October 2021. More than 10 million awards were made between 1 October 2022 and 31 March 2023.
The noble Baroness, Lady Lister, asked why we are not going to increase the benefit cap. She cited the fact that the Secretary of State has an obligation to review at least once every five years. We believe that there has to be a balance. The benefit cap provides a balanced work incentive and fairness for hard-working taxpaying households, while providing a safety net of support for the most vulnerable. She will know that the Government increased the level significantly from April 2023 following the review in November 2022. The proportion of all working-age households capped remains low, at 1.3%, and these capped households will still be able to receive benefits up to the value of gross earnings of around £26,500, or £31,300 in London. For single households, this is around £15,800, or £19,000 in London.
The noble Baroness, Lady Lister, asked about HCI—the household costs index. The ONS’s household costs index is an experimental statistic that does not have national statistics status. At any point, HCI inflation could be higher or lower than CPI. Using a consistent measure of inflation for uprating means that any differences smooth over time, but it was a fair question. It has been the convention to link uprating to CPI for over a decade; the noble Baroness will be aware that the 1992 administration Act gives the Secretary of State discretion over how to measure the increase in prices. I am sure that if there were a case for changing to a robust alternative measure it could be considered, but we do not see that particular case now. I hope I have given a considered view of her question.
The noble Lord, Lord Davies, asked about the lag in uprating and particularly why it took so long. The Social Security Administration Act 1992 provides for an annual review of benefit and pension rates and is the basis on which Parliament has required successive Secretaries of State to act. The noble Lord may know that the requirement is for one review each tax year. Aside from the legislative requirements, uprating in a shorter timeframe can be achieved only for universal credit payments, not across all benefits, because the systems and processes used to deliver universal credit are fundamentally different from the other benefit systems.
In future, state pension benefits will be moved to a new modern IT platform that is starting in 2025, under current planning assumptions. Other benefits, including disability benefits, contributory benefits and carers’ allowance, will be addressed as part of other programmes when possible. I would add that this migration of customers to modern IT services is, in the short to medium term, unlikely to change the uprating timetable due to interdependencies across government—for example, passing data to local authorities to assess housing benefit and to HMRC so that it may issue as many as 12 million tax notices.
The noble Lord, Lord Davies, asked about the comparability with Europe on the state pension. It is difficult to make meaningful comparisons between state pension schemes in different countries—the noble Lord knows much more about this than me—because there are many fundamental differences in the way they are set up and run. There are many factors to take into account, such as different tax systems, the cost of living, access to occupational pensions and the availability of other social security benefits, as well as the provision of services and goods free to pensioners or at concessionary rates.
However, OECD rankings show that, due to government reforms, including the new state pension and automatic enrolment, the UK’s pension system will provide future workers with income replacement rates comparable to the OECD average, alongside countries such as Germany and Norway. I hope that goes some way to answering the noble Lord’s point.
The noble Lord, Lord Davies, also asked about the Government being a bit misleading in saying that state pensions are all increasing by 8.5%—that was the gist of his question. In all our statements, we have been clear about which elements of the state pensions increase with earnings and which do not. The latter includes the additional pension, which is linked by statute to the increase in prices when it is uprated while in payment rather than in accrual. Additional state pension is the state equivalent of an occupational pension scheme, as he will know. These are usually increased by prices, so this approach maintains an element of parity.
The noble Baroness, Lady Janke, asked if there was any consideration or review of the two-child policy, which is often raised in Grand Committee and the Chamber. The Government are committed to supporting families and helping parents into work. That requires this balanced system, which provides strong work incentives and support for those who need it, and a sense of fairness to the taxpayer. Since 6 April 2017, families can claim support as universal credit and child tax credit for up to two children, as she will know, and there may be further entitlement for other children if they were born before April 2017 and if an exception applies. The two-child policy was announced in 2015 as part of a package of measures to deliver a more sustainable welfare system. The noble Baroness may not be surprised when I say that there are no plans to change this policy, I am afraid.
The noble Baroness, Lady Sherlock, asked a number of questions, in particular around the fact that two-thirds of children in poverty have parents who are in work. Our figures tell us that, in 2021-22, there were 1.7 million fewer people in absolute low income after housing costs compared to 2009-10—a decrease of four percentage points—including 400,000 fewer children. I was interested in the noble Baroness’s figure when she said that she thinks there are 400,000 more children in poverty; I take issue with that. Perhaps we should establish via a letter exactly what our statistics tell her. I see that she is shaking her head. We understand that some families are still struggling, as I said earlier, which is why, as I mentioned, we are providing households with cost of living support worth £104 billion.
The noble Baroness also asked about deferral increases. She will know that information is available on GOV.UK about deferral and that, if people have further questions, they can contact the Pension Service to speak to someone. That sounds like a bit of a lame answer but, in the letter that I will write, I may be able to give her a little more detail.
I may not have covered all the questions, but I wanted to try to answer as many I could in the round. I hope that that has helped on what is a challenging subject.
Motion agreed.
As a further measure to reinforce work incentives, the monthly amounts of universal credit work allowances will also go up by 6.7% from April 2024. They will increase from £379 to £404 a month for those also receiving support for housing costs, and from £631 to £673 a month for those not receiving support for housing costs. Noble Lords are aware that these are the amounts a household can earn before their universal credit payment is affected if they have children or if they have limited capability for work. The 6.7% increase will also apply to statutory payments, such as statutory maternity pay, statutory paternity pay and statutory sick pay.
