Amendment 5

Social Security (Up-rating of Benefits) Bill - Committee – in the House of Lords at 9:15 pm on 26 October 2021.

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Baroness Sherlock:

Moved by Baroness Sherlock

5: Clause 1, page 2, line 11, at end insert—“(3) Within six months of the passing of this Act, the Secretary of State must publish a review of the impact of this Act on pensioner poverty.(4) This review must be laid before both Houses of Parliament, and a Minister of the Crown must arrange to make a statement.”Member’s explanatory statementThis amendment requires the Government to carry out an assessment of the impact of the Government’s chosen policy option on levels of pensioner poverty.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Education)

I rise to move Amendment 5, in my name, and to speak to the other amendments in this group. I tabled Amendments 5, 6 and 7 for two reasons: to try to plug what seems to be a serious knowledge gap in this legislation, and to highlight the wider concern about the growing rates of pensioner poverty and the worsening cost-of-living crisis.

It seems evident that the Bill must have an effect on pensioner poverty, because it will not only give today’s pensioners a lower pension next year than they expected but it will affect the value of the state pension for them and for future generations of pensioners for ever, as it is the base from which future percentage increases will take place. As noble Lords have already said today, that is a low base, since the UK pension is comparatively low.

The last Labour Government were able to achieve big reductions in pensioner poverty, in large part by introducing pension credit. At Second Reading I asked the Minister what action the Government would be taking to increase the take-up of pension credit, since at that point the last figures that I had seen suggested that only six in 10 of those eligible were claiming it. In response, the Minister picked just one figure and talked about take-up by value, and only for the guaranteed minimum standard pension credit. She did not talk about the aspect that most people talk about: the proportion of people who could claim pension credit who are actually doing so—in other words, take-up by volume.

I am sure the Minister will appreciate that that matters a great deal. With some benefits, if you only get a small amount then some people might choose not to claim. But the thing about pension credit is that if you get it at all, it is a passport to other really important benefits, including council tax credit, help with health and energy costs, and of course the free TV licence for the over-75s. It therefore matters that everyone gets pension credit if they are entitled to it.

I think the latest figures show that take-up for pension credit is still only 63%. Will the Minister confirm that? If so, what are the Government doing to boost it, including the leaflets mentioned by my noble friend Lady Lister? There were lots of other ideas—what is happening about those?

Since 2012 pensioner poverty has started rising again. Official figures show that some 18% of pensioners were living in poverty last year. That amounts to around 2.1 million poor pensioners, with over 1 million of those living in severe poverty. Has the Minister seen the report in June by Independent Age which found that people aged 85 and over have the highest rate of poverty among pensioners, at 22%? There are big regional variations; London has by far the highest rate of pensioner poverty, at 25%, but there are worries about rising poverty in the north.

In September, Age UK published research which found that, since 2012-13, the number of women pensioners living in poverty has increased from 990,000 to 1.25 million—an extra 260,000 women living in poverty. This is especially remarkable given that, because the state pension age was going up at that time, the actual number of female pensioners fell by 800,000. So we have 800,000 fewer female pensioners and yet 260,000 more female pensioners living in poverty. Can the Government explain that and tell us what they are doing about it? Age UK also found that older people from black and Asian communities are around twice as likely to be living in poverty as white pensioners.

Given the worries about pensioner poverty, and the fact that the state pension is the largest single source of income for most pensioners, it would seem obvious that Ministers would want to carry out an impact assessment so that they would know what effect suspending the triple lock could have on pensioner poverty. But astonishingly, at Second Reading, the Minister confirmed to us that the Government have not done that and do not propose to. My Amendment 5 would simply force the Government to carry out that assessment within six months of the Bill passing, and then make a Statement to both Houses outlining the steps needed to address pensioner poverty.

Of course, the Bill cannot be seen in isolation from other government decisions, including the cut of £20 a week for up to 5 million or 6 million universal credit claimants—to which we will return in more detail a little later. The number of older workers claiming universal credit has hit a record high just as the Government’s decision to cut £1,000 from universal credit comes in. There are older workers who are affected by both of these things, so that one decision will take a whopping £1.3 billion from the pockets of 1 million over-50s.

At Second Reading, I asked how many people would be affected by both the £20 cut in universal credit and the Bill, and the Minister said it would be around 50,000 people. We have since had clarification that the estimate is that more than 30,000 mixed age couples will be claiming universal credit at the start of 2022-23. So that is 60,000 people, plus any dependants, facing a double whammy of the Government’s decision to suspend the triple lock and to cut universal credit but, again, no attempt has been made to look at the impact on them. Amendment 6 in my name would force the Government to review the impact of the Bill on those households.

That £20 cut and this Bill both take place at a time when inflation is rising and energy bills are skyrocketing. As winter approaches, we are heading for a real cost of living crisis, which could have a devastating impact on pensioners. My Amendment 7 would require the Government to publish an assessment of the impact of the Bill on pensioners’ ability to pay their energy bills. The Minister mentioned the price cap earlier; she will be aware that 15 million consumers on default energy tariffs faced a rise in the price cap from 1 October. That meant an increase of £139 for those paying by direct debit and £153 for those on prepayment plans. National Energy Action, the energy charity, estimated that this was

“likely to result in more utility debt, 500,000 extra households in fuel poverty and an increase in preventable deaths this winter.”

I fear that prices are likely to rise further still. Research firm Cornwall Insight is forecasting that the energy price cap could be put up in early 2022 by about 30%, adding hundreds more pounds to household bills. As so often, the poor end up paying more, and the “poverty premium” on energy is really marked. Having to use prepayment meters, which are more expensive, not being unable to pay by direct debit, and even having to request paper bills can all add up. The poorest households also tend to have fewer adult occupants, so the burden is not spread out.

