Clause 3
11:30 am
Jeremy Browne (Taunton, Liberal Democrat)
I beg to move amendment 4, in clause 3, page 2, line 17, leave out paragraph (b).
This is a simple, clarifying amendment. Clause 3 (1)(b) says that
“the person has a connection with the United Kingdom of a kind prescribed by regulations.”
Unless I have not fully understood the nature of those regulations, I am slightly uncomfortable with the vagueness of the phrase, “a connection with the United Kingdom”. I have connection with all kinds of countries without necessarily expecting to be eligible for financial support from them. Subsection (2) lists as specific criteria
“income support; employment and support allowance; jobseeker’s allowance”
and so on. There are seven different criteria of eligibility. If one were eligible under one or more of those seven criteria, one would imagine that one also had a connection with the UK. After all, one does not qualify for JSA in the UK if one has no connection with this country. Otherwise, there would be billions of people getting UK JSA. The point I seek to draw out in this amendment stems from the fact that I do not understand the need to specify the connection with the UK when it is implicit in the nature of the list of entitlements.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
The amendment would remove the requirement that a person must have that connection with the UK to be eligible for the saving gateway account. As a result, any person entitled to a qualifying benefit or tax credits would be eligible. A person may, in certain circumstances, continue to be entitled to certain qualifying benefits and tax credits, even though they no longer live in the UK, provided they still satisfy all the other conditions for entitlement. While there are good reasons for them to be able to continue to claim their benefit or tax credit when they no longer live or work in the UK, we do not believe that that is the case for the saving gateway account. The connection with the UK that individuals need to be eligible for the saving gateway account will be set out in regulations. The relevant draft regulations have been published and I hope that they will be available shortly, if that is not already the case.
Very broadly, those who live or work in the UK, as well as being entitled to a qualifying benefit or tax credit, will be able to open a saving gateway account. That will also include Crown servants posted abroad and their partners, and people who are ordinarily resident in the UK but are temporarily absent. That is one reason why the legislation is phrased in that way. It will exclude, however, people claiming incapacity benefit, severe disablement allowance or contribution-based employment and support allowance who move out of the UK permanently, although they may still be able to claim the underlying benefit. It will also exclude people who are not ordinarily resident in the UK but who would otherwise be eligible for the saving gateway through a joint claim to one of the qualifying benefits or tax credits such as child tax credit.
I appreciate that this might be slightly complicated, but the key point is that that presents no problem for the vast majority of people who are ordinarily resident in the United Kingdom. We are trying to introduce a system that is as simple as possible. We think that Crown servants posted abroad should be entitled if they qualify, as should people who are ordinarily resident here but who are temporarily absent, perhaps because they are working or have activities abroad that take them there for a period of time. We do not think that people who are not ordinarily resident in the United Kingdom should be able to open a saving gateway account. That does not seem to us to be a very targeted use of taxpayers’ money. I hope that that clarifies the points that have emerged. The regulations, which I am sure we will consider in due course, explain this in more detail, and no doubt we will return to them later.
John Bercow (Buckingham, Conservative)
Order. Just in case any Member is not aware and in the light of the point of order raised by the hon. Member for Fareham, copies of those draft regulations are now available in the Room. Connection with the UK is addressed on page 5.
Jeremy Browne (Taunton, Liberal Democrat)
I am grateful to be made aware of that, Mr. Bercow. I do not doubt that it is possible to come up with a whole list of criteria and regulations which satisfy the drafters in the Minister’s Department. The concern often expressed is that it is very difficult for members of the public to understand who is, or is not, eligible for certain entitlements, and why they are not eligible when someone they know who appears to be in similar circumstance is eligible. This is typical work for an MP, both in their surgeries and in correspondence. It is strange to have a list of criteria, one or more item of which has to be satisfied, then come up with a separate category which is defined in regulation by another list of criteria.
This may be for the DWP rather than the Treasury, but quite a few people would find it strange that there are people claiming benefits who are essentially receiving money directly from the UK Government despite having no connection with the United Kingdom of a type laid out in the regulations. I think that most people would feel that if someone had no connection with the UK they should not be receiving the benefits listed in subsection (2). There may be co-ordinating criteria explaining why it is so much easier to get benefits than it is to open one of the new saving gateway accounts and why our taxes are being spent on people who have no connection whatsoever with the UK, but I sense the Economic Secretary is not keen to add the type of clarity that I would wish to see. On that basis, having made my point, I beg to ask leave to withdraw the amendment.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I beg to move amendment 26, in clause 3, page 2, line 21, at beginning insert ‘income-based’.
