(4 days, 16 hours ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Minister for Social Security and Disability (Sir Stephen Timms)
I beg to move,
That the draft Guaranteed Minimum Pensions Increase Order 2026, which was laid before this House on 12 January, be approved.
Madam Deputy Speaker (Caroline Nokes)
With this it will be convenient to discuss the following motion:
That the draft Social Security Benefits Up-rating Order 2026, which was laid before this House on 12 January, be approved.
Sir Stephen Timms
In my view, the provisions in the instruments are compatible with the European convention on human rights. The draft Social Security Benefits Up-rating Order will increase relevant state pension rates by 4.8%, in line with the growth in average earnings in the year to May to July 2025. It will increase most other benefit rates by 3.8%, in line with the rise in the consumer prices index in the year to September 2025, so the regular formula has been used.
The order commits the Government to increased expenditure of £9 billion in 2026-27, of which £6 billion will be from state pensions and pensioner benefits, £2 billion from disability and carers benefits, and £1 billion from other working-age benefits. A further £2 billion of expenditure on working-age benefits will be incurred in 2026 as a result of uprating decisions made under separate legal powers in the Universal Credit Act 2025, which will set new rates for universal credit and income-related employment and support allowance.
Let me say a little more about each of the benefits being uprated in turn. First, on pensions, the Government’s commitment to the triple lock means that the basic and full rate of the new state pension will be uprated by the highest of the growth in earnings or prices or 2.5%. That means that the uprating will be by 4.8% for 2026-27. As a result, from April the basic state pension will increase from £176.45 per week to £184.90, and the full rate of the new state pension will increase from £230.25 at the moment to £241.30 per week.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
I suppose I ought to declare an interest, Madam Deputy Speaker. [Laughter.]
The right hon. Gentleman will understand that we welcome the adherence to the triple lock that my party introduced. He will also know that there are tens of thousands of expatriate United Kingdom citizens whose pensions have been, and remain, frozen at the point at which they left the United Kingdom, in spite of the fact that they have paid their full taxes and national insurance contributions throughout their working lives in the UK. The last Government, to our shame, failed to address this issue. Do this Government have any plans to do so?
Sir Stephen Timms
I am grateful to the right hon. Gentleman for raising this point. It might be of some comfort to him to know that it was not only the last Government who failed to do anything about this, and that previous Governments also failed. Indeed, in my previous tenures of the office of Pensions Minister, this issue was raised with me. However, it was the case that when those people left the UK, the rules were then as they are today. They were quite clear when people left. Of course, it depends on which country they went to, but in the countries where uprating has not been applied, it has always been the case that uprating has not been applied there, so it should not have come as a surprise to those who left that their pensions were not uprated. We are not looking at any proposals to change the situation at the moment, but I know that the right hon. Gentleman has campaigned on this matter consistently over a long period and I pay tribute to him for that.
Jim Shannon (Strangford) (DUP)
We very much welcome the triple lock and the extra moneys coming to our pensioners, but an issue has come to my attention recently. I had an 84-year-old pensioner in my office just last week who said, “Jim, I’ve got a demand from the HMRC for hundreds of pounds, but I’ve never been in debt in all my life.” When it comes to those pensioners who now find themselves being taxed when they were never taxed before, is it not possible to have a different system where the money could be taxed at source, rather than asking pensioners who are financially, mentally and emotionally under pressure to fill in an online form, which they just cannot do? There must be a simpler way of doing it.
Sir Stephen Timms
The question of how the tax system operates is a matter for His Majesty’s Treasury rather than for me. However, the hon. Gentleman might take some comfort from the reassurance provided by the Chancellor that those whose only income is the basic or new state pension, without any increments, will not have to pay any income tax in the course of this Parliament. Of course, those who have additional income beyond the state pension often do have a tax liability. The mechanism for how that is applied is a matter for my hon. Friends in His Majesty’s Treasury rather than for me, but I can certainly ensure that his point is passed on to them.
Other components of state pension awards, such as those previously built up under earnings-related state pension schemes, including the additional state pension, will increase by 3.8%, in line with prices. The Government are committed to supporting pensioners on the lowest incomes, so the safety net provided by the pension credit standard minimum guarantee will increase by 4.8%. That means that it will increase from £227.10 to £238 per week for single pensioners, and from £346.60 to £363.25 per week for couples. The maximum amount of pension credit savings credit will increase by 3.8%, in line with prices.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
One of the first acts of this Government was to remove the winter fuel payment, before their subsequent partial U-turn. The Prime Minister himself promised assistance for WASPI women, which is manifestly not happening. Both things affect pensioners significantly. When it comes to uprating, the gap between new and old pensions is widening all the time, because although they are going up by the same percentage, they start from different baselines. What are the Government doing to equalise pension levels to prevent that situation from worsening?
Sir Stephen Timms
We are not proposing any change in those arrangements. As the hon. Gentleman will know, those arrangements were introduced by the previous Government. In fact, the coalition Government put in place the current arrangements for the new state pension, which were introduced with commitments to future uprating. We are committed to delivering the triple lock, but we are not planning to change the relativities between those two arrangements.
