All 5 Lord Sikka contributions to the Social Security (Up-rating of Benefits) Act 2021

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Wed 13th Oct 2021
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2nd reading & 2nd reading & 2nd reading
Tue 26th Oct 2021
Social Security (Up-rating of Benefits) Bill
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Committee stage & Committee stage & Committee stage
Tue 2nd Nov 2021
Social Security (Up-rating of Benefits) Bill
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Report stage & Report stage & Report stage
Mon 8th Nov 2021
Tue 16th Nov 2021
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Consideration of Commons amendments & Consideration of Commons amendments

Social Security (Up-rating of Benefits) Bill Debate

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Social Security (Up-rating of Benefits) Bill

Lord Sikka Excerpts
Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, it seems that there is a competition among Ministers to find novel ways of hurting the most vulnerable people in our society. After the cut in universal credit, the hike in income tax through frozen allowances and the new Johnson tax of 1.25%, the Government are clearly gunning for senior citizens. They have already taken away the free TV licence for the over-75s and are raising the age for free prescriptions in England from 60 to 66. The next instalment of the triple blow for seniors is to suspend the triple lock. I cannot support this cruel Bill.

The average UK wage is around £31,461 a year. The full state pension at the moment is £9,350, but only four out of 10 retirees receive it. Some 2.1 million pensioners receive less than £100 a week in state pension, most of whom are women. The actual average state pension, as Age UK has just reminded us, is £8,000 a year or roughly 25% of average earnings. This is the lowest among industrialised nations, with the average being around 60% in OECD countries. The Office for Budget Responsibility said that by 2022-23, the state pension would form around 4.6% of GDP. Germany already allocates 10% of its GDP to the state pension.

A 2019 study noted that despite the triple lock the proportion of elderly people living in severe poverty in the UK is five times what it was in 1986. This is the largest increase among major western European countries. A major reason for this, as has already been pointed out, is the legacy of the Thatcher Government, who broke the link between pensions and earnings by cancelling the 18% supplement provided by the Treasury. We have never really made up that lost ground. Will we ever make up the lost ground from this proposed suspension of the triple lock?

The low state pension condemns millions to a life of poverty, insecurity and early death. According to Age UK, despite the triple lock, 2.1 million pensioners—18%—in the UK live in poverty. Some 1.25 million of these are women. The poverty rate has risen since 2012-13, when only 1.6 million pensioners—13%—lived in poverty. Some 33% of Asian retirees and 30% of black retirees, compared with 16% of white retirees, also struggle to make ends meet.

Malnutrition—or undernutrition, as some people would call it—affects over 3 million people in the UK and 1.3 million of these are over 65. Around 25,000 older people die each year due to cold weather and here we are busily reducing their income.

Rather than lifting retirees out of poverty, the Government are going to suspend the triple lock. They say that they cannot afford whatever the cost is, which may be up to £5 billion. That is certainly less than the £8.5 billion subsidy given to profiteering train companies last year.

Governments have bailed out banks and provided £895 billion of quantitative easing to speculators. However, when it comes to helping senior citizens, the usual call is “We can’t afford it”—as though we can afford misery, squalor and early death. This is how the Government cheated 3.7 million women out of their promised state pension by raising the retirement age. The same slogans are being marshalled again.

Let us be clear. The Government can create any amount of money they wish to shape a society which is good for all of us. If that money creation is inflationary, they can remove some of it from the rich through redistribution—a phrase that all Ministers and the Prime Minister have carefully avoided, even during their party conference.

The extra £5 billion that is needed for the triple lock is already available. The 2020-21 cost of paying the state pension to 12.4 million retirees is £101.2 billion compared with £98.7 billion for 2019-20. If you look at the National Insurance Fund accounts for the year to 31 March 2020—the most recent information—they show a cumulative surplus sitting there of £37 billion. That is more than enough to meet the triple lock obligation of £5 billion. Will the Minister explain why this surplus is not being used to honour the triple lock?

The state pension, as has been pointed out, is a major—and in many cases the only—source of income for many people. It will be even more so in the future. Relentless attacks on workers and trade unions have sapped people’s ability to save for private pension schemes. Today, workers’ share of GDP in the form of wages and salaries is around 49.4%. It was 65.1% in 1976. That is the biggest decline in any industrialised nation over that period. Even before Covid, 14.5 million people were living in poverty. Household debt is currently £1.7 trillion. Young people saddled with student debt and astronomical housing costs are unlikely to accumulate wealth and will be forced to rely upon the state pension for their retirement.

