State Pension Credit Bill [Lords]

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Mr. Steve Webb (Northavon): I do not wish to detain the Committee, but I want to return to a point that we discussed this morning. Under the clause, the

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duration of assessed income period will generally be five years. There are limited exemptions from that but the general principle is that it should be for five years. Will the Minister give some insight into why the Department chose five years? The more I reflect on the matter, the harder it is to see any objective for choosing that particular period. An interval had to be chosen and that was probably as good as any. However, I am seeking clarification about the evidential basis on which it was chosen.

This morning I said, slightly as an aside, ''Why not 10?'' That was not an entirely facetious comment if the argument is that the process of filling in the form or talking on the phone and giving all one's personal details costs the taxpayer money and is a burden on the individual. That is what the Government are saying—they want to make it as infrequent as possible. Why stop at five years? Presumably there has to be some sort of trade-off. My concern is that if the interval were to be 10 years, circumstances could change so much that the award will be so out of kilter with them as to be inappropriate. The Government's argument is that within five years people will get a letter every year; they will know about anything that has changed and will report it. However, if those mechanisms are good enough, why is there a compulsory five-year point at which there has to be a reassessment?

John Mann (Bassetlaw): What would the hon. Gentleman suggest instead of five years?

Mr. Webb: Had I the resources of the Department to assess such issues, I would ask—I hope that the Minister has asked and will tell us—what assessment the Department has made of, for example, how frequently people's circumstances change. That should inform one's answer to the question that the hon. Gentleman rightly asked. I cannot say that it should be three or seven years; the decision as to how long the period under clause 9 should be informed by evidence, by research into how often pensioners' circumstances change and by how much and by what effect leaving it for a longer or a shorter time would have. It would be helpful if the Minister were to lay before the Committee the evidence on which the decision to specify five years was taken.

Mr. Boswell: Briefly, and conscious of the fact that, to my chagrin, I missed a number of the earlier exchanges other than those on the amendment that I moved, let me say that I endorse the points made by the hon. Member for Northavon (Mr. Webb). If we are to form a trade union of interested persons in order to obtain lots of data so as to carry out our research, I shall be one of the first to subscribe. However, there is a serious point here for Ministers. The more information that we have, the more evidence-based it is, the better. Beyond that, I would record for the Committee, as I have not done so explicitly before, the extent to which this is a major change in philosophy. It should, therefore, at least be commented on by the Minister.

The tradition has been that social security benefits are tied to the week and are about need and short-term need. PAYE and the tax system operate broadly on an annual basis for earnings and ability to discharge

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responsibilities; there has never been a time scale beyond a year. I am not canvassing the Committee to respond to the implied question of the hon. Member for Bassetlaw (John Mann) that we should seek to substitute one year. However, it would be a more precise means of assessing need and of addressing the kinds of issue that we have discussed in relation to vested interest long-tail assessments going for, perhaps, four and a half years when circumstances change, and the kinds of exchange that we have had about prisoners and persons going abroad.

Against that, the Department does not want to spend an inordinate amount on routine reassessment and it does want to identify those who have suffered a significant diminution in income. Lest the Committee be in any doubt, I accept that many pensioners would normally experience a decline in income over the period of their retirement. The tendency would be in that direction rather than the other.

I also remind the Committee that the pure doctrine of a weekly set of benefits has been eroded. We would welcome that in relation to things like linking rules and passporting. We are not considering an absolutely pure system. However, we are entitled to ask Ministers to sharpen their thinking, or to reveal it to the Committee, about why we have gone for five years, whether it is sensible and whether it might be subject to modification in the light of experience. Most of the rest of what we on the Opposition Benches plan for the Bill will involve standing back a bit from the text. It is pretty opaque, so that is not a wholly unattractive prospect. We will ask how the Bill is unfolding and whether the doubts that we have expressed were justified. We will try to see whether the Bill is operating in the way in which Ministers intended it to and whether it needs to be modified in the light of experience to make it a more appropriate vehicle for helping pensioners. That is all. The Minister just needs to explain to the Committee why he proposes what he proposes.

