Social Security Benefits Up-rating Order 2024

Lord Davies of Brixton Excerpts

Tuesday 27th February 2024 Grand Committee

In conclusion, I have raised the question of benefit adequacy every year in which I have participated in these uprating debates. It is encouraging that it is no longer a niche issue, but the Government have yet to acknowledge the case for a review of benefits adequacy and restrictions. I just hope that they or a future Government will do so; otherwise, we will continue, in future uprating debates, to wring our hands over the hardship experienced by too many of our fellow citizens.

[Lord Davies of Brixton (Lab)]

It is a great pleasure to follow my noble friend Lady Lister of Burtersett. In her usual meticulous manner, she made a series of detailed points. I will just make a couple of relatively straightforward points on pensions.

There is a touch of unreality about this discussion, because I received notification of my increased state pension last week and there was nothing in there to suggest that it was subject to any further parliamentary process. Should we vote it down today, my hopes based on the notification that I had from the noble Lord’s department will be shattered. However, I suspect that we are not going to turn this down today.

I have two points. First, a lot of the coverage of this increase said that state pensions would be increased by 8.5%. I discovered that it was not actually 8.5% and might be something else only from reading the small print. The press are mainly at fault for that. I found no significant story in a national paper explaining the distinction between the 8.5% increase for the new and basic state pensions and the 6.7% for everything else.

The everything else is not trivial: it is all the additional pensions that people earned while they were in the state second pension, the retained rights that they received when the new state pension was introduced and the additional pensions that people gained because they deferred their state pension. A particular surprise to me was the 10% increase that pre-2016 retirees receive. The additional pension, the 10%, is increased by only the lower figure rather than, as I would have logically thought, the higher figure. It includes the graduated retirement pension from the Boyd-Carpenter scheme. So significant amounts are increasing and, I dare say, by only 6.5%. I say “only” because that reflects the rate of inflation. I think saying it is increasing only in line with inflation is a fair assessment of the situation.

To a certain extent, it is the fault of the press, but I think the department has a responsibility to produce greater clarity on this issue. In moving these regulations in the Commons, the Parliamentary Under-Secretary for Work and Pensions said:

“The draft order will increase relevant state pension rates by 8.5%, in line with the growth in average earnings in the year to July 2023. It will also increase most other benefit rates by 6.7%”.—[Official Report, Commons, 31/1/24; col. 929.]


To the non-expert observer, I am sure that would suggest that all the state pension was going to increase by 8.5%, and I suggest that that was reflected in the press coverage. However, I defy the department to produce a single person whose entire benefit is just the new state pension or the basic state pension. People are bound to have some other increases, even if it is only the graduated pension scheme, so no one gets 8.7%. I thought at one stage I was going to tell the Committee what my increase was, but then I realised that with a simple bit of algebra noble Lords could work out what my state pension is, and I do not want to mention it in this debate.

Look at what the Chancellor of the Exchequer said about the Autumn Statement when he announced these increases:

“The government will … continue to protect pensioner incomes by maintaining the Triple Lock and uprating the basic State Pension, new State Pension and Pension Credit standard minimum guarantee for 2024-25 in line with average earnings growth of 8.5%”.


There is no mention that there is this large chunk of pension that will be increased only in line with inflation. It annoys me each time, and Members of the Committee have been the recipients of my annoyance on this occasion.

The other point I wish to raise has already been raised by my noble friend Lady Lister—the delay in payment. I spoke about this at some length last year, and it has not changed, but I thought that on this occasion it is worth quoting, as my noble friend mentioned, Nigel Mills MP speaking in the Commons. He is chair of the All-Party Parliamentary Group on Pensions. He described it as a “crazy process” and said:

“We have to use September’s inflation for an April increase in benefits, and we have to have an uprating order quite a while after the Chancellor has announced it in the Budget. The Work and Pensions Committee recommended that the Government bring these orders before the House earlier than February, so I commend the Government—we are still in January”.—[Official Report, Commons, 31/1/24; col. 932.]


So down the other end they got it in January, but we did not get it until February and the important point is that pensioners will not get the increase until April. That system of a September/autumn announcement and April increases has, in effect, subsisted for 40 years despite all the developments in maintaining records and the computerisation of systems.

I was glad to hear my noble friend suggest that some further thought is being given to this. In the interim it would be reasonable, to the extent that the effect of the increase could be from 1 January—although it is not possible to start the payment until April, because of the systems—for us to give the underpayment for the first three months of the year as a lump sum, at the beginning of April. I think that everyone would love to receive that.

Workers (Economic Affairs Committee Report)

Lord Davies of Brixton Excerpts

Thursday 8th February 2024 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, it is an honour and a pleasure to take part in this debate, with its stellar cast of speakers. The report was introduced extremely well by the noble Lord, Lord Bridges of Headley. I should mention that I am currently a member of the Economic Affairs Committee, but I was not when it produced this report. Indeed, when I saw that this was down for debate, I thought that I was going to have to stand up and make a whole series of criticisms, but then I took the precaution of reading the report, rather than just the press.

The report itself is measured in what it says. It does not attempt to make moral judgments about the situation, but identifies that we need to know more and that there is a shortage of data—the intervening period since its publication has strongly reinforced that point. I agree with the remarks of the noble Baroness, Lady Noakes. The Government’s failure to get to grips with understanding the situation is the most concerning point that we need to discuss today.

I will direct my remarks, not surprisingly, to what the report says about pensions and retirement, but I think that the most important part is where it talks about sickness and ill health. I strongly endorse the remarks of my noble friend Lord Layard in relation to mental health.

We should recognise that economic inactivity is quite a difficult concept to pin down. It appears in some official statistics, so we are very much subject to the way in which those statistics are drawn up. One issue that has not been addressed in this debate is how useful people classified as economically inactive are to the overall standard of living and quality of life: how they are contributing. It is doubtless that many are making a massive contribution that is simply not reflected in the economic statistics. Having said that, it is clearly a matter of importance that we take an interest in the reduction that we have seen in the size of the workforce, as measured by the statistics.

It is important to understand that the report does not provide us with policy solutions, and it certainly does not tell us what the long-term implications are, how significant the reduction of the workforce is, or even whether it is a good or bad thing. Certain speakers have claimed generally that it is a bad thing that we have seen this reduction in the workforce, but the report itself does not do that—unlike, as I suggested earlier, much of the commentary on the report.

Chapter 1 identifies the impacts of the reduction of the workforce. It identified inflation, but went on to say that inflation was because of the implications that the reduction in the workforce has for people’s wages. I want to be absolutely clear that I think that pressure to increase wages is a good thing, both economically and for the individuals concerned. Business needs people to spend money, and they will spend money only if they have good wages. The report also said that it limited economic growth and, as an associated point, would worsen public finances. As we know, GDP is a pretty bad measure; it is the only one we have, which is why we use it, but, as a measure of quality of life it is a pretty poor proxy. I suggest that—I need to say this the right way round—men and women were not made for the GDP. You cannot assess the quality of people’s lives by the level of GDP, because they are doing other things that are not reflected in the GDP figures themselves.

It is right that the report focuses on retirement and the changes that have taken place in retirement. We should try to understand figure 16, and what it tells us about the reasons people are taking retirement. The report is a bit thin on this; it raises lots of questions and provides some speculation, but it does not really tell us why people are taking retirement.

Looking at figure 16, what it suggests to me—and here I am entering into speculation, along with everyone else—is a considerable class divide. People on higher incomes are not retiring as much; people on very low incomes are not retiring as much; but people in the middle are. At the risk of making very broad generalisations, people on higher incomes have the resources to retire but they probably also have more fulfilling, more interesting, more rewarding jobs—by definition they are more rewarding—so they keep working. People on low incomes cannot afford to retire, so they stay at work. It is people in the middle income bands who have some agency here and who actually take retirement. That is obviously influenced by factors such as home ownership and what the report describes as financial resilience, which I assume means a bit of money in the bank. The report suggests that people who retire are the well-resourced group. Well, yes, I am sure that is true.