The UK’s six richest people have wealth equivalent to that of 13 million citizens. The richest 1% have 23% of all wealth, the top 10% have 44% and the poorest 50%, who are being condemned to a low state pension, have just 9%; the poorest fifth of society have only 8% of the total income, and the top fifth have 40%.

The ministerial reply to one of my Written Questions on 21 January 2021 was that 18.4 million individuals in this country have an annual income of less than the annual tax-free allowance, which currently stands at £12,570. The Institute for Fiscal Studies states that

“only 58% of the adult population (those aged 16 or over) receive enough income to pay income tax”,

so 42% of adults pay no income tax because their income is already too low. How will they buy into these private pension schemes? Two days ago, during the debate on the Health and Social Care Levy Bill, the Minister said that 6.2 million people have earnings below the primary threshold for national insurance. How are these people going to save for so-called private pension schemes?

Even if impoverished people manage to put a few pennies into a pension scheme, the tax system works against them. At the moment, 1.5 million individuals are enrolled in a private pension scheme and receive zero tax relief because their annual income is less than the annual personal allowance. I hope the Minister will explain why people at the bottom of the ladder are being treated this way and not getting any help whatever.

This is a stark reminder of the inequalities in the UK. Present and future generations will rely upon the state pension more than ever before, and it is vital that it does not condemn them to poverty. I am opposed to suspension of the triple lock.

The state pension is too low. In July this year, we heard the Prime Minister say that he finds it hard to live on his £160,000 salary; last week, Peter Bottomley MP said that he cannot really survive on an MP’s salary of £82,000. My reply is that they should try living on the £8,000 a year state pension and see how they get on—welcome to the real world. Perhaps the Minister would want to take up the offer of living on the state pension—I do not know, but I await a reply. We must lift retirees out of poverty and not only maintain the triple lock but go beyond it. We need to align the state pension with the living wage, and that should be enshrined in a future Bill of Rights. Nobody in a rich country should be living on such a low income.

I have already pointed out that the Government have plenty of resources to achieve these aims. They could utilise the £37 billion surplus in the national insurance fund; they could restore the 18% Treasury supplement which was removed by the Thatcher Government. They could find the money by taxing capital gains in exactly the same way as earned income, which would raise £17 billion a year more and another £8 billion in national insurance contributions—at the moment, unearned income is exempt from national insurance. They could tax dividends in the same way as earned income, which would raise another £5 billion in taxes plus another £1 billion in national insurance. They could extend the current 12% rate of national insurance contributions to earned incomes above £50,300, which would raise another £14 billion a year. The Wealth Tax Commission told us earlier this year that, with an asset threshold of £2 million, a wealth tax could raise up to £80 billion a year. Billions could also be raised by extending the scope of financial transactions tax.

These few examples show that the Government’s claim of not being able to afford the triple lock has no substance. It is a bogus claim which simply falls apart when examined. None of the examples that I have given requires an increase in the basic rate of income tax or the 40% rate of income tax, or an increase in national insurance contributions for the masses. It seems that the Government lack any will. They find it so easy to hurt the most vulnerable people, and that should not be accepted by anybody in the country. I will not support this Bill in any way whatever.

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Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Con)
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My noble friend has made this point on a number of occasions; other noble Baronesses and noble Lords have too. Before I bang a nail in, I think it is best that I write to noble Lords about that to make sure it is absolutely clear on that basis. I hope they will accept that.

My noble friends Lord Shinkwin and Lady Stroud raised the issue of a UC uplift impact assessment. The legislation enacting the temporary uplift, including its eventual removal, was approved by both Houses. No impact assessment was conducted when the uplift was introduced, as it was by law a temporary measure, as I have already said. No assessment was conducted on the reversion to the underlying rates of universal credit.

Do I have only 20 minutes for this? No? Okay, I am in charge. We will not be here for another half an hour. I want to pay respect to everybody, but I certainly do not want to abuse the House’s good will.

I hope the noble Lord, Lord Sikka, will take this in the spirit in which it is meant: I thank him for the master class in economics. I hope the Chancellor will read Hansard, and I am sure he will be in touch if he wants to take it further.

Lord Sikka Portrait Lord Sikka (Lab)
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I thank the Minister. I do not know what the tuition fee would be or whether it would have gone up by then. Can she please explain why the £37 billion surplus on the National Insurance Fund account is not being used to pay even £8 billion or £10 billion in extra pensions?

Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Con)
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This is a pretty challenging question, and I do not know. I will go away and find out, write to the noble Lord and place a copy in the Library.

