Social Security Benefits Up-rating Order 2010

My Lords, this is our annual benefit and pension uprating order, but the past year has by no means been usual. The collapse of the global banking sector and the resultant recession have hit many people hard in this country. Times have been tough: people have lost their jobs and unemployment has increased. We have discussed on numerous occasions the actions that this Government have taken to respond to the recession and to support both people and the economy—measures such as the fiscal stimulus package, the support for the banking sector and for business, and the £5 billion investment in back-to-work support. This support is having an effect. As I have said before, unemployment is some 450,000 lower than forecast at the last Budget. While there will probably be some increases in the claimant count to come, the labour market figures are showing positive signs and unemployment appears to be levelling out. Meanwhile, the latest official economic data show that the UK economy returned to growth in the last quarter of 2009 and, while I would not want to tempt fate, we are cautiously confident about the future prospects of the economy. While there is much to be positive about, it would be wrong to withdraw the support on offer—both the support to help people back to work and the financial support that we provide to those out of work on low incomes or those retired. This is what today’s order is about: providing an additional £2 billion in pensions and benefits at a time when the vulnerable need our support more than ever. As is usual, income-related benefits for those of working age will be uprated in line with the Rossi index—the retail prices index, less housing costs. We use this index because housing costs are usually met separately from those benefits. This means that people receiving jobseeker’s allowance, employment and support allowance and incapacity benefit, for example, will see the support that they receive increase by 1.8 per cent from April 2010. This is more than double the rate of wage inflation. Noble Lords will be aware that it is usual to increase the state pension and some other social security benefits in line with the September retail prices index figures. As a consequence of the credit crunch, however, the RPI moved into negative territory for the first time in around 50 years. In September 2009, it stood at minus 1.4 per cent. This means that those who rely on benefits being uprated by the RPI will see their benefits frozen in cash terms, with no increase at all from April of this year. However, continuing the commitment that this Government have shown to supporting the most vulnerable in society, my right honourable friend the Chancellor announced in his Pre-Budget Report last year an increase for key carer and disability benefits of 1.5 per cent from this April to help people now, when they need it most. This includes increasing attendance allowance, carer’s allowance, disability living allowance and maternity allowance to ensure that they do not fall behind. Since September, inflation has increased, with the RPI for the year to January 2010 standing at 3.7 per cent. It is important, however, to bear in mind that the uprating process is cyclical and that inflation between last October and this March will be taken into account when benefits are uprated next year. When it comes to uprating in 2011, the annual inflation to September 2010 will include the return to positive RPI inflation from November last year. The basic state pension is also traditionally uprated in line with the retail prices index. However, the Chancellor used the Pre-Budget Report to reconfirm our commitment that the basic state pension be uprated by 2.5 per cent from April 2010. This amounts to an above-earnings increase. It means that, from April, the basic state pension for a single person will increase by £2.40 per week to stand at £97.65. It also means that the standard rate, based on a spouse’s or civil partner’s contribution, will increase to £58.50, giving a pensioner couple a total of £156.15 per week. The Government believe that the most effective way of helping pensioners is to increase the basic state pension. This increase, which is delivered as a result of a commitment first given in 2001, will ensure that more than 11 million pensioners receive an increase in the value of their basic state pension over and above the level of earnings. It will mean that pensioners will have benefited from a long-term real increase to their basic state pension of 12 per cent since 1997, worth more than £10 a week. When we looked at the potential to uprate additional pensions, the uprating of which has always been linked to prices, we faced several challenges. The RPI was negative for the first time in around 50 years. You cannot look at additional pensions in isolation, since any increase in additional pensions feeds directly through to public sector pensions and some aspects of occupational pension schemes. Nevertheless, we looked at whether it would be possible to uprate additional pensions by the 2.5 per cent underpin used for the basic state pension, but that would have cost the taxpayer an additional £1.2 billion this year. We also looked at whether it would be possible to uprate them by the 1.5 per cent used this year to uprate key disability and carer benefits. However, we felt that to do so without creating unintended consequences for public sector and occupational pension schemes was difficult. In the circumstances, we decided to hold additional state pension flat in cash terms this year. Nevertheless, the 2.5 per cent increase in the basic state pension means that, on average, recipients in Great Britain will see an overall increase of 2 per cent in their state pension. For the poorest pensioners, the Chancellor also confirmed that the standard minimum guarantee in pension credit will increase by more than earnings from April by £2.60 per week for single pensioners and £3.95 for couples. This means that, from April, no single pensioner will be living on less than £132.60 per week and no couple on less than £202.40 per week. This demonstrates a real-terms increase of over a third for the poorest pensioners since 1997. The above-earnings increase in the pension credit guarantee underlines the continuing commitment to tackling pensioner poverty by a Government who have already taken 900,000 pensioners out of relative poverty since 1998-99. In fact, the Government have spent around £100 billion more on pensioners since 1997 than we would have done if we had simply allowed the policies of the previous Government to continue. We have taken action that shows that returning to growth and pre-recession levels of employment will be the Government’s first priority. In this package of uprating proposals, worth around £2 billion for 2010-11, we are providing further significant help for those who are among the poorest and most vulnerable in society—real help when it is needed most. I commend the order to the House.