1A: Because Lords Amendment 1 would alter the financial arrangements made by the Commons and Lords Amendment 2 is consequential on that Amendment; and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
My Lords, I know it will be a disappointment to my noble friend Lady Altmann and others in this House that the Commons has disagreed with Lords Amendments 1 and 2. I ask that this House does not insist on its amendment for two reasons.
First, we have discussed at length the reason why the Government do not believe that they should set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus. That would be the position with an adjusted measure of earnings growth, which is why the Government decided to apply a double lock, underpinned by the established consumer prices index, which is published by the ONS. This approach was also recommended by the Social Market Foundation.
Secondly, Royal Assent is needed by 22 November 2021. This will allow the Secretary of State to conduct her statutory review using the new powers in time for the DWP to meet its hard deadline of 26 November for reprogramming its computer systems. This will ensure that the new rates of benefits and pensions are payable from April 2022. While I welcome the intentions behind the amendment, we cannot accept it. That is why I ask that the House does not insist on Amendments 1 or 2. I beg to move.
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.
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?
The ONS data gives the Government the option of maintaining the link between the state pension and earnings and increasing pensions by something between 3.6% and 5.1%. The Government have those possibilities. The Treasury’s Red Book, accompanying the Chancellor’s Budget, contains estimates for the economy and tax revenues. These cannot really be produced without some assumptions about wage growth, so hopefully the Minister will tell us what assumptions about the economy the Treasury has made in producing its numbers, and what it thinks will happen to wages. The Treasury assumptions are not clearly stated in the Red Book either.
Let us look at another avenue. The Bank of England can do the appropriate modelling, and people think that it has that ability. On 4 November, the Bank of England published its Monetary Policy Report, which contained estimates of wage growth. On page 2, it states:
“Bank staff estimate that annual growth in underlying pay has picked up to a little over 4%.”
On page 29, it says that wage growth
“has picked up to around 4.5%, above its pre-pandemic level”.
On page 30 it says:
“Bank staff expect underlying wage growth to remain around 4% in the near term”.
So some approximations are possible. Why are the Government not willing to accept these numbers? They are there, so any Government with good will and who cared for our senior citizens would have ensured that it was possible to adopt some of these numbers, modify them or even commission research from the Bank of England and the ONS to that effect. However, I sense that the political will to improve the living standards of our senior citizens is not there. That is a fundamental problem.
My Lords, I will be brief and speak on behalf of my noble friend Lady Janke, our Front-Bench spokesman on this Bill. Unfortunately, she cannot be here today.
First, I will say that we are glad that the Government have reconfirmed their commitment to the triple lock in the long term throughout all these discussions. We are disappointed that the Commons have rejected these amendments. The Government had an excellent opportunity to maintain their manifesto commitment while taking into account the special circumstances of the pandemic. We will not be pursuing this amendment —we accept that this has to be accepted—but we thank the noble Baroness, Lady Altmann, for the work that she has done.
We are concerned that pensioners will not be protected from the effects of the economic pressures now coming from inflation. The Governor of the Bank of England is very uneasy about the situation and we want to know whether the Government are prepared to keep an open mind and look particularly at the case of the poorest pensioners as time goes on in the next few months, when these pressures will come to a head. More importantly, we are extremely supportive of the maintenance of the triple lock in the longer term.
My Lords, we have been hearing lately that the House of Lords is a rather useless body and that the other place is better—but twice recently your Lordships’ House has asserted that it cares more for the people than the other place. The noble Duke, the Duke of Wellington, stood up for the right of the citizen to clean water, asserting that against what the Commons had said. We also stood up for the triple lock and had that rejected.
I have a very simple suggestion for the Government. Since they have no intention of helping pensioners, why can they not be honest and say that the triple lock simply means that we will raise pensions by the lowest number of the three which are here, unless it is higher than the Bank of England target of 2% inflation? The 2% inflation that the Bank of England has chosen as its target is not a statistic. It is not disputable because they have made it up. It will always stay at 2%. So the Government could at least guarantee to be honest; they could just give 2% and run away. They should not give false promises and then not fulfil them.
My Lords, I will briefly follow the introduction made by the noble Lord, Lord Desai. I will not address the issue—I did that the last time we sat—but there is a wonderful clarity about this issue. With ignorant journalists in the media calling for the abolition of your Lordships’ House, this issue shows, above all, that we will always be an irritant to the Government, whatever party is in power. It was the same when I was over there; the House is an irritant. The clarity with this issue, particularly for those of us who do the Peers in Schools programme, it that it is a wonderful example that is very easy to explain of the fact that the Commons always has the last word.
So, whatever the arguments about the composition and powers of this place—and the idea that we can legislate at will, which we cannot—this example gives wonderful clarity on the fact that the Commons always has the last word. Our job is to ask MPs to think again and again, and sometimes again—I have known examples of three occasions. But the fact of the matter, which the elected Chamber cannot run away from, however it is dressed up, is that the Commons has the last word—and I think that is to your Lordships’ advantage for the way we operate.
My Lords, I thank the Minister for introducing her Motion and all noble Lords who have spoken. I am going to get a new T-shirt for Christmas: “Proud to Be an Irritant”. Perhaps they should start selling them in the House of Lords gift shop; they might sell quite well. A nice note for the noble Lord, Lord Desai.
