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Lord Higgins: Will the Government adjust whatever arrangements are made for the pension credit element of the state pension credit to allow for inflation or for earnings?

Baroness Greengross: I support the noble Lord, Lord Higgins. Some form of uprating or attention to the pension credit is needed annually. Over the years, I have seen a great many benefits and concessions withering on the vine because of inflation or earnings growth. This is not a great issue at present, because we have low inflation and low earnings growth. But it could be bad policy-making if the provision is not reviewed annually just to make sure that matters are not going wrong. For example, the capital limits for support in nursing homes were unchanged for almost 10 years, yet that coincided with a period of high inflation during the early 1990s. Some attention to this point is needed.

6.15 p.m.

Baroness Hollis of Heigham: The effect of Amendments Nos. 18 and 23 would be to place in primary legislation a commitment for all future governments to increase the guarantee element—previously the MIG—of the pension credit by at least the increase in earnings. Amendment No. 23 specifies that it should be increased according to whichever is the greater, prices or earnings.

It is unusual for prices to rise more than earnings. We have been scratching our heads. So far as I recall, during the four years when pensions were related to earnings—between 1977 and 1981—in only one year, or possibly two, did prices exceed earnings. Those are the only two years that I can recall since 1970, possibly since 1960, that that has been the case. The scenario envisaged by the noble Lord—I do not deny that it is possible; in any particular year there may well be lags—is of a gradual invasion of wage rates by a pension which overtakes because it is artificially boosted. On that scenario, it would take about 277 years, give or take a year or two, for that to be extrapolated over time. I hope that he will take that point.

The Bill as drafted applies to pension credit the existing legislative provision for uprating that applies to MIG. Under Section 150(2)(b) of the Social Security Administration Act 1992, the Secretary of State is committed in each tax year to review the level of the guarantees credit and to increase it if,

"he considers it appropriate, having regard to the national economic situation and any other matters which he considers relevant".

These amendments ask us to set that provision aside and to make a future commitment. I do not believe that it is wise, sensible or appropriate so to do. As I

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said earlier—and the noble Lord, Lord Higgins, was right to pick me up on this point—we are not willing as a government to bind future governments. It is not only a matter of "cannot"; we are not willing, on the face of the Bill—which is what the amendment would do—to bind future governments, of whatever persuasion, to an uprating which they may believe cannot be justified in the prevailing economic situation. I do not think that anyone should be asking governments to do that on the face of the Bill.

The amendments may also reflect concern—this is the point about the annual uprating—that omitting the value of the guarantee credit from the face of the Bill undermines the proper processes of parliamentary scrutiny. I hope that the Committee will be reassured to hear that the regulation setting the amount of the guarantee credit and the order which uprates that amount annually will continue, so far as this Parliament is concerned, to be subject to affirmative resolution.

I hope, therefore, that the Committee will accept that we cannot, on the face of the Bill, bind a future government to the "numbers" part. I hope that Members of the Committee will agree that we are producing adequate parliamentary scrutiny. In the light of that, I hope that the amendments will subsequently be withdrawn.

Lord Higgins: Before the noble Baroness sits down, what is the position as regards uprating the pension credit element? Will adjustments be made?

Baroness Hollis of Heigham: Pension credit is made up of the guarantee and the savings element.

Lord Higgins: I am referring to the savings element.

Baroness Hollis of Heigham: I could not work out whether the noble Lord was referring to the retirement pension element. Any uprating of the savings element will be decided by the Chancellor at the appropriate time.

Baroness Turner of Camden: Before my noble friend sits down, does that affect the decision that the Government have already made to ensure that the MIG—which, of course, is also a promise to pensioners—would also be uprated in line with the earnings index? I know that the MIG will disappear with this legislation, but there was a commitment—which pensioners took very seriously—that the MIG would be uprated in line with the earnings index.

Baroness Hollis of Heigham: I can reassure my noble friend that we shall be doing that, at least for the life of this Parliament.

Baroness Turner of Camden: I thank my noble friend for her response, and also for her response to Amendment No. 18. I prefer our amendment to Amendment No. 23, although I said that it was a very good amendment. I specifically wanted a link with the earnings index. It still seems to me that that is the way

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in which pensioners can be assured of the income that they will have in retirement, permitting them to have some share in the rising prosperity of the community.

Nevertheless, I understand that the Government are unwilling to commit themselves to that in legislation, despite the promises that have been made to deal with the matter outside a legislative commitment. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 19:

Page 2, line 24, leave out subsection (6).

The noble Lord said: I shall speak also to Amendment No. 35. The two amendments are concerned with a combination of drafting and comprehension. It has always been the case that parliamentary draftsmen have been extremely well paid, but also frequently seem to suffer from a mental breakdown.

The two subsections concerned—one relating to guarantee credit and the other relating to savings credit—are totally incomprehensible. Perhaps the noble Baroness could explain them. I beg to move.

Baroness Hollis of Heigham: Amendments Nos. 19 and 35 would remove the regulatory powers designed to enable the Secretary of State to prescribe a lower amount in place of the standard minimum guarantee that would be payable to the claimant and additionally, when appropriate, to set the amount of standard minimum guarantee at nil. Furthermore, they would remove entitlement to the savings reward for whose guarantee credit had been adjusted following a period in hospital. I wonder whether I need to go beyond that.

Lord Higgins: That is what the two subsections say, but what on earth do they mean?

Baroness Hollis of Heigham: What they say is what they mean. I am baffled by the noble Lord's question.

Lord Higgins: I do not think that they are comprehensible. It would be helpful if the Minister could give us some indication of the purport of the two subsections. I do not think that anyone reading them could readily understand them. An explanation, no doubt as a result of the draftsman briefing the Minister, would be helpful.

Baroness Hollis of Heigham: I have given the noble Lord the description that I am content with. I shall happily write to him further if that would be helpful.

Lord Higgins: The noble Baroness's description is almost exactly what the two subsections say. For the record, I shall read them out. Clause 2(6) states:

"Regulations may provide that, in prescribed cases, subsection (3) shall have effect with the substitution for the reference in paragraph (a) to the standard minimum guarantee of a reference to a prescribed amount".

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What are those two prescribed amounts? That might give us some idea of what is going on. Clause 3(5) states:

"Where, by virtue of regulations under section 2(6), the claimant's appropriate minimum guarantee does not include the standard minimum guarantee, regulations may provide that the definition of 'amount B' in subsection (4) shall have effect with the substitution for the reference in paragraph (a) to the appropriate minimum guarantee of a reference to a prescribed higher amount".

What is that intended to achieve?

Baroness Hollis of Heigham: I had thought that the noble Lord understood exactly what those provisions were intended to achieve. The £100 a week minimum income guarantee—the retirement pension plus the top-up—is the standard minimum income on which anybody over the age of 60 is entitled to live, taking into account flows of income from capital and the rest. However, the Secretary of State has the power to reduce that standard minimum if, as a result of him taking no action, there would be double provision. That might be the case, for example, if someone was in hospital, in prison or in a convent where there was full care. The Secretary of State will be able to ensure that such people are paid less than the standard minimum of £100 if provision for their support is being made in other ways. In my innocence, I had assumed that the noble Lord was getting at that point. The Secretary of State will be able to prescribe an amount lower than the standard minimum guarantee—currently £100—to be payable to the pensioner claimant. Additionally, when appropriate, he will be able to set the amount of standard minimum guarantee at nil if, for example, the pensioner is in prison. What could be simpler?

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