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I think that I dealt with the point raised by the noble Lord, Lord Skelmersdale, about the total number of claims. He also asked about pleural plaques. A House of Lords judgment was recently handed down which concluded that pleural plaques, per se, were not compensable. The Government obviously had to consider long and hard whether to seek to legislate to overturn the impact of that judgment, and they have determined not to do so. That is not to say that someone suffering from pleural plaques who then developed a disease could not be compensated for that, but with regard to the existence of pleural plaques, the Government have accepted the House of Lords judgment in that case.

4 pm

Lord Skelmersdale: I was well aware of that, but there must be some reason for the Government to accept the ruling of the court that the Minister just mentioned. Very often, Governments disapprove of rulings from your Lordships’ Judicial Committee and succeed in changing the law back to what everyone thought it was before legal colleagues—I was going to say “got at it”, but “interpreted it” would be a better way of putting it. My question remains: “Why?”.

Lord McKenzie of Luton: It was because it was a very clear legal judgment. I have actually read it; we had some representations on the matter, and it was very clear that the House of Lords determined that pleural plaques were not compensable on two grounds—that the condition itself did not create compensable damage; and that the potential stress and anxiety that might flow from the existence of pleural plaques that might be indicative of exposure to asbestos was not compensable under basic provisions in the law. The Government reflected on and accepted that clear judgment. We obviously continue to engage with stakeholders on this and are listening carefully to representations about the matter. In particular, we are exploring how people who have been exposed to asbestos, of which the existence of pleural plaques is indicative, might be supported. We do not intend to override the judgment.

The noble Lord, Lord Kirkwood, asked about devolved Administrations. Obviously this is a GB scheme so, so far as there is engagement in Scotland and Wales, we need to make sure that we have a robust system for the whole of Great Britain. I dealt with the point about administrative pressures and indexation. I think that I have dealt with all questions

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asked by Members of the Committee, although the noble Lord, Lord Skelmersdale, looks as though he is going to prompt me because I have missed one.

Lord Skelmersdale: I just say that I am extremely grateful for the Minister’s much fuller answer second time round on pleural plaques. However, I asked whether any consideration has been given in the department to rolling what is essentially an uprating order for these dust-borne diseases into the more general uprating order that we are going to discuss in a few moments.

Lord McKenzie of Luton: I thought that I had covered that; apologies if not. The answer is no. I think that we have made a prior commitment to always try to engender a separate debate on this; I think that was the express will of noble Lords at some stage. The key point is that there is a clear government commitment to uprate on an annual basis. However, on that basis we do not feel the need to enshrine it specifically in legislation.

On Question, Motion agreed to.

Guaranteed Minimum Pensions Increase Order 2008

4.03 pm

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton) rose to move, That the Grand Committee do report to the House that it has considered the Guaranteed Minimum Pensions Increase Order 2008.

The noble Lord said: I believe that we are dealing with two orders, the second being the Social Security Benefits Up-rating Order 2008. Both were laid before the House on 23 January. I am satisfied that the orders are compatible with the European Convention on Human Rights.

The uprating order will increase most national insurance benefits by the September 2007 retail prices index, which was 3.9 per cent. Most income-related benefits will be increased by the Rossi index, which as Members of the Committee will be aware is the retail prices index excluding rent, mortgage interest, council tax and depreciation, and was 2.3 per cent on the same date. The uprating order provides for increases to take effect, in most cases, in the week of 7 April.

The Guaranteed Minimum Pensions Increase Order 2008 sets out the amount by which contracted-out defined benefit schemes must increase members’ guaranteed minimum pensions that accrued between 1988 and 1997. This order will provide for an increase of 3 per cent. Primary legislation provides for increases to be capped at this level, when the retail prices index exceeds 3 per cent. This year’s uprating adds nearly £4 billion to government spending. I hope that noble Lords will agree that this will reinforce our commitment to build an active welfare state and to tackle poverty by helping those most in need.

The uprating order provides an extra £2.8 billion to pensioners, of which £240 million is above inflation.

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Today’s pensioners are no more likely to be living in poverty than any other sector of society. Since 1997, pensioner poverty has been reduced by more than one-third through targeted support such as pension credit and around £11 billion extra funding. We have lifted more than 1 million pensioners out of relative poverty. In 1997, the poorest pensioners lived on £69 a week. From April, pension credit means that no single pensioner will need to live on less than £124 a week and that couples need not live on less than £189.35 a week. Around 2.7 million pensioner households, which is 3.3 million individuals, receive pension credit, with an average weekly award of £50. Because of our reforms, pensioner households will be an average of £1,500 better off in 2007-08 than they would have been had the 1997 system stayed in place.

