Draft State Pension Credit Regulations 2002

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Mr. Brazier: To give an example that we discussed in Committee, a widow might spend slightly more than four weeks with a friend in a villa in Spain and then return to this country. If it is discovered a year later that the trip was made, will she be deemed to have been claiming illicitly for the whole of that year because she did not fill in another form, and will the state then demand a large sum back from her? That seems to be how the regulations can be read.

Mr. Boswell: My hon. Friend is acute in raising that issue. I had been thinking in terms of discrete periods, but there is a potential liability on someone who merely forgets to fill in a form. The Government should think hard about that.

Even if everyone does everything exactly according to the rules, it would be helpful to know how many people are likely to travel abroad for more than four weeks at a time, how many would return to the United Kingdom because they do not anticipate an absence likely to exceed 52 weeks, how many will have to reapply and how simple that will be.

We have discussed—I do not want to reopen the matter here because we cannot amend the regulations—the possibility of a suspensory arrangement, but that does not exist or is not provided for and would be severely impractical and an administrative complication.

I am also concerned that a number of legal issues arise. We should not come to these Committees using European jurisprudence as a weapon, but we should be aware that a threat exists. I say that as a non-lawyer and with great respect to the Minister. The four-week rule creates discrimination between, for example, pensioner A who decides to stay with a friend for five weeks on the Costa Brava and pensioner B who takes a couple of shorter package holidays. In the latter case, the pensioner would presumably not be required to stop their pension credit. An industry might even become established to provide package tours for pensioners that get them back before conclusion of the assessment period. In the former case, the absence from the United Kingdom would have been less within a 12-month period, but the effect would have been quite different, whether it is a legal effect, as my hon. Friend the Member for Canterbury trailed, or leads to loss of benefit because it cannot be restored to the previous level and so on.

Perhaps wider than that, if a rule effectively requires a pensioner who travels abroad to lose benefit and that benefit is not income-related or connected with work in the United Kingdom, the European authorities might become interested because that could be a potential inhibition on the free movement of people.

I welcome the power in the regulations to extend to eight weeks the qualifying period of absence for those accompanying a sick child. We should be grateful for that, but there may be perfectly reasonable circumstances in which someone goes abroad to accompany a sick adult—for example, their spouse or partner, or someone else. I remember a case in which I was successful in obtaining from the Home Office exceptional leave for a lady with bone cancer to remain with a foreign national with whom she had

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become closely associated and in whom she had a great deal of confidence.

Maria Eagle: I wonder whether the hon. Gentleman remembers that the rules are carried forward from income support and that the eight-week period for accompanying a child who needs treatment relates specifically to the Peto institute. Does he remember that from our earlier deliberations? There is no change.

Mr. Boswell: There may be no change, but there may be an outstanding unfairness. I fully understand the danger and have warned Ministers of the difficulties that can arise when a small concession is made, because it may become necessary to make a wider one to avoid new unfairness.

The Government, perhaps unwittingly, have created an objectionable distinction in making a concession. The Minister will remember that her colleague, the Minister for Pensions, said on Report that the Government had decided to exclude from the loss of benefit provision or to treat as not absent from the United Kingdom people who travel abroad to receive medical treatment paid for by the national health service. I believe that the powers to do that are set out in a footnote and it is clear that the regulations provide that power. That is remarkably discriminatory against someone who may have exactly the same condition but chooses to go abroad for medical treatment at his own expense—perhaps even at the same hospital. One will be treated as resident in the United Kingdom as if he had never left; the other will be treated as having gone abroad and disqualified himself from benefit.

Mr. Brazier: My hon. Friend is making a powerful point, but a parallel group must also be considered. Those who fall ill while abroad might end up staying for more than the four weeks originally intended.

Mr. Boswell: Indeed, that is an important additional consideration.

These matters are not trivial and European lawyers may become excited about them because they raise important issues of principle about free movement. They also give rise to practical problems and unfairness in particularly hard cases. I am sure that the Government want to avoid that unfairness and I hope that they will give the matter active consideration.

I do not want the Committee to believe that that is the only subject in which I take an interest. The Minister said, and I concede, that the regulations come from income support regulations and are not newly created. They reflect custom, practice and previous judgments. I have one concern about regulation 5 and whether a person is to be treated as being a member of the same household. The relevance of that is that only one pension credit claim may be made per household. The regulation states:

    ''A person is to be treated as not being a member of the same household as the claimant if—

    (a) he is living away from the claimant''

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and so on. How firm a test is that? Someone might declare that they are living away from the claimant when they are not or do not intend to continue to do so. The test is objective because it states ''is living'' and not ''says he is living''. Does that contain potential for confusion?

Maria Eagle: The provisions exactly mirror those for income support. In that sense, they ought not to be any more confusing than the current provisions for income support.

Mr. Boswell: Perhaps I should re-present the question to the Minister: will she tell me that in the existing income support regulations there is no potential for evasion by the application of a test that allows collusion to take place?

Maria Eagle: Obviously, there is potential for fraud in all benefit regulations, but as far I am aware, it is not a particular concern in this case.

