|State Pension Credit Bill [Lords]
Mr. Webb: To a point, I am with the hon. Gentleman, and I accept that we are not talking about the 1930s. However, two important aspects of what is proposed here are substantially worse than anything any of us would want in our old age. First, there is the duty to report certain changes in circumstances to the authorities for fear of creating overpayments, debt and all the rest of it. The death of a spouse would be an obvious example, but there are others. There will be a set of people who have to tell the authorities about what is going on in their lives, and that will affect their income. Secondly, whereas we all want to know that we have a certain income in our old age, which we know will go up in a certain way, people subject to the pension credit will always substantially be at the whim of the Chancellor, whoever they are and whatever party they come from, and the way in which they set tables, thresholds and rates. That is quantitatively different from, and inferior to, what we would want in our old ages.
Kevin Brennan: As we know from the last Government, pensioners can be subject to whims and ideology. The last Conservative Government made perhaps the most significant breach from the pattern of pension provision since the war when they broke the earnings link with the state pension many years ago.
Providing that those reports are the minimum required, simple and well understood, I do not see
Column Number: 148them as an intrusive and unnecessary burden. It is not unreasonable to expect people to be able to make them. When one gets down to the minutiae of people's business and they are expected to report on a weekly basis, one can talk about a means test in the sense that people are trying to portray.
Annabelle Ewing (Perth): I have listened to the debate with interest. The hon. Member for Northavon made some good points about the potential frequency of testing, and I await the Minister's comments with interest. Aside from the potential frequency of the tests and leaving aside periodicity, what makes that kind of means-testing more humane?
Kevin Brennan: That is self-evident. When people apply for the state pension credit, they will not need to reveal the minute details of their means on a weekly or daily basis. The proof of the pudding is in the eating. On the ground, people will see how that is radically different from the sorts of means-testing they may have faced before under income support.
David Cairns (Greenock and Inverclyde): As well as the five-year frequency, another key factor is the amount of money that is being given, which is far more generous than anything given under the old system. Does my hon. Friend agree that the weekly assessments of the old National Assistance Board were designed to ensure that people were not getting too much money? Their income was assessed, and any additional assistance that they got still kept them in poverty. This assessment is about ensuring that people get the maximum amount of money that they need in order to lift them out of poverty.
The Chairman: Order. Before the hon. Member for Cardiff, West (Kevin Brennan) resumes, I remind the Committee that the debate is interesting, but it is going rather wide of clause 6, which is entitled:
Kevin Brennan: I naturally take your advice, Mr. Atkinson. I am grateful to my hon. Friend for his in-flight refuelling, which enables me to conclude my remarks by saying that we obviously need clarification from the Minister about the circumstances in which people will need to make reports, and I am sure that he will provide us with that. The specification of a period of five years for the assessment of income will make the pension credit a radically different type of benefit from those that we have seen before.
Mr. McCartney: I shall try to be helpful to the hon. Member for Hertsmere. He raised the issue of whether the establishment of clause 6 is consistent with the assertions in the consultation paper. It is to pensioners' advantage that, in putting down the proposal, we maximise the period of assessment in their favour by taking into account the way in which their incomes overwhelmingly grow after retirement. Five years is surely a better period for them because their incomes are more stable—we shall come to this later—than those of people of working age. Tax credits do not allow for reductions in income, but that is not the case in pensions. Pensioners have access only to a limited income, in any event. If, for whatever legitimate reasons, their income falls, it would be important to reassess in favour of them. In that five-year period, any
Column Number: 149changes that impact negatively on pensioners' overall income can be assessed and additional income can be achieved, which would not have been available to them if we set this in a concrete way.
Mr. Clappison: I was drawing a contrast between the Bill and what has happened with the working families tax credit. I fully appreciate that if pensioners' income goes down, they can apply for reassessment. The problem in the working families tax credit is that the change that has been made since the consultation means that recipients are under a duty to report change of circumstances upwards at the end of the year period, which they were not when the consultation came out when the Government said that they were learning lessons from the working tax credit. I was merely drawing a contrast between what was happening there, and what will happen with this credit.
