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Lord Astor of Hever: My Lords, I thank the Minister for that response. I take on board the points she makes about part-time work. I agree with the noble Lord, Lord Goodhart, that there are times when it is reasonable for a parent to remain at home looking after a child or children up to the age of 11 or 12. They should not be penalised for that. We shall, of course, carefully read Hansard. However, in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 64 and 65 not moved.]

9 p.m.

Lord Goodhart moved Amendment No. 66:

("(e) the pensioner--
(i) did not have an earnings factor for the year equal to or greater than the qualifying earnings factor for the year; but
(ii) would have had such an earnings factor if he had had earnings equal to the lower earnings limit in each week in which paragraph (b), (c) or (d) would have applied to him if the words "throughout the year" had been omitted").

The noble Lord said: My Lords, in moving Amendment No. 66 I shall speak also to Amendment 67. Although it is not formally grouped with Amendment No. 66, I believe that it may be convenient if I speak to it at the same time because it covers a good deal of common ground.

This is the first in a short series of rather complex amendments on matters concerning pension contributions. Clause 30 of the Bill inserts a new Section 44A into the Social Security Contributions and Benefits Act 1992. Among other things, it gives deemed pension credits for the S2P to people who qualify in four different categories. I regret that my amendment covers only three. I notice that I failed to take up a point made by the Minister in Committee. The four categories are: first, those who qualify as recipients of invalid care allowance; secondly, those with home responsibility for a child under the age of six; thirdly, recipients of long-term incapacity benefit; and, fourthly, recipients of severe disablement allowance. In each of those four cases, the pensioner, or prospective pensioner, gets credit only if he or she falls within that category for the whole of a fiscal year. This creates serious problems for what might be described as the "entry and exit years"; namely, the year in which the right to the benefit begins or ends. I use "benefit" as a shorthand way of including people with home responsibility, who are not receiving benefit as such.

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If in the entry or exit years a contributor has sufficient earnings, he or she qualifies for S2P credits on that basis. The level of earnings required, as I understand it, is 52 times the lower earnings limit for each week. That aggregate is described as the "qualifying earnings factor". But there will obviously be many cases, particularly if the change from earner to carer comes early in a fiscal year, in which the contributor will not have reached the qualifying earnings factor before he or she switches from earning to caring.

Therefore, as the Bill now stands, many people will lose the year's credit towards the S2P for their entry and exit years because they do not have sufficient earnings in those years to reach the qualifying earnings factor, but have not been receiving the relevant benefit for the whole of that year. I believe that that is unfair. Why should people in those circumstances lose credit? Not only is it unfair, it is also random, because the question of whether a contributor has reached the QEF in any particular year may well depend on whether the switch from earning to caring, or earning to benefits, has happened late or early in that year. Moreover, it is worse than random because it discriminates against the poor. Even though, of course, earnings above the higher earnings limit are disregarded for this purpose, one will reach the QEF much more quickly if one's earnings are at the higher earnings limit than if they are at the lower earnings limit. So, this is irrational; it is random; and it is discriminatory against the poor.

The way of curing that problem is obvious: to allow people to mix and match. If someone switches from earnings to benefits half way through the year, surely one should take the earnings for the first half of the year and add on a notional credit for earnings at the lower earnings limit during the period when that person has been in receipt of benefits. That in the great majority of cases would solve that particular problem. Therefore, why not allow mix and match?

In Committee, the noble Baroness, Lady Hollis of Heigham, recognised the problem and promised to look at it again. No doubt she has done so, but no government amendment appears in the Marshalled List. Clearly, although she has looked at it again, it has been decided that nothing should be done. I have to say that I find it difficult to believe that the problem is as intractable as that. I await with interest her explanation.

The only problem that I can see is that the Contributions Agency, which is now part of the Treasury, will have to talk to the Benefits Agency. The Contributions Agency will know what a contributor's total earnings were in any year. It will have to find out from the Benefits Agency, whether any person was receiving relevant benefits for part of that year. Surely, those are facts which are relatively simple to ascertain. All one has to do is to put the two of them together, and "hey presto", if the aggregate sum reaches the qualifying earnings factor, problem solved. I do not believe that the problem is insoluble. I believe that if there is a will to solve the problem, it could be solved.

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I should like to finish by referring briefly to Amendment No. 67. That derives from a matter raised by the noble Baroness, Lady Pitkeathley, both at Second Reading and in Committee. There is a special problem which relates to ICA (invalid care allowance). This can be lost temporarily if a person cared for is in hospital or respite care for more than 28 days in any one period of six months. The pension credit, therefore, in this case may be lost not only in the entry and exit years but in an intermediate year in which the hospital or respite care exceeded the permitted amount.

The purpose of the amendment is to allow a carer to continue claiming the pension credit, although not the ICA itself, during the period of hospital or respite care of the person being cared for, for up to three months. This is perhaps a relatively small point, but it is surely a very important one for those who are affected. I believe that the Government would do well also to accept the principle of this amendment. I beg to move.

