Moved by Baroness Sherlock
3: Clause 1, page 1, line 24, at end insert—“(2C) No draft order laid before Parliament under subsection (2A) may be made in the form of the draft unless the Secretary of State has laid before Parliament—(a) a report containing an assessment of the existing levels of pensioner poverty in each of the regions and nations of Great Britain, and(b) a statement outlining the expected impact of the draft order on pensioners with the lowest incomes.”Member’s explanatory statementThis amendment would prevent a draft order under inserted subsection (2A) from being made unless the Secretary of State has published a report outlining current levels of pensioner poverty across the regions and nations of Great Britain and a statement outlining the expected impact of the Government’s chosen policy option on these poverty levels.
My Lords, I made it clear at Second Reading that we support this Bill, and I have no wish to delay its implementation, so Amendment 3 is a probing amendment. I have tabled it to make sure that we get a chance to address the issue of pensioner poverty, which was raised by many noble Lords at Second Reading but did not get a substantive response, no doubt because time was tight. Fortunately, we have all the time in the world in Committee.
The number of poor pensioners had fallen significantly, largely down to the introduction of pension credit, but it is now a cause for concern again. The Government’s own figures show that 1.9 million pensioners are living in relative poverty, so this is something that we should all be concerned about. People who have worked all their lives should not be worrying in old age about how to make ends meet.
There are broader policy concerns too, such as the evidence showing that people on lower incomes have lower life expectancy and fewer years of healthy life after retirement. That is bad for the individual, but it is also bad for the state. Research by the Joseph Rowntree Foundation has shown that these health inequalities have an effect on state spending, leading to higher costs to the NHS and social care services. Has the Minister read the interesting recent report based on research commissioned from Loughborough University by Independent Age which suggests that the underclaiming of pension credit is costing the Government roughly £4 billion a year in increased NHS and social care costs? What does she make of that?
Taking pensioner poverty seriously means that when Ministers talk about their plans for the triple lock for the state pension, they should also be ready to talk about their plans for uprating the standard minimum guarantee in pension credit. That is the reason this amendment suggests that the uprating should be accompanied by a report on the implications for poverty. If pension credit is not uprated by an equivalent amount to the triple lock, the benefit of the increase in the state pension enabled by this Bill will be enjoyed in full, as I have said before, by many Members of this House, but not by the poorest pensioners, who will have it clawed back from pension credit.
Pension credit is key to tackling poverty because as well as topping up weekly income for poor pensioners it can be a passport to other benefits—housing benefit, council tax reduction, the cold weather payment and now the free TV licence for the over-75s. That could be worth up to £7,000 for some pensioners. Do not take my word for it. In giving evidence to the Scottish Social Security Committee on
“In the UK, 16 per cent of pensioners are in poverty. If all those pensioners claimed pension credit, housing benefit and the council tax reduction—especially the council tax reduction—that would reduce the 16 per cent to almost zero.”
The latest DWP paper on take-up that I could find came out last February but covered the period 2017-18. It said that only six in 10 of those eligible for pension credit are claiming it. That means 1.2 million eligible families did not claim the benefit and only 70% of the total amount of pension credit that could have been claimed was claimed—only 70%. That means that up to £2.5 billion of pension credit is going unclaimed, amounting to around £2,000 a year for each family who would be entitled to receive pension credit but did not claim. This take-up rate has basically stalled for a decade. It is crystal clear that, if the Government care about pensioner poverty—and they should—they need to care about the take-up of pension credit.
I am talking more than I expected to about this because we had a rather unsatisfactory debate in Oral Questions yesterday. In response to a Question from my noble friend Lord Foulkes, the Minister was not able to offer any indication that the DWP has a proper strategy for increasing pension credit take-up. It is not enough simply to say that Ministers want people to apply. The DWP did run a 12-week campaign starting in February but, as my noble friend Lord Foulkes pointed out yesterday, that campaign, plus online claims and the threat of losing free TV licences, resulted in fewer than 30,000 of those lost million-plus people making a claim.
Maybe that is because the key feature of the campaign was a video to be shown in GP surgeries and post offices—of course, we are now in a pandemic and most pensioners are not going to those places. The Minister acknowledged to me yesterday that, because of the pandemic, people were not able to access that information, but I asked if they would be running a fresh campaign instead. She said:
“At the moment there are no plans for a new campaign. We are working with stakeholders, who again are absolutely swamped by the impact of Covid, to ensure that the message gets out.”—[Official Report, 26/10/20; col. 14.]
