State Pension Credit Bill [Lords]

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Mr. Webb: When the Minister was running through his four pillars, the third one concerned targets for the Department. It struck me that the fact that the Department has targets at present backs up the need for amendment No. 19 because the Government do not have a specific numerical target for the rate of take-up of income support pension credit. There is no notion of ''it is now two thirds, we want it to be three quarters'' or ''it is three quarters and we want it to be

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four fifths''. That is the sort of target that we want, and amendment No. 19 would bring that about. The Government have general targets—more money for poor pensioners, or whatever—but not the specific target that the amendment would bring about.

Mr. McCartney: That is very interesting. A year ago, I remember that the Government were lambasted by Conservative Members for having too many targets. It was an absolute burden—targetitis. You can't win, can you? They moved the goal posts.

I thought that I made it quite clear to the hon. Gentleman, without reading any notes from officials, where I was coming from regarding transparency and the importance of the Pension Service giving a clear indication of where it is going regarding the uptake of pension credit and developing its role. We have ambitions for pension credit. It is a good policy, and we want to maximise the number of those who are entitled to it. I ask the hon. Gentleman to trust me on this, if he can. If I prove to be untrustworthy, I have no doubt that he will tell the House in no uncertain terms that that was the case. If he is setting out to ensure—if I have got it right—that the Department's targets for the Pension Service are to make the policy more effective, that is true. If he is asking whether the targets that we set look to the objectives that the Department has set itself, that is also true. I made it absolutely clear in my earlier remarks how that relates to the Treasury, and how we will implement the spending programme in a transparent way.

Mr. Clappison: I am grateful to the Minister for that contribution, which covered a number a points that I will study in detail. He says that it will pay to save as a result of the pension credit, but he will be aware that it is the existence of the minimum income guarantee that made it not worthwhile to save in the first place. It is common ground that anybody, whatever their background, in the appropriate thresholds will be aware that losing 100 per cent. of their savings from their benefit is not an incentive to save. The whole purpose of the savings guarantee that the Bill will put in place is to remedy the problems that the minimum income guarantee is creating by way of disincentives. That is the nature of the problem.

Maria Eagle: That is no different from the situation in respect of income support that existed for pensioners before the minimum income guarantee. The hon. Gentleman seems to be complaining about the fact that the Government have put in a higher level of support through the minimum income guarantee. How can he complain about giving pensioners a decent minimum?

Mr. Clappison: I am trying to do justice to the Government's case because they were aware of the problem and have tried to do something about it. I am examining whether they have gone about it in the right way. I do not want to go back over the points about the difference between income support and the minimum income guarantee, but the hon. Lady will be fully aware that the minimum income guarantee is now much higher than the basic state pension, and it is likely to get higher still. As matters stand, it would not pay to save with the minimum income guarantee without a savings credit because there would be a 100

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per cent. rate of withdrawal. The hon. Lady will accept and appreciate that point.

The question is whether the pension credit goes far enough in creating an incentive to save. The Minister referred to the treatment of housing benefit and council tax benefit, but the analysis carried out by the Association of British Insurers made a favourable assumption from the Government's point of view because it disregarded that potential disincentive. It looked at the disincentive for saving caused by a 60 per cent. rate savings credit and the minimum income guarantee. Having looked at everything that is known, which is important because it knew all about the Government's proposals, it concluded:

    ''Most importantly, under the current proposals it is not true to say 'the pension credit will make sure that it always pays to save'.''

I am sure that it said the same thing to the Minister.

I considered that and took it in conjunction with the expert view of the Institute for Fiscal Studies, which reached a similarly mixed conclusion. The hon. Member for Hamilton, South (Mr. Tynan) is shaking his head. He will be interested to know that the effect that he described by which working people do not bother to save because there is benefit is explained by the Institute for Fiscal Studies—the hon. Member for Northavon will know this better than me because he is a technical expert—as an income effect. The Institute for Fiscal Studies disregarded it, and looked purely at the substitution effect of whether or not it is worth saving for the future when 40 per cent. of those savings are taken away. The Minister will know that its conclusions were very mixed.

Mr. Tynan: Does the hon. Gentleman accept that anyone who is in employment would rather have money on which to retire than be in a position in which they had to depend on benefit? If that is the situation for someone who is in work and saving for their retirement, surely there is no adverse effect in creating a system such as pension credits in order to deliver to the poorest people in society at the present time an incentive to live, not to save?

Mr. Clappison: I do not disagree with some of what the hon. Gentleman says, but it is a question of whether a pension credit will encourage such people to save. We know, and the Government accept, that a 100 per cent. rate of withdrawal will not encourage them to save. The hon. Gentleman asks whether they will be in a better position than someone who has not saved at all. Plainly they will be, but that would also be true if there was a 99 per cent. rate of withdrawal and they received only a 1p benefit from savings. We are all working people, and anyone with common sense would realise that it is not worth saving 100 per cent. to have 99 per cent. of it taken away later.

6.45 pm

I am not an expert and have not given a particularly good summary of the essence of what the Association of British Insurers said. The ABI believes that there is an implied negative rate of return, and that someone would have to save for 10 years before they received a positive rate of return on what the Government propose. Perhaps the Under-Secretary will consider that.