Amazingly, I have gone well over my time. I shall finish, skipping a lot of what I wanted to say, with a remark about retirement age. I always worry when people who are well off, in well-paid, interesting jobs, say that other people should be retiring later than they want to. The whole issue of the retirement age is going to come back to us, I am sure, but I want to add a dissenting note: you cannot solve the productivity problem by forcing people to stay at work.

Love Matters (Archbishops’ Commission on Families and Households Report)

Lord Davies of Brixton Excerpts

Friday 8th December 2023 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, thanks are due to the Archbishops and their commission for producing this report. Drawing on a wide range of knowledge and experience, it provides a good basis for discussion of these important issues. I particularly welcome the speech by the most reverend Primate the Archbishop of Canterbury in stressing the importance of a partnership between families and the state. People have suggested that the family is everything and the state is a subsidiary part, but it is a partnership between the two. Quite rightly, the most reverend Primate stressed the role of the state in relation to the family, and I very much welcome that.

I thought it would be helpful for a committed atheist to contribute to this debate, if only to emphasise that believers do not have a monopoly on recognising the needs of families and individuals within society. I am going to avoid the theology, look at the practical proposals and make a number of comments where I think there is more work to be done.

First, I often have a problem with the use of the term “family” in this and similar discussions. Its use is particularly questionable in political discussions where it is often used as a way of dividing rather than uniting. Whenever it is used, we must ask ourselves what counts as a family. At least in the report, the particularly suspect term “hard-working families”, which is too often used when discussing social policies, does not appear. In awful truth, it is sometimes used in a form of dog-whistle politics suggesting that there is the other, the deserving and the undeserving poor, or us and them.

However, if the term “family” is to be defined as including everyone, it loses all meaning. Who is being excluded when we use the word “family”? I am therefore pleased and give tribute that, obviously, care and attention has been taken in drafting this report to avoid this trap. I assume this is deliberate, as the report notes:

“Terms such as ‘family-friendly’ can be alienating for people without children and those who live alone. They must be used with great care”.


So, while the report argues that

“strong and stable families and households … are … the foundation for our society”,

it then goes on to call for singleness to “be recognised and honoured” as

“a major part of our society”.

All well and good to see. It does suggest, however, that a lot of words could have been saved in producing the report by just referring to everyone.

The report also notes that

“Family life can be difficult and messy”—


all too true, although I will avoid the temptation to quote Philip Larkin. The report concludes, therefore, that

“All relationships … can benefit from support at different life-stages”.


The key here is “different life stages”.

That brings me to the main point I want to make in this debate, which is about what I believe is a serious omission. I may be wrong—I may misunderstand the report—but as far as I can see there is no specific reference to issues that arise with families and relationships with increasing age, be they failing faculties, ill health or, ultimately, bereavement. There is no reference to old age or pensions or elderly family members, only one reference to retirement, which can be such a seminal event in anyone’s lifetime, and there is nothing specific about those who, through choice or circumstances, grow old alone.

I have to ask whether this was deliberate. Was it thought simply that a general age-blind approach was right? I suspect not, as children get a mention, with one of the priorities being identified, quite rightly, as ensuring that they get the best possible start in life. Either way, I must express some disappointment. Forgive me if I have misunderstood what is in the report and, in any event, I am not suggesting for a moment that the commission does not care about the elderly, but the elderly have specific issues that need to be addressed in the context of the issues dealt with in this report, and I suggest that they might have been expressed more explicitly in its recommendations.

Looking at what is in the report, it includes 36 recommendations for the Church of England, and 29 for the Government. I hope noble Lords will forgive me if I avoid commenting on those for the Church, but turning to those for the Government, there are a number where specific reference could have been made to the elderly. They include where reference is made to “life transitions”. It should be kept in mind that facing up to old age is often difficult—looking around the Chamber, I feel that many will bear witness to that. It is not all negative, of course. It can be a form of liberation, providing new opportunities for development, but relationships might change and, certainly, as I can testify, slowly but inexorably, new life-changing issues arise that must be confronted.

The report also stresses that

“strong and stable relationships in every family and household”

should be a priority for every government department, and it suggests a

“Cabinet level Minister holding responsibility for the implementation, oversight and publication of a family review”.

Care for older family members should obviously be part of such a review, which has important implications for the Government’s policy, or perhaps more accurately, lack of policy and financing for an adequate social care service.

Then there is the call on the Government to

“Value families in all their diversity, meeting their basic needs by putting their wellbeing at the heart of Government policymaking and our community life”.


One form of diversity is the growth of multigeneration households. ONS figures, for example, have shown a steady rise in three-generation households, which will typically include older people. I surmise that is due to growth in certain parts of our community. I am sure support will be needed to ensure their well-being, for example, more housing tailored for their particular needs.

Finally, I mention the welcome call in the report to

“Honour singleness and single person households, recognising that loving relationships matter to everyone”.


This again is particularly important where people are newly single, typically at older ages, and have to cope with the death of their partner after many years together.

I am sure that there are other examples. In no sense is this a criticism of the work that has been done; it is pointing a pathway to what more attention needs to be given to the needs of the elderly.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, it is an honour to close this debate on Love Matters, the report of the Archbishops’ Commission on Families and Households. I start by thanking all noble Lords for their valuable contributions today and, in particular, the most reverend Primate the Archbishop of Canterbury for initiating this important debate and for treating the House to a moving and passionate speech. If noble Lords will excuse the pun, in looking up to the gods, I thank the commission for its work in producing the report. It is a landmark report for the Church which makes valuable recommendations. I assure the House that these have been closely studied by the Government and are reflected in our plans and actions across the families agenda.

I add that it is a delightful change to see that there are more recommendations for the Church than for the Government on this occasion. However, just to reassure the House, there still remains much for us to do. As my noble friend Lady Bottomley said, faith groups and the Church are a crucial element in communities around the country and support many families. We have strong partnerships with the Church, including on the delivery of high-quality education in schools, and I will say more about that later.

Before I begin, I will just round up some of the themes. There were a lot of wide-ranging themes this afternoon: the importance and value of marriage, including same-sex marriage and in the traditional sense; a focus on children; views on single-person households and lone parents; relationships generally, and relating better, and how much this matters; a focus on the elderly from the noble Lord, Lord Davies; the joys or otherwise of being married to an MP; national service for young people cropped up; and, it is fair to say, bad days at the office for benefits officials struck me as being quite interesting. There was an emphasis on friends and “Neighbours”, and we have been exhorted to watch “Coronation Street” next Wednesday—I must make sure to put that into my diary.

I happen to be wearing a tie with an elephant on today, and the House will know that elephants have deep family bonds. They are loyal to a fault and they are known to spend time with the relics of their ancestors, so clearly, in that respect, love matters. I welcome the report’s focus on love, which provides an important reminder of the human element, the unconditional bond that underlies the entire families agenda. We all know that children benefit from growing up in a family that provides love and support and is part of a community. These are the things that ultimately make a difference to children’s happiness and success throughout childhood and up through as far as employment.

We also know, sadly, that this is not the case for all children, and that some families require greater support. As a result, providing such support to create an environment where all children can thrive is a key priority for this Government. That is why, in February, we published Stable Homes, Built on Love, which sets out our vision for a social care system built on love, safety and stability, along with the actions being taken to reform children’s social care, a focus shared by the report. This is just one part of our wider support for families, and I will highlight some of the further initiatives shortly.

