Pensions and Inflation (Hansard, 7 June 1990)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, Her Majesty's Government attach a high priority to protecting the interests of elderly people. In particular the state retirement pension is uprated annually in line with the retail prices index.

§ Lord Stoddart of Swindon
My Lords, is the Minister aware that that is the second disappointing and unsatisfactory Answer that I have had this week? Is he further aware that, under this Government, married couple pensioners are losing £20 per week? Does he not agree that most pensioners will be hard hit because of an uprating of their pensions in April of only 7-6 per cent, when inflation is now running at 9-6 per cent, and the pensioner index is even higher? Even if the Minister will not agree to an immediate uprating of the pension, will he arrange for a lump sum payment to be made to all pensioners between now and Christmas and perhaps also increase the Christmas bonus?

§ Lord Henley
No, my Lords. I must say that I am sorry the noble Lord feels disappointed in the answers that he has received for the second time in two weeks.

§ Lord Graham of Edmonton
It was this week!

§ Lord Henley
My Lords, I am sorry, it was the same week.
However, perhaps I may deal with some of the points that the noble Lord has raised. He said that inflation is now 9 per cent., and that the uprating was 7-6 per cent. The uprating was based upon the September to September figure. It is impossible to bring forward the uprating any earlier than the next April for obvious technical reasons.
The noble Lord also asked why we could not restore the link in uprating with earnings. The link between the basic pension earnings is not the key factor in proving pensioners' income. What is most important to pensioners is the value of their total income from all sources, and not just from the retirement pension. Between 1974-79 (when the noble Lord's party was in office) and when pensions were increased in line with the higher figure between earnings and prices, total net incomes increased by a mere 3 per cent, which is 0-6 per cent, a year. During our first eight years in office pensions increased in real terms by over 31 per cent.

§ Lord Stoddart of Swindon
My Lords, can the Minister give me an answer about the possibility of a lump sum payment?

§ Lord Henley
My Lords, I have already answered that question. I said no.

§ Lord Boyd-Carpenter
My Lords, is not the noble Lord, Lord Stoddart of Swindon, right in pointing out that pensioners are people who are particularly vulnerable to the effects of inflation? Will he therefore use his own influence with the trade unions not to press excessive wage demands which are a major cause of inflation.

§ Lord Henley
My Lords, my noble friend is correct. I should like to make one point about the effect of inflation. When the noble Lord's party were in government, income from savings for pensioners actually went down. Over the past eight years savings income for pensioners, because we have inflation more or less under control, has increased by 130 per cent.

§ Lord Jenkins of Putney
My Lords, is the noble Lord aware that salary inflation at the highet level is at a much higher rate than ordinary rates of inflation? Will he not therefore speak to some of his friends rather than always addressing the trade union members who are the least offenders in this respect? The offence is among the Government ranks and among their friends.

§ Lord Henley
My Lords, I shall not be drawn into a discussion on salary inflation. The Question on the Order Paper is about the uprating of the state retirement pension. As I stated at the beginning, the state retirement pension is uprated annually in line with the retail prices index.

§ Baroness Phillips
My Lords, can the Minister explain why pensioners receive a pension as man and wife, whereas their poll tax is levied on an individual basis?

§ Lord Henley
My Lords, that is a completely different question and one which goes quite beyond the Question on the Order Paper.

§ Lord Stallard
My Lords, the Minister is quite correct when he says that this is uprated from September to September. It means—and certainly has in recent years—that the pension has never really increased in line with the cost of living and inflation. For instance, last year it was increased by 0-9 per cent, when inflation by September stood at 7-6 per cent. We never make up that loss between the April and September period. Is there not therefore a further argument for a biannual increase? With computerisation, is should not be too difficult to review the increase every six months.

§ Lord Henley
My Lords, the noble Lord is correct; there is a lag. However, any increase in inflation after September will obviously be taken into account in the next uprating. The noble Lord seems to think that with computerisation we would be able to cut down on the time between the uprating period of September to April. I am advised that that is not possible; and even if it were we would not be able to reduce it by more than two or three months, compared to the existing six-month period. Therefore, there always has to be a lag, but this only exists when inflation is rising; the minute inflation comes down, the pensioner benefits because the RPI for September to September will be higher than it is in April.

§ Lord Stallard
My Lords, with all due respect, I do not think that the noble Lord has understood the issue. We can never make up the lag. The uprating last year was, for instance, 5-9 per cent, with inflation running at 7-6 per cent, in September. It has now increased to 7-6 per cent. What happens to the months between April and September? From April this year the uprating was 7-6 per cent, and inflation is now 9.4 per cent.—God knows what it will be by September!—and the increase next April will perhaps be 9-4 per cent. However, we have still lost the few months in between.
Regarding what happens if the inflation rate goes down and pensioners gain, does the Minister recall that when this happened previously, his Government clawed back the extra amount which had been paid? They brought in legislation to claw back the extra money. They should get their facts right.

§ Lord Henley
My Lords, we have to carry out the uprating on the historic basis. This means that we have to have delay between the uprating period and the time when the increased pensions are paid. We could return, as happened before, to a basis of forecasting inflation; but that is far more unreliable.

§ Lord Hailsham of Saint Marylebone
My Lords, does not the point which the noble Lord, Lord Stallard, has been making in his last two supplementary questions simply underline the necessity of keeping inflation down? Further, does not my noble friend agree that, without looking further than the Benches opposite, if the Labour party want to make themselves intellectually respectable, they should 1510 stop suggesting spending more money on every problem which arises in this House?

§ Lord Henley
My Lords, I thank my noble and learned friend for those very helpful remarks.

§ Lord Carter
My Lords, is the Minister aware that cutting the link between the increases in pensions and the increases in average earnings, which was referred to by my noble friend Lord Stallard, has saved the Exchequer £17 billion since 1981? That is the money which would have gone to pensioners. When the Government take credit for the reduction in the national debt in recent years, should they not be thanking the pensioners who contributed substantially to that reduction?

§ Lord Henley
My Lords, I do not necessarily accept the figure given by the noble Lord. As I stated earlier, the most important aspect to look at is not the basic state retirement pension, but the average incomes of pensioners which have increased by about 31 per cent, in real terms over the years that we have been in office: whereas, when the noble Lord's friends were in office it increased by a mere 3 per cent, over six years, which is 0.6 per cent, per year.

§ Lord Carter
My Lords, if the Minister intends to quote the figures for the occupational pensions and the savings which contribute to pensioners' incomes, is he aware that the Government's own figures show that these contribute only a small amount to the incomes of the poorest pensioners, that one fifth of pensioners are totally reliant upon benefits, and that 60 per cent, are relying upon state benefits for 80 per cent, of their income?

§ Lord Henley
My Lords, if the noble Lord wants figures just on total social security benefits, I can assure him that the increase in real terms for pensioners who are dependent purely on social security benefits is about 17 per cent, compared to a mere 12 per cent, when the noble Lord's friends were in office.

§ Lord Stoddart of Swindon
My Lords, in relation to the point made by my noble friend Lord Stallard, does not the Minister realise that I was throwing him a lifeline when I suggested a lump sum payment? Will he reconsider the matter?

§ Lord Henley
No, my Lords.