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Session 2001- 02
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Standing Committee Debates
State Pension Credit Bill [Lords]

State Pension Credit Bill [Lords]

Standing Committee A

Thursday 18 April 2002


[Mr. Win Griffiths in the Chair]

State Pension Credit Bill [Lords]

9.30 am

Mr. Tim Boswell (Daventry): On a point of order, Mr. Griffiths. You will recall that at the end of our previous sitting we were discussing amendment No. 14. I had concluded my remarks and I do not intend to re-open that discussion. Can Ministers comment on the imputed calculation of income as a result of yesterday's Budget? Given that the Chancellor of the Exchequer has now scrapped that in respect of other tax credits, some commentators have said that the position of the pension credit is left exposed and anomalous. No doubt we will return to that matter when discussing later clauses so, in a sense, I am giving notice to Ministers that such issues will be raised then. Representatives of organisations that deal with older people have said that 5 million pensioners are likely to become involved in the system of income-related benefits. Can Ministers respond briefly to my concerns?

The Chairman: I am sure that the Ministers have heard your comments, Mr. Boswell. It would not be appropriate for them to respond immediately, but I am sure that something will be said during the debate.

The Minister for Pensions (Mr. Ian McCartney): Nothing that was announced by the Chancellor of the Exchequer yesterday or in his pre-Budget statement will affect the structure of the Bill or any matters relating to it. If there had been, the Government would have had to table amendments to the Bill. As the Committee will notice, we have tabled only one small technical amendment. We can rest assured that the job of the hon. Member for Daventry (Mr. Boswell) as Opposition spokesman has not been made any harder by changes that were announced in the Budget statement yesterday.

Andrew Selous (South-West Bedfordshire): With respect, I think that the Minister is slightly missing the point made by my hon. Friend the Member for Daventry, which was that the treatment of earnings under the State Pension Credit Bill will now be different following the announcements made by the Chancellor yesterday in respect of other credits and arrangements for pensioners. My hon. Friend was referring to that particular aspect of the Budget.

Mr. McCartney: I know exactly what the hon. Gentleman was saying. But nothing that was said yesterday affects the structure or the clauses of the Bill and resulting calculations.

The Chairman: I think that the Committee has exhausted that point of order. I am sure that we shall hear some questions on the matter later in our proceedings.

<<084>>Clause 2

Guarantee Credit

Amendment proposed [16 April]: No. 14, in page 2, line 24 to leave out subsection (6).—[Mr. Boswell.]

Question again proposed, That the amendment be made.

The Chairman: I remind the Committee that with this we are taking amendment No. 3, in page 2, line 26, at end insert—

    '(6A) Such regulations may not apply to hospital in-patients.'.

Mr. Steve Webb (Northavon): Good morning, Mr. Griffiths. The purpose of amendment No. 3 is similar to that of amendment No. 14. That amendment would remove subsection (6), while our amendment would allow the Secretary of State the power to specify lower amounts, except in respect of hospital in-patients. That proposal is more narrow than amendment No. 14, because the explanatory notes to the Bill suggest that the Secretary of State needs powers to specify lower amounts, for example, in respect of prison inmates. Even I do not have a problem with a lower rate of pension credit for prison inmates. However, hospital in-patients should not be treated the same.

We welcome the fact that the Government made a concession in another place. It is clearly a step in the right direction, but has it gone far enough? The issue is one of principle as well as one of pragmatism. The key question is whether the Bill should give the Secretary of State power to reduce guarantee credits for hospital in-patients. The Minister will no doubt say that it has been a feature of the welfare state since the war that people in hospital have their benefit cut, but because something has been going on since the war does not make it right. There has been an upper earnings limit on the national insurance system since it was established, but yesterday the Chancellor of the Exchequer breached that by taking national insurance beyond the upper earnings limit. That something has been in done for decades does not mean that it cannot or should not be reformed, and I hope that the Minister would not suggest that that is a reason for continuing with the system.

We have to examine the thinking behind the practice. The historic argument is that the state should not pay twice—in this case, by providing for patients in hospital and also paying their full pensions, or pension credits. They are being fed, sheltered and looked after while they are in hospital, which is part of what the pension credit is about. However, the Government have not produced any evidence about the extent, if any, of the double provision, so my first question is empirical—what evidence is there of double provision? Clearly, food would be an obvious example.