Data shows that energy makes up a much larger proportion of expenditure in the poorest households but, to my astonishment, new analysis has shown that the poorest 10% of households pay on average £756 a year per person for electricity, gas and other fuels. So the poorest 10% pay £756 a year for energy—50% more than the richest households, which pay just £504 per person. The poorest households spend more on energy per person than any other group.

There is widespread concern that the state pension increases could be outstripped by price rises. The Centre for Economics and Business Research found that retired households will be nearly £700 worse off by next year as the state pension fails to keep pace with soaring bills and tax charges. Does the Minister accept that pensioners will be worse off? If she does, what will the Government do about it? If she does not, and if she disagrees with what I have said, all the evidence I have cited and the things that other noble Lords have done, there is a very simple way forward: she can accept my amendments, do an impact assessment and tell us the facts. I beg to move.

Photo of Baroness Boycott Baroness Boycott Crossbench 9:30, 26 October 2021

My Lords, I am pleased to support this amendment in the name of the noble Baroness, Lady Sherlock. I thank her for that incredibly good and detailed outline of what the problem is.

I want to speak briefly as the chair of the charity Feeding Britain, where I succeeded the wonderful Frank Field—the noble Lord, Lord Field of Birkenhead. We began three years ago to support the rollout of affordable food projects. We originally held the assumption that most of the people who would want it would be working-age groups, disabled people or families with kids, but that assumption proved to be wrong. We have 80 affordable food projects in our network. In many of them, between 30% and 40% of the members are pensioners on low incomes. They either could not or would not use a food bank. Pensioners find it extremely difficult to go to a food bank. I think that when you have paid your taxes and national insurance all your life, to find yourself at 85 having to ask someone whether they will give you a can of baked beans is both humiliating and almost impossible. Indeed, we have heard stories of many people who would really rather go without than have to endure that.

In Glasgow, where we have set up many affordable food projects, we have now set them up particularly in areas where there are lot of pensioners. People have really been supported by this. One said to us: “It’s been a godsend, really, because all the prices are going up—electricity, the cost of food and the lot.”

When I was a kid, my parents both did meals on wheels, and I used to go round with them once a week and deliver meals to people’s houses. It was kind of a joy; my parents really enjoyed it. When I chaired the London Food Board, I spent a lot of time seeing what we could do to bring meals on wheels back. The reality is that no councils have any money for this anymore. As always happens when it is about food, it is a budget that gets cut, or the costs go up and it becomes not many people, so it gets struck off the list of things that you could do. One thing we could do would be to start looking at a service like that.

As the noble Baroness, Lady Sherlock, pointed out about energy, you have to pay a lot to be poor in this country. It is certainly true of food. If I go to a shop, I can buy a large size of washing powder or rice or whatever it happens to be. If you are scraping along on very little money, you pay a great deal more. We did a survey in Greenwich which pointed out that your average shop would cost you 30% to 40% more in your corner store than if you had been able to go to your local Aldi. You pay a price to be poor. That is really terrible, and it is why I support the amendment in the name of the noble Baroness, Lady Sherlock.

Photo of Baroness Lister of Burtersett Baroness Lister of Burtersett Labour

My Lords, these amendments raise important issues about the impact of the Bill on poverty. I simply want to raise a point about the measure of poverty that should be used.

At Second Reading, in her response to the debate the Minister referred to a fall in pensioner poverty since 2009-10 as measured by the so-called absolute poverty measure, and she did so again earlier this evening. In fact, it is not a measure of absolute poverty as such but is better described as an anchored measure which measures any change by adjusting the 2010-11 poverty line for inflation. In contrast, the House of Commons Library briefing, using the relative poverty measure, recorded an increase in pensioner poverty from an historic low of 13% in 2011-12 to 18% in 2019-20, as my noble friend Lady Sherlock said. With reference to Amendment 8, single female poverty is higher than the overall figure—a point already made.

However, the Minister was dismissive of the use of a relative measure, stating:

“The Government believe that absolute poverty is a better measure of living standards than relative poverty, which can provide counterintuitive results”.—[Official Report, 13/10/21; col. 1885.]

Criticisms of the relative poverty measure as potentially counterintuitive have tended to focus on when it is used for short-term, year-on-year comparisons, but, in this case, we are talking about a rise in relative poverty over a period of eight years, which surely should have triggered some alarm bells in the department.

Relevant here is a recent Work and Pensions Committee report. Although its focus was on measuring child poverty, what it has to say is relevant also to pensioner poverty. It states:

“The Secretary of State is of course right to say that a relative measure can, in the short term, produce counter-intuitive results—but it has great value for assessing long term trends. We are concerned to see Ministers focusing on a single measure, rather than drawing on the rich information offered by DWP’s own set of income-based measures, which combines relative, ‘absolute’ and broader material deprivation statistics … Ministers should reaffirm their commitment to measuring poverty through all four measures”.

Similarly, I have a Written Answer from the Minister’s predecessor, dated May 2018, which states:

“No one measure of poverty is able to fully capture the concept of a low standard of living in all economic circumstances.”

Yet increasingly, Ministers use the so-called absolute measure, as if it is the only appropriate measure. Will the Minister reaffirm that commitment as called for by the Work and Pensions Committee? After all, I remind her that, when he was leader of the Conservative Party, David Cameron explained:

“We need to think of poverty in relative terms—the fact that some people lack those things that others in society take for granted. So I want this message to go out loud and clear: the Conservative Party recognises, will measure and will act on relative poverty.”

Can the Minister explain why that is no longer the case? What has changed, other than that the Government’s record on poverty looks worse using the relative poverty measure that Mr Cameron championed?

Photo of Baroness Drake Baroness Drake Labour

My Lords, I will speak to Amendment 3. To quote from a publication by the Institute for Fiscal Studies,

“We’ll know we are on the way to levelling up when differences in health and life expectancy across the country start to drop. Sadly, that’s one measure of inequality that has clearly been moving in the wrong direction over the past decade.”