The term “family” does not automatically imply everyone living together under one roof, nor only those who find themselves under the branches of the same family tree, so I welcome the report’s broad definition of family. In preparation for this debate, I was struck by one definition I happened to come across. It goes as follows.

“Family is loving and supporting one another even when it’s not easy to do so. It’s being the best person you could be so that you may inspire your loved ones”.


Indeed, as my right honourable friend the Prime Minister puts it, quoted by the report,

“whatever your family looks like, it doesn’t matter as long as the common bond is love”.

I echo the report’s celebration of all forms of loving relationships. As the most reverend Primate and the right reverend Prelate the Bishop of Durham said, they are significant for every individual, whether they opt for a life as a pair within a family unit or as a single person. We must respect and recognise the different family arrangements and structures, so that we can provide the right types of support. However, I listened very carefully to my noble friends Lady Stowell, Lord Cormack and Lord Robathan. They spoke passionately, particularly my noble friend Lady Stowell, about the value and benefit of marriage and the need to keep promoting this, and they are absolutely right.

The right reverend Prelate the Bishop of Durham echoed the view, which was also raised by the noble Baroness, Lady Twycross, that the marriage ceremony is enormously important, and the preparation for the ceremony—preparing for the commitment of marriage—was at the heart of this. The right reverend Prelate cited a role model for this at the Holy Trinity Brompton. I also declare an interest that I believe that I am a beneficiary of good preparation for marriage, having just, last June, celebrated 35 years—not quite as many as some others in the Chamber. I also noted the question raised by the right reverend Prelate the Bishop of Durham about the registrar possibly doing some signposting. I will reflect on that, and I will certainly get back to him, and put a letter in the House Library regarding that important point.

In terms of supporting marriage, I remind the House that the Government do indeed support the institution of marriage. The House will know that we introduced the marriage allowance in 2015 to recognise marriage and civil partnerships in the tax system as just one example of our support for marriage. The Government also have a strong track record of advancing LGBT rights, including the introduction of same-sex marriage in 2013. I was deeply moved by the speech from my noble friend Lord Herbert.

The most reverend Primate mentioned the importance of state intervention where needed. The noble Lord, Lord Davies, added in at different stages, and I think he alluded to the reference made to the elderly. I will come back to that, hopefully, with time later.

I will directly address what support the Government are providing on issues that affect families. As my noble friend Lady Bottomley highlighted, my own department, DWP, oversees the reducing parental conflict programme, which shows that supporting parents, inter alia, to reduce the damage of frequent arguing—I make the point that it is frequent arguing, not just arguing, that is very damaging—achieves positive and sustained impacts for children. This programme is delivered through local authority family services and with local community and faith partners. The most reverend Primate emphasised the importance of local action in this respect, and he is right. We continue to provide ongoing support for local authorities across England on this programme and are on track to have directly supported 40,000 parents in the last two years.

In addition, the start for life and family hubs programme has created a network of centres for families with children up to 19, or up to 25 where the child has a disability. These family hubs link professionals, local partners and faith groups to support families. The right reverend Prelate the Bishop of Durham spoke about family hubs very eloquently. They also support the very important early years development, which I know is a priority for the Royal Foundation and her Royal Highness the Princess of Wales. I am sure that the House will welcome the joined-up support being given by midwives and family hub workers to expectant and new parents, helping them with both their child’s and their own health and well-being.

The right reverend Prelate the Bishop of Durham asked how the Government will ensure that faith groups are involved in family hubs, and that they provide the necessary relationships advice. He is right: faith groups are at the heart of many communities and therefore are a key component of the family hub model. We have published guidance for local authorities on the services we expect family hubs to offer, including helping families access support for separating and separated parents, and to reduce parental conflict.

In another passionate speech, the right reverend Prelate the Bishop of Gloucester spoke about children with a parent in prison—a very important subject. A parent going into prison can have a profound impact on children, which I would say is an understatement. Local agencies are best placed here to determine what support is needed, for example, Keeping Children Safe in Education 2023: Statutory Guidance for Schools and Colleges states that the additional needs of children with a family member in prison or who are affected by parental offending should be considered.

Healthy relationships are built on a foundation of mutual respect, trust and honest communication. In schools, our children are being taught about the importance of healthy relationships through the inclusion of age-appropriate relationships, sex and health education within the curriculum. This helps them to develop mutually respectful relationships more broadly, but that is not all the help that they get on relationships. School mental health teams are already making a difference when relationships get tough, to help children address problems early before they escalate.

The reality is that not all relationships stand the test of time. The noble Lord, Lord Griffiths, put it very well when he said, “Bad things happen”, and indeed they do. In 2020, the Government introduced the Divorce, Dissolution and Separation Act. The legislation has modernised divorce laws and has created an online divorce service to help with financial settlements and childcare arrangements after separation.

In addition, the Child Maintenance Service—which I am directly responsible for—plays a crucial role in securing financial support for children where parents have separated. It mandates—and, where necessary, enforces—appropriate arrangements so that children have the best start in life with a solid financial foundation. Through both private family-based arrangements and more formal Child Maintenance Service arrangements, looking at the years 2020 to 2022, on average 160,000 children were kept out of absolute low income on an after-housing-costs basis.

Despite this progress, however, there is much more we can do. That is why, in October, my department announced measures to strengthen the Child Maintenance Service by accelerating our enforcement powers and removing the £20 application fee. We will also consult on the ways in which the Child Maintenance Service collects and transfers maintenance payments, all with the primary aim of getting more funds to children. My noble friend Lord Robathan is right to mention that it is mainly men—93%—who have strayed in a marriage. However, I emphasise that not all do not take responsibility for their children, so it is a complicated story.

The right reverend Prelate the Bishop of Durham spoke about the two-child limit, which I was certainly expecting to speak about this afternoon. He will probably know what my answer will be; my noble friend Lady Stowell alluded to it. The two-child limit has been extensively debated in this House. On inception, the policy had two clear intentions: first, to make universal credit fairer and more affordable to the taxpayer; secondly, to make sure those supporting themselves through benefits face the same financial choices around the number of children they can afford to have as those not on benefits. The House will be aware of the exceptions that apply. Child benefit continues to be paid for all children in eligible families.

Going further, in 2014—as the most reverend Primate highlighted—we introduced the family test, which guides policy-makers in assessing the potential effects of their decisions on family dynamics, including elements related to marriage. The family test is for individual departments to apply. The approach allows for flexibility to consider the test at the most appropriate points in the policy-making process. In my role, I have actively supported the family test and I remain committed to promoting it across government.

I know the most reverend Primate regards this as being very important. We acknowledge that some people, including himself, might like to see the consideration and publication of the family test become a statutory obligation. To work best, an assessment of the potential family impacts of policies needs to be done early in the policy development process, so that consideration can be given to adapting proposals. Feedback from policy-makers tells us that statutory tests risk becoming a box-ticking exercise at the end of the policy process, with pass or fail outcomes. However, perhaps I can reassure him and the House that we continue to work across government to support officials developing policy to apply the family test from the earliest policy development stages and encourage the sharing of best practice. We are also starting work across government to consider the language of the family test questions and supporting guidance. We really do want to ensure that it continues to be relevant and appropriate. We acknowledge the recommendations in the report, but also in the Children’s Commissioner’s report.

I will turn to some other matters raised in the report. On reducing poverty and supporting low-income families, the Government believe they have a strong track record of helping vulnerable families. There were a number of questions from the noble Baroness, Lady Twycross, and I will need to write a letter as there were an awful lot of them. I will be touching on housing later, however, which was a general theme during the debate, so I hope that some answers may come to her from that.

