State Pension Credit Bill [Lords]

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Mr. McCartney: That seems a very clever case—Railtrack. I shall try to count on one hand the number of pensioners who suffer from Railtrack in terms of

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shares. Certainly, plenty suffer from it in terms of poor performance.

The hon. Gentleman's point is not a big deal. Even under the current system, every day pensioners legitimately use up their capital for various reasons and so qualify for the minimum income guarantee. The whole point is that a pensioner has choice. A pensioner whose capital decreases, for whatever legitimate reason, has access, through this system, to additional income from the state.

How is that a burden? I take it that the hon. Gentleman is not suggesting that, when a pensioner's income falls significantly to the point at which it affects their level of pension credit, whether because of Railtrack shares or another reason, we should simply leave them to grin and bear it for five years. There is no way that I would agree to support the Liberal Democrats on such a policy.

The hon. Gentleman had a good try, but it was an attempt to construct a scenario that has been claimed continuously since the original presentation of the Bill—that this Government have turned their back on Britain's pensioners and are forcing them through old-fashioned means-testing. That was not true at the beginning, it was not true during the consultation process, it is not true now and it will not ever be true. That is not what we are attempting to do.

I ask the hon. Gentleman to think about the matter a little more, to think about what we are trying to do to change the whole ethos of the basic state pension and income related to it. Even if someone is totally opposed to what we are doing, they cannot argue against the significant change that we have made to people at the point of retirement. For the first time, the state will recognise not only their contributions to the basic state pension but contributions of other kinds and other forms of income, and will give out income in relation to that.

Mr. Julian Brazier (Canterbury): It does not seem to me that the Minister has answered the questions posed by my hon. Friend the Member for Hertsmere and by the hon. Member for Northavon. I put to him another hypothetical case. Let us look at income from earnings, which the Secretary of State has assured us will be treated in exactly the same way as other forms of income. If a pensioner is doing a part-time job in which the value of the work fluctuates enormously from week to week, as quite a lot of younger pensioners do, how will their work be treated?

Mr. McCartney: The hon. Gentleman said that I had not answered the questions, but perhaps he did not like the answers. Eighty-five per cent. of pensioners have less than £6,000 capital. They will not be affected by the rules, and quite rightly so. [Interruption.] The hon. Member for Northavon says 15 per cent., as if I am trying to wash this away. Is it his contention that half of Britain's pensioners will be forced through a draconian system to get income? That is patently not the case.

The rules are designed to assist the 15 per cent. if they legitimately use up their capital at any point. If a

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change in circumstances affects their entitlement, they will automatically have access to the system and be reconsidered for receipt of income. What is wrong with a system that acts so proactively for older people? At present, an older person in that situation has to grin and bear it. Under the Bill, we will reassess their case in respect of the change in their circumstances—circumstances are bound to change—when they approach us. As a package, clauses 6, 7, 8, 9 and 10 are a reasonable approach and allow for fair assessment of claimants' circumstances.

If the five-year award were totally fixed and continued to be paid regardless of any change, there would be significant costs. The Bill reduces reportable changes to the absolute minimum and maintains the integrity of the scheme. If we had not designed it in such a way, the taxpayer would not be protected from attempts to undermine the scheme but, more importantly—the balance must be right—pensioners who legitimately find themselves in the situation that I outlined earlier would not have an automatic right to be reassessed and, I hope, secure additional income from the state. I will come back to that later—it is important to deal with the general principles of the clause. I hope that I have dealt with the question of whether the Bill introduces a nasty, means-tested system.

Clause 6 establishes the principle of an assessed income period of up to five years during which most changes need not normally be reported. That is one of the main reasons for introducing pension credit. The assessed income period is the legal mechanism through which we will abolish the weekly means test for pensioners from age 65. When they reach that age, the vast majority of pensioners find that their income is settled and that their circumstances are stable. There is no need to continue to impose on them a requirement to report every little change from week to week. That is in response to the hon. Member for Canterbury (Mr. Brazier). Fluctuations in incomes will have to be reported, but in a way that is in keeping with the principle of the Bill. The reporting system is designed to assist the pensioner to benefit from the assessment, in almost all circumstances.

Clause 6 requires the Secretary of State to set an income period when he is making a decision on the pensioner's pension credit entitlement. The decision may be made when the pensioner first claims on retirement or it could be made at a later stage. The assessed income period will usually last for five years, during which the retirement provision—the types of income are defined in clause 7—of pensioners aged 65 or over will be deemed to stay the same.