Baroness Pitkeathley: My Lords, in Committee I put my name to an amendment similar to this one in the name of the noble Lord, Lord Goodhart. I have not done so on this occasion because I believe there may be some technical difficulties with the suggestions that he puts forward. However, I want very much to speak in support of the principles which I believe underlie his amendments. I raised these issues about carers' income at Second Reading and in Committee. I must acknowledge the huge progress that has been made for carers in recent years: the Carers (Recognition and Services) Act 1995, the National Carers Strategy, and--if your Lordships will forgive the commercial--the Carers and Disabled Children Bill, which I shall bring before your Lordships' House tomorrow. But, so far as income is concerned, progress for carers and policy thereon have not kept pace.

At Second Reading I asked about a review of carer's benefits. I raised that again with my noble friend last week in a Starred Question. I am particularly concerned at this moment about carer's income because the latest survey published by the Carers National Association--Caring on the Breadline--shows that 77 per cent of carers say that they are worse off as a direct result of their caring responsibilities; one in three have trouble paying for gas and electricity; and one in three have been or are in debt. It is an extremely gloomy picture.

I know that the Government value carers. But on the question of income, carers are beginning to have doubts about that. I am not suggesting that there should be vast influxes of money; like all carers, my requests are modest. But small changes can make big changes in carers' lives; for example, raising the earnings limit for invalid care allowance and the lower earnings limit for national insurance contributions; introducing a taper on invalid care allowance; extending invalid care allowance for eight weeks after the death of the person being cared for. There is a precedent for that, as I pointed out on an earlier occasion, because the carer's premium, which was introduced some years ago, extends for eight weeks

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beyond the death of the person. Alternatively, the respite care provision could be continued as suggested by the noble Lord, Lord Goodhart, in Amendment No. 67.

I hope that the Minister, who I know is extremely sympathetic to the problems of carers, will take note of these points, either now or at Third Reading. The Government must show some movement in this area if carers are to be reassured that they are valued in the way that everybody agrees they deserve.

Baroness Hollis of Heigham: My Lords, we discussed Amendment No. 66 in Committee. As the noble Lord, Lord Goodhart, said, in good faith I took it away to see what I could do.

The intention of the amendment is to allow someone with earnings below the annual lower earnings limit for the year (LEL) to benefit from the lower earner's boost where they were also entitled to ICA, long-term incapacity benefit or home responsibilities protection (HRP) for part of that year.

During the previous debate I tried to set out the very real difficulties underlying what the amendment sought to achieve. I said that I had then and continue to have sympathy for it. I hoped that if there were an easy solution we would find it. I was more than willing to take it away to see what we could do.

We have examined these matters again. Speaking personally, I have been engaged in two quite long and extensive meetings with officials. I am still unable to see a way through the difficulties, as I shall explain. But perhaps for those who were not present at the time, I can say what the nature of the problem is.

As is the case for SERPS, entitlement to S2P (state second pension) will be calculated on an annual basis on a person's surplus earnings; that is to say, the amount by which someone's earnings exceed the annual lower earnings limit of £3,500. That means that we need to look at someone's earnings over the whole of the tax year in question. That is consistent with the annual returns made by employers on each employee's earnings in the preceding year.

This means that someone who has earnings between the annual LEL and the low earnings threshold for the year in question will benefit from the state second pension low earner's boost. And someone who has been entitled to ICA or long-term IB throughout the year will be credited into the state second pension.

The noble Lord, Lord Goodhart, supported by my noble friend Lady Pitkeathley, was seeking to see whether we could mix and match benefits and earnings for the entry and exit years. The difficulty is the consequential anomalies that would result. We have found ways around some of the problems, but there are others we are unable to resolve.

We have proposed that it will be necessary to meet the qualifying criteria for the whole of a year--that was the original intent--because it would not be operationally feasible for either employers or the department to move to a system which calculated entitlement not on a yearly basis, but on a weekly

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basis, given that all earnings details are provided on an annual basis by employers and are recorded as such by the department.

Having looked carefully at that issue to see whether we could find a workable solution, we established that it would be operationally possible to combine earnings for weeks in which someone earns over the lower earnings limit (£67 a week) with credits for ICA and long-term IB recipients, treating the credits as if they were equivalent to earnings at the level of the weekly LEL. So far so good. Technically we could do that.

The problem arises--it may be that I did not explain this fully enough at the time, but I have been round this time and again and cannot see a way forward--when we try to read across to home responsibilities protection for basic pension purposes. HRP will be of much greater benefit to such carers under our proposals for state second pension, and we intend many more to be aware of it. But as HRP is only available for whole years of caring activity, we cannot unpick and revise that legislation to allow for part years. Any measure therefore which benefited only certain carers would not only be morally difficult to justify, but would also leave us open to future ECHR challenges.

Perhaps I can remind your Lordships that ICA goes to those who are caring for more than 35 hours a week and earning less than £50 a week and therefore are likely to be either in a household where no one is in receipt of benefit or, alternatively, are likely to be in work. As the noble Lord said, it is not beyond our wit to do a mix and match for entry and exit where people are above the LEL for the other part of the year. Our problem lies with home responsibilities protection: HRP goes to two other major groups. It goes to the carers of elderly or disabled people who qualify for ICA but do not receive it; for example, those who are on income support with the carer premium, the poorest carers, or those who, although they are entitled to ICA, also get another, higher benefit, such as widows' benefit or IB, who are often the most frail carers. So those who most need the protection are those who are most likely to be protected by HRP, rather than getting ICA.