I will stop soon, but I want to come back to my noble friend Lord Shinkwin and the disability Green Paper. This issue is not in the scope of the Bill, as he will know. I assure him that I will raise his concerns with my ministerial colleagues. We have been blessed with the appointment of Chloe Smith. I have talked to her about my noble friend and I know she will meet him—because there will be trouble if she does not.

Without being disrespectful to anybody else, I would like to hold a further briefing and answer all the unanswered questions. I hugely appreciate the time and intent of all noble Lords, and I commend the Bill to the House.

Social Security (Up-rating of Benefits) Bill Debate

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Social Security (Up-rating of Benefits) Bill

Lord Sikka Excerpts
Debate on whether Clause 1 should stand part of the Bill.
Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle and my noble friend Lord Davies of Brixton for their support for this proposal. My motives are very simple—to address poverty among our senior citizens. I should like to see an 8.3% increase in the state pension, although 8.3% of little is still very little. It is not going to make an enormous difference to the Government’s finances—I shall deal with that issue in a moment.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lord Russell of Liverpool Portrait The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)
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My Lords, just to be clear, it is not an amendment.

Social Security (Up-rating of Benefits) Bill Debate

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Lord Sikka Excerpts
Lord McNicol of West Kilbride Portrait The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)
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My Lords, if Amendment 2 is agreed to, Amendment 3 will not be called due to pre-emption.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I support my noble friend Lord Davies of Brixton and his detailed remedy for future problems, and the call for an 8.1% increase in the state pension. DWP has not given us the median numbers, but the pre-2016 average or mean state pension is £155.08 while the post-2016 figure is £164. 23. It seems that the older you are, the lower the pension you actually get.

Discrimination against senior citizens is built into the system itself, which is wrong: 8.1% of that tiny amount is very small. A correspondent who contacted me from New Zealand said, “In New Zealand Super, there is a phrase that at 65, you get 65—at 65 you retire and you get 65% of average wage.” That is at least two and a half times more as a fraction of average wage than it is in the UK, where it is impossible for anyone really to live on it.

We have heard from many Members of your Lordships’ House that the state pension is the only or main source of income for many, many people. I do not know whether Ministers speak to ordinary people to hear their experiences of trying to manage poverty. I will read out just one message that I have received from a senior person: “I am struggling to pay my rent, buy food and pay for gas, electricity and water. TV is my only source of company and the government is now taking that away too. I can’t afford to buy a TV licence. It would be better for me to go to prison. At least I will be warm and I will also be fed.”

Earlier, the Minister rattled off a whole range of pension benefits that people can collect. Will she tell the House how a 75 year-old with no TV for company, with one heating bar in a room, with no access to the internet and with her local library shut, gets access to those benefits and asks for help? I should be very grateful if she can describe to the House how that person can make ends meet on this meagre state pension.

We have institutionalised poverty in this country and the voice of the poor is not being heard, so I fully support my noble friend’s call for a pensions commission. However, people cannot wait for that. We need an 8.1% increase now.

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Moved by
6: Clause 1, leave out Clause 1
Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I first congratulate the noble Baroness, Lady Altmann, on winning her vote, which is a great achievement for so many people out there. I declare my interests in the Members’ register: I am an unpaid adviser to the Tax Justice Network and the people’s panel for the Convention on the Elimination of All Forms of Discrimination against Women.

I thank the noble Baroness, Lady Bennett of Manor Castle, and my noble friend Lord Davies of Brixton for supporting this amendment. I am also grateful for the support of the National Pensioners Convention, Silver Voices, the BackTo60 group and many other civil society organisations, as well as the thousands of pensioners who have written to me to support my amendment.

The amendment in the name of the noble Baroness, Lady Altmann, goes only so far. I am seeking a full 8.1% increase for our retirees, which is consistent with the commitment the Government gave in their election manifesto that

“We will keep the triple lock”.


All we have heard since is why the Government will not keep their pledge. They say things like, “It is temporary” or “We can’t afford it”, but I will debunk all those claims in a moment. Clause 1 is also contrary to the Government’s levelling-up agenda. Rather than levelling up, it impoverishes citizens and condemns millions of current and future retirees to a life of poverty and misery. There is no moral or economic rationale for this; indeed, none has been offered by any Minister so far.