Most working-age benefits and other benefits for people below state pension age will also increase by 3.8%. They includes statutory payments such as statutory sick pay, statutory maternity pay, the personal allowances of income support, housing benefit, jobseeker’s allowance, and contributory employment and support allowance. The order will also increase by 3.8% the child amounts, the carer amounts, transitional severe disability premiums in universal credit, and pensioner and carer premiums in income-related employment and support allowance.
As I mentioned earlier, the Universal Credit Act 2025 included important changes to rebalance universal credit. For 2026-27, the standard allowance in universal credit will be uprated by September’s consumer prices index plus an additional 2.3%. That represents the first ever permanent above-inflation rise to the universal credit standard allowance, and I believe that it is the first permanent real-terms increase in the headline benefit rate since the 1970s. That is not part of the order that we are debating, but all these increases will apply across Great Britain.
John Milne (Horsham) (LD)
I very much appreciate the action that the Government have taken to uprate UC—for the first time in its history, as the Minister says—but does he accept that it still will not cover the cost of basic essentials such as food, heating and rent for many of our most put-upon constituents?
Sir Stephen Timms
I think perhaps the point that the hon. Gentleman is making is that it does not fulfil the aspirations of the essentials guarantee campaign, with which he and I are familiar, and that is true. However, April’s above-inflation uprating will be the first of four such upratings, so there will be a similar over-inflation uprating in each of the following three Aprils. It will not end up at the level on which the essentials guarantee campaign has focused, but let us see what happens beyond the period for which we have made these announcements. As he said, it is an historic change of direction for public policy.
Benefits for people in England and Wales who have additional costs as a result of disability or ill health will also increase by 3.8%. These include disability living allowance, attendance allowance and personal independence payment. The increase will also apply to carer’s allowance.
The draft Guaranteed Minimum Pensions Increase Order 2026 sets out the yearly amount by which the guaranteed minimum pension part of an individual’s contracted-out occupational pension, earned between 1988 and April 1997, must be increased when it is being paid. The increase is paid by occupational pension schemes, and helps to provide a measure of inflation protection for people in receipt of contracted-out occupational pensions earned between 1988 and 1997. The law requires that GMPs earned between those two dates must be increased by the percentage increase in the general level of prices measured the previous September, capped at 3%. The September 2025 inflation figure— or CPI—was 3.8%, so the increase for the financial year 2026-27 will be 3%.
The 3% cap provides pension schemes with more certainty, allowing them to forecast their future liabilities more reliably. That is important when they are considering their funding commitments. The measure strikes a balance between, on one hand, protecting members against the effects of inflation, and on the other, not increasing scheme costs beyond what schemes and sponsoring employers can reasonably afford.
The draft Social Security Benefits Uprating Order 2026 will, if Parliament approves it, commit the Government to increased expenditure of £9 billion in the next financial year. Changes will mainly come into effect from 6 April this year and apply for the tax year 2026-27. The order maintains the triple lock—which benefits pensioners in receipt of both the basic and new state pensions—raises the level of the safety net in pension credit beyond the increase in prices, increases the rates of benefit for those in the labour market, and increases the rates of carers benefits and benefits to help with additional costs arising from disability or health impairment.
The draft Guaranteed Minimum Pensions Increase Order requires formally contracted-out occupational pension schemes to pay an increase of 3% on GMPs in pensions earned between April 1988 and April 1997, giving a measure of protection against inflation, paid for by the scheme. I commend the orders to the House.
Rebecca Smith (South West Devon) (Con)
I wish to reassure the Minister about something that I said in last week’s debate on the two-child benefit cap. I shared something of my story, and said that we had lost child benefit as a result of the Labour Government coming into office in 1997. I was convinced I had said “family credit”, which was what I was supposed to say. When I read back over Hansard, I realised that, in my haste to get my point across, I had said the wrong thing, which explains why I caught sight of the Minister’s perplexed face from across the Dispatch Box. I have also corrected the record through Hansard.
I can confirm that the Opposition support the usual increase in the guaranteed minimum pension, and the uprating of social security benefits. However, given that this debate is largely a formality and there will be no vote on the motions, it is a good opportunity to take a step back and reflect on the pensions and benefits system more broadly—in the context of the motions before us, of course.
First, let me highlight what I call the “benefits barbell”. At one end is the working-age welfare bill, which keeps getting heavier; at the other is the eye-watering cost of public sector defined-benefit pensions. In the middle of those two heavy weights is the hard-working taxpayer, straining under the load. Welfare and pensions both matter—they are pillars of a decent society—but it is Britain’s taxpayers who do the heavy lifting. They are the ones who get up before dawn, commute in all weathers and keep the economy moving. Without their efforts or even more Government borrowing, there would be no welfare state at all, and we cannot pile more weight on to their shoulders indefinitely.
The Secretary of State for Work and Pensions has already admitted that the long-awaited Timms review will not involve making welfare savings and is not likely to be published before 2027. It seems that this Government are shunning any attempts at reform over the coming year, and yet again, it is taxpayers who bear the cost of this delay. Right now, the UK is on the verge of becoming a welfare state with an economy attached. Over 40,000 people were signed off work every day by GPs over the last year, according to the Centre for Social Justice. Over 5 million people are claiming benefits with no work requirements, which is equivalent to over half of London’s population.
