State Pension Credit Bill [Lords]

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Mr. Clappison: It has been a useful debate. I emphasise that it was a probing amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Clappison: I beg to move amendment No. 35, in page 5, line 38, at end insert

    'or of any decision where it seems to the decision-maker that the claimant has acted either fraudulently or without the utmost good faith in making the claim'.

The amendment would allow decisions on entitlement to credit or retirement provision to be changed if claimants had acted fraudulently or without the utmost good faith when making their claims. We shall come to the general question of fraud later, in a new clause. The amendment is designed to explore how decisions on income received, and the effect that that will have through the pension credit, could be revised in the circumstances outlined. We imagine that there is some mechanism whereby a decision can be revised if the applicant has behaved fraudulently, and

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we look to the Minister to say a few words on the subject. It might also be worth exploring whether decisions should be revised if the applicant may not have acted fraudulently but did not act with the utmost good faith.

Mr. McCartney: Over the years, pensioners have put off claiming the help that they are entitled to because of the nature of the claims process. Claiming is sometimes seen as stigmatising. We do not want to debate that today, but clause 7 tries to deal in a practical way with those issues, which are real to older people, but to take account of them when developing a system that meets the taxpayer's need for the decision-making process to be secure.

I realise that it is a probing amendment, but I do not want those taking part in this debate—even if only the hon. Gentleman and I are in the firing line—to think that we are accusing pensioners of fraud. Indeed, fraud among older people is comparatively rare. For example, for the 12 months to March 2001, only 3.2 per cent. of MIG cases were found to be engaged in fraud compared with 8.9 per cent. of income-based jobseeker's allowance cases.

The principal types of fraud are incorrect declarations of capital and savings by claimants, and the new system will significantly reduce that error rate. Claimants will continue to receive benefits while living abroad or when on extended leave from the United Kingdom that has not been reported. Another fraud is incorrect declarations of benefit received and other sources of income, including occupational pensions. We are developing a strategy for measuring losses for fraud and error. Pension credit is a brand new benefit and it means that we can scrap the weekly means test. It is important to ensure that our strategy for measuring underlying losses for fraud and error is robust.

None of us is interpreting the hon. Gentleman's intention in moving the amendment as anything other than honourable towards older people. He is attempting, rightly, to discover whether we have put effective arrangements in place to deal with it. Subsection 8 already provides the powers that he refers to in the amendment. The amendment, is therefore, redundant.

Committee members will no doubt appreciate an explanation of why we seek those powers. It is a bit like following a string through a labyrinth, but here we go. We will have powers to revise pension credit decisions that have been based on a mistake or ignorance as to a material fact, including those that have arisen through fraud or misrepresentation. Those powers derive from section 9 of the Social Security Act 1998.

12.15 pm

Pension credit is included in the provisions of the 1998 Act by virtue of the consequential amendments contained in part 2 of schedule 1 of the Bill. In turn, overpayments that arise through fraud or misrepresentation are recoverable under section 71 of the Social Security Administration Act 1992. Pension credit is included in that provision by paragraph 10 of schedule 2 of the Bill. Happily, very few pensioners

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seek to defraud the taxpayer or obtain an overpayment deliberately. However, we recognise that, especially with the existing regime, the continuous requirement to report changes can cause pensioners to be overpaid inadvertently. Indeed, for that reason, some pensioners are put off claiming the MIG. We do not wish to brand decent, well-intentioned pensioners as fraudsters, and another major positive effect of the assessed income period will be that changes in income will no longer have to be reported. Where cases of fraud or misrepresentation do occur, I hope that I have satisfied the hon. Gentleman that the Bill already provides for the powers that he seeks in his amendment, which I ask him to withdraw.

Mr. Clappison: I am grateful to the Minister for his explanation. We have drawn out, first, that the powers exist to revise such decisions and, secondly, where those powers lie. For those of us who do not have section 71 of the Social Security Administration Act 1992 at our fingertips, the Minister's response is helpful.