Associated with those growing inequalities is pensioner poverty, which, as we have heard, has risen from 13% to 18% and is likely to rise even further. For older pensioners, the rise is even higher. With the rising energy and food costs that we can all see coming down the track, there will be a lot of old people this winter with very little money, sitting in cold houses, fearing that they will not get any help when they fall ill. That will be the reality for many thousands of people in the coming winter months.

We know that there is a major problem generally of households on low incomes with rising debt who will not be able to weather the storm of the growing cost-of-living problems that we are beginning to see. Then again, looked at from a regional perspective, in the majority of regions in England pensioner couples have average weekly incomes below the pensioner couple average, and we are seeing this problem in particular regions: in the north-east, the north-west, east Midlands, West Midlands, Yorkshire and indeed in London, which now has the highest relative level of pensioner poverty. As Imperial College research now shows us, life expectancy is falling in urban areas in these regions—in Leeds, Newcastle, Manchester, Liverpool and other areas. Cuts to health and social spending will have contributed to that trend, and we have not yet experienced a winter with the backlog that the NHS is dealing with.

Pensioners with low incomes are more sensitive to indexation changes because they are more dependent for their income on those benefits. Yet we have seen no assessment of the impact of suspending the triple lock, or indeed what could be the implications of decisions the Government will take next year or the year after, given that through the Bill they have suspended both the triple lock and the legislative underpin of earnings. We know that projected levels of pensioner poverty will vary according to the uprating provisions applied to the state pension, given its dominance in pensioner income. If you play negatively with pensioner income, pensioner poverty will go up. That sensitivity to indexation will continue to increase, as fewer and fewer pensioners reach state pension age without the generous defined benefits or defined contribution pensions which, in the past, cushioned the fall in the state pension that occurred under successive Governments.

Pensioner poverty is not a legacy issue. State pension is and remains a dominant source of income for the majority of both current and future pensioners. Research by the Pensions Policy Institute—your Lordships can tell that I am a governor—reveals that the UK is currently on course for a quarter of people approaching retirement being unlikely to receive even a minimum income. Of the 11 million people in the UK between the age of 50 and state pension age, around 3 million will not receive a minimum income.

Those earning at median levels or below—women, people from BME communities, carers, disabled people and the self-employed—are more likely to be in the groups not meeting adequacy levels in retirement. All the drivers of the gender pay gap also drive the pensions gender gap, and added to that is the current generation of women pensioners who accrued their state pensions under a legacy system that directly discriminated against them. Many women are now excluded from auto-enrolment and treated less favourably under the tax system when saving their pensions than those on higher incomes. The number of workers now ineligible for auto-enrolment has risen to over 10.1 million.

Listening to the Minister reply to the previous debate was extraordinary, given the sort of circular restriction the Government have imposed on themselves. The Minister said that they have spent 5.7% of GDP on pensioner benefits, but that is low by any basis of comparison. If that is the basis going forward, the Government have a plan that will make future generations poorer on 5.7% of GDP. I do not have the figures with me, but it is certainly lower than the figure that was quoted when the new state pension and the accelerated state pension ages were introduced and talked about. Because that new state pension is set at a relatively low level, the minimum income guarantee—an underpin of protection for our poorest pensioners—cannot go up by more than that new state pension. The Government have created a sort of ceiling. There is a limit to how much we can help our pensioners through the pension credit, because it cannot go above the new state pension. But that new state pension is based on an assumption of GDP that is pretty low, and the value of it is pretty low relative to earnings.

We are beginning to see inequalities of pensioner income emerging, and if the Government really are focused on the kind of regional inequalities that we are seeing, it is just not sustainable to keep saying that we cannot increase the minimum income guarantee for pensioners because we have set the new state pension at a relatively low level. The Government have locked themselves out of the main mechanism for dealing with pensioner poverty.

The Bill removes the earnings indexation underpin and suspends the triple lock. What will apply next year or in future years rests on a verbal promise which, like snow, could melt when the heat rises. Who knows what next year will bring? But a precedent has been set that both the triple lock and the earnings underpin can be taken away.

Pensioners with lower incomes, particularly women, will be very sensitive to those index changes, and yet we have no impact assessment on this matter of considerable importance. Rather than just debate endlessly, the amendment is calling for the Government and the Minister to lay some analysis about the impact on pensioner poverty. Rather than having an argument, could the Minister not just accept the intent of my noble friend Lady Sherlock’s amendment and provide that report, so that we can all clearly show where we are going on trying to protect our poorest pensioners?

Photo of Baroness Altmann Baroness Altmann Conservative 9:45, 26 October 2021

My Lords, very briefly, I have added my name to Amendments 5 and 6 and I support the thrust of these amendments. I urge my noble friend the Minister to look seriously at the merits of investigating the poverty levels that are rising among pensioners. Indeed, I urge her to accept some of these looking at the gender issues—so not just pensioner poverty but relative pensioner poverty between men and women—in her new role as Minister for Women, on which I congratulate her. I support these amendments and I look forward to hearing my noble friend’s comments.

Photo of Lord Davies of Brixton Lord Davies of Brixton Labour

My Lords, I just want to add that we have a complete lack of information on these proposals. As a matter of law, when the regulations come, they have to be accompanied by a report from the Government Actuary. In effect, we are making the decision now—the regulations are just a carry-on of the Act—and it is really unfortunate that we do not have before us the information that Parliament has decided should be available to us when we deal with these regulations.

Photo of Baroness Janke Baroness Janke Liberal Democrat Spokesperson (Work and Pensions), Liberal Democrat Lords Spokesperson (Work and Pensions)

My Lords, I thank the noble Baroness, Lady Sherlock, for her amendments and for the information she has drawn to our attention. I share her concern at the lack of impact assessments of the proposed uplift on the most affected groups. The increasing pensioner poverty that we are all aware of and the poor take-up of pension credits, which are important as a passport to other benefits, are matters we are all extremely concerned about. I agree that pension increases are fast outstripped by rising costs, and I certainly fear a winter crisis, with increased energy prices and their effect on those who most need heat to keep their homes healthy and warm.

