Consideration in Grand Committee (Lords) of the Guaranteed Minimum Pensions Increase Order 2020 - Mar 3

Moved by

Baroness Stedman-Scott

That the Grand Committee do consider the Guaranteed Minimum Pensions Increase Order 2020.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)

My Lords, I will start with the Guaranteed Minimum Pensions Increase Order. I will cover this briefly as it is an entirely technical matter that we attend to in this place each year. The order concerns contracted-out defined benefit or final salary occupational pension schemes. It will increase scheme members’ guaranteed minimum pensions that accrued between 6 April 1988 and 5 April 1997 by 1.7%, in line with inflation as measured by the consumer prices index.

I should now like to turn to the Social Security Benefits Up-rating Order. The Government are committed to supporting working families and providing financial security for pensioners, and the provisions in the order reflect this. It will increase the basic state pension and the new state pension in line with the triple lock; increase the pension credit standard minimum guarantee in line with earnings; increase working-age benefits in line with prices; and increase carers’ benefits and benefits intended to meet additional disability needs in line with prices.

The Government’s commitment to the triple lock means that the basic state pension will continue to be uprated by the highest of earnings, prices or 2.5%. The triple lock has been an invaluable tool in combating pensioner poverty, so keeping it in place gives pensioners the financial security and certainty they deserve. This year, the increase in earnings was the highest of the triple lock figures. As a result, the basic state pension will increase by 3.9%, rising to £134.25 a week for a single person. This increase is at the highest rate for the past eight years. From April this year, the basic state pension will be over £1,900 a year higher in cash terms than in April 2010.

Four years ago, the Government introduced the new state pension, which provides a transparent and sustainable foundation for private saving and retirement planning for people reaching state pension age from 6 April 2016 onwards. We have also committed to increase the new state pension by the triple lock, so from April 2020 the full rate of the new state pension will increase to £175.20 a week. This year, state earnings-related pension schemes, other state second pensions and protected payments in the new state pension will rise by 1.7%, in line with prices.

We are continuing to take steps to protect the poorest pensioners. This includes through the pension credit standard minimum guarantee, the means-tested threshold below which pensioner income should not fall. The pension credit standard minimum guarantee will rise by 3.9%, in line with average earnings. From April 2020, the single person threshold of this safety-net benefit will rise to £173.75, over £2,100 a year higher than it was in 2010.

I would like to turn now to working-age benefits, which will increase by 1.7%, in line with prices. This includes people receiving jobseeker’s allowance, employment and support allowance, income support, housing benefit and universal credit. Benefits linked to child tax credits and working tax credits will also be uprated in line with those benefits. This reflects the Government’s ongoing commitment to help working-age people get on. Work remains the best route out of poverty. Those in receipt of working-age benefits will see their payments rise at the rate of inflation, with the Government spending an additional £1 billion supporting working-age claimants. Universal credit work allowances will also rise in line with prices. This measure raises the amount that someone can earn before their universal credit payment is reduced and directs additional support to some of the most vulnerable low-paid working families.

Finally, let me turn to disability benefits. This year, the Government will continue to make sure that carers and people who face additional costs as a result of their disability will get the additional support they need. Disability living allowance, attendance allowance, carer’s allowance, incapacity benefit and personal independence payment will all rise by 1.7%, in line with prices, from April 2020. In addition, the carer and disability-related premiums paid with pension credit and working-age benefits, the employment and support allowance support group component and the limited capability for work and work-related activity element of universal credit, will also increase by 1.7%. This Government are committed to supporting the most vulnerable in society.

The Guaranteed Minimum Pensions Increase Order provides for scheme members to receive their annual guaranteed minimum pension increases for pensions in payment, or increases guaranteed minimum pensions that have been postponed as a result of continued employment.

The Government propose to spend an extra £5 billion in 2020-21 on increasing benefit and pension rates. With this spending, we are upholding our commitment to the country’s pensioners by maintaining the triple lock, helping the poorest pensioners who count on pension credit and spending an additional £1 billion on working-age benefits, ensuring that we continue to support working people and providing essential support to disabled people and carers. I commend both orders to the House.

