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.
While this Bill seems to be a technical piece of legislation, it raises fundamental questions about this Government and the trust that they enjoy among people across the country. I want to address a number of issues today: the substance of the Bill; how it is part of a pattern of behaviour; the changes we would like to see to protect pensioners; and the context of wider Government policy towards the most vulnerable in our society.
Turning first to the substance of the Bill, we are being asked to vote today for a change in the law to suspend the earnings-related part of the triple lock for one year while retaining the link to prices and the commitment to raise the state pension by a minimum of 2.5%. This is an important issue that directly affects millions of people today as well as the value of state pensions for future generations. Labour supports the triple lock. Indeed, all the major parties committed to maintaining it in the 2019 general election. I should add that it was a Labour Government in 2002 who committed to raising the state pension by the higher of 2.5% and inflation. It is also important to note that, taking inflation into account, state pensions rose more on average under the last Labour Government than they have under the coalition or the Conservative Governments.
Of course, the covid-19 pandemic distorted the earnings growth figures for this year, and the impact of the furlough scheme and the distribution of jobs lost in the crisis has artificially inflated the headline earnings growth figure. The Government have said that they expect earnings to be above 8% as a result of this anomaly. We have been clear that the Government cannot be allowed to use the current crisis as a smokescreen to break their word to pensioners and to abolish the triple lock by the back door. We accept that the pandemic has distorted the earnings data, but we knew that this problem was coming and it was surely not beyond the wit of the Treasury to find a solution to the anomaly in wage data that maintained the link to earnings and offered certainty to pensioners.
Although the temporary increase in universal credit has come to an end, surely the hon. Gentleman would welcome the permanent increases to the local housing allowance and the work allowance, the above-inflation increase to the national living wage and the changes to income tax thresholds. Does he welcome those?
I am grateful for the hon. Gentleman’s intervention, as I understood that the Government had frozen the housing allowance. I look forward to discussing that further in this debate.
The Government have left it late to do the right thing and end the cut, but it is not too late. There is clearly a strength of feeling on both sides of the House on the universal credit cut and the state pension uplift. I think we agree that trust is important and is the basis of good government. The Government will be letting down pensioners and the country if they plough on with these unfair changes without any explanation or reassurance about the future and without any assessment of the impact on many pensioners. We have now seen three successive breaches of trust in just a few weeks, and the last two were only days apart. Trust in this Government has fallen dramatically, and it will fall even further if they fail to listen.
We are making a very important decision today, but the Government can still correct some of their mistakes if they listen to their own Back Benchers as well as to the advice of the Opposition.
I am grateful to be called so early in this debate, Mr Deputy Speaker. I am a huge admirer and supporter of my right hon. Friend the Secretary of State for Work and Pensions, as she knows.
I have some personal views on this subject, which I will explain. I tabled my amendment because I felt we needed to debate what the right level of investment in universal credit is. I have to say from the beginning that I otherwise support the idea that the Government have to make changes to the triple lock. What goes missing in a lot of these debates is the fact that we have just suffered the biggest blow to the economy as a result of covid—I accept that fully. We debate these things without realising that, but I recognise it and it changes the terms of the debate. It also changes the terms of the debate on the manifesto, because no manifesto could have predicted the kind of crisis we have just been through.
We need to get a rational and stable debate about these things. It is important to recognise the huge amount we have done for pensioners since the arrival of the triple lock; increases for pensioners have been remarkable, and so many more pensioners have been lifted out of poverty. These are success stories the Government should be able to talk about and recognise that there has to be some flexibility, so I am not going to end up at odds with the Government on this—quite the contrary, as I recognise all that fully.
However, I want to speak to the amendment that I tabled alongside the right hon. Member for East Ham (Stephen Timms) and my right hon. Friend the Member for Ashford (Damian Green). I do feel it is necessary for us to re-examine the investment levels in UC. I recognise that the Government made the right decision at the beginning of the pandemic to invest in universal credit to ensure that those who were naturally going to be falling unemployed as a result of the problems that came from the pandemic would receive a higher level of support.
No, you have got that wrong. You are not allowed to speak to an amendment that has not been selected. You can make passing reference to it, in the generality, in a Second Reading debate—that is fine—but you cannot go into it in detail.
In that case, I am going to make passing reference to it, and I will leave the Chair to decide whether or not that passing reference is more substantial. I shall pass through universal credit carefully and make full reference to the statement that has been made or the passing of this on Second Reading.
