Social Security Benefits Up-rating Order 2024

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Social Security Benefits Up-rating Order 2024.

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%.

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.