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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, I think that the contribution made by the noble Lord, Lord Higgins, was very helpful: he has nailed the problem precisely. Our dilemma is that we currently have different retirement ages, and that, to make it more complicated still, we shall be gradually moving from one age to another for women. There is therefore a double issue. He is absolutely right also that, at the point at which pension ages for men and women are the same, at 65, both the pension credit guarantee element and the pension credit savings reward element will kick in equally for both. He is absolutely right on that point, as he anticipated.

The noble Lord is also right that, meanwhile, as we are dealing with conflicting notions of fairness, there may not be a way through the issue that is obviously fair. What may be fair to women may be considered unfair to men, although the European Court may rule otherwise. As your Lordships will know, the conclusion that we have reached is that we should treat men and women equally at 60 for the guarantee element, which is the point at which they are poor, but treat them equally at 65 for the savings element, which hinges not on their poverty but on the fact that they have taken their retirement pension. As men cannot take retirement pension until 65, we have established the two different ages.

The minimum income guarantee does not require a given retirement pension level. The pension credit savings element, however, must establish such a requirement as that is the fulcrum on which the element rests. That is why we have dealt with the two ages in different ways.

As I said in Committee when speaking to similar amendments tabled by the noble Baroness, Lady Barker, and by the noble Lord, Lord Hodgson, 65 is the only reasonable choice for a minimum age for the savings credit element. We have had to make the choice not only because of European rules, but because of our respect for the Pensions Act 1995 introduced by the then Conservative government.

It would clearly be unfair if the savings credit were payable to people aged 60 to 64. Men and women would have different outcomes simply because of the unequal nature of the existing state help that they receive. As the noble Lord, Lord Hodgson, identified, depending on the exact circumstances—which could be extremely quirky and extremely perverse—a man could receive either more or less savings credit, in quite unpredictable ways, than a woman in the same situation. That would be unfair. Consequently, as I said, we decided to make the savings credit available from 65.

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If we were instead to do as the noble Baroness, Lady Barker, suggests in Amendment No. 1 and pay the credit at 60, the provision would have to reward the basic state pension, although that is not paid to men until 65. The noble Baroness therefore asks whether we could introduce a version of deeming and reward the additional pension provision that people have made. As I said, that would unfairly reward those who had not contributed to the basic state pension above those who had contributed throughout their working lives.

I gave a lengthy example, which has been quoted back to me. However, as the noble Lord, Lord Hodgson identified, deeming people to have a full basic state pension could lead to situations in which people who have saved more end up worse off than people who have saved less. Equally, as I said in Committee, there are real difficulties about SERPS. Equally, because they are more likely to be in work, and unlike women, men can expect to continue building up provision for their retirement until 65.

As I said, the issue is difficult not only because women have a different retirement age from that for men, but because we are gradually bringing the retirement age for women up to that for men. I could speak for 20 minutes on the issue. All I shall say is that we cannot have a savings element of pension credit that does not rest on the fulcrum of a retirement age of 65—except by means of deemings, for example, which are not only unfair but would be horrendously expensive, to the tune of billions of pounds. That cannot be right.

We are saying that, when people are poor, we shall treat them equally at 60. However, when we are rewarding savings, based on the fulcrum point of the retirement age of 65, we shall treat everyone the same. It may not be a perfect solution, but I believe that it is the optimum one.

Although I could speak to the issue at considerable length, I am sure that your Lordships do not wish me to rehash our discussion in Committee. I therefore ask your Lordships to withdraw or not press the amendments in this group. Nothing that has been said today or in Committee has persuaded me that, despite its imperfections, there is a better way forward than the solution we have arrived at. So far as I can see, our solution is the best way forward without treating men and women unfairly on the basis of gender, treating individual men and women unfairly, or landing all taxpayers with a horrendous bill arising from deeming men to have taken a retirement pension that they have not yet earned.

The Government cannot move on the issue. Nor—given the concept of the pension savings credit—do I think that we should. I therefore ask the noble Baroness, Lady Barker, to withdraw Amendment No. 1.

Baroness Barker: My Lords, I thank the noble Baroness for her customary full answer on the subject. I am not terribly surprised at her reaction. However, I return to the fact that a woman aged 63 and a woman aged 67 may have the same income but under this

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scheme will end up with entirely different provision. They may not have done anything different throughout their lives in terms of saving. The only thing is that one will have reached the retirement age for men. I go back to the point that I made in Committee. When we are dealing with the details of these Bills it is sometimes easy to move away from their broad thrust. The broad thrust of the Bill is to try to encourage people to save for their retirement. I cannot see how healthy, fairly active women in their late fifties and early sixties faced with this proposition could have any inducement to save as opposed to spending. There is an inherent flaw in what the Government are trying to do. Having said that, I rest my case at this point. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 [Guarantee credit]:

Baroness Greengross moved Amendment No. 2:

    Page 2, line 28, leave out subsection (6).

The noble Baroness said: My Lords, Amendment No. 2 seeks to delete the clause that gives the Secretary of State the power to reduce the level of the standard minimum guarantee in certain circumstances. The Explanatory Notes state that this power is intended to be used when the claimant or his or her partner has been in hospital for six weeks. I understand that there may be other circumstances when the power will also be used, but my intention in putting forward the amendment is to continue the important debate that we started to have in Committee on hospital downratings.

As noble Lords will be aware, the issue of hospital downratings has received considerable attention recently. I raised the issue as a Starred Question in October following Age Concern's report on the subject. Since then there has been much media interest and parliamentary support for change—an Early Day Motion in the other place has 175 signatures with support from all sides of the House. There is also strong support for reform from a range of organisations including Age Concern, the National Association of Citizens Advice Bureaux, the British Medical Association and the Royal College of Nursing.

