Social Security Payments: Uprating (Hansard, 14 February 1989)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Skelmersdale)
No, my Lords.

§ Baroness Jeger
My Lords, why not?

§ Lord Skelmersdale
My Lords, whatever method of uprating is in force, it has always, under all governments, taken six months between the announcement and its implementation. That is because a centrally issued order book runs for 20 weeks. As the lead time for printing and dispatching the books to post offices is three to four weeks, a minimum period of six months is needed between the setting of the new rate and the new rate coming into force.

§ Baroness Jeger
My Lords, in view of that answer, how can the noble Lord presume to fulfil the election manifesto of the Conservative Party, which stated quite clearly: "We will continue to maintain the value of the state retirement pension"? How can the Government say that they are doing that when they are proposing the 5.9 per cent. increase in April and when even the Chancellor of the Exchequer has warned that the increase in inflation is likely to be 7 per cent. and more? Why, at this point in time, are the poorest people suffering a fall in their standard of living which is contrary to the Conservative manifesto?

§ Lord Skelmersdale
My Lords, I do not think that it is contrary to the Conservative manifesto. Under the present system, recipients will always catch up in the longer term. On an annual basis, of course, they gain when inflation falls and they lose—this is the point made by the noble Baroness—when inflation rises. That is why a major factor in this Government's policy of keeping control of inflation reflects this major priority. The historic method of uprating ensures that changes in the rate of inflation are taken into account and benefits are thus fully protected against price increases.

§ Lord Carter
My Lords, will the Minister inform the House whether, besides uprating benefits, there is an intention to put right the many anomalies and injustices in the new social security system? For example, is he aware that, in the case of an elderly couple where one partner receives a severe disability premium, that couple receives a lower income by way of benefit than a person living alone who receives a severe disability premium? Do the Government believe that, in the case of disabled people, two can live more cheaply than one?

§ Lord Skelmersdale
My Lords, perhaps I may be allowed to paraphrase what I believe to have been the noble Lord's question: are the long-term sick and disabled being disadvantaged under the method that we have chosen? The answer is "No", because we have increased their benefits over and above inflation. Of course, there are occasionally —sometimes more often—very good reasons for favouring one group over and above another group. That is one of the factors that must be taken 70 into account in the annual calculations before the uprating of benefits.

§ Lord Boyd-Carpenter
My Lords, will my noble friend confirm that the uprating of the national insurance retirement pension is an enormous operation covering many millions of people, that it is quite impossible to alter it at the last minute and that any attempt to do so would only cause confusion and hardship?

§ Lord Skelmersdale
My Lords, yes; my noble friend is quite right. We are talking about around 11 million cases.

§ Lord Jenkin of Roding
My Lords, will my noble friend also confirm that, under the statutory arrangements which are now in force, any shortfall that may occur in one year will automatically be made up at the next uprating? If the noble Baroness, Lady Jeger, shakes her head, she is perhaps harking back to the time when her own Front Bench missed out the period of the peak months of inflation in the 1970s and never made it up at all.

§ Lord Skelmersdale
My Lords, in answer to my noble friend's first supplementary question, he put the matter much more succinctly than I did, but clearly we both agree.

As regards changing from the forecast to the historic method of accounting, it is in fact the case that, over a period of eight months, pensioners lost £1 billion in today's prices. Lord Peston
My Lords, perhaps I may ask the Minister to clarify one matter which I raise in a totally non-partisan spirit and which has always troubled me. How can national newspapers, for example, produce 4 million copies overnight when the Government claim that the printing of small benefit books takes six months? Is our technology still so primitive that we cannot print these documents much more rapidly and could therefore update in a much more fine-tuned fashion?

§ Lord Skelmersdale
My Lords, I am sorry that the noble Lord finds it difficult to be non-partisan. However, the reason for his dilemma is that all 4 million newspapers are identical—4 million Guardian newspapers or 4 million Sun newspapers are virtually identical, although I accept that there are slight differences around the country. However, social security benefits are dealt with on an individual basis and that inevitably takes time.

§ Baroness Jeger
My Lords, will the Minister tell us when old-age pensioners, many of whom may well be dead before too long, will catch up on the 7 per cent. increase that the Chancellor has predicted? Will they have to wait another six months, for example, before there is another uprating that will help them?

§ Lord Skelmersdale
My Lords, the noble Baroness well knows that the next uprating will be announced next autumn and will come into effect in April next year. We must all hope and strive for a reduction in 71 the inflation rate, because that is the one thing that will most help pensioners and anyone else on benefit.

§ Lord Stallard
My Lords, will the noble Lord answer the Question? Can he assure us that the 5.9 per cent. will be raised to the present inflation rate as soon as possible? Does he recall, as we do, that in recent years pensioners were alleged to have been overpaid and that that money was clawed back by the noble Lord who spoke a few moments ago? Can he give us a guarantee that there will be uprating to bring this 5.9 per cent. up to the current rate of inflation?

§ Lord Skelmersdale
My Lords, since 1979, the increase given to pensioners has exceeded by several per cent. the total amount by which inflation has risen. As regards the noble Lord's primary supplementary question, of course the next uprating will take account of past inflation, as it did last year and the year before.

§ Lord Banks
My Lords, the noble Lord has said that when the rate of inflation is falling the present historic period of reference helps those on benefit and that when the rate of inflation is rising people on benefit suffer because they lag behind. In view of that fact, have the Government considered returning to a reference period half in the past and half in the future so that an estimate has to be made each year for, say, six months from November as to what the rate of inflation for the year will be? I do not necessarily advocate that system, but would it not allow likely future trends to be taken into account as well as past experience?

§ Lord Skelmersdale
My Lords, I believe that it would be damaging to people on benefit. History has proved that forecasting inflation, even if one forecasts only half the amount of inflation, is an unreliable method of uprating which was more often wrong than right. Even the government of the party opposite switched, as my noble friend Lord Jenkin reminded us, from the historic to the forecast method in 1976. They then promptly switched back again.