Clause 6
Pensions Bill
11:30 am

Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

I am sure that the Committee will be delighted to hear that I shall be very brief in discussing this clause. Compared with its predecessor, clause 6 is a relatively inoffensive clause; it has certainly not attracted an awful lot of comment from outside bodies. However, I wanted to raise a couple of issues before we move on.

Clause 6, along with its various related consequential amendments, is designed to ensure that, for some benefits, the preservation of the link with prices rather than earnings will continue, but some benefits will be linked with the basic state pension as and when it comes to be linked with earnings—we do not want to go back over the issue of when that day will dawn. One example of the second category of benefits is bereavement benefit.

I am asking the Minister to address two issues in his comments. First, I should like him to explain the reasoning behind the distinction between the two groups of benefits. I assume that the reason for the groupings is financial. I should be grateful if he would indicate the kind of saving that is expected by making this distinction between the two groups of benefits: those that will be clinging to the coat tails of the basic state pension, in terms of uprating with earnings in due course; and those that will continue, for ever and ever, to be linked to the level of prices. That is all I have to say.

James Plaskitt (Parliamentary Under-Secretary, Department for Work and Pensions; Warwick and Leamington, Labour)

You will recall, Mr. Taylor, that in our discussion of clause 5 we provided for the earnings uprating of the basic state pension, the standard minimum guarantee in state pension credit and industrial death benefit. Clause 6 completes the picture. It amends section 150 of the Social Security Administration Act 1992, which provides for price uprating. Essentially, clause 6 removes references to the benefits that will now be uprated in line with earnings, while preserving the existing position for other benefits. I think that the answer to the second question by the hon. Member for Eastbourne is that this process is about maintaining the status quo; it is not about delivering any savings in expenditure.

The changes that relate to the basic state pension, industrial death benefit and bereavement benefits have effect in relation to the designated tax year. The  changes that relate to the standard minimum guarantee have effect in relation to the year in which the Act was passed.

Historically, the rate of certain bereavement benefits has been linked by legislation to the rate of the basic state pension, and consequently they have been uprated in line with that. As I explained before, clause 5 maintains that link in the case of industrial death benefit, because most people receiving that benefit are over state pension age—I think that is the answer to the first question by the hon. Member for Eastbourne.

However, other bereavement benefits—widowed mother’s allowance, widow’s pension, widowed parent’s allowance and bereavement allowance—are paid to people during their working lives, when people have needs and responsibilities that are different from those of pensioners. If we did nothing, those bereavement benefits, which at the moment are uprated in line with prices, would instead increase in line with earnings, as a consequence of the earnings uprating of the basic state pension.

Our policy commitment was to uprate the basic state pension and the pension credit standard minimum guarantee by earnings. Working-age benefits will remain linked to prices, as they are now. So I repeat to the hon. Member for Eastbourne that the clause maintains the status quo.

The clause breaks the link between the rate of the basic state pension and those working-age bereavement benefits, so that those benefits will continue to be increased by prices, as they are now, in line with other working-age benefits.

Sections 39 and 39C of the Social Security Contributions and Benefits Act 1992 provide the legislative links between the rate of the basic state pension and bereavement benefits. Clause 5(5) and (6) amend those sections, the effect of which would be to remove the links to the rate of the basic state pension.

Given that there is, at present, no legislative mechanism to determine the separate rates of these benefits, the Bill gives the Secretary of State powers to make regulations that prescribe new rates for these bereavement benefits before the basic state pension starts to be uprated by earnings. Clause 5(9) will ensure that the prescribed rate of bereavement benefits will be the same as the basic state pension until that is uprated in line with earnings. After that, the new prescribed rates of bereavement benefit will be uprated by prices via section 150 of the Social Security Administration Act 1992. For those reasons, I hope that the Committee will agree to the clause standing part of the Bill.