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Pensions Bill

I should like to support my noble friend Lord Oakeshott. Amendment No. 136 and the paving amendment that stands with it in this group relate to one of the most important aspects of the Bill—the long-term incomes of pensioners. More than any other group in the country, pensioners are affected by uprating policy because they are exposed to it for longer. I have often felt that the ramifications of upratings policies across the benefits field are not given the degree of care and attention that they should be given by the House of Commons and by your Lordships’ House. From year to year, although the changes may be apparently slight in terms of the figures of the annual increases, over periods of time they have profound effects on policy. The most important thing Mrs Thatcher’s Conservative Government did in relation to benefits was to de-link the pensions uprating from earnings in 1981. By a margin, it was the most important thing done by that Government. I want to clothe my noble friend’s robust and sound arguments with one or two examples of what can happen over a spread of years. For example, if the 25 pence age addition that 330,000 pensioners who reach the age of 80 each year are blessed with—the 25 pence that was first introduced in 1971—had been uprated in terms of earnings since 1971 it would now be worth nearly £5 per week. As my noble friend rightly pointed out, the evidence is that £5 a week would be worth having if you were 80 and reliant on benefits; in that case, people would welcome such a pension addition. Let me give two other figures at random to illustrate how big an impact this would have. Between 1997, when the Labour Government first came into office, and 2008—roughly 10 years—the retail prices index went up by 37 per cent. Over that same period, the pension level went up by 45 per cent, but the increase in average earnings was 54 per cent. Translated into a single pension, that is £5.60 per week—again, an increase of £5 per week had uprating been linked to earnings during that period. That is £290 per year. The Prime Minister would need to go about the United Kingdom making special one-off payments of £200 a year for fuel and £200 for health checks for young people if there were consistent benefit policies that uprated the benefits available to people in relation to the increase in earnings and not, as happens currently, to the RPI. Let us look at the broader sweep. If the basic pension had kept pace with average earnings since 1980, it would have amounted to £137 per week for a single pensioner. That is nearly at pensioner credit levels. We could deal with all the means-testing difficulties that we have rehearsed over many debates. That sum is calculated in a recent publication by the Joseph Rowntree Foundation called The Impact of Benefit and Tax Uprating on Incomes and Poverty, which I commend to the department and the Minister as making instructive reading. For the reasons I have outlined, the uprating policy can, over a period, have a dramatic impact on pensioner poverty and across the whole benefits structure. The noble Lord, Lord Skelmersdale, is right to be careful about the cost of such a change; it would not be cheap and would involve making a principled decision about whether to allow pensioners to share in the increasing prosperity of the nation. The Rowntree Foundation report makes the very positive suggestion that we should be looking at some of the increases that fiscal drag brings into the Treasury over these periods; where the tax thresholds are not indexed to the same extent and more people are brought into taxation, the Exchequer benefits. The report makes some compelling calculations which demonstrate that there is some comfort for the noble Lord, Lord Skelmersdale, and others who rightly think that this has to be paid for and that the money cannot just be conjured out of thin air. This is one of the most important amendments to the Bill and one of the most important debates. I encourage my noble friend to seek what comfort he can from all sides of the Committee, but I would press the amendment to a Division at some stage in our proceedings; it is a core issue which needs to be decided. People need to be asked on which side of the divide they stand. I do not think it is fair to do anything other than attach the uprating to average earnings in April 2012—nothing less will do.