John Bercow (Buckingham, Conservative)
With this it will be convenient to discuss amendment 27, in clause 3, page 2, line 22, at beginning insert ‘income-based’.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
These amendments relate to entitlement, which was alluded to in an earlier debate. They would insert the phrase “income-based” in subsection (2)(b) and (c). At the moment, employment and support allowance and jobseeker’s allowance can be claimed on either an income or on a contributions basis. We want to make sure—and the Economic Secretary made this point in his response to the amendment tabled by the hon. Member for Taunton—that the resources are targeted well and carefully on the demographic that we want to develop a saving habit. The hon. Member for South Thanet talked about MPs losing their seats in the next election and being able to claim contributions-based JSA, open a saving gateway account, then moving out. Perhaps the House authorities might take that into account and put it in a leaver’s pack for MPs at the next election. It is an example of people who could claim the contributions-based JSA, see the opportunity to put £600 into an account, and get £300 back from the Government. That is a good rate of return, and probably reflects a dead-weight cost. I think the second pilot was meant to reduce the income threshold so that people who were already saving or were in a position to save were not diverting savings from a different account to benefit from the 50 p in the pound match. The amendment seeks to narrow down eligibility to those who are claiming income-based JSA or employment and support allowance.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I can sense that both hon. Members are desperate to intervene. I will give way to the hon. Member for Taunton first and then to the hon. Member for South Thanet.
Jeremy Browne (Taunton, Liberal Democrat)
I am grateful to the hon. Gentleman for giving way to me first. I understand his desire to try to reduce dead-weight costs, and I share that instinct. However, I am always concerned when the complication of any scheme acts as a disincentive preventing people from participating in it. In particular—obviously, I am making a generalisation—I am talking about people who are on low incomes and may not necessarily have saved in the past or be familiar with the mechanisms for saving. Is it not a worthwhile consideration, even it may slightly increase dead-weight costs, to make sure that people are not disincentivised to save because they find the systems intimidatingly complicated?
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I am not sure that I agree that that point applies to the design of the system, because we have already introduced some complexity, through the reference to whether someone is ordinarily resident in the UK. I do not think that is a huge increase in complexity, but I do think there is a need—and I would be grateful for the Minister’s comments on this, and it is partly why I tabled this amendment—to understand the demographics of the group claiming JSA on the basis of national insurance contributions. One of the points made in the evidence session last week by Teresa Perchard of the CAB, and by Brian Pomeroy as well, was that a high proportion of people who claim contributions-based JSA are on low incomes. They could, by virtue of the eligibility criteria, help to develop a savings culture through their entitlement to open a saving gateway account.
If the Minister says, “Yes, there is a high proportion of people in that demographic group claiming contributions-based JSA who are on low incomes, and it is right to enable them to acquire a savings gateway account”, I am quite content with that explanation. I am just probing the rationale for including contributions-based JSA, which would potentially allow quite a large number of people to open a saving gateway account even though they are outside the target demographic for this initiative.
Stephen Ladyman (South Thanet, Labour)
I cannot recollect whether the hon. Gentleman was in the Chamber yesterday for DWP questions, but it was a recurrent theme among Conservative Members that there is insufficient difference between the benefits people get, having paid contributions all their lives, and the benefits they get if they had not paid any contributions when they became unemployed. It seems ironic that, if that is the view of the Conservative party, he should suggest that we should narrow again the difference between the benefits that people receive, whether they are claiming income-based JSA or contribution-based JSA. Not to make this benefit available to those who have made contributions would be very unpopular among Conservative Members.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
The hon. Gentleman makes an interesting point. It is certainly a point that has been raised with me by my constituents. I received a letter last week from someone who had paid national insurance contributions all their life. When they claimed JSA at £60 a week, because they were single, they wondered why they had bothered to pay for that benefit, and wondered what they got in return for their contributions. The hon. Gentleman makes a very important point, but we are trying to ensure that this initiative is well targeted. We should think about the potential leakage to people who are already saving, and we should ensure that our approach provides value for money. I tabled amendments 26 and 27, not simply to press them to a vote, but to obtain clarification from the Government about the impact of extending the measure to people who claim JSA on the basis of their contributions. It is a big part of the teasing-out process, which is important for scrutiny in the House.