We heard from the noble Baroness, Lady Boycott, about how poor pensioners do not want to claim food —they do not want free food, they would rather starve than do that—and I believe that that is certainly an element in the uptake of pension credit. Again, we all worry that we are going to see more and more food banks and people unable to feed themselves as costs rise. The noble Baroness, Lady Drake, raised the whole issue of regional poverty and inequality. Certainly, when you look at the statistics across the regions, they are quite breath-taking. I believe we need much more information, as the noble Lord, Lord Davies, said, particularly about regional inequality. I wonder why we do not have this information when the Government have such a strong levelling-up agenda. How will they address these issues without adequate information on which to base decisions?

My amendment in this group highlights the unfairness experienced by many women as result of the pension gender gap. I will point out the current situation. The average pension pot for a woman aged 65 is one-fifth of that of a 65 year-old man. Women receive £29,000 less state pension than men over 20 years and this deficit is set to continue, closing by only 3% by 2060. Many women are wholly dependent on the state pension and as a result of this situation, we should take a particular interest in conducting impact assessments on the uprating of pensions on poverty. I support the measures proposed in this group and look forward to the Minister’s response.

Photo of Baroness Stedman-Scott Baroness Stedman-Scott The Parliamentary Under-Secretary of State for Work and Pensions, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office)

My Lords, I thank the noble Baronesses, Lady Sherlock, Lady Drake, Lady Boycott, Lady Altmann and Lady Janke, for raising important issues through these amendments and I reassure the Committee that we are committed to ensuring economic security at every stage of life, including when one reaches retirement.

On Amendments 5 and 8, tabled by the noble Baronesses, Lady Sherlock and Lady Janke, on publishing a poverty impact assessment, the department collects and publishes a wide range of data on income and poverty which are released annually in the reports in the households below average income series. Noble Lords raised the issue of pension credit take-up. Time does not allow me to go into the detail, but I undertake to have a further pension credit update when we can have more time to discuss and answer the questions that noble Lords wish to have answered.

In the absence of actual data, the only way to provide an assessment in advance of those dates would be to forecast and model how many pensioners might have their income lifted above the various low-income levels under an earnings uprating versus an inflation uprating. Assumptions would need to be made about how each individual pensioner’s income would change in future under each scenario. This would require making assumptions about, for example, how each pensioner might change their behaviour around other sources of income, such as drawdown of income from investments or a change in earnings, when faced with different amounts of state pension, which is virtually impossible to do.

Those projected incomes would then need to be compared with projections of the various income thresholds, which are themselves extremely uncertain. For absolute poverty, the threshold is increased each year by inflation; and for relative poverty, the threshold is determined by changes in median income across the whole population. Given the volatility in the economy and labour market, this is impossible to do accurately. There is a very high risk that any analysis seeking to forecast the number of pensioners moving above or below these projected poverty thresholds would be misleading due to uncertainty about both the economy and pensioners’ behaviour in response to various levels of state pension.

I turn to Amendment 6 and the specific request of the noble Baroness, Lady Sherlock, for a review of the impact of the Bill on mixed-age couples, and point to some practical concerns. Mixed-age couples in receipt of universal credit are a very small group, and data sources are limited. It is therefore not possible to identify these couples and analyse changes in health inequalities and homelessness for this group.

Further, the Government believe it is important for both individuals and wider society that people below state pension age remain in the labour market and continue saving for their own retirement. That is why, where a member of a couple is below state pension age and the couple are on a low income, support is provided through universal credit rather than pension credit. Providing support where it is needed through universal credit ensures that the same incentives to work and save for retirement apply to the younger partner in a mixed-age couple as apply to other people of the same age. Where the younger partner is unable to work because of disability or caring requirements, they may qualify for additional amounts and will not be subject to any work-related conditionality.

This approach is based on clear evidence about the importance of employment, particularly where it is full-time, in substantially reducing the risks of poverty and in improving long-term outcomes for families and children. In 2019-20, adults below state pension age in households where all adults were in work were six times less likely to be in absolute poverty, after housing costs, than adults in a household where nobody works.

As our economic recovery gathers pace and with vacancies at record levels, the focus of our expanded multi-billion-pound Plan for Jobs is helping people who can work to move into and to progress in work wherever possible. However, recognising that some people continue to require extra support this winter, we have announced the new household support fund.

On Amendment 7, tabled by the noble Baroness, Lady Sherlock, to publish an assessment of the impact of the Bill on those receiving the state pension, with reference to their ability to pay energy bills, energy prices are one of the factors built into the CPI measure, which is used in the assessment of annual uprating of benefits not covered by this Bill, such as personal independence payments and jobseeker’s allowance. In aggregate, where benefit rates are increased in line with CPI, the increases in those prices are reflected over time in the increases in benefit rates. The energy price cap will continue to protect millions of customers this winter, saving 15 million households up to £100 a year. Additionally, suppliers are prohibited from disconnecting customers of pensionable age between October and March, ensuring that pensioners have continuous supply during the coldest months.

I ask the noble Baroness, taking account of the points I have made, to withdraw her amendment.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Education) 10:00, 26 October 2021

My Lords, I am very grateful to all noble Lords who have signed my amendments. I thank the noble Baronesses, Lady Boycott and Lady Altmann, and my noble friend Lady Drake and others. I am most grateful to those who spoke.

My noble friend Lady Drake summed up the problem when she said: “There are going to be a lot of old people this winter with very little money, sitting in cold houses, worrying that they will not get the help they need.” I think there really will be.

Listening to the noble Baroness, Lady Boycott, I was very moved by the vision. I think that her parents must be terribly proud. They took her out to do meals on wheels when she was young and she in her turn is now doing such amazing work supporting people who cannot afford to eat. I really commend her for that—it was a wonderful image.