I appreciate the context in which the Minister has set the debate. I agree with him if he is saying that a balance needs to be struck in these matters, and that one should not introduce unwarranted measures that may alarm pensioners or put them off claiming. Pensioners understand as well as anyone what fraud means, and the amendment is designed to bear down on fraud. Fraud requires a dishonest intention to defraud, and I am sure that pensioners feel as strongly as everyone else feels about those who fraudulently divert the money of honest taxpayers into their own pockets.

We shall have a wider debate later about tackling fraud. I agree with the Minister that benefit fraud is less prevalent among older people, but it does exist. However, having drawn out from the Minister which part of the Bill contains the power to which he refers—clause 7(8), although the power is not spelt out in the clause—I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clause 8

Fresh determinations increasing

claimant's entitlement

Mr. Clappison: I beg to move amendment No. 31, in page 5, line 43, after 'any', insert 'reasonable'.

Claimants may request a reassessment where circumstances have led to a reduction in income and, therefore, a potentially higher award of pension credit. Committee members will become familiar with this point during the morning. Where that happens, a determination is made regarding the elements or the amount of any of the elements of the retirement pension, which may have an effect on the pension credit.

The purpose of the amendment might seem to be to limit the opportunity for claimants to seek a reassessment and possibly an increase. However, I can tell the Committee that it is intended to ascertain,

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in particular, whether claimants could seek a reassessment at any time during the five-year period. It is also designed to probe whether it will be possible for claimants to seek further determinations if an application should fail—that is, if it does not result in an increase in pension credit—and it would be interesting to know how many times a claimant may seek a determination in an assessed income period of five years. It would be useful if the Minister could say something about that, and tell the Committee how subsection (2) fits in with subsection (1), if subsection (2) is to deal with the situation where some elements are redetermined downwards and others upwards. The wording of subsection (2) is not as transparent as it might be.

Mr. McCartney: I hope that I can clarify this quickly for the hon. Gentleman, because clause 8 is designed to protect pensioners. It ensures that, whatever the changes in their income, pensioners have a right to a fresh determination of entitlement if that will result in their being awarded more credit. We have already discussed our objectives in introducing the assessed income period in the debates on clauses 6 and 7. It is designed to enable the abolition of the weekly means test, to put an end to intrusion and to introduce simplicity and transparency. It is fixed for five years and is available from the age of 65, when most pensioners' income has stabilised.

We want pensioners to benefit from the assessed income period. I accept in good grace that this is a probing amendment that is designed to find out whether the assessments are to be done for a reasonable purpose. Our intentions are plain and simple. Some pensioners may see drops in their income over the five years of the assessed income period, for example, if they choose to spend some of their savings. We do not want them to lose out and have to wait up to five years to have their entitlement reassessed. That could cause hardship or mean that they are living below the level of the guarantee, which would defeat the whole object of the measures. We want to take account of change when it happens, but only where it is to their advantage. Obviously, we need to look at their retirement provision to check their entitlement and take account of any changes to other income in the normal way.

If a pensioner's income has gone down, we will not wait until the end of the assessed income period to increase their pension credit entitlement; it will be increased immediately. If it turns out that their income has increased rather than decreased, they will keep the benefit of the increase for the remainder of the assessed income period. I was trying to make that point earlier—it is vital. It is important for pensioners not to be put off by the assessment.

There are no disadvantages to this system, only advantages—it is a virtuous circle. Giving pensioners all the advantages of a fixed income assessment without any of the disadvantages is a major change when it comes to benefits.

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Mr. Webb: I think I agree with the Minister that the clause is to the benefit of pensioners. Will he clarify whether, when pension income from one source has gone down and pension credit could go up, all the other sources of income will be examined to see whether they have gone down or up? If any of them have gone up, will that be offset against the increase in credit? If one pension benefit has gone down by £10 but another has gone up by £5, will the assessment ignore the increase of £5 or will the person's net income be judged to have gone down by only £5? Will such variations be in completely separate boxes, or is there the possibility of a partial offset from an increase in income? I am slightly hazy on that.

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