One may argue that capping the contribution at £25 a month might reduce the extent to which the measure could be taken advantage of by people who have savings in other sources and who want to switch from an ISA or an instant-access savings account to a saving gateway account. Perhaps the Government’s objective is to try and broaden the eligibility criteria as far as possible, within reasonable boundaries, while preventing—I do not like the word “abuse”—people from taking advantage of it, by limiting the amount of money that they can pay into the account. That would be reasonable.
These are probing amendments. What will the impact be of enabling people who qualify for JSA based on their national insurance contributions to take up the saving gateway account? Are people who claim contributions-based JSA in the target demographic for the saving gateway account, as suggested in the evidence session last Tuesday? Those people do not have a history of saving and this would be a good way for them to acquire that savings culture.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I accept the probing nature of amendments 26 and 27, and I am happy to put the Government’s thinking on record. To summarise, we think that most people on contributory JSA would be moving from one low-income job to another. We do not have incredibly good data on that, but it is our strong view that that is the case. Given the advantages of passporting from qualifying benefits and tax credits in the Bill, it is the appropriate way to go. I shall provide the hon. Gentleman with a little more detail because, as he is aware, the amendments would restrict entitlement to individuals who are on the income-based forms of JSA and ESA.
I understand the points that the hon. Member for Fareham has made. Some contribution-based JSA and ESA claimants might have relatively high levels of savings, but we do not believe that it is the case. In any system of passporting, there are some rough edges. However, the advantages of passporting outweigh the disadvantages, particularly the fact that some people with relatively high savings might qualify. The fact that people will not be required to fill out a form or complete a means test to prove that they are eligible for a saving gateway account is an important part of the programme. As the hon. Gentleman rightly says, if we are talking about a small number of people who have relatively high levels of savings, the sort of incentives that the saving gateway will provide would not have a great attraction to them.
I would like to give a little more detail, starting with contribution-based JSA. Sharon Collard, of the personal finance research centre at the university of Bristol, told the Committee at last week’s evidence session that
“people moving off...JSA are unlikely to be moving into highly paid employment. We know that that is the case.”——[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 24, Q48.]
I would like to have better information on the numbers involved, but it does not seem to be available. We would be concerned that if contribution-based JSA were not a qualifying benefit, people who move in and out of work frequently and do not therefore move on to income-based JSA—we have good evidence about such people—would not be eligible for the saving gateway account. In October last year, the average time spent on JSA was 3.7 months, but most people will not move from contribution-based JSA to income-based JSA until they have been on JSA for about six months.
Inclusion of contribution-based JSA was supported by Teresa Perchard of Citizens Advice in last week’s evidence session. On the question of whether both income-based and contribution-based JSA should be qualifying benefits, she said:
“Sticking with broad availability for both groups is appropriate”.——[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 7, Q16.]
All the research and evidence points to that being the appropriate thing to do. Similar arguments apply to contribution-based ESA, so I do not need to rehearse them.
Finally, it is important to remember that many people who are entitled to both JSA and ESA on the basis of their national insurance contributions will meet the income and capital requirements for the income-based benefits. The amendment would penalise those people on the basis of the national insurance contributions that they had paid. That is another reason why the hon. Gentleman will want to withdraw the amendment, although he is right to raise the problem of potential dead-weight costs. I hope that my explanations have reassured him that while the policy has some rough edges it is a sensible way to proceed, compared with significant means-testing for all applicants.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I thank the Economic Secretary for his response. When looking at a scheme one has to be pragmatic. I am sure that at some point the Opposition will point out that footballers or former Cabinet Ministers have set up savings gateway accounts. There will be a rich seam of cheap headlines, and hon. Members will perhaps want to participate in their generation. A compromise has to be struck. I accept the Economic Secretary’s point that the vast majority of people claiming contribution-based JSA will be in the target demographic. Some will fall outside it, but compromises need to be made when looking at implementing the proposals. With the Economic Secretary’s reassurance in mind, I beg to ask leave to withdraw the amendment.
Jeremy Browne (Taunton, Liberal Democrat)
I beg to move amendment 5, in clause 3, page 2, line 28, at end insert—
‘(h) carers allowance;
(i) housing benefit;
(j) council tax benefit.’.
John Bercow (Buckingham, Conservative)
With this it will be convenient to discuss amendment 39, in clause 3, page 2, line 28, at end insert—
‘(h) Carers Allowance.’.
