Select Committee on Work and Pensions Minutes of Evidence


Examination of Witnesses (Questions 220 - 239)

WEDNESDAY 13 MARCH 2002

RT HON ALISTAIR DARLING, MP AND MR PAUL GRAY

  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 moment.

  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 October 2005?
  (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 exact words.
  (Mr Darling) Yes.

  225. You are suggesting it should go on until October 2005?
  (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.

  227. Yes.
  (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 centres—the 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 that.

  230. More than 26 sites, the face to face bit?
  (Mr Darling) Yes. The face-to-face has to be available nationally.

  231. Right.
  (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.

Mr Goodman

  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 sometimes—and certainly I am not accusing you of doing this here today—people 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 place.


 
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