Examination of Witnesses (Questions 220
WEDNESDAY 13 MARCH 2002
MP AND MR
220. Do you think, Parliament permitting, you
are still on track for that?
(Mr Darling) I very much hope so, yes, we are at the
221. What about the IT side of things? You mentioned
the 400 odd local authority systems which there would need to
be some interface with.
(Mr Darling) To run the Pension Credit, no, it is
not like Housing Benefit, we do not need the direct interface
with local authorities, no.
222. There would have to be some kind of liaison.
(Mr Darling) Basically what we are doing is we will
run the Pension Credit off the Department's existing computer
systems, probably for the first couple of years because the ultimate
solution to this is to build a new one which would not be in by
autumn next year. We are using the existing systems to run it
for the first couple of years or so and then we will switch it
over to the new ones.
223. Are you talking about taking us up to roughly
(Mr Darling) We will use the existing computer systems
to do that.
224. With a system which you described this
morning as decrepit, "very decrepit" I think were your
(Mr Darling) Yes.
225. You are suggesting it should go on until
(Mr Darling) We can do that because if we built a
new computer system to run this, then I think it would be difficult
to ensure that was there and ready to go in the timescale that
we have in mind. It is not like going down to PC World and buying
one, our systems are so big they need to be built especially to
do these things. I want the Credit to come in as quickly as possible,
I want it to come in from the autumn of next year so what we have
done, and what we do with all these things is we reach a judgment
as to how much we can run on the system at one time. It may mean
shifting things around but the intention is that we use the existing
systems to operate the Pension Credit for the first two years
or so before we switch on to the new one.
226. If I went to buy a used car and a salesman
described it as "very decrepit" I would not expect it
to run until October 2005. You are rather concerning me with what
you are saying.
(Mr Darling) The Departmental computer systems have
been decrepit for years. Basically what happened was there was
no investment in them for years. We were competing against health
and education; who was going to buy a new computer for the DSS,
as it then was? A lot of the systems that we are running off were
designed in the 1980s. It is a tribute to those who operate the
system that we are able to deliver benefits to 17 million people
every week. We make changes, as all governments make changes to
these things. Now, obviously, one of the things I always have
to take account of is how much more can I run off this system.
(Mr Darling) I think when we looked at all these things
we concluded the safest way to proceed was to use the existing
system to run a Pension Credit. Remember it is building up. The
entire Income Support and JSA system needs to be in place by the
mid part of this decade anyway. As part of that process we are
rebuilding the system to serve the working age on one side and
the pensions on the other. The pension system will be different
and it will be newly built. That was never going to be ready by
the end of next year, it just could not be ready. What we are
aiming to do though is to run the system off the existing IS system.
228. You are pretty confident that you can do
that when you are means testing half the pensioner population?
(Mr Darling) Remember a lot of the process of assessing
whether people are ready, there is some IT dependency, will be
done by the new pension centres that we are building. I believe
that the Pension Credit, we are not going to rewrite this policy
but it is eminently achievable. What I have sought to do over
the last couple of years or so is to make sure that we introduce
it in a way that we can deliver it. The point I made to James,
something has to be workable as well as affordable and the doable
part is just as important to me.
229. On the doability, can we shift the focus
a bit to the new call centre model which is a kind of sexy way
to go forward for a lot of the financial services industry and
financial delivery. Is that going to work with pensions, particularly,
for example, those with sight difficulties or hearing difficulties
or ethnic minority pensioners? Is there going to be a call centre,
for example, in the South East?
(Mr Darling) Let me just explain the strategy and
I will come to all your points. At the moment we run the pensions
service in a variety of ways. We have some national centres, like
Newcastle for example, where pensioners get their money through
ACT, where telephone claims are dealt with; it is all done nationally.
It does not matter where you live in the country, if you phone
that number you will be routed through to Newcastle; you may not
know it as with any call centre but that is where your call will
go. This is in the same way as we run Child Benefit from Washington,
Washington as in the North East of England as opposed to the one
in America. The vast majority of the people who deal with it do
not know because they do not need to know or worry about where
it is actually located. We process pensions, also, in over 400
sites across the UK. As a passerby, going past one of our offices
in the street, you would not know whether the processed pension
was there or not because they are usually back office functions.