Jeremy Browne (Taunton, Liberal Democrat)
Amendment 5 is a probing amendment in support of campaigns by the RNIB and Carers UK among others to include additional income replacement benefits in the list of qualifying benefits in subsection (2). That list contains seven benefits and tax credits that confer eligibility. These organisations have suggested that the list should include carer’s allowance, housing benefit and council tax benefit. The allowances and tax credits in the list are not all of the same type: some are means-tested and some are not; some apply to income of less than £16,040 a year and some do not. There are no uniform criteria for the seven listed in the Bill, so there is no inherent reason why other forms of benefit or support could not be considered in addition to those seven.
Let me briefly make the case as to why the Minister may wish to consider carer’s benefit in particular. According to a report by Carers UK, 75 per cent. of carers struggle to pay their bills and 54 per cent. of those carers were in debt. This is becoming an even more prevalent issue—ironically, given that society as a whole is becoming healthier— because people are having to look after relatives who are ill, for one reason or another. If carer’s allowance were included in the list, 290,000 more people would be eligible for the saving gateway. Many of those people—although I admit not all—would be precisely the types of people that the Minister may be keenest to help and encourage through this legislation. However, if this amendment were not accepted, they would not be eligible for that assistance and encouragement. It is on that basis that I table this amendment.
Stephen Ladyman (South Thanet, Labour)
Amendment 39 is in my name, and it is essentially exactly the same as amendment 5. It is probably appropriate at this point for me to reassure my hon. Friend the Member for Waveney, who is the Government Whip on this Bill, that the amendments I have tabled for today are of a probing nature. I do not intend to damage my impeccable record of support for the Government any time soon, although I have a great deal of sympathy for this particular amendment. However, if my hon. Friend the Economic Secretary does not come up with a good explanation as to why carer’s allowance is not included, I suspect that this is something to which the House might want to return on Report.
At one point, I had the honour of being the Minister responsible for carers, so I am aware of their incredible work. It has been estimated that this work has a value to the country of more than £70 billion a year, which is the cost that would be imposed on us if we had to provide this care professionally. I am also aware that the Prime Minister is evangelistic about the need to encourage people to care and in his wish for the Government to support carers, so he would want to see us doing everything possible to make life better for them.
There are potentially two arguments that the Economic Secretary might muster for not including carer’s allowance. The first is that it is a poor way of targeting resources—some carers might not be part of our target audience for such savings accounts. However, if the Economic Secretary musters that argument, he has to return to the amendments that the hon. Member for Fareham has tabled, relating to why we are not limiting those people on jobseeker’s allowance to income-based jobseeker’s allowance, rather than making it contribution-based. You cannot say in one part of the Bill that we have to target a benefit tightly, and in another part say that we want to simplify a benefit and not target it tightly. I do not accept the argument that it is about targeting.
The second potential argument that my hon. Friend might muster is that an awful lot of the people who would be entitled because they are carers will be entitled to open one of these savings accounts because they are claiming one of the other eligible benefits. If that is the case and there would not be many of them in addition, it will not cost much to include them, so we might as well do the right thing by carers.
I encourage my hon. Friend—not just today, when he responds, but in the weeks to come before Report—to think very carefully about the benefits of including carer’s allowance in this, including sending out a signal that we will never treat carers as being in the second tier of our thoughts. They are people whom we always want to encourage, whose value we recognise and who we believe are entitled to a bit of extra help. If this is that bit of extra help that we can offer on this occasion, why not? Let us include them in it. I ask my hon. Friend to reflect on that in the weeks ahead.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I appreciate the probing manner in which both the hon. Member for Taunton and my hon. Friend the Member for South Thanet have dealt with the amendments.
This Government have done more for carers than any previous Government, much of which was done by my hon. Friend when he was the Minister with responsibility for carers. I would continue to stress that carers are in the first tier of our minds when it comes to taking action to provide them with support. They were too often forgotten by previous Governments and I am glad that they have not been by this one.
I agree that either amendment would make eligible more people from our target group, which, let us be clear, is working-age people on lower incomes. When framing legislation, we have to look at how we can best target it while accepting that if we are trying to do something simple and broad then there will be some rough edges. When we are talking about people on contributory JSA for instance, as we were previously, we believe that the vast bulk will be moving from one low-income job to another. It is right, therefore, that contributory JSA is included rather than excluded.
It is important, however, to recognise that many working-age, lower-income recipients of one or more of the benefits in amendments 5 and 39, may already be eligible for the saving gateway through entitlement to another qualifying benefit or tax credit. Adding any of those benefits to the list in clause 3(2) would also make eligible people from outside our target group of working-age people on lower incomes, either because they are not working-age or because they have relatively high incomes.