I want to make a simple point, and I am not going to hold the House up for too long. The point of the amendment I tabled but which was not selected and the purpose of today’s debate is to ensure that those of working age who are receiving security, support and benefit from this Government get the right level of support. We know that the changes made to the triple lock will ensure that a saving is made to the Exchequer against what was unpredictable at the time and resulting from the increase in pay that will happen as a result of the easing of the covid restrictions and the bounce back that is taking place. I also recognise that one problem we have as a result is that those of working age are going to have to pick up a bigger burden, which is why the universal credit uplift should be reviewed, and reviewed very quickly.
The point I simply make, in line with the idea that the pensioners are taking some of this burden, is about universal credit itself: if that money, or some of it, is moved towards the tapers, we will have a reality where more people move into work. I hope that my right hon. Friend the Secretary of State, in her discussions with the Treasury on these matters, will make the point that it needs to make sure that those on universal credit are able to move through it faster and that therefore investment in the tapers would benefit both the Treasury and those who are seeking to get work, by making that pathway easier. That will complement what is being done for pensioners at the moment under the terms of ending of the triple lock for one year. Such a move will almost certainly be beneficial; this winter and into the spring, while we see the effects of the fall-out of moving from the furlough scheme and of the other difficulties on energy pricing and some food pricing, which is going to rise, it will protect those who are most vulnerable, while giving people an opportunity to work, with work being the very best way out of poverty.
It is a pleasure to follow the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith).
I rise to speak in favour of the reasoned amendment tabled by the right hon. Member for Kingston and Surbiton (Ed Davey), and commit the SNP to voting for it when the House divides this evening. As well as speaking to that amendment, I wish to comment on the broader principles of the Bill. I am conscious that those watching our proceedings will perhaps be unaware of the consequences of the passing of this legislation, and especially of rushing it all through in the space of a couple of hours.
In short, as we all know, the Bill facilitates this Tory Government’s breaking yet another manifesto commitment —namely, by breaking the pensions triple lock, to which all parties in the House committed themselves at the election less than two years ago. The breaking of that manifesto pledge follows on from the Government’s scrapping the commitment to spend 0.7% of GNI on the world’s poorest through our international aid budget, and now comes on top of the new Tory poll tax, which sees hard-working Scots having to endure a hike in national insurance to pay for the sorting out of the utter mess of England’s health and social care system. The Prime Minister is not known for keeping his promises, and the decision to suspend the triple lock will have dire consequences for pensioners.
As constituency MPs, we all know that the state pension is by far the largest source of income for UK pensioners, and the triple lock has kept it secure throughout the pandemic. To be blunt, the British Government’s decision to break its triple-lock promise is a betrayal and an unacceptable attack on pensioners’ incomes. What is more, this change will do nothing to stop recent indications that more pensioners are living in poverty. The proportion of pensioners on relative low income—that is, the percentage of pensioners in the UK living in households with net disposable income below 60% of the national median, after housing costs—rose from a historic low of 13% in 2011-12 to 18% in 2019-20.
Does the hon. Gentleman recognise in his analysis that we took notice of pensioners’ needs last year? The triple lock is reliant on earnings being positive, and last year they were negative, but my right hon. Friend the Secretary of State took the opportunity to raise pensions, despite the fact that the terms of the triple lock were not met at that time.
If the hon. Lady pays attention to the rest of my speech, she will understand that I am developing my argument because the UK state pension is so pitiful. That is the point I am addressing and I am sure she will make it in her speech, too.
The rise in the proportion of pensioners on relative low income followed a period of more than a decade during which the measure had been trending downwards from a high of 29% in 1998-99. The passing of the Bill will undo all that work.
Although the state pension is the biggest source of income for pensioners, House of Commons Library analysis shows that UK state pensions are the lowest as a proportion of pre-retirement wages of all our European neighbours. Pensioners throughout these islands receive around just a quarter of the average wage when they retire, whereas pensioners in Luxembourg and Austria receive 90% of the average working wage. According to the OECD’s latest analysis, the UK has an overall net replacement rate of 28.4% from mandatory pensions for an average earner. That is well below the OECD average of 58.6% and the EU average of 63.5%. It is simply not right that the UK devotes a smaller percentage of its GDP to state pensions and pensioner benefits than most other advanced economies.
The triple lock betrayal is yet another Tory-imposed austerity cut. The Commons Library briefing for this debate estimates that the British Government will take away £5 billion from pensioners in 2022-23 if the triple-lock elements of the state pension are uprated by 2.5% rather than 8.3%. Investment in the state pension is crucial, especially as many are still excluded from automatic enrolment in workplace pensions—although I acknowledge that some, but nowhere near enough, progress has been made on auto-enrolment.
Let me briefly develop that point a little further. The British Government’s failure to extend automatic enrolment to low-income earners and young people disproportionately impacts women, thereby worsening the already massive gender pension gap on these islands. That is before we even come to the issue of the Department for Work and Pensions’ maladministration with regard to 1950s-born women who, quite rightly, await to see what stage 2 of the ombudsman’s process will conclude. I very much hope it will do so soon.
