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Lord Lea of Crondall: My Lords, the noble Lord's critique of the £400 million is now a critique that has one or two extra features. It is the first time that I have

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heard this notion that the discounted present value of that £400 million is £250 million. Is that what the noble Lord said?

Lord Higgins: My Lords, I have said the same thing time and again throughout the deliberations, and the noble Lord very assiduously attended throughout.

Lord Lea of Crondall: My Lords, £250 million?

Lord Higgins: Yes, my Lords.

Lord Lea of Crondall: My Lords, well that is my mistake. However, I understand that the question of how the £400 million is interpreted, how the sum is administered and how it can be reported on has yet to be pinned down. Certainly, it is unreasonable to suppose that it would be possible, on the face of the Bill, to specify that £400 million means X, Y and Z. With his experience as a Treasury Minister, the noble Lord should not have expected that to happen. He is trying to have his cake and eat it with his argument about this being a rather obscure matter.

Some of us have difficulty in accepting the noble Lord's critique and are sympathetic towards my noble friend's amendment. Let us see what the Minister has to say, but it is not quite as simple as saying that £400 million must nevertheless equal 20 times 20. There are several ways of skinning this cat, if I can use a different metaphor, and I want to query that there is only one way of viewing this arithmetic and it is the way asserted by the noble Lord, Lord Higgins. I am sure that I could come up with three or four different ways in which the figure could be interpreted, and we are not actually at that point. That is why I do not think that his critique should necessarily be accepted as a factual description.

Lord Oakeshott of Seagrove Bay: My Lords, this is not the time or place to have a general discussion about the adequacy or otherwise of the FAS. Views are pretty widely known. We said from these Benches that it was a cruel deception when the figure was announced. Since then, the experts have got to work—people such as Ros Altmann—and her remarks over the weekend were virtually unprintable. It is fair to say that almost all independent experts believe that it will be only a drop in the bucket.

However, we are discussing the amendment moved by the noble Baroness, Lady Turner. I support it. It would be churlish not to, given that it is on similar lines to the one for triennial reports on adequacy that we moved and just lost at Report. It is a sensible amendment and I support it.

Baroness Hollis of Heigham: My Lords, we have had constructive discussions on the subject of future FAS accountability both in Grand Committee and at Report. I supported and still support the principle that the FAS must be accountable to Parliament and that regular reports on objective questions such as how many people have been helped and how much assistance they have been given ought certainly to be made available. The noble Lord lost his amendment

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partly because he did not accept my offer. None the less, we would still expect the information to go to Parliament and think that it is right that it should.

We have discussed at length the ongoing work that we are doing to determine how financial assistance will be provided—when, and to whom. I understand noble Lords' frustration at the lack of detail in the Bill today. But long before we begin making assistance payments, we will of course have a much clearer picture of how the FAS will operate and, when we do begin making payments, we want to ensure that the process is transparent and open to public scrutiny, and above all that we are able to keep the promises that we have made about this assistance.

Two other bodies which are being set up through this Bill—the Pensions Regulator and the Pension Protection Fund—will also be open to public scrutiny. Under provisions in Clauses 12 and 120, both the regulator and the board of the PPF will be required to produce reports and to send them to the Secretary of State, who must then lay the reports before each House of Parliament. We can make the same provisions with FAS under powers at Clause 287(4)(j) as well. I can confirm that we will do this to ensure that the arrangements for FAS reports are made in regulations. The detail of the new arrangements will of course depend on future decisions on the Government's arrangements for FAS, but I hope that this will satisfy my noble friend on that matter.

I will return to the concerns that I expressed at Report regarding amendments that refer to the "adequacy" of the assistance provided from the FAS. The problem is against whose judgment will "adequacy" be measured? We are discussing an assistance scheme; the FAS will not, as the amendment seems to imply, have "liabilities" as such, nor is there any reference to such liabilities in subsections (3) and (4). I therefore cannot accept the amendment as drafted. I hope that my noble friend will accept my assurances that we have the powers to require reports to be prepared and laid before Parliament on FAS in regulations. We plan to use them to ensure that FAS will be administered in a transparent and accountable way. With those assurances now in Hansard, I hope that my noble friend will withdraw her amendment accordingly.

Baroness Turner of Camden: My Lords, I thank my noble friend for those assurances and I am glad to learn that the intention is to ensure that the promises that have been made will be kept. I have made a careful note of that. I am glad that transparency is the objective and that the information will be publicly available as well as being available to Parliament. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Barker moved Amendment No. 71:

    Before Clause 297, insert the following new clause—

The Secretary of State shall have power to vary the amount of the basic state pension payable according to the age of the recipient."

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The noble Baroness said: My Lords, the amendment has been tabled for a particular purpose. The Minister and other noble Lords will be aware that it has been the policy of noble Lords on these Benches that there should be greater weighting of pensions towards those who are older. We believe that the longer someone has not received earnings from a job, the greater their need for an enhanced pension. That is our stated policy which we look forward to defending over the coming months.

The particular reason for the amendment, which was not moved at an earlier stage, is to make an inquiry of the Minister. There are already enhanced payments for the over-80s of 25 pence, or the "bottle of milk" provision, as it is known among pensioners. It was recently suggested to our colleague, Mr Steve Webb, in another place that the reason the Government were averse to greater age-related enhancements of the state pension was because they believed that they did not have the power to do so—they had no power to make a greater enhancement other than the current nominal 25 pence. I wish to ask the Minister at this opportune stage of the Bill whether that is indeed the case. I beg to move.