Like the noble Baroness I have been involved with many organisations such as churches and others that do food banks. I know how older people do not like to use food banks and how difficult it is. I think how shameful it is that we have come to the point where they have to, or indeed anyone has to, on the scale that we have in our country. We have somehow lost our way.

The worrying levels of pensioners on low income and those approaching low income should really concern us. My noble friend Lady Drake mentioned a figure from the PPI. If we are heading for a quarter of all people approaching retirement being unlikely to receive even the minimum income level, something has gone badly wrong. What has happened to the vision that was meant to lift people away from that situation? Can the Minister tell us what has gone wrong there?

The noble Baroness, Lady Altmann, and the noble Baroness, Lady Janke, in her amendment, mentioned women pensioners in particular. Those drivers of the gender pay gap are driving the gender pensions gap as well. If we do not get things right earlier on, we are not going to be able to put it right later. This means that it is not just a legacy problem. It has been clear from the comments and contributions from noble Lords tonight that this is not a problem just of older systems in days when, for example, caring was not recognised. This is happening now and is going to drive pensioner poverty into the future.

On the question of poverty measurements, I am so grateful to my noble friend Lady Lister who has literally written the book on poverty and is therefore in a very strong position to be able to take apart the Government’s arguments. It just does not work to say that relative poverty is some hopeless measure that no one uses when, frankly, it is used robustly by academics all over this country, Governments and international bodies. It has been used over very long periods for longitudinal studies. It is fine to use other measures as well. It is fine, as the noble Baroness, Lady Stroud, has done in her work, to look at baskets of measures. However, simply to say that relative poverty does not matter and cannot be measured is not a credible stance if we are to have a serious conversation about social policy.

The point about trends was really well made. Even if the noble Baroness does not like measures year to year, in 1997, pensioner poverty in the UK was at 29%; in 2010 it was 14% and in 2012 it starts to rise. Last year it was 18%. There are huge trends there. Something is happening with pensioner poverty and the Government cannot simply turn a blind eye to it.

The Government argue that they cannot do an impact assessment and that they have data such as households below average income. That is nonsense. HBAI is simply a statement of the state of income across the nation. It is not a measure of the impact of any legislation. Whenever the Government do an impact assessment, of course they have to make assumptions about what will happen and how people will respond. It is called modelling. All I am asking is for them to do it on things they do not want to do it on, as well as the things they do want to do it on. That does not seem to me to be an unreasonable request.

To be honest, a lot of the people that we are talking about here are so close to the poverty line that I do not think it would be very hard to make assumptions about what was going to happen to their income, and how far they are going to draw down extensively on assets, as a result of measures the Government are taking.

The Minister says that we do not have time to discuss pension credit take-up tonight. This is the Committee stage of a Bill in which we are meant to do line-by-line analysis. We have been asking this for quite a long time and if we do not have time to do it tonight then, frankly, proceedings should carry on at another time when we do have time to do it. It should not be that we do not get to discuss things and to have questions answered because the timing, which was entirely in the Government’s hands, is such that the noble Baroness feels that we do not have time to discuss it tonight. Take-up of pensioner credit is fundamental to pensioner poverty. This is a group of amendments about pensioner poverty so I think it would have been helpful if she had anything else to say on that.

I am disappointed that the Minister is not willing to move on this. These are gentle, simple and reasonable amendments. If the Government will the ends of this, they should will the ability to assess the impact of their ends. I hope that the noble Baroness will revisit this idea and be more willing to accept it before we come back to these matters later in the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Debate on whether Clause 1 should stand part of the Bill.

Photo of Lord Sikka Lord Sikka Labour

My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle and my noble friend Lord Davies of Brixton for their support for this proposal. My motives are very simple—to address poverty among our senior citizens. I should like to see an 8.3% increase in the state pension, although 8.3% of little is still very little. It is not going to make an enormous difference to the Government’s finances—I shall deal with that issue in a moment.

Previously, Governments have broken the link between earnings and state pension, which has had disastrous intergenerational consequences. As has already been mentioned, in the 1980s, the Thatcher Administration broke the link between earnings and the state pension, and we never recovered from it. This is another example of where, once that link is broken, we will never really recover from it; the Minister so far has not said that in future the backlog will somehow be made up. Nothing has been said about that.

The current full state pension at the moment is £9,350 a year, and only four out of 10 retirees receive it. The average state pension is about £8,000 a year and, as has already been pointed out, is around 24% or 25% of the earnings. It is the lowest among industrialised nations, and by not increasing the state pension in line with average earnings we are going to condemn it to remain low.

According to the OBR, in one of the documents I came across, it said that by 2022-23 the UK is expected to allocate around 4.6% of its GDP to the state pension. That is considerably less than the European Union or OECD countries, and Germany already allocates about 10%. Why is it that the Government are content for such low allocation to the state pension? What happened to the billions that the Government took from 3.8 million women by raising their state pension age from 60 to 66? What happened to the billions that the Government said would be saved by coming out of the European Union? Why have those resources not been used to lift our senior citizens out of poverty?

Some 2.1 million pensioners receive a state pension of less than £100 a week, and most of these are women. Some gender issues have already been discussed. Currently, female pensioners receive on average 16% less state pension than men; the Government use the pretence of equality to raise the state pension age for women, but women still receive less.

A low pension inevitably means that there are consequences. For example, some 1.3 million senior citizens are undernourished. Every year, 25,000 or sometimes more senior citizens die from cold because they simply cannot afford to heat their homes or buy adequate food. As has been pointed out, this Bill has not been accompanied by an impact assessment from the Government to show the effects on the lives of our senior citizens.

Pensioner poverty has increased so, despite the triple lock, the proportion of elderly people living in severe poverty is five times as much as it was in 1986. Again, that is the largest increase among western European countries—bearing in mind that the UK is one of the richest countries in the world. That is really an indictment of the policies that have been pursued by successive Governments.