Stephen Ladyman (South Thanet, Labour)
My understanding is that carer’s allowance is an income replacement benefit. One of the most common complaints that I receive about it as a Member of Parliament is that it is lost upon reaching retirement age because one cannot have two income replacement benefits. By definition, people who are receiving carer’s allowance are of working age and have given up income. It seems to me that they absolutely fall into the category that my hon. Friend is trying to target.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
Let me go on to explain the situation. First, carers are not excluded from the saving gateway. Those who are in low-income households will be able to claim income support, including the carer’s premium, in addition to carer’s allowance. There is also a carer’s premium in JSA, another qualifying benefit. People who are entitled to either income support or JSA will, as hon. Members will know, be eligible for the saving gateway. Overall, therefore, we expect around 225,000 recipients of carer’s allowance to be eligible for the saving gateway.
Stephen Ladyman (South Thanet, Labour)
I cannot help thinking that many of the people on the list that my hon. Friend has just read out will actually be the person being cared for and not the carer. Someone who has given up their job in order to care for somebody—possibly not in the same household, but still as their primary carer—would be excluded from the saving gateway on that basis. It is clear from my hon. Friend’s tone that he does not want to exclude those kinds of people from it, but they would be on that basis.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
As I have said, I do not have a detailed breakdown of the figures, within that total, of those who might be carers or being cared for. Certainly, we believe that about 225,000 recipients of carer’s allowance will be eligible for the saving gateway. Making carer’s allowance a qualifying benefit would bring many people into eligibility who we believe are outside our target group. Honourable Members will be aware that carer’s allowance is available to people who care for a severely disabled person and have earnings lower than £95 per week, who, by any definition, would qualify as people on low incomes.
Therefore, while all recipients of carer’s allowance will have low individual earnings, it is not limited to those in low-income households. Extending the scheme to all carers could bring into eligibility some people with higher household incomes. It would also bring many people who are not working age into the scheme. Of some 875,000 people entitled to carer’s allowance, about 500,000 are of working age, leaving 375,000 who are not. We have been very clear that the saving gateway is for working-age people on low incomes.
Of course, none of this means that we do not recognise and support the important role that carers play in our society. I want to be very clear that many carers will be eligible for the saving gateway, particularly through income support and jobseeker’s allowance. Our view is that making carer’s allowance itself a qualifying benefit would not be well-targeted, but I appreciate the points made by my hon. Friend.
George Mudie (Leeds East, Labour)
This is just a thought on what the Economic Secretary said. Is it beyond the wit of the Department to put something in the Bill—I do not know if it is elsewhere in the Bill, but it could be inserted—that excludes carers who are not of working age? If that is a specific objection, it can be easily dealt with via a minor amendment.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I will certainly undertake to reflect on that point. Some 375,000 are on carer’s allowance who are not of working age, and 225,000 are on carer’s allowance who would qualify for a saving gateway account because of their receipt of other benefits, so this is an appropriate way of targeting.
George Mudie (Leeds East, Labour)
I would not wish my hon. Friend simply to consider that isolated point, but rather to consider the whole amendment. I do not think that he can do one without doing the other. I am sad that my hon. Friend the Member for South Thanet introduced it as a probing amendment. I think that there will be a widespread feeling in Committee that this is an important amendment for those who save the Government enormous amounts of money by caring, and it deserves consideration in its entirety, not just on the age-related question.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I will certainly undertake to go away and reflect further on the points that have been made. As a Government, we have been and continue to be very supportive of carers. However, we have to be clear about what we are trying to achieve through the Bill. It is to encourage saving among working-age people on low incomes, and a significant number of carers are not in that category because they are not of working age.
Stephen Ladyman (South Thanet, Labour)
I would be grateful if my hon. Friend could help us before Report by writing to Committee members with a breakdown of the people who he believes claim carer’s allowance, but who are not of working age. I do not see how anyone can claim an income replacement benefit if they are not of working age. The only people to whom that might apply would be young carers or people who have passed retirement age but are taking carer’s allowance rather than their pension. I would have thought that we would want to encourage young carers to save, but I do not think that they are eligible for carer’s allowance, and I cannot imagine that many people receive carer’s allowance rather than pension. I do not know where the figure of 375,000 comes from, and I would be grateful if my hon. Friend could provide us with details of that before Report. As I said earlier, I suspect that we will return to this discussion.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I will see whether I can do that. It might be possible to discuss this matter under a later clause. If not, I will happily write to the Committee to make available any information we have.
