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General Committee Debates
Delegated Legislation Committee Debates
|©Parliamentary copyright||Prepared 8th July 2010|
Publications on the internet
General Committee Debates
Delegated Legislation Committee Debates
Draft State Pension Credit Pilot Scheme Regulations 2010
The Committee consisted of the following Members:
Mark Etherton, Committee Clerk
† attended the Committee
It is a pleasure to serve under your chairmanship this afternoon, Mr Bone. It is the first time that I have had that privilege and my first formal occasion to put on the public record my appreciation of my predecessor, the hon. Member for Wallasey. We have changed places, as it were. [ Interruption. ] It is a good job I did not hear that. We took part in many exchanges in Committee over the years, and I always felt that she treated Committees with respect. She was briefed thoroughly and sought to answer the occasionally impertinent questions that were asked by Opposition Members. I pay tribute to her work as Minister of State for Pensions and the Ageing Society.
As the Committee will know, pension credit is paid to pensioners on the lowest incomes. It provides additional support to those who need it most and it is one of our key tools to combat pensioner poverty. It means that no single pensioner need live on less than £132.60 a week or a couple on less than £202.40. Those with severe disabilities, caring responsibilities or qualified housing costs may be entitled to more. Following the introduction of pension credit in 2003, take-up rose quickly to 2.7 million households. Since then, it has stagnated and remains at about 2.7 million today. It was right, therefore, that in 2008 the then Secretary of State, the right hon. James Purnell, asked his officials to look for innovative methods to make the most of the considerable data the Government already held in ways that could improve the take-up of pension credit. The result of that was a study to look at how to increase take-up by making better use of the information, and the draft regulations will enable that study to go ahead.
As with other social security benefits, to receive pension credit people first have to submit a claim. As I have said, 2.7 million households or 3.3 million individuals currently do so. We estimate that at least 1 million pensioners who are eligible for extra support do not claim it and do not receive the extra help to which they are entitled and need. There are many reasons for that: some pensioners think that they are not entitled to it, perhaps because they have modest savings or their own home; others might not want to go through the process of means-testing and some might be baffled by the complexity of the whole thing. Although pension credit can be claimed with one relatively simple telephone call, I am sure that it does not surprise members of the Committee, who are also constituency Members of Parliament, that many older people are sufficiently bewildered by the whole system that they do not claim what they are entitled to claim.
We need to explore new approaches to making sure that pensioners receive the help they need, while also ensuring that taxpayers’ money is properly targeted. We will use data already held by the Department for Work and Pensions to identify a pool of pensioners who do not currently receive pension credit, but who we believe might be entitled to it. From that pool, 2,000 pensioners resident in Great Britain will be selected at random to take part in the study. Further details on how we will select those pensioners are set out in regulations 6 to 9. We shall exclude pensioners who have already said that they do not want further contact from the Department for Work and Pensions. We will contact participants by letter to let them know the details of the study. We will then pay them our best estimate of the level of pension credit to which they are entitled, as set out in regulations 15 to 21, for a fixed period of 12 weeks.
The calculation of the payments will be based on the information we already hold and, crucially, without the need for a claim. The pensioners will be contacted again by letter to encourage them to submit a pension credit claim before the end of the 12-week period. They will have access to a dedicated telephone number throughout the study for further information. The period of 12 weeks, together with the modest number of participants in the study, balances the burden on the taxpayer on the one hand with the need to produce meaningful results on the other. After that stage of the study, we will first carry out a statistical analysis of its outcomes. That will tell us things such as how many participants went on to make a pension credit claim and how much they were entitled to receive. There will also be a qualitative analysis of the motivations of the participants who went on to make a claim and those who did not. Importantly, the study will also give us reactions to how people feel about their personal data—that is what we are talking about here—being used in new ways.
To be clear, the information that we will use is data already collected by Her Majesty’s Revenue and Customs and the DWP. Such information is already routinely used for purposes such as targeted mailing and investigating cases of fraud and error. However, we are aware of the sensitivities around using individuals’ data, and the research study will give us a chance to see how participants feel.