The House will be aware of the £276 billion spent on welfare in Great Britain over 2023-24. I will not rehearse all the Autumn Statement announcements, because the House has heard them on several occasions over the past two weeks or so. However, as I said earlier, I will focus on housing. The noble Lord, Lord Mann, raised this, and the most reverend Primate also spoke about the importance of family, where they live and how they live, and the right reverend Prelate the Bishop of Chelmsford spoke about the types of houses, the intergenerational focus on the buildings and, frankly, making it a lot better for families to live near each other so that we have the influence of the intergenerational aspects. Those are incredibly important points, which I certainly take on board.

In the meantime, as the House will know, in the Autumn Statement the Government are raising the local housing allowance rates to the 30th percentile of local market rents in April 2024, which will benefit 1.6 million low-income households by on average £800 a year in 2024-25, and of course help many who are in poverty. The right reverend Prelate the Bishop of Chelmsford asked about timing. I will certainly take her point back about perhaps bringing the date forward but I certainly cannot offer any reassurance on that.

The report rightly identifies many of the features that support families’ flourishing, including friendship, shelter and the ability to deal with conflict. However, I highlight the importance of work. I have to say that I am slightly amazed that this has not been raised at all during this debate, so I will take this opportunity to focus on it. It has been a long-standing principle for the Government that the most effective and sustainable way to tackle poverty is by championing employment, acknowledging the mental health benefit that this brings and supporting people, including parents, to progress in work. Work can be an important part of bringing families together, supporting their mental health, and role-modelling positive behaviours for younger generations. The Government are committed to improving lives by ensuring that more people can reap the rewards of work. The voluntary in-work progression offer is now available in all jobcentres across Great Britain. We estimate that around 1.2 million low-paid workers will be eligible for support to progress into higher-paid work, and we will encourage them to take up this offer.

On childcare and the actions of my department to support parents into work, from June 2023 we increased the universal credit childcare cost caps by 47% to £951 a month for one child and £1,630 a month for families with two or more children. Importantly, we can now also provide even more help with up-front childcare costs when parents move into work or increase their hours. I reiterate my appreciation to faith groups and their commitment to parents, carers and children, and I am grateful to the commission for its invaluable contributions to supporting and strengthening family life since it was established in March 2021.

I want to raise one very important point, which is the role of grandparents—the noble Lord, Lord Davies, referenced the elderly in his remarks, but I also thank the noble Lord, Lord Mann, profusely for raising this important subject. The intergenerational aspects of grandparents—the way they play a pivotal role in families, often stepping up to provide kinship care and support to children and their parents—are important. Many kinship carers, especially grandparents, take on this role at a time in their lives when they least expect to raise a family, we would guess. They provide support, sage advice and stability, forging strong relationships not out of duty but because love matters.

I will answer a question raised by the noble Lord, Lord Davies, to do with having a Cabinet-level Minister for Children. Perhaps I can be helpful by saying that of course he will know that we have a Children’s Minister, but that was not his point. The Secretary of State for Education fulfils the role of Cabinet-level Minister. She makes sure that the best interests of children and families are front and centre in policy and decision-making at this highest level of government. She has a statutory duty to promote the well-being of children in England under the Children and Young Persons Act 2008, and is responsible for overseeing domestic implementation of the United Nations Convention on the Rights of the Child and leading the reporting process on behalf of the UK to the UN.

The Minister for Children, Families and Wellbeing also chairs a cross-government child protection ministerial group. This group helps to ensure that safeguarding is championed at the highest level by government departments that provide services to children and families. Through this group, the Secretary of State also ensures that other government departments are held to account in delivering for children.

This Government are committed to delivering on issues that matter to the British people. That is why we will continue with our mission to help all families to thrive, and our young people growing up within them to flourish.

[Lord Davies of Brixton (Lab)]

Before the Minister sits down, can I ask him whether he used a word in his section on divorce advisedly? He referred to a proportion or percentage of men who had “strayed”. To me, that suggests an element of blame, whereas I thought that the whole thrust of developments in divorce law is for the law to avoid allocating blame.

[Viscount Younger of Leckie (Con)]

The noble Lord is absolutely right. I clarify that I was not attaching any blame; I was just making a factual point that it is the 93% of men who stray. There is a balance that we strike within the Child Maintenance Service to be sure that we take account of the issues relating to paying parents and receiving parents. It is very important that we do not take sides, but we also have to look at the facts.

Benefit Claimants: Free Prescriptions

Lord Davies of Brixton Excerpts

Thursday 30th November 2023 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I thank the right reverend Prelate the Bishop of London for securing this debate on the end of free prescriptions for certain benefit claimants. She covered, in detail, the operational effectiveness of this and how it works out in practice; I will talk about the philosophy that lies behind the proposal.

As I said in yesterday’s debate on the Autumn Statement, I am angry. I saved my anger from yesterday’s debate for today. It is unfortunate that the noble Viscount the Minister, for whom I have considerable respect, has to be the butt of my anger, but my anger exists nevertheless. I am angry about this cruel and outrageous proposal that reflects so badly on a Government that have already lost much credibility and honour—I am angry and sick to my stomach. My immediate reaction when I read this policy was to ask, “Are we back to the workhouse?”. I am angry, because we have known for almost two centuries that the policy of less eligibility simply does not work—not only does it not work; it leads to further cruelty in a race to the bottom, devoid of compassion and sense.

I will talk history. I am sorry that we have lost the noble Lord, Lord Lexden, who gave us a history lesson in the previous debate today, for which three of us were present—but here is some more history. I will talk about the Poor Law and the principle of less eligibility that played significant roles in shaping the approach to poverty and welfare in the 19th century, particularly in the United Kingdom.

The Poor Law, a system of social welfare that dated back to the 16th century, underwent significant reforms in the 1830s with the implementation of the Poor Law Amendment Act 1834. The core principle of the Poor Law was the provision a relief to the poor through workhouses, which were intended to be austere institutions to discourage dependence on state assistance. The workhouse system aimed to make poverty less desirable than the lowest paying jobs available, thus enforcing a concept of less eligibility. That meant that conditions in the workhouse were intentionally made to be harsher than the worst situations outside, creating a deterrent against seeking public assistance.

Less eligibility sought to create a clear distinction between the deserving and the undeserving poor, with the belief that the fear of destitution would drive people to seek alternative means of support. The workhouse environment was designed to be Spartan and unpleasant, reinforcing the idea that dependence on state support should be a last resort.

It became clear, however, that the Poor Law and less eligibility meant the system was dehumanising and punitive, pushing vulnerable individuals and families to the brink of despair. The workhouse conditions were often harsh, further exacerbating the emotional toll on those seeking assistance. Charles Dickens, through his literary work such as Oliver Twist, on the Poor Law and its bastard children, vividly depicted the hardships faced by the poor in workhouses, contributing to public awareness and debate. Over time, society’s attitudes shifted and the harshness of the Poor Law system began to be questioned. As the 19th century progressed, there were calls for reform and a more compassionate approach to poverty. Eventually, the Poor Law system was largely dismantled in the early 20th century, making way for the development of modern welfare programmes.

In retrospect, the Poor Law and less eligibility reflected the prevailing ideologies of the time, attempting to address poverty through deterrence rather than systemic support. The approach was rooted in a belief in self-sufficiency, but it ultimately led to widespread suffering and hardship for those already marginalised by poverty. The lessons learned from the shortcomings of the Poor Law should influence contemporary discussions on social welfare and the importance of a compassionate and inclusive approach to addressing poverty and inequality. However, it is as if the Government have forgotten these lessons.

My question to the Minister is: has he read his Dickens? Does he realise that, not as an individual but as the representative of the Government here today, he is playing the part of the villain in an up-to-date Dickens novel and that he is, in his official role, if not personally, acting as a modern-day Mr Bumble, the cruel manager of the workhouse in Oliver Twist, devoid of compassion? I was struck by the remarks of the noble Baroness, Lady Vere, in the discussions yesterday, when she complained that this was a compassionate policy. I think it is identical to Mr Bumble, the cruel manager claiming to be compassionate.