Concerningly, that number includes more than 300,000 people aged 16 to 24—young people with promising lives ahead of them whose ambitions are being stifled by a benefits system that would rather write them off. Labour is presiding over a youth unemployment crisis and seems unable to offer long-term solutions. There are already nearly 1 million young people in the UK who are not in education, employment or training. Over 700,000 university graduates are out of work and on benefits. One and a half years after taking office, this Government are still failing to tame the runaway benefits bill and rising unemployment rates. By contrast, the Conservative plan to get Britain working again will tackle youth unemployment by offering young people a first jobs bonus, which they can use to save for their first home.
Living within our means is one of those sensible, mundane things that gives the Conservative party its reputation as a safe pair of hands for the economy. Of course, making welfare savings is far less likely to grab headlines—scrapping the two-child benefit cap or rolling out more free school meals is a far easier win—but getting the deficit under control is crucial to a healthy economy. When the Conservatives took office in 2010, the Government were running a deficit of 9%. By the time covid struck, we had brought it down to under 1%. That, in turn, enabled us to provide generous support to individuals and businesses during lockdowns.
As I said in the debate on the two-child benefit cap last week, keeping the limit would have saved the taxpayer £2.4 billion in 2026-27, rising to £3.2 billion in 2030-31, yet our current Prime Minister would rather throw some red meat to his Back Benchers than exercise fiscal discipline. He has caved in to their demands, even though scrapping the two-child benefit limit was previously ruled out by the Chancellor and was conspicuously absent from Labour’s manifesto.
Conservatives believe in fairness for the working parents who make difficult choices about whether they can afford another child. Many working families do not have incomes much higher than the threshold for universal credit but are paying for others through their taxes. Why should we make those parents bear the double burden of supporting their own children and subsidising other people’s? A fair system should not simply exempt families on benefits from making tough choices.
Speaking of fairness, the issue of passported benefits desperately needs investigating. Last week, I highlighted the shocking statistic that one in four full-time UK workers would be better off on benefits than in work, but something that often gets overlooked is that people on universal credit also gain access to a raft of discounts and additional benefits such as free prescriptions, discounted broadband, healthy food cards and special savings accounts. There are over 20 of these schemes sprinkled across multiple Government Departments. Taken together, passported benefits give some families who are already on universal credit over £10,000 a year in extra support, costing the taxpayer over £10 billion, according to a new report from the think-tank Onward. These benefits need rationalising and streamlining within universal credit. Otherwise, we will continue to face three serious problems.
First, passported benefits disincentivise people from entering employment. Any sensible person would think twice about starting a job if they faced a cliff-edge denial of additional benefits worth thousands of pounds once their universal credit tapers away. Secondly, we have a two-tier system. As a result of these linked benefits, individuals just outside the universal credit threshold often face greater financial hardship than benefit claimants. Thirdly, for those who really do need these extra schemes, there is a labyrinth of bureaucracy that slows down the process of getting help. These piecemeal entitlements distort the system. From a quantitative perspective, it is harder to see which poverty interventions are actually having a positive effect. It is also incredibly difficult for everyone to see whether this Government are succeeding at reducing poverty.
I welcome the Government’s new emphasis on deep material poverty as a headline poverty metric, which is a far more holistic measure that captures how poverty impacts people’s daily lives and whether they can afford necessities. Last week, we heard endlessly that the Government’s child poverty strategy and the scrapping of the two-child benefit cap will bring half a million children out of poverty, but it is worth noting that we are talking about relative poverty. That can never be eradicated, because it refers to a household income below 60% of the median household income. The only way to reduce relative poverty is to raise the incomes of the poorest faster than the middle or compress the income distribution. An overemphasis on relative poverty has underpinned a misleading left-wing argument that exaggerates the need for income redistribution. I worry that we will end up paying people to be so-called middle-class if we continue as we are.
At the heart of Conservative philosophy is a belief in personal responsibility—taking control of our future through hard work and aspiration. If we are serious about tackling child poverty in the long term, it is vital to deal with the effects of intergenerational worklessness and not just rely on social security. Children in long-term workless households are four times more likely to be materially deprived and 10% more likely to end up workless themselves. For every parent who does not go out to work, there is a child who misses seeing a positive example of work modelled to them—the early alarm clock, the daily routine, the reward for an honest day’s work and the ability to save up to buy important things. That is not to say that there are not those in dire circumstances for a vast number of reasons, but ultimately, when we are looking at people in general, that is the reality we need to deal with. Under our watch, the number of children in workless households fell consistently. Under Labour, the number has reached a nine-year high, with 1.2 million children now living in homes where no parent has worked for over a year.
Turning to the topic of personal independence payments, I would like to ask the Minister about a disabled constituent I caught up with at the weekend. She is a veteran who served in the Royal Navy for 19 years and is now an unpaid carer for her elderly father. She works full time, mainly from home, and commutes to London a few times a month. She had a Motability scooter, which enabled her to get to the office and around London when required, but after her last PIP review, which took place over the phone, she lost her higher rate of PIP and thus her scooter. She then received a puzzling letter from the Department for Work and Pensions, which wrongly claimed that full-time work indicated she had reasonable mobility, despite the fact that her entire home is adapted for her accessibility requirements.
