My Lords, I shall speak also to the draft Social Security Benefits Up-rating Order 2016. In my view, the provisions in the order and the regulations are compatible with the European Convention on Human Rights. Together, these statutory instruments demonstrate the Government’s continuing commitment to support those who have worked hard all their lives, paid into the system and done the right thing to provide them with dignity and security in old age.
Let me first address the issue of those social security rates which are linked to the rise in prices. This includes the additional elements of the current state pension, working-age benefits, carer’s benefits and benefits which contribute to the extra costs that may arise as the result of a disability or health condition.
Last year, the relevant headline rate of inflation, the September consumer prices index, stood at -0.1%, which means that price-indexed benefits have retained their value in relation to the general level of prices. These benefit rates will therefore remain unchanged for 2016-17 and have not been included in the uprating order this year. For the same reason, the Government have not laid a draft guaranteed minimum pensions increase order.
I add that the Government intend to bring forward additional secondary legislation to adjust rates and thresholds within certain social security benefits that would usually be covered by an uprating order. These include adjustments to pensioner premiums within working-age benefits, pensioner amounts in housing benefit, the level of savings credit and non-dependent deductions. We will be laying these regulations, which will be subject to the negative procedure, before Parliament in due course.
As for those rates that are included in the uprating order, this Government continue to stand by their commitment to the triple-lock guarantee, by which the current basic state pension is uprated by the highest of earnings, prices or 2.5%. This year, the increase in average earnings has been 2.9%, more than inflation and more than 2.5%. This means that from April 2016 the rate of the basic state pension for a single person will increase by 2.9%—that is, £3.35, to £119.30 a week, the biggest real-terms increase of the basic state pension since 2001. Therefore, from April 2016 the full basic state pension will be more than £1,100 a year higher in 2016-17 compared to the start of the previous Parliament. We estimate that the basic state pension will be around 18.1% of average earnings, one of its highest levels relative to earnings for more than two decades and in contrast to the low of 15.8% which it reached in 2008-09.
This Government continue to protect the poorest pensioners. The pension credit standard minimum guarantee, the means-tested threshold below which pensioner income need not fall, will rise in line with average earnings at 2.9%, so that from April the single person threshold of this safety-net benefit will rise by £4.40 to £155.60 a week and will be the biggest real-terms increase since its introduction. Pensioner poverty now stands at one of its lowest rates since comparable records began. Despite the difficult economic decisions that we have had to take, I am pleased to say that this Government are spending an extra £2.1 billion in 2016-17 on supporting pensioners who have worked hard and done the right thing while continuing to protect the poorest pensioners.
The state pension regulations set the new state pension full rate that will apply from April 2016 at £155.65 per week, equivalent to more than £8,000 per year. This will mean that the new state pension will therefore stand at 23.6% of average earnings, and I am
pleased to confirm that the triple lock will apply to this full rate for the remainder of this Parliament. Our reforms will see the complicated state pension system become clearer and fairer, providing a solid foundation on which people can build up their retirement savings. They will lift many more pensioner incomes above the basic means-tested threshold for the pension credit standard minimum guarantee.
The new state pension will see many groups better off than they would be on the current system. Around 650,000 women who reach state pension age in the first 10 years can expect to receive, on average, more than £400 a year more than under the current system. Around three-quarters of those reaching state pension age will be better off under the new system by 2030. Carers, lower-earners and self-employed people will also benefit under the reformed system. However, we are ensuring that the reforms in the new state pension cost no more than the present system.
In conclusion, these measures demonstrate the Government’s overall commitment to support current pensioners by increasing their basic state pension through the triple lock, to protect the poorest pensioners by raising their guaranteed minimum income and to reform the state pension system so that it is clearer and fairer for future pensioners. Despite the tough and difficult decisions we have had to take, the Government are rewarding pensioners who have worked hard by providing them with a secure and dignified retirement. On that basis, I beg to move.