Despite the triple lock, 2.1 million pensioners live in poverty, 1.25 million of whom are women. The poverty rate is higher now that it was in 2012-13. Many simply struggle to survive. Those retirees who try to top up their meagre state pension with part-time work will soon be hit by the Johnson tax: a 1.25% hike in national insurance. At the same time, what do we actually observe? For those rich people who make vast fortunes from capital gains and dividends, or speculation on second homes, commodities markets and securities markets, no national insurance contributions are payable on unearned income. That money could definitely be used to alleviate poverty, but the Government have not indicated any inclination to do that.

The cost of honouring the earnings link to the state pension is probably around £4.7 billion. It is miniscule compared to the cost of bank bailouts, or the £895 billion in quantitative easing. It is certainly less than the £8.5 billion subsidy handed to train companies, which are promptly paying out very high dividends. It is certainly less than the subsidies given to the oil and gas companies. Retirees are not asking for vast sums of money. All they are asking for is something to enable them to keep they heads above water. The 3.1% increase in the state pension from next April is not really enough—it is actually a backward-looking measure. It only reflects the consumer price increases, not the RPI increase, which is always higher. In fact, it only reflects the consumer price increases during the last year and does not take into account the 12% hike in the energy cap or the expected food price rises, for example. The experts are already telling us that the rate of inflation will be 5% very soon. That means the value of the expected rise is already eroded: it has vanished. So, retirees will actually be even worse off.

A triple lock based upon the existing formula could have given an increase of around 8% to 8.3%, adding up to about £14 a week in the full new state pension, instead of £5.55 a week. That is a difference of about £8.50 a week. Is that really a king’s ransom? It is probably less than what many Ministers pay for a glass of wine with their lunch. That is all retirees are asking for. I will spell out the financial consequences in a moment.

Let us also remember that retirees pay council tax, VAT, various duties and, where appropriate, income tax. Their expenditure boosts local economies and is likely to have a greater multiplier effect on the local economy because they spend the money on essentials. The best legacy for future generations is a decent state pension now, because they would be even more reliant upon it. The final salary pension schemes have all but vanished for new members, so income from occupational pension schemes will be low. People will be forced to rely upon their state pensions. Workers’ ability to save for private pensions has been severely damaged. Workers’ share of GDP has declined, from 65.1% in 1976 to 49.4% now—the biggest decline in any Western country. People just do not have the ability to save extensively for a private pension.

As others have mentioned, around 14.5 million people live in or below poverty. Household debt is some £1.7 trillion. Young people just do not have the capacity to pay high housing costs and high food costs, repay student debt and then save adequately for their retirement. That, again, is a very serious issue.

The social divide in this country is stark. Some 18.4 million individuals have an income of less than the tax-free allowance; 42% do not earn enough to pay income tax; 6.2 million people, as the Minister told us last week, do not earn enough to pay national insurance contributions. Paradoxically, however, individuals who do not earn enough to pay income tax are somehow asked to pay national insurance, while millionaires from capital gains do not pay any. The poorest people are being damaged.

A large proportion of the population is not sitting on a pot of money that they can easily use for retirement. The poorest 50% of the population have only 9% of the total wealth. The poorest fifth of society has only 8% of the UK’s income. Inevitably, the state pension will be their main source of income in retirement. We need to meet that challenge now, not in five or 10 years. We need to make progress towards a decent state pension now.

The cost of honouring the link with earnings is about £4.7 billion. This can easily be met out of the £37 billion surplus in the national insurance fund account. The Minister disagrees; I shall respond to that when we come to another amendment. The Government can maintain the triple lock without increasing the 20% or 40% rates of income tax, or increasing national insurance contributions for the vast majority of people. Will the Minister tell us if she agrees that £17 billion a year could easily be raised by taxing capital gains in the same way as earned income, and another £8 billion by ensuring that the beneficiaries of capital gains pay national insurance at the current rate? That is £25 billion from that measure alone. A further £5 billion could be raised by taxing dividends in the same way as earned income. Ensuring that all earned income is liable to a national insurance levy of 12% would raise another £14 billion. There is absolutely no shortage of finance.

Why do the Government lack the political will to lift so many people out of poverty? Ours is one of the richest countries. People should not be living in squalor or poverty. I urge all Members of this House to make a concerted effort to ensure that our senior citizens do not live a life of poverty. I commend this amendment to the House.

Photo of Baroness Fookes Baroness Fookes Deputy Chairman of Committees, Deputy Speaker (Lords) 10:15, 26 October 2021

My Lords, may I make it clear that this is not an amendment? We are debating a straight question of whether Clause 1 should stand part of the Bill or not: in other words, whether it is accepted or not.

Photo of Lord Davies of Brixton Lord Davies of Brixton Labour

My Lords, I am pleased to speak in support of my noble friend Lord Sikka and in favour of retaining the existing legislative provisions by leaving out Clause 1 entirely. As the noble Baroness said, it is about whether Clause 1 should appear in the Bill at all. Clearly, to leave it out would vitiate the entire Bill but it would invite the House of Commons to think again, which is the primary role of this House. The intention now is to enable those of us who believe it would be reasonable and right to go for the full 8.3% increase that the Government have stated is the appropriate figure to debate it.

The triple lock has come in for some criticism. It does not enjoy universal support. I understand some of those criticisms and perhaps, in a perfect world, it should not be necessary. We would like to live in a world where pensioners would simply share in the same increases in living standards as those enjoyed by the working population. This is not where we are. For me, the triple lock serves a dual purpose. First, it is needed to protect pensioners’ living standards. Secondly, and in some ways more importantly, it is a way of increasing the flat-rate benefits towards a more adequate level. I am glad to say that I do not have to expound at length on that point because the case has been made so clearly by my noble friend Lady Drake. It is an accelerator which will project the basic pension to a more adequate level.