Baroness Lister of Burtersett (Lab)

My lords, at last, after four years we finally have an uprating order that actually uprates working-age benefits. But it is very disappointing that it does nothing to start making good the serious losses sustained by an estimated 27 million people, in and out of work, who rely on those benefits, amounting to an average loss of nearly £400 a year for families with children. That will be the focus of my contribution this afternoon.

According to the House of Commons Library briefing, the real value of affected benefits has been cut by about 6%. Taking account of all uprating restrictions across the decade, they are about 9% lower than if CPI indexation had applied since 2010. A cut of nearly 10% in the real value of benefits that were already far from generous represents a shameful attack on the living standards of many of the poorest in our society.

Although the department has done nothing to assess the actual impact on those affected, civil society organisations have provided some evidence, and I thank them. For instance, Citizens Advice reports that from April to August last year,

“four in 10 of the people we helped with debt to claim income-related benefits didn’t have enough money to cover their living costs. This is up from 32% in 2016-17—a 25% increase since the benefits freeze came into effect”.

In contrast, the proportion of households with what it calls a “negative budget” who are not in receipt of those benefits has remained largely unchanged. StepChange, too, identifies the benefits freeze, alongside other social security cuts and changes, as key factors in high levels of problem debt and as

“undermining financial inclusion policy goals”.

The Heriot-Watt University/Trussell Trust State of Hunger report and last week’s Marmot report likewise identify the low level of benefits as a key factor in growing food insecurity and reliance on food banks. The latter argued that benefit and taxation policies since 2010 have largely been responsible for the worsening socioeconomic situation underlying widening health inequalities. The Government’s own statistics show an increase in levels of severe income deprivation. It is worth noting that the impact of the benefit freeze will probably be seen as much, if not more, in the intensity of poverty as in the numbers in poverty, given that many of those affected will already have been in poverty. According to the CPAG, an average family in poverty is now £73 below the poverty line, compared with £56 below in 2012-13, adjusted for inflation. As the Joseph Rowntree Foundation put it, the largest single driver that has “tightened poverty’s grip” in the past few years has been the freeze.

4.30 pm

When I raised the benefits freeze issue in Oral Questions the other week, the Minister generously responded that she could not argue with the points I had made and that her door was open to discuss them further. I am very grateful that, true to her word, she arranged for me to meet with her and officials. I will pick up some of the points she made during our exchange in Oral Questions. I emphasise that I do so not to go over old ground for the sake of it, but to support my case for an above-inflation increase now that the freeze has ended.

One of her arguments was that benefits had been rising faster than median earnings. This is true if one takes a short-term perspective, but that period was an aberration in a longer-term trend that has seen working-age benefits plummet relative to median earnings. According to the IPPR, the rate at which the benefit for a single unemployed person was frozen represented only 12.5% of median earnings last year, compared with 20% in 1984. If the relativity between benefits and earnings is important, surely the argument cuts both ways and the Government should seek to make good at least some of the shortfall, the more so because, as the Resolution Foundation emphasises in a recent study,

“adequate benefit levels have a critical role to play in protecting all households from in-work poverty”—

the very route out of poverty that Ministers like to laud. The foundation calculates that, as benefits have become increasingly inadequate, households, including lone-parent families, need to work longer hours to lift themselves out of poverty, which may well not be in the interests of family life. Indeed, it suggests that the number of hours needed to escape poverty are “often unreasonable”.

The Minister also argued that the benefits system was “unsustainable” and that the Government had to take

“very difficult decisions to try to balance it out”.—[Official Report, 13/1/20; col. 443.]

I have two points in response. First, on the basis of OBR analysis, the level of spending would appear to have been perfectly sustainable. Its 2014 Welfare Trends Report noted that

“the proportion of national income devoted to welfare spending has not shown a significant upward or downward trend over time.”

