Clause 4
Pensions Bill
5:45 pm
Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)
I am sorry for rising belatedly to speak, but I was under the impression that, as there are no amendments, the Minister would introduce the clause. However, let us proceed the other way round, just for fun.
On first blush, one might think that the clause is pretty uncontroversial. Indeed, that might yet prove to be the case. It certainly has no enemies, because nobody has tabled any amendments to it; but does that mean that it is a wholly innocent part of the Bill? There might yet be a torrent of written evidence stacking up somewhere—it has not reached me, but presumably someone would be looking at it—but, as far as I recall, no outside body has taken it upon itself to make representations about the clause to us either. It might therefore be quite easy to write off adult dependency increases as just an historical anomaly—an outdated matter that needs to be tidied up round the edges, as part of the wider reform.
However, there are a few issues that I should like the Minister to deal with in his summing-up. The first is the extent of the savings likely to be made by scrapping ADIs. Figures have been bandied around in supporting documents, but I shall deal with them in more detail in a moment. The second is the extent to which there will be net losers as a result of the proposals and how many there will be.
Again, it is perhaps an indication of the strange status of clause 4 that one must fall back on the excellent Library brief to find out the effect of the provision. I have to say that ADIs have not featured high on my list of interests within the DWP brief until fairly recently. According to the brief, however, a married man on the basic state pension can claim an increase for his wife provided that she does not have earnings or an occupational pension of more than £57.45 a week. That is paid at the same rate as the category B pension, about which we heard so much earlier. A married woman can claim a dependency increase for her husband only if she received an increase in incapacity benefit for him immediately before she qualified for her own pension. It is perhaps not surprising, therefore, that according to the brief, more than 99 per cent. of adult dependency increase recipients are men. That figure is based on DWP statistics.
The White Paper announced that ADIs will be abolished in April 2010. It might help if I quote the reason for that given in the White Paper:
“Our conclusion is that the concept of ‘dependency’ on which the ADI provisions are based has little relevance in today’s society in which partnerships of equals are the norm.”
If I may, I shall come back to that in a moment. Again, as I understand it, all existing entitlements to ADI will be protected up until 2020. On the question of possible losers, as I understand it, the average weekly pension for a person with a category A pension with no dependants was £94.77, but for those with adult dependants it rose to £144.51. In May 2006, 59,000 were in that category—pensions with an ADI—at a cost of £160 million. Some 59 per cent. of recipients are men aged 65 to 69. One begins to see the shape of any likely overall saving in that £160 million figure.
Child dependency is another issue. Any new claimants were effectively shut off as a result of the Tax Credits Act 2002, but existing ones continued to receive increases. Again, in May 2006, 5,300 pensioners received an increase for a dependent child. The average increase was £104.63. The clause would abolish such increases to pensioners caring for children. I have made the point already that new claimants are dealt with under the child tax credits legislation. According to comments in the debate on 6 January 2006, overall savings, as a result of the abolition, will be about£500 million by 2015, and about £1.2 billion by 2020. It will be interesting to hear from the Minister whether those figures have changed in the interim. The Department has estimated that 660,000 people would otherwise have received increases in 2020.
It is interesting that, as the Library briefing points out, this part of the Bill has received so little comment outside this place—in fact, I feel sort of guilty to be the first to add a comment. Perhaps people do not appreciate what is happening, do not understand the way in which it works, or have not done the calculations. I am not in a position to comment. However, there has been intervention by Saga Magazine, which, as we all know, is a powerful voice for the over-50s and offers a very decent rate of insurance for those of us who have passed that magic milestone. Paul Lewis, in the magazine’s guide to pensions reform in August 2006—I am sure that it has been required reading for all members of the Committee—made the point that the scrapping of new claims for the dependency increase will result in some pensioners being worse off than others because of reaching pension age the wrong side of 5 April 2010. That has the potential to be another cliff-edge or steep-incline problem, and it needs to be addressed. One sentence of Mr. Lewis’s piece reads:
“There will be a lot of people who will fall just the wrong side of this line and who will get a much smaller pension than someone in the same circumstances just a few days younger.”
He says “a lot of people”. What is the Minister’s current estimate of that number?
The Government’s position, of which we will hear more in a moment, appears to be that the transitional arrangements will protect people already receiving ADIs up to 10 years from now and that the money saved—it would be interesting to have the net figure—will provide better state pensions, particularly for women. Like the savings made on contracted-out rebates, that is an example of money being ploughed back into the pensions system.
The gender impact document published with the Bill contains some rather delphic comments on the matter. It points out that ADIs will be abolished under the reform proposals and states:
“These increases are less necessary where both members of the couple are likely to be economically active and can also act as a disincentive for women to work up until the State Pension age.”
I have to say that it sounds to me as though the amounts involved are not likely to be sufficient to stop a woman working until pension age if that is what she wants to do.
The regulatory impact assessment states at page 29 that the rationale is
“the principle that the reforms would enable a person to accrue pension entitlement in their own right.”
That is fair enough.
“The abolition of adult dependency increases removes a disincentive for women to continue in work up to at least State Pension age and the Government’s position is that the principle of dependency in the benefit system is outdated.”
That seems a sweeping statement. Yes, as we constantly hear, and no doubt will in the Committee, we have moved on from the days of Beveridge when the man went out to work and the woman stayed at home, brought up the children, looked after elderly relatives and usually never went back into the jobs market. That has changed out of all recognition, but even in the most modern societies there will be some dependency in the system. My hon. Friend the Member for South-West Bedfordshire touched on that point in our previous debate. If the Government hope, by diktat, to scrap the concept of dependency altogether, they are making a mistake.
To summarise, I have raised three broad issues that I wish the Minister to deal with: first, the likely savings arising from the change, which he is apparently relying on to help finance the rest of the pensions reform package; secondly, whether there will be any losers in real terms; and thirdly, whether he accepts that there will be situations in which, through no fault of the individuals involved, dependency still exists and where some people may be part of the group of potential losers that I have mentioned.