I turn finally to benefits for those with additional disability needs and those who provide unpaid care for them. The rates of personal independence payment, disability living allowance and attendance allowance will increase by 6.7% from April 2024, in line with the increase in the cost of goods and services. As we have debated previously in other contexts, the Government recognise the vital role played by unpaid carers. This order also increases the rate of carer’s allowance by 6.7%, from £76.75 to £81.90. Unpaid carers may also access support through universal credit, pension credit and housing benefit. All these include additional amounts for carers, which will also increase by 6.7%. For a single person, the carer element in universal credit will increase from £185.86 to £198.31 a month. The additional amount for carers in pension credit and the carer premium in the other income-related benefits will increase from £42.75 to £45.60 a week.
In conclusion, the draft Social Security Benefits Up-rating Order 2024 implements the Government’s commitment to the triple lock. It provides for a real-terms increase in the value of the safety net in pension credit, it maintains the purchasing power of benefits for additional disability needs and for people providing unpaid care to people with those needs, and it strikes a balance in universal credit by maintaining both work incentives and the purchasing power of benefit income. I commend this instrument to the Committee.
“The draft order will increase relevant state pension rates by 8.5%, in line with the growth in average earnings in the year to July 2023. It will also increase most other benefit rates by 6.7%”.—[Official Report, Commons, 31/1/24; col. 929.]
To the non-expert observer, I am sure that would suggest that all the state pension was going to increase by 8.5%, and I suggest that that was reflected in the press coverage. However, I defy the department to produce a single person whose entire benefit is just the new state pension or the basic state pension. People are bound to have some other increases, even if it is only the graduated pension scheme, so no one gets 8.7%. I thought at one stage I was going to tell the Committee what my increase was, but then I realised that with a simple bit of algebra noble Lords could work out what my state pension is, and I do not want to mention it in this debate.
Look at what the Chancellor of the Exchequer said about the Autumn Statement when he announced these increases:
“The government will … continue to protect pensioner incomes by maintaining the Triple Lock and uprating the basic State Pension, new State Pension and Pension Credit standard minimum guarantee for 2024-25 in line with average earnings growth of 8.5%”.
There is no mention that there is this large chunk of pension that will be increased only in line with inflation. It annoys me each time, and Members of the Committee have been the recipients of my annoyance on this occasion.
The other point I wish to raise has already been raised by my noble friend Lady Lister—the delay in payment. I spoke about this at some length last year, and it has not changed, but I thought that on this occasion it is worth quoting, as my noble friend mentioned, Nigel Mills MP speaking in the Commons. He is chair of the All-Party Parliamentary Group on Pensions. He described it as a “crazy process” and said:
“We have to use September’s inflation for an April increase in benefits, and we have to have an uprating order quite a while after the Chancellor has announced it in the Budget. The Work and Pensions Committee recommended that the Government bring these orders before the House earlier than February, so I commend the Government—we are still in January”.—[Official Report, Commons, 31/1/24; col. 932.]
So down the other end they got it in January, but we did not get it until February and the important point is that pensioners will not get the increase until April. That system of a September/autumn announcement and April increases has, in effect, subsisted for 40 years despite all the developments in maintaining records and the computerisation of systems.
I was glad to hear my noble friend suggest that some further thought is being given to this. In the interim it would be reasonable, to the extent that the effect of the increase could be from 1 January—although it is not possible to start the payment until April, because of the systems—for us to give the underpayment for the first three months of the year as a lump sum, at the beginning of April. I think that everyone would love to receive that.
I had some other questions on pensions and pensioners but I was entirely thrown by the decision to separate these two instruments this year. Most years, we do them together in a single block, so I wrote a wonderful speech waxing lyrical and weaving in pensioners and old age, but now here I am. I shall come back, if the Minister will indulge me, to a couple of more general questions on pensioners when we come to debate the next instrument.
The context for this year’s uprating, as my noble friend Lady Lister expounded in some detail—aided ably by the noble Baroness, Lady Janke—is absolutely brutal. I will not repeat the extensive critique that my noble friend made or her unpacking of the economic climate in which so many families are living, but it is brutal. The basic fact is that there are now more than 4 million children living in poverty. There are 400,000 more children living in poverty now than when Labour left office in 2010.
One of the things that bothers me about this is that, whenever somebody raises this, the Minister—I know it is in his brief—will at some point in the response use the line that the Government believe that work is the best route out of poverty. Yet, clearly, the facts speak for themselves: more than two-thirds of children who live in poverty have parents in work. Something in that picture does not work. It is something that all of us in politics must address.
We in Labour have been looking at what we would do. We have a plan to give people a better life, so that they are able to make ends meet and have a good start for their children. We are looking at making sure that there is a breakfast club in every primary school and at giving people access to cheaper energy and an insulated home. We will reform universal credit, jobcentres and employment support so that people can get a better job with better pay. We will also have a child poverty strategy. Can the Minister tell the Committee in his response what the Government’s strategy is? What is their plan to do that? Other than simply declaring that work is the best route out of poverty, what is the Government’s plan to deal with the challenge of child poverty today? I look forward to the Minister’s response.
The noble Baroness, Lady Lister, asked about benefits levels and how to measure them. There is no objective way of deciding what an adequate level of benefit should be as every person has different requirements depending on their circumstances. However, we will spend £276 billion through the welfare system in Great Britain this financial year, including around £124 billion on people of working age and their children. Over the past two years, the Government have demonstrated their commitment to supporting the most vulnerable by providing one of the largest support packages in Europe, which I mentioned earlier.
The national living wage, which I also want to mention, is set to increase this April by 9.8% to £11.44, on top of the increase in April 2023 of 9.7%. This represents an increase of over £1,800 in the annual earnings of a full-time worker on the national living wage, and it is expected to benefit over 2.7 million low- paid workers.