I echo what my hon. Friend is saying about 1950s-born women. Is the decision to abandon the triple lock not a double injustice to those women—and to the Women Against State Pension Inequality campaign—because not only are they now being denied the rise in their pension that they might have expected, but they were denied a pension at all at the time they originally expected their pension?
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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.
I am afraid that the Government have failed to be open about the earnings data they are using. They have also failed to show that they are concerned about low-income pensioners. They are asking us to vote on trust alone, but that is something I am afraid this Government do not enjoy much of. By downgrading the triple lock, they are breaking a manifesto promise. Trust in the Government has been badly damaged. I should not have to say this, but given the history of the Prime Minister and his Government, I want to set out what the House and the public have a right to expect. Over the last months we have seen a series of actions that show that the Government do not understand, and that in some cases they just do not seem to care. This should be obvious, but sadly it does not seem to be, to the Prime Minister and his Administration.
Today’s broken promise is the third breach of trust in just a few months. This is starting to become a pattern of behaviour. First, there was the cut in overseas aid that the Government made despite a wide range of opposition. We are the only G7 country to cut aid, breaking a manifesto commitment to support the world’s poorest and most vulnerable people, and this Conservative Government are retreating from our moral duty. This has already weakened the UK’s position at the G7 summit and it will continue to do so at the upcoming summit on education and COP26. Parliament has repeatedly made it clear that it does not support aid cuts and that Britain must not turn its back on the world’s poorest. I would add that a Labour Government will build partnerships with other Governments, civil society groups and communities to overcome global challenges by using the aid budget to tackle poverty and inequality.
Secondly, there was the breach of trust we saw last week when the Government broke their promise not to raise national insurance. The Government had already weakened social care and our NHS, cutting £8 billion and leaving us with long accident and emergency, cancer and mental health waiting lists even before the pandemic. Their solution, when finally pushed to act by the coronavirus pandemic, is an unfair tax on jobs—the biggest tax rise on families in over 50 years.
With a cut to universal credit in the Government’s sights, it seems that they are going after the same people time and time again. A tax rise that hits less well-off areas—so much for levelling up. The CBI, the Federation of Small Businesses and the British Chambers of Commerce have all criticised the national insurance rise as illogical and harmful to businesses and our recovery.
Now we face the third broken promise, on the triple lock, which Ministers have consistently said they would protect. I repeat that the Government must not use this crisis to leave the door open to scrapping the triple lock altogether. We recognise that the pandemic has caused an anomaly in the earnings data and, crucially, we are not calling for an 8% rise in the state pension, but the Government must come clean and show why they cannot calculate underlying earnings growth over a longer period of time. They have not adequately made the case for why an earnings link, with this year’s anomaly resolved, cannot be maintained.
At the very least, Ministers should maintain an earnings link, explain their decisions, offer binding commitments to protect the triple lock and protect the incomes of less well-off pensioners. There is nothing in the Bill that seeks to increase the uptake of tax credits or, indeed, to set out other steps the Government will take to protect low-income pensioners.
The public, and we as the Opposition, expect the Government to look at this thoroughly, to be diligent and to treat people fairly. When the Secretary of State first informed the House of her decision, my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) asked the Government to publish their reasons. That is the least pensioners could expect. Governments should explain the evidence used to make key policy decisions, as evidence-based policy making has been a central plank of good governance for a very long time. Sadly, no answers were forthcoming, but perhaps we will see some actual evidence in this debate. The Government’s track record on the use of evidence, however, does not offer much hope.
Finally, I pay tribute to the right hon. Members for Chingford and Woodford Green (Sir Iain Duncan Smith) and for Ashford (Damian Green) for tabling their amendment. Opposition Members are deeply concerned about the cut to universal credit and the devastating impact it could have. It will hit thousands of families and many people in work, including nurses, teaching assistants and supermarket workers. I know from experience that 9,000 people in my constituency will be affected. Like colleagues on both sides of the House, I have spoken to residents who are desperate and who do not know how they will cope.
When I resigned from the job that my right hon. Friend the Secretary of State now holds, I did so on the basis of two or three things. My No. 1 basis was that the Treasury took a significant sum—much the same as the uplift—out of universal credit. I always made the point very early on that when we put money into universal credit we are investing in a dynamic process. It is one that by its very nature reduces the overall cost, because the more we get people into work, the lower the overall cost of the money we put in.
I am going to finish by simply saying that this is an important matter and I hope my right hon. Friend will take our amendment, which was not selected, as justification in her negotiations with the Treasury to secure a better investment in the taper.