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12.46 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Andrew Mitchell): The issue that we are debating concerns the rules for the payment of invalidity benefit to people over pension age. Until April 1995, invalidity benefit was the main social security provision for sick and disabled people who were incapable of work in the long term. Hon. Members will recall that we overhauled that benefit provision in April 1995 and replaced invalidity benefit with the new incapacity benefit.
I think that it is important to ensure that we do not lose sight of the background to that significant improvement. The rapid growth in recent years in both expenditure on invalidity benefit and in the number of people receiving it was beyond dispute. If left unchecked, spending on that benefit alone was forecast to reach £10 billion by the end of the century; yet there was no evidence of any deterioration in the health of the nation as a whole--no wonder concerns were growing that invalidity benefit might be going to people for whom it was never intended. No responsible Government could ignore those developments.
That is why we replaced invalidity benefit with incapacity benefit in April 1995. We have provided a more objective test of people's ability to work, to ensure that benefit is focused on those who are genuinely incapable. The changes ensure a fair system for people who are unable to work that is also fair to the taxpayer. These reforms are a major success, and are on course to reduce expenditure by £2.3 billion a year in the long term.
I pay tribute to the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) for the energy that he has devoted to pursuing this specific case, and I congratulate him on securing this Adjournment debate. His interest in these matters is such that my officials had no difficulty identifying the case that he wished to raise. I am grateful to him for confirming the specifics of that case, and I welcome the opportunity to debate the issue. Having examined Mrs. Weatherby's case, I am satisfied that her benefit claim has been handled correctly by the Benefits Agency. The hon. Gentleman may find it useful if I outline the background to the rules that have led to the decision in Mrs. Weatherby's case.
Under the invalidity benefit scheme that existed before the introduction of incapacity benefit in April 1995, payment of benefit could continue for up to five years beyond the state pension age. However, for people over pension age, the amount of benefit paid was based on the rate of retirement pension to which they would be entitled if they had claimed it instead. That meant that invalidity benefit changed to the pension rate, as the hon. Gentleman said, at the age of 60 for women and 65 for men.
Unlike invalidity benefit, the amount of retirement pension to which people are entitled depends on their overall national insurance contribution record throughout
their working life. That is why people who chose to stay on invalidity benefit found that it went down after they reached pension age, if they had not paid enough national insurance contributions to qualify for a full-rate retirement pension. That is what happened in Mrs. Weatherby's case.
I should explain that that rule simply put such people in the same position as those who had been working immediately before reaching retirement age. That is clearly right, as to do otherwise would have placed pensioners who chose to remain on invalidity benefit at an unfair advantage over those receiving their retirement pension.
We have always believed that those rules complied with European equal treatment law. In particular, directive 79/7/EEC on equal treatment in social security specifically allows different pension ages for men and women, along with the possible consequences for other benefits. However, on 1 April 1992, as the hon. Gentleman mentioned, a social security commissioner decided that such different treatment of men and women was not permitted by the directive, and that invalidity benefit in payment to women should not be changed to the pension rate when they reached the age of 60.
The Secretary of State and the chief adjudication officer jointly appealed against the social security commissioner's decision to the Court of Appeal. As a result, the increased rate of invalidity benefit awarded to women after the age of 60 was suspended by the Secretary of State pending the outcome of the appeal and clarification of the law.
The Government acknowledged that, while the appeal was outstanding, this area of the law remained unsettled, and were sensitive to the concerns of the women affected. That is why we decided not to impose the suspension of the increased benefit in cases of hardship. Mrs. Weatherby was one of a number of women who were allowed to continue receiving the higher rate of benefit awarded as a result of the commissioner's decision, even though that decision remained the subject of an appeal.
In January 1994, the Court of Appeal decided to refer the case to the European Court of Justice for a preliminary ruling on questions of European law relevant to the case. The European Court of Justice delivered its ruling on 11 August 1995. That ruling fully supported the Government's position and confirmed that the linking of invalidity benefit rules to state pension age was permitted by European law.
The case was formally disposed of by the Court of Appeal in December 1995. By that time, invalidity benefit had been replaced by the new incapacity benefit, and those receiving it had transferred to the new benefit. Following the European Court's decision, the Benefits Agency undertook to review those cases where an increased amount of invalidity benefit was--as we now know--incorrectly awarded, following the commissioner's decision in April 1992.
Once those cases had been reviewed by an adjudication officer, in line with the court's decision, it followed that there was no longer any legal entitlement to the increased invalidity benefit. Accordingly, payments that were being made on the grounds of hardship automatically ceased.
I set out those points clearly to the hon. Gentleman, as that is precisely the position that applied to Mrs. Weatherby. I emphasise that the increased money paid to people in that position was based on a decision
that was later held by the European Court to be incorrect. The money has therefore been overpaid. I can, however, reassure the hon. Gentleman that we will not take any action to recover those overpayments from his constituent or any others who were involved.
Mr. Llwyd:
I appreciate the Minister's detailed response. It is a principle of social security law that, if the applicant has not fundamentally misled the agency, there is no ground for it to claim repayment, but I hear what the Minister says.
Mr. Mitchell:
The hon. Gentleman is right in his interpretation of social security law. I stress that, in the circumstances, the money was overpaid, but that the Government will not seek to recover it.
The hon. Gentleman noted that the European Court ruled in Thomas that the different upper age limit breached European law. My response is that the Thomas case concerned non-contributory severe disablement allowance. The Graham case was decided by the European Court after the Thomas case, and the court held that the linking of contributory benefit to pension age was permitted by the European equal treatment directive.
Invalidity benefit and its replacement, incapacity benefit, are contributory benefits designed to replace earnings during periods of sickness. We believe that it is reasonable to limit or, as with incapacity benefit, to cease paying such a benefit when people reach an age where they are no longer required to work. Once a person has reached pension age, we believe that retirement pension or a benefit paid at the equivalent rate is appropriate.
Mr. Llwyd:
The Minister is generous in giving way again. The point at issue in the Weatherby case and the other cases to which I referred is that, under the national conditions of service, teachers are entitled to work until age 65. The Minister referred to people being
Mr. Mitchell:
I understand the hon. Gentleman's point. Sadly, however, for whatever reason, his constituent was unable to work. That is the key fact that the law and the Department of Social Security should take into account.
Income-related benefits would remain available for people who subsequently found themselves without sufficient income or other resources. The Government have made additional sums available to poorer pensioners who have no means of support other than the state pension. That is to protect people, especially poorer pensioners, on low incomes.
Linking the payments of invalidity benefit to people who have reached pension age to the retirement pension rate was not a new rule. It operated under successive Governments and was a long-established principle in the national insurance system as a necessary consequence of the different retirement ages for men and women.
"no longer required to work."
There is a requirement to work until 65. It is a choice, of course, but it is a standard condition of service in the teaching profession. That distinguishes those cases.
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