Social Security Benefits Up-rating Order 2023

Baroness Janke Excerpts

Wednesday 22nd February 2023 Grand Committee

[Baroness Janke (LD)]

My Lords, as the two previous speakers said, I am sure it will be a matter of great relief to the poorest citizens and families that this year there is a realistic rise, unlike last year when, despite forecasts from the Bank of England of inflation rising to 7.9%, the rise in benefits and pensions was only 3.1%. Other speakers have referred to the distress suffered by so many citizens who have had to manage with that, despite the crisis in energy costs and the cost of living, and the pressures that have been put on families and individuals in recent months.

Some evidence of the level of distress caused by this policy is the increase in the use of food banks. The number of food bank users increased to over 2 million in 2022, of whom 832,000 are children. A measure that was intended for emergency charitable use has now become a national institution and without it many impoverished families would go hungry.

The increase in short-term government funding is a positive step and it is to be welcomed that it is excluded from the benefit cap. I share the views of the noble Lord, Lord Davies, on the triple lock and agree that we should retain it until the state pension has regained much more of its value, because it is taking quite a time to catch up. Large numbers of the poorest pensioners are dependent on the state pension but that is sometimes not appreciated. We hear quite a lot of speeches from people nowadays saying that the triple lock should be abolished because everybody is jolly too well off; in fact, large numbers of pensioners are completely dependent on the state pension so to those people, it is absolutely crucial that it retains its value.

We would also like to see an extension of auto-enrolment to younger workers and those on lower incomes. They could get started a bit earlier and would welcome that in their older age.

I also recognise the campaign on pension credit and know that the noble Baroness, Lady Stedman-Scott, was keen to pursue it. It has encouraged me greatly to hear the adverts and to hear from the Minister today that the percentage of take-up has increased so much. I would certainly like to have a look at that.

The uprating increase of 10.1% will, we hope, provide more protection to those on limited incomes but the situation for many families does not improve—it only worsens. We have heard from the noble Baroness, Lady Lister, about the benefit cap and although it will be uprated today it has quite a bit to catch up. The benefit cap has been found by many studies to be a major contributor to poverty in families. There are 123,000 households subject to that cap. That is 64% higher than before the pandemic; 85% of them are families with children and 65% are lone parents. The benefit cap takes no account of the size of a home needed to house a family, so the freezing of the local housing allowance at the March 2020 level, despite rapidly increasing rent costs, will mean more capped households falling into poverty.

I have these questions for the Minister. What will the Government do to prevent a new wave of homelessness following the freeze in the LHA? I point out to him that in my city of Bristol, for example, the cost of a one-bedroom home at the 30th percentile is 7% higher this year. But with housing benefit still frozen, there is now a shortfall of £18.41 a week between what can be claimed and what has to be paid.

What plans do the Government have to review the range of evidence about the benefit cap? I am sure the noble Baroness, Lady Lister, can provide plenty. She has certainly made that case very articulately many times. I feel it is time that the Government re-evaluate and look into the circumstances that this is causing. I would also like the Minister to look at the findings of studies of the two-child limit. This seriously disadvantages families. It was championed by the Government as an incentive to people on benefits to work. However, official statistics show that most families affected are in work while a study found that those affected felt strongly that the two-child limit unfairly punished hard-working, low-income families at a time when they needed most support, that is, at the birth of a child. I hope that we may revisit that.

All in all, I am grateful that we are having a much more realistic increase this year. I hope that some of the points made by other noble Lords about the delay and distress caused by the way that the increase is calculated can be looked at. I hope that we will look again at how some of the most vulnerable underprivileged families, and particularly children, are faring under the current benefits scheme.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for his introduction and all noble Lords who have spoken. As my noble friend Lady Lister said, it is nice to have the band back together again. I also find it very moving that people turn out every year to try to make the case and to bear witness to the struggles that so many people around the country have and why it matters.

