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Lord Higgins: My Lords, this may be an appropriate moment to let the noble Baroness, Lady Hollis of Heigham, catch her breath. Are we not right in thinking that the object of this Bill is to benefit those with savings? It will not benefit, in any way, those who have a deficient contribution record and whose savings take them up only to the level of the basic state pension.

4.45 p.m.

Baroness Hollis of Heigham: My Lords, yes. Those people have not paid in their national insurance contributions. Had they done so they would have had lower incomes and found it that much harder to save. Therefore, that money is available for them to put into other savings vehicles.

I, for example, deliberately chose, by financial calculation, to take advantage of the married woman's reduced contributions stamp. I calculate that over the years I have saved many, many thousands of pounds. That is serious money.

For me now to come back and say, "Now please deem me as though I paid the full national insurance stamp and you, taxpayer, with a much lower income than mine as a university academic, should subsidise me", would seem to be unreasonable.

Obviously, I would not be a claimant of pensioner credit but the same principle would apply to the reduced married woman's stamp. One would be saying that because they were women, they should be financially compensated upwards irrespective of their situation?

The first point of my argument is that all the variants offered by the noble Baroness, or the noble Lord, on proportionality end up with the perverse result that somebody with lower national insurance contributions ends up with a higher income than someone with a complete record. The second point is who are the unfortunate losers?

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Let me go through those people who are going to be most affected. The majority of pensioners who are going to have less than full contribution records are likely to be included among the following groups but it is impossible easily to give easy numbers. Some will be married women who, like myself, opted to pay reduced rate contributions and stand financially to gain by many thousands of pounds over the years. Others will be married women, without children, who were not active in the labour market because they chose not to work. I do not believe that society has any obligation to reward them with a savings credit when they have not actually made good their basic retirement pension because they have chosen not to work and not to pay national insurance.

Others will be recently arrived from abroad or those who have worked abroad and have not contributed to a reciprocal scheme. Again, the option is available for anybody who works abroad to develop alternative savings vehicles if they are not able to contribute to the national insurance scheme.

The major two groups that have been identified are those women who have been carers and those who have been self-employed. I appreciate that some women have been carers for whom home responsibilities protection and the introduction of credits for ICA in 1976 came too late to boost them to a full pension.

As far as carers' ICA is concerned, it is now simply too late to revisit the circumstances and determine whether they might have been eligible for a benefit that did not then exist. That would depend on the hours they worked; their relationship to the lower earnings level; their earnings and the like. We cannot revisit. We cannot presume people to be entitled to a benefit when the conditions for that benefit did not exist because the benefit did not exist.

As for HRP, it is impossible to go back and find out what was happening 30 years ago in terms of the hours of caring; the earnings; and the relationship to LEL, which legitimises their access to ICA.

The same applies to HRP. The noble Baronesses, Lady Barker and Lady Greengross, will know that HRP produces 20 years offsetting against the need for women to achieve 39 years national insurance contributions. Most women will be coming to the end of that period.

However, many women will have got protection because their youngest child enabled them to receive that protection in the 1960s and 1970s. Others will be on minimum income guarantee and will receive their protection in that way. However, I believe that it is impossible to revisit the circumstances of the early 1970s and the 1960s and try to determine the facts of retrospective entitlement. No benefits that I am aware of are retrospective in that respect and I do not believe that we should do it here.

The final group—though one cannot distinguish one group from another—that might be covered, or be advantaged by these amendments were they to succeed, are the self-employed. The self-employed are liable for Class 2 national insurance contribution.

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Historically, there has been some blurring between the self-employed in the informal economy; those who are self-employed in their own business; and those who simply sub-contract their labour to others—for example, in the building trade.

In the past, for those who wanted to, those who were part of the informal economy or worked as sub-contractors, it was all too easy to avoid paying national insurance contributions. Would your Lordships really wish to reward such people and deem them to have paid it for these purposes? I think that is deeply unfair.

I suggest to your Lordships that we cannot now go back and consider good or bad cause for these particular groups—that is, carers, self-employed, and people working overseas. There are different circumstances associated with all of them and I think it would be unreasonable to do so.

However, there is a broader point relating to the technical side of the amendments. To treat those who have not contributed fully on the same basis as those who have would, I believe, perpetuate again the same sort of unfairness that exists now when someone says, "I've worked all my life. I've put some savings aside and I'm no better off than her down the road who's done nothing at all. And she's got the same income as me because she's getting MIG."

That is the basic unfairness that pension credit seeks to identify.

Baroness Greengross: My Lords, I am grateful to the noble Baroness for giving way. Perhaps I may make one point. I understand the Minister's astute reasoning. Is it not possible for the Government to set a top limit? No one should receive more than the proportion of pension which they have paid. Therefore, it could not just go on escalating so that they receive more of anything than someone who has paid a full national insurance contribution. There are many regulations which have exceptions or limits to them. In the same way, if one wanted, one could exclude people working abroad or self-employed people from this benefit. But on the wider point, why not set an upper limit, which would mean that they would always get less?

Baroness Hollis of Heigham: My Lords, I am addressing the tabled amendments. Obviously, if the noble Baroness wanted to come back with further amendments, we could see how they would work. As the amendments stand, all the versions that we devise end up with the perverse consequence that someone who has incomplete records can receive more money than someone with complete moneys.

The substantive second point is whether this is the right method of proceeding. What I was trying to say in conclusion was that we have introduced pension credit because people believe that if they have modest occupational savings of, say, £100 per month—for example, a widow or a low paid local authority worker—they are no better off than if they have no occupational pension at all because MIG floats them

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above that figure. Under our proposals, they would keep £60 of that £100 per month, which is why they are better off. We are addressing a perceived sense of unfairness.

If we said to someone out there, "Well, you have got an incomplete national insurance record, but none the less you will receive some of the savings credit even though you have not got up to the full £77 entitlement of retirement pension", that would introduce an equally valid sense of unfairness between those who have contributed fully and those who have not—especially when we are dealing with groups such as the self-employed, those who have been abroad, those married women who have taken the reduced married women's stamp and saved money in the process and those who have alternative savings vehicles and have chosen to exercise those because they have been living abroad. At the end of the day, I know that the noble Lord, Lord Higgins, believes that this is a right and proper way to approach the matter. I think that he is wrong. On many issues I can see where he is coming from but there may be technical difficulties to meet. But I think that this is unfair. The savings element of pension credit hinges on the £77 retirement pension. If one has not contributed to that, it does not seem right that one should be rewarded for those moneys one has above it.

That is our position. I must suggest to those proposing the amendments that the Government are unable to accept their reasoning and therefore their amendments.

Lord Hodgson of Astley Abbotts: My Lords, we are very grateful to the Minister for her characteristically thorough response. Obviously, there is much there for us to read through. As she has rightly pointed out, the devil is in the detail. I just emphasise where I and maybe some other noble Lords are coming from: this is about people who have deficient state contribution records through no fault of their own. It is about incentives to save; and it is about fairness. It is all very well to talk about the £77 hinge, but there are people who will have made quite substantial contributions to reduce their costs to the Exchequer and to the state and who will receive no credit for it. I am sure that we shall all want to reconsider the matter having read the remarks of the noble Baroness. In the meantime, I beg leave to withdraw.

Amendment, by leave, withdrawn.

[Amendments Nos. 6 to 14 not moved.]

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