My honourable friend in the other place has announced a package of measures that will simplify the state pension system and encourage take-up. The changes will make the system less confusing and intrusive. A simplified and integrated process has already been introduced to make pension credit and state pension easier to claim, but this will be extended further to include housing benefit and council tax benefit—four benefits in one call—without the need for the customer to sign and return a claim form. I am sure that noble Lords will agree that this improvement to simplify claiming council tax benefit in particular should help to increase take-up of that benefit. We recognise there are those who, for a variety of reasons do not claim. We are therefore working jointly with Help the Aged, Age Concern, Citizens Advice and other partners to encourage pensioners to apply for benefits, targeting those areas where take-up is low and helping thousands more pensioners out of poverty.

We will also uprate benefits and allowances for the working population. The order provides for an extra £630 million for disabled people and carers, and an extra £420 million for those of working age. Child-related allowances paid in the income-related benefits will be increased in parallel with the child tax credits to ensure that families getting these benefits see the full value of increases in child tax credits. In particular, the allowance paid for a child dependant in the income-related benefits will from next April increase by £5.14 a week to £52.59—almost 11 per cent. This shows our commitment to provide increased financial support for low- and moderate-income families. Tax credits currently benefit nearly 6 million families and 10 million children.

This year’s uprating has provided an opportunity to provide extra help to some vulnerable teenagers as well as simplifying the benefit structure. From next April, the single-person rate for the small number of 16 and 17 year-olds getting income support and jobseeker’s allowance will be the same as the rate for 18 to 24 year-olds. This will mean an increase of £12.30, uplifting their weekly benefit from £35.65 to £47.95. The number of people in work is at record level at 29.4 million, and 1 million fewer people get out-of-work benefits than in 1997. The New Deal has helped more than 1.7 million people into work; this includes over 764,000 young people and more than 300,000 long-term unemployed adults. The New Deal

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for Lone Parents has helped more than 500,000 people into work, with the number of lone parents on benefits almost 250,000 lower than in 1997, and child poverty has fallen by 600,000 since 1998-99.

The cost of uprating benefits for next year is nearly £4 billion, with over two-thirds of this going to pensioners. I hope that the order has the support of the Committee. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Guaranteed Minimum Pensions Increase Order 2008. 8th Report from the Joint Committee on Statutory Instruments.—(Lord McKenzie of Luton.)

Lord Kirkwood of Kirkhope: I am very pleased to take part in this important and regular parliamentary occasion. It is sensible to take the two orders together. I would like to make one or two passing remarks about the Guaranteed Minimum Pensions Increase Order. I am not sure about the detail, but it appears to me—

[The Sitting was suspended for a Division in the House from 4.12 to 4.18 pm.]

Lord Kirkwood of Kirkhope: Before the Division, I was raising one or two questions about the Guaranteed Minimum Pensions Increase Order. Do the Government have any plans to look at ways of getting rid of the guaranteed minimum pension? It is now a rump. I know that entitlements accrued between 1987 and the early 1990s, which I do not diminish, but it is an awkward hangover from an earlier time. They cost a lot of money to administer. I am told by people who have to do the actuarial work for them that they are fiendishly complicated and boring for them. Those few employers who still run the defined benefit schemes have to pay an enormous additional cost, because of the failure fully to uprate guaranteed minimum pensions by indexation and the cap. That is a further burden on employers. With pensions legislation coming thick and fast through your Lordships’ House, and if it is possible to apply a little creativity, we should undertake a thorough review of the way in which the GMP system works. Review and reform are long overdue.

A number of colleagues who are involved in the pensions field complain that information from Her Majesty's Revenue and Customs and the National Insurance Contributions Office has often been unacceptably misleading and incorrect in the past, which causes great problems for employers who run the schemes. It is an urgent problem which I hope that the Minister will say he will address.

I turn in the main to the Social Security Benefits Up-rating Order 2008. I could speak without hesitation, deviation and even repetition for a long time about all this, because I have spoken to one such order per year since 1983. They do not get easier as you get older.