The Government’s own statistics, published on 3 September 2021, say that the average weekly pre-2016 state pension is £169.21 for males, £141.98 for females, and the overall mean is £155.08. The average weekly post-2016 pension is £166.34 for males, £160.11 for females, and the overall average is £164.23. As we can see from these figures, women are especially impoverished by the way that pensions are calculated and paid. They will be hit even harder by the abandonment or, as the Minister might say, the temporary suspension of the triple lock.

The state pension is the main or sole source of income for the majority of retirees. As I have said before—I have not had any volunteers—I doubt that any Minister could actually live on that, even if this pension was to increase by 3.1% next April. Retirees have for far too long been neglected by successive Governments. Governments have taken away the right to a free TV licence for over-75s. They took away the earnings link in the 1980s, and they are taking it away again. Today, the average state pension is around £8,000 a year and only roughly 25% of earnings, and it is the lowest in the industrialised world. The full state pension—which the Minister has referred to a number of times in debates this week and last week—of £9,350 is received by only four out of 10 retirees. Some 2.1 million pensioners receive less than £100 a week, and most of those are women. Many are unable to negotiate the maze of benefits which they may well be entitled to; they are simply not really claimed.

In OECD countries, the state pension is nearly 60% of average earnings. The EU average is close to 63%, as was pointed out last week. There is a long list of countries that take better care of their retirees than the UK, including the Netherlands, Portugal, Italy, Austria, Spain, Denmark, France, Belgium, Finland, the Czech Republic, Sweden, Canada, Germany, the USA, Norway, Switzerland, New Zealand, Australia, Ireland, Chile, Japan, Poland, Mexico, Hungary, South Korea, Luxembourg and Slovakia, to mention just a few. Many of these countries are not even as wealthy as the UK, but their Governments seem to care for their citizens. Why are the Government here so indifferent to the plight of their own citizens?

Low pensions condemn our citizens to a life of misery. Some 1.3 million retirees are affected by malnutrition or undernutrition. Around 25,000 older people die each year due to cold weather, and we will no doubt hear the grim statistics for this year, possibly on 26 November when the next numbers are out. Despite the triple lock, the proportion of elderly people living in severe poverty in the UK is five times what it was in 1986, which is the largest increase among major western countries. Some 2.1 million pensioners live in poverty, and the poverty rate has actually increased since 2012-13.

The Government must keep their election pledge and increase the state pension in line with average earnings of 8.1%. The 3.1% increase is backward looking; it offers an increase only in line with past increases in the consumer prices index, which is lower than the retail prices index. It takes no account of the forecast rate of inflation of 5% and the huge increases in the price of food, energy, rents and other essentials. The rate of inflation for retirees now is probably higher than the average CPI. In many cases, the 3.1% increase will not even enable retirees over 75 to buy the TV licence that the Government have taken away from them.

The Minister has emphasised that the suspension of the triple lock is temporary. However, its effects are permanent; they affect not only the current but the future generation of retirees. Lower pensions now will definitely ensure lower pensions in the future. The Treasury’s Red Book says that by switching to a double lock, the Government will deprive retirees of £5.4 billion of pensions in 2022-23. This rises to £5.78 billion in 2023-24, £6.1 billion in 2024-25, £6.5 billion in 2025-26 and £6.7 billion in 2026-27. That amounts to £30.5 billion removed from pensioners’ pockets over the next five years. I cannot remember any other Government taking that much away from the pockets of our senior citizens. This money would be mostly spent in the local economy, which increases footfall in beleaguered town centres and has a great multiplier effect on the economy. The double lock that the Government are offering delivers huge damage to retirees and local economies. Let us not forget that retirees pay taxes too, whether it is VAT, income tax, duties, council tax or other taxes.

The best legacy for future generations is a decent state pension. Future generations will be even more reliant on the state pension. Due to the Government’s laws, the workers’ share of GDP has shrunk beyond recognition, from 65.1% in 1976 to 49.4% now. It is the biggest decrease in any industrialised country. Yet the Government expect that people will somehow be able to save for a private pension; for many, that simply will not be possible.

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Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Con)
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My Lords, this clause requires the Secretary of State to review the rates of the basic state pension, the new state pension up to the full rate, the standard minimum guarantee in pension credit and survivors’ benefits in industrial death benefit by reference to the general level of prices in Great Britain. This is in contrast to, and in place of, the provisions of the Social Security Administration Act 1992, which require a review by reference to the general level of earnings.

Under the clause, if the relevant benefit rates have not kept pace with the increase in prices the Secretary of State is required to increase them at least in line with that increase or at least by 2.5%, whichever is the higher. If there has been no increase in the general level of prices, the increase in the benefit rates must be at least 2.5%. The requirement will apply for one tax year only, after which we will revert to the existing legislation and the link with the general level of earnings will be re-established.