Mr. McCartney: It is not so much a question of Ministers sharpening up their act. The Opposition have opposed the Bill from the outset. They have opposed the methodology, the concept and the principle behind achieving our aim of tackling pensioner poverty through eradicating it where it exists, preventing it in the future and rewarding thrift.

The hon. Member for Northavon tries to dress his question up as some big theoretical problem, implying that the Government have to find some empirical evidence to support a process of five-yearly assessment. I do not want to disappoint the hon. Gentleman, but it is called common sense—it is a matter of judgment. We have had discussions and debate with older people's organisations, trade unions and the pensions industry to discover a practical way forward to ensure that the period chosen does not lead to assessments being way out. The five-year strategy is a judgment. We have made a judgment, as simple as that.

Mr. Webb: Based on?

Mr. McCartney: On the basis that over a five-year period there are economic cycles, and cycles affecting

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public expenditure, income from the stock market, Government expenditure, inflation and people's personal use of their capital assets. The five-year assessment may fall in between those cycles, but at any point the virtuous circle can come into operation and a pensioner can intervene when their circumstances have changed and they require more support under the proposals. They can secure a reassessment.

That is the important thing here. Rather than just a rigid five-year cycle requiring them to have absolute certainty about their likely income, we give them other important inputs to the process to help them to have some ownership and control over their income. We allow them to have a reassessment during the five-year period when their income has gone down for legitimate reasons. If their income goes up—we had this debate during our consideration of an earlier clause, so I will not go back over it—their assessment remains as it was. We do not remove income from them. That is a clear judgment made by the Government.

In the end, all Governments have to make judgments on the political issues of the day. That is the judgment that we made and we will have to stand by it. It will be effective, because we did not just pluck it out of the air—we have held consultations and involved people in the decision, including older people's organisations and the panoply of other organisations involved with this measure.

We made that judgment because a five-year period ensures that older people have certainty and clarity, but is not so long as to allow huge variations to impact negatively on them. The judgment was made on the basis of providing older people with support, rather than out of consideration for the system itself.

The hon. Member for Daventry may be concerned that we do not have a 50,000 page consultant's report giving us a range of options from one to 99 years, but I should have thought that that would be a bit of a waste of money. He might want to give us one—we could have it for nothing. If he wants us to go for 10, 15 or 20 years, he will have to give us examples of where interventions would take place and why. After any length of time greater than five years, the potential difficulty of the assessments increases.

In the end the matter is about judgment. Unlike the Liberal Democrats, we are still prepared to use judgment in such matters. I hope that, if hon. Members are not happy, they will accept that the process has been one of consultation involving proactive consideration and assessment of difficult issues on behalf of older people.

It is a clear break with the past. Pensioners are subject to weekly means testing. We also check on their capital and second pensions in three-year reviews. However, their incomes are largely stable, as I said earlier, although there is some capital drawdown. The five-year proposal is sustainable. It has the support of the older people's organisations and of older people themselves. If there is no analysis or evidence leading to a particular decision, in the end it is a question of

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judgment. I submit my judgment to the Committee and hope that it can accept it.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.

Clause 10

Effect of variations under section 7(4)

Question proposed, That the clause stand part of the Bill.

The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): I should like briefly to set out what the provisions in clause 10 mean and give some idea of why we think that general upratings of second pensions are possible in respect of pension credit. Clause 10 resembles, as I am sure that members of the Committee who have been Ministers will know, the routine adjustment provisions in sections 159 and 159A of the Social Security Administration Act 1992. I can see everyone's ears pricking up at that, because they are all familiar with that legislation. The only difference between those provisions, which allow for general uprating, and these, is that these operate only while an assessed income period is in force.

In practice, the clause allows us to get, annually, an updated view of the retirement provision that must be taken into account in awarding pension credit. I was sorry to miss an earlier debate about this matter because I was attending another pensions debate with the hon. Member for Daventry—pensions debates seem to be popular in the House at the moment. I will try not to go over old ground.

In respect of the assessed income period, we are trying to ensure that pensioners do not have to report changes in every little dot and comma of their income and retirement provision every week, which is the current position in respect of income support. However, the period should not be so long—I am sorry to see that the hon. Member for Northavon is no longer in his seat. However, he has left his jacket, so we have every hope that he will return in due course.

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