When we look at the people who will be affected by this policy, we do not really know much about their characteristics—I think that was the point that was made—so we do not know who will be harmed by this policy. Make no mistake: the intention of this policy is to harm people. I suspect that few if any people fit the tabloid caricature of the feckless, workshy scrounger, but we do know that these people are poor. We also know that they are ill, and we know this policy is designed to make them poorer and iller. To put it at its clearest, even the feckless, workshy scrounger deserves the medical treatment they require.

I hope the Minister can hear history speaking to him, saying that this policy is a component of the failed idea of less eligibility, and it is bound to fail and create more problems than it seeks to address.

Pensions (Extension of Automatic Enrolment) (No. 2) Bill

Lord Davies of Brixton Excerpts

2nd reading
Friday 14th July 2023 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I join my noble friend Lady Drake in congratulating the noble Baroness, Lady Altmann, on bringing this important Bill before us today. I still struggle to get my head around the idea that a government policy requires a Private Member’s Bill to bring it in: it seems a bit odd to me, but then most of the Bills this morning seem to have been in line with government policy. I suppose that is because you have a chance of getting legislation through only if it has government backing. But this is government policy and the Government have promised to introduce it. They did not say when, so their tardiness is being pre-empted by the Bill.

I am going to say some things which may seem a bit grouchy, but I do support the Bill and I am not suggesting any amendments: I think it should be put on the statute book as quickly as possible. It is, of course, an enabling piece of legislation; it is just the first step. We are going to have the regulations and there is some suggestion that we are going to have a consultation later this year. We are a bit overburdened with consultations at the moment—I think there were about five earlier this week—on crucial issues in the pensions area, so I hope there will be some understanding of the capacity issues in dealing with all these areas of policy.

The Bill does two distinct things: it increases the contributions that everyone who is automatically enrolled has to receive in their pension: it affects everyone, right up to the ceiling. It is not in any way targeted at the lower paid, but it has a much bigger impact on the lower paid, of course, because including the extra £6,000 for someone on £18,000 has a much bigger proportionate effect than for someone on, say, £30,000 or £35,000. So, proportionately, it is aiming at those on lower levels of pay. It also brings in those who are between the ages of 18 and 22—my noble friend Lady Drake dealt with this in detail.

Nevertheless, while both those things seem like good things, I do have concerns. There is a general concern that this might be seen as solely what we need to do in order to address what I think is currently the biggest problem in pensions policy, which is the gender-based pension gap that the noble Baroness referred to in her introduction. It is because of inadequate pension provision and of course it affects primarily women, hence the gender gap. We could spend a bit of time discussing the DWP errors and the differential impact that they are having on women, but we will leave that to one side today. However, the two key issues there are low pay for women and continued gender discrimination in employment.

The second concern is that caring tends to be the responsibility of women. There is, perhaps, greater sharing now than there was in the past, but it is still overwhelmingly women who have caring responsibilities, and this has an impact on the pensions that they accrue.

What solutions do we have to those issues? I am afraid that I must disagree with the noble Baroness, Lady Altmann, about the impact this will have on the pensions gap. I think it is irrelevant to the pensions gap and hence is a diversion from what we should be doing. My crucial point on the pensions gap, and where the Bill misses the point, is that we cannot solve the problem of the inadequate pensions received by women, people on low incomes and people with caring responsibilities by making them save more money. It is not the answer to the pensions gap to rely on people having greater savings, because their resources are just not there. We have to look at other ways of providing support to eliminate the pensions gap, and I really do not think that market-based funded pensions are that solution. We have to look at the solution through improvements to the state scheme. Clearly, the state has a bigger role here. In that sense, this Bill is a diversion and raises concerns in my mind, even though the measures in themselves are worth supporting.

There are also practical issues that need to be addressed if we are to extend auto-enrolment. First, we have to resolve the problem of small pots. The Government have issued a further consultation. I thought that we had consulted almost to death on this issue, but we got another consultation paper on small pots earlier today. The new and dynamic Pensions Minister says:

“I am setting out a decisive way forward built around the multiple default consolidator model”.


That is perhaps the correct approach—it moves away from the pot-follows-member model that previously had support—but this debate has been going on for 10 years or more, ever since the birth of auto-enrolment. We have to address the problem of small pots and we need to do it soon, so increasing auto-enrolment must go along with sorting out the problem of small pots.

The other issue that needs to be resolved, particularly for younger people, whose earnings will tend to be low and may be outside the tax regime, is that of net pay. I was going to say something about that at Second Reading of the Finance (No. 2) Bill, but unfortunately I could not make it. However, they are important issues and, in this context, I stress that the small pots issue needs to be taken more seriously by the Government. It was discussed in Committee in the House of Commons and various points were raised. I do not believe that the Government have yet totally resolved these issues—the need to make sure that people know that net pay tax relief will be there.

The Government’s proposal is to start, in effect, two years in the future, but I cannot see any sound reason why we should not go back to 2023. There is the whole process of individuals being able to object to whatever assessment is made and additional technical issues which I will not detain the House with today. There are a number of issues with net pay that need to be addressed. So, okay, let us go ahead, let us expand auto-enrolment, but unless at the same time we resolve the other issues of net pay and small pots, it will not have the impact that it should have. To come back to my prime point, let us not believe that this is going to resolve to a significant extent the biggest issue, which I believe is the gender pensions gap.

State Pension Underpayment Errors

Lord Davies of Brixton Excerpts

Tuesday 16th May 2023 Lords Chamber

Asked by

[Lord Davies of Brixton]

To ask His Majesty’s Government what steps they are taking to tackle under-payment errors in state pensions.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, the Government are fully committed to ensuring that state pension error is put right as quickly as possible. More than 1,300 staff have been recruited or redeployed to the ongoing state pension underpayment correction exercise, with case reviews expected to significantly increase this year. This is an issue that dates back many years, and we are working hard to correct these historic errors and to ensure that they do not happen again.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the noble Viscount for his reply and I know that he takes the issue seriously. However, it is notable that the figures published last week by the Office for National Statistics showed that the main cause of underpayment was what it termed “official error”, and in the last financial year, the underpayments totalled £580 million—£50 million more than in the previous year. It is getting worse. I note what the Minister says about additional staff, but it is clear that more needs to be done.

[Viscount Younger of Leckie (Con)]

The noble Lord is right. We know that 700,000 cases require review; an estimated 230,000 customers will be affected. In terms of what we have actually done, 173,538 cases have been reviewed; 46,760 underpayments have been identified, and just over £300 million was paid in arrears. As for the reasons that were highlighted by the noble Lord, they are multifarious. One is that DWP staff sometimes fail to manually set an action system prompt on state pension accounts to review payments, such as reaching an 80th birthday.

Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023

Lord Davies of Brixton Excerpts

Wednesday 26th April 2023 Grand Committee

Moved by

[Lord Davies of Brixton]

That the Grand Committee takes note of the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023, given the impact of current increases in the cost of living on pensions payable by the Pension Protection Fund.

Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee

[Lord Davies of Brixton (Lab)]

My Lords, this order is routine and has little practical impact on the PPF. The levy that is currently payable is only 16% of the cap set by the order. However, having it before us provides an opportunity to discuss the operation of what is becoming—a bit under the radar—one of the country’s biggest financial institutions.

I have a particular interest as I like to think that the PPF, or at least the name, was my idea. Back in 1995, following the Maxwell scandal, I drafted a paper for the TUC that proposed, among other things, that there should be a central discontinuance fund that should be called—wait for it—the Pensions Protection Fund, or PPF. Of course, the proposal was not accepted at that time, but it was introduced subsequently in the Pensions Act 2004.