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Maria Eagle: The hon. Gentleman seems perilously close to arguing that to prevent any disincentive to save, the poorest pensioners must be kept in penury on very low income.

Mr. Clappison: I am not arguing that. I am arguing on the basis of the expert evidence that was put before the Select Committee by the Association of British Insurers and the Institute for Fiscal Studies. We all want to encourage saving, but the question is whether the Bill does that.

I have carefully listened to the Minister. The subject is of considerable importance, and the amendment is good. However, I am prepared to listen to someone who thinks that it can be improved, or that it can be made more explicit and include more information. For example, it could include a breakdown of information with regard to women. I shall consider in detail what the Minister has said. I would have pressed the amendment to a vote because it is so important, but I shall think about his comments, and consider how it can be improved given the support and interest in it from the Committee. I may return with a similar amendment on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendment proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill.

Question agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2

Guarantee Credit

Mr. Boswell: I beg to move amendment No. 14, in page 2, line 24, leave out subsection (6).

The Chairman: With this it will be convenient to discuss amendment No. 3, in page 2, line 26, at end insert—

    '(6A) Such regulations may not apply to hospital in-patients.'.

Mr. Boswell: I sense that we have had a useful afternoon, but that we may now want to make more progress. We shall see how far we get in the time left.

When I examined clause 2, I was concerned that it was unamended. A maxim of an Opposition spokesperson in Committee—certainly one that I have followed in the past—is that if a clause is unamended, find something to ask about it and table an amendment to probe it.

I hope that my amendment goes further, and addresses a point of substance. The Under-Secretary almost revealed in the exchanges on the previous clause that the minimum income guarantee, which transmutes into guarantee credit, is substantially the same concept as the income support that it replaced. The level at which assistance is given, and the disincentives, if any, that exist to save are important matters, but we certainly do not want to rehearse them now.

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I may wish later to ask the Minister some general questions about the operation of the guarantee credit, which arise more properly under clause stand part. Rather than trying to ask them now, I shall restrict myself to our amendment and that of the hon. Member for Northavon.

Amendment No. 14 has two purposes. The first is to smoke out from the explanatory notes whether prescribed amounts should be confined to hospital downrating. It would be useful to have the Under-Secretary's assurance that it is. If she is contemplating introducing prescribed amounts in other areas, where an arbitrary level would be substituted for the standard minimum guarantee, it will be useful to know that.

The second purpose of our amendment, which is the one of substance given that hospital downrating has been trailed, is to ask the Under-Secretary to comment on the thinking behind what has been done. The Committee heaved a collective sigh of relief, which I hope included the Ministers, when they were led, encouraged or dragooned by a combination of forces in another place to relax the hospital downrating rules from six to 13 weeks. That substantial hole has been kicked into the concept of the downrating rules and Ministers should say a little more about what is left and why. If a substantial chunk is removed—half the cost or value of the scheme by any analysis—we must ask what is left and whether it is appropriate.

I fully understand, and Ministers will know better than anyone else in the Committee, that there is a revenue implication. They cannot go around making concessions according to the state of the sun or the moon, but must consider their overall budgets. I shall not press them hard on the principle, but it would be useful to know a little more about their thinking on that.

The relict scheme, which reflects the wish from the start of the national insurance scheme in 1948 not to allow for double provision, is an anomaly. I am sure that that came into debates in another place. I do not want to suggest that an untypical case is typical, but it would be possible for a pensioner in receipt of the guarantee credit suddenly to receive a windfall or to return to work unexpectedly with a large increase in their income. They would retain their entitlement to the guarantee or any savings credit that may arise, and good luck to them. I am not arguing about that. However, I understand that, if people are confined in hospital and receiving support from the public purse for their board and lodging perhaps, that is the only exceptional circumstance in which the guarantee credit would be written down with substitution of a prescribed amount. Those people would be in an unusual and unique position. The Ministers should explain that—that is the purpose of my amendment—and justify whether we have now reached an equitable and acceptable position.

It is easy to say—perhaps it should be said from the Opposition Benches—that people confined in hospital have problems. They have health problems and the Ministers acknowledged in making their concessions the continuing obligation to expenditure outwith hospital. It is not simply a matter of keeping people

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alive by providing food and shelter. A 13-week period is more acceptable than a six-week period, but it would help if the Ministers explained how they reached that position and whether that is the only prescribed exception that they are minded to make.

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Debate adjourned.—[Angela Smith.]

Adjourned accordingly at five minutes to Seven o'clock till Thursday 18 April at half-past Nine o'clock.

The following Members attended the Committee:
Griffiths, Mr. Win
Atkinson, Mr. Peter (Chairman)
Boswell, Mr.
Brazier, Mr.
Brennan, Kevin
Cairns, David
Clappison, Mr.
Cruddas, Jon
Eagle, Maria
Ewing, Annabelle
McCartney, Mr. Ian
Mercer, Patrick
Mountford, Kali
Osborne, Sandra
Purnell, James
Selous, Andrew
Smith, Angela
Turner, Mr. Neil
Tynan, Mr.
Webb, Mr.

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