The
Committee consisted of the following
Members:
Baron,
Mr. John
(Billericay)
(Con)
Barrett,
John
(Edinburgh, West)
(LD)
Boswell,
Mr. Tim
(Daventry)
(Con)
Clark,
Ms Katy
(North Ayrshire and Arran)
(Lab)
Corbyn,
Jeremy
(Islington, North)
(Lab)
Davies,
David T.C.
(Monmouth)
(Con)
Dobbin,
Jim
(Heywood and Middleton)
(Lab/Co-op)
Drew,
Mr. David
(Stroud)
(Lab/Co-op)
Fraser,
Christopher
(South-West Norfolk)
(Con)
Jones,
Helen
(Warrington, North)
(Lab)
Kidney,
Mr. David
(Stafford)
(Lab)
Morgan,
Julie
(Cardiff, North)
(Lab)
Prosser,
Gwyn
(Dover) (Lab)
Selous,
Andrew
(South-West Bedfordshire)
(Con)
Willott,
Jenny
(Cardiff, Central)
(LD)
Winterton,
Ms Rosie
(Minister for Pensions and the Ageing
Society)Rhiannon Hollis,
Committee Clerk
attended
the Committee
Fourth
Delegated Legislation
Committee
Tuesday 16
December
2008
[Mr.
Roger Gale in the
Chair]
Draft Christmas Bonus (Specified Sum) Order 2008
The
Chairman: Good morning, ladies and gentlemen. Members may
remove their jackets, if they wish to do
so.
10.30
am
The
Minister for Pensions and the Ageing Society (Ms Rosie
Winterton): I beg to
move,
That
the Committee has considered the draft Christmas Bonus (Specified Sum)
Order
2008.
I
am delighted to be here this morning under your chairmanship,
Mr. Gale, to discuss what I hope will be a welcome order
made under sections 148 and 175 of the Social Security Contributions
and Benefits Act 1992. The purpose of the order is to award a one-off
payment of £60, to provide direct and swift financial support to
15 million people, 12.5 million of whom are pensioners in receipt of
state pension or pension credit; 2.5 million other people will also
benefit from the one-off payment, because the money will go to some 2
million disabled people, including about 300,000 children, 350,000
carers and 150,000 people who are in receipt of bereavement benefits.
That is real help, when and where it is needed
most.
We
recognise that many older people are concerned about their finances
during the current economic downturn. That is why we are spending
approximately £900 million on the additional Christmas bonus
payments. That means an extra £60 in pensioners pockets,
on top of the regular £10 Christmas bonus received annually in
December. The Christmas bonus will be paid in two instalments.
Recipients will get £10 this month, as in previous years, with
the additional £60 to be paid between January and March in the
new
year.
Mr.
Tim Boswell (Daventry) (Con): Will the Minister confirm
that the additional payment, being part of the Christmas bonus, will be
tax-free? I have not found that stated anywhere in the literature. For
the record, in case I do not get around to making a speech, I ought to
declare an interest in the
matter.
Ms
Winterton: Yes, it is a stand-alone payment, which is a
tax-free sum, so it will not affect any recipients entitlement
to the income-related benefits that they may already
receive.
The
majority of state pension customers should receive the £60
payment in January, in addition to their pension. The remaining 3
million customers will get their £60 in February or March next
year. Practically, that is the earliest that we could make the payments
after seeking and obtaining the approval of the Committee and of the
other place. A negative resolution has moved the
qualifying week from the first week in December to the week commencing
22 December. That provision came into force on 27 November. The payment
will be made automatically, so no one needs to worry about how and
where to
claim.
I
hope that the Committee will agree that the one-off payment will
provide genuine help to 15 million people, 12.5 million of whom are
pensioners. It will be a valuable means of support to many of those who
need it most during a time of increased financial pressure. It builds
on other targeted measures in the Chancellors pre-Budget
report, including an increase in the basic state pension from
£90 to £95 a week and the biggest increase in pension
credit since it was introduced. No pensioner need live on less than
£130 a week from April 2009. The order adds to the significant
help already in place for pensioners, such as the increase in the
winter fuel
payment.