More recently, it estimated that, on current trends, spending on support for children and working-age adults would be at its lowest share of GDP since 1990-91. Yes, “difficult” decisions had to be made, but difficult for whom? To quote the Marmot report:

“Throughout the austerity of the last 10 years, choices have been made as to who most experiences the effects of tax and benefits reforms … working-age families with children within the five lower income deciles have experienced the most significant and negative impacts in the long term as a result of tax and welfare policies.”

A different, fairer choice would, for instance, have prioritised protecting the safety net over increases in personal tax allowances, which are regressive in their impact and some of which, in effect, were paid for by cuts to that very safety net, as shown by analysis by the LSE’s Centre for Analysis of Social Exclusion.

The Minister also prayed in aid the increase in the national minimum wage. Welcome as that is, it is of little help to those hurt by the freeze, including those in work, because, as the IFS has pointed out, only a minority of those who gain from the national living wage are in households hit by the benefits freeze: minimum wages are much less tightly targeted than working-age benefits.

The Minister rightly noted that a major contributory factor to the freeze’s impact was higher than expected inflation towards the end of the period, but she acknowledged that that “is no excuse”. It is not, but it is a very good reason for now making good, at the very least, the part of the cut attributable to higher than expected inflation, which, if I have read the Commons Library briefing correctly, saved the Treasury around £1.2 billion more than it had anticipated. This is money that the Treasury owes to those in receipt of benefits, not least as it rejected widespread calls, including from leading Conservative MPs, to end the freeze a year early in response to the unanticipated increase in inflation.

The Work and Pensions Committee in the last Parliament called for benefits to be uprated by 2% more than inflation over four years to make good the overall losses. When the new chair of the committee raised this in the Commons debate on the uprating order, the Minister did not even bother to respond in his winding-up speech. I know that the Minister here today will be more courteous. I know she cannot make any commitments for the longer term, but I ask her to do all she can to ensure that, first, there are no further cuts in the real value of benefits during this Parliament; and secondly, she takes back the message to the department and the Treasury that it is simply not acceptable that the current depressed value of benefits should be carried forward and locked in in perpetuity. In effect, this would be a long-term levelling down of the living standards of some of the poorest members of our society.

Finally, the Prime Minister has committed the Government to “levelling up”, but levelling up is not just about much-needed physical infrastructure investment in so-called left-behind areas. It has to be directed also to the individuals who live in those areas and elsewhere, who are falling ever further behind because of the freeze and other social security cuts. Indeed, according to a Resolution Foundation analysis, what they call the “blue wall” seats that the Conservatives won from Labour have suffered relatively high exposure to

“the impact of reduced working-age welfare generosity.”

It warns:

“Ongoing pressure from welfare reforms concentrated in certain parts of the country calls into question the extent to which it will feel like austerity has ended and levelling up is happening.”

A real increase in social security offers an oven-ready policy instrument—to coin a phrase—to start levelling up much more quickly than infrastructure investment, which, according to the National Institute of Economic and Social Research, will probably take a decade to deliver fully. Moreover, as a real increase in benefits would be likely to be spent quickly and locally, it would have ripple effects in these blue wall areas.

I know that the Minister genuinely cares about what is happening to our fellow citizens at the bottom of the pile. I hope, therefore, that she will take the message back and do what she can to persuade her colleagues, so that we will not be back here next year having to make the same old arguments all over again.

Baroness Janke (LD)

My Lords, I congratulate the noble Baroness, Lady Lister, on her speech and I very much support what she said. I shall just raise a few issues that I hope the Minister will agree to consider.

After four years of the freeze in working benefits and £36 billion in cuts over that period, we of course welcome the end of the benefits freeze. However, as the noble Baroness said, the current increase does absolutely nothing to address the shortfall that has built up over the four years, especially since prices are rising for essentials such as food and children’s clothes. The benefit freeze has hit families very hard, particularly children. There are 4.1 million children in poverty—and they are in deeper poverty, further below the poverty line. The average family in poverty is now £73 per week below the poverty line, compared with £56 per week in 2012-13. Unless the Government act to restore the real value of financial support for families, things will continue to get worse. Without policy change, child poverty is projected to rise to 4.8 million, or 37% of all children, by 2023.