What is clear is that it is not at an adequate level at present, which is why what is described as the “ratchet effect” of the triple lock is so important; of course, the same would be true of a double lock, based on prices and earnings, which is why we shall return in a moment to the important role of the 2.5% element. Introduced as a political fix at a time when inflation was somewhat higher than it has been for most of the last decade, it has turned out to be of real benefit to pensioners.

As was so clearly explained by my noble friend Lady Drake, the job of the triple lock is not just to protect pensioners in relation to earnings and prices; it is, over time, to achieve real increase in their incomes when measured against either of these indices. As I have said before, it is an inherent feature of the triple lock, not a bug. Whether you agree depends on whether you think the state basic pension or the new state pension are currently high enough. If you think they are, you might consider that we do not need the triple lock, but if you want to see them increase, as I do, the triple lock has a proven track record of gaining ground on that objective. The triple lock may not be pretty, but experience has shown us that it works. During periods when the triple lock—or, in the case in the long-distant past of the 1974-79 Labour Government, a double lock—has applied, we have seen a consistent incremental move of the state flat-rate pension towards a more adequate level.

The element of the triple lock that has attracted most criticism, not least from my noble friend Lady Lister, is the 2.5% minimum increase. It has been said that it is arbitrary and without any justification. Maybe, but so are many other figures in legislation. When we analyse the real increase that pensioners have benefited from since 2011 with the triple lock, almost half the improvement has been due to the 2.5% element. To me, that in itself justifies its inclusion. Does anyone here believe that the basic state pension should be 18% of earnings rather than 19%? It might not sound like much but, to the poorest pensioners, everything counts.

Perhaps we need a debate about what level of flat-rate state pension we need and what the target should be when we have a ratchet effect. I would favour a commission to address the issue, building on the work of the earlier Pensions Commission, which set out the present structure of pension provision in this country. The commission itself did not feel able to specify with any precision what the basic pension should be in earnings terms, but the structure it established depends as much on the level of the flat-rate element as it does on the pension produced by automatic enrolment. I am pleased, therefore, to see that more work is being done in this area, through initiatives such as those from the Living Wage Foundation and the Pension and Lifetime Savings Association, with its retirement living standards.

Particularly given the hour, now is not the time to have a full-scale debate on the conclusions of that work, although it would be valuable to do so when appropriate. What is clear from the work that has been undertaken is that 19% is not nearly enough; it is well short even of the 26% that was attained back in 1979. These benefits are not just inadequate; there is a long way to go before they can become adequate. Consequently, we definitely still need a triple lock and its ratchet effect, and I would be prepared to see something better and faster replace it. That brings us to the increases due in 2022, as determined by this Bill. I believe that we can and should stick to the triple lock, as provided in the legislation, which means the 8.3% increase. Taking the increases to be made in 2021, 2022 and 2023, this provides an ideal opportunity to achieve a significant increase in flat-rate pensions towards a more adequate level in the longer term, which can only be a good thing.

It will no doubt be pointed out that this would have to be paid for, with the figure of £5 billion per annum being quoted. My noble friend Lord Sikka has dealt with that but, for the purposes of today’s debate, I simply say that I support increases in general taxation on those with the broadest shoulders to meet this clear social need, with the obvious target of equalising what I still think of, in the old terminology, as unearned income, rather than earned income. I believe that this would best be done by the restoration of the Treasury’s supplement to the National Insurance Fund, for which there is already provision in legislation.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green

My Lords, it is a pleasure to follow the noble Lords, Lord Sikka and Lord Davies of Brixton. Given the hour, I will be brief. I very much endorse the comments of the noble Lord, Lord Davies, about this Clause 1 stand part debate seeking to ask the other place to think again, and indeed to ask your Lordships’ House to debate this.

I would be more radical than either noble Lord who preceded me. I believe that the state pension should be set at a level where no pensioner is living in poverty—that is looking at the relative poverty levels, as outlined and widely discussed by the noble Baroness, Lady Lister. That would mean abolishing the contributory principle. Our debate tonight has demonstrated how discriminatory and actively massively unfair that is—because, as worked through now, it largely acknowledges only contributions through paid work. We know that many people, particularly women, make huge contributions to our entire society and future through care, community work and other activities which are simply not recognised in our pension system. This is leaving huge numbers, particularly of women, in a state of living that our whole society should regard as not acceptable.

I agree again with the noble Lord, Lord Davies, that the triple lock is far from perfect. We have talked about heating costs. Of course, another way in which we have very much failed our pensioners is the quality of the housing stock that they are living in. Reference has been made to the quality of council housing, but we also have a huge problem with more and more pensioners now living in private housing due to the huge privatisation of our housing stock through right to buy. Those people are living in extremely poor conditions and are placed in very difficult circumstances in that housing.

I agree with the noble Lord, Lord Sikka, that the cost of not going forward with ending the triple lock for this year—£4.7 billion—is very modest in the overall scheme of things. We have bailed out the banks. When Covid-19 hit, we bailed out many businesses. Surely we should look to bail out our pensioners.

I finish by noting that, when we talk about £14 a week, I agree with the noble Lord, Lord Sikka. There is a relatively small number of people in our society for whom £14 a week is small change, but there are very large numbers of people and pensioners for whom it is literally a matter of life and death. I invite noble Lords to consider our excess winter deaths, many of which occur among pensioners.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Education)

I will be very brief. I thank my noble friend Lord Sikka for introducing this debate. We all share an underlying concern about the living conditions for poorer pensioners. I will not dwell on pensioner poverty; I made a perfectly long—arguably overlong—speech on the last group of amendments about this very subject.