I will talk briefly on each order in turn. If we come back again, I notice that it has been nice to have had the Minister here previously as a Whip, although if one can be here one year as a Whip and the next year as the Minister, perhaps his noble friend to his right should be thinking very carefully about what might happen next year if he is not very good indeed.

I shall run though each order in turn, although probably not in the order the Minister did. GMP is really interesting. As we have heard, this gives schemes the percentage by which they have to uprate GMP between 1988 and 1997. I have a really simple question: can the Minister remind the Committee why the cap was set at 3%? That makes me Clive Myrie to the contestant behind me, my noble friend Lord Davies, who asked a much better question, so I will simply wait and let the Minister answer that instead. It will be very interesting.

Is there any reason why the Minister thinks we ought to worry when the gap is so big between the cap at 3% and the prevailing inflation rate at 10.1%? Is there any cause for concern there?

The only other point I want to raise on GMP is that some people with a large GMP lost out when the new state pension was introduced in 2016. The Minister will be aware that the Work and Pensions Select Committee called on the Government to identify those who were affected, calculate their losses and get in touch with them. Obviously that did not happen. The Parliamentary and Health Service Ombudsman reported on two cases of people who complained that they had not been given enough information by the DWP about the fact that the reforms could leave them worse off. The ombudsman said that the DWP failed to provide clear and accurate information despite being warned, with the result that some people were not aware that they might need to make alternative provision for their retirement. The ombudsman recommended that the DWP should

“review and report back its learning from our investigations. In particular”,

it should improve its communications on this issue. In response, in August 2021, I think, the DWP finally published a fact sheet on GMP and the effect of the new state pension. I then read with fascination the growing correspondence between the Select Committee and successive Pension Ministers, driven, I think, by correspondence from members of the public who were concerned about the effect. For the record, I commend the Committee for its detailed and tenacious work on this frankly very technical issue.

I shall ask the Minister two brief questions. First, now that there is a fact sheet, what is DWP doing to draw its existence to the attention of those who might need to know about it? Secondly, can the Minister tell the Committee how many people have successfully applied, or indeed applied at all, for any compensation since the PHSO report?

I now turn briefly to the draft Benefit Cap (Annual Limit) (Amendment) Regulations because the case has been made so well by my colleagues that there is not much left for me to say. As we have heard, the Secretary of State is required to review the level every five years. My noble friend Lady Lister and the noble Baroness, Lady Janke, have set out the background to how we got here and the consequences of the failure to uprate it hitherto. I remember the then Secretary of State Iain Duncan Smith saying very clearly that the original rationale for the policy was to ensure that people who were unemployed and on benefits would not receive more than average earnings. We had a debate at the time because, for example, child benefit also goes to those on average earnings. However, even allowing that for the moment, the problem with that argument is that the level of the cap was not in any way tied to average earnings. Having brought it in in 2013, not only was it not increased but it was reduced in 2016 and never increased after that until these regulations. Is the Government’s rationale for the benefit cap still related to average earnings? If not, what is the rationale, so we can assess how effectively the policy is achieving its objective? Has DWP made any assessment of the impact of the benefit cap on child poverty? If not, would it like to?

I turn now to the draft Social Security Benefits Up-rating Order, which we debate every year, except during the years of shame. It is worth reminding ourselves for the record that before 2010 annual uprating of benefits by at least inflation was the norm for both Conservative and Labour Governments. However, between 2013 and 2020 this was abandoned, with most working-age benefits and tax credits being either frozen or uprated by just 1%. The reason I continue to repeat this, even in a year when they are being uprated, is because that means that most benefits and credits have fallen in value even before the latest cost of living crisis. Many noble Lords have expressed relief that, finally, having debated the alternatives and being subject to pressure from around both Houses and outside, the Government decided to raise benefits and tax credits in line with CPI last September.

