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3 November, 2021 Open access

House of Lords votes to preserve triple-lock protection for state pension

Introducing amendment to Uprating Bill, Conservative peer Baroness Altmann says that while the change would be for one year only, 'what a year to choose' when older people are facing a cost-of-living crisis

The House of Lords has voted in favour of an amendment to the Social Security (Up-rating of Benefits) Bill which would preserve the triple-lock protection for the state pension.

The Bill, which was introduced in the House of Commons on 8 September 2021, proposes that the earnings element of the triple lock - under which state pension increases are set by the highest of earnings growth, inflation or 2.5 per cent - should be suspended for one year to avoid an overly high increase due to a Covid-19-related 'statistical anomaly' in wage growth.

As a result, in 2022/2023, pension up-rating (including up-rating of the standard minimum guarantee in pension credit, and widows’ and widowers’ benefits in industrial death benefit) would be limited to a 'double lock' increasing by the higher of the September 2021 Consumer Price Inflation (CPI) figure or 2.5 per cent.

NB - the Office for National Statistics (ONS) May to July 2021 Average Weekly Earnings figure - the method chosen by the Secretary of State to measure earnings for up-rating purposes - was 8.3 per cent, while the September CPI figure was 3.1 per cent.

However, during the Report stage of the Bill's passage through the House of Lords, Conservative peer Baroness Altmann introduced an amendment that would - 

'... maintain the link between pension uprating and earnings but require the Secretary of State to make adjustments that are considered appropriate for distortions in the traditional ONS Average Weekly Earnings figures, which were caused by the exceptional pandemic effects and Government measures on the labour market.'

In fact, questioning whether the Bill is necessary at all, Baroness Altmann highlighted that -

'In the Social Security Administration Act 1992, which we are being asked to revise through the Bill, Section 150A (8) explicitly allows the earnings statistics to be adjusted. The legislation 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 [she] thinks fit.'

So this is not a question of having to use the 8.3 per cent earnings statistic.'

Finally, pointing out that while the September CPI figure was 3.1 per cent, the Office for Budget Responsibility (OBR) - in its Economic and fiscal outlook - October 2021 - predicted that next year inflation could 'peak at close to 5 per cent' and could even 'hit the highest rate seen in the UK for three decades', Baroness Altmann urged the House to support her amendment saying - 

'That is around 7.5 per cent. Last month, gas and electricity bills rose by 12 per cent. Food prices are rising, and the OBR warns of a further rise in the energy price cap next April. Yes, this is for one year only, but what a year to choose to do this, while older people are facing a cost-of-living crisis and the protection that they were relying on is being removed.'

Responding, and asking Baroness Altmann to withdraw her amendment, DWP Minister Baroness Stedman-Scott said - 

'I must remind the House that this Bill is for one year only. From 2023/2024, the legislation will revert to the existing requirement to uprate by at least earnings growth, and the Government’s triple lock manifesto commitment remains in place.

Finally, I point out that, if a percentage of 3.1 per cent or more is applied in 2022/2023 to the current rate of the basic state pension, this would mean that the full yearly rate will have increased since 2010 by £570 more than if it had been uprated by prices; that is over £2,300 pounds more in cash terms. In addition, people over state pension age are entitled to free winter fuel payments worth £2 billion every year, free eye tests and NHS prescriptions worth around £900 million every year, and free bus passes worth £1 billion every year.

However, with Baroness Altmann choosing to test the opinion of the House, the amendment was agreed by 220 votes to 178.

The Report stage debate on the Social Security (Up-rating of Benefits) Bill is available from Hansard.