She also said in response to other noble Lords that there were no plans for research and no plans for targets for take-up. So I ask the Minister, what is the Government’s plan to boost take-up of pension credit?
If there is no plan, I have some suggestions. First, the DWP needs a written strategy to boost pension credit take-up. It does not have one and that is a problem. They should publish one so that we can scrutinise it and hold Ministers to account. Secondly, there should be a proactive campaign targeted directly at those thought to be non-claimants, rather than just general information; it should prioritise those who need the money most and are the least likely to claim. That requires up-to-date data and good qualitative research. It also needs to be creative. I am told that, when pension credit was launched, there were roadshows in various community settings and the DWP sent out mobile vans to go around small towns and villages on market day in areas where data suggested take-up was low. Finding a Covid-secure version of that will take time, resources and creativity, and engagement with stakeholders. If, as the Minister says, stakeholders are swamped, will the Government consider funding them to get involved with this work?
Does the Minister agree with the points that I have made? Crucially, does she accept that the Government have a responsibility for tackling poverty across the UK and across the generations? I do not want to open up the debate that we had about intergenerational issues at Second Reading, although I feel very strongly about working-age benefits and working-age poverty, but it is a really interesting comparison. Because Ministers do not have a strategy for tackling child poverty—indeed, they repealed the Act that made them do so and refused to accept the internationally accepted measures of poverty—we are seeing the numbers of poor children in the UK rising. If Ministers were forcibly, legally committed to eradicating child poverty, they presumably would not have cut billions from working-age benefits.
I indicate now that I will not press this amendment to a vote, but I urge the Minister to accept it. The Committee deserves a comprehensive and serious response from the Government today. If that is not available, they could at least follow the spirit of this amendment and bring forward a report on these issues before Parliament soon. I beg to move.
My Lords, in speaking to Amendment 4, to which my name is attached, I also wish to support Amendment 3, which addresses similar issues. The aim is to understand better the impact of this Act on pensioner poverty.
According to the Joseph Rowntree Foundation, pensioner poverty has been decreasing across the UK. Given the existence of the triple lock, that should not be a surprise. Indeed, it shows the success of the triple-lock policy since 2010 in reducing pensioner poverty generally. That is something of which my party should be proud.
Yet, as we have heard from the noble Baroness, Lady Sherlock, pension credit is still needed by large numbers of individual pensioners, and we know from a Question asked yesterday by the noble Lord, Lord Foulkes, that the campaign to encourage take-up of pension credit this year seems not to have achieved very much.
As we have heard, too many people who would qualify for pension credit still do not claim it. One reason could be clawback. I think a main reason is lack of face-to-face support to assist individuals for whom digital and telephone access is a barrier. I hope the Minister will look carefully at this problem, because if the Government really want to reduce pensioner poverty, they have to will the means of doing that. As the noble Baroness, Lady Sherlock, said, we need a new campaign.
Our Amendment 4 also identifies a considerable pensions gap between men and women and calls for a specific review of the impact of the provisions of the Bill on women. I hope the Minister can agree to that.
We said at Second Reading that the Bill is primarily a technical Bill. But the amendment in my name and that of my noble friend Lady Janke adds an important dimension, which is that any further decisions on pensions uprating should be brought forward by the Government in the light of their findings from the review; in other words, we need the clear, evidence-based decision-making that Amendment 4 would provide.
My Lords, I will speak to Amendment 3, and thank the noble Baroness, Lady Sherlock, for her work on it. I have previously spoken about the importance of the Government fulfilling their promise to deliver the triple lock to pensioners, so I support the general thrust of the Bill. However, it is important that a considered approach to uprating is taken that analyses the benefits of this policy. After all, pensioners, like the rest of the population, represent a very diverse range of income levels.
Covid-19 has shaken the economic standing of much of the working population—a fate that pensioners have largely been shielded from. The taxation of future generations to pay for current pensions must be balanced with assessments that clearly outline the effectiveness of this policy. The reality is we do not have unlimited economic resources at our disposal, and trade-offs are required. I do see dangers in uprating the entire pensions scheme by 2.5%, without the necessary impact assessments, at a time when unemployment and working household debt are rising. Reviewing both the cost and relative success of this policy in determining not only whether it reduces existing levels of pensioner poverty but whether the relationship between pensioner and working household incomes throughout a given period might lend itself, in the future, to a much more targeted approach to uprating.
