|State Pension Credit Bill [Lords]
John Mann: I shall make a few comments on the issue of capital. I listened with interest to the hon. Member for Daventry, to whose 60th birthday celebrations I trust we midlands Members shall be invited. I look forward to the invitation.
The hon. Gentleman said that his accountant dealt with his own capital, and referred to how he spent his Sunday evenings. I spend my Sunday evenings not reading this or any other Bill but in the company of pensioners at Manton miners welfare organisation. [Interruption.] I suspect that there are no polygamous retired miners, and there are very few lottery winners. That matter has been mentioned in relation to capital, but the lottery winners are easily identified and not secret, whether they want to be or not. There are several people there with shares, and I note that those with shares are acutely aware of every change in circumstance that the Government bring to bear on them, every proposed change, to the penny, and the
Column Number: 216daily changes in share values. I am regaled every Sunday evening with the latest long faces over British Telecom shares, which were especially popular among some. Those who failed to sell at an appropriate time are waiting, optimistically, for the share value to rise.
That group of retired miners will be perfectly capable of working through any entitlement with great gusto, but they are the minority. I want to raise the major, significant change that is affecting many retired people in my constituency, and will affect others across the country. By the Department of Trade and Industry's projections, there will be a net influx to pensioners of £200 million, during the next 18 months to two years, in compensation for retired miners. That is a significant amount of money for one constituency. It is unquestionably the single biggest redistribution of wealth that there has ever been in that community. In my constituency, 8,500 claims have already been put in. As some of those are dual claims, that equates to approximately 7,000 households, more than 90 per cent. of the claims being from living retired miners. That will be a significant increase in capital.
On my reading of the Bill, there is no particular issue for the ministerial team to apply their minds to in relation to that. However, I urge one point. There should be deliberations with the Department for Trade and Industry over the giving of advice, at the appropriate time, on the change in legislation. Those who are to benefit—those who suffered from what is in essence a historic legacy of bad employment practices that damaged people's health chronically, often through no fault of their own, and who are now rightly being compensated—should be given accurate information on exactly how the change in legislation will affect them. About 18 months ago, the DTI wrote to every one of the applicants across the country, so it has full records. As such a database and mailing list exist, there must be some discussion, at departmental or ministerial level, between the two Departments to ensure that those people—the large numbers in my constituency and the many across the rest of the coalfields—get accurate information on changes in circumstance.
I am encouraging the Government, with some success, to let that money flow immediately. The problem might well be rectified in advance. My call to my constituents is to spend, spend, spend: spend for Bassetlaw and spend for Britain. They are doing so, with some gusto: the number of travel agents in the high streets demonstrates that, although I am not sure if my constituents are going abroad for more than four weeks. There might be particular advice to be given to them on that. Many of them are spending the money, boosting the local and national economy in advance of the changes. Nevertheless, I suspect that some will not do that. I hope that some specific advice can be given to that large, important group of pensioners, who will be receiving a rightful boost to their capital during the period in which the Bill is becoming law.
Mr. Webb: I am not sure that I can follow the local colour of the hon. Member for Bassetlaw (John Mann). It is back to nitpicking mode, I am afraid. Will the Minister clarify two aspects of the clause when she responds? If I read clause 15(1)(b) correctly, it
Column Number: 217implies that income from the working tax credit will be treated—I am picking up on what the hon. Member for Daventry said—as income for the pension tax credit. Even saying that makes one slightly twitchy.
There is no upper age limit on the working tax credit as I understand it. Therefore, someone in a household with low earnings topped up by one means-tested tax credit could find that another part of the system means-tests that means-tested tax credit, and takes a sum away, presumably at 100 per cent. in the case of the MIG. It will reward that person for 60 per cent. of their earnings, but it has already rewarded them through the working tax credit. One starts to descend into a complete fog in such circumstances. If it is foggy for us, how must the claimant feel to be told that they will be rewarded for earnings through working tax credit, when the partner who presumably is over pension age says, ''Sorry dear, your reward for working is coming off my reward for saving''? I wonder whether there is a case for a clean break whereby a household is either a working tax credit or pension credit case, but not both simultaneously. That sounds awful.
