1: Clause 1, page 1, line 4, leave out “(1)” and insert “(1)(za) to (c)”
Member’s explanatory statement
This amendment is intended to limit the application of the Bill so that it does not apply to the uprating of the pension credit standard minimum guarantee, thereby ensuring the poorest pensioners are still protected against rising earnings. It is linked with the new Clause in the name of Baroness Altmann.
My Lords, I rise to speak to Amendments 1 and 7 in my name and those of cross-party Peers—the noble Baronesses, Lady Wheatcroft and Lady Janke, and the noble Lord, Lord Hain—to whom I am extremely grateful for their support, and also to support Amendment 5. I declare my interest as set out in the register, and I am honoured to speak in this debate in your Lordships’ House. This Bill will affect every pensioner in the UK, but in speaking to Amendments 1 and 7, I am focusing on what sometimes seems like an underclass in British society: the poorest pensioners. Amendment 1 seeks to exclude from this Bill the application of its measures to the pension credit minimum income guarantee. This is what the poorest pensioners in our land rely upon. It is a means-tested benefit, and it is not a king’s ransom. We are talking about £177.10 a week.
Pensioner poverty was already rising even before the pandemic. It is a myth that pensioners are all well off. The charity Independent Age, and figures from Age UK, show that pensioner poverty remains a significant social issue, too often skirted over by commentators. Already, more than half of single pensioners, mostly women, live in fuel poverty, while 13% of older households live in extreme fuel poverty. Those numbers will undoubtedly grow if the Bill is passed without amendment, especially as rising energy costs are hitting so many with massive increases in their bills. Official figures show that one-quarter of pensioners were in poverty in 2002, when pension credit was introduced. That proportion fell significantly thereafter, reaching a low of around 13%, but it has been rising in recent years to 16% in 2018 and 18% in 2019, even before the impact of the pandemic and the measures we are debating today.
Pension credit has never been covered by the triple lock. It has always had only earnings uprating in legislation. The Bill removes that as well. Pension credit has helped alleviate pensioner poverty, but the benefits are being unwound. Partly, this is because the take-up of pension credit has been stuck at a very low level. Forty percent of those entitled are generally too proud to claim, and try to make ends meet without having to go through a means-tested claim. But the Bill sweeps away vital earnings protection, replacing it with just a 3.1% figure, which reflects the consumer prices index that was reported for September this year, and which is actually an artificially low figure. The Budget confirmed that inflation is rising, with 4%-plus expected and the Chancellor warning of higher figures. The OBR suggests that inflation is likely to rise to 4.4% and could be significantly higher.
My Lords, I will speak to the other amendment in this group: Amendment 5, in my name and that of the noble Baronesses, Lady Janke, Lady Altmann and Lady Boycott. But first, I want to comment on Amendments 1 and 7 and thank the noble Baroness, Lady Altmann, for her introduction and explanation of them.
Noble Lords will remember that in Committee, the noble Baroness, Lady Altmann, tabled an amendment which simply excluded pension credit entirely from the effects of the Bill. The Minister opposed this on lots of grounds, but probably the main one was that the earnings growth had been distorted as a result of the pandemic, and therefore it would not be an appropriate way to increase pension credit. The noble Baroness has come back with Amendments 1 and 7, which would require the Government to uprate pension credit with reference to earnings but adjusted for the effects of the pandemic.
As the noble Baroness mentioned, I am quite sure the Minister will get up and say that the Government do not believe a figure can be found which will be robust enough to use as a measure of underlying earnings growth. We will come back to the substantial discussion on that point in the third group, but, in short, Labour accepts that there is a distortion in the earnings data, but we think the Government should go back and try harder to find an alternative way to deal with this without ditching the earnings link and the manifesto commitment to the triple lock—and, indeed, losing the trust of the nation while they do so. Our view is that that should be done for the state pension, which we will come back to in the third group.
In the meantime, we need the Government to face into the growing problem of pensioner poverty and to develop a longer-term strategy for tackling it. Amendment 5 would force the Government to start by assessing the impact of the Bill on pensioner poverty within six months of the Bill passing, followed by a Statement to both Houses of Parliament.
My Lords, I had not intended to speak. I can see why there is a logic against the noble Baroness’s amendment in some ways, although if she puts the amendment to a vote, I will support her. There was a time—I am going back some years now—when the Government were committed to a link. The consequence of that was that I had to put forward a 75p pension increase. I remember saying to Alistair Darling, my boss, “Couldn’t we make a quid? It’ll be a lot easier to explain a quid than 75p.”. He said, “No, no. The formula’s there. The Treasury said this is what we do: we stick to the formula.” So we stuck to the formula. I was always able to defend it in a way because the supplementary pension, although people did not always apply for it, was worth three quid rather than 75p, but we know about the uptake. The Treasury factor in that people do not take up benefits.