We will have preliminary findings by summer 2011 and a full report in 2012. We are not talking about preparing for a fully automated pension credit payment system, but we will learn about both pension credit and other means-tested benefits, so what we learn will be of much broader application. After the study, we will have new evidence about how information that Government already hold can be used more effectively. In particular, we will know how that data can be used in more innovative ways—the key to the study—to increase benefit take-up. The regulations enable us to undertake that innovative study. They allow us to identify potential participants, to calculate the amount of pension credit that they will receive during the study and to set out the manner of making subsequent payments.
I know you are an eagle-eyed Chair of Committees, Mr Bone, and you will have spotted the typographical error on the front cover of the draft regulations. In case other members of the Committee have not done so, it says:
The development of the draft regulations has involved the ongoing input of a number of stakeholders, in particular the helpful support of Age UK, which is keen on the idea of automatic payment. We are grateful for its continuing input into the study. I would like to express my appreciation of all those who have been involved in getting the draft regulations to this stage, including the hon. Member for Wallasey, and I commend them to the Committee.
Ms Angela Eagle (Wallasey) (Lab): It is a pleasure to serve on my first Committee with you in the Chair, Mr Bone. Uncharacteristically, you are watching over our proceedings rather than actively participating in them—something we are far more used to.
I welcome the Minister to his position on the first occasion that we have had a chance to debate in the new Parliament. I am in rather an odd position, because a close look at the draft regulations will reveal that I am the Minister who first promulgated them, who did all the work to bring them about and who states that I think that they are compatible with human rights legislation. This peculiar interregnum will only last so long, but no one would expect me to make a huge, thundering speech today against the draft regulations. I support them and did a lot of work to bring them about. My only disappointment is that we did not manage to get the draft regulations through the various phases of pre-presentation scrutiny that we have for social security legislation in time for the House to debate them before Dissolution, which has given us this unusual and hybrid experience in Committee. We are all singing from the same song sheet. I have some questions, however, in particular about the changed context in which the pilot will take place. I shall then ask the Minister for some updates on some of the detail of the legislation.
The Minister is right to point out that there is a problem with the take-up of pension credit, as there is with the connected benefits. He was perhaps too eager to get away from the Committee to talk about some of them, but he knows as well as I do that they include housing benefit and council tax benefit, which often accompany—sometimes pretty automatically—the award of pension credit. In 2008, the then Secretary of State, my former colleague James Purnell, set in train a process to see whether we could change the way in which benefits are applied for and granted, to deal with the perennial problem with take-up of means-tested benefits.
The regulations are a novel piece of secondary legislation, representing perhaps the first time that social security legislation has attempted to allow the award of benefits without a claim first being made. When we were preparing the regulations in the previous Government, they were the cause of much interesting debate, if I can put it that way, between the Department for Work and Pensions and Her Majesty’s Treasury. Without giving away any terrible secrets, I can say that there is a great deal of worry in HM Treasury about the breach of that fundamental aspect of the benefits system. At present, although one has a theoretical entitlement to benefits, especially means-tested benefits, if one’s circumstances
I can tell the Minister—he probably already knows—that some in Her Majesty’s Treasury are very worried about the extent of the implications of that breach of a fundamental principle of social security legislation, particularly for annually managed expenditure. I spent quite a bit of time questioning my officials because I was worried about it, but I was trying to come at the long-standing problem of means-tested benefits take-up, and the battle against the poverty that is implied by the lack of take-up, from a different direction.
If we look at the take-up figures, we see issues that still need to be tackled. Although some welcome progress was made while we were in government, there is still some way to go. It is estimated that between 61% and 70% of the pension credit benefit is taken up. In the worst-case scenario, that leaves a large and alarming percentage of pensioners who have decided not to claim that benefit, although something that gave me comfort when I was the Minister was the fact that the older and, therefore, the poorer the eligible pensioners were, the higher the take-up rate. It went up by about 10% among the over-70s. However, that still left a range of between 10% and 20% of very elderly pensioners who were not accessing the benefits to which Parliament had said they were entitled.
The novel approach set out in the regulations was born out of many years of trying to make it easier for pensioners to claim benefits. When we were in government, a great deal of good work was done to ensure that there was a simplified claims process. When the benefit was first introduced, it was a sort of annexe to income support and the means-tested parts of income support before the introduction of what was then the minimum income guarantee, which subsequently evolved into pension credit. We had to get away from the 40-page application forms that sometimes asked elderly pensioners whether they were pregnant—although that may even be possible in these days of rampaging scientific advance. We had to get away from those kinds of questions, which were perhaps logical in the benefits area, but bizarre and peculiar as far as the people trying to engage with the system were concerned.