In general, pensioners, particularly those aged 65 or more, have settled and regular income that is not subject to frequent changes. There is little point in continuing the existing regular re-examinations of the financial circumstances of people in that situation. In theory, under the current regime, pensioners are supposed to decide each week whether there has been a reportable change. That is intrusive and demeaning, and we have discussed why it is completely wrong. We are righting a big wrong by introducing an effective and transparent system that

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provides flexibility for the pensioner or the pensioner couple. That will reduce considerably the number of enquiries that are made and the number of changes that must be reported by pensioners.

Mr. Brazier: A growing number of pensioners, particularly younger people in their late 60s, choose to go out to earn money in part-time jobs—a growing number that Government spokesmen have said that they expect to continue to grow. Given that incomes usually fluctuate enormously—sometimes they stop completely, then start again—how will the Minister square such cases with what he has said?

11.15 am

Mr. McCartney: I thought that I had already acknowledged that there would be occasions on which there were fluctuations, and that we would be using average figures. I have already explained all of that. The problem of the hon. Member for Canterbury is that he does not like what we are doing. However, we have not heard what the Conservative Front-Bench spokesmen would do: would they keep the credit or get rid of it? The mother and father of all parties when it comes to using means-testing to prevent people from accessing income and other benefits is the Conservative party. It is a past master.

We have been consulting people and restructuring the basic state pension credit to try to unpick the labyrinth of rules and regulations left by the Conservative party. I am not just referring to way back in the '40s, '50s and '60s, but to when you were last in power. You spent most of your time not providing access—

The Chairman: Order. When the Minister says ''you'' and ''your'', he is referring to me.

Mr. McCartney: I am sorry. I realise that for the purposes of the debate, you are not a member of the Conservative party, Mr. Atkinson. I do apologise, and would not want to embarrass you or impugn your character.

Most of the 18 years that the Conservative party was in power was spent creating new forms of regulation to prevent people gaining access to credit, including removing income support from those who already received it. I spoke out against that from the Back Benches, and occasionally from the Front Bench. The Conservative party did not modernise the system, but ensured that what people had was removed from them. It left a huge pool of general poverty—children's poverty, in-work poverty and, of course, pensioner poverty. Clause 6 reverses that so that the state has a different relationship with older people, and it creates a different way in which to assess them and their incomes.

Clause 6 is an important aspect of the Bill, and we have had a good discussion on it. There is a divide between the Government and Opposition Members, but nothing more that I could say would bring the Opposition on board. I will leave it at that, and simply add that it is an excellent and necessary building block of the Bill. I ask hon. Members to accept it.

Mr. Webb: In theory, means-testing every five years under an assessed income period sounds great. The

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Government's line, which is always airbrushed, is that pensioners will not have to touch the authorities for five years at a time, which is wonderful. However, on examination, we find that that is not the case.

Things will not be like that, and the first group for whom things will not be like that comprises of women aged 60 to 64. Their assessed income period will be every week, as it is at present. That may not be called an assessed income period because the clause refers only to people aged 65 and over, but of the 5 million people who will receive pension credit, probably more than 500,000 women aged 60 to 65 will have a weekly assessment. They form one group for whom the assertion is not true.

The second group comprises anyone who must report a change in circumstances. If people's incomes drop, it is good to give them the opportunity to report that and to give them more money. However, the Minister has not addressed two problems. The first is take-up. If people are given the impression that the amount is for five years, and that they will have no contact with the authorities for that period, when reassessment takes place, I reckon that hundreds of thousands of people will be uncovered who are not getting what they should because they have failed to report falls in their income. The system is so complicated that the chances are that people will not appreciate what has happened. The Government are using a five-year assessment period, but leaving the onus on the individual to report falls. Why not 10 or 20 years? There is a trade-off. The Minister has given no justification for selecting a five-year period. The longer the period, the greater the chance that there will be people whose circumstances have changed but they have not reported it, and those people will be missing out. However, the shorter it is, the more intrusive the assessment. That is the trade-off that he has not addressed.

The critical point is that the claim, ''This is five years, and we'll leave you alone between times,'' is not true. People will have a lot more contact with the authorities than is being suggested, so it is simply not true that the provision makes a completely clean break with what has gone before. I am not convinced that the Minister has made a strong case to persuade us that the Government have got the balance of that trade-off right.

 
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