I must say that I am disappointed. The House voted by a healthy majority for the amendment in the name of the noble Baroness, Lady Altmann, which would have kept the link between pensions and earnings. It is worth noting that the amendment won support from around the House, whereas the Government were able to persuade only 13 Members who do not take the government Whip to vote against. The reason is clear: the case was unpersuasive.
The Government came to power on the back of a manifesto commitment to the triple lock, which we also supported at the last election, as did the Liberal Democrats and other major parties. The Government now want to ditch it for next year on the grounds that the rise in earnings over the year to last summer was artificially high as a result of Covid. We accept that earnings growth was distorted as a result of the pandemic, but that does not mean that the Government should just ditch their promises. They could and should have found a way to maintain the earnings link in pensions while adjusting for the Covid effect.
I will not relitigate this but, during the passage of the Bill, we looked at lots of ways we could do it, and lots of constructive suggestions emerged, and in the end the House coalesced around a very reasonable amendment in the name of the noble Baroness, Lady Altmann, with cross-party support, which simply said that the Government should use a figure for earnings chosen
“in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.”
It could not have been more reasonable, and it left the Government considerable latitude: we were not telling the other place what to do but simply giving them a chance to think again.
But the Government flat out rejected that. The Pensions Minister in the other place did comment on the merits of the amendment, but he caricatured it by saying that it
“invites the Secretary of State to measure earnings as if they were not actually growing by 8.3%.”—[Official Report, Commons, 15/11/21; col. 359.]
So are the Government now saying that earnings growth actually is 8.3%? If so, why are they ditching the triple lock? And if it is not 8.3%, why did they not take the chance this House afforded them to look at alternatives?
The Minister again mentioned time pressure, so I put to her again a question I put at an earlier stage in the Bill. She told noble Lords there were two reasons why it was so time-critical. The first was that the computers have to be changed by a date—I think it was 26 November, or another date late this month that was the last date that computers could be changed to adjust the rates for next year. She also said that the House will then have to approve the uprating order, which we normally do in the spring. So what happens if they change the computers deep in the bowels of DWP and then the House chooses to reject the uprating order? What happens then?
While we are here, by refusing to look again, we are left with a Bill which will uprate pensions by the CPI inflation rate prevailing last September. Meanwhile, we all know that the costs of things that all pensioners use—food and fuel, for example—are spiralling up. Pensioner poverty is on the rise again. The last Labour Government managed to bring it way down, but it started to rise again in 2012. It is now on the rise and it will get worse yet.
I am sorry to say that this short Bill is a mistake. It steps away from the earnings link and, in walking away from their manifesto commitment for the third time, the Government are breaking trust with the electorate. Why are they so determined to do it? Ministers tell us that it is for one year only. Great, but I worry that their refusal to be creative in finding a way to deal with the fallout from the pandemic raises fears that they really are planning to walk away from this longer term.
My noble friend Lord Rooker is, as always, right. We have done what we can. We have asked the elected House to think again. The Government whipped their people to say that they did not want to do so. I think they are wrong. Pensioners will pay the price for this and they will not likely forget this breach of trust. I hope the Government think it was worth it.
My Lords, I thank all noble Lords for their contributions. To answer the question put by the noble Lord, Lord Davies, about the Government believing in the long-term earnings link, yes, this Bill is for one year only. After that, it will revert to the current legislation, and state pensions will increase at least in line with earnings. The triple lock will be applied in the usual way for the remainder of the Parliament. We believe that 8.3% is atypical growth, just as we considered minus 1% to be atypical last year, which is why we increased state pensions by 2.5% instead.
Again, to the noble Lord, Lord Davies, inflation is forecast to be higher than 3.1%. Do pensioners not need a higher increase? The uprating order for all benefits will take effect from April 2022 and, last year, pensioners saw an increase of 2.5% when CPI for the uprating review period was 0.5%. Average actual CPI over the first six months of this financial year was lower, at 2.4% at the Budget, and the OBR forecast that CPI would average 4.1% for the second six months of this financial year. If this turns out to be the case in September, the CPI figure will be a good reflection of average inflation over whole of 2021 and 2022.
The noble Lord, Lord Sikka, said that the state pension is the lowest in the developed world and is still below the 1979 level relative to average earnings. This comparison is misleading. There are many factors to take into account: tax systems, healthcare systems, pension ages, cost of living, access to occupational pensions and the availability of other social security benefits, as well as the provision of services and goods free to pensioners or at a concessionary rate. The Government provide considerable additional support for pensioners. People over state pension age are entitled to free winter fuel payments worth £2 billion every year, free eyesight tests, NHS prescriptions worth around £900 million every year, and free bus passes worth £1 billion every year. In addition, the BBC has made provisions so that those aged 75 or over who are in receipt of pension credit are eligible for free TV licences.
To answer the question put by the noble Baroness, Lady Sherlock, if there is no Royal Assent, we need to use the current legislation at 8.3%.
Motion A agreed.
2A: Because Lords Amendment 1 would alter the financial arrangements made by the Commons and Lords Amendment 2 is consequential on that Amendment; and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Motion B agreed.