Before getting to the focus of my speech, I have a couple of questions. First, the Minister should provide the Committee with some explanation of the error that was made with this order. I am not trying to embarrass anyone, but it surely suggests excessive pressure on DWP staff, so the question is: has the situation been rectified?

Secondly, as was raised in the 30th report from the Secondary Legislation Scrutiny Committee, can the Minister tell us where we have got to in following the recommendations in the departmental review? I will highlight two recommendations from the review. First, recommendation 2 is that

“the DWP and the PPF work together to understand the implications of the PPF’s funding position in light of expected future developments in the population of Defined Benefit (DB) pension schemes and plan well ahead for any legislative changes that might be needed; for example, to address what happens to any funding which is surplus to requirements”.

It is worth noting that the current legislation says nothing about what should happen to any assets that, in the event, are not needed to pay members’ benefits. Given the PPF’s policy of building up a substantial buffer that, even on its own figures, is unlikely to be needed, the question needs to be addressed.

Any money that is left over cannot go back to the employers, because things will have moved on and employers will have moved on. It also seems wrong that it should go to the Government. The only just solution is for it to be used, as far as possible, to provide benefits for members. In practice, this means that the buffer should not be excessive. In these circumstances, where there is no residual legatee, bigger is not necessarily better. It might be unjust, and its level therefore becomes not just a technical issue but an issue of fairness to members.

Recommendation 6 states:

“The PPF should consider how the Board could hear more directly about the member perspective to inform its deliberations”.


It should be a matter of concern that currently there is no formal procedure to reflect the interests of members. So what thought are the Government giving specifically to these two recommendations in the context of the review?

These two recommendations also bring me to focus on the central issue of my remarks: the impact of high rates of inflation on pensions in payment from the PPF and the scope for the fund’s assets to be used to protect their real value. The problem is that the limits on annual pension increases are severe in current circumstances: none at all for benefits accrued before 1997 and only 2.5% per annum for benefits accrued thereafter. Until recently, the PPF operated in a period of relatively low inflation. The problem of inflation has always been there, but it has become more salient now we have moved into a period of materially higher rates of inflation—most obviously in the current year, but the issue is not going to go away.

The net effect of these limits is that the real value of members’ pensions has been cut significantly. Pre-1997 benefits have already been cut by up to one-third, while benefits accrued after that date have fallen by up to one-sixth. It is important to understand that these are reductions so far; they are going to continue. There is bound to be another cut next January, which will be based on the level of inflation this coming May. It is potentially another 7% if we believe the OBR’s forecasts. In the longer term, I am a relative pessimist about inflation —but even optimists do not expect a return to CPI increases of 0% or even 2.5%. So the need to protect the real value of members’ benefits will only increase.

The reductions in the real value of members’ benefits must be seen in context: the funding position of the PPF, in its own words, is “strong”. As a result, the PPF levy has, quite rightly, been reduced and there are plans to reduce it further. I have no problem with that. According to the PPF’s latest annual report and accounts, the scheme held £39 billion in assets as at 31 March 2022. At that point, the PPF estimated that, of that figure, £11.7 billion—almost £12 billion—was in excess of what it needed to pay every current member and their dependants their compensation for life. This represented a funding ratio of 137.9%. I think that would be broadly recognised as going a bit beyond “strong”.

Given the experience of the last 12 months, it is likely that the position this March will be materially stronger. It also needs to be understood that these figures are already being calculated—I presume—on a prudent basis. The general practice is to undertake these valuations on a prudent basis. Unless the PPF advises me otherwise, I assume that this is the case here, so we have prudence placed on top of prudence.

The problem with all this is that PPF members have not shared the benefits of this strong funding position. Indeed, it is the reduction in the real value of their benefits that has been one of the contributing factors to the strong position. This situation is wrong and should be remedied as soon as possible. This will probably require legislation because the board of the PPF has limited ability to pay compensation over the levels set in the Pensions Act. The lack of increases for compensation in respect of pre-1997 service is devastating for the members who are affected, especially during the current cost of living crisis.

As well as the size of the impact, it is also important to appreciate the differential effect on various groups of members. Information released to the trade union Prospect through a freedom of information request shows that the lack of inflation protection for pre-1997 service disproportionately impacts women and older members. There is no rational justification for this discriminatory treatment. Ministers have sought to justify the discrimination by saying that there was no statutory right to increases before 1997—true, but there was no statutory right to have an occupational pension at all. The idea that the initial pension is the real benefit and the increases are an optional extra is fundamentally wrong.

In practice, the majority of pre-1997 scheme members were either accruing benefits to which they were entitled through RPI increases, typically capped at 5%, or were in the many schemes funded on the basis that such increases were going to be provided and members had a reasonable expectation of receiving them. In other words, such increases were part and parcel of the package of scheme benefits, and their effective exclusion from protection must be open to legal challenge. Such a challenge becomes more likely as higher rates of inflation persist. So we should, first, provide higher rates of protection to better reflect modern rates of inflation and, secondly, eliminate the arbitrary and unfair difference in treatment for compensation in respect of pre-1997 and post-1997 service.

On a Brexit note, it is a matter of much regret that the Retained EU Law (Revocation and Reform) Bill does not provide for the retention of the minimum levels of compensation established in the Hampshire and Bauer cases. When that Bill was debated in the Commons, a Minister even went so far as to state that the Hampshire case

“is a clear example of where an EU judgment conflicts with the United Kingdom Government’s policies”.—[Official Report, Commons, Retained EU Law (Revocation and Reform) Bill Committee, 22/11/22; col. 169.]

To conclude, is it the Government’s intention to cut the potential benefits that members might receive from the PPF to below the level to which they are entitled at present? I beg to move.

[Baroness Drake (Lab)]

My Lords, the PPF provides real support to some 295,000 pension scheme members who have entered it, including through the £1.1 billion paid out in compensation each year. It provides security to those in current DB schemes who may need to call on it in future. Add to those figures the Financial Assistance Scheme, which covers a further 150,000 members and, following the Pensions Act 2004, is administered by but not funded through the PPF, and we are providing a blanket of considerable security to heading for half a million people.

It is very important to remember that, before the 2004 Act, members could lose all or much of their pension savings when employers became insolvent or simply walked away from their liabilities. When the Labour Government created the PPF, there were many doomsayers who predicted that it would not be sustainable. In fact, the PPF has defied those doubters: it is financially resilient, has been well run, and has weathered the various economic storms that have occurred over the past 15 years.

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

Absolutely. That plays well into what I said in that I will reflect on what I and the noble Baroness have said, and there may well be a letter coming to add to the one that I will send to my noble friend.

I will address a couple more questions before I wind up finally. The noble Baroness, Lady Drake, and indeed the noble Baroness, Lady Sherlock, asked whether the PPF is right to build reserves at a slower pace than it has been doing. It is a fair question but that is, as the noble Baroness will expect me to say, very much a matter for the PPF board.

On whether there will be an update on the levy discussions, I may have alluded to this earlier—it was raised not only by the noble Baroness, Lady Drake, but by my noble friend Lady Altmann and indeed the noble Baroness, Lady Sherlock. I will certainly happily make inquiries, and that will be an addition to the letter which is growing bigger by the moment. There may be some other questions that I have not answered, but I will certainly look very closely with my team at Hansard.

To conclude, again I thank the noble Lord, Lord Davies, for providing us with this opportunity to discuss the UK’s flexible and robust regime for funding and protecting defined benefit pensions, which, as was mentioned, is an important subject. This regime has enabled most schemes to weather the severe economic downturns following the crash in 2007-08—the financial crisis, I should better call it—and the Covid pandemic, as well as the prolonged period of historically low interest rates. In fact, the aggregate scheme funding position on a Pension Protection Fund basis improved from 83.4% on 31 March 2012 to 113.1% on 31 March 2022 —an interesting statistic to reflect on. These improvements to scheme funding mean that fewer and fewer members of DB schemes will require the safety net of the PPF. That is of course good news for members, who are increasingly likely to receive their full pension entitlement. This is progress indeed but there is more to do, although of course we cannot eliminate all risk. When employers become insolvent, the PPF continues to stand by as a well-funded and responsibly managed safety net.