However, here it looks as though pensioners are being treated unfairly. I do not think they are because, as I shall say tomorrow in the debate on the Budget, there are so many hidden tax increases, particularly for pensioners with a very small occupational pension who are at the moment outside the tax net but who will be sucked into it because of the freezing of the personal allowance over a five-year period. Substantial numbers will be paying tax without anybody announcing a tax increase, and that is unfair. I hope that some time, when he flies in, the noble Lord, Lord Lawson, will come to support me on the basis that he supported me and Audrey Wise in 1977 to make the system workable.
However, the noble Baroness has a point. I do not intend to speak on the other amendments because there is a point where logic says you cannot take account of the pandemic. I understand the long run. For a couple of years, I did the job that the Minister is doing and I understand that Ministers are presented with a 30-year run of the consequences of any change in the figures. That has got to be the case when you are talking about pensions.
My Lords, I have put my name to Amendments 1 and 7 in this group, as well as to Amendments 3 and 4 which will be debated later. I am delighted to follow the noble Lord, Lord Rooker. He spoke sanely about what these amendments would do and why they should do it.
The noble Baroness, Lady Altmann, made the case very clearly. There are 2 million pensioners living in poverty and 1 million in extreme poverty. Noble Lords need to know that this Bill would put more people in this position. We should not be passing it unamended.
I find the arguments against our amendments pitifully thin—I am sorry, but I do. I remind the House that, in Committee, the Minister, who wants to do the right thing, said:
“The Government’s triple lock manifesto commitment remains in place”.—[Official Report, 26/10/21; col. 738.]
I know that that is a reference to the fact that we are told that the suspension will be for only one year, but that is not good enough. If you suspend the earnings lock for one year, the cumulative effect goes on, so the commitment is lost.
The commitment was to keep the earnings lock in place because earnings might well be greater than inflation—particularly CPI inflation—and there is no doubt that that will be the case. After all, the Government keep telling us that they want a high-wage economy. But they do not seem to want higher increases for pensioners. We know that, in most cases, these people’s spending is very curtailed. It goes predominantly on fuel and on food. Those are constituents of the CPI, but they are not in the same proportion as they are in pensioners’ spending. Therefore, increases in fuel and food prices hit pensioners harder.
I am still bemused as to how, in Committee, the Minister was able to tell us that,
“we are not currently expecting widespread, significant and sustained increases in consumer food prices in the coming months”.—[Official Report, 26/10/21; col. 740.]
My Lords, in speaking briefly in support of Amendment 5, although I also support the other amendments in this group, I will spare noble Lords the full lecture on the use of relative and so-called absolute poverty measures that I gave in Committee. As the Minister completely ignored the point in her response to that group of amendments in Committee, I return to it now. In discussing an assessment of the Bill’s impact on pensioner poverty—which is certainly necessary—we should be clear how we measure poverty.
When mentioning poverty, the Minister constantly uses the so-called “absolute measure”, and no doubt she has been briefed to do so today. I say so-called because it is better described as an anchored measure, anchored to the poverty line in 2010-11 adjusted for inflation, but taking no account of changes in living standards in the intervening period. In doing so, she ignores what has happened using the more commonly used relative measure, which is part of the suite of official measures.
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As already noted, pensioner poverty has risen to 18% in 2019-20 compared with 2011-12 when, according to the House of Commons Library briefing on the Bill, it was at an historic low of 13%. We are talking about eight years here, and not the kind of year-to-year change that Ministers argue leads to counterintuitive results if a relative measure is used. This is something which should be of concern to the Government rather than glossed over by playing with statistics. Not least, it should be of concern because, in the past, Ministers have acknowledged the need to draw on the full suite of measures used to compile the Government’s own statistics. Moreover, David Cameron, when leader of the Conservative Party, committed the party to recognition that poverty is relative and to both measuring and acting on relative poverty, reflecting the fact that:
“some people lack those things which others in society take for granted.”
I asked the Minister in Committee what has changed, other than that the Government’s record on poverty looks worse using the relative poverty measure. I would be grateful if she could answer today and undertake to look at why relative pensioner poverty is on the increase. As a first step, she could accept the modest amendment in the name of my noble friend as, like her, I found the Minister’s response in Committee unconvincing. The Minister rightly has a reputation for caring about those in vulnerable circumstances. Does she really not care about the impact of this Bill on pensioner poverty?