I shall say a word about the context. It is acknowledged that the Government have made a lot of progress. It is very easy to be blinded by big numbers, and we are dealing with big numbers in the

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social security system. We are using the September 2007 retail prices index figure, and I could persuade Members of the Committee that things have changed quite a bit since September. I am sure that noble Lords have seen the figures about energy costs that I have recently seen. They suggest that fuel inflation over the recent past was nearly 20 per cent—19.3 per cent. Fuel, particularly domestic heating fuel, cannot be avoided in a poorer family or household, and that is a worrying level of increase. Reading the commodity pages of the quality national press, it is obvious that in the next few months we will sustain quite substantial increases in basic food costs—not just in raw material costs, but in processed foods costs as well.

Therefore, although I welcome this order and think that the Government have done much, I worry whether we are making proper provision for the next 12 months. I do not want to be gloom-laden or a doomster in any sense, but we could well be heading for a much more difficult period of economic growth. If that is the case, worklessness will increase, which will make it more difficult for the Government to attack their 80 per cent employment target. In addition, the costs of living will go up. Another factor that is now worse in the context of this uprating order than in many years in the past is the residual level of indebtedness in the economy. Many poorer households have unconscionable levels of credit card debts that are very difficult to sustain. The context in which these orders are being promoted by the Government is difficult. The economic situation is likely to get worse before it gets better.

Secondly, I know the Minister will play a straight bat and say that the Government can deliver it all with the level of departmental spending but, as I said earlier, I am really concerned that the 5 per cent saving and the Gershon cuts will make it nearly impossible to deliver the changes that are coming. We have a raft of Jobcentre Plus schemes, bit and pieces and pilots. Taken on their own, they are all welcome and I am not arguing against them, but I have serious reservations about whether the headcount and the resources available to the department between 2008 and 2011 will be able to administer the processes that deliver these benefits. It is all very well increasing the benefits, but if people do not get access to them or if there are barriers to access to them, there will be great difficulty for the people we are seeking to serve.

I could make a longer point about this, but I will not, because it plays into the consequential argument about complexity on which the Select Committee in the other place produced an excellent report. There is a simplification unit in the department, but I am still not convinced that its members are earning their pay, but if they meet me in the pub late at night they may tell me different. There is a real issue about complexity. The Social Security Advisory Committee captured it rather well when it said that there was still a,

“substantial barrier to full customer engagement”.

I think that that is right and that it will get worse because we are asking Mrs Strathie and the others who are running Jobcentre Plus and the pension credit system—the whole pension system, indeed—to

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do more with less. I acknowledge that there has been investment from the Treasury in the past, but I have some severe worries that the processes will fall over and that clients will not be served despite the increases in these orders.

In particular I want to mention two kinds of households and client groups. One is people in workless families without children. It is absolutely true that the Government can say that income support for pensioner households and for households with families with two and more children is higher relative to earnings than in the past. I was looking at some figures produced by the Monitoring Poverty and Social Exclusion 2006 report. It confirms that that is the case. It also makes an important point which I want the Minister to go away and think about. It demonstrates to me without any peradventure or doubt that the level of support for working-age adults without children is much lower and getting worse. A graph on page 36 of that report demonstrates that very clearly.

The other thing the report says—and I confess that I did not know this—is that almost half of all adults relying on state benefits or of working age do not have dependent children; 46 per cent are of working age without children. That client group is very important to us, and to the Government because the whole act of labour market policy that is driving the Government’s reforms—and I am in favour of that—is trying to get people into work. What if we are trying to get people into work and they find that they are actually worse off? The budget changes have made this worse because the 10 per cent tax rate—if you do not have access to child tax credit, as you will not if you are a workless household—means that the better-off calculation in terms of welfare to work is very much harder to make positive. I genuinely think that is a problem and that not enough is being done about that client group. I could go on at much greater length about that. I will not; I just make the point that it is a particular client group of families under these uprating orders who are being left behind.

The second group I want to mention in passing, and this is more familiar territory, is pensioner households and the whole question of take-up. I know that the Government have take-up schemes and that take-up schemes have come and gone in the past. There is now a structural problem about uprating and the stigma of take-up, both of pension credit and with housing benefit credit and council tax credit.

I was quite taken aback last week when I discovered in a press release from the Administration in Wales that it has now been calculated that up to £100 million in council tax benefit goes unclaimed in Wales. Good for the Welsh devolved Administration for finding that out. They are spending £3 million on a targeted take-up campaign. That is very welcome too. I know that the Government have got some plans to roll out some development of take-up schemes with associated organisations in the voluntary sector—not-for-profit organisations—but this is now urgent. A lot of the residual long-term poverty in our

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communities derives from the fact that these means-tested benefits, which are designed rightly to target the poorest, are just not getting through. That is a serious worry.