[Lord Davies of Brixton (Lab)]

I thank the Minister for his detailed and considered response to what I have certainly found a useful debate. I just need to say that I do not think that the issue will go away. As I suggested, the attrition of members’ benefits will continue, and pressure to do something will get stronger. It would be useful if a meeting could be organised—it is probably just as easy to do it directly with the PPF, but Ministers and officials might like to be involved in it as well, so I will write and suggest that. I thank the Minister again for his attention to this important topic.

Motion agreed.

Pension Schemes: Guidance

Lord Davies of Brixton Excerpts

Monday 13th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

Well, I will not be drawn on that by my noble friend, but the comments that she makes are broadly correct. It is very important that pension schemes, particularly those for purpose, encourage investments that align with the environment and society, and that includes climate change. I believe that the report, One Year On, outlines some pointers, insights or challenges. For example, most funds are using their investment consultants, while some are not yet using or including carbon offsets in their TCFD reports, but nothing in the findings so far is unfamiliar to DWP. We know there is work to do to improve the reports and build an element of expertise across the industries more generally.

[Lord Davies of Brixton (Lab)]

My Lords, I welcome the report. The question is whether the advice can effectively come from the Government against the background—I hope the Minister will agree—that it is the members’ money that is intended to provide them with a retirement income and should be used in accordance with their wishes and views. Can the Minister confirm that that is his view of how money in pension funds should be used?

[Viscount Younger of Leckie (Con)]

I think it is important that the right advice is given. I start by saying that this is pretty ground-breaking, because the UK is the first country in the world to make occupational pension schemes consider, assess and report on the financial risks of climate change. In terms of what I would call “the push”, we have consulted with the pensions industry and certainly think it is right that guidance is given. For example, my department has introduced guidance alongside the TCFD requirements to help pension schemes understand how to identify, manage and assess climate-related risks and opportunities.

Social Security Benefits Up-rating Order 2023

Lord Davies of Brixton Excerpts

Wednesday 22nd February 2023 Grand Committee

“The cost of living has strangled us. Stopped us from living normal, healthy lives … Nothing is affordable. Our children are hungry. Schools report ‘short concentration’ and ‘unmanageable moods’. They have lost their childhood … we are sick with anxiety, drowning in financial doom. And the government has offered nothing but a flimsy life jacket. We need more … Perhaps you don’t see desperation unless you have lived it? Well learn from us. Because we are living it.”

[Lord Davies of Brixton (Lab)]

My Lords, I, too, welcome the noble Viscount to our deliberations. He was possibly here as a Whip last year. I took the opportunity to look again at what I said then and, in fact, it would be possible for me to repeat what I said for the benefit of the new Minister, but I have amended it slightly and added some detailed comments on GMPs, which I am sure the Minister will look forward to.

There is no doubt that because of the lag in carrying out a pension increase the poorest in our society lose out. A figure has been calculated, which I was given by the researchers who work for the parliamentary party, that it is of the order of £520. That is the cash loss that they have incurred this year because of last year’s inadequate increase.

The important point is that it is no consolation to those who have lost that money to be told, “Okay, you’ll catch up next year” or, in the Minister’s words, “the fluctuations even out”. We are talking about the poorest people here; they are in no position to even out their income, as they have no savings worth addressing. The year of plenty when they are nudged marginally higher within the range of poverty does not ameliorate in any way at all the loss they incurred in the year that they fell behind. We are talking about pensioners in poverty. Let us not pretend that there are not millions of pensioners still in poverty. For them, this is simply not good enough; they suffer the effects in the current year.

The question is: what can be done about it? Last year, the Minister said that

“it is not possible to undertake the uprating exercise any later than currently timetabled.”

But she gave the game away a bit by also telling the Grand Committee:

“All benefit uprating since April 1987 has been based on the increase in the relevant price inflation index in the 12 months to the previous September.”—[Official Report, 9/3/22; col. GC 484.]


In truth, the seven-month delay goes back even longer. I can recall being in discussions with officials in the relevant department on this topic in the early 1970s, so we are going back on a system that has existed for 50 years. I find that less than impressive. Seven months is too long when inflation can change so rapidly. Given all the changes there have been in handling and processing data in the past 35 or 40 years, it is amazing that we cannot do any better.

I quite understand why officials tell the Minister “It has to be that way” but, really, with modern systems of handling data, it is simply untrue to say that nothing can be done and that we cannot move to a system that more closely aligns increases in prices with increases in benefits. Even if it were not possible—which I do not accept—could we not move to a system where the increase allows some provision for back-payment to make good the shortfall that people have suffered in the seven-month interim? I really do not accept the department’s line that nothing can be done about the delay in the increase.

My second point is about the triple lock. Last year, I asked how much credence we could give the Government’s repeated promises to keep the triple lock for the basic state pension and new state pension. The Secretary of State said last year:

“I am again happy to put on record that the triple lock will be honoured in the future.”—[Official Report, Commons, 21/3/22; col. 99.]


but she said the same thing in 2020 when she went on to break the triple lock. We know that the Government are prepared to break the triple lock—that is a fact—but we do not know what they count as the exceptional circumstances in which they are prepared to break it. The important thing about the Government trying to justify it last year is that they quoted exceptional circumstances, but those are not unique circumstances.

I was very pleased that the Minister, in his introductory remarks, reaffirmed the commitment to the triple lock. It is perhaps unfortunate that the Minister in the Commons, when introducing the same order, failed to refer to the triple lock at all even though it was mentioned several times in the debate. I was going to ask the Minister to give a commitment, but he has already done so.

It is worth stressing again the importance of the triple lock in this current period. Views differ, I know that, but I am totally committed to it so long as and until the state pension reaches an adequate level. When we compare it with the figures quoted by the Joseph Rowntree Foundation about what constitutes an adequate retirement income, we still have some way to go. If and when we reach that sort of level, we can have a debate about the triple lock but, at the moment, it is important that people receive the benefit.

I will just explain the triple lock a bit more. People refer to pensioners’ incomes but it only partly affects those. Pensioners who depend on the state pension, who by definition are on very low incomes, get the full triple lock. The people a bit above that level, who are not on massive incomes but whose additional income is from a personal or an occupational pension, are not getting triple-lock increases on those pensions; their overall increase is somewhat less. So long as we have this unequal and inadequate benefit system, the triple lock retains its justification.

I will make two more points. First, this is about taxation. I am sorry that the noble Baroness, Lady Penn, has left because this is really a Treasury point. It is important for the department to understand the implications of the decision to freeze the personal allowance until 2028. People have not realised how significant that is in terms of running the social security system. The state pension is not subject to PAYE. That works as a system where almost everyone has a state pension below the personal allowance, so they pay the tax on any income they get over the state pension. But we are heading towards the personal allowance being the same as the new state pension in 2028. Any income a person receives from the state over that level—and many do, because of retained rights from the state earnings-related pension scheme—has to be taxed from their other income. They may not have any other income, so in the following year, they will start receiving the brown envelopes saying, “You owe the tax system and HMRC significant sums of money”, which will have to be paid as a lump sum.

This situation needs to be addressed at some stage but I have seen no indication by the Government that they understand this problem coming down the tracks. The most appropriate way would be to include PAYE to cover the state pension. It is a historic anomaly that it does not. I hope that the Minister, who may not accept all my arguments, will agree that this needs to be looked at now, and that we do not need to wait until 2028 before it is resolved.