George Mudie (Leeds East, Labour)
The Minister is opposing amendment 39 on the basis that some carers may have high incomes, but in the regulations he has taken care to put a limit of £16,000 on applicants who receive working tax credit and child tax credit. He has put that limit on working tax credit, so why is he not prepared to look at the same mechanism so that it is fair for carers who receive below £16,000, £10,000 or even £8,000?
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
It is possible to impose such limits without having a means-testing regime because of the income thresholds. The current Government view is that some carers will be able to open saving gateway accounts because they receive another qualifying benefit. We expect that figure to be about 225,000. However, we are proposing that two categories of carer—those in high income households and those who are not of working age—should not be eligible for saving gateway accounts. I will undertake to provide figures because further clarification is needed in those areas.
Similar arguments apply for the insertion of housing benefit and council tax benefit under amendment 5, which was tabled by the hon. Member for Taunton. Many people who are eligible for those benefits are outside our target group. Of the 5 million families in receipt of council tax benefit, just 50 per cent. are of working age. Of the 4 million who are eligible for housing benefit, the figure is 63 per cent.
Some recipients of those benefits may also be on relatively high incomes depending on the rent and council tax that they pay. If those benefits were included in the Bill, large numbers of people from outside the intended target group would be eligible. As with carer’s allowance, many recipients of housing benefit and council tax benefit who are in the intended target group will be eligible through another qualifying benefit. We do not believe that including those benefits would target people well.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
Will the Minister explain at what income somebody ceases to be eligible for housing benefit or council tax benefit? It is important to know where the parameters are and who we are excluding by excluding those benefits.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I do not have the figures immediately to hand. If I cannot make them available during the debate, I will happily write to the Committee about those areas. My key point is that the amendments are not well targeted. In the case of housing benefit, half of recipients are not of working age. We are clear about the fact that the intention of saving gateway is to encourage the saving habit among people who are of working age and on low incomes. It is not possible for us to support the amendments.
None of this means that we do not recognise and support the role that carers play in our society, or recognise the importance of council tax benefit and housing benefit for those who require it. Many people are eligible for those benefits; if they have another qualifying benefit, we will be able to secure them. However, it remains our view that, with housing benefit and council tax benefit in particular, the proposal is not well targeted; it is not what we want to achieve in terms of the Bill’s objectives. I appreciate the probing nature of the amendment, but I invite the hon. Gentleman to withdraw it.
Jeremy Browne (Taunton, Liberal Democrat)
That was extremely useful, and I appreciate the contributions made by other Members. However, I still do not quite understand the point. The Economic Secretary was on the thinnest ice when he said that most of the people who qualify for carer’s benefit would probably be scooped up by other criteria in the Bill, in which case not many people would be disadvantaged. That seems to reinforce the argument for including them on the basis that the cost is presumably negligible, because most of them already qualify by other means. It would feel even more iniquitous to those who do not qualify by other means, when they see that they are in a relatively small minority and others who appear to be in similar circumstances to them are qualifying.
There is a reasonable point about how we treat carers and the impression that is given to them. I do not know whether the Economic Secretary has made any assumption; my impression is that many carers would not choose to open one of these accounts. They might feel that there were other things that they wished to do with their limited income than put it into such a savings scheme. Even if they did, they might not put the full amount of money to which they are entitled into the scheme.
I imagine that the cost to the Government of including those carers who do not qualify by other criteria and who would be inclined to use the scheme to its maximum is fairly small—I am guessing: if the Economic Secretary has any estimate, it would be interesting for the Committee to hear it. The number of people involved is, I think, fairly small, but they would regard that as a gesture of good will. Although I do not intend to press the amendment to a vote, I think the interest that has been expressed in it by the Liberal Democrats and by Labour members of the Committee is well intentioned and worthy of the Economic Secretary’s reflection. I beg to ask leave to withdraw the amendment.
Jeremy Browne (Taunton, Liberal Democrat)
I beg to move amendment 6, in clause 3, page 2, line 31, at end insert—
‘(3A) Each person entitled to a benefit or tax credit with another person is eligible to hold a Saving Gateway Account regardless of whether the other person holds an account or not.’.
This is a probing amendment which seeks some clarity. It does not need to detain the Committee for long. The Bill states:
“a person is ‘entitled’ to a benefit or tax credit whether the person is entitled to the benefit or tax credit alone or with another person.”