I hope the Government will consider what they can do to restore the situation. I know the Minister has a great interest in the welfare of children and I feel sure she will do everything she can. I hope the Government will consider ending the two-child limit on tax credits and universal credit. Continuing with these will push a further 300,000 into poverty. Will they consider lifting the benefit cap to move 100,000 children out of “deep poverty”—those living on 50% of median income before housing costs? Another suggestion is that adding £5 to child benefit would start to restore key benefits to all children.

We welcome the pensions uprating, which is particularly important to women as they live longer than men and often live alone. The pensions situation in the UK shows very significant differences between men and women, and I hope that the Minister will consider what can be done. I know we will be coming back to this issue when we discuss the Pensions Bill tomorrow, but the position as far as women are concerned needs to be looked at.

I very much welcome the fact that state pensions have become more inclusive and redistributive for those who take family caring breaks. However, for those who retired before April 2016, because the full amount of the basic pension remains nearly £40 a week below the threshold for means-tested single-rate pension credit, this improvement has had a limited effect on gender equality. As far as private pensions are concerned, among 65 to 74 year-olds the median private pension wealth is £164,700 for men and £17,300 for women. Among women aged 55 to 59, total personal income is two-thirds the income of men in the same age bracket.

Self-employment, zero-hours contracts and other precarious forms of employment have been increasing and these inequalities restrict the ability to pay either national insurance or private pension contributions. Even when incomes are similar, women’s pension saving is less than men’s, with too many women relying on their partner’s pensions. Many women are excluded from auto-enrolment because they are in low-paid jobs. Extending the coverage of auto-enrolment by reducing the earnings threshold to the national insurance primary threshold would bring 480,000 people, mostly women, into pension saving and would help to improve the gender pensions gap.

I hope that the Minister will consider what has been said. We take the opportunity to raise this issue while we can, despite the fact that nothing can be done about it today. Perhaps reforms to pensions such as revisiting care credits, a reduction in the number of qualifying national insurance years for the state pension and reducing or, indeed, removing the earnings limit so that low-paid workers, particularly women, would be eligible for private pension schemes are issues she might consider in due course.

Baroness Sherlock (Lab)

My Lords, I thank the Minister for introducing these orders and thank all noble Lords who have spoken. First, I will speak briefly about the Guaranteed Minimum Pensions Increase Order before moving on to the Social Security Benefits Up-rating Order.

As we heard, the Guaranteed Minimum Pensions Increase Order 2020 provides for defined benefit occupational schemes that were contracted out to increase by 1.7% members’ guaranteed minimum pensions that accrued between 1988 and 1997, in line with CPI. This is a basically a routine uprating, but I want to take the opportunity to raise a specific issue. When the GMP order 2019 was debated on 14 February of that year, my noble friend Lady Drake invited the then Minister to give an update on the Government’s proposed guidance to occupational pension schemes in the light of the Lloyds Banking Group case. As the Minister will know, that case had the effect of requiring trustees to amend their pension schemes to equalise GMP benefits. In that debate, the Minister, the noble Baroness, Lady Buscombe, said:

“My department has put forward a method that schemes can use to equalise pensions which, because of its ‘once and done’ nature, should limit costs resulting from additional administration requirements. The department will provide guidance in the near future for schemes wishing to use the method upon which the department consulted in November 2016.”—[Official Report, 14/2/19; col. 1961.]

4.45 pm

I see from the DWP website that the department has issued guidance in the wake of that case, which I think was updated last April, and that more recently, on 20 February, HMRC has issued guidance on the tax treatment of this issue. I understand that there are some matters which have not yet been clarified, in particular the position of trustees who are seeing further guidance on the extent of their obligation to revisit past transfers out of the Lloyds scheme. If the Minister has any information on this, perhaps she might share it. But what I really want to ask about is the Government’s next move, because in the debate last year, the noble Baroness, Lady Buscombe, continued by saying:

“The Department for Work and Pensions intends to make further changes to the guaranteed minimum pension conversion legislation to facilitate the methodology on which we consulted. We are looking to make those changes as soon as a suitable opportunity presents itself.”—[Official Report, 14/2/19; col. 1961.]

