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Earl Russell: My Lords, it seems to me that the order is a necessary consequence of the introduction of best value. The noble Lord, Lord Higgins, would not have great difficulty in persuading me that we might perhaps have given more thought to the concept of best value. However, that is now with us, and while it is with us, the order must be with us also. The debate on best value has taken place. The time to have it again has not yet come. In the mean time, I am happy to accept the order.

Baroness Hollis of Heigham: My Lords, I am grateful to the noble Lord, Lord Higgins, for his response. He will know that at present something like 25 local authorities contract out their housing benefit administration to such companies as CSL, Capita, EDS, IT Net, and so on. The noble Lord will recall that there have indeed been problems with Hackney, and so forth, where administration has had to come back in-house.

At present, local authorities do not have the discretion to contract out all aspects of housing benefit administration—only some aspects. We are giving them a permissive power to contract out. However, as local authorities they still remain legally responsible for the work done for them. In housing benefit administration, nothing in the order jeopardises the rights of an individual to a tribunal procedure recently introduced for housing benefit circumstances.

As regards sample, agency staff are in the same position as a local authority. They are under the direct control of the local authority. Therefore, contracting out in that sense does not apply. By contracting out we mean an independent company as opposed to an individual coming in to cover sickness, maternity, and so forth. However, if I have misunderstood the point made by the noble Lord, perhaps he will come back to me.

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Lord Higgins: My Lords, I do not see why a so-called individual sub-contractor should not be employed by the council. Why should we suddenly give local authorities that additional discretion?

Baroness Hollis of Heigham: My Lords, individual agency staff are effectively employed by the local authority for those purposes and are subject to local authority control and supervision. That perhaps meets the point. The noble Lord pressed me on confidentiality. Local authorities will be told that adequate safeguards must be put in place to meet data protection requirements. The situation is no different from that of banks, building societies and the like. In dealing with the Social Security Fraud Act we discussed fully the security which applies not just to local authority staff but to contracting out. The same duty of care applies. Obviously, there will be circumstances within a local authority or outside where that slips up. I have no reason to think that that difference will occur between contracting out and non-contracting out because the Data Protection Act applies in both cases.

Finally, I assure the House that in my view the provisions of the order are compatible with the European Convention on Human Rights.

On Question, Motion agreed to.

State Pension Credit Regulations 2002

8.40 p.m.

Baroness Hollis of Heigham rose to move, That the draft regulations laid before the House on 26th June be approved [34th Report from the Joint Committee].

The noble Baroness said: My Lords, I beg to move that the State Pension Credit Regulations 2002 laid before the House on 26th June be approved.

I have a fairly full description of what the regulations do. However, I am mindful that, given that the first order of the day went well past its time, I do not want to trespass too largely on your Lordships' patience. I shall make two points. Perhaps I should then respond to questions rather than describe each of the regulations. Your Lordships, and certainly the noble Lord, Lord Higgins, will have recently taken part in the Bill. I am sure that every item is engraved on the noble Lord's memory.

The draft regulations cover the five main issues associated with pension credit: first, people not in Great Britain—the habitual residence questions; secondly, the calculation of the guarantee credit; thirdly, the assessment of income and capital; fourthly, the savings credit; and, finally, the assessed income period. They are full regulations, primarily because they incorporate rather than merely cross-refer to the core income support regulations of 1987. It seemed more sensible to reincorporate those old regulations into this so that there is, as it were, a clean read. We thought that that would be more helpful and transparent. For example, Regulation 22 on the diminishing notional capital rule is unchanged from the Income Support Rules of 1987.

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That is what the regulations cover. I have a fairly full description of them because we had originally allowed ourselves 20 minutes for the discussion. It may be that it would be more helpful if I simply sat down at this point and sought to respond to questions. If your Lordships wish, I should be happy to try to describe in greater detail what the regulations do, but your Lordships may feel that having recently passed the Bill and having had, I hope, a helpful explanatory memorandum, that is not necessary. I commend the order to the House.

Moved, That the draft regulations laid before the House on 26th June be approved [34th Report from the Joint Committee].—(Baroness Hollis of Heigham.)

Lord Higgins: My Lords, this is an absolutely marvellous opportunity to make another Second Reading speech on the State Pension Credit Act 2002. However, I think that it is true to say that while a number of noble Lords have arrived for a subsequent debate, those involved in this debate are probably those who might usually be described as "the usual suspects". We are not unfamiliar with this matter, which, as the noble Baroness has rightly pointed out, we have only recently discussed.

It is also right that the Minister's virtue should be rewarded, in the sense that during the passage of the Bill she—I think unusually—provided draft regulations in Committee, on Report and at Third Reading and so on, which cover much of what we have in the order. Therefore, it is not unfamiliar to us. So far as one can see, it does not contain any shocks.

Perhaps I may, therefore, just ask one or two questions. The first is a question to which I ought to know the answer and do not. In the order it says, as is normal, that the advice of the Social Security Advisory Committee has not been taken because the Bill has been passed only a short time before. I am not absolutely clear whether the Social Security Advisory Committee expresses a view ahead of a Bill. Does it have an opportunity to make any comment after the Bill is passed and after it has seen these regulations, which it has not previously seen? It seems rather unfortunate that when it may have some comments on the regulations it is precluded from so doing. Probably the normal case is that the initial regulations come out within the six-month period.

Secondly, the orders cover a number of points with regard to absence overseas and whether individuals should or should not be allowed to continue to receive state pension credit when they are overseas. The order sets out the period over which they continue to receive the benefit, although that is a fairly tight limit—in some cases four weeks and in other cases eight weeks. It is particularly relevant in the context of the orders, which are concerned with what are described as "patients", that is to say, people who go overseas to receive medical treatment.

My impression is that the individuals concerned only continue to receive the state pension credit if they go overseas for medical treatment paid for by the

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NHS. If that is true it seems to me quite wrong because the individual who pays has not only paid all the normal contributions for National Health Service treatment but has in addition paid for his own treatment, thereby relieving the state of that cost. Consequently, it does not seem to me that there should be a differentiation between people who go overseas for medical treatment under the NHS and those who go overseas for medical treatment privately. No doubt the Minister can respond to that and we can then consider whether we need to go further.

The only other point which one might consider is the question of the definition of income. In particular, the orders are concerned with the rate of return which is deemed to be received on capital. The Minister anticipates what I am going to say. The rate which is specified in the order would seem to imply a rate, once the initial tranche of capital has been taken into account, of something over 10 per cent. If the noble Baroness can tell me where I can invest money at 10 per cent at the moment I should be happy to hear from her. So will many other people suffering from the situation on the Stock Market.

The usual Treasury argument is, "Well, you must take the average rate of return, allowing for the fact that the first tranche of capital is not taken into account". It is the marginal rate which is relevant. Even if one were to take the average rate, it is still significantly higher than the rate one is likely to receive on risk-free investments at the present time. What I am really saying is that it does not seem to me that the rate which is set is as favourable or as sensible as it ought to be. The question then is whether there are sufficient powers to alter that rate in future.

Those are my main points. I shall not go over the fascinating aspects that we discussed on the recent passage of the Bill through your Lordships' House, particular with regard to polygamy and other favourite subjects of the noble Baroness. I look forward to hearing her specific answers to those points.

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