Dear Colleague,
THE SOCIAL SECURITY (UP-RATING OF BENEFITS) BILL 2021
Every year, I am required to undertake a review of Social Security rates to consider whether benefits have kept pace with inflation or earnings increases. Last year, we changed the law for one year to increase State Pensions by 2.5%, when average earnings had fallen and price inflation increased by half a percentage point. If we had not taken this action, State Pensions would have been frozen. This year as the economy and businesses have reopened thanks to our world-leading vaccination programme, and millions have moved off furlough, the labour market has shown strong signs of recovery. The latest figures for the measure used for up-rating benefits has growth at 8.8%, which is over 2 percentage points higher than at any time over the last two decades.
At a top level, this recovery in earnings is remarkable, but it is also in reality a statistical anomaly, distorted by the cumulative effects of the natural economic reactions to the Coronavirus pandemic and the labour market response to the supportive measures introduced by the Government to protect livelihoods. Therefore, an adjustment is needed to protect pensioner buying power, whilst ensuring fairness to younger taxpayers. Recognising this Covid-related distortion, the Government is again setting aside the earnings link for the year 2022/23 and continuing the double-lock of at least inflation or 2.5%, with inflation expected to be the higher figure this year. The Triple Lock policy will be applied in the usual way from next year for the remainder of the Parliament.
This approach will ensure pensioners’ spending power is preserved and that they are protected from higher costs of living. But it will also ensure that as we are having to make difficult decisions elsewhere across public spending – including freezing public sector pay – pensioners are not unfairly benefitting from a statistical anomaly. The benefits affected by this Bill are: the basic State Pension, new State Pension, Pension Credit Standard Minimum Guarantee and survivors’ benefits in Industrial Death Benefit. State Pension and Pension Credit uprating is a reserved matter for Great Britain; although survivors’ benefits in Industrial Death Benefit are devolved to the Scottish Government. They are, however, currently being delivered by DWP on behalf of the Scottish Ministers under an Agency Agreement whilst the Scottish Government builds its own delivery capacity. If the Scottish Government wishes this Agreement to continue, then it will need either to offer a Legislative Consent Motion, or to take legislation through the Scottish Parliament which has identical effect to the relevant provisions in this Bill.
Given the urgency of the matter, it has asked the UK Government to proceed with a Bill assuming Legislative Consent while the Scottish Government considers its preferred way forward. The up-rating of earnings linked benefits and pensions is a transferred matter in Northern Ireland. The Northern Ireland Executive has a policy of maintaining parity with Great Britain through its own legislation. In relation to this Bill, Northern Ireland will not need to match any primary legislation. As this Bill amends the Social Security Administration Act 1992, the Executive will lay their up-rating Order under the powers transferred in section 87 of the Northern Ireland Act 1998 An all MP’s briefing is scheduled for Thursday 9th September, 15:00 – 16:00, on MS Teams.
A briefing for all peers will be scheduled for next week.
