Friday, 7 March 2014

Katy's concerns over pensions and benefits

Katy Clark MP has described as “pitiful” UK Government ‘increases’ to pensions and benefits, which at just 1% - below the current rate of inflation – represent a real-terms cut for some of the poorest and most vulnerable members of society.

The Labour MP recently used a debate in the House of Commons to raise her concerns and condemn the Tory-Lib Dem Government’s inadequate ‘increases’ to pensions and benefits. In particular, she referred to the government’s change to the measure of inflation used to uprate benefits - from the Retail Price Index (RPI) to the Consumer Price Index (CPI) – which has left many people even worse-off.

Ms Clark explained, “The changes the Government has introduced since 2010 have been of huge significance for millions of the poorest in our country. Under the last Labour Government, most benefits were up-rated in line with RPI. Shortly after taking office, though, the Coalition announced it would be changing to CPI. Every year since 2010, RPI has been higher than CPI and the gap between those figures has made a real difference to pensions and benefits. The danger with the change is the cumulative impact over many years. In 2010 the RPI figure was 4.6 percent. That went up to 5.6 percent in 2011, down to 2.6 percent in 2012 and was 3.2 percent last year. The equivalent CPI figures were lower in each of those years, which has meant that some of the poorest and most vulnerable in our society have ended up with less money in their pocket.”

The MP for North Ayrshire & Arran said the Tory Prime Minister, David Cameron, had made much of the decision to introduce a ‘triple-lock guarantee’ for the basic state pension – which means it will be uprated by whichever figure is greater between the rate of inflation, average wage rises or 2.5%. However, Ms Clark points out, “The uncomfortable truth is that the triple-lock was introduced alongside the change from RPI to CPI, so the basic state pension increases in 2012 and 2013 were lower than they would have been if the previous system had been used. By 2015, the basic state pension will therefore be £1.11 a week lower than it would have been if it had risen in line with RPI.”

Referring to the impact on other groups in society, Katy Clark said, “Next year, Carers’ Allowance will be £1.69 per week lower than it would have been under RPI, with carers £255.84 worse off by April 2015 as a result. Those receiving both the higher rate mobility and care components of disability living allowance will be £571.48 worse off by the same date.

“From April 2013, the Coalition slashed the annual uplifts for a range of benefits to just one-percent. This included Employment and Support Allowance (ESA), which is the primary income replacement benefit for disabled people. The Government has exempted from the cap the higher rate care component paid to the most severely disabled people, supposedly shielding the vulnerable from it. Unfortunately, however, this is a deceptive sleight of hand. ESA is paid in two parts—a basic rate, plus an additional component—and although the additional component of £35.75 is exempt from the one-percent cap, the basic rate of £72.40 is not. Therefore, over-25s in receipt of the care component of ESA will receive £5.11 a week less than they would have received if it had increased in line with RPI.”

Ms Clark said, “These cuts matter, because they are having a real impact on some of the poorest and most vulnerable people in our society.

“Between 1997 and 2010, the Labour Government reduced the percentage of people living in absolute poverty from 28 percent of the population to 15 percent. During that time, 2.3-million children and 2-million pensioners were lifted out of poverty.

“Research from the Institute for Fiscal Studies suggests that investment in the social security system was the primary factor behind that reduction in poverty. By slashing social security benefits the Government risks putting some of the most vulnerable people in society back below the poverty line.”

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