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Lord Crickhowell: My Lords, with the leave of the House, perhaps I may ask a question that arises from that answer. In light of the fact that we have not had a Statement today and in light of the fact that the noble and learned Lord, Lord Falconer of Thoroton, has failed to reply to letters from me dated 14th September and 19th October raising important questions about information given to this House about the Dome at the end of July, can we at least be assured that we shall be given an early opportunity for the noble and learned Lord to answer for his responsibilities in this House?

Lord Williams of Mostyn: My Lords, again, I do not know of the letters of 14th September and 19th October. I was given no prior notice of that question and I simply do not know whether my noble and learned friend Lord Falconer of Thoroton was given notice. However, if your Lordships want distinct answers to particular questions, it is helpful if notice is given so that I can discharge my duty properly.

I see that a finger is being pointed at the Government Chief Whip. I am sure that if he had any information he would transmit it to me. But I repeat that I cannot know the answers to questions about correspondence between one of your Lordships and one of my colleagues unless I am told about them in advance. With the best will in the world, I cannot do everyone else's job as well as my own.

Lord Marsh: My Lords, perhaps I may help. This is a major report, as everybody knows. It has been issued publicly and is being debated by the media all over the place. My understanding is that Her Majesty's Opposition asked specifically for either a Statement or for a Private Notice Question and that was refused. That would be very surprising and, certainly, it would

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be a matter of interest to all of us. Somebody here must be able to answer whether or not that is so. Otherwise, we shall go away thinking that there is collusion between the two Front Benches, both of whom come out of the report very badly.

Lord Strathclyde: My Lords, everybody must sympathise with the difficult position in which the noble and learned Lord the Deputy Leader of the House finds himself. We all understand that, from time to time, the noble Baroness the Leader of the House must absent herself from this House on official duties. But it is rather strange that she did not advise the noble and learned Lord, as her deputy, of the decision that she took earlier today.

My noble friend Lady Anelay of St Johns asked to table a PNQ on the Dome, requesting the attendance of the noble and learned Lord, Lord Falconer of Thoroton, in this House. That PNQ was turned down on the authority of the noble Baroness the Leader of the House herself. Does the noble and learned Lord the Attorney-General find it rather strange that he was not advised of that?

Furthermore, does he also not find it rather strange that those of us who happened to turn on our televisions during the course of this afternoon saw the noble and learned Lord, Lord Falconer of Thoroton, being interviewed by the press? This is not the first time that that has happened. Why is it that a government Minister in this House seeks to explain himself to the press but not to this House?

Finally, does the noble and learned Lord think that it would be appropriate for this House to debate the whole subject of the Dome at the earliest possible opportunity?

Lord Williams of Mostyn: My Lords, the important question is the last one that the noble Lord put. That is a matter of the general interests of the House and I am trying to honour the interests of the House in dealing with the central question that the noble Lord put.

He asked me whether I think it is appropriate to have an opportunity to debate the matter in this House. The answer is that my personal opinion is yes, and I dare say that the usual channels will collude to ensure that a desirable outcome is brought about. I do not know whether or not the noble and learned Lord, Lord Falconer, is on the television. He may be; he may not be. I am not a great television watcher myself, except for the parliamentary channel.

Lord Shore of Stepney: My Lords, I do not wish to add at all to my noble and learned friend's difficulties and I appreciate them, but can he tell us where exactly my noble and learned friend Lord Falconer is? Knowing that this matter would arise, I am sure that he must have given a very good reason for not being present in this House this afternoon.

Lord Williams of Mostyn: My Lords, we becoming a shade unrealistic now. I do not know where my noble

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and learned friend Lord Falconer is. That is the danger with giving honest answers. I must reform myself! It is wholly unrealistic, to put it at its kindest and most neutral, to expect me to know where all my colleagues may be. Indeed, in many circumstances, I probably ought not to know.

Earl Ferrers: My Lords, we all understand the difficulty in which the noble and learned Lord the Attorney-General finds himself in not knowing where the noble and learned Lord, Lord Falconer, is. Does he know where the noble Baroness the Leader of the House is?

Lord Williams of Mostyn: My Lords, I do.

Pension Credits and Benefits Uprating

3.44 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, with the leave of the House, I shall repeat the Statement made by my right honourable friend the Secretary of State for Social Security in another place. The Statement is as follows:

    "With permission, I should like to make a Statement, first, on the annual uprating of benefits and, secondly, on pensions and the new pension credit.

    "First, on uprating, subject to the following exceptions, most national insurance benefits will rise by the retail prices index, which is 3.3 per cent, and most income-related benefits will rise by the Rossi index, which is 1.6 per cent, in the usual way. Details of the uprating will be placed in the Vote Office and will be published in the Official Report.