Mr. Boswell: The hon. Gentleman may wish to intensify that point. When we have sought to require information in parliamentary questions relating to the distribution of the benefit, except for the global figure of relief of £40 million annually, it has been remarkably difficult to work out how many people are affected and for how long, and to determine the caseload on which information is based.

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Mr. Webb: I would certainly agree that there have been gaps in the detail. There has been a greater amount of detail concerning the numbers affected than the hon. Gentleman suggests, but the Department has hardly been overflowing with information about how such people are affected.

I presume that the Under-Secretary will respond. Will she provide empirical evidence of research committed by the Department to determine the costs incurred by people in hospital and the costs saved because they are not living in their own homes? Obviously, they are not buying food while in hospital, so a slightly lower rate may be justified to account for that. However, how important are such items of expenditure compared with costs that roll on when one is in hospital, such as household insurance premiums, which may rise during an extended period of absence—insurance companies sometimes increase premiums if nobody is sleeping in the house? Many costs roll on regardless, such as standing charges on utilities—telephone bills, for example—and car insurance does not stop when one is in hospital.

What is the relative magnitude of the costs involved? If one took all costs faced by a pensioner, what is the balance between costs that continue when one is a long-term hospital in-patient and those that stop? If, as I rather suspect, a large proportion of costs continue and only a small amount is saved, that should inform any hospital downrating.

My second question is what costs increase during a hospital in-patient stay? If a person is married, the partner will want to visit regularly, which will incur additional travel costs, such as car parking charges. Hospitals in my constituency, like others, charge rates of approximately £3 a visit. The cost of visiting once a day would be some £20 a week, which is a substantial sum relative to the figures that we have been discussing. Such additional costs may offset any savings.

Pragmatically and empirically, have the Government commissioned research on the problem and demonstrated evidence? Frankly, the number of people involved when the system was established post-war was probably only a handful. Most people died before any downrating would have applied, which is no longer the case. People are likely to live longer now and have long in-patient stays. Harking back to the fact that downrating is a feature of the post-war welfare state does not prove the case. It affected far fewer people in a very different world.

Hospital downrating also involves an issue of principle that relates to benefits other than those in the Bill, so I will not dwell on that point. However, one may question whether we should be going down this track with regard to contributory benefits. For people who receive benefits for care needs, although the hospital provides care for in-patients, a carer may have to be retained and wages paid for the duration of the hospital stay.

Mr. Boswell: I am grateful to the hon. Gentleman for giving way again. I hope that this will be the last

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intervention that I need make. He mentioned care needs. Does he agree that there might be inequity between people who are resident in hospital, and possibly blocking a bed, in the absence of other care provision, and those who have moved out of hospital and are resident in other accommodation? That, too, might give rise to inequities.

Mr. Webb: The hon. Gentleman is right to raise the issue of bed blocking, which is entirely germane to the point, as I shall explain in a moment. I am not sure that the position of people in residential care is different, because their treatment under the pension credit will be complex. However, bed blocking matters, because the people with whom we are dealing are long-stay hospital in-patients. In a sense, they are, potentially, victims twice. Not only are they in hospital when they would like to get out—they are ready to do so, but the social care is not available—but, under clause 2(6), they will also have some of their money taken from them. People face a sort of double jeopardy. Once again, the phrase ''bed blocking'' had not been invented in 1948, but it is now part of the lexicon of everyday language.

The matter involves issues of principle that relate to hospital downrating and apply especially to contributory benefits, and issues that relate to the Government's failure to extend the concession to care benefits, with which we should deal elsewhere. Means-tested benefits are designed to top-up people to a certain standard of living and ensure that they can maintain that standard of living. The matter involves arguments about double provision. I hope that the Minister will give us evidence of research that the Department has commissioned to measure the extent of that double provision and that suggests that there is a basis for the tendency to downrate.

Having spoken informally to Ministers elsewhere about why the Government did not go the whole hog and scrap hospital downrating, my impression was that it was not so much the people left—the victims of hospital downrating—who were the worry. It involves a thin-end-of-the-wedge argument. It was not the 6,000 people, or whatever the figure involved is, but the fact that, once we allow the principle of not downrating hospital in-patients, we have opened a Pandora's box. What other things are the Government worried about in accepting the principle? What other expenditure do they fear that they might incur? Where else in government might the principle be applied about which they are worried? Ministers have implied informally elsewhere that the reason is not so much those 6,000 but where it might lead. I hope that the Minister will fill us in on the empirical evidence on cost-saving and on the thin-end-of-the-wedge argument.


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