The
Government have recognised the need to help people on the lowest
incomes at this time. The one-off payment will address some
peoples concerns. The order is compatible with the European
convention on human rights, and I commend it to the
Committee.
10.35
am
Andrew
Selous (South-West Bedfordshire) (Con): It is a pleasure
to serve under your chairmanship this morning, Mr.
Gale.
I thank the
Ministers officials for their usual comprehensive brief in the
explanatory memorandum, which I and other Members, I am sure, have
found helpful this morning. For the sake of clarity, can the Minister
confirm that the first statutory instrument related to the order was
the one that she mentioned, which moved the qualifying week on a
negative resolution. The second paragraph of the explanatory memorandum
says that the order is
the second part
of a pair of statutory instruments.
The Minister is
nodding, which is helpful.
Can the
Minister also confirm the position of Northern Ireland in respect of
the order? Paragraph 5 of the explanatory memorandum,
Territorial Extent and Application, states that this
instrument applies only to Great Britain. Furthermore, has the
Department for Work and Pensions made any estimate of the impact that
this £900 million will have on jobs and gross domestic product?
The Minister referredas does the explanatory
memorandumto the Chancellors comments in the pre-Budget
report and said that this money needs to be paid as quickly as
possible, as part of the Governments fiscal stimulus package.
Quite a considerable sum is being spent from pressed public finances,
so it would be good to know what the Minister believes the impact on
the economy will be. We realise that the payment will be helpful to
pensioners, disabled people and others who will receive it.
The Minister
pointed out that the order could be perhaps more appropriately called
new year, rather than Christmas, given
that she told the Committee that, in the main, the £60 will be
paid in January, although some of it will be paid up to March. Someone
commented in the other place that pensioners, in particular, might
therefore end up receiving the money themselves, rather than spending
it on their grandchildren if they get it after Christmas, rather than
before. Perhaps that was part of the Governments
thinking.
I note the
£2 million administration cost. Will the Minister say whether it
was not possible to make the payment all in one go? One imagines that
computers could have been programmed to pay people £70, rather
than £10. I realise that £2 million is quite a small
amount in relation to the £900 million cost of the order, but
when there is considerable pressure on public finances, that £2
million administration cost could have been reduced or saved.
Finally, as
the Minister went a little wide of the order in some of her remarks
about the increase in the basic state pension, can she say anything on
the reduction that pensioners get in their pension credit in terms of
their savings amounts? The Government assume a savings rate for
pensioners of over 10 per cent. That was a source of contention to
pensioners when interest rates were higher than today. The Government
assumed the figure of 10 per cent. before the recent cut in interest
rates, so can the Minister tell us whether they intend to reconsider
that, to help pensioners who have tried to do the right thing and set
by some money for their old age?
10.38
am
John
Barrett (Edinburgh, West) (LD): I certainly welcome this
mornings announcement. It is a nice thought that all Members
here today will have played their part in delivering £900
million to deserving individuals over the Christmas and new year
period. It is often referred to as a pensioners bonus, but the
2 million disabled, 300,000 children and carers and a number of other
people who will also receive the benefit are a vital group.
As mentioned
by the Conservative spokesman, it is effectively a new year
bonusmost of it will be paid then. I hope that the Government
will not announce this new, new year bonus again after Christmas,
because they have been known in the past to declare the same amounts
two or three times.
I am happy to
see the order go through; it is a welcome boost, both for the
individuals who will receive it and for the economy. The vast majority
of the £900 million will be spent, and that is a good
thing.
I have one or
two questions on the overall issues for pensioners. The bonus is part
of a package for pensioners, along with their pensioner savings and any
income that they receive. It is a one-off bonus, when what pensioners
actually need is something all year round: an increase in the basic
state pension. Their pension has risen markedly slower than the costs
that they face, so what we have here is a sticking plaster at one time
of the year.
The other
thing that pensioners are looking for is a statement on Equitable Life.
