Social Security (Up-rating of Benefits) Bill — Clause 1 — Up-Rating of State Pension and Certain other Benefits Following Review in Tax Year 2021-22 — 15 Nov 2021 at 18:59

The majority of MPs voted for potential additional increases in state pensions and related benefits to be determined in relation to the general level of prices, rather than in relation to the level of earnings as adjusted to take account of the impact of the Covid-19 pandemic.

MPs were considering the Social Security (Up-rating of Benefits) Bill.^[1][2][3]

The Bill^[2][3] provides for the basic State Pension, the full rate of the new State Pension, the Standard Minimum Guarantee in Pension Credit and survivors’ benefits in Industrial Death Benefit to be increased by the general level of prices and at least by 2.5% for the 2022-23 tax year.

The motion supported by a majority of MPs in this vote was:

• That this House disagrees with Lords amendment 2.

Lords amendment 2^[4] stated:

• Page 1, line 11, leave out paragraphs (a) to (e) and insert “in subsection (2), at the end there were inserted “in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.””

Had it not been rejected this amendment would have impacted subclause 1(2) of the Bill which originally provided for the pensions and benefits in question to increase in-line with prices, and at least by 2.5%^[2] and to make it so the subclause stated:

• In relation to the tax year ending with 5 April 2022, the other provisions of 10 section 150A of that Act are to have effect [as if] in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.

The presence of "as if" in the amended text appears superfluous, removing it aids with interpretation.

An explanatory note on the amendment stated^[5]:

• Lords amendments 1 and 2 intend to maintain the link between pension up rating and earnings growth, but the earnings growth figure is to be adjusted to take account of the exceptional effects of the Covid-19 pandemic on the Office for National Statistics (ONS) Average Weekly Earnings (AWE) index.
• ...
• Amendment 1 makes changes to subsection (1) of Clause 1 and provides for a review of the basic State Pension, the full rate of the new State Pension, the Standard Minimum Guarantee in Pension Credit and survivors’ benefits in Industrial Death Benefit by reference to earnings growth (adjusted for the exceptional effects of the Covid-19 pandemic). Amendment 2 makes changes to subsection (2) of Clause 1 and provides for an increase in those benefits by reference to earnings growth (also adjusted for the exceptional effects of the Covid-19 pandemic).

Amendment 1 is about the review of the the position, and Amendment 2 is about on acting on it, however the two are tied together as Section 150A of the Social Security Administration Act 1992^[6] appears intended to require the Secretary of State to act on the basis of the review's findings.

Amendments 1 and 2 need to be considered together, if one but not the other is applied an irrational position is reached where a review is required on one measure (prices or earnings) but action is to be based on a measure the review did not consider. Data could presumably be obtained from elsewhere.

The Bill's key operative provision amended Section 150A of the Social Security Administration Act 1992^[6]. Prior to the Bill subsection two of that provision stated:

• (2)Where it appears to the Secretary of State that the general level of earnings is greater at the end of the period under review than it was at the beginning of that period, he shall lay before Parliament the draft of an order which increases each of the amounts referred to in subsection (1) above by a percentage not less than the percentage by which the general level of earnings is greater at the end of the period than it was at the beginning.

The Deputy National Statistician for Economic Statistics estimated that the underlying earnings growth in the year to July 2021 was between 3.2% and 4.4%^[7]. The consumer prices index was up 2.9% in the 12 months to September 2021^[8] (the latest data available from the ONS at the time of the vote), and up 2.1% in the 12 months to July 2021^[9].

At the time of the vote it appeared reasonable to assume an adjusted earnings basis would have led to higher pensions and related benefits, however prices were up by 4.6% in the 12 months to November 2021^[10] and by February 2021 (the last data available before the new tax year) prices were up 4.9% over the previous year^[11].

It is not clear if an adjusted earnings measure, or prices, would have led to higher pensions and related benefits, or if there would have been a significant difference. The criteria for making the Covid-19 adjustment, and the timing of the review and decisions would have impacted the outcome.

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• [1] Parliament's webpage on the Social Security (Up-rating of Benefits) Bill, Parliament.uk
• [2] Social Security (Up-rating of Benefits) Bill, as introduced on 21 September 2021, Parliament.uk
• [3] Explanatory notes to the Social Security (Up-rating of Benefits) Bill, as introduced on 21 September 2021, Parliament.uk
• [4] Lords amendments to the Social Security (Up-rating of Benefits) Bill, 8 November 2022, Parliament.uk
• [5] Explanatory notes to Lords amendments to the Social Security (Up-rating of Benefits) Bill, 8 November 2022, Parliament.uk
• [6] Section 150A of the Social Security Administration Act 1992 as of 23 November 2020, Legislation.gov.uk
• [7] Far from average: How COVID-19 has impacted the Average Weekly Earnings data, Jonathan Athow - Deputy National Statistician for Economic Statistics, UK Office for National Statistics, July 15, 2021, ONS.gov.uk
• [8] Consumer price inflation, UK: September 2021, UK Office for National Statistics, 20 October 2021, ONS.gov.uk
• [9] Consumer price inflation, UK: July 2021, UK Office for National Statistics, 18 August 2021, ONS.gov.uk
• [10] Consumer price inflation, UK: November 2021, UK Office for National Statistics, 15 December 2021, ONS.gov.uk
• [11] Consumer price inflation, UK: February 2021, UK Office for National Statistics, 23 March 2021, ONS.gov.uk

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