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House of Lords

Wednesday, 19th March 1997.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Ripon.

Pensions: Downrating during Hospitalisation

Baroness Fisher of Rednal asked Her Majesty's Government:

    What savings occur from the financial penalty imposed on persons on state retirement pensions who spend up to six weeks a year in hospital.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, data are not available to calculate savings from downrating of retirement pensions for stays in hospital of up to six weeks. The only cases where downrating applies during the first six weeks of a hospital stay are where the person goes into hospital from a council home. The estimated total saving from hospital downrating of state retirement pensions is some £60 million a year, almost all of which comes from downrating after six weeks.

Baroness Fisher of Rednal: My Lords, does the Minister agree that the people concerned have earned that pension, by their entitlement and through the insurance scheme? Does he further agree that when they go into hospital they are still faced with the same responsibilities to keep the home going, whether it be house, bungalow or flat? Is it right that they should then be deprived of that money if they spend more than six weeks in hospital undergoing treatment which is designed to make them better, when going there is not their personal choice?

Lord Mackay of Ardbrecknish: My Lords, the downrating of the state pension when someone is in hospital for over six weeks and the further downrating when they are in hospital for over 52 weeks is of long standing and has been the policy of governments of both parties since the inception of the pension system in 1948. Of course, the pension is not all lost. The downrating is merely a portion of the pension after six weeks and then a slightly larger portion after 52 weeks. The reason is that, if the state is looking after many of the person's needs in hospital, it would be double provision to continue to pay the pension should they be in hospital for some time. The state system is pay-as-you-go, unlike Basic Pension Plus, which we have just announced and which would be funded.

Lord Stoddart of Swindon: My Lords, does the Minister agree that whether it is something which has been operated by all kinds of governments does not matter? The fact is, as my noble friend said, that it is an

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insurance-based pension. Let us make no mistake about that. It has been contributed to by pensioners and it is their money. Will he accept that other people are not similarly disadvantaged when they go into hospital, and it is about time that the Government, of whatever colour, reviewed their policy and ceased to penalise older people when they go into hospital?

Lord Mackay of Ardbrecknish: My Lords, the fact of the matter is that pensions are paid out of the taxes and national insurance contributions collected in the same year as the pensions are paid out. As I mentioned, it is not a properly funded policy. The point is that the taxpayer and national insurance payer are paying to look after someone in hospital for more than six weeks initially and, if it goes on, for more than 52 weeks. It seems to me that it is double provision if they get the help there and at the same time receive their full retirement pension. I believe that they get sufficient of their retirement pension to continue with any responsibilities for their house and so on that they might have. But if the noble Lord wants the social security budget to rise by another £60 million, I suggest that he talks to his honourable friend Gordon Brown about his suggestion that the budget that we are providing for the next two years is perfectly adequate in social security.

Baroness Fisher of Rednal: My Lords, will the noble Lord clarify that £60 million? How many persons does it represent in one year who are benefiting from the state, as the noble Lord said? How many persons are involved?

Lord Mackay of Ardbrecknish: My Lords, the position on downrating is that approximately 35,000 people at any one time have their pension downrated. Approximately 20,000 of them are in the six to 52-week period and approximately 15,000 are in the over-52-week period.

Inward Investment and Employment Statistics

2.38 p.m.

The Viscount of Oxfuird asked Her Majesty's Government:

    What is their forecast for inward investment for the remainder of this financial year and what effect that figure will have on the unemployment statistics.

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, it is not possible to predict the number of new inward investment decisions and related employment figures that will be notified to my department's Invest in Britain Bureau in this period. However, the pattern over the past three years has shown an upward trend in both numbers of projects and jobs created.

The Viscount of Oxfuird: My Lords, is my noble and learned friend aware that today in Dunfermline, Scotland, the Hyundai Company of Korea is breaking

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the ground for a new factory, which will give 2,000 jobs to the constituency of the Shadow Chancellor? Does he agree that the declared objective of the party opposite is such that to sign up to the social chapter is surely a somewhat strange step, in view of that investment?

Lord Fraser of Carmyllie: My Lords, my noble friend is absolutely right. Noble Lords may laugh, but I do not believe that there is anything in the least bit humorous about it. Dunfermline is an area that many in the party opposite had written off as a place for employment, opportunity and reasons for optimism. Two thousand jobs will be created there. That is as a result of this Government's policy in attracting inward investment. I have no doubt whatever that, were we to sign up to the social chapter, that quite remarkable record in Europe, which is better than anyone else's, would seriously be put in peril.

Lord Bruce of Donington: My Lords, in order that the Question may be considered within its correct perspective, will the Minister confirm that, according to the Government's figures, for every £1 invested inwards in the United Kingdom, £2 is invested outside Britain?

Lord Fraser of Carmyllie: My Lords, I am not sure that those figures are correct. However, we have a remarkable economy in that we attract almost as much inward investment as we invest outwards. We wish to see that activity maintained. It is as desirable that we attract inward investment as it is that we invest elsewhere around the world. We are doing that extremely satisfactorily and efficiently.

Lord Clark of Kempston: My Lords, does my noble and learned friend agree that one of the reasons the UK has the bulk of inward investment into Europe, not only from Europe, but also from Korea and America, is the competitive position of our industries? They have a lower labour on-cost than our main competitors in Europe. Does he agree also that, if the social chapter was signed, inward investment would dry up?

Lord Fraser of Carmyllie: My Lords, yes. An interesting indication of that is not so much the Japanese and Korean investment that we now attract to the United Kingdom--we are the number one location for Asian investment--but that some of the most important investments undertaken by German companies are now in the United Kingdom. Most notable, in recent years, is the massive Siemens semi-conductor plant in the north-east of England.

Lord Mackie of Benshie: My Lords, can the noble and learned Lord tell us who those foolish investors are from this country who invest abroad when it is so much more attractive to invest at home?

Lord Fraser of Carmyllie: My Lords, all manner of companies. One group that certainly would not have been investing abroad, had it not been for this Government, are the privatised utilities which now have

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extensive investments overseas. It is highly desirable that they should undertake that activity and no other government would have given them that opportunity.

Lord Gisborough: My Lords, to what extent would a dissipation of the funds of the utilities through the proposed windfall tax--which will give six months employment to the unemployable--deny investment in restructuring which would create genuine long-term jobs?

Lord Fraser of Carmyllie: My Lords, I have just made the point that those utilities that have been privatised have been extremely successful and are now investing in every continent in the world. If they were to be subjected to a windfall tax, I would consider that their prospects of being able to continue that high level of investment, either in the United Kingdom or overseas, would be seriously diminished.

Lord Sewel: My Lords, does the Minister accept that the evidence he gave earlier indicates beyond doubt that inward investment into Scotland is not at all deterred by the prospect of a Scottish Parliament?

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