Image shows money in notes and coins

On 23 March 2022, the House of Lords is due to debate a regret motion related to the draft Social Security Benefits Up-rating Order 2022. The order is a statutory instrument which gives effect to the up-rating of certain inflation-linked welfare benefits and tax credits for the 2022/23 financial year. From April 2022, the benefits are due to increase by 3.1%. The rate of increase has been criticised for not meeting the rising cost of living on benefit recipients.

The instrument was laid before Parliament on 17 January 2022 under the draft affirmative procedure. It must be approved by both Houses before it can come into force. The order was considered by the House of Lords in Grand Committee on 9 March 2022, and a motion to approve the order is due to be considered by the House of Lords on 14 March 2022.

Lord Davies of Brixton (Labour) has laid a regret motion related to the order, which is due to be debated on 23 March 2022. It is a non-fatal motion. If agreed, the motion would formally signal that the House has reservations about the order. However, it would not stop the order from having legal effect.

What would the order do?

The order has been laid under the powers of the Social Security Administration Act 1992. The act provides that the Government must review the rate of certain benefits to determine whether they have retained their value in relation to the general level of prices. The order gives effect to the Government’s decision to raise benefits by 3.1% for 2022/23, in line with the rate of consumer price index (CPI) inflation in the year to the end of September 2021.

The explanatory memorandum for the instrument, produced by the Department for Work and Pensions, provides further information on the benefits and tax credits which will be up-rated. It says the “main benefits affected are attendance allowance, carer’s allowance, disability living allowance, personal independence payment and the additional state pension”.

The order would also up-rate the basic state pension and the full rate of the new state pension. Previously, pensions were subject to the ‘triple lock’, which committed the Government to increase them by whichever was the greater of 2.5%, CPI inflation, or the average increase in earnings. The Social Security (Up-rating of Benefits) Act 2021 temporarily suspended the earnings element for 2022/23, due to what the Government described as a “statistical anomaly” of 8% earnings inflation in 2021 caused by the coronavirus pandemic. The order therefore gives effect to the up-rating of state pensions by the rate of CPI inflation.

The secretary of state also has discretionary powers to raise the rate of a range of other benefits, including the personal and standard allowances of universal credit, income support, and housing benefit. The order gives effect to the Government’s decision to up-rate those, and other, benefits by 3.1%.

The Department for Work and Pensions has published a full list of the proposed benefits and pensions rates for 2022/23. Further information on the benefits up-rating can be found in the House of Commons Library briefing Benefits Uprating 2022/23 (2 February 2022).

Why has the up-rating been criticised?

The benefits increase has been criticised because inflation is expected to be much higher in April 2022 than it was in the year to the end of September 2021, which is the reference period used to decide the level of up-rating. Inflation has been rising in recent months, partly due to significant increases in energy prices. The Bank of England has estimated that inflation could be 7.25% by April 2022.

The increases come on top of the removal of the £20 a week universal credit uplift, above-inflation energy price rises in October 2021, and tax rises from April 2022 (such as the increase in national insurance contributions to finance the health and social care levy). The Resolution Foundation think tank has said the uprating could cause a “real, damaging, but avoidable living standards rollercoaster for poorer households”, which spend more of their incomes on essentials such as fuel and food.

The Joseph Rowntree Foundation (JRF) charity has said that “400,000 people could be pulled into poverty” by the real-terms cut to benefits from April. Its analysis found:

Around nine million households on means-tested benefits due to low incomes, both in and out of work, will experience an average real-terms cut of £500 per year.

The JRF said low-income households with children would be even worse off, experiencing a “real-terms cut of £720 per year”.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), has said that the unemployed are the group most in need of help with the rising cost of living. He said that increasing their benefits:

by 6 percent in April, the likely inflation rate, rather than the planned 3.1 percent would largely protect their living standards on average and would cost about £2 billion in the coming year. Future uprating could be adjusted so that it does not increase spending in the medium term.

The IFS has stated that it is an “opportune moment” for long-term reform of the way benefits are uprated. It said that instead of using the current “lagged measure of inflation”, an alternative would be to use:

near-term forecasts for inflation to attempt to increase benefits in line with the actual annual rate of inflation that applies at the point of increase. This is what is already done with the uprating of excise duties.

The Government has set out a package of measures to help households with rising energy prices and the cost of living. The Secretary of State for Work and Pensions, Thérèse Coffey, told the House of Commons Work and Pensions Committee on 9 February 2022 that she believed it was “reasonable” and “sensible” to continue the policy of uprating benefits in line with inflation the previous year.

What parliamentary scrutiny has the order received?

The order was considered by the Joint Committee on Statutory Instruments on 26 January 2022, but it was not reported to either House.

On 1 February 2022, the order was considered by the House of Lords Secondary Legislation Committee, but it did not draw it to the attention of the House.

The House of Commons considered the order on 7 February 2022. The order was approved on division, by 298 votes to 29.

The House of Lords considered the order in Grand Committee on 9 March 2022. Introducing the order, the Department for Work and Pensions (DWP) minister, Baroness Stedman-Scott, said that it provided “£4 billion of expenditure on benefits for pensioners and £2.6 billion on benefits for people below state pension age” in 2022/23. However, the level of uprating was criticised by the other members who took part in the debate.

Baroness Lister of Burtersett (Labour) said it was:

[a] shamefully low increase in social security benefits in the face of forecast inflation of 6% to 7.25% this April, which will go even higher later this year following the horrifying assault on Ukraine.

Baroness Lister said the Government’s response to the cost of living crisis had been “inadequate and poorly targeted towards those who will suffer most”. She said the DWP should undertake a review of the uprating procedure.

Lord Shipley (Liberal Democrat) said that the uprating was “out of date” and that “the spring statement needs to bring proper solutions to the deepening crisis in our cost of living”.

Baroness Sherlock, the Opposition DWP spokesperson, questioned why the inflation rate used for the uprating needed to be taken from the previous September, particularly as “we are always told how flexible, dynamic and instantly responsive universal credit is”.

In response, Baroness Stedman-Scott said that she agreed that “people [on benefits] are struggling”, but she claimed the Government had offered a package of support:

We have raised the national living wage, reduced the universal credit taper rate, increased work allowances and provided £140 million a year in discretionary housing payments and cold weather payments of £25 a week to up to 4 million people.

She also defended the uprating procedure. She said that “all benefit uprating since April 1987” had been calculated with reference to the rate of inflation in the year to the previous September.

A motion to approve the order will be considered by the House of Lords on 14 March 2022.

Lord Davies’ regret motion on the order is due to be considered in a debate of the full House on 23 March 2022.

Read more

Cover image by Suzy Hazelwood from Pexels.