My constituent is a highly capable woman who is skilled at advocating for herself as well as her father and, indeed, her fellow veterans, but she admitted that she felt too stressed to open the letter for a few weeks, meaning that the reconsideration window had timed out by the time she fully processed the DWP’s decision. For context, she has also been diagnosed with complex post-traumatic stress disorder following a traumatic experience in the military and is currently on a long waiting list for treatment. Statistically, she is unusual; fewer than one in six PIP claimants are in employment.
It seems bizarre that the DWP assessors are happy to downgrade someone in this situation, who is in work and genuinely needs the higher rate of PIP to help her carry out that work, yet the Department seems reluctant to stem the tide of benefits claims from people with less severe mental health issues. That is why a Conservative Government will end sickness benefits for low-level mental health problems, to ensure that support is targeted at people who need it most. I welcome the Government’s commitment to increase the number of face-to-face PIP assessments to 30%, up from the very low rate of 5% in 2024, but I urge them to be even more ambitious with their target, to ensure that constituents like mine are accurately assessed and receive the help they need.
In conclusion, as I return to the image I began with, the barbell is getting heavier by the year, with welfare on one side and pensions on the other, and still the hard-working taxpayer stands in the middle doing all the heavy lifting. The Government are doing far too little to ease that pressure. Working families are paying the price for a system that grows ever more expensive, while true reform moves at a crawl. It is time for a welfare system that is fair to those who need support and fair to those who pay for it.
Madam Deputy Speaker (Caroline Nokes)
I call the Chair of the Work and Pensions Committee.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I am pleased to follow the shadow Minister. I would like to challenge several things she said, but I will pick up on just a couple.
First, one of the hon. Lady’s opening statements was that hard-working people who get up at dawn and go out to work do not approve of this increase in support. I gently point out to the hon. Lady that most people in receipt of social security support are working, but they are in the low-paid jobs that were presided over by previous Conservative Administrations.
Secondly, the hon. Lady spoke of her concerns about young people. Yes, absolutely, nearly 1 million young people are not in education, employment or training and that concerns us all, but we must all look at the evidence and at the underlying causes of that. She might not have heard me say last week—I have said it a few times—that evidence from the UK Millenium cohort study suggests that half of that population have experienced childhood poverty and adversity in their young years, under the former Conservative Government, and that is the driver. People are five times more likely not to be in education, employment or training if they have experienced that long childhood of poverty and adversity—I do not think the shadow Minister would claim that that has not happened.
It is also a pleasure to follow my right hon. Friend the Minister. I give the pensions and social security uprating orders my wholehearted support. The uprating is absolutely the right thing to do, and I will expand on exactly why. This year’s uprating, confirmed last November by the Secretary of State, will see inflation-linked benefits and tax credits rise by 3.8% this April, which is the level of inflation as measured by the consumer prices index in September 2025. As a result of the Universal Credit Act 2025—some people did not support that, but I did once we got rid of the bits I had concerns about—we increased the universal credit standard allowance. That is important, as it means an additional 2.3% for the standard allowance, which equates to an increase in the standard allowance for a single claimant over 25 from £400.14 to £424.90 per calendar month.
Andy McDonald (Middlesbrough and Thornaby East) (Lab)
I am sure my hon. Friend will be aware of today’s Resolution Foundation report that shows how increases in income have significantly slowed over the past 20 years, particularly for those on low incomes, as shown by the basic rate of UC, which has fallen by 9% in real terms since 2010. Does she think there is merit in proposals from the Joseph Rowntree Foundation for an independent advisory process to inform universal credit rates, ensuring that the standard allowance reflects the real cost of essentials and the inflation experienced by those living on lower incomes?
Debbie Abrahams
My hon. Friend may not know this, but the Minister and I were on the Work and Pensions Committee when the Joseph Rowntree Foundation and the Trussell Trust presented the case for the essentials. I think there is overwhelming support for such measures, but it is a question of how we do it in a sustainable way. If I may go on and develop my argument a little, he will see that I am moving in his direction.
As we have heard, the new state pension will also increase by 4.8% in April to £241.30 per week, which is in line with the annual increase in the average wage earnings index from last May to September. Briefly, I will explain why it is important that the increase in UC should be above CPI and inflation. Although state support for working-age people and pensioners was fairly similar when annual uprating was first introduced in 1972, the uprating or increase in working-age social security support such as UC in line with inflation has not always happened. In the last 15 years, social security support for working-aged people increased by only 1% between 2013 and 2016, and it was frozen between 2016 and 2020. If anyone wants to look at the changes to inflation over the past 15 years, it makes interesting reading, particularly in 2022-23 and 2023-24, and the increase was far below inflation. As a result, since 2012 benefit levels for working-aged people and their families have lost 8.8% of their value.
The UK’s social protection levels are among the least generous in the OECD. In 2021, the New Economics Foundation estimated that the actual loss in cash terms was equivalent to £14 billion. It also estimated that if spending had been maintained, there would have been 1.5 million fewer people living in poverty. People are often surprised to hear that over the last 20 years or so, the amount of DWP spending as a percentage of GDP—that is acknowledged as the only way we can fairly compare spending—has changed very little: it was 10% in 2005 and 11% in 2025, with the slight increase being accounted for by an increase in spending on pensioners. I think we would all agree that that is the right thing to do. What is alarming is that although poverty levels have been stabilised and will start coming down this year as a result of, for example, the removal of the two-child limit for social security support and the increase in the living wage, the depth of poverty is increasing.