I have perhaps a penultimate point, and I have said this before. Uprating year to year is fine, but uprating over a 20-year period is dire for low-income households and social mobility. People have slipped behind earnings increases inexorably, year in and year out, over a 20-year period. We are intelligently positing some of the policy proposals over longer periods. The Government are right to look at their child poverty programme up to 2010-20, because it is only over those timescales that you can get hold of some of those issues properly.

4.30 pm

I did not have time to do the calculation but, to demonstrate the point about the erosion in the value of benefits, I should say that before I was elected to the House of Commons in 1991 I last calculated that the state pension was worth 23.7 per cent of average earnings. When the new Labour Government came to power in 1997, it was 17 per cent and at today’s prices it is 15.4 per cent. I know the arguments better than anyone—that it is not about a basic state pension but about pension credit, and that we will have guaranteed minimum payments and a savings element to the pension credit. I know all that, but every one of those benefits—not only the basic state pension; it is not the best example and if I had had more time I could have chosen a better one—is being eroded over time. That will continue over time, as long as we merely use RPI.

Incidentally, there is immense confusion about the plethora of different indices that are used. I get confused myself. We have RPI, RPI minus X, CPI, the Rossi index and other indices. Somebody should get hold of that, rationalise it and make it a lot more easily understood. Again on the point from the Social Security Advisory Committee, it is a substantial barrier to full customer engagement.

For all these reasons, these uprating orders are welcome so far as they go. The noble Lord, Lord Skelmersdale, and I are always being held to account for expenditure claims that we make on behalf of our respective organisations. I pose an important question: are the Government going to use benefit uprating as a tool between now, 2010 and 2020 to bear down on child poverty? There are lots of welcome schemes that seek to do bits and pieces of that work, but personally I do not believe that it is possible to do this job properly without looking substantially afresh at how we uprate basic benefits. Means-testing and targeting were worth trying but have come through with all sorts of problems. This involves the noble Lord, Lord Skelmersdale, and I thinking hard too, because these are big numbers if you start to go above indexation of benefits, and you have to justify them. But if the Government are really serious about bearing down on child poverty and abolishing it by 2020, they will not do that unless they improve on the uprating orders that we have before us this afternoon, welcome as they are.

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Lord Jones: I support the orders and welcome them, but the noble Lord, Lord Kirkwood, probed very shrewdly. It is right to support the needs of the poor.

My noble friend made a very good speech and these are welcome and excellent upratings. However, can he say a little more on statutory paternity and adoption pay in Article 11? When did paternity pay become part of the system and when was that social history made? How many are drawing paternity pay? Are the numbers increasing?

Lastly, my noble friend may read from time to time the prestigious weekly magazine—it is almost a magazine of record—the Economist. He may have noted, as I have these last several weeks, that the distinguished commentator Bagehot has been missing. When I turned to read the magazine this week, what did I see in small print? That Bagehot is on paternity.

Lord Skelmersdale: I seem to remember that it was this Government’s policy to introduce paternity leave, following the successful previous policy of maternity leave. Time flies. I cannot remember whether it was four years ago or longer, but no doubt the Minister will be able to tell us in answer to the noble Lord, Lord Jones.

I do not intend to follow the comments of the noble Lord, Lord Kirkwood, except to say that I think that we are all determined that as many people as are fit enough should be in the world of work, but—it is a big but; I go along with the noble Lord, Lord Kirkwood, on this—they will not even try unless the recompense in wages or salary is more than the benefit that they got in the first place. For families with children that is comparatively easy, because of the families’ tax credit. For others, it becomes a lot more difficult, and is a lot more of a challenge for those of us making policy who have that objective.

Having said that, on behalf of my party, I am pleased to support the orders, which increase the main social security benefits and pensions by 3.9 per cent. Inflation is creeping up. I note that last year’s increase was 3.6 per cent, and both those amounts relate to the retail prices index, which is rising. Given, as was pointed out in another place and today by the noble Lord, Lord Kirkwood, that the average RPI is not representative of “individual” household bills—at least in the short term—the increase is not seen to be sufficient for many. However, as there is an annual fixed point for recording inflation, and therefore using that amount to uprate year by year, people gain when household expenditure falls relative to the RPI. The question is whether the gains equate with the minuses. I do not know whether any work has been done on this on the 20-year period of the noble Lord, Lord Kirkwood, but at some stage it would be extremely useful if the Minister could set his mind to write to us on exactly that subject.

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