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Baroness Turner of Camden: I thank my noble friend for that explanation. I still think that there would be no harm in writing that provision into the Bill, but in view of her positive response, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 59A:
- Page 5, line 36, leave out subsection (8).
The noble Baroness said: This is a probing amendment. I have read Sections 9 and 10 of the Social Security Act 1988 to try to understand what Clause 7(8) is intended to do, but I must confess that I am none the wiser. The Explanatory Notes say only that nothing in the Bill will affect the powers of the Secretary of State to revise decisions under Section 9. My question to the Minister is: in what circumstances can the Secretary of State use the Section 9 powers to revise a pension credit decision under the Bill? Can they be used to reduce an
individual's pension credit? Can they override the setting of an assessed income period? In the cause of enlightenment, I beg to move.
Baroness Hollis of Heigham: Amendment No. 59A would severely undermine the department's ability to recover overpayments. The provision as amended would prevent the decision maker in the local office revising the original decision regarding the claimant's retirement provision if, for example, that decision was based on ignorance of a material fact caused by the fraudulent, deliberate or negligent conduct of the claimant. Under current rules, an overpayment is calculated from the date on which an incorrect award was made, or on which an award became incorrect due to a change in a person's circumstances. Where benefit has been overpaid as a consequence of a person's failure to disclose, or misrepresentation of, a material fact, the department has always sought to recover the amount overpaid. Indeed, not to do so would be contrary to government accounting procedures which require departments to try to recover debts where it is cost-effective to do so.
The Committee will be aware that a person in receipt of the minimum income guarantee has an ongoing obligation to notify the department of any change in their circumstances. However, pension credit recipients, once the five-year period has begun, will have to notify only major changes. These include when a person becomes a member of a married or unmarried couple, when a person loses their spouse, when a person attains the age of 65, or, where the claimant is a member of a married or unmarried couple, the other member attains the age of 65. The claimant is not obliged to report changes in retirement provision during the assessed income period, though he or she may report such changes if they would result in an increased entitlement to pension credit. As I have said, it is a win/win for pensioners.
That simplification will ease the burden on claimants to report every change as it happens. But—and this is where the amendment would bite—it is important that the claimant gives us accurate and full information at the start of the claim, as that will be vital to establish not only the correct level of entitlement but whether the five-year period is appropriate. If there are obviously going to be fluctuations during the next year, the five-year period will kick in only when we have a reasonably reliable income forecast. Equally, at the end of the current assessed income period, the same considerations will apply.
As drafted, the amendment would effectively curtail the department's ability to recover overpayments of pension credit where there had been an incorrect assessment of a person's retirement provision at the start of an assessed income period—where the overpayment may have arisen as a result of fraudulent omissions on the part of the pension credit recipient or their partner.
For example, Mr X might, at the start of his pension credit claim, deliberately conceal from us the fact that he has two separate occupational pensions. Let us for the sake of argument say that he told us that he had only one occupational pension, and the decision maker decided to set a five year assessed income period. Mr X would be overpaid, for obvious reasons. If the existence of his
second occupational pension were discovered at the end of his assessed income period, the amendment would mean that the decision maker could reassess Mr X's entitlement only from that point in time. He could not go back to the original decision, even if it were based on a calculated deceit, revise it and seek to recover the overpayment. In effect, sanctions would be heavily undermined. Such omissions, deliberate or otherwise, do occur. I am sure that none of us would wish to encourage such behaviour.Our proposed policy for pension credit is that where an overpayment occurred as a result of a person's failure to disclose, and therefore the entitlement decision was based on a mistake as to a material fact, the claimant would be liable for recovery from the day on which the overpayment occurred. The Government want to be consistent. Were we to accept the amendment, it would create a disparity in the way in which the department treats overpayments of pension credit that arose due to a mistake in the calculation of a person's retirement provision compared with the treatment of overpayments resulting from any other circumstance, such as a non-dependant leaving the household or the repayment of an outstanding mortgage loan. The local decision maker would be able to revise a decision where the claimant misrepresented a fact about his household composition, but not where the claimant had misrepresented a fact about his retirement provision. I am sure that the noble Baroness would accept that that would be absurd.