My second question returns to my intervention concerning annuities. Whoever drafted the Bill has clearly gone to enormous trouble to differentiate between several different types. In clause 15, we have income from annuity contracts under subsection (1)(d), but under subsection (1)(c) we have retirement pension income, which refers to the definition in clause 16 that identifies several different types of annuity separately. Why have the draftsmen gone to this trouble? Will any type of annuity be treated differently for the purposes of the pension credit? The Minister of State, responding this morning, said that there are different types of annuity, one of which is covered under the definition of retirement pension income and another of which is covered under the definition of income from annuity contracts.
Mr. McCartney: I apologise for intervening in the Under-Secretary's debate. Given that I raised the question earlier and asked the hon. Gentleman to think about my words, I will write to him through the Committee Chair, so that everyone will get a copy. We are not going to resolve the matter in the way that the hon. Gentleman wants. I have been honest about what it concerns. If he wants more information, I will do that by letter.
Mr. Webb: I am grateful to the Minister. I have no intention of making life difficult. I hope that I have just clarified what I am unclear about. There are all those different types of annuities throughout the Bill. Some come under one heading, some come under the other, and I do not understand whether the distinctions are significant. One assumes that if they were not significant, they would not be in the Bill, but I cannot quite see under what circumstances the differences might apply.
Mr. Boswell: I seek only to assist the debate. The hon. Gentleman is right to raise his concern about the different categories, but I suspect that one of reasons for them might be the fact that, as the Government's
Column Number: 218consultation paper on annuities makes clear, about 5 per cent. of the total volume of annuities are purchased as a matter of discretion, and where the retirement is contingent rather than essential to the category in question.
Mr. Webb: I am grateful for that intervention. I would not dream of second-guessing the Minister's reply, but I am sure that it will be to our benefit. I will not seek any response from the Under-Secretary to that point. I would be grateful for some clarification on my point about whether people with modest earnings will receive a top-up from the working tax credit, and find it taken away by another system. That seems such a nightmare; why could we not have a clean break between the two systems?
Andrew Selous: I want to touch on the question of equity release from pensioners' houses. Most pensioners do not have substantial savings, but increasingly, many own the houses that they live in. We need further clarification of the Bill's treatment of pensioners who either sell their houses or manage to release some equity from them through several schemes that are increasingly publicised among pensioner groups.
It is particularly unjust that the 10 per cent. return on capital is deemed to apply to equity release. Pensioners who have saved all their lives to buy their home will find it unjust when they discover that their income is deemed to be based on a 10 per cent. rate. Mervyn Kohler, head of public affairs at Help the Aged, highlighted that point to the Select Committee. Will the Minister clarify the position?
Maria Eagle: Clause 15, in setting out what counts as income for the purpose of the legislation, is an important part of the Bill. That sounds easy, but as one would expect, our debate has shown that there are many issues of concern. I shall attempt to deal with some of the points that have been raised in the debate.
The clause sets out the income to be taken into account in the calculation. Without that, subsections (2) and (3) could not operate. It also sets out the basis of how we intend to treat certain types of income and capital in the assessment. I hope that members of the Committee will recognise some of its good aspects. For example, the provisions abolish the rules that exclude pensioners with £12,000 or more of savings from any help at all. Savings below £6,000 will also be disregarded. In assessing the imputed 10 per cent. return, hon. Members should not forget the disregard, which can affect the final amount. It takes out the first £6,000 of any savings, and we reckon that about 85 per cent. of pensioners will not have to report any capital at all. The income that they receive from savings will be ignored entirely.
The assumed rate of return of £1 for every £500 of savings above £6,000 will halve the current rate, and the Committee should acknowledge that improvement. As hon. Members will know, we initially considered examining actual income, but decided after consultations and representations that it would be simpler, easier and fairer to do it in this alternative way. We are improving the current position
Column Number: 219by halving the current rate of return, and as I said, the disregards mean that many people will not have to worry about assumed income at all. In addition, we should not forget that such income will be rewarded through the savings credit—another offsetting consideration. Overall, savings will be treated five times more generously than under the minimum income guarantee.
Clause 15 also protects the position of payments made to people in exceptional circumstances. For example, we intend to ignore attendance allowance and disability living allowance, which are designed to meet the extra costs of disability. We also intend to recognise the special nature of certain payments, such as war pensions, by not taking account of the first £10 in the assessment. I hope that members of the Committee will be pleased with such aspects of the clause. It allows for flexibility, which is I how I would choose to put it, though the hon. Member for Daventry probably believes that it takes liberties.
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