It is incredibly inefficient to run a pensions service on 400
sites, no commercial organisation would do this. What we are doing
`as part of the overall modernisation of the Department' is concentrating
pension processing on 26 sites throughout the UK. I have published
a list of where they are, I have it here today if you want me
to run through it. We have put them in places where we know we
can recruit and retain staff. We have a big problem in the South
East of England in recruiting and retaining. To train somebody
to operate pensions is expensive, it is time consuming, we need
to have people who will stay with us for some time because they
are more experienced, you get a far better service. So when we
chose the sites it was partly with that in mind. Now as far as
the general public are concerned, because the contact with these
26 sites is by phone and, for example, someone living in Guildford
will not necessarily be routed to the nearest call centre, it
might be the one in Dundee for example, because they are call
centresthe location itself is not quite so important. On
top of that, which is where the public interface is important,
what we intend to do is to have a local service which will mean
that if somebody needs to talk to somebody about things, they
can do so, if they want to go through the form or something like
230. More than 26 sites, the face to face bit?
(Mr Darling) Yes. The face-to-face has to be available
(Mr Darling) The difference is that at the moment
if you are 86 and you have a query you could end up in one of
the job centres you saw in the Full Monty, where you really
do not want your grandmother to be because that is not the sort
of environment where you should be advising an 86 year-old lady.
So the new service will operate for the most part in places that
old people like to go, like libraries; we will do home visits,
we will see them perhaps in the premises operated in conjunction
with the voluntary sector and so on. There will be people who
are good at face-to-face contact, who will take the information
they want but the processing, which it frankly does not matter
whether it is done in a room in Guildford or a room in Motherwell
or wherever, that will all be done on those 26 sites. It will
be more efficient and more effective. As I say, you asked about
IT, if you go into those 26 sites, the difference between those
sites and the ones we have got at the moment, on the new sites
you have got modern IT, you have very little paper going around
the place, better working conditions for our staff; I think you
will get a better service out of that rather than trying to maintain
a system, which is antiquated in modern terms. There will be a
local service so that if someone who is elderly wants to sit down
and see someone then we will have that facility. Also you asked
about people who might be deaf or people
232. Vision impairment.
(Mr Darling)who need to speak to somebody in
their own language, again that is something you can do far better
from centralised sites because you could not have in every office
somebody who could deal with whatever the disability was or, if
you take London for example, in any one office there might be
15 or 20 different languages. By centralising you can do these
things a bit better. What you will get out of this is a far better
operational delivery than at the present time. That and the changes
that we are making in Jobcentre Plus, if you look at what we will
have done in the next four years it will be a world apart from
the world we inherited five years ago. This was a service in desperate
need of overhaul and that is what we are doing. It will be much,
much better for the public.
233. Secretary of State, I am sure you would
agree that if large numbers of those who would be eligible for
a Pension Credit do not take up the Pension Credit then it will
scarcely be possible to describe it as a success. I want to open
a series of questions about this by looking at where we are now.
As you know, something like 57 per cent of all pensioners will
be on means testing of one sort or another by 2003, a rise from
about 38 per cent in 1995. By 2025 something like 70 per cent
will be eligible for the Pension Credit but, here we come to the
key point, with MIG there are up to 750,000 pensioners who did
not take it up. So given the record with the MIG, which is frankly
not very good, how is the Pension Credit take up going to be better?
(Mr Darling) Let me deal, first of all, with the Minimum
Income Guarantee. What you are referring to is the annual survey
which has a huge variation in estimates as to how many people
take up these things. It ranges from something like 300,000 to
700,000. It is important also to understand how we get these things.
They are done by interviews with people and people are asked where
their income comes from and how is it calculated and a lot of
people do not know. What they get on their order book, if you
like, in many cases is "The bottom line is X" and they
do not necessarily know where it comes from. I have always had
doubts as to whether that figure is right. Indeed it is worth
bearing in mind that the authors of the report also say that they
have doubts too as to what the actual figure is. What I can say
to you is that there are now just about two million people getting
the Minimum Income Guarantee. We know that when we ran the advertising
campaign last year we had many more inquiries, which showed that
people did not have a reluctance, because that was the old idea,
people were reluctant to claim these things, we got a huge response.
The reason a lot of them did not qualify, of course, was because
of precisely the reasons we have discussed all morning, they were
just over the limit which the Pension Credit is designed to help.