There has been a great deal of progress, which I hope the Minister will acknowledge, in making the process of claiming pension credit much easier. He made passing reference, for example, to the pension credit helpline and the fact that access to the benefits was made much easier by the introduction of pensioner helplines and fit-for-purpose IT. That does not sound revolutionary, but it enabled people who were trying to help pensioners making inquiries to see, by interrogating the system, the circumstance of those individuals. Great strides were made in our time in government to equip the DWP with the technical capacity, computers and information needed to enable more modern approaches to be taken. We moved from very old computers with unusable green screens to a much higher digitally interactive capacity during our time in government by investing in the capacity of the Department to serve its clients. The regulations before us will take that a step further, using data matching and automatic approaches and some of the building blocks that we left in place.
Will the Minister say something about how the pilot will be supported by the Department’s infrastructure? I know that the pilot is a time-limited little test, lasting only 12 weeks. It will, as he made clear, involve 2,000 people who may qualify for pension credit payments, randomly chosen by data matching. Those objective data are held, I think, by the Department and HMRC, unless there has been a change since I was dealing with the regulations.
Experience shows that take-up campaigns cannot be just an automatic kind of thing; they must be supported by capacity, access and availability of information when people contact the system—the Department—to find out why the payments have suddenly appeared in their bank account without their requesting them. What can the Minister say about the support that will be available during the pilot scheme? Initially that will be for the 2,000 people who may suddenly find money unexpectedly popping up in their bank accounts. Some might not even notice it; others may be pleasantly surprised, but not know where the money has come from and want to ask why it has been given to them.
When the Minister is looking at the results of the pilot, it will be important, if he is thinking about whether the scheme offers a way forward in general, to assess the costs of the support needed to assure people who get automatic payments that the payments are above board and appropriate and that they should not worry, and to enable those people, if they suddenly realise that having access to pension credit is rather a good thing—giving them £50 or £60 a week, on average, and more in some areas of the country—to gather information so that, if they wish, they can make a claim after the period of automatic access to payment has ended. All that implies the need for greater ability to contact “the system” and get back communications that make sense to the client group—pensioners of various ages, or sometimes their carers. What arrangements has he put in place to ensure that that kind of access is present for the pilot and, more important, in other areas, in the event of a decision to extend automatic access to other means-tested benefits?
I hope the Minister agrees with me that the local service, for which the Pensions, Disability and Carers Service in his Department is currently responsible, does a fantastic job in outreach—contacting often vulnerable and elderly pensioners about their benefit entitlements. Unless something has changed in the past few weeks, they make 13,000 visits to people’s homes week in, week out. It is an important part of access to the DWP’s systems and is valued by many stakeholders and those who participated in the consultations before the draft regulations were drawn up.
What work will the Minister do and what conclusions will he seek in relation to the local service, to ensure that automaticity and some of the questions raised—particularly ongoing issues—can be dealt with properly after the trial pension credit award period ends, after 13 weeks? It is also important to look at how the pension credit helpline is staffed. It receives 24,000 calls a day, which is not surprising, given that we are talking about well over 3 million recipients of credit and perhaps another 1.5 million who do not claim. Those are big numbers. Access to
Has the Minister also thought about the annually managed expenditure and the departmental expenditure limit implications of the draft regulations? The context has changed quite drastically since the election. There were announcements in the Budget not only about cuts to the real value of many benefits because of the move from the retail prices index to the consumer prices index, which will save £6 billion over the next five years, but about the huge cuts to the departmental expenditure limits, which will be announced in the spending review on 20 October. There are also the annually managed expenditures. The hon. Gentleman has the great privilege in his current job of having a ringside seat for a high percentage of the annually managed expenditure that is our welfare system.