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

The noble Lord, Lord Sikka, raised the issue of the state pension and government content being so low. The Government have a proven track record of helping people to plan for their retirement. We have reformed the state pension system, introducing the new state pension to be simpler, clearer and a sustainable foundation for private saving to address the fact that millions of people were not saving enough for their retirement. Automatic enrolment into a workplace pension was created to help them with their long-term pension savings. Together, the new state pension and automatic enrolment into workplace savings provide a robust system for retirement provision for decades to come. Last month the UK pensions system ranked ninth in a report by Mercer that looked at the systems of 43 countries. It measured adequacy, sustainability and integrity, and the UK Government were grouped with countries such as Sweden, Finland and Germany.

In taking into account the points that I have raised, I ask the noble Lord to withdraw his amendment.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I thank the Minister and all noble Lords who have participated in the debate. I shall pick up some of the points.

Earlier, the Minister referred to how pensioners can get winter fuel payments. Thousands of pensioners are tuned in and watching, and while the Minister has been talking some of them have sent me information to say that the winter fuel payment was last fixed in 2011. If it had increased in line with inflation, it would be around £159. The Government have once again chosen to hurt retirees, because there has been no increase in line with price level changes.

I have also been sent information about the Christmas bonus of £10, which was introduced in 1972. It is still £10. Pensioners would be lucky to get a plate of egg and chips and a cup of tea with that. If the bonus had been kept in line with inflation, it would now be £140—another example of how pensioners have been short-changed.

The Minister said that, from 2023 onwards, we will revert to the triple lock, but no commitment is given that the amount lost will be restored to pensioners. As I said, over the next five years, £30.5 billion will disappear. The Minister has not said that even a penny of that will be restored, so pensioners will remain on low pensions—not only current but future pensioners.

The Minister referred to the extra cost. I have suggested numerous ways by which the extra cost could be met, and they must have been evident to the Chancellor when he gave a £4 billion cut to banks. Obviously, the Government’s priority is the banks, rather than our senior citizens, who are struggling to heat their houses and eat sufficient food. The Minister talks about the new pension arrangements, but the point remains that, if you earn little and put away something, it will still bring you little. The issue of pensioner poverty is not really tackled.

My noble friend Lady Sherlock said that this clause was passed in the Commons, as many clauses are passed in the Commons before Bills arrive in this House. This House’s duty is to scrutinise legislation, give its opinion and urge the Commons and the Government to rethink, as my noble friend Lord Davies of Brixton said.

There is no invisible hand of fate which condemns our retirees to a life of poverty and misery. It is the invisible hand of political institutions that has condemned millions to a life of poverty and early death. This House should not be willing to be a part of that invisible hand, which will bring more misery to not only current but future generations.

I am not convinced by the Minister’s explanation and I should like to test the House’s opinion.

The Deputy Speaker decided on a show of voices that Amendment 6 was disagreed.
--- Later in debate ---
Moved by
8: Clause 2, page 2, line 14, leave out subsection (2) and insert—
“(2) Section 1 of this Act comes into force on such day as the Secretary of State may appoint by regulations.(2A) Regulations under subsection (2) may not be made until the Secretary of State has laid a report before Parliament setting out how the National Insurance Fund would be affected if such regulations—(a) were made, and(b) were not made.(2B) Section 2 of this Act comes into force on the day on which this Act is passed.”
Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, if I may say so, I am a little surprised. I did say “Content” when the question was put on the previous amendment; it may not have been loud enough for some, but the people watching out there will no doubt form their own opinion on why a vote was not allowed.

I turn to my amendment to Clause 2. It requires that suspension of the triple lock not become effective until the Government present a report to Parliament showing its effects on the National Insurance Fund account.

By a happy coincidence, the Minister wrote to me on 25 October in a joint letter, which was also copied to a number of other Members of your Lordships’ House. The background is that, during the Second Reading of the Bill on 13 October 2021, I stated that the most recent audited accounts of the National Insurance Fund, for the year to 31 March 2020, showed a surplus of £37 billion, and said:

“That is more than enough to meet the triple lock obligation of £5 billion.”


Eventually, the Minister replied:

“This is a pretty challenging question, and I do not know. I will go away and find out, write to the noble Lord and place a copy in the Library.”—[Official Report, 13/10/21; cols 1869, 1888.]