Graham Leadbitter
Many things can be done to tackle child poverty. One thing the Scottish Government have done, which has massive backing from the third sector, is introduce a universal child payment. Does the hon. Lady agree that that is potentially the way forward?
Debbie Abrahams
I am familiar with the child payment, but I need to understand it in the context of what else is happening in Scotland. I am aware of it, and I think it is an interesting way for Scotland to try to address the issue. We had a meeting with the Children and Young People’s Commissioner Scotland and were impressed with what she was doing, but I will reserve judgment until I understand it a little more in the round.
Only last week, the Joseph Rowntree Foundation published new analysis:
“In 2021-24, the average person in poverty had an income 29% below the poverty line, with the gap up from 23% in 1994-97”.
If we use equivalised figures, that means that couples without children are living on less than £12,500 a year, and couples with two children under 14 get about £17,500 a year. Social security is complex, but looking at deep poverty, as my right hon. Friend the Minister is doing, is important. If we are to avoid the appalling situation with NEETs that we have inherited, that is what we need to do.
Of the 14.2 million people living in poverty identified in JRF’s most recent poverty analysis, 6 million are in severe and persistent poverty, and more than half are disabled or live in a disabled household. Although I recognise the significant moves that this Government have made to address the inadequacy of working-age social security support to tackle the poverty and cost of living crisis that people are experiencing, I personally think we need to be a bit bolder.
As I said last week, I want to see us be clearer about our vision and values, which define what our social security system is for. It is 80 years since the National Insurance Act 1946, which was introduced in response to the Beveridge report and the outcomes and appalling circumstances after the second world war. I believe we need a new social contract that the British people can buy into and that spells out how all the elements of a comprehensive 21st century welfare state work together to deliver for them.
Our social security system, like our NHS, should be there for all of us in our time of need. It should protect us from poverty if we lose our jobs, are born with or acquire health conditions or disabilities, and when we grow old. It should also be there for us if and when we need extra support, become carers and, sadly, lose a loved one, but it cannot work in isolation; it needs to be considered in conjunction with our health and social care, education and skills, and business and employment systems in particular, but there are more.
Without a fit and healthy working-age population, a skilled workforce and a fair employment system providing quality, well-remunerated jobs, our economic productivity is known to fall, and our welfare system as a whole then comes under threat. As an example, Health Equity North’s “Health for Wealth” report shows that improving the health of the north to the same level as the rest of the country would add an extra £18.4 billion to the economy through enhanced productivity while reducing demand on the NHS.
Last year, the Work and Pensions Committee commissioned Health Equity North to report on what income could be generated through increasing returns to work for people in receipt of universal credit by just 5%. Its estimates show that that would yield an extra £20 billion over the life of this Parliament, with a return on investment of between £5.21 and £6.63 for every £1 of employment support invested. That is the way that we will reduce DWP spending and increase growth.
I look forward to seeing how the “Get Britain Working” and “Keep Britain Working” programmes, such as Connect to Work and the vanguards, are expanded. They are fantastic examples of how we can proceed. I was so impressed when I met organisations delivering Connect to Work. The Work and Pensions Committee had a session last week with Sir Charlie Mayfield and small businesses to see how they could be involved in that, and I hope that we can expand and build on this work.
Madam Deputy Speaker (Caroline Nokes)
I call the Liberal Democrat spokesperson.
Steve Darling (Torbay) (LD)
It is always a pleasure to follow the hon. Member for Oldham East and Saddleworth (Debbie Abrahams). It is almost as if she has been cribbing off my speech—maybe it is because we are both on the Work and Pensions Committee.
The reality is that our welfare state is part of a society that should be at ease with itself. Let me reflect that the old age pension was first introduced by Asquith in 1908 for 70-year-olds. That demonstrates that the Liberals were there at the foundation of our welfare state. If we fast-forward a few decades, we find that Margaret Thatcher broke the link between earnings and pensions, which had a devastating effect on pensioner poverty and increased it significantly over many years.
It is really heartening that when the Liberal Democrats were back in government as part of the coalition, we were part of the Government who introduced the triple lock. We have seen pensioner poverty being driven down, but there is still too much of it. I am concerned that the current Conservative leader, the right hon. Member for North West Essex (Mrs Badenoch), has mused about means-testing the triple lock, which is disturbing. Would she put it back to the five shillings a week for those of good character that we had under Asquith? We will look for the white smoke to appear from the Conservative party on that.
Let me reflect on pensioner poverty. As the hon. Member for Oldham East and Saddleworth reflected, we have done a lot of work as part of the Work and Pensions Committee around this issue. It has been interesting to hear from people, particularly those who have given us evidence in recent weeks, on how workers—particularly manual workers—find it harder to continue to do the jobs that they are in as they get older, as well as how we need to ensure that there is a whole-system approach.