However, as my noble friend Lady Lister said, this is not an act of unusual generosity. It is simply a decision not to cut the value of benefits in the middle of a cost of living crisis, which should be a pretty obvious decision. To do the alternative would have consequences that we have heard about already. Of course, as noble Lords have pointed out, the reference point is the 12-month CPI rate in the previous September. When inflation is as volatile as it is now, that gap can cause real hardship. If we go back a year to last April, inflation was nearly 10%, but benefits were uprated that month by just 3.1%—the CPI rate from the previous September, and that loss of value is baked in because it is the basis for this year’s increase.

The result of this is that the value of out-of-work benefits is at a historically low level, as my noble friend Lady Lister said. As the noble Baroness, Lady Janke, said, it is no wonder that food bank use is at a new high. Trussell Trust food banks gave out 1.3 million parcels between April and September, which is up by one-third on the year before and includes an estimated 328,000 people using its food banks for the first time, so new people are being drawn into the need to use food banks to survive. The Trussell Trust thinks that this winter will prove to be its busiest ever. I want to put something in particular to the Minister. The Prime Minister told the Liaison Committee in December that he very much hoped that food bank demand would be lower by the end of this Parliament. Is there any plan in DWP to take action to make sure that this will actually come to pass?

Although most working-age benefits will be increased by 10.1%, there will be no change to two crucial benefits: first, the childcare element of universal credit and tax credits and, secondly, the local housing allowance, as mentioned by my noble friend Lady Lister and the noble Baroness, Lady Janke. Why are those two not being uprated? Is the presumption that they are not affected by inflation in the same way? Childcare is in crisis. We know that employers are desperate for staff and parents cannot afford childcare. I notice that we keep seeing media briefings appearing about possible benefit crackdowns and how people need to work more hours. Can the Minister confirm whether it is the case now that the childcare support in universal credit is sufficient to cover part-time hours only because the cap in it has been frozen for so long? Of course, that is not to mention the fact that for parents to get that help, they have to pay the money up front for childcare and then claim it back. That makes it a non-starter for most parents who are poor enough to be entitled to universal credit in the first place in the middle of a cost of living crisis. Can the Minister tell us what the plan is to address this?

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

In which case, I apologise. I would normally take note and come back with some answers. Of course I will include the noble Baroness; in fact, I will include any Peer who has taken part in this debate in my letters about anything that I am not able to answer.

The noble Lord, Lord Davies, and the noble Baroness, Lady Sherlock, said that the Government need to be clear about why we are raising the guaranteed minimum pensions by 3%. For the pre-2016 pensioners, the Government meet the difference; for post-2016 pensioners, we do not—however, these people benefit from transitional protection. I hope that gives some form of an answer.

The noble Baroness, Lady Sherlock, raised communication. A fact sheet covering the policy change was published on GOV.UK in August 2021—I see that she is nodding at that—which invited people to write to the department if they wanted an explanation of how they had been affected by the policy change. One request for compensation has been received so far, which is interesting. As of 25 January, we do not yet know the outcome of that claim, but I hope that provides an answer.

The noble Baroness also asked about the benefit cap increase linked to child poverty. As she will know, the Government are fully focused on tackling the root causes of poverty, such as children’s education and parental worklessness, to improve the lives of people in our country. She will know that the best way of doing that is for us to have a strong economy and get people into work. As mentioned earlier, the proposed levels will mean that households will be able to receive benefits up to the value of gross earnings of around £26,500, or £31,300 in London.

The noble Baroness, Lady Lister, asked about low pay and whether the Low Pay Commission—the LPC—would include in its deliberations the adequacy of benefit rates. I thank the noble Baroness and will draw the Treasury’s attention to that.

There are a number of other questions that I need to answer, but we probably need to draw a halt, as time is running short.

[Baroness Janke (LD)]

Please can I have some answers to my questions, perhaps in writing?

[Viscount Younger of Leckie (Con)]

Yes, of course. To conclude, I beg to move.