Finally, I come to my point on the GMP. I think I have said previously in this Room that if I was ever on “Mastermind”, my specialist subject would be the GMP.

[Baroness Lister of Burtersett (Lab)]

There would not be much competition for that.

[Lord Davies of Brixton (Lab)]

Yes, I agree. In the Commons, the Pensions Minister said:

“Under the Guaranteed Minimum Pensions Increase Order 2023, there will be an increase of 3% paid by occupational pension schemes, which means that that part of the GMP will increase by 3% from April 2023.”


The important bit is this:

“The 3% cap strikes a balance, I suggest, between providing members with some protection against inflation and not increasing scheme costs beyond what can be afforded.”—[Official Report, Commons, 6/2/23; col. 681.]


This is rewriting history. That is not in any way, shape or form why that 3% is there. It is to relieve strain not on the pension schemes but on the state pension, because it was the state pension scheme that was meant to be paying for any increases required over that 3%. I listened carefully to what the Minister said in his speech today, and it was a bit more nuanced than what the Minister said in the Commons the week before last.

This fiction is given a bit of support in the Explanatory Memorandum on the GMP increase order which says, in words very similar to those of the Minister:

“Guaranteed Minimum Pensions are increased yearly to help ensure that the value of a member’s pension has some protection against the effects of inflation”.


It is only “some protection” because the state was meant to be paying the excess over the 3%. The issue is complicated because, in some ways, people with GMPs got favourable treatment from the new state pension. That was reflected in some of the Minister’s words, but we need to be clear that we should not let the Government get away with the idea that it is only 3% because we do not want to put the burden on the schemes. It is only 3% because the Government previously promised to pay that excess, so perhaps the Minister could clarify that and tell me that I have got all the points from my “Mastermind” entry.

Bereavement Benefits (Remedial) Order 2022

Lord Davies of Brixton Excerpts

Tuesday 17th January 2023 Grand Committee

[Baroness Altmann (Con)]

My Lords, I too very much welcome this order. I am most grateful to my noble friend the Minister for his excellent introduction and explanation.

Enabling co-habiting bereaved partners to be treated the same way as those who are legally married in claiming the widowed parent’s allowance or bereavement support payments is something for which I think there is unanimous support. Indeed, I have found it extraordinarily difficult to justify denying these payments to cohabiting couples in the past when, in other tax and benefit calculations, there is no differentiation in this way; often, that can be to their financial detriment. This order is most welcome.

Echoing the words of the noble Baroness, Lady Hayman, I pay tribute to my noble friend Lady Stedman-Scott and welcome my noble friend Lord Younger to his position. I am most grateful to the Low Incomes Tax Reform Group for its briefing and the work it has been doing on this change and want to raise a few issues relating to the potential tax and benefit consequences of surviving partners receiving backdated lump-sum payments pursuant to this order. If the Minister does not have the answers today, I am happy for him to write to me.

The first issue relates specifically to the widowed parent’s allowance, as this benefit is taxable, unlike bereavement support payments. Lump-sum back payments could well give rise to tax demands for the recipients, when they are applied to past tax years for which they were due. In many cases, recipients are unlikely to have a tax adviser to help them look back over past years. They may have spent the money and, as a consequence of this order, face sudden tax demands and penalties for which they are unprepared. The documents accompanying this order state that the DWP will flag cases to HMRC, but how will this work in practice? Could it give rise to a potential problem for the claimants which, after all the years they have been waiting for this money, seems to be something to be avoided—if we can?

Paying the lump sums gross runs the risk of the money being spent. What measures can the Government implement in practice to protect claimants? Could my noble friend tell us, for example, how the DWP might work with the Treasury to jointly identify those who may be affected, perhaps by using national insurance numbers to link up records, and help people to understand how much tax they need to pay? The JCHR recommends that recipients should be clearly reminded, but might my noble friend consider going further and, perhaps, more proactively involving MoneyHelper or some other direct communication that clearly warns that tax may be due on this money, so that it does not come as a surprise?

The second issue relates to recipients of back payments who are on means-tested benefits. I welcome my noble friend’s confirmation that the lump sums resulting from this order will indeed be disregarded, but I hope he can also reassure us on a point that has been raised—it may already have been catered for—about whether, as I hope, there is a sensitive interpretation of the deliberate deprivation of capital rules. People who suddenly have a change in lifestyle because they have received a lump sum that they should have had over a period should not then be considered as deliberately depriving themselves of capital or should not lose out in some other way.

How will backdated lump-sum awards be treated for tax credits? I thought I heard my noble friend say that these are disregarded for universal credit and means-tested benefits, but is that the same for tax credits? I suspect it is not, from listening to my noble friend. It seems wholly unfair for the DWP to treat the payments as capital and disregard the income, other than that relating to the current year, when HMRC treats them as income in that year for the purpose of tax credits.

I know that tax credit legislation is complicated, and it refers to the amount of widowed parent’s allowance being payable. That may be what is driving some of this, but as this relates to past years, it was actually payable previously rather than being—one could argue—payable today. It seems like a grey area. I wonder if the Government might consider building a specific income disregard into regulations if the current position cannot be remedied.

Finally, I echo the comments of the noble Baroness, Lady Hayman, on the importance of reaching out to potential claimants, particularly as there is a time limit, to ensure that people know that they can claim and come forward with their claims. This could be through some national advertising campaign, or maybe the Government already have a database with some indication of cohabiting couples or past claimants who were turned down who can be contacted. Overall, I very much welcome this order and thank my noble friend for his introduction.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the noble Viscount for his useful introduction and give a more general welcome; I suspect that we will be endlessly discussing a series of regulations over the coming months. I thank the noble Baroness, Lady Hayman, for reminding us that there are people involved here. It is easy when you just have a printed set of regulations to think it is just shuffling paper, but there are real people out there who will benefit from these changes. Clearly, we have to welcome that.

Part of the problem is—I take the points raised by the noble Baroness—the mechanics of how this is operated: not what is set out in the regulations but how it will be applied in practice by the officials involved. It should be done as sensitively and practically as possible. I am particularly interested in taxation and how tax is applied to these payments. This is a particular problem which is going to get bigger, and we will be discussing it again. It is a result of the fact that, for all intents and purposes, state benefits are outside the PAYE system.

The problem is that we know the personal allowance will be frozen for a number of years, at a time when inflation is at high levels. With benefits tied to inflation and a frozen personal allowance, more and more pensioners are going to be dragged into the PAYE system on relatively limited amounts of non-state pension income, which will have to be used to pay the tax, potentially, on their state pension. Many people have state pensions in excess of the personal allowance given their credits under SERPS. I think this is going to be a growing problem. It is one I hope the DWP will be able to discuss with HMRC.

My personal situation is that I suffer from this. I have a pretty good state pension and I have to pay tax on quite a large slice of that income out of other income. I manage it because I have the resources to do so, but people on the margin are going to find it increasingly difficult. The example mentioned is one where the closest co-operation between DWP and HMRC is crucial. Politically, it would be advantageous to get the situation sorted, because it will lead to a lot of concern and debate.

My final point relates to the evidence requirements for cohabitation. Most rules applied in the social security sphere about cohabitation tend to be there to take away benefits rather than grant them. Will the department apply the same rules that it applies when it comes to means-tested benefits about cohabitation, or will there be a separate set of rules? If there is a separate set of rules, is there a possibility that it will work against the individual at both ends? To just put in the Explanatory Memorandum that the evidence requirements will be produced “in due course” rather misses the sharp end of this legislation. How it works in practice will depend on the evidence requirements, and it would be useful if we could be told a bit more about where the evidence requirements will fit as compared with other examples where cohabitation affects benefits of different sorts.