We need to ensure that employers are more flexible, and the Mayfield report is important in that. Rather than just shuffling people off the books, we need to ensure that employers see what reasonable adaptations they can make to keep them on the books, as our continental friends do.
We need to drive forward with work on pensioner poverty. I reflect on my own constituency, where I have had people heading towards their pension who still want to work but are unable to because they have a dodgy hip and are awaiting an operation. Sadly, improvements at Torbay hospital have been delayed by many years. Again, as the hon. Member for Oldham East and Saddleworth alluded to, this is about ensuring that we sort out our national health service across the country as a whole so that people are in a fit state to work. Another thing that causes Liberal Democrats concern is the way in which social care has been kicked down the line and is not being resolved sooner rather than later.
Let me move on to a key element of these proposals. I welcome more generally the uprating that we have heard about from the Minister today, but what about carer’s allowance? The fact is that unpaid carers in the United Kingdom undertake work equivalent to the value of the whole of our NHS, which is absolutely mind-blowing. The Sayce review investigated overpayments to carers, and people needed to earn only £1 or so over the limit in a week for them to lose thousands of pounds from their carer’s allowance and end up having a liability.
Last February, the Sayce review found that nearly 87,000 people had that liability from the overpayment of carer’s allowance. The Government have committed to writing off the debts of 26,000, which means that debts remain outstanding for 61,000. That causes grave concerns for lots of people who have that hanging over them like the sword of Damocles. I would be really grateful if the Minister could reflect on that area in his winding-up speech.
Finally, the last benefit that I will reflect on is what was originally known as DLA but is now known as PIP. At the time when this benefit was a hot potato, some Ministers described it as pocket money for people with disabilities. However, it is there to support people with basic living needs, whether it is being able to get out and about and live a normal life, which many people would take for granted, preparing food or the simple dignity of being clean, able to wash and having help with that. This benefit supports those people, so it is disturbing that last July, the Minister had to almost rip up the speech in front of him and go in to bat with a rubber chicken in his hand, effectively. We welcome the upgrade to these benefits, but does it truly reflect the increase in earnings that we have seen, and give people on the personal independence payment the ability to take people on to support them?
The hon. Member for Oldham East and Saddleworth was right to mention the Joseph Rowntree Foundation, because its report, published last week, shows that poverty has flatlined since 2005, and if we look at deprivation and deep poverty, we see that the situation is really disturbing. I hear from church leaders in Torbay that they are seeing much higher levels of destitution than they have done historically, which is shocking. It is disappointing that the Government have not driven hard to make the positive reforms to the welfare state that would tackle the deep poverty suffered by many in our communities. The Government should ensure that we reform the welfare state, with those who use it, so that they can live their best life.
Neil Duncan-Jordan (Poole) (Lab)
Our social security system is the bedrock of our welfare state, but for years, the safety net that it was meant to provide has been developing bigger and bigger holes, through which some of our most vulnerable citizens have fallen.
For our older generation, the state pension is the foundation on which a decent retirement can be built. The restoration of the triple lock has been key to raising the income of some of our poorest pensioners, which is why we need it to continue, but it would be wrong to say that the job has been done when we still have 1.9 million older people living in poverty. The weakness of our means-tested pension credit system is that around 750,000 older people are eligible to claim, but have yet to do so. That is why we need to look again at the advantages of a universal system of income in retirement that reaches everyone.
Even in the current uprating arrangements, there is an unfairness. Some 8.3 million older people are in receipt of the pre-2016 state pension, made up of a basic state pension and a second state pension, which for many would have been SERPS—the state earnings-related pension scheme—introduced by the late, great Barbara Castle. While the triple lock applies to the basic state pension for these people, the lower consumer prices index is used to uprate the second state pension. This year, that will give a difference of 1%, and over time, we have seen the gap between those on the old state pension and the new state pension widen. That is unfair, and we should consider uprating all pensions in the same way.
As hon. Members have said, uprating is a contentious issue when it comes to overseas pensioners. Nearly half a million UK state pensioners do not receive the annual increase because they have moved to a country that does not have a reciprocal agreement with the UK. That means that their state pension is frozen at the value it had when they left the UK. For some, that will mean that their pension is now virtually worthless. Today, we are debating the annual uprating of the state pension, but the process does not include the frozen pensions policy, because that is dealt with through secondary legislation. Despite the serious impact that this issue has on many voters living overseas, there is a lack of scrutiny and opportunity to vote, which means that this House is unable to hold the Government to account on this issue. That needs to change.
Finally, I address an issue that a number of hon. Members have raised: our social security system needs to provide for the essentials for living. This April, for the first time since universal credit was introduced, as the Minister has said, the standard allowance will increase above inflation. That will go some way towards closing the gap between income and the daily cost of living, and it is welcome. However, despite this boost, too many families will continue to face a significant shortfall, caused by the increased cost of essentials.
The Joseph Rowntree Foundation and Trussell estimate that a single adult needs at least £120 a week, and a couple need £205 a week, to afford the essentials. Sadly, universal credit falls short of this. We know that the vast majority of people referred to a food bank were in receipt of a means-tested social security payment, such as universal credit. At the heart of the problem is the fact that there is no evidence-based foundation for setting benefit levels. As a result, updated rates do not properly reflect people’s needs. That is why there is a call for an independent process, which draws on research, including from those with lived experience, for advising Ministers on how much universal credit needs to be, if people are to afford essentials like food, utilities and vital household items.