That is what was said in February last year. A number of us have spent most of our adult lives, or so it feels, looking at the Pension Schemes Bill in Committee, which is going through Parliament at this very moment. Was not that Bill a suitable opportunity in which to take this forward, and if not, why not? Do the Government still intend to legislate on these matters, and if so, to what timescale?

I turn now to the Social Security Benefits Up-rating Order 2020. In one sense, this is a routine order that makes changes to the rates of various benefits, but as we have heard in the marvellous speech from my noble friend Lady Lister, this has been anything but routine. In fact, in recent years, a number of us have turned up year on year, even though there were no upratings to debate, just to make the point that they should have been debated, so it is wonderful to be reunited with my noble friend on what is becoming an annual outing. I miss the noble Lord, Lord Kirkwood of Kirkhope, who often attended the debates, but I see that the right reverend Prelate the Bishop of Durham is in his place, and a number of other noble Lords have chipped in on these debates in years gone by. However, there is actually something to uprate and thus to debate.

This is all getting a bit complicated. We now have various categories of benefits. There are those which have to be uprated by at least the increase in earnings: the basic state pension, the new state pension, the standard minimum guarantee element of pension credit and a number of other pension and industrial death benefits. All of these are to go up by 3.9%. Then there are those which must go up by the increase in prices. The Minister gave some examples, mostly for disability benefits, carers’ benefits and some other widows’ benefits. These are to go up in line with the CPI at 1.7%. After that, there are benefits over which the Secretary of State has discretion, which are most of what we think of as working-age benefits that are means tested, plus statutory maternity pay, paternity pay, adoption pay and so on. I think the Minister said in passing that the Government are spending an extra £1 billion on these benefits. Is that in real terms or is that just the cost of the inflationary increase? If it is in real terms, the Government will not be spending anything extra at all. The Treasury measures money in real terms, so if these benefits are simply being increased in line with prices, presumably the Government are spending zero extra. I am glad to see that they will not be cut year on year again, but perhaps the Minister could clarify that.

There is still a fourth category of benefits which will not be uprated at all. By my calculation, this is now a category of one: bereavement support payment that for yet another year will remain at the same cash rate, which means that its value is being cut once again. Will the Government look at this? We expressed grave concerns at the time about the reforms to bereavement benefits, but the fact that this is now a cash payment that is not being uprated year on year means not only have families with children who have been widowed lost out on many years of payments, their value has been decreasing every single year. As I say, this should be looked at again.

I welcome the decision to return to increasing most benefits at least by inflation because the decision to cut the value of most working-age means-tested benefits year on year for seven years—three years of capping followed by the four-year freeze—has, as my noble friend said, been one of the biggest single drivers of poverty rising in the UK. It has saved the Government billions, more than £4.5 billion in the last four years alone, and far more than the £3 billion forecast when Parliament voted for it. The cumulative effects on those who experienced this have been severe. My noble friend cited the House of Commons figures, which are very damning. The idea that benefits will be 9% lower next year than if indexation had applied since 2010 is really damning, while the child benefit and working tax credit elements are between 13% and 17% lower in 2020-21 than would have been the case with CPI indexation. That has a huge effect on a population that is just about managing anyway. I was grateful to my noble friend Lady Lister and the noble Baroness, Lady Janke, for pointing to the intensification of poverty: people are driven ever further below the poverty line. Frankly, they had no give in their budgets already, so where do they go now?

These cuts are now baked in. All future increases are a percentage of today’s rate, which is lower than it should have been, so low-income households are taking a hit year on year on what they should have had. The inflation change has been quite marked. This year, the CPI rate for the year to September, which determines the increase, is 1.7%; the applicable rate last year was 2.3% and the increase was zero; the year before, it was 2.6% and the increase was zero, so that gap is big.