People often go on about the size of our welfare bills. With respect to the DWP’s annually managed expenditures, they very rarely say that more than half of what is spent each week goes on pensioners. They prefer to concentrate on other less popular welfare and benefits recipients. Nevertheless, the implications for the Treasury of having automatic access to these means-tested benefits will be a huge increase in annually managed expenditure. Because of the access to support, help and information that has to come with automatic payments, there is also an implication for departmental expenditure limits. People have to be available on the end of the phone with IT advice in order to deal with the queries and inquiries that automatic payments are bound to raise. People in those areas of the private sector that have automated many of their services and use a lot of digital services and telephony always say that as soon as another approach or way into the system is opened up, all the other access paths to information have to remain available because people will use all of them to try to discover what is going on, what their rights are and whether the payments they have received are okay.
Those are important questions. I would not like to think that this innovative and welcome piece of legislation—the Minister would expect me to say that— will be only a little interesting vignette that will be swept away by the October spending review when the Treasury crosses its arms and says, “Well, don’t think for a minute that you will increase your annually managed expenditure by improving the take-up of benefits and making it higher than it is already. Do you take us for somebody who has just dropped off a Christmas tree? You cannot have access to extra funds to deliver increases in annually managed expenditure when we want cuts, cuts, cuts”. The Minister will have his work cut out in dealing with the Treasury, which I suspect has its beady eyes on the vast majority of his budget and the shrinkage on which it has decided.
I want to deal with a couple of other points about take-up and the implications of the pension credit pilot scheme for both housing benefit and council tax benefit, which are directly connected to pension credit benefit. The hon. Gentleman used to make many speeches and wring his hands at the poor take-up of those benefits—particularly council tax benefit, which he said was a failure of the take-up campaign for pension credit. He knows that housing benefit take-up for pensioners is thought to be between 81% and 87%. The take-up for
I have some specific questions about the scheme. As the pilot was put together and consulted on I was worried about overpayments. People in the welfare benefit system have a great deal of experience of receiving overpayments. That is particularly true for council tax benefit. Often, for administrative reasons, claimants have not realised that they have been overpaid. They then have to make repayments when they had not realised that they had had access to extra money to which they were not entitled. People who live in constrained circumstances cannot get into a situation where they might have to make sudden repayments. That makes them very risk-averse when approaching the system. The Minister will know about that from his casework, as, I suspect, will every Member of Parliament. If they have not yet seen any of it, they certainly will.
How does the Minister think the fear around overpayments can be dealt with? The regulations are explicit that no overpayment will be taken back; that was done at my insistence because of the fear. If this pilot is to go anywhere and have a presence after the short trial we are discussing today, we must think about how we can be reassured. The regulations allow for rounding up. Although that never seems much money at an individual level, when it is multiplied by 1 million, it comes to a large amount, and the Treasury would be on the Minister’s back about that. What is his view on rounding up and the implications for a wider use of the pilot automatic award regulations, which may later extend more widely across the benefit system?
Finally, I want to ask the Minister how he is getting on. I know there are issues with the renaming of council tax benefit as council tax rebate. He was extremely vociferous on the subject when in opposition. It was something that we all wanted to do, though I spent some time explaining that it was more complicated than it appeared, as matters of social security often are. Will he give us an update on where we are with the council tax rebate, as we would all like to see it happen as soon as practically possible? Paradoxically, there are 409 different local authority systems administering a national benefit. The benefit has been administered at local level since it was introduced by his new coalition partners all those years ago.
I welcome this legislation. It is novel and, if it is taken forward, it has huge implications for how our benefit system will run. I would like to be reassured that, if the pilot proves successful, he will take it forward, although I have some doubts, given the AME and DEL implications. Will the Minister write to me with his assessments of the AME and DEL implications, first of the pilot itself and, secondly and more importantly, of any wider roll-out ahead of the spending review? Will he undertake to keep the Committee in touch with how the pilot is going, and commit to writing to me once the pilot is over to share with me—as the Minister when the regulations were written—the progress and the lessons learned from it? I look forward to the Minister’s response.
I am grateful to the hon. Lady for her support for these regulations. Her fingerprints—that sounds a pejorative phrase—her imprimatur and her DNA are on these regulations. I am grateful for her input in bringing them to this stage. I am pleased to be midwife to her regulations, bringing them into the world. I had better not proceed much further with that analogy.
The hon. Lady asked a number of questions. I was intrigued by her discussions of the relationship between the Department and the Treasury. It was fascinating. I understand—indeed, I know from experience—that we have been working closely with the Treasury throughout the development of this initiative. The Treasury completely supports the policy intention and the way in which the regulations implement it. I can therefore reassure the hon. Lady that the Treasury is 100% behind us on this. She need not have any fears on that front.