The protection offered by our social security system should ensure that no one in need falls through the gaps. That is the mark of a compassionate society, and something that we should be proud to advance.
Sir Stephen Timms
I am grateful for the opportunity to wind up this debate. I thank everyone who has taken part for their constructive and helpful contributions, and I want to make a number of points in response.
I am grateful to the hon. Member for South West Devon (Rebecca Smith) for clarifying what happened in 1997—she read my facial expression correctly. I was perplexed when she told us that child benefit had been abolished. I have done a little bit of checking since she made that clarification, and it was in 1999 that family credit was replaced with the much better and stronger tax credit system. I do not know whether her family decided not to apply for that, but the introduction of working tax credits and the wider tax credit system made big progress, particularly in reducing child poverty across the country.
The hon. Lady was absolutely right to draw attention to the scale of the challenge that the country faces in the number of young people not in education, employment or training, as nearly 1 million were left behind by the previous Conservative Government. We are energetically on the case now to address that problem, which should have been addressed long ago. It is encouraging that the proportion of young people out of education, employment or training has fallen over the last year, but we do not want anybody to be left behind.
We are investing £820 million in the youth guarantee over the next three years to ensure that every single young person can access the support that they need to earn or to learn. Nearly 900,000 young people will receive intensive one-to-one support, and we are expanding youth hubs to every area in the country, creating around 300,000 additional opportunities to gain valuable workplace experience and training. Additionally, the youth guarantee will guarantee jobs for some 55,000 young people aged 18 to 21. The hon. Lady is absolutely right that there is a great deal to be done on this issue, and we are finally doing it. I look forward to reporting back to the House on progress as it develops.
The hon. Lady referred to the Conservative party’s reputation for being “a safe pair of hands for the economy.” Well, following the Liz Truss debacle, that reputation has sadly been destroyed, and it will take a long time to rebuild. People have a long memory, and remember the awful turbulence that the country was plunged into during that period, and that alleged reputation is sadly long gone.
The hon. Lady made the point that families have a choice about whether they can afford another child. Of course, one of the points that emerged from our debate on the two-child limit was that most families on universal credit with more than two children were not on universal credit when they had them. That was not an issue in their minds when they made that choice, so the Conservative response in that debate did not reflect the realities of what families are facing.
The hon. Lady made an interesting point about passported benefits, and I have seen the publicity on what the think-tank Onward has said on this matter. It is understandable that service providers use an existing means test to target their provision. That is what the last Government did on the cost of living payment during the pandemic, for example. I notice that the head of Onward is a former Chief Secretary to the Treasury, so one would have thought that he would have had a chance to do something about this over his years in office, but it is an interesting topic. I think the arrangements we have for passported benefits make sense, but if there are proposals for alternative arrangements, we will be interested to look at them.
The hon. Lady was critical of the use of the relative poverty measure for assessing the number of children growing up in poverty, as was the hon. Member for Faversham and Mid Kent (Helen Whately) last week. The relative poverty measure is the international standard measure; it is widely respected, and is used for all international comparisons on this metric. I think the reason why the Conservative party has always been so reluctant to refer to relative poverty is that its performance on that measure in government—I am talking about the Government who left office in 2024, but Governments before that as well—has been so consistently dreadful. During the debate on the two-child limit Bill, the point was rightly made that an important part of David Cameron’s work to bring the Conservative party up to date was embracing relative poverty as a valuable measure that ought to be taken into account. We now seem to have moved back to the pre-Cameron era in the Conservative party, and it may take some time for the party to recognise the scale of the change in its thinking that is needed if it is to reflect the country’s current situation.
I was interested in what the hon. Member for South West Devon said about her constituent who is on PIP. I would very much like to see the letter that she referred to, because she is absolutely right that PIP is an in-work benefit as well as an out-of-work benefit, and I would be extremely concerned if people were being told, “You’re in work, so you can’t have PIP any more.” There are disincentives of that kind in the system that need to be addressed, so I would love to have a look at that letter. As the hon. Lady knows, I am co-chairing a review of PIP that will conclude by the autumn of this year; she said that she did not think that the review would happen until 2027, but it will conclude by the autumn of this year.
The hon. Lady is right that we need to increase the proportion of face-to-face assessments for benefits. Face-to-face assessments are such a small proportion of total assessments at the moment because of the contracts that the Conservative Government entered into towards the end of their term in office, which contained no requirements for an adequate number of face-to-face assessments. Indeed, the Conservative Government sold off most of the premises where those assessments were undertaken, so of course it is taking some time to build up again the capacity to deliver those assessments, but we are doing so. We are putting right the mistakes that the previous Government made, and we are seeing a steady increase in the proportion of both work capability assessments and PIP assessments that are undertaken face-to-face.
Carla Lockhart (Upper Bann) (DUP)
Accuracy and fairness are really important, so I think the face-to-face assessments are vital. There has been talk of a 30% increase, which is a little bit less than what I would like to see. Can the Minister give this House assurances that the increase will not sit at 30%, and that the Government will strive for more face-to-face assessments? Nothing beats seeing the white of a person’s eye.
