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The Deputy Speaker (Lord Skelmersdale): My Lords, in calling Amendment No. 19 I must inform the House that, if it is agreed to, I cannot call Amendment No. 20.
Baroness Noakes moved Amendment No. 19:
- Page 9, line 11, leave out paragraph (a).
The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendment No. 21.
The amendment seeks to remove paragraph (a) from Clause 15(1), thereby removing "earnings" from the ambit of "income" for the purposes of the pension credit. It would mean that all of a person's earnings would be disregarded in all pension credit calculations—both guarantee credit and savings credit.
Amendment No. 21 is different. It seeks to introduce a specific earnings disregard based on part-time work of 16 hours, valued at the lowest wage rate; namely, the minimum wage. Both amendments would disregard all or part of "earnings".
In Committee, the Minister said that the position as regards earnings had not yet been decided. But it is an important issue—800,000 pensioners could be affected, and possibly even more if a younger spouse's earnings were factored in. We really do need to know exactly what the Government intend in regard to earnings. I do not believe that we should be expected to consider the Bill without knowing that. What the Government intend to do in regard to earnings is possibly one of the most important outstanding issues relating to the Bill. I hope that the Minister will now place the Government's intention on record. I beg to move.
Lord Addington: My Lords, Amendment No. 20, standing in the name of my noble friend Lady Barker and in my name, is grouped with this one.
The case for disregarding earnings is simply one of making sure that pensioners can carry on working for as long as is reasonably possible. With an ageing population and with people "ageing more slowly" the idea would seem to make sense. Our amendment is a modest attempt to drag out of the Government their thinking on the subject.
If earnings are taken into account, the question will arise of certain people earning huge amounts of income and of the minimum income guarantee. The list of definitions of "income" in Clause 15 includes "income from capital" and,
- "income of any prescribed description".
Baroness Hollis of Heigham: My Lords, noble Lords on the Opposition Benches have asked a number of times how earnings would be taken into account. They rightly warned me that they would return to the issue. I owe the House an apology. We are still considering the detailed treatment of earnings as "income" within the pension credit.
However, I welcome the opportunity of debating amendments covering the treatment of earnings and pension credit income assessment. What I can say is that, as a minimum, we shall bring forward the current earnings disregards from MIG. Any proposals will apply equally to the guarantee element and the savings credit element of the pension credit. We propose also that the present rule in MIG which excludes pensioners in remunerative work over 16 hours will not apply to pension credit. In effect, we have abolished the somewhat arbitrary 16-hour rule.
I turn first to Amendment No. 19. The amendment proposes to remove earnings from consideration as income within Clause 15 of the Bill and, therefore, from consideration within the calculation of both the guarantee credit and the savings credit of any pension credit claimant aged 60 or over. Earnings of their partners, of any age, would also not be counted.
I do not want to keep boring the House with the cost implications, but the cost of this amendment would be nearly £2.5 billion. That is more than the cost of the pension credit as currently set out in the Bill—precisely because so many people between 60 and 64 are in work. If we disregarded their income and made them eligible for pension credit, we would have some serious problems.
Amendment No. 21 would introduce a disregard of the earnings from 16 hours' work—equivalent to two days' work at the minimum wage. That would equal a weekly earnings disregard of around the first £65. However, the amendment would apply the disregard to all people aged 60 and over, which would cost around £350 million a year to implement, rising to £650 million a year if the disregard applied to both members of a couple individually.
Under Amendment No. 20, all earnings of those over state pension age would be disregarded. We cannot perpetuate in new law the same old inequities in the state retirement age. I ask the noble Baroness, Lady Barker, to reconsider her proposals on equal treatment grounds.
We have debated many amendments on this major issue. It may help if I explain the context. Currently, 50 per cent of men and 25 per cent of women aged 60 to 64 work, at wages that can rightly be substantial. In addition, a further 800,000 people aged 65 and over are at work. I am delighted that they are working. It is welcome for the economy and for them. Work for pensioners is not just about ensuring that we have a steady flow of human resources or trying to get the demographic balance right; it is about experience, handing on skills and promoting inter-generational understanding and respect. It is a key part of active ageing and social inclusion. We share those values.
We have no difficulty with promoting opportunities for older workers. The challenge is how best to do that. Some of the amendments that we have discussed today and in Committee would have disregarded earnings in part or in full for all people over the age of 60. The cost of a full disregard, at about £2.5 billion, is prohibitive. I hope that your Lordships also appreciate the Government's view that, taken together, the working tax credit, the abolition of the 16-hour rule and bringing forward the existing disregards in the income-related benefits best suit the needs of those aged 60 to 64.
That leaves the question of how best to promote the interests of those aged 65 and over. I suspect that that is what the noble Baroness is really concerned about, but the amendment does not narrow the issue down in that way. Again, there are three options in play. The first is simply to bring forward the existing disregards in the income-related benefits—the first £5, or, for couples, the first £10. The second is to disregard some higher amount. A disregard of £40 per household would cost £80 million, for example. A further possibility, which we have not debated so far, would be to annualise the existing disregards or some new ones. That might intrigue the noble Baroness, because it might suit smaller businesses by providing welcome cover for holidays or sickness without putting a pensioner to the trouble of keeping to the law as it stands.
One further option is to disregard all earnings for those over 65. Using old currency, where the things that mattered were income, earnings and capital, that proposition would abolish one third of the test. It would also put pension credit on the same standing as retirement pension, for which all earnings are ignored. However, it would come with a heavy price of perhaps £250 million—that is a quarter of a billion pounds. That is one reason why discussions are still going on about the issue. The cost is at odds with what would otherwise appear to be a decent social policy.
There is one further issue to consider. Clause 5 allows for the aggregation of household income, which is the only sensible approach. However, that also introduces a challenge of how to treat a younger partner's earnings in the income assessment when the claimant is aged 65 or over. Would the younger partner's earnings be covered by the claimant's disregard? Would those earnings be rewarded or just taken into account in the income assessment?
The issue of earnings and pension credit is very much in our minds. It could be very expensive and it is complex. The issue reads across significantly to the other Bill that is currently going through the other House. Given that the issue is under active consideration, I hope that the noble Baroness, Lady Noakes, and the noble Lord, Lord Addington, will not press their amendments, although I obviously expect them to probe our intentions further at Third Reading. I am only sorry that I cannot give a clearer answer tonight.
Baroness Barker: My Lords, before the Minister sits down, does she accept the tenor—or the push, to use her word of today—behind all the amendments that have been tabled? On all sides of the House, we are not seeking to reward those with high earnings. We are seeking to be as specific as we can to help people on low earnings. It has been intriguing to listen to the Minister. I have not been keeping count to see who has put forward the most expensive amendment.
Baroness Hollis of Heigham: My Lords, it was the noble Lord, Lord Higgins.
Baroness Barker: My Lords, the noble Lord, Lord Higgins, seems to be winning the lottery at the moment.
It is sometimes difficult to know what the Minister means when she cites a cost. Is it the cost of disregarding all earnings or the cost of disregarding earnings within a limited amount? I hope that the case is being made to the Treasury that the argument is about limited disregards to enable people to earn small amounts by doing small jobs that, in many cases, other people do not want to do. Such jobs can have a big impact on the social and care economy, which is currently in desperate shape. That is another factor that could be put on the balance sheet.
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