Because the Bill has only two clauses and Clause 2 is the commencement clause, I suspect that, in coming back, the Minister will be tempted to focus on the fact that this may be regarded as a wrecking amendment because it would remove the entire contents of the Bill. We on this side accept that there is a difficulty in looking at and using the data for the earnings measure without adjustment, so that is not the position that we are in. I encourage her, when she responds, to answer and speak to the underlying concerns about pensioner poverty that have been expressed noble Lords, and perhaps give some assurance to the House about how the Government will tackle that, as well as looking at the immediate issue.

Photo of Baroness Janke Baroness Janke Liberal Democrat Spokesperson (Work and Pensions), Liberal Democrat Lords Spokesperson (Work and Pensions) 10:30, 26 October 2021

My Lords, I support the triple lock and its effect of keeping the value of the state pension, which has been lost over very many years and has not yet recovered. I share the point made by the noble Baroness, Lady Sherlock, that we accept that these are special circumstances. The Minister has assured us that this is just for one year, so we take her at her word and will judge her on future actions next year.

Photo of Baroness Stedman-Scott Baroness Stedman-Scott The Parliamentary Under-Secretary of State for Work and Pensions, Parliamentary Under-Secretary (Foreign, Commonwealth and Development Office)

I assure the noble Baroness, Lady Sherlock, and the whole Committee, that the Government take the issues of living conditions and the standards of pensioners seriously. As I have relayed in previous contributions to this debate, we have done an enormous amount to try to help, but I have no doubt that that will not be enough for some. It is a work in progress, and we will see where that goes.

This clause requires the Secretary of State to review the rates of the basic state pension, the new state pension up to the full rate, the standard minimum guarantee in pension credit, and survivors’ benefits in industrial death benefit, by reference to the general level of prices in Great Britain. Under this clause, if the relevant benefit rates have not kept pace with the increase in prices, then the Secretary of State is required to increase them at least in line with that increase or by 2.5%—whichever is the higher.

This is a two-clause Bill. If the noble Lords, Lord Sikka and Lord Davies, and the noble Baroness, Lady Bennett, successfully oppose Clause 1, the Bill will fall and, as a result, these pension rates will be increased by 8.3%, which is the average weekly earnings index for the year May to July 2021. This means that, if the Bill does not achieve Royal Assent in good time, there will be an increased cost to the Exchequer of between £4 billion and £5 billion.

Taking into account the points raised, I ask the noble Lords to withdraw their opposition to the question that Clause 1 stand part of the Bill.

Photo of Lord Sikka Lord Sikka Labour

My Lords, I am very grateful to all the participants in this debate, which has been very interesting. I am particularly grateful to the Minister for her comments, but the issues remain. Many of our senior citizens are condemned to poverty and, by breaking this link with earnings, we will be condemning more to poverty, not only the current generation but future generations too. Nevertheless, for the time being I would like to withdraw this amendment, but I reserve the right to bring it back.

Photo of Lord Russell of Liverpool Lord Russell of Liverpool Deputy Chairman of Committees

My Lords, just to be clear, it is not an amendment.

Clause 1 agreed.

Amendments 6 to 8 not moved.

Photo of Baroness Evans of Bowes Park Baroness Evans of Bowes Park Leader of the House of Lords and Lord Privy Seal

My Lords, before my noble friend moves her amendment, it is my duty to draw the attention of the Committee to the advice I have received from the Legislation Office and ask the Committee to endorse it. It is rare for a Leader to advise the Committee in these circumstances. Since 1999, my predecessors have done so on only four occasions, and on all but one the House has endorsed the impartial advice given.

My noble friend’s amendment is not admissible under the rules governing what is relevant to a Bill. The Public Bill Office, therefore, properly and promptly advised me of that fact. Paragraph 8.56 of the Companion to the Standing Orders states that the Leader of the House

“draws the House’s attention to the advice when the amendment is called, and asks the House to endorse the advice of the Legislation Office … the admissibility of an amendment can ultimately be decided only by the House itself, there being no authority that can in advance rule an amendment out of order.”

To ensure that the advice is clear and available to all, I have placed the Clerk’s advice and my open letter to the party and group leaders about it in the Library of the House. If I may briefly assist the Committee, I will explain further why my noble friend’s amendment is not admissible before turning to the unusual decision the Committee is being asked to take.

The amendment is not within the scope of the Social Security (Up-rating of Benefits) Bill. This is because the Bill covers one narrow topic and has only one purpose: the uprating for one year of the basic and new state pension, the standard minimum element of pension credit, and survivors’ benefits in industrial death benefit. Only amendments relating to the purpose of the Bill or touching on matters closely connected with it are permitted. My noble friend may point to the title of the Bill as being broad, but I am afraid that, in this case, that is not relevant. As the Clerk’s advice says, the scope of a Bill is defined by its purposes as contained in its clauses and schedules, not the title. Bills can have what might seem to be very wide titles but be narrow in scope. The advice from the Clerk is clear and unambiguous, and I hope my noble friend will not seek to challenge it and will not move her amendment today or bring it back at a later stage.

However, the fate of the amendment is ultimately in the hands of the House, as the Companion says, so, if I may, I will end with a wider point about how we work. So far this Session, 1,144 amendments have been considered by your Lordships’ House. The fact that every amendment is debated, and every point of view considered, enhances the quality of the legislation that makes its way on to the statute book. But this works only if we all respect the rules and conventions the House has set itself. We are a self-regulating House, and we rightly take pride in that, but that does not mean there are no rules. It means Members’ good sense and restraint must be relied upon to police those rules we set ourselves in our Companion and Standing Orders.

Many Members feel incredibly strongly about particular issues that are close to their hearts but work within the rules of the House to achieve the changes they passionately believe in, because they understand the damage to the House, its reputation and standing if they do not. So I very much hope noble Lords will carefully consider their stance on this amendment. As a House, we rely on the professional and impartial advice of our clerks; we rely on the judgment of Members to abide by the few rules we have; and we rely on the House as a whole to ensure that, in the last resort, the rules are enforced.