Sir Stephen Timms
We would certainly like to do so. Let us get up to the level that we have set, which will be a dramatic improvement on the situation we inherited. Once we have done so, we will learn the lessons and see what more we can do.
I very much welcome the comments made by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who chairs the Work and Pensions Committee. I commend her and the Committee for their work. She referred to the research—published, I think, towards the end of last year—showing that children who suffer poverty and adversity in childhood are, as she said, five times more likely to be NEET as young adults. I looked at that interesting paper, and I think I am right in saying that it found that children who had grown up just below the poverty line, but without childhood adversity as well, were three times more likely to be NEET as young adults, so just poverty on its own leads to a big increase in the likelihood of being NEET. In order to tackle this big NEET problem—the shadow Minister was right to say that it needs tackling—we have to tackle child poverty, as we are doing with the scrapping of the two-child limit in universal credit.
Debbie Abrahams
My right hon. Friend is absolutely right about those two figures. The fact is that more than half of the current NEET cohort—52.9%—have experienced not just child poverty, but family adversity. That is the five times more likely figure.
Sir Stephen Timms
It is an interesting paper, and I very much welcome research along those lines, as I know my hon. Friend does. She is right to make the point that spending on social security is not rocketing. It is not out of control as one sometimes reads, but is between 10% and 11% of GDP. Working-age benefits are 4% to 5% and pretty consistent. It is not changing rapidly at the moment. She makes an interesting point, as did my hon. Friend the Member for Poole (Neil Duncan-Jordan), about the current depth of poverty. That is an important part of the picture that we need to address in our work.
I agree with my hon. Friend the Member for Oldham East and Saddleworth that the social security system has an important job to do. We cannot just freeze it for a year and under-uprate it for another year, because that inflicts harm. We have seen that harm inflicted and the consequences of it. She is also right that we need a properly functioning health service again. We also need support for good employment. I was pleased to hear from her and the hon. Member for Torbay (Steve Darling) that the Work and Pensions Committee has been listening to Sir Charlie Mayfield and his excellent “Keep Britain Working” review, from which he is continuing to develop work.
The hon. Member for Torbay rightly referred to the practice of shuffling people off the books. Too often, people have run into a health problem in the course of their work, had to take time off and then, by accident really, lost touch with work and the workplace and become unemployed and inactive. If there had just been a bit of flexibility and a bit of continuing communication, that outcome could have been avoided. I welcome the work that Sir Charlie Mayfield is doing with more than 100 vanguard employers looking at how best to put those lessons into practice.
The hon. Member for Torbay also referred to the carer’s allowance overpayments scandal. We appointed Liz Sayce OBE to conduct an independent review of how overpayments occurred, how affected carers could be supported and how to prevent future problems with overpayments arising. The review made 40 recommendations, and the Government have accepted or partially accepted 38 of them. We have taken action to raise the earnings limit in carer’s allowance by the largest amount it has ever increased by. In future, we will uprate the earnings threshold annually in line with the increase in the national living wage, so that accidental exceeding of the earnings threshold will be less common.
The hon. Member for Torbay also drew attention to the difficulties with the current cliff edge arrangements for the carer’s allowance earnings threshold. In the 2024 Budget, the Chancellor announced that we were considering the introduction of an earnings taper to replace that cliff edge, and we may well conclude that that would do a better job.
I do not think I ever expected there to be a Labour Member of Parliament for Poole, but I am delighted that my hon. Friend was successful in being elected to that role, and long may he serve there. He was right to highlight the continuing scale of the challenge of pensioner poverty. If we look at the record of the former Labour Government, we see that there were dramatic reductions in both child poverty and pensioner poverty. In respect of child poverty, those reductions were reversed under the coalition and the Conservative Government, and towards the end of the term of the Conservative Government the number of pensioners in poverty was rising again, but it rose much less dramatically than the number of children growing up below the poverty line. Our priority has therefore been to tackle child poverty, and that is the reason for the strategy that we have published and the changes to universal credit that we debated in the House last week.
However, I recognise that there are continuing challenges for pensioners as well. The Government are increasing the basic state pension and the full rate of the new state pension, in line with earnings growth, by 4.8%, meeting our commitment to the triple lock. We are increasing the pension credit standard minimum guarantee in line with earnings, by 4.8%, to support pensioners on the lowest incomes. We are increasing benefits to meet additional disability needs and carers’ benefits, in line with prices, by 3.8%. We are increasing a number of working-age benefits, statutory payments and disability benefits in line with prices by the same amount, 3.8%. The Guaranteed Minimum Pensions Increase Order requires formerly contracted out occupational pension schemes to pay an increase of 3% on GMP—for the reasons I gave earlier—in payment earned between April 1988 and April 1997, to give a measure of protection against inflation for those pensioners which is paid for by their scheme.
I commend both orders to the House.
Question put and agreed to,
Resolved,
That the draft Guaranteed Minimum Pensions Increase Order 2026, which was laid before this House on 12 January, be approved.
Social Security
Resolved,
That the draft Social Security Benefits Up-rating Order 2026, which was laid before this House on 12 January, be approved. —(Sir Stephen Timms.)