To put the provision in statistical context, in the current year the department has sought recovery on 25,000 overpayments from people aged 60 and over receiving MIG. If the amendment were to be accepted, we could not do so in future—or not substantially—and there would be a net loss to the department of £20 million. Depending on when the claimant reported the change, we would be able to pay any other arrears.
I hope that the noble Baroness will accept that our proposals are reasonable and that the amendment would be an invitation for people to misrepresent incomes and that we would have no means for recovery. Obviously, the vast majority of pensioners try to be as truthful as they can. Sometimes mistakes occur in error, but sometimes we know that they are deliberate. We need the currently available sanctions to continue to operate.
4.15 p.m.
Baroness Noakes: I am grateful to the Minister for that explanation and my enlightenment. Will she clarify one point? She spoke throughout largely in terms of fraudulent misrepresentation. The powers apply to any overpayment where the facts are incorrect, whether because of error or oversight. There is no gradation. The powers will allow the Secretary of State—or the local office—to revise whenever there is a change, for whatever circumstance.
Baroness Hollis of Heigham: Yes, if money has been paid in error, the department has an obligation to seek to recover it. I know from experience that where the department may in part be responsible for an error, it tries to take as sensitive an approach as possible in the circumstances, especially in the case of pensioners,
disabled people, people with a mental health problem, and so on. If we do not have such a power, the problem is not so much that there may be an innocent error as that there may be deliberate cheating, which is an entirely different situation.
Baroness Noakes: In the light of what the Minister said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden moved Amendment No. 60:
- Page 5, line 39, at end insert—
The noble Baroness said: The amendment covers similar ground to that which we have already discussed. It provides that where a recoverable overpayment of state pension credit is the result of an error, the determination of the amount recoverable should be limited to the amount overpaid in a period of 12 months or the assessed income period, whichever is the shorter.
Pension credit entitlement is fixed for a period of five years, unlike some other benefits. A relatively small weekly overpayment for which the claimant is held responsible may result in a demand for a very large repayment. The amendment therefore proposes that, in such circumstances, only 12 months' overpayments should be recoverable. I hope that my noble friend will feel that there is some justice in that request, because we are talking about a period of five years, rather than a much shorter one, as in other circumstances. I beg to move.
Baroness Hollis of Heigham: I can give my noble friend Lady Turner of Camden a fairly full answer, and I shall return to one of her points. However, I wonder whether she really needs me to, given the discussion we have already had. What she is saying is that if at the outset of establishing a five-year claim someone deliberately misrepresents their income, and we do not learn that they have done so until five years later, we could recover only one year's worth of the payment obtained by that deliberate cheating. I am sure that that is not what my noble friend intends, but that is the implication of the amendment. I hope that she will not pursue that.
The amendment would also produce unfairness of treatment. I shall give the Committee an example. Mr A is 65. He has a partner who is 58, who has irregular and intermittent earnings, which prevents our setting an assessed income period. Mr B is 65 and has an assessed income period in force. Both misrepresent the correct amount of their second pension at the start of their respective claims. In both cases, we discover the misrepresentation, say, two years or four years into their claims. In the first case, we would take steps to recover all the overpayment, as Mr A does not have an assessed income period,
For those reasons, the advantage that claimants would gain by misrepresenting, knowing that once they were past the 12-month period only the money for 12 months could be clawed back, and, secondly, the discrepancies that would be created between those who had partners below the age of 60—for women—who might still be in the labour market earning a regular income in which case we could recover the money, whereas, if someone had a partner of pension age and a fixed period, we could not, I hope that my noble friend will not pursue the amendment.
"( ) Where a recoverable overpayment of state pension credit has occurred as a result of an error, however caused, in the determination of the amount of an element of the claimant's retirement provision, the amount recoverable shall be limited to the amount overpaid in a period of 12 months or the assessed income period, whichever is shorter."
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