I ask your Lordships’ indulgence to make a few observations following events last week, in the context of Amendment 5 on poverty, in the name of the noble Baroness, Lady Sherlock. My noble friend Lady Stroud and I are not pursuing our amendment on universal credit at this time.
I was delighted with the Chancellor's decision to improve work allowances and reduce the universal credit taper to 55%. According to my intelligence, this was very much a last-minute decision. I have always felt that there is a tipping point in terms of encouraging people to work more, and a taper of 55% is much more likely to be near that point than the 65% at which we were forced to start the new welfare system. However, I am much more concerned that the Chancellor did not feel able to improve the standard allowances, which have been eroded by 9% in real terms over the last decade, and which are now too low. There would be no point in an amendment which sought a vote on the standard allowance, since I believe that the Chancellor has done enough to eliminate any risk of rebellion among Conservative Back-Benchers on the issue. I am conscious, also, that Lady Stroud and I have tried the patience of the House by moving an amendment considered inadmissible by the Clerks.
Nevertheless, I sense that a sea change in public attitudes to welfare is now under way. In my account of the traumatic reform of the welfare system Clashing Agendas, I quote Rupert Harrison, the then-Chancellor’s chief of staff, on why the benefit cap was introduced. He told me:
“I know it didn’t make much in the way of savings but when we tested the policy it polled off the charts. We’ve never had such a popular policy.”
That was in 2010. This year, there have been a number of polls showing that most people in the country support extending the universal credit uplift. I do not believe that turn-round in attitudes has been purely because of the perceived meanness of the standard allowance. Universal credit is perceived as a fair and rationale safety net which eliminates the arbitrary nature of the legacy systems.
My Lords, I shall speak to Amendment 5 in the name of the noble Baroness, Lady Sherlock. I thank and pay tribute to my noble friend Lord Freud, who I believe did a huge service in putting his weight behind the amendments last week.
This amendment speaks to the impact that changes to social security have on those who are in poverty, and it is that poverty impact which I want to focus on here. I want to put on record my thanks to the Minister for all that she did to work with the Chancellor to ensure that as we stand here today the universal credit taper rate is being lowered to 55% and the work allowance increased by £500. Those who are doing everything they can to ensure that they and their families work themselves out of poverty will benefit hugely from this budgetary intervention.
However, it goes without saying that, as my noble friend Lord Freud has just alluded to, there is a group who will not benefit from this change: those on the standard allowance, those who cannot work, those with sicknesses and disabilities. It is to that group that this House must now turn its attention. Testing this House with inadmissible amendments late at night is not the business for today, but we need to keep our focus on this issue.
The challenges that we and many across this House highlighted were the rising costs of inflation and rising fuel bills at the same time as the removal of the £20 uplift. The NICs increase will not impact on that group. A new Social Security (Uprating of Benefits) Bill is coming to the House shortly. It will cover universal credit and focus on the annual uprating of universal credit in line with inflation. We have an opportunity to argue that this should be in line with where inflation will be at the time when it is laid rather than where it was in September, in order to protect these households. There is also a fund of £500 million that has gone to local authorities to cover the colder months of the year. That should be ring-fenced and allocated to those who are on the standard allowance and unable to work or, better still, put through universal credit for that group.
My Lords, I support these amendments as they support the very poorest and most vulnerable people of pension age, who are going to face the same rising costs of living as everyone else. When we come to group 3, I hope to speak in more depth about what I believe should happen with overall pension policy, but for this group, I want to focus on the most vulnerable.
When I headed up Age Concern England, we ran many campaigns calling for an end to pensioner poverty—a problem that sadly still exists today. Part of the problem is the low uptake of pension credit, something that the noble Baroness, Lady Altmann, has worked tirelessly on, building support across the House. These two amendments would ensure that, at a time when we are likely to face rising prices, our most vulnerable pensioners are supported.
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Amendment 1 will exclude the pension credit from the Bill and retain its earnings protection. I am not planning to divide the House on this amendment, but I may return to this issue on Amendment 7 if Amendments 3 and 4 are not accepted. Amendment 7 permits the Government to adjust the measure of earnings used to uprate the pension credit to allow for what I certainly agree, and I think most commentators would as well, are the exceptional factors that distorted the number released for average weekly earnings, which was the traditional figure used of 8.1%.