Mr. McCartney: If that is all that the hon. Gentleman has to say, fair enough. We are not here to debate the working families tax credit, but we have learned from that. In the consultation period, we have learned a lot from pensioners. In my initial intervention, I said that the income patterns for people of working age are radically different in context from those of pensioners. During the process, we did consider the working families tax credit, but we also listened to what was being said by older people's organisations and older people themselves. We considered the empirical evidence—what happens to people's income, and the stabilising effect of that, as they reach 65 and beyond.
We have been true to the consultation paper. Indeed, we have actually improved on it by not taking what might be called the prescriptive route of the working families tax credit, which I am not criticising. I would be criticising the Chancellor—God almighty. If the hon. Gentleman was saying that the way in which that has been prescribed is different, the answer to that is yes. The reason for that is to take into account the different circumstances of people of working age and their propensity to earn income in a way that is not available to older people. The propensity for older people to lose income is greater than those of working age. I think that we have got the balance right.
The hon. Member for Northavon raised a legitimate question concerning the proportion of assessed income periods that will be achieved during the five-year period. We expect the vast majority of assessed income periods not to change during that period. The main ongoing changes concern those with earnings: only 2.5 per cent. of those entitled to pension credit would be in that group. Other changes are life events, such as the unfortunate death of a partner, of which people would notify us in any event for the obvious reason that it initiates other benefits. Furthermore, when income goes down we do not want pensioners to lose out.
The whole system is designed as an intervention measure, more for pensioners' intervention than the state. That is the difference from what has gone on in
Column Number: 150the past. There has been state intervention in the past to prevent people gaining access to income, because legislation is usually designed as a gateway—''Do not come through here''. Alternatively, assessments have been carried out in such a way to make it difficult for people to make claims, or the tapering arrangements are such that the number of people entitled to claim is reduced. As far as possible, all of the panoply of what people feared in the old-fashioned system has gone. The whole principle and concept is now different. We are standing the old welfare state on its head, and the principle of the basic state pension. We have brought together for the first time two forms of income that will be assessed when people claim their pensions. Hopefully, those who are currently in the system will automatically, with no fear or concern, transfer to pension credit. In future, when people apply for their basic state pension, they will also apply for pension credit, which will be worked out for them. How can it be said that that is some from of draconian means test? During the four months or so in which someone applies for their basic state pension, what do they do? They apply to have their national insurance contributions assessed. It is that assessment that determines someone's level, whether they get the basic state pension or not, as has been the case ever since the day when we created the basic state pensions.
The state has decided to get rid of the income trap in which people have been for so long and, at the same time, is assessing their pension credit for them. What is wrong with that? I have been branded a red-hot socialist on occasion but, for the life of me, even as a red-hot socialist, I cannot see that that could ever, in any way, be painted as a draconian measure, forcing half of Britain's pensioners into a means test. That is ludicrous. [Interruption.] I shall give way to the hon. Member for Northavon and have a wee rest.
Mr. Webb: The Minister identified three cases in which there would be a reassessment, the third being where someone's income fell, including imputed income from capital. Let us take the hypothetical scenario in which pensioners have Railtrack shares and those shares have fallen in value. In principle, their imputed income from that capital would fall and, if they were above the threshold, they would be entitled to more pension credit. So, every pensioner with Railtrack shares who is getting pension or savings credit, if they are not to miss out, should contact the Department.
That, indeed, is the case for anyone with any other shares. If one thinks of what has happened to the stock market during the past 12 months, and in the previous year, it is probable that everyone with shares has a case to re-contact the Department. What assessment has the Department made of the number of people in that third category—those who might face falls in their income, including that from capital, and who would, therefore, have the ongoing contact with the Department that the five-year assessment is supposed to prevent?
|©Parliamentary copyright 2002||Prepared 23 April 2002|