Given the way that all the records are built up, we cannot possibly "part-year" home responsibilities payments for carers. Even if we could, we would have to consider what to do about the people receiving HRP because they are caring for children under five. The cost of extending these exit and entry years would be extremely high--about £200 million per year. In addition, we must also consider the implication of extending that to a group far wider than that envisaged by the noble Lord.

Our problem is that wherever the line is drawn, greater anomalies are created than if that line was not drawn at all. That is our dilemma. We can solve it for those on ICA. However, we cannot have equitable treatment of those carers of older people who are receiving HRP without at the same extending it to other groups, who I am sure are not envisaged by the

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noble Lord as requiring entitlement, such as those who get HRP through caring for children. For HRP, that is built up on an annual basis.

I am very sorry about this. I very much wanted to see whether we could deliver a mix and match. I recognise the arguments and I have every sympathy with them. However, I now honestly believe that we cannot do it without producing more anomalies than we solve. I am afraid that the read-across consequences of doing something which here looks decent, right and proper, but which in turn generates other unfairness and injustice in the system, is a recurrent problem in social security. It is for that reason that, although I took away the provision in good faith, I have not been able to come back with something that will meet the concerns of the noble Lord tonight. With that explanation, I hope that the noble Lord will accept my arguments.

The noble Lord also referred to Amendment No. 67. It may be helpful if I remind your Lordships about the interaction of ICA rules regarding periods spent in hospital and residential care, including respite breaks. During any six-month period, ICA can still be paid for four weeks when there is a break in the caring. In addition, it remains payable for a total of eight weeks in a six-month period if either the carer or the disabled person is in hospital. The total of 12 weeks can all be taken as a hospital in-patient if no respite breaks are taken. If the carer is in hospital, the eight weeks could cover one period. However, if the disabled person is in hospital, the length of time for which ICA is payable depends on the disabled person's DLA or AA still being paid.

The DLA and AA rules for periods in hospital have recently been changed to extend entitlement to DLA and AA to include the day of discharge from hospital and the day of admission to hospital, which means that there will be fewer cases where there is a break in entitlement. Similarly, the carer of a disabled person--it might be a severely disabled child in a weekly residential school--who is in publicly funded care all week, but who returns home on Saturdays and Sundays, could now become entitled to ICA for the whole week. Because of the discharge rules of DLA and AA, that would not previously have been possible; it is now possible. There has been some decent movement on that front, where, particularly for parents with disabled children or someone in weekly residential care, the entry and exit days do not jeopardise their entitlement to ICA. I think that the rules are quite generous.

This amendment would introduce a set of different rules in S2P for periods spent in hospital or residential care for respite breaks to those receiving ICA, which we think would be administratively cumbersome. A carer whose ICA had ceased during such a period would be treated as though they were still entitled to ICA for up to three months at a time, which is quite a long period in which to have a roll-over of entitlement. It could be repeated several times during the year. Therefore, although the majority of the year could be spent not caring, that year would still provide a year's entitlement towards S2P.

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In addition, it is worth noting that this proposal would break the essential link between DLA and AA and its carry on entitlement to ICA and, therefore, the link between ICA and caring for a severely disabled person.

With regard to Amendment No. 67, I hope that the noble Lord will agree that the Government have gone quite a long way to meet some of the very real concerns. I hope that he will recognise, however, that we cannot do what he is now asking us to do, which would not only be cumbersome but probably unfair. In the light of my explanations and my regret that we cannot move on Amendment No. 66, I hope that the noble Lord will withdraw his amendments.

9.15 p.m.

Lord Goodhart: My Lords, I am most grateful to the Minister for the obvious effort that she has put into seeking a way round what are undoubtedly real administrative difficulties in this matter. I very much regret that it has not been possible to find a way round these difficulties, because I think that this is a cause of real unfairness and injustice.

I accept that it would, of course, cause anomalies to extend the measure to cases in which it could be done, such as ICA, while not extending it to HRP. At the same time, however, I want to say two things about that. First, the anomaly is no greater than the existing anomaly where someone who starts drawing ICA on 31st March will then get credits starting from the following 6th April, whereas someone who starts drawing ICA on 12th April will have to wait nearly a whole year to be able to get the credit. That seems to me to be at least as serious an anomaly as the other one.

I also think that this is perhaps a case where the following principle applies: thou shalt not do a just thing today for fear of having to do a juster thing tomorrow. Were the Government to at least extend it where it could be done with relative administrative ease, they might find themselves more motivated to come forward with a solution for the more serious difficulties surrounding HRP.

Nevertheless, I feel that this is a highly technical issue. Without the administrative backing that the noble Baroness enjoys, I am reluctant to insist that this problem that can be overcome. In those circumstances, it would frankly be wrong for me to do anything other than beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 67 not moved.]

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