The subsequent letter from the Minister seems to deny that there is a surplus of £37 billion, or that, if there is, it is not available to fund the triple lock.

It would be helpful for me to refer to the appropriate parts of the letter, so that I can challenge and debunk the claims being made. First, the Minister said:

“The National Insurance Fund (NIF) part-funds the NHS as well as paying for contributory State Pensions and contribution-based benefits. The NIF operates on a multi-year basis and balances expected contributory pensions and benefits spending with forecast National Insurance income. The NIF is currently forecast to have an annual deficit in 2022/23.”


She continued:

“There is no surplus in the Fund that can simply be drawn upon. The Government Actuary’s Department recommends a surplus is kept in the NIF to cover day to day variations in expenditure. The surplus is lent to the Government while that happens—it cannot simply be spent again. When the fund runs low, the Treasury injects new money into it in order to ensure that the State Pension and other benefits are still paid. When the Fund is in surplus as it currently is, the surplus is invested in order to help pay down the national debt”.


First, let me confirm that I agree with the Minister when she said that:

“The National Insurance Fund (NIF) part-funds the NHS as well as paying for contributory State Pensions and contribution-based benefits.”


That said, the National Insurance Fund has a different accounting basis. Page 14 of the fund’s 2020 accounts states:

“An allocation for the NHS is paid over by HMRC before the contributions are paid into the NIF and therefore the NICs are shown net of the NHS element”.


That does not support what the Minister said. Page 16 of the same accounts tells us:

“The NHS allocation is paid over by HMRC to the NHS before any contributions are paid into the NIF and so the figures shown are net of this NHS allocation. The NHS allocation was £26.5 billion in 2019 to 2020 (£25.4 billion in 2018 to 2019) and forms part of the total NHS funding”.

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Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Con)
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My Lords, out of courtesy to the noble Lord, Lord Sikka, and the noble Baroness, Lady Sherlock, for the points that she has made, and to bring some clarity to the questions raised, I hope that the House will agree that I sent the letter in good faith, and will allow me to take it back to officials with the points that have been raised and come back with, I hope, the re-emphasis that is needed to clarify the position on the fund. However, I am advised that the first point raised by the noble Baroness, Lady Sherlock, in her summing up, is correct.

As the noble Lord, Lord Sikka, will be aware, there is an existing statutory requirement under the Social Security Administration Act 1992 for a GAD report on the likely effect on the national insurance fund of the draft Social Security Benefits Up-rating Order and the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations. There is no equivalent statutory requirement for this Bill, and GAD will conduct its assessment in the round based on the draft uprating order, which will include all benefits paid out of the national insurance fund, not just the ones covered by this Bill.

With respect to an assessment of the impact on the fund if this legislation is not passed, it is important that the working balance of the national insurance fund remains positive, as this ensures that there are always enough funds to pay for these benefits and allows the Government to deal with short-term fluctuations in spending or receipts. If the balance of the fund is expected to fall below one-sixth of forecast annual benefit expenditure, the Government will transfer a Treasury grant, paid from general taxation, into the fund. This ensures that benefits such as the state pension can always be paid as necessary.

I know that several noble Lords have suggested that, when in surplus, the fund can be used to increase expenditure beyond the level originally planned, but I am afraid that that is a misconception. The balance of the national insurance fund is managed as part of the Government’s overall management of public finances and reduces the need for it to borrow from elsewhere. Therefore, any additional spending from the national insurance fund would represent an increase in overall government spending and, without cuts in other areas of spend or additional taxes, an increase in government borrowing.

Not passing this Bill would not only increase state pension payments from the fund this year by an anomalously high figure of 8.3% but have a long-lasting compounded impact for decades to come as the anomalous figure would be baked into the baseline. The Government do not believe that this would be fair to younger taxpayers. Based on these arguments and the commitment that I have given to review the letter and the questions raised today, I ask the noble Lord to withdraw his amendment.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I am very grateful to the Minister for her explanation. I understand and agree that some margin of safety is needed in any account, but this is a £37 billion surplus, out of which only £5 billion is needed to maintain the triple lock—a small proportion. When somebody asserts that accounting numbers are perhaps not serious and I have investigated, I have normally given them the phone number of the Serious Fraud Office and said, “Maybe you’d like the bed-and-breakfast facilities at one of Her Majesty’s establishments”. However, I will not offer that to the Minister, as she has promised to return to the House with an explanation.

