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Baroness Hollis of Heigham: Amendments Nos. 31, 34 and 44 propose refining the drafting of Clause 3—
Amendment No. 31 at "amount A" in Clause 3(4)(b); Amendment No. 34 at "amount B" at Clause 3(4)(a); and Amendment No. 44 at "the maximum savings credit" at Clause 3(7)—to include the wording "the amount equal to".We welcome the opportunity to improve the drafting of the Bill during its progress through the House. One of the many accomplishments of the noble Lord, Lord Goodhart, when he was pensions spokesman, was finding, as he liked to think, at least one drafting error by parliamentary counsel in a pensions Bill. So if the noble Baroness is correct, she will be following an admirable precedent. I am sure that the amendments seek to be helpful in this regard.
I recognise that Clause 3 may appear complicated. But in essence, it defines the calculation of the savings credit by reference to a single calculation. In effect, it comes down to the amount by which "amount A" exceeds "amount B". That is the basis of the calculation.
Although the clause could work equally well with the addition of the words inserted by the amendments, the effect of doing so is the same as the current drafting and I believe that they would make no difference to the operation of the clause. Neither do I believe that the amendments would increase transparency or understanding of how we want to calculate the savings credit. They seek to add extra words to a clause that is already precise. I suggest that the changes are not necessary to deliver pension credit successfully, and that they do not add to or alter our understanding of intent.
I am happy to examine the noble Baroness's point about an "amount" as opposed to a percentage. I shall discuss the matter with officials and see whether the amendment does what she believes it does. They do not believe it to be the case. However, I am happy to scrutinise the wording to see whether it is. If so, I shall either write to the noble Baroness or return to the matter during the course of the Bill. My present understanding is that this proposal would not improve the drafting of the Bill, but I am happy to scrutinise it. The noble Lord, Lord Goodhart, was invariably right and it may well be that on this occasion the noble Baroness is right—I rather doubt it, but she may be. Let us have a look at the wording. After all, that is the point of a Committee stage. I hope that with those offers, the noble Baroness will feel able to withdraw her amendment.
8.45 p.m.
Baroness Noakes: I thank the Minister for that response. To reiterate the point, in the calculation of the savings credit,
- "'amount A' is the smaller of . . . the maximum savings credit"—
- "a prescribed percentage of the amount".
Amendment, by leave, withdrawn.
Baroness Turner of Camden moved Amendment No. 32:
- Page 3, line 13, leave out "a prescribed percentage" and insert "60 per cent."
The noble Baroness said: This is a probing amendment. The savings credit is a prescribed percentage of qualifying income above the savings credit threshold. Initially, as we know, the percentage will be 60 per cent. But if the threshold remains tied to the basic pension, which rises in line with prices, while the minimum guarantee rises in line with earnings, the cost of the savings credit is likely to rise steeply. The Government may decide to contain the cost by reducing the percentage.
The November 2000 consultation paper stated that the initial rate would be 60 per cent. We have already been over this course to some extent. However, I should be grateful if the Minister would state the Government's intention. I suspect that she is likely to tell the Committee that the Government are not prepared to tie future governments. However, I should be obliged if she would say what precisely is the Government's view in relation to this amendment. I beg to move.
Baroness Hollis of Heigham: Again, this is a "good try" by my noble friend. I should like to put two points on the record. First, we have made our policy intentions clear in our consultation document. There has never been any suggestion that the Government would adopt anything other than 60p in the pound, or 60 per cent, reward for savings. That is our policy intent. However, the general point remains that you do not bind future governments and you try to keep the figures out of the way in regulation.
The commitment is for the lifetime of this Government, and that is precisely why we have committed ourselves to the policy of uprating the guarantee credit in line with earnings for the duration of this Parliament. However, I do not believe that we can bind the hands of subsequent administrations, given the discussions we had earlier about what may happen to the balance of public funds.
We expect the structure of pension credit to endure. The principles have wide support on all sides of the Committee. That is not to say that in future it may not need tweaking in various ways. Fine-tuning may be necessary in future months and years.
My noble friend may also be worried that this provision may never face proper scrutiny. But, again, the regulations setting the amount will be subject to affirmative resolution. Needless to say, any change that she fears would have to be brought before the House in an affirmative resolution. It is certainly not our intention to depart from the provision, but experience has taught governments to be wary of enshrining such matters in case the situation may need to change. For example, it is conceivable that in future years a government might seek to disaggregate or reaggregate the concept of "household" as a social
security basis. That might have knock-on implications for percentages and the like. It is therefore not unreasonable to keep flexibility.I cannot be clearer than I have been: I have set out the Government's intention and said that we expect it to endure. However, we need flexibility should circumstances change or should subsequent pension developments mean that there are interlocking consequences that may lead us to revisit the issue. With that assurance, I hope that my noble friend will withdraw her amendment.
Lord Higgins: The Minister pointed out earlier that the present Government cannot bind future governments, for which we must be grateful. However, on a related matter she was also prepared to give an undertaking that a certain assurance would persist for the rest of this Parliament. Will she give a similar assurance on the point that has just been made? If she cannot do that in terms of 60 per cent, will she at least promise that the withdrawal rate will not rise above the top rate of income tax under this Government?
Baroness Hollis of Heigham: On the second point, the noble Lord is simply wrong, if he will forgive me. The withdrawal rate for pension credit cannot be separated out from the withdrawal rate for other benefits. That takes us back to our debate about MDRs. However, on the first point I assure my noble friend that for the life of this Parliament, the reward for savings—which pensioners have never had the luxury of experiencing—will be enjoyed at a rate of 60p in the pound if as a result they stay under the £100 threshold.
Baroness Turner of Camden: I am grateful to my noble friend the Minister for those assurances. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 33 and 34 not moved.]
Baroness Barker moved Amendment No. 34A:
- Page 3, line 19, at end insert—
The noble Baroness said: I apologise for the amendment not appearing on the Marshalled List. We tried to table our amendments as early as possible. I thought that his one had been submitted, but there was a slight problem.
Throughout the Committee people are making valiant attempts to deal with Clause 3—not only to understand it, but to improve it. The amendment would not change the structure of the pension credit, but would deal with the principle. In her reply to the last amendment, the Minister talked about the structure and the principles of the pension credit being established.
As was said on Second Reading, one principle appears to be enshrined: although there may be a reward for pensioners for the first time, their savings will still, in effect, be taxed at 40 per cent. That is extraordinary when we are talking about people who, to repeat the phrase used by the Minister on Second Reading, are not poor, but are nearly poor. We are talking about people with very low incomes.
On an earlier amendment dealing with the withdrawal rate, the noble Lord, Lord Higgins, pointed out that people with very low incomes are being subjected to a taper rate that would normally apply only to people with earnings of more than approximately £35,000 a year.
The amendment would not change the structure or the workings of the savings credit. I am sure that by now we all have the diagram in our heads explaining how the system will work. However, the amendment would introduce the principle that the taper rate should not be more than the basic rate of income tax. I hope that it is as simple and as clear as that. I look forward to the Minister's response. I beg to move.
"( ) In relation to amount A, the prescribed percentage shall be 100 per cent. less the basic rate of income tax.
"( ) In relation to amount B, the prescribed percentage shall be the basic rate of income tax."
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