I will not digress from what we are talking about today, but it is part
of the bigger picture. Again, as was mentioned by the Conservative
spokesman, the assumption is that 10 per cent. of pensioners
income will come from their savings, and that is clearly not going to
happen. There is also a large amount of unclaimed pension credit, but I
will not go into that, as it is wide of the remit for this
mornings debate.
We would like
the bonus to be larger, but the money that is being put forward by the
Government is very welcome, not only for pensioners, but for the
disabled, carers and other groups who will receive it, and we are
delighted to support it.
10.41
am
Mr.
Boswell: May I briefly comment? As I have already
indicated to the Committee, I have an interest in the matter in that I
am now in receipt of a state retirement pension, which I claimed on
reaching qualifying age, which was over a year ago. [
Hon.
Members: Surely not.] I am delighted to
have the encouragement of my colleagues in talking about that. It gives
me the advantage of age and perspective, and I need to share a couple
of points with the Committee in welcoming the order. First, my
political mentor, who was a great man, was the late Iain Macleod. He
once memorably described his attitude to a Government concession of the
day by saying that he did not intend to shoot a one-legged Santa Claus.
We have a Santa Claus here, and even if the payment is only qualified
alleviationsome of it will be spent and some will go to reduce
the liabilities that pensioners have incurred, and I do not know the
distributionit is, of course, welcome.
Secondly, on
the genesis of the original Christmas bonus scheme, although I cannot
claim credit for itcertainly not pension credit, as that came
afterwardsI happened to be the then head of the Conservative
partys economic department, and I have a feeling that I had
some part in the initiation of the scheme in 1972. I am sure that, as I
move towards retirement, I should claim credit for that, too. It was an
interesting idea at the time, and I shall make one or two comments on
its substance.
As I have
already explored with the Minister by implication, the payment is
tax-free and when grossed up, it is more beneficial to people like me,
who are in receipt of other income and are paying marginal tax at 40
per cent., or 45 per cent. if the Labour party is returned at the next
election. Paradoxically, it is also more valuable to people at the
savings credit end, and it distributes against people in the middle.
Although it was introduced in the Government package as equivalent to
an acceleration of the additional pension to be paid in April next
year, it will not have the same distributional effects.
The second
important point on distribution is that the bonus is payable to
disabled people who are below the qualifying ageI use that for
shorthand, but I refer also to other groupsand there is an
interesting anomaly in relation to the winter fuel payment, which is
not paid to people in that category, partly because the cost is
greater, but it is difficult to sustain that logic.
On the whole
idea of the Christmas bonus payment, as I mentioned, I was party to
some of the discussions when it came in. The payment was a substantial
amount then; it was more or less like another weeks pension. I
have not checked the retail prices index through from 1972, but I have
a feeling that the £70 bonus is not that far different from the
£10 bonus that was payable over a generation ago. We have not
made it a very material payment, although, as I indicated, it will be
useful to
pensioners.
In
due course, we need to look at the payments structure. As I mentioned,
we have the winter fuel payment, the Christmas bonuswhich has
been allowed to wither on the vine, until its sudden revival to inflate
the economythe free television licence for over-75s and the
state retirement pension, which is taxable. Some of my colleagues have
looked at a rationalisation of
those schemes in the past, as a matter of policy, and have been attacked
for doing so. However, whatever else one may say, it cannot be a tidy
position for the Government to administer, and it is perhaps not the
cheapest possible solution for getting money to pensioners.
I thank the
Minister for the initiative. I shall benefit personally and
proportionately; others might benefit even more. I hope that the
Minister will reflect at leisure on the structure of these benefits, as
I am sure my colleagues will. Such benefits may be useful in difficult
and exceptional times, but they need rationalisation when we get to a
steady
state.
10.45
am
Gwyn
Prosser (Dover) (Lab): My constituents in east Kent will
welcome this news, and like the hon. Member for Daventry, I also
declare an interest, as I will benefit from this change.
[
Hon. Members: Surely not.] I
will not detain the Committee any longer, except to ask whether the
Minister has considered those pensioners and other recipients who heard
the news in the pre-Budget statement and saw the headlines in the
newspapers, but who will get £10 at Christmas, rather than
£70. Will she ensure that it is broadcast, loud and clear, that
more good news will come in the new
year?