We need a fuller investigation and report, bearing in mind the point that my noble friend Lady Sherlock made: why have these surpluses built up? The surpluses have not always been around, but they have built up, and the Treasury’s forecast is for a vast increase for the period in which the Minister’s letter said that we were going to have a deficit. If it was so important, the Chancellor should have said something. It should have been in the Treasury and OBR documents. It is not there. I cannot help feeling that some ex-post rationale is being developed to say that we are not going to maintain the triple lock, and somehow offer an explanation.

However, in view of the Minister’s offer, I beg leave to withdraw my amendment.

Amendment 8 withdrawn.

Social Security (Up-rating of Benefits) Bill Debate

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Department: Foreign, Commonwealth & Development Office

Social Security (Up-rating of Benefits) Bill

Lord Sikka Excerpts
Baroness Altmann Portrait Baroness Altmann (Con)
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My Lords, I also thank my noble friend the Minister and the Bill team for all their work, and for the courtesy they have shown in meeting us many times to listen to the concerns we have expressed. I too am extremely grateful for the work across the House that was encompassed by this Bill. It has shown the House of Lords at its best. This is an issue of significant social importance where this House has shown that it believes that the other place took a decision based, perhaps, on incorrect information and has asked it to reconsider. I am particularly grateful to the noble Baronesses, Lady Sherlock and Lady Janke, my noble friend Lady Wheatcroft and others including the noble Lords, Lord Hain, Lord Davies and Lord Sikka, and the noble Baroness, Lady Drake, for their hard work. As the noble Baroness, Lady Sherlock, has said, I hope the Government will find a way to retain this amendment in the Bill and uprate state pensions by more than the 3.1%, which is clearly inadequate to protect against cost of living increases.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, I echo the words of the previous speakers. I hope that the Government will act on the recommendations of this House. I am also grateful to the Minister for the impact analysis, which I received on Friday night. I should be grateful if in future we could have a better quality of data. For example, it refers to weekly mean benefits, which do not tell us much about the societal impact or distribution. It would be very helpful, for example, to know the median figure and to have some further analysis in the appropriate financial brackets. Table 4 refers to the number of people eligible, pre-2016, for the new state pension but does not tell us how many actually receive the full amount. Once again, could I please request a fuller analysis, which would not only provide greater transparency but enable us to call the Government to account? It could be in the form of a statement of the number of individuals receiving, for example, a pension of less than £100 per week, those receiving between £100 and £120, and so on in other brackets. A better quality of analysis would enrich the debate.

Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Con)
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My Lords, I am grateful for the remarks made by all noble Lords today. Our discussions have been thoughtful and powerful. Above all, they have demonstrated the commitment across your Lordships’ House to protect the income of pensioners and to bear down on pensioner poverty. The Bill now goes to the other place to consider the amendments put forward by this House. I look forward to our consideration of its reasons on the Bill’s return. As always, I note the challenge of the noble Baroness, Lady Sherlock. I will take the observations of the noble Lord, Lord Sikka, on the impact assessment back to the department, as I have done with all the other points he has raised. Finally, I thank all noble Lords who have spoken today and at earlier stages. I also thank the officials who have supported me in our discussions.

Social Security (Up-rating of Benefits) Bill Debate

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Department: Foreign, Commonwealth & Development Office

Social Security (Up-rating of Benefits) Bill

Lord Sikka Excerpts
Lord Davies of Brixton Portrait Lord Davies of Brixton (Lab)
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My Lords, it is a matter of real regret that the Commons has not accepted the amendments to the Bill proposed by your Lordships’ House, but it is worth taking this opportunity to stress that not only have the Government broken a freely given promise to the electorate but, as has been clearly explained, they have done so totally unnecessarily. They could have lessened, if not avoided, the concern caused by breaking their promise by taking this opportunity to reaffirm clearly their commitment to the earnings element of the triple lock. It baffles me why they failed to do so.

I will not repeat all the arguments, despite the importance of the issue, but I have one more question for the Minister. The problem is that the Government are trying to have it both ways. On the one hand, they say they remain committed to all three elements of the triple lock—prices as measured by the CPI, average earnings and the 2.5% minimum. They want us to believe that this was an exceptional case that justified special rules being applied, and that they still deserve the electoral kudos that comes from standing by their promises. On the other hand, they have in practice made it clear that there are exceptional circumstances in which they can break the commitment.

We know they are prepared to break the triple lock, but we do not know under what conditions. We know what they were in this case; Ministers in this House and in the Commons have explained on several occasions the special circumstances which they believe applied. The noble Baroness the Minister said at Second Reading that

“the effects of the Covid-19 pandemic have caused distortions in the labour market, which have been reflected over two years in highly atypical trends in earnings growth.”—[Official Report, 13/10/21; col. 1847.]

