Welfare Reform Bill

My Lords, this amendment is intended to give the Government the flexibility to uprate the basic state pension by the commitment of 2.5 per cent and to uprate other social security benefits as the Secretary of State thinks fit, even though the level of prices, as measured by the retail prices index, has not increased. Announcements of the following year’s benefit rates are made at the Pre-Budget Report and the subsequent uprating statement. The proposed rates of benefit that will apply from 2010 will be announced in the normal manner. Noble Lords will therefore appreciate that I am not in position to pre-empt those announcements in our deliberations on this amendment. That said, as the Chancellor made clear in this year’s Budget, the Government’s commitment to increase basic state pension annually by a minimum of 2.5 per cent stands, and other benefits will not be reduced in the event of negative inflation. The new clause proposed by this amendment allows the Government to fulfil their promise to pensioners. It may helpful to noble Lords if I give a brief technical explanation of why we have tabled this amendment. The proposed new clause is inserted into the Social Security Administration Act 1992. This provision dates back to the mid-1970s, a time of double-digit inflation, when the likelihood of negative inflation is unlikely to have been at the forefront of the draftsman’s mind. Section 150 of the Social Security Administration Act 1992 requires that the Secretary of State reviews the rates of benefits and pensions in each year to establish whether they have kept their purchasing power. Where the general level of prices has increased, the Secretary of State is required to lay the draft of an uprating order. Since the power was introduced, the benchmark for the review of prices has been the retail prices index. Since 1980, the reference point has been the retail prices index for September, which this year is minus 1.4 per cent. This technical amendment, for 2010 only, allows the Secretary of State to make an uprating order in the absence of an increase in prices, as measured by the retail prices index, and to deliver the increase in the basic state pension from April, which will be worth around £1 billion to pensioners over the year. The amendment makes a change to Clause 51 and ensures that the new power will come into force on Royal Assent. It will therefore allow there to be a benefit uprating for April 2010 in line with the normal uprating timetable. I feel sure that this will have the full support of noble Lords. I beg to move.