Ms Eagle: Does that mean that the Treasury will continue to be supportive when it looks at whether the automatic award of benefit in a very small pilot can be applied to a much larger area of benefit application? That will have implications for, and increase expenditure in, AME and DEL.
Steve Webb: I am grateful for that comment, which pre-empts my response to another of the hon. Lady’s questions. I refer her to her response last July to a written question by the now Home Secretary, the right hon. Member for Maidenhead (Mrs May):
That remains the Department’s position. It sails on like a ship of state and its position has not changed. There are no plans for a wholesale roll-out with the spending implications that the hon. Lady describes.
On the implications for AME and DEL, the hon. Lady knows that the pilot is wholly contained in the departmental expenditure limit, so the full costs of less than £1 million are covered by DEL spending. Notwithstanding, as she said, the exceptionally tight fiscal position in which she left us, we have managed to persevere with the pilot—the research study—so we will go ahead with it. Despite the difficulties in finding the funding I was determined that we should do that. Beyond that, we want to learn the lessons from it and see whether they should be applied to pension credit or other means-tested benefits. The key thing is that the budget for the pilot has already been allocated and the study will go ahead later in the year.
I will be happy to keep the House up to date as the project develops. The hon. Lady was the scheme’s progenitor—I will not develop that analogy further—and has been intimately involved in getting it going and in helping to design it. I will be more than happy to write to her once the pilot has concluded to let her know how things are going.
The hon. Lady rightly pointed out that the pension credit claims process has been simplified, and I agree with that. However, regardless of the simplified claims process, phone lines and better IT, we have a hard core—an almost irreducible minimum—of a third of pensioners, many of whom are, almost by definition, living in poverty, who are not claiming. That is why innovative approaches, such as the pilot, are needed. I accept that steps were taken and that forms and claims have been simplified somewhat. However, I visited a pensions centre recently and listened in on calls from people claiming pension credit. It is still an excruciatingly complicated benefit, which puts people off. We therefore need to look at innovative new ways, such as the research study, to find better ways of ensuring that people take up the benefit.
The hon. Lady asked whether we would write to people before putting money in their bank accounts—I stress that we will do that. She is right that people will want to call the dedicated phoneline when they receive the letter and when the money arrives in their bank account. That is the specific purpose of the dedicated phoneline. I understand that approximately 10 staff will handle calls in a pensions centre, although the demand will fluctuate. I suspect it will peak when the letters are received and when the bank credits happen. We will ensure that enough people are in place.
If the lessons we learn from the pilot imply a greater use of the principle of automaticity, it is right that the implications for support would have to be considered as part of the package. If we generate demand in that way on a bigger scale in future, the implications for staffing, as well as public expenditure, would have to be part of our appraisal.
Ms Eagle: Does the Minister agree that, although the pilot is an important part of trying to develop a new way—let us call it the Heineken way—of reaching the parts other things cannot reach, it is equally important to carry on doing the day job? That means maintaining the work of local services and their 13,000 visits a week to pensioners and vulnerable benefit claimants in their own homes. Moreover, what has happened to the regional
Steve Webb: No, I have not—I am keen to give direct and straight answers. The extent to which such things are a one-off hit or deal with the structural issues is interesting. One purpose of a pilot such as this is to get at the structural issues that affect pensioners of different sorts in different parts of the country—issues that can be addressed through pension credit and other means-tested benefits. I welcome and salute the work the hon. Lady did in getting coverage and appearing in local media to raise awareness, and I am sure that it was valuable in the areas that she visited. I am keen to see that, wherever we can, we as a Department tackle the structural problems in the system, which, I hope, will have a far more significant impact than I could achieve. I am sure the impact that the hon. Lady had was far greater than that that I would have from an individual visit, but it is crucial to look at structures as well as temporary publicity.
Ms Eagle: If that was all that the visits did, I would agree with the Minister’s approach, but they led to significant increases in successful pension credit claims. It was not I who brought that about, although having a Minister visiting is always newsworthy, especially for the local media that pensioners read. From our detailed work, we discovered that peer support and endorsement from people who were on pension credit and had been through the claims process reassured non-claimants that that it was doable—there was life after it and they could receive £50, £60 or £70 a week more than they received before. It was that peer endorsement, rather than a Minister appearing in a cape with a big “S” on the front, that was the positive outcome of the visits. I would be very worried if the Minister simply said that they were about temporary publicity, when they were certainly about a lot more than that.
