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Lord Higgins: Perhaps I may add that much of the noble Baroness's defence of the clause was listing people who will not be hit by it. I find the justification for those who are to be hit by it wholly unconvincing. I very much hope that we shall return to this matter on Report. I do not think the clause is amendable; it must simply be eliminated. I hope that it will be brought before the House at a reasonable hour on that occasion.

Clause 57 agreed to.

Clause 58 [Incapacity benefit: reduction for pension payments]:

On Question, Whether Clause 58 shall stand part of the Bill?

Lord Ashley of Stoke: I wish to oppose this clause as well. The clause introduces means testing for the first time for a major long-term contributory benefit. That is a very significant change. It is based on the clarion call from my noble friend of directing help to those in greatest need. That is a fine objective and a fine principle with which few of us would disagree. It is easy to argue that those who can afford it should help those who cannot. But we should look carefully at the consequences.

We are moving away from universal provision for everyone who pays contributions. That will damage trust in the Government. People will undoubtedly resent paying and not receiving the expected benefits. They will see this as a case of, to change a prime ministerial phrase, "nothing for something".

We should not forget that expectations are rising in this country and few will accept that poverty should be the automatic consequence of being unable to work. That is why occupational pensions are so numerous. In olden times, many people lived for the day because they could not afford to do otherwise. Now they are more able and willing to prepare for the future. But attitudes will change very quickly and very radically if the prudent find themselves little or no better off. That would be a major consequence of this clause.

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The Government deserve credit for their new provisions for disabled people, but the poor should not be made to pay for the very poor. That is a fundamental principle in objecting to this clause. We need to look at the income levels of those whose occupational pension will be reduced to pay for other reforms. I am sorry to challenge my noble friend again on this issue, but the Government's proposal is that anyone with an occupational pension of more than £50 a week loses part of incapacity benefit for every extra pound of that pension. The consultation document indicated that that would be at the rate of 50p in the pound.

Any attempt to justify means-testing severely disabled people, and at a penal rate which is higher than the highest tax rate paid by millionaires, is to be deplored. The Government seek to give the impression that those with incapacity benefits are well off and that they are receiving a state benefit which they can do without. Nothing could be further from the truth and I think the Committee should scrutinise the figures with very great care.

Ministers, including my noble friend Lady Hollis, talk of "almost 100,000 people" getting occupational pensions of more than £230 a week and having incapacity benefit of £60 a week on top. Those are the figures which appear in Hansard and the press, but according to my noble friend's Written Answer on 30th June, this is just not true. The Written Answer says that £230 is the average pension of the 90,000 incapacity benefit recipients who have a pension of £150 a week or more. But £230 is the average figure: some will be above and some below, but we cannot be sure how many will be above. However, we can be sure that there will not be 100,000. The estimate I have been given is that some 40,000 people have occupational pensions of more than £200 a week.

I am afraid I must challenge the Government here. Does my noble friend accept that her figure of almost 100,000 people is wrong? Does she accept that only some 40,000 people have an occupational pension of more than £200 a week? If my figure is correct, just 6.6 per cent of a total of 600,000 people have both occupational pensions and incapacity benefit. That is a very small percentage: yet it is being used to justify the means-testing of a far larger group whose pension is very much lower. Forty-six per cent of incapacity benefit recipients with occupational pensions have a pension income of between £50 and £150 per week.

These are the people who in future will be hit the hardest. When the occupational pension income is as low as £2,652 a year, the incapacity benefit would be cut. It would be taken away completely when the occupational pension is £9,542 a year. These figures are for a single person and they are very, very low indeed. This is a blatant case of the poor paying to help the poorest, and I simply cannot agree with that. Far too many other people on middle incomes and well-off people should be doing it; taxpayers should be doing it, not poor, disabled people.

That is what is wrong with this clause. The message that this Government are giving to the vast majority of people is, "If you become disabled, beware. As far as

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the Government are concerned, you will have a low income. You won't be the poorest in the land but you will be poor, and all the super-rich will be all right". For those people struggling to work despite a disability or an illness, as mentioned earlier, which they know will eventually incapacitate them, it is a really terrifying prospect.

This Government argue that there is double provision of pension and incapacity benefit. The facts are these. The Thatcher government removed the earnings-related element of the former invalidity benefit, claiming that there was double provision. The same tired old argument is being used again now. This Government refer to double provision. The idea was used again in our debates today. It is as if the previous cut never occurred, and the Government are rushing in brandishing a new idea. However, rather than double provision, it is a case of double jeopardy.

I hope that the Government will think again about the clause between now and Report stage. I repeat: if they do not, I shall again give notice of my intention to oppose the clause and, on Report, the House will be divided.

Lord Higgins: Incapacity benefit is a national insurance benefit awarded to people who are incapable of work and who, having contributed to the scheme all their working life, have entitlement to a payment to replace their earnings when they become too ill or disabled to work. The effect of Clause 58 is to remove that entitlement for people who happen to have pensions.

It is difficult to envisage any clause that would be objectionable on so many different grounds. I have already complained that we ought not to be debating this issue at five minutes to midnight. One can only hope that the BBC parliamentary channel will transmit the debate at a better time. In that context, I must say that the captions that appear at the bottom of the screen, impartial as they are, are done in a most extraordinary way. They are very effective indeed. I wish that I had similar research facilities.

This is a matter of very great concern to people outside this Chamber. This provision abuses the contributory principle. People who have contributed may find, in the circumstances described in the clause, that they do not receive their benefits. It is an extension of means testing, but in a curious way. Most strange is the fact that the clause is a positive deterrent to having a pension. As I said, this legislation is about five Bills rolled into one, but much of it is devoted to encouraging people to take out pensions. Yet in the same Bill, what do the Government do? They say that if people happen to have an occupational pension--a type of pension that the Government believe is the best thing that ever happened in the pensions field--they suddenly find themselves clobbered and their pension reduced at a rate of 50p for every £1 of pension income over £50 a week.

As I say, it is difficult to envisage any proposal that offends so many different principles at the same time. As with the previous clause, I do not believe that Clause

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58 is amendable. The only thing for this place to do is to reject it. I hope that when we return to the matter on Report, it will do exactly that.

Lord Morris of Manchester: In the debate on Clause 57, I asked where, in our general election manifesto, it was suggested that 170,000 people who now qualify for incapacity benefit would lose entitlement. I ask now where it was stated that disabled people would be forced to take a cut in benefit of 50 per cent of any personal pension worth over £50 a week so that someone who has saved for years to provide a weekly pension of £75 will have their benefit cut by £12.50 a week.

Again, the proposals are justified by reference to "massive fraud" in the disability benefits system. The most precise figure used for the extent of such fraud was that given by the Prime Minister in an article in The Times on 15th January 1998. He wrote:

    "We spend more on disability and incapacity benefits than we do on the entire school system. Benefit fraud, estimated at £4 billion a year, is enough to build 100 new hospitals".

But the figure of £4 billion, used also by the National Audit Office, was quickly shown to be entirely bogus. Indeed, it was dismissed that same day by my noble friend Lady Hollis, speaking for the DSS, who told this House that it was,

    "based on old information from the previous government",

and that in the tens of thousands of cases investigated under BIP her department had,

    "not found a single case of confirmed fraud".

After her disclosure-- Midnight

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