As the CPAG points out in its briefing to noble Lords for this debate, that freeze came on top of a series of other cuts, among them removal of the higher amount for the first child in tax credits and UC, the two-child limit, the benefit cap, reductions in housing benefit—which were introduced before the freeze and then locked in by it—the bedroom tax, cuts in the earnings disregards in tax credits and removal of the limited capability for work element in ESA. Many families are suffering multiple versions of these cuts, with multiple cuts hitting the same people.

Analysis by the CPAG in 2017 found that families with children stood to lose on average around £2,000 a year from cuts. Some benefits are now not just worth less than they were a few years ago; they are worth less than they were two or three decades ago. The Resolution Foundation points out that the real value of basic out-of-work support this year, at £73 a week, is lower than it was in 1991-92, despite GDP per capita having grown by more than 50% in that time. Let us pause for a moment and think about how many of us would try to live on £73 a week. You get help with your rent, but, often, housing benefit does not pay whole rent these days, so you may have to contribute to your rent on top of that. Could the Government not think again about this?

What assessment have the Government made of the impact of the freeze in benefits on poverty levels? On the question raised by my noble friend Lady Lister, the Work and Pensions Select Committee recommended that, from next year, the Government increase the rate of frozen benefits by CPI plus 2%. It says that that would mean that benefit rates would, after four years, reach the level at which they would have been set if they had not been frozen. Did the Government consider that recommendation from the Select Committee and, if so, why did they reject it?

The Government switched from using RPI, the old inflation measure, to CPI because they felt that RPI was flawed. As it happened, they saved a lot of money along the way because RPI was rather higher than CPI. Incidentally, they retained RPI, this deeply flawed measure, for things which cost consumers money, such as the interest rate on student loans or the annual increase in rail fares—they were happy to use RPI for that, but it did not work for benefits. I understand that work is now going on in the Treasury to revise RPI and perhaps to move towards a single measure. Is the department involved in those conversations and will it look at adopting a revised RPI if that comes about?

What is the Government’s final estimate of the savings to the Exchequer of that four-year freeze in benefits? My noble friend raised this, but we would be interested in a having a final, definitive view. I am not asking what it was scored at in the Budget, as we all know that; I am asking what in the end it was worth.

I am glad to have this debate happening here. My noble friend mentioned the debate in the Commons. I was shocked when I read it. Eight MPs contributed and the Minister’s response was 202 words, half of which were simply to thank Members and to tell them that his door was always open and that he did not want to answer everything in the Chamber. Just 202 words, half of which were introductory, were said on something as important as this. I am grateful that noble Lords have turned out to do it more justice than that and I look forward to the Minister doing so, too.

Baroness Stedman-Scott

My Lords, I thank noble Lords who have spoken for the honesty, clarity and passion with which they champion those people whom we all come here to serve. I thank the noble Baroness, Lady Lister. I still cannot argue with her, so I am not going to try—I shall not take 202 words to do it either—but the door and our ears are open, and I am not alone in the department in raising these things. At the risk of driving everyone mad, I ask Members to keep coming to us and telling us things. Be assured that we are passing them on, and that real debate is going on about them. I assure noble Lords that I will take all their points back to the department and the Treasury, particularly the profound one about levelling up: it is about not just geography, but people. If we make it work for people, we make it work.

We have had an open discussion in the department about the benefit freeze. I take all the points raised by noble Lords. We are continuing to try to support families and those who we exist to serve. There is a raising of the national living wage and a reduction in the UC earnings taper. The income tax personal allowance has been raised and tax-free childcare introduced. On balance, while there are many things we are unhappy about, these reforms are working and making sure that there are more people in work than ever.

I take the point raised by the noble Baroness, Lady Lister, about the Citizens Advice report and the request for an extra 2% rise. This is well understood in the department and everybody is aware of it. I wish I could tick it off, but it is just above my pay grade. I remind noble Lords that the Secretary of State has a statutory obligation to conduct a review each autumn of pension and benefit rates for the following year. Decisions about the uprating for next year, to take effect from April 2021-22, will take place from October.