I expect the report’s assessment of existing levels of pensioner poverty will be reflective in assessing the efficacy of blanket uprating policies and whether considered and targeted increase in social security and relief would better account for uncertainties such as the Covid-19 crisis, which has had a disproportionate economic effect on the working-age population. Of course, pensioners need to be adequately looked after. Until a review on whether the 2.5% minimum uprating delivers intergenerational fairness, it is right that the House approves these measures.
Finally, on intergenerational fairness, which was mentioned at Second Reading, I once again call on the Government to extend April’s universal credit increase and extend this lifeline that so many across the country are relying on.
My Lords, I have only a little to add to what has been said. If you do not know how severe a problem is, you cannot do much about it. Having something that looks into the problems of pension policy is a very sensible idea. The Minister will undoubtedly say, “We are—we are doing X, Y and Z” and give us a list, but the fact is that the non-claiming of benefits is something that bedevils our system. By necessity, it is a bureaucratic system, and even if you make the bureaucracy as manageable as possible, it is still there. People who think, “Well, I should not be asking for something else”—something that the pensioner population seems to get an A grade in—means that we have poverty that leads to other problems.
The reason we have given people these back-ups is because they need them: they make their lives better and mean they are not as big a drain on the National Health Service or emergency care going in to support them. It is actually in the general public’s interest to make sure that people are not living in poverty: it leads to problems, to costs and to knock-ons; it makes our lives less pleasant. So, I hope that when the Minister replies, she will give us some idea of how the Government are trying to find this information, because it is needed. To make the system work well, it is needed across the board. If we do not have enough information about issues, we cannot address them. The idea of having some solid knowledge to base future planning on cannot be a bad thing.
My Lords, I too support the amendments in this group. I think they have a lot in common. The triple lock has done a great job in restoring value to the state pension, which is hugely important given that so many people are dependent on the state pension and have no other pension at all. The intention behind the amendment in my name is to have a detailed assessment of how effectively the triple lock is tackling poverty.
If we think about older pensioners particularly, and the pension credits debate, those I have been in touch with are very shamed at having to apply for means tests. Applying for benefit has a stigma for them, so I am not completely supportive of the idea of targeting in this respect. I personally believe that there are ways of ensuring that wealthier pensioners pay more, and support those who have less, other than by targeting pensioners in need and putting them through processes that they find distasteful and disturbing and give them great anxiety.
The issue of pension credits has been raised and yesterday’s Oral Question from the noble Lord, Lord Foulkes of Cumnock, certainly contributed to that debate. If a detailed analysis were done before consideration of uprating policies, this could include the inadequacy of any take-up campaign and ensure a proper monitoring process to see what is happening. Also, on the points made about pensioners in poverty, particularly women, this is an area that needs to be looked at separately. Many women—older pensioners in particular—have very little pension entitlement. The new pension has, to some extent, addressed the fact that many women have spent a great deal of time doing the caring within the family. This needs to be looked at more closely, particularly when, with increasing divorce rates, very many divorce settlements do not address the fact that the woman has contributed to her husband’s pension over the years. I would very much welcome the opportunity for a detailed analysis of the impact of the triple lock, with particular reference to poverty and its effects on women. In so saying, I support both these amendments.
My Lords, I thank all noble Lords who have contributed to the discussion on these two amendments. I want the House to understand that I share noble Lords’ concerns about pensioner poverty, and assure the House today that we are committed to ensuring economic security at every stage of their life, including when they reach retirement.
The triple lock improves incomes for current and future pensioners. Auto-enrolment into workplace pensions and action on fuller working lives will also help people towards the income that they aspire to in later life. Pension credit provides an important safety net for pensioners on low incomes. As I mentioned in our earlier debate on the amendment from the noble Lord, Lord Addington, that safety net is currently nearly £10 per week higher for a single pensioner, and nearly £15 per week higher for a pensioner couple, than it would otherwise have been if we had just increased it in line with earnings since 2010. Material deprivation among pensioners is at a record low, and the absolute poverty rate is lower than in 2010.