So the first point I make to you is that I think that 700,000
figure is difficult to attach too much significance to, as the
authors of the report say themselves. I think where we need to
do a lot more, and where we are going to do a lot more, is the
way in which we approach people as they approach retirement. Remember
at the moment when you retire, if nothing else happens, you will
be approached and you will be told that "According to our
calculations your basic pension is such and such" and that
is it. So if you do not do anything, you would drift along on
whatever the Basic State Pension happened to be at the time. In
the future what we will do is we will approach people saying "This
is what your Basic State Pension appears to be. These are your
contributions" and then we will say also "If you have
got savings, if you have got earnings, you will be entitled to
Credit" and we give examples of what it would mean. Because
I think the processing will be better, in reply to Rob's point,
then I think we can steadily increase the take up and make sure
that we get more people who are entitled to it. I think, also,
that in time, just as people have no qualms about claiming a tax
allowance, which is their entitlement, which is their right, I
think people will also say they have no qualms, just as increasingly
we are talking about Working Families Tax Credit, they will have
no qualms about claiming their Pension Credit, they are entitled
to it. I think probably you deliberately chose the term "means
tested" and sometimesand certainly I am not accusing
you of doing this here todaypeople go on about the criticism
of means-tested benefits for these pensions. What they actually
mean is that they do not want to give them the extra money. You
have a choice, either you give everybody the same, which I do
not think is sustainable nor do I think it is right in social
policy terms, or you give more to those people who need the help
most. At the moment, this year pensions are going up for a single
person by £3 but some people are getting about £6 a
week extra. I think that is the right thing to do. Now the way
in which you do it, it is comparatively new territory for us in
the sense that we are doing something on a fairly large scale,
and we are using new methods, but I do think the policy is right
and I think in time, especially because people do get to learn
about these things and when you bear in mind that about half the
pensioner households in this country are on average £400
a year better off, what we have found is when you increase the
amounts of money available, the interest in the thing tends to
go up a wee bit. Conversely, if it were to be your view that this
was a bad thing, then you would have to be saying to people: "I
think it is a bad thing, I am going to take it away and it is
going to cost you £400." If you do that I will look
forward to listening to you.
234. But, Secretary of State, just going back
to one figure you gave to us, you gave your lowest figure of the
number of people not taking up the MIG at about 300,000 people
but that by definition means that you have 300,000 people who
by not taking it up, in fact, have stopped taking up the Pension
Credit and are at the bottom of the pile.
(Mr Darling) We do not know who they are.
235. They are there.
(Mr Darling) The Financial Reporting Standard, it
is a useful measure, it is not the only measure. My view is that
in time, as people realise what the Pension Credit does, and the
gain they can get from it, my guess is that you will see a steady
increase in the people who want to get it.
236. With respect, that was not what I was asking.
The question I was asking was this. There is still, even on your
lowest estimate, a large number of people who, because they are
not applying for one reason or another, are getting nothing at
all and that is the difficulty, is it not?
(Mr Darling) In the same way as if you have a tax
allowance you cannot compel someone to accept it. There may be
people in the country, I have not met one, who say "No, no,
I want to pay more tax". The same with a Pension Credit,
we cannot ever get ourselves in a situation where you are compelling
someone to take something. What I can say to you is that I think
that as the thing is introduced, as it builds up and we make it
easier for people to get their entitlement, I think more and more
people will take the thing up.
237. I am sure you got the point about it taking
time. This is a musical theme almost that has come out.
(Mr Darling) That has the merit of being true.
238. But, let us have a look at your target
for take up next year, 2004, you are anticipating a take up of
67 per cent which even you describe as ambitious. Given that the
whole process takes time, and I think you are absolutely right
to stress this, are you really going to hit this target?
(Mr Darling) What we have published here is our estimate
of what we think the first year of take up will be. Assuming we
get all the legislation through and everything else, we will do
everything we possibly can to make sure that take up does rise
to that level and beyond it as the thing builds up. I will come
back to the central point, the argument here is whether you have
a Credit or you do not. I think the Credit is an excellent reform.
I think, also, the way in which we intend to administer it will
be a lot better than the present time but of course these things
take time to build up. If you take, for example, PEPs and TESSAs
which your Government introduced, they took time to build up.
ISAs take time to build up because you cannot force people to
take these things up. When people see the attractive proposition
in front of them you will find that the propensity to take these
things up tends to increase.
239. What about the 33 per cent who will not
get anything at all even if you hit your target?
(Mr Darling) Gradually in time the take-up will increase.
As I said to you, you will never, ever get a situation where people
will take everything they are entitled to but just because that
is the case is not a good reason for not doing it in the first