State Pension Credit Bill [Lords]

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Mr. Boswell: Will the hon. Gentleman acknowledge that no less than the Association of British Insurers has estimated that the annual current savings gap is in the order of £27 billion, which is a lot of anyone's money even if the figures are not precise.

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Mr. Webb: It is indeed. There is a substantial savings gap, but even the best of researchers would struggle to reach a robust conclusion whether a particular measure had influenced the behaviour of a group of current workers to save more or less, rather than the many other issues that may be affecting their savings behaviour. Although I understand where the hon. Gentleman is coming from, my fear is that even if we had such a report it would not convince anyone either way. I would not object to such a report, but I doubt whether it would be possible to disentangle its findings from the many other things that affect people's propensity to save, among which the proposal is, as he and I probably agree, likely to be peripheral. Trying to ascribe an amount to it is, I suspect, almost impossible.

Far more practical and desirable is amendment No. 19, which would require the Secretary of State to put in the public domain reliable information on the numbers receiving the different components of the pension credit and the numbers entitled to it. The issue of take-up is fundamental to assessing the pension credit, and the hon. Member for Hertsmere is right to raise it.

We should be especially worried about take-up. The Government are doing a good thing. They are contacting people when they reach pension age and telling them about retirement pensions and pension credit. Over time, that will tend to increase take-up. That is entirely good, and the Government should have done that a long time ago. I support the Government that far. The problem with hitting people at 60 and suggesting that there might be quite a good level of take-up on the inflow is that it will be about another 40 years before everyone has been through the process. All Committee members would want some serious progress on take-up substantially more rapidly than that. We cannot merely wait until everyone in the system now has worked their way through, as we shall probably all be dead by then. We need to make more rapid progress.

Reports such as the amendment suggests would put pressure on the Government to give us reliable figures on take-up. One of the more disappointing aspects of the Department for Work and Pensions and its predecessor in recent years is that it has been rubbishing its own take-up figures. Lord Rooker of Perry Barr, the previous Minister with responsibility for pensions, was fond of saying, ''These are not real people; they are just statistics.'' Yet the surveys on which take-up estimates are based are surveys of real people. Interviewers go to households, sit in front rooms with laptop computers, go through people's circumstances and calculate that those people are entitled to benefits and are not claiming them. To say that they are not real people is absurd.

The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): Does the hon. Gentleman accept that Lord Rooker meant that the figures were based on a 5 per cent. sample and that they are extrapolated from that figure? Although they are statistically meaningful, that is what he was referring to. We have not counted up all the people.

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Mr. Webb: I take the hon. Lady's point; indeed, the figures were based on a sample of much less than 5 per cent. However, as the Minister responsible for pensions, the noble Lord was trying to rubbish the figures and to suggest that, because when Thora Hird did her stuff in all the adverts, the number of people who ended up claiming extra was nothing like the numbers in the take-up figures, they did not really exist on the scale that his figures suggested. That was what he tried to imply, as the record will show.

That is dangerous. I should feel pretty disheartened if I were an official in the Department constructing the take-up figures, which take months of careful statistical analysis, to find the Government rubbishing their own figures because those figures are inconvenient.

As I believe the Minister or one of his colleagues said yesterday, a margin of uncertainty is attached to the figures. We accept that. They are estimates. They are based on a sample, and the recording is not necessarily always accurate. However, it is clear that large numbers of pensioners, whether a third of a million or two thirds of a million—that is the sort of range with which we are dealing—are missing out.

The danger with a proposal such as the pension credit—the reason why amendment No. 19 is so welcome—is that the problem will get worse. It will get worse not for the 60-year-olds who receive the letter, who are more likely to claim—I welcome that—but for the stock.

The fundamental reason why take-up might end up being lower, possibly for years, relates to why a person claims a benefit. People claim a benefit if they believe that they might be entitled to it. That has to be the first thought. They hear about it, read about it and think, ''That could be for me.'' If the circumstances involved and the system are so complicated that it is not possible to work out readily whether it might be for them, or it does not occur to them that it might be for them, take-up could end up being lower. With the MIG, or income support, or whatever we call it, if a Minister says that everyone receives £100 a week, and people think, ''I'm not getting £100 a week; maybe that's me'', fair enough. However, if we start talking about people possibly being entitled to a tapered disregard, people's eyes immediately glaze over.