This measure is the biggest spending reduction or cost saving in the Budget. The Treasury will save £5.4 billion in 2022-23, £5.8 billion the year after, £6.1 billion the year after that, and so on. This is money that is being taken away from pensioners. Too often, Chancellors have eyed state pensions or pensioners as a tempting target to raid when they need to find large sums of money. This is about large numbers of people, but for each person, we are not talking about large sums.
However, this should not be about money. It is about people and the social welfare system. It is about trust in politicians and in our social welfare system as a whole. It is about millions of people who are often out of sight but struggling in 21st century Britain on the lowest state pension in the developed world. The pension credit level, which is lower than the new state pension, has not yet recovered to the level that the basic state pension sat at in 1979, when the earnings link was first removed. That started the whittling away of pensioner incomes and the rise in pensioner poverty.
What does it say about our country if the elderly are used to help fund Budget reductions in alcohol duty and bank taxation? Amendment 1 is about important protections for the poorest pensioners. I will return with more details on a wider level with Amendment 3, which deals with the breaking of a manifesto commitment. I also urge noble Lords to listen to this debate and to think very carefully about what this House is for. The other place dealt with these issues in two and a half hours, with very little debate. It was presented as a fait accompli. In truth, the other place was slightly misled. On 20 September, when this Bill was placed before them, MPs were given this assurance:
“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.”—[Official Report, Commons, 20/9/21; col. 62.]
Perhaps that was almost believable in September, but since then, with the sharp rises in the costs of essentials and the statements in the Budget which confirm that 3.1% CPI is an exceptionally low figure, it is no longer an appropriate basis on which to vote this through.
There is also an argument being used that the Government cannot use the earnings figure of around 8% because it is too high and is distorted by the pandemic. Apparently, there is no robustly agreed methodology to adjust that figure for the pandemic. It strains credulity that, with the legions of statisticians and actuaries at the Government’s disposal, it is not possible to produce a reliable, adjusted figure that accounts for the pandemic. However, if that is indeed the case, the OBR and the ONS helpfully have produced their own statistics which could perhaps be used as the basis of such a re-estimation of average earnings.
Amendment 7 explicitly permits the Government to use an adjusted figure for 2022-23. It is put in place to meet the objections that apparently there was concern that the Government could be legally challenged should they use an adjusted figure. This measure in Amendment 7 would ensure that unless a figure was used that is entirely irrational, such a judicial review is unlikely to proceed.
I hope that we will have a good debate on these measures and can send them back to the other place for reconsideration on the basis of much fuller and more accurate information. I beg to move.
We know we have a problem. I will not go over again all the evidence from around the House that we rehearsed in Committee, but let me give a quick summary. Pensioner poverty was doing really well: it fell markedly between 1997, when it was 29% for the UK, and 2010, when 14% of pensioners in Great Britain were living in poverty. That was due primarily to the introduction of pension credit. From 2012, pensioner poverty started to rise again. Last year, 18% of our pensioners were living in poverty—that is more than 2 million pensioners now in poverty, with over a million in severe poverty.
There is a real gender pensions gap. The number of women pensioners living in poverty has increased dramatically at a time when the total number of women pensioners has fallen as a result of the state pension age going up. That is really significant. We also have a particular problem in some regions, especially London, and there is a worry about a growing problem in the north. Older people from black and Asian communities are around twice as likely to be living in poverty as white pensioners.
The context for the Bill is a cost of living crisis, with inflation rising and energy bills skyrocketing. I raised this in Committee, and the Minister responded to my concerns by saying that energy prices were built into CPI. But the prices reference point for uprating is the September CPI rate, and the energy cap was raised on 1 October. It has been raised by £139 for those paying by direct debit and a huge £153 for those on prepayment plans. Yet again, there is huge premium on being poor: the poor pay far more per person for energy than the rich.
Given the worries about pensioner poverty from around the House, and the fact that the state pension is the largest single source of income for most pensioners, it would seem obvious that Ministers should carry out an impact assessment so that they would know what effect suspending the triple lock would have on pensioner poverty. But, astonishingly, there has been no impact assessment for the Bill. When I moved a similar amendment in Committee, the Minister said it was not possible to do what we asked because it would involve modelling. She said:
“Assumptions would need to be made about how each individual pensioner’s income would change in future under each scenario.”—[Official Report, 26/10/21; col. 750.]