    "The Government believe that it is right to do more to help people with disabilities and for carers. We know that it is particularly hard for families on low incomes who are bringing up children with disabilities. I am therefore proposing to increase the disabled child premium by £7.40 a week, on top of the normal uprating. So as part of our drive to end child poverty, around 80,000 children will see a rise in the disabled child premium from £22.25 a week to £30 a week over and above their basic entitlement to benefit.

    "Just as we are committed to abolishing child poverty, we are also determined to provide greater security for those who are unable to work. That is why we announced in 1998 that we would introduce a disability income guarantee from April next year for people with severe disabilities.

    "When it was first announced, we set the guarantee at £128 a week. But today I can announce that when it is introduced in April, it will not be £128, it will be £142--£14 more a week. And for couples, it will be £186.80.

    "Thirdly, we want to do more for carers. We all owe a debt of gratitude to people who give up so much to care for their relatives. That is why in

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    September I announced that we would extend the invalid carer's allowance to people over 65; raise the earnings threshold; and extend payments for eight weeks after the death of the person being cared for. I also announced a £2 a week increase in the carer premium, which is the extra supplement for carers on income support.

    "Today I can go further. I have decided that the increase in the carer premium will, from next April, not be £2 a week, but £10 a week on top of the normal uprating. That means that the premium will rise from £14.15 to £24.40, helping over 200,000 carers on low incomes. In total, the Government will be spending nearly £200 million more on supporting carers and people with disabilities next year--and every year thereafter.

    "I now turn to pensions. I confirm that the basic state pension will rise by £5 for single pensioners next year, and by £3 the year after. For married couples, the figures are £8 and then £4.80. I can also tell the House that the widows and bereavement benefits (which will go to men and women equally for the first time next year) will also rise by £5 next year and £3 the year after.

    "And for this winter, I can confirm that pensioners will start receiving their £200 winter fuel payment from Monday.

    "Today I am also publishing a consultation paper on the new pension credit. Copies will be available from the Vote Office following my Statement.

    "There is a fundamental fault in the system we inherited. Saving should be rewarded, not punished. So the pension credit will, for the first time, reward the thrift of millions of people who have worked hard to save for their retirement. The credit builds on the long term reforms the Government have already made. We are building block by block, a coherent and sustainable strategy for pensions.

    "For tomorrow's pensioners we are reforming the state second pension, giving greater security in retirement to 18 million people on low incomes. And for moderate and higher earners, we are introducing the new stakeholder pensions from April.

    "Not only will the pension credit help millions of today's pensioners on modest incomes; it will also complement these long term reforms by rewarding people for saving. The message is clear: whatever you can afford to put by, it will always pay to save. Our aim is both to end pensioner poverty and to ensure that all pensioners share in the rising prosperity of the nation.

    "When we came into office, the inequality of pensioner income had grown dramatically under the last government. This means that the old approach--an across-the-board increase, whether linked to prices or earnings--is inadequate. It would not do nearly enough for the poorest pensioners. Nor would it do enough to reward thrift. A new approach is required which deals with the reality of pensioner incomes today.

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    "First, there are now many more pensioners retiring on very good pensions, mainly thanks to occupational pensions and of course SERPS. One in six pensioner couples are now retiring on £20,000 a year, and that proportion will grow steadily over time. While those pensioners are sharing in the rising prosperity of the nation, for those who come within the scope of the tax system, we are determined to give them a fairer deal.

    "We have already halved the rate of tax on savings income from April 1999 and increased pensioner tax allowances. And today I can announce further proposals to raise those allowances. At the moment most pensioners have no income tax to pay. But for those who do, in 2003 the Government propose to raise the age-related allowances by £240 that year over and above indexation. On current forecasts, that will take the allowance to £6,560 a year for those aged 65 to 74, and to £6,850 for those aged 75 or more. And throughout the remainder of the Parliament we propose to carry on raising the allowances in line with earnings. Over 3 million pensioners will gain from this.

    "Secondly, we inherited a situation where in Britain--the fourth largest economy in the world--there were too many pensioners living in poverty. Pensioner poverty has no place in a civilised society. That is why the Government were right to make ending pensioner poverty their first priority, and why we introduced the minimum income guarantee, which is already helping nearly 2 million pensioners. Now we want to go further to tackle pensioner poverty.

    "As the Chancellor announced yesterday, we are increasing the minimum income guarantee over and above the planned earnings increase. So from next April, no single pensioner need live on less than £92.15 a week. For 285,000 of our poorest pensioners, that is a £14 a week rise between now and next April. And when we introduce the new system in 2003, the minimum income guarantee will be set not at £92, but at £100 a week; that is £22 a week more than today. For the first time a single pensioner will be guaranteed at least £100 a week. And for every subsequent year in the next Parliament, the guarantee will be raised in line with earnings.