In Committee the Minister referred to the need to prevent double provision, as no doubt all Ministers have done for the past 54 years. However, as I said at earlier stages of the Bill, the situation of older people in hospital today is very different from that in 1948. Indeed, that situation was a major spur to the development in this country of the specialism of geriatric medicine in which the UK became the acknowledged world leader. Today very few people "live" permanently in hospital or spend a long spell there when they could be more sensibly—as we know today—and appropriately cared for at home or in a care home. As we all know, most geriatric wards have quite rightly long gone. I would therefore assume that if someone is in hospital for more than six weeks now he or she is there because they are extremely ill. Alternatively, I wonder whether some of the older

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people suffering cuts to their state pension are only in hospital for more than six weeks because they are waiting for a placement in a care home or for community support to be put in place to enable them to return home. Does the noble Baroness have those figures?

Nowadays most pensioners have a home to maintain. Bills such as insurance, telephone rental, standing charges, maintenance, TV rental and licence fees do not stop. Families are more dispersed so there may not be someone round the corner to keep an eye on things or to look after a pet. Instead, people may need to pay someone to do those jobs or at least to cover their transport costs. Couples face costs such as taxis to visit or car parking charges which hospital visitors in 1948 would not have thought of having to meet.

However, in addition to my concern about the costs that people face is the worry and distress caused by the administration of hospital deductions. Age Concern's briefing refers to a woman who left hospital against medical advice because she did not want to be in hospital for six weeks having seen the problems a fellow patient had experienced when her pension book had not been returned during a three month stay in hospital. NACAB has also produced a briefing giving examples of administrative problems faced by many people. When people are ill we should not expect them to understand how complicated benefit systems work and deal with the bureaucracy, to say nothing of the delays and poor administration that unfortunately they sometimes have to face.

In Committee I raised the issue of the effect of a stay in hospital on the assessed income period. I thank the noble Baroness for her letter on that issue and the reassurance that a stay in hospital will not affect the duration of the period unless one member of a couple is in hospital for 52 weeks. I welcome that but it would be far simpler if the sensible rules that will mean people do not need to report changes in retirement income were extended so that admission to hospital was another change in circumstance that did not affect the level of payments and therefore did not need to be reported.

As the House will know, I have a later amendment on this subject. I should like to see much closer integration between tax and benefits systems. If a pensioner does not need to tell the Inland Revenue that he or she is in hospital, why should they need to inform the Department for Work and Pensions? I fully support the Government's aim of producing a less intrusive and less bureaucratic system. Removing, or at least reforming, hospital downrating rules would help to achieve that aim. I remind your Lordships that this rule has been in place since 1948, as I said before, and has largely been unreformed since then, despite being under almost permanent review. I know that the Minister has referred to read-across with local authority systems and that there are issues about the rules for other benefits, but I believe that there is time for these areas to be fully examined.

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I hope that the Minister will be able to tell the House that she is giving serious consideration to abolishing the out-of-date and unfair six week downrating rule. At the very least I hope that she will accept in principle that the rule needs to be reformed and that there will be a genuine review of the current system. I beg to move.

3.45 p.m.

Lord Higgins: My Lords, I wish to speak to Amendments Nos. 13 and 14 as well as to Amendment No. 2 moved by the noble Baroness, Lady Greengross. The noble Baroness has immense experience and expertise in this area and we must take due account of what she says. It seems to me that there are essentially three issues at stake here. First, the question of principle goes right back to the origin of the social security system; namely, that there should not be duplicate payment of benefits. Therefore, if provision is made under one benefit, it should not also be made under a second benefit. Secondly, there are problems as regards the amount of the deduction or downrating. Thirdly, there are problems when a patient is discharged with regard to overpayments being recovered and payment of the original amount to which the patient was entitled being resumed.

I shall discuss those issues in turn. I do not dispute the point of principle which is well established and was reinforced by the Select Committee in another place which reported on the matter some time ago. But having said that, the time has come to reappraise the issue. Apparently, at any one time about 30,000 people have their benefits downrated. I think I am right in saying that when we discussed the matter at an earlier stage the Minister said that the cost of changing the provision would be some £60 million. That may be the theoretical cost, but what is the actual cost to the extent either that overpayments are not recovered or the cost to patients in the sense that there is a delay in resuming their benefits and they never fully catch up? If we are to consider the importance of the point of principle, we need to consider it in relation to possible costs. I hope that the Minister will help us with that task.

As is often the case with work and pensions issues, it is very clear that this matter is of unbelievable complexity. If I were asked to explain which benefits were downrated and which were not, I would have the greatest trouble doing so. It is not surprising that those who suddenly find themselves in hospital and are told that their benefits will be downrated have some difficulty understanding that.

That brings us to the question of how much the deductions will be. In particular, what research has been done on that issue? Those in various charities, and so on, who are concerned with this problem have produced a list of items that remain as ongoing costs even when the patient is in hospital. They include rent, water rates, fuel, telephone rental, insurance, TV licence and rental services, warden charges, maintenance bills, car tax and insurance, other bills, and so on. In addition, some costs increase when a

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patient is in hospital—for example, the cost of having someone to look after a pet. We need an up-to-date appraisal.

One of my colleagues in the other place asked staff in the House of Commons Library to try to establish what research had been carried out on the matter. The Library was not been able to find any such research. This is the sort of issue that the noble Earl, Lord Russell, typically raises in this House. Apparently, no research has been done. However, the Library consulted officials in the department, who, I understand, were also unaware of any research, but who referred to the 1949 report, which made certain assumptions about costs. As the Minister rightly pointed out, things have rather changed since 1949.

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