However, the wording does not make it clear whether two people who together qualify for a benefit or tax credit would be eligible to do so independently of each other. I seek the Government’s assurance that both individuals would be allowed to open their own separate saving gateway accounts if they both collectively met the criteria for qualification. At present, there seems a lack of clarity between the criteria for eligibility and whether two individuals can be assessed separately and could, therefore, both open an account.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
The purpose of the amendment appears to be to ensure that, with a joint claim to one of the qualifying benefits and tax credits, both parties are eligible for the saving gateway. That is already the effect of clause 3(3), which says that, for the purposes of the Bill,
“a person is entitled to a benefit or tax credit whether the person is entitled to the benefit or tax credit alone or with another person.”
Our view is that that is straightforward and really puts the matter beyond doubt. Therefore, we do not believe that the amendment is necessary. Indeed, the effect of the amendment would be different because it would not limit benefit or tax credit to the qualifying benefits and tax credits listed in clause 3(2). For tax credits, there is no limit in relation to the income threshold set out in regulations under clause 3(4). There is also no limit in relation to connection with the UK. So, the amendment is defective and I urge hon. Members to resist it. If it is probing, I am happy to confirm that both individuals will be entitled to take out saving gateway accounts.
Mr. Mudierose—
Jeremy Browne (Taunton, Liberal Democrat)
I am grateful to the Minister for those comments. I beg to ask leave to withdraw my amendment.
John Bercow (Buckingham, Conservative)
The hon. Member for Leeds, East wanted to contribute, but I am afraid that he needed to catch my eye a bit earlier. I am sure that he will find other ways to highlight his views and concerns.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I beg to move amendment 24, in clause 3, page 2, line 34, after ‘credit’, insert
‘where their income is below the threshold for child tax credit and’.
John Bercow (Buckingham, Conservative)
With this it will be convenient to discuss amendment 25, in clause 3, page 2, line 36, leave out sub-paragraph (a).
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
Amendments 24 and 25 would include in the Bill all the threshold points at which people cease to become eligible for saving gateway accounts if they claim either child tax credit or working tax credit. It relates back in a different way to the debate about the carer’s allowance, housing benefit and council tax benefit in that in relation to the saving gateway account there has been a thought process in Ministers’ minds: do we go down a route that is purely about means testing, whereby people submit an application form and if they meet the criteria they can open a saving gateway account? We know that means testing can be expensive, complicated and prone to error. Alternatively, do we use the existing architecture of the benefits and tax system to prove eligibility, so that, in effect, a person is passported through to a saving gateway account if they qualify for a particular benefit or tax credit?
I can see that that thinking is probably present in some of the Minister’s responses on carer’s allowance and is probably part of the thought process used in designing the system. It explains why some benefits have been excluded and how Ministers slice and dice the population entitled to receive those benefits.
Clearly, the regulations referred to in clause 3(4) take that a stage further. Families with incomes of up to about £60,000 are eligible to receive tax credits at the top end of the taper. Without the test in regulations set out in subsection (4), people with relatively high incomes—who will, we hope, save anyway through ISAs or other forms of saving—would qualify for the saving gateway account. I can therefore understand why it is important to set a threshold—indeed, the threshold that has been used is the one where people cease to be eligible for full child tax credit and where a taper applies. If that is such a fundamental part of the system’s architecture, I do not understand why it is not in the Bill and why it has been relegated to regulations.
The Minister will say he wants flexibility. If he does, I will understand that, but perhaps he might explain why he wants—
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
The hon. Gentleman should want it as well.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
The Economic Secretary says from a sedentary position that I should want it as well. Perhaps I should, but we will wait for that day to come. Will he explain why the Government need that flexibility and what factors would drive them to vary that threshold up or down? I tabled the amendment to obtain such an explanation. I can see the thinking that goes on in designing the system, but it would help if we understood why the Government believe that that threshold of around £16,000 is correct, why they need flexibility and what might drive them to change their mind about where the threshold kicks in. This is a probing amendment.
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
We set out in the document that we published in December and in the draft regulations that we published ahead of the Bill’s Second Reading the fact that we intend to set an income threshold above which the entitlement to tax credits will not lead to eligibility to the saving gateway. We intend to set it at the same level as the income threshold for child tax credit, which is £15,575 and will rise to £16,040 in the financial year 2009-10. We also intend to ensure that people who have been passported into a maximum award of child tax credit because of their entitlement to another benefit will in turn be passported into eligibility for the saving gateway.
The probing amendment moved by the hon. Member for Fareham would put into the Bill the link between eligibility for the saving gateway and the income threshold for child tax credit. I hope that I can assure the Committee that it is our intention to link those two thresholds, as set out in condition 2 of draft regulation 3(1). That is the appropriate level at which to set the threshold; it is the same as the threshold for receiving a higher Government contribution to a child trust fund and for several other passporting benefits.