    "But the next stage of our reforms is to help the millions of pensioners who worked hard all their lives, saved for their retirement and rightly believe that they are being punished, and not rewarded, for their thrift. All of us are familiar with the pensioner who feels let down by a system that has not rewarded their thrift. A pensioner with £20 of occupational pension on top of her state pension can find herself just a pound or two better off than someone who saved nothing. That is unfair, unjust and it is going to stop.

    "That is why we are introducing the pension credit--to help pensioners with savings or a modest income in retirement. So, for the first time in the

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    history of the welfare state, saving will be rewarded, not punished. I can confirm that when it is introduced in 2003, the credit will reward all those with weekly incomes up to £135 for single pensioners, or £200 for couples. Today I can tell the House that 5.5 million pensioners--that is half of all pensioner households in this country--will be better off as a result of the new credit.

    "Not only will the new system ensure that pensioners are better off when they retire, it will also ensure that the support they get from the state will keep up with the rises we are seeking in family incomes over their retirement. Because not only will the minimum income guarantee rise in line with earnings; but so will the new pension credit.

    "Let me explain how the credit will work. First, we will guarantee a minimum income, which by 2003 will be at least £100, or £154 for couples. Secondly, on top of that, for every pound saved, pensioners will receive an additional cash credit. This will mean extra cash on top of the basic state pension; sums of between £1 and £23 a week. The amount of that reward will depend on the amount of savings and other income. Take, for example, a pensioner in 2003 who is on the basic state pension, which we then expect to be £77, and with income from savings or an occupational pension of, say, £20 a week the total weekly income will be £97. With the credit, her income will be raised to the minimum income guarantee of £100. But on top of that, she will receive a credit of £12 extra for her saving. So her income will not be £97, but £112. The pension credit will mean she is £15 a week better off--that is her reward for saving.

    "The changes we are making will be of particular advantage to women. On average, women have smaller occupational pensions than men. And because they are likely to live longer, they are more at risk from the falling value of their pension income over their retirement. As a result, two-thirds of those who will benefit from the credit are women. The credit also allows us to make a number of changes. First, we have always recognised the unfairness of someone losing out simply because they have modest savings in a bank or building society. We have already announced that from next April, as we prepare for the pension credit, we are raising the capital limits for the first time in 10 years. As a result, 500,000 pensioners will gain an average of £5 a week, and many will find themselves entitled to extra support for the first time.

    "But from 2003 we are going further. As part of the credit we are scrapping the capital limits completely. Instead, we will look at the income pensioners receive from their savings. Not only are we abolishing the capital limits, but we are also getting rid of the rules on tariff income for pensioners. So we will no longer assume that pensioners can get a ludicrous 20 per cent return on their savings.

    "And the second change is that we will make it easier for pensioners to get the money they are entitled to and get rid of the weekly means test.

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    Now, there are some who weep crocodile tears at means testing for pensioners, but who did nothing in 18 years to change it. We will. At the moment we ask all tax-paying pensioners to tell us about their income just once a year, if that. But we ask poorer pensioners to tell the benefit system about changes every week. There is no good reason for that. So instead, the credit will be based on an income assessment that is more like the tax system.

    "When we retire, a calculation has to be made about our basic state pension. At the same time, we can work out how much a pensioner is entitled to under the minimum income guarantee and the pension credit. We know that most pensioners have stable incomes. So after the initial award at retirement, any adjustments will only need to be made when circumstances change significantly; and we are making it easier for pensioners to claim their entitlements by introducing a dedicated new service for pensioners. People will be able to claim by phone, giving pensioners the better service they want.

    "Although most pensioners have stable incomes, there are of course pinch-points during the year when pensioners need to meet the costs of lump sum bills. That is why pensioners have welcomed the extra help they receive from the winter fuel payment and the free TV licences for over-75s--more help when it is most needed. We promised to make sure that all pensioners would share fairly in the rising prosperity; and the measures we have announced deliver on that promise. As a result of our reforms, all pensioners will gain. We are spending £8.5 billion more on pensioners over this Parliament; that is £5 billion more than an earnings link.

    "We promised to do more for those who most need it. That is why, next year, the poorest third of pensioners are getting five times more than they would have done under the earnings link. We promised to do more to reward saving; that is why under the tax changes I announced today 3 million pensioners will be better off; and the new pension credit will mean that 5.5 million pensioners will be better off.

    "So, from next week: the £200 winter fuel payment; from next April the £5 and £8 increases in the basic state pension and the minimum income guarantee goes up to £92.15; from the following April a further £3 and £4.80 on the basic pension; and from 2003 a guaranteed income of at least £100; and the introduction of the new pension credit and higher tax allowances to reward saving.