10.46
am
Ms
Winterton: I thank members of the Committee for their
broad welcome to the proposalsit is a pleasure to bring some
Christmas cheer to my hon. Friend the Member for Dover and the hon.
Member for Daventry. I will try to address most of the points raised by
hon. Members, and I confirm that the statutory instrument referred to
was that which moved the qualifying week. That ties in with the point
raised by the hon. Member for South-West Bedfordshire about the
£2 million administrative cost. He is rightideally, it
would have been good to pay both together. However, because of the
timing of the pre-Budget report on 26 November, we laid the order
moving the qualifying week straight away, and it was not possible to
tie that in with the payments that were already being processed. That
is why we needed a different system; hence the administrative cost.
Parallel legislation covering Northern Ireland will be introduced in
due course.
Andrew
Selous: Just to clarify, will people in Northern
Ireland therefore receive the payment later than people in the rest of
the United Kingdom?
Ms
Winterton: I am not sure whether people in Northern
Ireland will necessarily receive the payment later, given the time
difference regarding what goes out in December. However, everyone
should have received the payment by the end of March. If the situation
is different, I will write to hon. Members.
The hon.
Gentleman asked about the estimates for jobs and GDP. That is part of
the Chancellors overall fiscal stimulus package. I do not have
the exact figures for jobs, but when we introduced the minimum wage
guarantee in 1999, the evidence showed that spending rose by an amount
similar to the boost given to the incomes of poorer pensioners. Such
payments feed into
the economysome have suggested that people will put the money
into savings, but previous evidence shows a feed through into the whole
economy.
John
Barrett: Does the Minister accept that, although
£900 million extra will be given in the bonus, more than
£2 billion of pension credit is still unclaimed? If a move can
be made towards that claim, it would have a larger impact. If
£2.5 billion is unclaimed, given that the sum is less than
£1 billion, that still leaves £1.5 billion in the pot, so
a lot more could be done.
Ms
Winterton: Of course, we undertake a whole range of
initiatives to encourage people to claim pension credit and will
continue to do so. As I have said in previous Committees, perhaps we,
as Members of Parliament, can come up with ideas to encourage our
constituents to claim. I am doing a lot of work with Age Concern and
Help the Aged to make sure that people do so, and I am always looking
at what else can be done. We have introduced one telephone line to
assist people to claim state pension and pension credit. People often
do not claim their housing and council tax benefits, but using that
service, we can send information about them direct to the local
authorities, so that, in a sense, a separate claim does not have to be
made. The key is often in the fact that unclaimed amounts can be part
of housing benefit.
Mr.
David Drew (Stroud) (Lab/Co-op): I am delighted to serve
under your chairmanship, Mr. Gale, so close to Christmas. I
congratulate the Ministers Department on what it has done in my
area with the village agents. They are employed to go out in rural
areas to check on elderly people, particularly those who might live in
nice properties but are income poor, to see whether they are entitled
to benefits. The system works excellently, and I commend its use
throughout the
country.
Ms
Winterton: I thank my hon. Friend for that information and
will pass it back to my staff. Incidentally, I visited the pensions
centre in Burnley yesterday and listened to some of the calls. That
brought home the fact that we need to get over to people that the bonus
is certainly an entitlement; it is nothing to do with handouts. People
are entitled to the bonus. We need to do some work to overcome
peoples reluctance to come forward and to ensure that they are
aware that they are entitled to receive
it.
The
hon. Member for Edinburgh, West talked about increasing the state
pension. The Liberal Democrats proposed a figure of about £151 a
week, but people can receive about £130 a week through pension
credit, and given that the average housing benefit award is about
£60 a week and that the average award for council tax benefit is
about £14, that gives us a figure of about £198 for many
vulnerable people. Being able to target those people is crucial, so
there must be an element of means-testing, but it is important to
remember that some people would lose out considerably under a blanket
figure.
Jeremy
Corbyn (Islington, North) (Lab): The Minister must be
aware that there are a numbernot a huge numberof
pensioners in high-cost urban areas living
in private rented accommodation for whom the housing benefit award does
not come near to meeting their rent requirements. They are suffering
badly as a result. Does she think that there is a case for re-examining
the housing benefit
tapers?