We do not intend to depart from that, but there are good reasons for wanting to make the link in secondary rather than primary legislation. In particular, a Government may decide to alter the tax credit system, in which case it might be necessary to set an income threshold purely for saving gateway purposes. Primary legislation would not be an efficient use of parliamentary time. I am not convinced that the Conservative party is particularly keen on child tax credits, so I cannot see why it would want to make that link explicit in the Bill, as the Bill would become defective if a change of policy were desired.
A future Government might simply decide that the two thresholds, which are for different purposes, should be set at different levels. As the Bill stands, that can be done without the need for primary legislation and the regulations will be subjected to the affirmative procedure to provide the appropriate parliamentary scrutiny. That is the appropriate way to do this. I hope that the hon. Gentleman will therefore withdraw his probing amendment.
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I am happy to accept the Economic Secretary’s explanation as to why secondary legislation should be used and what the checks are, but our concern is not so much the principle of the child tax credit as the administration of the system. From the earlier comments about the inefficiencies of the system, I think that Labour Members share some of our concerns about the problems that the administration of the system brings to our constituents. It is difficult to get the level right.
If we are to target these measures where possible on people with a certain income, we need to have that cut-off in place. The Economic Secretary’s comments about being consistent with contributions to child trust funds and with other passported benefits suggest that this is reasonable point at which to draw that line. On the back of that, I beg to ask leave to withdraw the amendment.
George Mudie (Leeds East, Labour)
I wish to raise a point on the spouse’s situation in a household, which we discussed under the previous group of amendments. How will the Economic Secretary indicate eligibility to a spouse in a household where the husband is on income support or jobseeker’s allowance, but the partner or wife is at home not receiving any of the benefits, which would be the straightforward thing to do? I am thinking particularly of Bangladeshi women in my constituency. The mother is often at home for language or cultural reasons or because of children. On the question of language, the publicity that the Economic Secretary will bombard them with might pass them by without much recognition. Is there any intention to write to spouses in such households?
Stephen Ladyman (South Thanet, Labour)
My hon. Friend is making a good point. We all know of households in our constituencies where that would be an issue. Will he suggest that the Economic Secretary consider some advertising with the family allowance? We pay that to the parent with care, so putting the advertisements with that might be a way of getting the information to that member of the household.
George Mudie (Leeds East, Labour)
That is a sensible suggestion that the Economic Secretary will probably add to his list of sensible points that he will make to me. Will such people be sent anything with the eligibility form? For people in a number of households, the first time they will be aware of this scheme is when the form falls on the mat saying that they are eligible to participate in it by virtue of their jobseeker’s allowance or income support. In a low-income household, the lack of that will often mean that the individual assumes that they are not eligible. The only people that I know in low-income households do not make contact with Her Majesty’s Revenue and Customs without due cause. They might leave it at that and not be aware of their eligibility.
In addition to the point made by my hon. Friend the Member for South Thanet, if we do not do anything with the spouse, will there be anything in the literature sent out with the eligibility form to alert the individual that they should tell anyone else in the household who might be eligible for the scheme?
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
My hon. Friend is right to raise concerns about his constituents and to probe me on how the clause will work. When the legislation is on the statute book, we will consider carefully how to market and promote saving gateway accounts to individuals as part of the implementation process. As I said earlier, MPs have a role in doing that directly in their constituencies. There is a broader role for those who offer saving gateway accounts in deciding how to market them, and a role for Government in promoting the principle of the saving gateway.
On the direct question about a spouse who is not working and is at home, my hon. Friend will be aware from the criteria in clause 3 (1) and (2) that the system is based on defining an eligible person who is entitled to one or more of a number of benefits or tax credits and also passes the test of connection to the UK. If there is a claim for one of the qualifying benefits with two claimants, then both sets of details will be on the claim and both will be sent a notice of eligibility. In a lot of the instances that he is probably thinking about, low-income households will be making joint claims. In those circumstances both would automatically be sent a notice of eligibility.
My hon. Friend also raised some broader questions, such as, what if somebody got a notice and someone else did not? In that case, how would they know whether they might have qualified, and might have been missed out? Again, we would want to consider that when looking at how to promote the scheme in future. Notwithstanding the amendments discussed so far and the commitments I have made to reflect, particularly on the point about carers, I believe that we need a scheme that carefully determines eligible persons, and that is what clause 3 does.