In the long term, it is this Government’s reform to the state and private pension systems—including the introduction of the new state pension in 2016—that will improve outcomes for all, and particularly help to reduce gender inequality in retirement income. Over 3 million women stand to receive an average of £550 more per year by 2030 after recent reforms to the state pension alone.
Under the new state pension, outcomes are projected to equalise for men and women by the early 2040s, over a decade earlier than under the old system. For future pensioners, auto-enrolment into workplace pensions has transformed pension saving for millions of workers. Our employer-led strategy on fuller working lives aims to maximise the labour market opportunities for people to earn and save for longer.
“a report containing an assessment of the existing levels of pensioner poverty in each of the regions and nations of Great Britain”,
“a statement outlining the expected impact of the draft order on pensioners with the lowest incomes.”
With respect to subsection (a) of her amendment, the noble Baroness, Lady Sherlock, will be aware that my department publishes annual estimates of pensioner poverty at a regional level in the Households Below Average Income series.
I turn to subsection (b) of Amendment 3, and will address Amendment 4 at the same time. Amendment 3(b) would require a statement outlining the expected impact of the draft order on pensioners with the lowest incomes. Amendment 4 would require the Secretary of State to report on the impact of the Bill and of the triple lock on pensioner poverty, with reference to women. The provisions in the Bill can only be used to increase the rates of state pension and certain other pensioner benefits, so its effects on pensioner incomes, and therefore pensioner poverty, can only be positive. However, I am sorry to inform noble Baronesses and noble Lords that we do not believe a report of the sort outlined in these amendments could be made with an acceptable degree of analytical robustness.
To make an assessment relating to how many pensioners might have their income lifted above the various low-income levels, assumptions would need to made about how each individual pensioner’s income will change in future. This would require making assumptions about, for example, how earnings for pensioners will change, or trends in the rate of return and drawdown of income from investments. These projected incomes would then need to be compared to projections of the various income thresholds.
The relative poverty low-income threshold in a particular year is determined by the increase or decrease in median income across all individuals in the UK. Forecasting a relative income threshold requires making assumptions about how the net income of every individual in society will change, not just of those above state pension age. Each individual’s total net income is influenced by how every different source of income, including their earnings, and their costs, such as housing costs, may change in future. Making assumptions about future changes in net income for individuals involves complex interactions between income and outgoings.
For absolute poverty, the threshold is increased each year by inflation during that year. As demonstrated in recent months, inflation is currently extremely volatile and there is a high level of uncertainty about what its level is likely to be over the next few years. In the current circumstances, with a higher level of uncertainty around the economy than usual, it is impossible to forecast individual pensioner incomes or the various low-income poverty thresholds with a reasonable degree of accuracy. Therefore, there is a very high risk that any analysis seeking to forecast the number of pensioners moving above these projected poverty thresholds is highly likely to be misleading.
I note, however, that my department collects and publishes a wide range of data in this policy area, such as national statistics on the number and percentage of pension-age women on low incomes. This is published annually in the report on households below average incomes. The last publication covered data for 2018-19, and trends over time can be identified from this source. These trends are an important element in policy-making in the department, such as that which led to the state and private pension reforms I mentioned earlier.
The noble Baroness, Lady Sherlock, raised pensioner poverty. I am assured that since 2009-10, material deprivation for pensioners has fallen from 10% to 6% and that there are 100,000 fewer pensioners in absolute poverty before and after housing costs. To be clear, in 2021 we are forecast to spend over £126 billion a year on pensioners, including £102 billion on the state pension.
The noble Baroness also raised the Independent Age report. The figures in Independent Age’s latest report are based on assumptions about the relationship between healthcare outcomes and income and rely on survey data. We know that pension credit is often underreported in survey data; unfortunately this makes it inherently difficult to categorise groups based on receipt of pension credit or to identify pensioners who may be entitled to pension credit but who, for whatever reason, are not claiming it.
The noble Lord, Lord Shipley, asked what the Government are doing about women and the gender gap. While the triple lock continues to improve incomes for current and future pensioners, in the long term it is reforms to the pension system that will improve outcomes for women and reduce the gap.
I move to the issue of pension credit, which all noble Lords raised very eloquently and clearly. In response to the question of the noble Lord, Lord Foulkes, yesterday, I agreed to go back to the department and relay the sentiments; while I cannot give your Lordships the information on a campaign you require today, I can give an utter assurance that I will go back to the department to relay the points that have been made.