The noble Baronesses, Lady Janke and Lady Lister, and the right reverend Prelate the Bishop of Durham raised the two-child limit. Their points were well made. I can make no promises, but we are keeping on; who knows what will happen. I am not trying to lie low on this, but we were trying to get a benefits structure that did not automatically adjust to family size; that was unsustainable. We recognise that some claimants are not able to make the same choices about the number of children in their family and we have exceptions to protect certain groups. Child benefit continues to be paid for all children, as well as an additional amount for disabled children.

Baroness Lister of Burtersett

Could the Minister explain why it was unsustainable? People are not having larger families. What was unsustainable about benefits reflecting family size and meeting people’s needs?

Baroness Stedman-Scott

My understanding is that this is a purely fiscal situation. People who are working make choices about the size of their families and others should too. I can tell by the look on the noble Baroness’s face that she profoundly disagrees with that. I understand, and if there is anything she wants me to take back to the department I will do so, but that is the reason for the Government’s decision.

The noble Baroness, Lady Janke, raised points about women’s pension outcomes and poverty. While women’s pension outcomes have, historically, been worse than men’s, mainly due to a difference in labour market participation, women’s pension outcomes are increasing and the gap with men is narrowing. On average, women live longer than men and the average weekly amount that women on the new state pension receive is 95% of what men receive on it. At least 80% of women reaching state pension age before 2030 stand to receive more under the new state pension than they would have done under the previous one.

The noble Baroness, Lady Sherlock, raised some points about the GMP equalisation situation. It remains our view that the existing GMP conversion legislation allows schemes that wish to use the DWP’s methodology for equalising to do so now. It is not absolutely necessary to wait for further changes to the GMP conversion legislation to take place first. Schemes that have any concerns over how the DWP’s methodology is supposed to be used can access the department’s guidance published in April 2019. This is a question-and-answer section to address many of the issues that schemes may face when they equalise.

I note what my predecessor said in the answer given last year. My answer to noble Lords is not quite the same: we intend to make further changes to the GMP conversion legislation to facilitate the methodology consulted on. We will look to make those changes in due course.

Baroness Sherlock

The Minister has read out two different things. For clarification, is she saying that we do not need to legislate, because the existing legislation allows people to follow the guidance that the Government have issued, or is she saying that they do intend to legislate and will do so in due course, rather than at the first feasible opportunity, which is now? The Minister may want to come back to me on that.

5.00 pm

Baroness Stedman-Scott

The best thing is that I write to the noble Baroness, rather than put my neck in the noose again.

The noble Baroness, Lady Sherlock, also asked whether the £1 billion was in real terms or an increase. It is a cash increase; there is no increase in real terms. She mentioned equalisation. HMRC has recently published guidance for schemes which compare benefits on an annual basis. We are working closely with HMRC to update this guidance for schemes which choose to use DWP’s method of equalisation.

On the choice of the RPI or the CPI, the RPI is no longer an official national statistic due to concerns over its methodology. The Government and the UKSA will consult on whether the proposed change should be made prior to 2030. The department has no plans at this time to deviate from the CPI and its measure of inflation when uprating benefits.

These provisions reflect the Government’s commitment to supporting working people, while protecting the most vulnerable in society. The Guaranteed Minimum Pensions Increase Order provides for scheme members to receive their annual guaranteed minimum pensions increases for pensions in payment.

To reiterate, through the Social Security Benefits Up-rating Order this Government are: increasing the basic state pension and the new state pension in line with the triple lock; increasing the pension credit standard minimum guarantee by earnings to support the poorest pensioners; increasing working-age benefits in line with prices; increasing the universal credit work allowances, so that claimants can earn more before their payments are reduced; and increasing benefits to meet additional disability needs and carer benefits in line with prices.

I know that I have disappointed many noble Lords with my answers, but I hope that I, and my colleagues in the Government, do not disappoint in our efforts to try to make things better. I commend both orders to the House.

Motion agreed.

Social Security Benefits Up-rating Order 2020

Considered in Grand Committee

5.03 pm

Moved by

Baroness Stedman-Scott

That the Grand Committee do consider the Social Security Benefits Up-rating Order 2020.

Motion agreed.