- 3.1% rise in State Pensions next year means a real terms cut, despite 2019 Manifesto commitments to protect pensioner.
- Scrapping the triple lock earnings link takes over £5billion away from pensioners next year – the Budget’s biggest cost-cutting measure.
- Pensioners should not be used as a cash machine to pay for spending elsewhere, such as a lower bank levy or alcohol duty, especially as we face a cost of living crisis.
- Tuesday’s Lords debate could stop this and ask MPs to think again as the Commons was not given correct information when it voted on the legislation to remove triple lock.
3.1% rise proposed for State Pensions next year is a real terms cut and a betrayal of Manifesto pledge: I believe the Government needs to think again because this will certainly not be enough to protect pensioners against rising living costs. When the legislation to scrap the triple lock is debated on Tuesday in the Lords, we have a chance to vote to keep the earnings protection promised to pensioners in every party Manifesto.
The Chancellor’s Budget speech announced 4% inflation which “is likely to rise further”: The Budget confirmed advice from the Office for Budget Responsibility (OBR) which said “We expect CPI inflation to reach 4.4% next year”, warning it could peak “at close to 5%”. It also added “And it could hit the highest rate seen in the UK for three decades”. Gas and electricity bills rose 12% last month, and food prices have risen too. The OBR Budget report (page 85) points out that, since March 2021, forecast average earnings figures for year 2021-22 have been revised upwards by 2.7% above the previous expected number and CPI is now expected to be 1.6% higher than previously anticipated. Clearly, the last few months have seen a significant change in expectations for next year, which means increasing State Pensions by just 3.1% is inadequate.
Scrapping triple lock will save over £5billion a year, but pensioners should not be used as a cash machine to fund other spending: Abandoning the triple lock for pensioners is the biggest spending reduction in the Budget. The Budget Red Book (page 136 Table 5.1) shows that by not sticking to the triple lock and using 3.1% CPI instead, the Treasury plans to save £5.4 billion in 2022-23, £5.8billion in 2023-24 and £6.1billion in 2023-34. In the next five years over £30billion will be taken away from pensioners, leaving more than 12 million citizens worse off. Too many chancellors have eyed pensions as a tempting target to raid when they want to find large sums of money. But pensioners should not have their pockets picked to fund projects for cash-strapped Governments. Society has a duty to look after its elderly citizens. EVen increasing pensions by 5% would still save around £3billion and protect pensioners in line with earnings.
Not all pensioners are well off and this will leave many struggling to afford their everyday bills: Taking away proper protection for one year may seem alright if you believe the myth that pensioners are all pretty well off, but in the real world there are already over 2 million pensioners in poverty and the UK state pension is the lowest in the developed world according to the OECD. Many pensioners already struggle to make ends meet and most have not just sailed through Covid-19 unscathed. Some are wealthy, but most are not. Only around 3% of pensioners earn enough to pay higher rate tax and pensioner poverty was actually rising before the pandemic. These older people are facing a cost of living crisis without the protection they were relying on. This is Parliament and politics at its worst. With a 6.6% rise in the living wage announced in the Budget to help families with the cost of living crisis and money found for so many other areas such as cutting bank levy or alcohol duty, it seems the Chancellor has not been straight with pensioners.
MPs decision to scrap triple lock earnings link was based on false premise: MPs were asked to approve this measure after being told the only alternative to taking away the triple lock would be to uprate state pensions by over 8%, reflecting the ONS ‘Average Weekly Earnings’ figure for July. They were told this would cost an extra £5bn. It was on this basis that that Parliament decided to abandon the Manifesto commitment to protect pensioners, and the legislation passed through all the stages in the Commons in 2 ½ hours, with very few MPs present. However, these statements misrepresent reality.
It is simply not correct that the Government had no alternative to an 8%+ rise: It has insisted that it would have had to use the precise figure reported by the ONS for Average Weekly Earnings, because this is the statistic it has always used for last few years. However, it would be perfectly in order to adjust this figure (which was over 8%) to take account of any upward bias caused by the exceptional effects of the pandemic on the labour market and the furlough scheme last year. The actual wording of the 1992 Social Security Administration Act (which is the legislation we are amending and requires the Government to review the level of state pensions each year to ensure it keeps up with average earnings) allows the Government full discretion to use an earnings measure that is considered appropriate to reflect the impact of Covid-19 measures. The 1992 Act (Section 150A subsection (8)) explicitly states that when reviewing how to uprate the state pension each year ‘the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit’. Clearly, then, the law already allows the Government to adjust the ONS figure of over 8% to a lower number. MPs were led to believe this was not possible.
ONS, OBR statistics are available and Government has plenty of statisticians to produce revised figures: In fact, there is a range of alternative numbers to use that give a better picture of the earnings increases. The ONS has produced its own estimates and even more recently and the Budget analysis from the OBR reports earnings growth of 5% for 2021. It defies belief that the entire army of statisticians and actuaries in the DWP and Treasury are unable to produce a reasonable adjusted earnings figure to uprate state pensions next year. Earnings protection is the most important element of pensioner protection.
The Commons passed this legislation after assurances that 3.1% rise would protect pensioners against rising living costs: When MPs debated this legislation to scrap the triple lock for 2022-23 in September, Ministers gave the following assurance:
‘This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions, while also preserving the spending power of pensioners and protecting them from increases in the cost of living.’
In summing up MPs were told the so-called ‘double lock’ of cpi or 2.5% ‘will ensure that pensioners’ spending power is preserved and that they are protected from the higher cost of living.’
Since then, next year’s inflation outlook has sharply worsened due to recent rises in fuel bills and much higher inflation expectations for food and utilities. Indeed, September’s 3.1% cpi figure was artificially lowered by the effects of the pandemic on hotels and restaurants, as well as household services. Sharp falls in these costs offset rising bills for fuel and food. How is it right that the Government says it cannot use the earnings statistics as they are too high, but instead wants to use a cpi number that is too low? Particularly when this is not even strictly necessary because the legislation would allow for the earnings figures to be adjusted for the pandemic.
On Tuesday, the Lords could send this legislation back to the Commons for MPs to think again: The Bill to abandon the triple lock will be debated on Tuesday in the Lords and I am determined to try to ask Peers to support amendments that would keep the triple lock, ensure that the Secretary of State can adjust for any upward distortions on earnings from the pandemic and protects pensioners, particularly the poorest, as they were promised in 2019. I believe millions of pensioners deserve better treatment. It’s time for Parliament to stand up and protect good citizens. What are we there for if not to try to stop dangerous policies that are based on false information.