Baroness Hollis of Heigham: My Lords, perhaps I may say that I am slightly taken aback by the manner in which the noble Baroness moved her amendment. I thought that she was seeking to argue that older pensioners were poorer and, therefore, that they should have an increased state pension. The noble Baroness is signalling that that is her view. That is the argument I wish to address, rather than her more specific point. I have received some advice on that matter—there is no power to do anything about the 25 pence, except for that. We have no separate powers to go after that 25 pence figure. In other words, my understanding is that that would have to be done by primary legislation. If I have misled her I will come back to her. Time and again I have asked, "Why the heck was that not rolled up into something else?", given that we have been dealing with other matters. I am told that that matter would require primary legislation.

I wish to return to the substance of the noble Baroness's basic position and that of her party, which is to allow the Secretary of State to vary the amount of the basic state pension, presumably to increase it by age. We recognise that pensioners have additional expenses as they get older—in terms of warmth, for example. We have addressed the need for extra income by introducing a number of specific measures which help pensioners at the time that they need the extra income.

Winter fuel payments, for example, which from the age of 60 are worth £200 per eligible household, benefit over 11 million people in around 8 million households. Anyone aged 80 or over gets an additional payment of £100 as part of his or her winter fuel payment entitlement, which helps a further 2 million people. Help also includes TV licences and with council tax for those suffering hardship—where people over 70 benefit by up to £100 or so. This payment will go to

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over 6 million pensioners. We also reintroduced free eye tests, pensioners do not have to pay for their passports and the Transport Act 2000 helps guarantee that pensioners and disabled people can obtain concessionary services.

So we have done much to meet some of the very real areas where older pensioners find that their costs increase. The major point, in my judgment, is that because they tend to be less mobile and spend more time at home, it is heating costs that most affect what pensioners spend. We have addressed that decently, humanely, properly and appropriately with the winter fuel payments. However, going beyond that and providing an age-related addition to the basic state pension, for example £5 per week to all recipients aged 70 or over, with a further £5 at the age of 75 or so, would require a gross additional cost of almost £4 billion a year.

I do not want to rest my argument primarily on its cost, although that would be substantial. My problem is that that cost would not be well targeted, for two reasons. First, although it is clear that as pensioners get older they become poorer—often because their pensions, particularly for widows, do not keep pace with inflation and so on—it is also the case, as the Turner report found, that older pensioners do not spend their incomes. In cash terms, older pensioners actually reduce their expenditure from about £157 per person to about £122 per person. On average, a household headed by a person aged 65 to 74 spends about 90 per cent of its income. From the age of 75 onwards households spend about only 76 per cent of their income. The figures show that there is an average under-spend for older pensioners of about £30 regarding their income.

Obviously, poorer pensioners are much more likely to spend to their ceiling and better-off pensioners are less likely to do that. Whereas pensioners, according to the Turner report, appear not to disinvest themselves of their savings, as one might expect, the reason for the under-spend may be due to concerns about matters such as funeral costs and also that they are less mobile than in the past and are, therefore, not spending the money on transport that they may have done. To give more money to older pensioners when they now under-spend their incomes significantly, compared with younger pensions, would seem somewhat curious.

Secondly, there is a greater and more substantive argument. I know that the noble Baroness has seen the figures that I am about to give, because I have sent them to her honourable friend Mr Webb in the other place three or four times, but I do not believe that he accepts the nature of the argument. It is undoubtedly true that pensioners become poorer as they get older, primarily because they are increasingly likely to be widows without a pension. The median income of a couple under 75 is £261 and the median income for those over 75 is £227. The equivalent figures for a single pensioner under 75 are £150 and £143 for those over 75. There is no doubt that single pensioners' incomes will drop over the course of their time as

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pensioners by about £7 per week. These are median figures. It is undoubtedly true that pensioners become poorer as they become older.

But the noble Baroness did not tell the House that that is considerably overwhelmed by the difference between the poorest quintile and the highest quintile within each pensioner cohort. Among the under-75s, the bottom quintile has an average income of £161 for couples, with £542 for the top quintile. For those couples over 75 the bottom quintile is £143 and the top is £413. Crudely speaking, within each age cohort, between the poorest and the richest there is a 3:1 ratio of about £200 to £300, compared to the difference in income between cohorts, which, for single pensioners is around £7.

If the amendment were passed, one would be giving an awful lot of money to older, richer pensioners and not to younger, poorer pensioners. The discrepancy within each age cohort is very many more times the discrepancy between age cohorts. That is why the amendment is not fair. The sums and the statistics do not bear it out. I have read the statistics for inclusion in Hansard, because I have provided them to the noble Baroness's honourable friend three, four or five times—in Parliamentary Questions and debates. The Liberal Democrats still recycle their argument and there is still no recognition that the facts do not support the amendment; it is not the best way to target the available resources of around £4 billion.

We have done much to help the particular problems facing older pensioners, where the issue can genuinely be that of heat, which we have tackled with the winter fuel allowance. But given my other arguments, I simply do not accept where the noble Baroness is coming from. She is right that one becomes poorer as one becomes older, but the gap within each age cohort between rich and poor is so great that most of her money would go to pensioners who did not need it, at the cost of other younger pensioners who did. Therefore, I cannot accept the argument behind the noble Baroness's amendment and I hope that she will withdraw it.

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