Mr. Boswell: Social security fraud is collectively estimated at upwards of £2 billion a year, even on the most conservative estimates—I am sure that the Minister will not mind if I use those. One does not want any insouciance on the part of Ministers about fraudulent matters, and I hope—without making a cheap point—that she will take that thought away and ask her officials about it later on.

Going through the other regulations, I sought to assist my hon. Friend the Member for Canterbury in a conversation at the margin about the definition of qualifying income for the purposes of savings credit. The Minister referred to that, and I would like her to confirm to the Committee that the income derived from items in PEPs and ISAs, or treated as derived from the capital value of those, will still be included in the pension credit calculations.

I mention that with particular intensity, because the Minister will remember that the Secretary of State, in the debate on the Floor of the House last Tuesday, when asked what sort of investment he would recommend to young people did not say pensions—to my surprise—but suggested that they take out an ISA. They could do that, but they would find 40 years down the track that, because of the Minister's own proposals for pension credit, the tax-free benefit of an ISA would suddenly become part of the calculations. I know that Ministers are not supposed to say it, but what they are actually saying is that it would be subject to an implied tax of at least 40 per cent.

I now turn to regulation 17(10)(c)—even describing it shows the complexity of the matter. I notice that right at the bottom—it might be easier to describe it as the lines before the beginning of regulation 18—there should be disregards of any amount paid in tax or any amount of national insurance contributions. However, only 50 per cent. is allowed in contributions towards an occupational pension scheme or a personal pension scheme,. I do not know whether that is analogous with any provision, and I would be grateful if we could ascertain what it is, and why it is. My understanding has always been that if one puts money into a superannuation scheme, it is fully allowed, subject to the overall contribution limits set by the Inland

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Revenue. That does not appear to be the case in the regulations.

There is a reference in regulation 20 to calculation of capital outside the United Kingdom. There are certain derogations—cases in which there might be exchange control—and in such cases the UK valuation would be substituted for what might apply to the asset abroad. Perhaps it would be easiest thing to ask the Minister to confirm that that is standard and precedented by other social security provisions.

Regulation 25 concerns persons whose benefit is docked because of fraud. I wonder whether the Minister would say a little more about the number of those who have been docked for fraud. She rightly said, and I would echo this, that she did not anticipate that many pensioners are likely to be guilty of fraud. However, the more means-tested systems there are, and the more complex they are, the more likely it is that there will be fraud.

Schedules I and II prescribe additional amounts available for, for example, disabled people. There is no problem with that in principle, but it would be helpful if the Minister could say something about how many persons she anticipates will be covered by it.

The text of the schedules contains a reference to interest on loans that I do not fully understand? Will mortgage relief interest, applicable in certain cases, also be counted in this as in other parts of social security legislation? Will the Minister tell the Committee whether and how the housing benefit regulations will be covered by, or mesh with, these regulations? I confess that I have not bottomed that out. She has established the principle that those benefits should not be docked alongside the provision of state pension credit.

The Minister may be aware that there has been recent correspondence and concern about non-dependency allowances for young persons aged between 18 and 25. Can she say how that will mesh with these regulations and say whether, for example, a grandparent who has admitted into their home a young person who is earning to some extent—quite a plausible situation—will lose benefit in that regard?

I appreciate that that is a series of rather complex questions, but the regulations, as the Minister admitted, are complex and difficult. I close with some more general concerns. We have heard from Ministers all the way through this process that they hope to implement pension credit from October 2003. Is that still the working assumption? We have had setbacks with the Child Support Agency, and the Minister referred to the fact that this measure is being brought in under old information technology equipment. Are we expecting that it will be done and dusted, and, even with the old equipment, available for pensioners in October 2003? I think that she is nodding, but perhaps she can confirm the point when she winds up. I realise, as her letter to us suggests, that pensioners can apply in advance and might be able to receive retrospective payments, but the Committee still needs to know that it is anticipated that the target date will be met.

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It is easy, when looking at legislation and regulations, to get very close to the details, and it is right that we should do so, but wider considerations about pensions policy are now being widely debated in the public prints and in national debate. We touched on some of them last Tuesday in the debate on the Floor of the House. It is welcome that pensions policy is beginning to attract a wider audience, but the circumstances in which that is happening are, perhaps, concerning. People are beginning to talk—these are not my words—of a pensions crisis.

In trying to come to my own view on the regulations, I would say that, although the small print is always difficult, they are probably designed to deliver and will deliver the legal framework for the Government's pension credit policy. However, the context in which that is happening worries me. I have a strong sense that although the Government's overall pensions policy may have had an initial coherence at the time of the 1998 Green Paper, by this stage it has already been quite severely holed below the waterline. It does not really know where it is going, for example, in relation to the interaction between pension credits and incentives for the lower-paid to save. I draw the Minister's attention to the article on that in the centre pages of The Daily Telegraph today. The policy does not even know where it is, because the national statistician has had to withdraw all statistics for pensions contributions.

In a sense, with the whole policy in severe difficulty, all that we can say about the regulations is what one might have said about the Titanic. The band plays on. It is, perhaps, better that it plays in tune rather than out of tune, but it is on a ship that is listing extremely badly and that, frankly, will not make it to port.

5.15 pm

 
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