The right reverend Prelate the Bishop of St Albans asked about an impact assessment. For pensioner incomes, assumptions would need to be made about how each individual pensioner’s income will change in the future, which would require making assumptions, as I have said, about many things, such as earnings for pensioners, change in the rate of return and drawdown of income. This is most difficult.
The noble Lord, Lord Addington, and the right reverend Prelate the Bishop of St Albans quite rightly raised a point about intergenerational fairness and questioned why we should keep the triple lock for pensioners when working-age people are only getting CPI increases. We have recently seen rises in the living standards of pensioners, but we must remember that not all pensioners are in the same position: over a million current pensioners rely solely on their state income. We must not forget that today’s working-age people are tomorrow’s pensioners, and future generations of pensioners will also benefit from the way the state pension is uprated today.
I was asked how we intend to uprate pension credit. Without this Bill, the core component of pension credit—the standard minimum guarantee—will be frozen in 2021. The decision on how to uprate the standard minimum guarantee will be made during the Secretary of State’s uprating review and announced in November. It would not be right to pre-empt the outcome of that review. Taking into account the points raised, I ask the noble Baroness to withdraw her amendment.
My Lords, I am grateful to all noble Lords who have spoken to these amendments. As the noble Lord, Lord Shipley, said, if the Government will the ending or reducing of pensioner poverty, they must also will the means. I am not sure that we have heard that today—in fact, I am quite confident that we have not.
Other noble Lords made some very good points. The noble Baroness, Lady Janke, made some important points about the need to understand the impact of the triple lock on poverty. I agree very much about the need to look at particular issues faced by women facing poverty in retirement. The noble Lord, Lord Addington, is absolutely right that, if we do not have adequate data, we will not address the right questions. What is not measured is never going to be accurately addressed.
I thank the right reverend Prelate the Bishop of St Albans for his continued advocacy for those on low incomes at all ages. I wholeheartedly endorse his call for the uplift on universal credit to be extended beyond April, and I ask that this also be extended to legacy benefits. Poor workers often become poor pensioners, so all we are doing at the moment is pushing the problem even further back.
The Minister started her response by saying that she shares our concerns about pensioner poverty, although I notice that she cherry-picked her measures, citing material deprivation and absolute poverty but not the standard measure of relative poverty. If I am honest, I found her response very disappointing. She gave us reasons why the Government are doing good things on private pensions and the state reform, but most of my speech and what other noble Lords spoke about was how to address pensioner poverty in the short term by looking at things such as pension credit. She simply did not do that. I asked a number of questions and made a number of suggestions, none of which got a response at all.
I find this very disappointing because I have a lot of respect for the Minister; I believe her when she says that she will take these issues back to the department, but, in the end, as a House, we are not simply here to say things to the Minister and for her then to say them to her colleagues. When does the message come back the other way? We are one of the Houses of Parliament; it is reasonable to expect someone to come to the House, defend the decisions that their department is taking and tell us why they are not going to follow through.
If we were not in a hybrid state, I would be getting up and saying, “Could I ask the Minister to respond on that?” I cannot, and, therefore, I am constrained by the circumstances, and there is no way to pursue this. However, I ask the Minister to think very hard about how she will go about telling this House what the department has to say and how it is going to respond to our questions If not, I will look for other opportunities to do this on a regular basis and will keep on until we hear something that actually answers our questions. However, in the meantime, I beg leave to withdraw Amendment 3.
I say to the noble Baroness, Lady Sherlock, and all noble Lords, that I have taken on board the ideas that have been put forward about pension credit: the campaign, and the importance of how it can lift people out of poverty and improve their lives. I will go back to the department, then return and answer the questions asked by the noble Baroness. I will always make that undertaking and will never shy away from answering questions, but I would rather get the right answers rather than give a wrong one and create another little tsunami on pension credit. If the noble Baroness can accept that, I will be grateful.
I am very grateful to the Minister for coming back on this. I will look out for those responses, and for the opportunity to discuss them on the Floor of this House. I thank her for her intervention, for addressing the questions and for her constant willingness to talk to us. These things make our debates much better.
Amendment 3 withdrawn.
Clause 1 agreed.
Amendment 4 not moved.
Clause 2 agreed.
Bill reported without amendment.