Ms
Winterton: Well, as my hon. Friend may be aware, some
reviews of housing benefit have been undertaken recently to make sure
that people receive their adequate entitlement. One of the issues is
that people have not been claiming it, which is why we have tried to
make it easier for them.
John
Barrett: Unfortunately, there will be a statement later
today about a number of people who have been overpaid their pensions by
possibly in excess of the amount under discussion. Will the
Ministers Department ensure that people will not receive good
news in the morning and bad news in the afternoon? Some people who will
get a £60 extra payment may well be about to be told that their
pension will be reduced in the coming year by who knows what
amount.
The
Chairman: Order. The cup of good will from the Chair has
just about run out. I have tried to be as generous as I reasonably can
in the broad context of a debate that should be about the Christmas
bonus. It might be a good idea if we could now return to the Christmas
bonus.
John
Barrett: Christmas
past.
The
Chairman: In some cases,
yes.
Ms
Winterton: I hope that the written statement later will
give the hon. Gentleman some reassurance.
Finally, I
want to address the tariff referred to by the hon. Member for
South-West Bedfordshire. About 80 per cent. of pensioners
who get pension credit have savings of £6,000 or less, so they
would not have the kind of tariff income applied. People would need to
have capital in excess of about £100,000 before the tariff
income rate would reach 10 per cent. The formula itself is not intended
to represent any rate of return that could be obtained from investing
capital.
Andrew
Selous: Following what the Ministers colleague
said in the other place yesterday, does not the tariff cut in on
savings over £6,000? When people have £6,001, the tariff
starts to apply. The Minister may have been making the point that it
does not bite at a particularly high rate, but I believe that it cuts
in from £6,000. If I am wrong, perhaps she would correct
me.
Ms
Winterton: The hon. Gentleman is quite right that, to
reach 10 per cent., the sum would have to be considerably in excess of
£100,000. The point that needs
to be remembered is that the figure is not meant to reflect a rate of
return that is obtained from investing capital; it is a way of
calculating the weekly contribution that people with capital in excess
of £6,000, or £10,000 when in a care home, are expected
to make from those resources to meet their normal living expenses. We
do not move the figure up and down to reflect interest rates when
making that calculation.
[Interruption.] I will
move on, because the Chairman would like me to return to the
substantive
question.
The
hon. Member for Daventry asked about applying the winter fuel payment
to other groups. Many of the benefits for people with disabilities and
so on include an element that is intended to cover heating costs, which
is why the winter fuel payment does not apply in those cases.
My hon.
Friend the Member for Dover makes the very important point that we need
to ensure that people understand that the payment will be made in
January. Of course, in a lot of the literature that we are publishing
and in dealing with the enquiries that we have received, we are trying
to stress that and make it absolutely clear. I take his point that we
may all have people coming to our surgeries to ask where their other
£60 has gone, but we will certainly make every effort to ensure
that people understand that the payment will follow
later.
Andrew
Selous: May I press the Minister a final time? I am keen
that what is on the record is understandable to people outside this
place. I understand that, for every £500 above £6,000
that a pensioner has, if they are not in a nursing home, £1 a
week is deducted. Therefore, they would have £52 a year taken
off their pension credit if they had £6,500 in savings and were
not in a nursing home. Will the Minister confirm that? We would not
want people to read a transcript of our proceedings and think that
there was no deduction unless they had £100,000 in
savings.
Ms
Winterton: The notional rate of income is £1
for every £500 or part of £500 in savings held above the
£6,000 threshold, which is half the rate assumed for working-age
benefits.
I
hope that, with those clarifications, the Committee will approve the
order.
The
Chairman: May I wish all hon. Members a happy
Christmasthose whom I shall not see again before
thenand, on an entirely non-partisan basis, a very good new
year?
Question
put and agreed
to.
Resolved,
That
the Committee has considered the draft Christmas Bonus (Specified Sum)
Order
2008.
11
am
Committee
rose.