5 pm

Mr. Boswell: Is it not also important that we examine the stock of people who might be in receipt, or otherwise, of pension credit? If their circumstances change while they are in receipt of the benefit, although they may receive something, they will not be paid their full entitlement. Even if there is the entry point of the allocation of the first state retirement pension, people whose circumstances change two and a half years down the track will not know that they are under-recorded and receiving less than their entitlement.

Mr. Webb: The hon. Gentleman makes an important point. There is absolute non-take-up by people who are entitled and do not receive, and there is an under-entitlement of people who would be entitled to more if the correct assessment was made. The

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amendment would prompt the Government to take their own figures seriously—rather than rubbishing them, as they are prone to do—and to work harder to give a higher profile to the system and to increase the impetus of the drive for take-up.

James Purnell (Stalybridge and Hyde): The hon. Gentleman argues that people will not apply because they will not know the exact amount to which they are entitled. People on the doorstep know that an injustice is going on because their small private-sector pensions are completely taken away under the current system. It would be easy to address that through an advertising campaign because people know that they should receive recompense. The hon. Gentleman's policy would do nothing for a person aged between 65 and 75 who was losing their entire pension, but we will be able to give them the pension credit.

Mr. Webb: I do not quite follow the hon. Gentleman's logic. He suggests that if I were a person aged 70 with a small private pension, I may hear on the news that there is a new scheme for people with private pensions. However, the situation is not as simple as that. If I had a private pension above a certain threshold, I would not get a reward for saving because the saving credit is tapered away. For example, if I had a £80 state pension and a £55 private pension, I would not receive the pension credit. Therefore, any coverage would say that not all people with a private pension are entitled to the credit, but that some people are. That is because the scheme is tapered.

Kali Mountford: Would not a fairer analogy be drawn with the tax system? Pensioners do not have difficulty filling in their tax returns if they are not absolutely sure about what the return will accrue. Does not the system bear more similarity to a tax credit than to income support, about which people would want more precise information about entitlement? Does that cover the attitudinal problem that was mentioned in the earlier debate?

Mr. Webb: The hon. Lady raises a range of issues. Many pensioners do not fill in tax returns. It is unusual if a pensioner sees a tax return because two thirds of pensioners do not pay tax.

The Minister for Pensions (Mr. Ian McCartney): Because of this Government's policies.

Mr. Webb: One of the Government's policies—there we go. Apparently, the goal is that fewer pensioners will see tax returns.

The poorest two thirds of pensioners, who are the target group of the pension credit, do not see tax returns—on average; some of them do. No analogy is drawn by saying that because pensioners are used to dealing with paperwork, the form will not frighten them.

Kali Mountford: I am grateful to the hon. Gentleman for allowing me to clarify that our debate has been about the attitude of pensioners, the level of take-up and whether a perceived injustice or a perception of means-testing would keep people out of the system. I tell the hon. Gentleman that many of my constituents complete tax returns or, at least, do

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not have the same mental attitude about that type of system as about income support. Could the advantage not be that the attitude to this system would be different and unlike the system that he mentions?

Mr. Webb: The system is not seen as different because the whole thing is integrated. A guarantee credit and a saving credit make the pension credit. What is the guarantee credit? It is income support by another name, although I accept that it is more humane means-testing. The sums are done on the thresholds of the income support system. A person would claim one benefit at the same time as the other. The two could not be more intertwined. The idea that people will think, ''Oh, it's like a tax return; I don't mind filling those sorts of forms in'', is very alien.

The key point that worries me and the reason why I think that the amendment would be so helpful is that people who will be beyond retirement age when the credit is introduced, and especially people whose circumstances have changed, will experience the take-up problem. One of the good things that the Department's research on take-up has shown is that some of the pensioners who are least likely to take up are those to whom some trigger event has happened, such as hitting 75 or 80, or becoming a widow.

Governments can take action to spot people at such points in their lives, and the Department is already taking action to catch some of them. We want to know about such matters systematically. We want to learn what is being done each year, what works and what does not. We are all on the same side on that subject. If there is to be a pension credit, we want people to claim it. The point of such a report will be to apply pressure and raise the profile of take-up, and that is entirely laudable.

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