We know the Government believe that highly atypical trends in earnings growth are sufficient justification for breaking the earnings link. We do not know how atypical earnings growth needs to be in future before they decide again to break the link. Can the Minister tell us more about what counts as atypical earnings growth? How atypical does it need to be to justify breaking the promise?

However, it is not just earnings growth that might be considered atypical. What counts as atypical growth in prices? This is not a hypothetical issue. Most of us here have become familiar with what many in this House might regard as consistently low rates of inflation, but who knows what is to come, with the unwinding of quantitative easing and other pressures on the economy? How do we know that the Government, when faced with a significantly higher rate of inflation than we have experienced in the last 25 years, will not decide that this too is atypical?

As I say, this is not hypothetical. Based on the OBR forecast for the Budget, it looks likely that the state pension increase in April 2023, which we will discuss next November, will be based on price increases rather than earnings or the fixed 2.5%. The latest Bank of England forecast, released earlier this month, suggests that next September—the relevant month for measuring the CPI—the increase will nudge 5%. Perhaps it will be higher, given this Government’s lack of economic competence. We do not know. In any event, an increase of this order would be significantly higher than the experience of the last few years. Earlier this year, not long ago, the September 2022 increase was expected to be only around 2%—it could be argued that this is more typical. I do not want to put ideas in the Minister’s mind, but I must ask how atypical the CPI increase next September has to be before it too will be considered atypical enough for the Government to decide that it justifies breaking the Conservative Party’s manifesto commitment to the triple lock?

The Minister needs to tell us that this year’s broken promise is truly a one-off and that the commitment to the CPI-linked increase will be adhered to, whatever next September’s increase. If we are not given such a commitment—which I suspect we will not be—then, in truth, we must conclude that we have a return to decisions about increases in the state pension being made on an ad hoc annual basis. History tells us that the inevitable outcome is that pensioners will suffer.

Lord Sikka Portrait Lord Sikka (Lab)
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My Lords, the outcome of the vote in the Commons is immensely disappointing. It condemns millions of retirees to a life of poverty and misery. At around 25% of average earnings, the UK state pension is already the worst in the industrialised world. It is the main or only source of income for the majority of retirees, and their lives will be even harder, especially those of women. Women never got pension equality: the retirement age was increased but their pension was never equalised with that of men. Thousands will die this winter because people will have to make the harsh choice between eating and heating, and the first statistics will be emerging fairly soon. Our retirees are being hammered from every corner, whether it is on pensions or winter fuel payments, which are unchanged since 2011, or the Christmas bonus, which is unchanged since 1972, or the loss of the free TV licence for the over-75s.

In 2021-22, the state pension increased by 2.5%, and the rate of inflation, we are now told, turned out to be 3.1%—that is the way it works. For 2023, the Government are proposing an increase in the state pension of 3.1%, and the rate of inflation is, as my noble friend Lord Davies of Brixton said, likely to be 5%. That means that there is a real erosion of the purchasing power of the state pension. Pensioners are not catching up; they are being left even further behind, and all that awaits them is a life of poverty.

The Government’s arguments about affordability were comprehensively debunked in this House. It was shown that there are numerous ways—not least a £37 billion surplus in the national insurance account. A Government which claimed not to be able to afford the triple lock two weeks ago gave away £54 billion in tax cuts, including a £4 billion tax cut to the banks, which are already awash with money and do not know what to do with the £895 billion of quantitative easing either.

The Government have really skewed priorities. Personally, I would have liked to see the state pension increase by 8.3%, which would have enabled a bit of a catch-up, but I was happy to support the amendments of the noble Baroness, Lady Altmann. Yesterday, the Minister in the other place said—and the noble Baroness the Minister referred to this again—that the figure for wage growth is not “robust”. The Minister has never told us what the characteristics of a robust statistic are. In social sciences, there is no such thing which cannot be refuted. What characteristics does she assign to the word “robust”? Is the government data on unemployment robust? Is it not contestable? Is the government data on inflation not contestable? Are the Government’s claims about levelling up not contestable? I do not know what she means by that.

We were told that wage growth data were not really reliable. Lots of resources are available to the ONS and it has come up with a number between 3.6% and 5%. It says that underlying wage growth is in that range. Why is that number not considered to be robust? If the ONS is deemed to be incapable of producing a robust number for wages, why should we trust any of its other numbers which inform government policies?