    "So there is a clear choice for the future. We are increasing the winter fuel payment, not abolishing it. We are building on the basic state pension, not undermining it or privatising it. We are tackling pensioner poverty, not ignoring it. And we are rewarding saving, not penalising it.

My Lords, that concludes the Statement.

    "I commend this Statement to the House".

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4 p.m.

Lord Higgins: My Lords, the House will be grateful to the noble Baroness, Lady Hollis, for repeating the Statement which was made in another place. Noble Lords will be particularly appreciative of the fact that she read it as though it were her own. It is easier to understand such complex matters if that is so rather than ripping through a Statement at high speed.

We on this side of the House welcome a number of aspects of the Statement. First, we welcome in particular the proposals for helping the disabled and carers, and for the projected abolition of the capital limit. We also welcome the proposed increase in the basic state pension. However, for 30 years I represented a constituency with the oldest population in the country and therefore I know well how pensioners think. I know that they will be asking themselves how it is that last year they were told that the maximum increase the Chancellor could possibly offer was 75p when suddenly this year it can be increased to £5. It may cross their minds that there may be an extraneous factor such as the timing of other events which they do not fully understand. No doubt the Minister will enlighten us on how it is suddenly possible to make such a massive increase compared with the measly, insulting increase of last year.

Secondly, as regards the basic pension, is the Minster aware that we on this side of the House believe that in addition to the increases which the Government have announced it is right to roll up the gimmicks on television licences, winter fuel payments, Christmas bonuses and so forth in order to save the heavy administrative costs and inefficiencies in delivering them and to devote the money instead to an increase in the basic pension? In that context, suitable adjustments should be made in relation to taxation and those receiving lower-level benefits. That would ensure that as regards the basic pension everyone would be better off than under the Government's proposal.

Finally, with regard to the basic state pension, does the Minister believe that there is a slight inconsistency in the Government's reaction to the proposal for linking pensions with earnings, so eloquently put forward by the noble Baroness, Lady Castle? They replied that much of the money would go to people who did not need it, but at the same time they increased the winter fuel allowance which also goes to many people who, in the Government's sense of the words, do not need it. Is not that a strange and inconsistent policy for the Government to adopt? No doubt the Minister will be able to give an explanation, but it is difficult to understand how these two parts of the policy can be reconciled.

The noble Baroness has, both in opposition and in government, made such statements on a number of occasions. The normal practice with regard to upratings is to state what they will be and what the corresponding increase in national insurance contributions will be. Surprisingly, in the Chancellor's Statement yesterday no reference was made to that and, more to my surprise, no reference was made to it

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in the noble Baroness's Statement today. If my understanding of a report in today's Times is correct, an additional £2,000 a year will be collected in national insurance contributions from those with incomes of more than £30,000 a year. That is an increase of 7.5 per cent; three times the rate of inflation. If that is correct--and no doubt the noble Baroness will tell us--it is extraordinary that no mention of it was made by the Chancellor yesterday or by the noble Baroness today. Clearly, as regards those with incomes of more than £30,000 a year, it is yet another stealth tax.

That brings me to the next point we need to question. The Government, as usual, pay tribute to the important role of occupational pensions. Once again, I must declare an interest as chair of an occupational pension fund. They are still suffering severely for the most notorious stealth tax; namely, that which was the result of the Chancellor's first Budget when he changed the rules on advance corporation tax and removed some £6 billion from occupational pensions.

In that context, perhaps I may raise another point with the noble Baroness. It would seem that the Chancellor's policy is to tax in order to repay debt. The effect of that is significant in relation to the gilt-edged market. If the Government are borrowing less, the supply of gilt-edged assets is less and the yield on gilt-edged assets will fall. So, too, will the rate on annuities. Therefore, the effect of the Government's policy in that respect is to reduce the level paid on annuities, even below the dramatic fall over the past two years. There are implications for those who will still be forced to take an annuity at the age of 75. Despite our having raised the matter on many occasions on the Floor of your Lordships' House, that has not been dealt with in the Statement. There are implications for the minimum funding requirement of such funds, on which the Government have made no comment and appear to be procrastinating in reaching a decision.

I turn next to the minimum income guarantee which is to be increased in line with earnings. Contrary to the Government's declared policy of wanting to reduce the number of people submitted to means testing, will not the effect be to increase the number? Perhaps the Minister would quantify that for us. The Social Security Select Committee of another place pointed out an inconsistency in the Government's policy in that respect. The change is likely to discourage those who might otherwise go into stakeholder or other pensions because for reasons of which we are aware it tends to discourage savings. That will be the case despite the proposal as regards pensioner credits. We shall study carefully what the Government now propose, but it would seem that the level of income at which the change will be effective will not be much higher. A superficial reading of the Government's White Paper suggests that the pensioner credit fades out at an income of £7,000 per year.

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