Steve Webb: It was apparent when I visited the pension centre in Cwmbran relatively recently that we need to get people into the system and handle them professionally and efficiently. Staff at pension centres overwhelmingly deal very professionally and effectively with people who claim complex benefits such as pension credits. Peer recommendation is important. I do not know if there have been appraisals of the long-term impact on take-up of the visits the hon. Lady made, and I understand why there would be a temporary spike, but I am interested in long-term increases in take-up, and the lessons we learn from the pilot will help us to generate that.
I shall deal with the other questions that the hon. Lady asked in turn. On local service, I agree that home visits, whether by Pension Service or local authority staff, should be part of the mix, because there is a set of recipients and potential recipients to whom a visit is
The previous Government committed to renaming council tax benefit “council tax rebate”, inspired by the Royal British Legion and others who felt that the change would improve take-up. They thought that the branding was better—that people understood the concept of a rebate and did not regard it as means-tested. The hon. Lady asked the question because she knows how difficult that change is to make. The previous Government committed to doing it and only afterwards discovered how hard it was. We are still working with local authorities and their IT suppliers on exactly how it will work. It seems extraordinary; one would imagine that we could just flick a switch to change one word, but as she said, there are many hundreds of local authorities administering the benefits, each with its own literature and computer system. We have to do this precisely. There is no set date for achieving the change, as there was no set date a few months ago, but we are working as hard as we can to deliver on the commitment she made.
The hon. Lady asked about rounding up. The draft regulations refer to rounding up because we are using estimates but, as they make clear, we will use limited data to estimate what people are entitled to and then round it, but that is temporary. Once we have triggered a claim for pension credit, that will be precise to the penny, so rounding will not be a long-term practice. If the approach being piloted triggers claims, the resulting payments will be precise. The National Audit Office would have views if rounding up was an ongoing practice.
The hon. Lady asked about the local service. The sort of figures that she quoted are the latest figures available to me, from 2009, but the pattern of local services has not changed substantially. I hope I have covered most of what she asked about.
Finally, the hon. Lady raised the question of the context. I will not stray too far into context, as I am sure you would not allow me to do, Mr Bone. However, she is right to point out the huge spending pressure on Departments and she will recognise the shocking scale of debt handed on by the previous Administration. It would have been nice to have come to power in 1997—my hon. Friends on the Government Benches will no doubt agree—when the economy was in good shape and reform was oiled by multi-billions of spare cash. It makes me feel that we have had 13 wasted years—I hesitated to use such a cliché, but it came out anyway—instead of the good social security reform that could have been achieved with the revenue available to the previous Administration. That is the context in which we are acting today.
When the hon. Lady talks about cuts, that is the context in which we are acting. The Prime Minister today used the phrase “Labour cuts”, and I am sure that she would like to identify the cuts she would have made.
Ms Eagle: We had better not get back into the Budget debate, although I am happy to do so if you will let me, Mr Bone. I have figures here, in particular about the sneaky little cut in indexation, changing from the RPI to the CPI, which will save nearly £6 billion in benefits expenditure.
Given the Minister’s comments about context, is he discussing with the Treasury the £5 billion of non-claimed benefits resulting from the take-up percentages that I quoted? If that approach were used, might it help to deal with some of the remaining hardcore issues of means-tested benefits not being taken up and the poverty that that implies?
I hope that the Minister recognises that we took 2 million pensioners out of absolute poverty in what he calls 13 wasted years. We also took 900,000 pensioners out of relative poverty, which is no mean feat. If his Government can even keep pensioner poverty going down, rather than allowing it to rise, as I suspect will happen, that will be helpful.
In conclusion, and to lapse back into consensus, we inherited the draft regulations and are pleased to implement them, so that we can learn lessons about why people do not claim their means-tested benefits. The hon. Lady is absolutely right that there are too many older people in Britain today living in poverty. That is scandalous. We hope that the small research study enabled by the draft regulations will provide us with insights we can use to tackle that long-standing problem.
|©Parliamentary copyright||Prepared 8th July 2010|