I accept that assumptions would have to be made—that is what happens when you model things. Is it really impossible to model the impact of this policy? If so, how does anyone model the impact of any policy on poverty? When I was a spad in the Treasury—which I accept was back when dinosaurs roamed the land—it had a TAXBEN model which it used to assess the impact of any changes in taxes and benefits. Also, in those days, the DWP had some of the best statisticians anywhere in Whitehall. I have no reason to believe that that is not the case now, although I know the department has shrunk. So, I recognise that assumptions would need to be made, but in modelling they just have to be reasonable and stated. I would even be happy with an assessment which ignored behavioural responses, if that would make it easier.
There is a common theme across all the amendments today and there are concerns from all Benches about low pensioner incomes. Our simple amendment reflects that concern. If the Minister is not convinced by all the evidence mentioned here and in Committee, I urge her simply to accept my amendment and do the work to establish the facts. If the Government want to break their manifesto commitment, at least they should be committed to gathering and publishing information about the impact of that decision. I look forward to the Minister’s reply.
If we had the second or third-best pension in Europe, we would not be having this argument, would we? However we have one of the poorest basic pension rates of any modern economic country, but we are, so called, one of the richest. Sometimes we have to say, “Hang on a minute: let’s take a stand,” and I think today is an opportunity to do that. I know the logic is against this, but when one looks at the figures, it is an opportunity to make a change. The Government could be forced to have a look at some of the long-run consequences of having such poor pensions, where they factor in low uptake of pension credit. One of the documents produced for the Budget on changes in household incomes mentions that they factor in that people will not claim benefits to which they are entitled. That is not very fair. Today is an opportunity for the little people to hit back.
I do not know what she knows, but the supermarkets certainly are. These price rises are already coming through. They are not yet fully reflected in the CPI, but we know that prices in the shops are going up. And the more that wages go up in this new, high-wage economy where we are encouraging drivers of HGVs to demand more money—which the Government say they deserve—the more this will feed through into increased food prices.
We need to make sure that our pensioners can eat. I do not want to be responsible for pensioners going hungry —or even hungrier than they have been in the past—and I do not believe that the Minister does either. It is imperative that we do what should not be beyond the wit of any Government and come up with a number that approximates effectively to where underlying earnings have gone in the last year. I have every confidence that the ONS can do this. Indeed, CPI is not quite as robust as the Minister would have us believe; it is often adjusted after a few months, or even a year, because a lot of numbers have to be adjusted as new information comes through. We could come up with an adjusted earnings figure which would enable the Government to maintain their manifesto commitment, which I am sure it would really like to do. It would enable the rest of us to ensure that pensioners –those on pension credit, as well those on the basic pension—lead a slightly better life. This is all part of the levelling-up agenda.
So, as the Chancellor contemplates the £25 billion of headroom that he is reported to have built into his Budget arithmetic, I urge him to use a small proportion of that figure to alleviate the real hardship being suffered by our very poorest citizens as soon as possible. My three-point recommendation to him is: first, restore the 9% erosion in standard allowances; secondly, tie the standard allowance to average earnings, something that we are debating in the context of pensions right now; and, thirdly, start getting rid of the excrescences such as the two-child policy and the benefit cap.
There is no need for late-night reactive decisions by a UK Chancellor on the shape of our welfare system. One of the clauses that I inserted into the Welfare Reform Act 2012 allows comprehensive trialling by the DWP of all the major elements within universal credit to discover the econometric impact of changes. For instance, the department can discover the exact optimal point of the taper, among many other aspects of the benefit. It may be that the point at which the Treasury makes the most tax and loses the least welfare revenue is a taper of 50%, for example, rather than 55%. The department can test and keep testing as society changes.
I thank my long-time colleague, my noble friend Lady Stroud, for her indefatigable efforts to find a way to help the most vulnerable in our society. Without all her energy and passion, I do not believe we would have achieved the progress that we have.
Speaking specifically to the amendment, one of the reasons why the Government are struggling to deliver poverty impact assessments on pensioner poverty or working-age poverty is that they have yet to decide how they are going to define and measure poverty. This matters, and it is one of the key reasons why they have so frequently walked into trouble on issues of poverty. If only the Government realised that poverty measurement can be their friend and guide. It could have guided them through their decision-making during the pandemic and through the challenges of free school meals. I have heard it said that this cannot be done in real time, but with RTI we are so much closer to being able to measure real-time impacts and make informed choices to protect our most vulnerable people.
However, today is a day to say thank you to the Government for their investment in the lives of those who are in work and on low wages, but also to ask them to be watchful for the poverty impacts on those who cannot work—those with disabilities, children and pensioners—and to take action where vulnerability is visible.