Clause 4 - Exclusions

State Pension Credit Bill [Lords] – in a Public Bill Committee at 3:30 pm on 18th April 2002.

Alert me about debates like this

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions) 3:30 pm, 18th April 2002

I beg to move amendment No. 27, in page 3, line 38, at end insert

'and in the event of a difference of opinion between those parties to that couple, then that person with an income profile likely to give rise to the higher amount of pension credit shall be deemed to be the claimant'.

I do not know whether antiquarians who are still on the Labour Benches remember clause four—I hope that they do—but I always feel an almost irresistible urge when I see—

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

It would concern me even more if the hon. Member for Dagenham still believed in it, because his leader does not. If we continued along these lines I think that you, Mr. Griffiths, would feel that we were being tempted. I intended merely to make the jocular remark that whenever I see a clause 4, I feel the urge to amend it.

I have no major conceptual problem with this clause. I am not about to suggest that the red hordes are going to march down Whitehall, or anything like that—indeed, perish the thought, with the present

Government. However, we can, perhaps, leave that topic to another day.

I wish to raise two serious issues that will arise with regard to different amendments. Such issues sometimes arise when one is addressing apparently simple and technical clauses, such as this one. I sometimes think about such matters in the small hours of the night. I hope that Committee members will not think that I spend all of the small hours reflecting on the State Pension Credit Bill, but occasionally one wakes up—after a nightmare, for example—and thinks about something that one had not thought about before.

As I have said, there are a couple of serious issues, particularly with regard to this amendment, that deserve a little bit of the Committee's time. The concept of the clause is not silly. Its primary aim is to prevent the payment of more than one pension credit to a benefit unit. I do not think that we will argue about that at all; it is clear that that will happen.

However, I should perhaps add that there is a wider issue here, which I have been concerned about. Following the advances that were made by the previous Conservative Government in the sphere of independent taxation—although I know that the Minister of State does not always feel that advances have ever been made by any of his political opponents—this measure begins to row us back towards a world in which people are seen and treated as one unit for the purpose of their income, bearing in mind that this is an income-related benefit. I record that but I will not necessarily debate it further, as that is the decision that the Government have made.

With regard to the purpose of amendment No. 27, two things need to be discussed. First, what is a couple? That came in for some comments from Help the Aged. I assume that a couple are usually—but, perhaps, not exclusively—two people of different sexes who are either married or cohabiting, and are therefore treated as a single benefit unit—to use the term of art—and that those would be the people who would be entitled to a single pension credit. However, Help the Aged makes a rather terse comment in relation to clause 2, which also applies here:

''Married/unmarried couples is always good for domestic tension. Will (say) two older sisters living in one household be two singles or one couple?''

My understanding is that they will be two singles, but it is important that the Minister of State should explain that.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I think that the Minister of State is giving me an affirmative answer to that, but I will let him do that formally, because that is important.

I have tried, in my rather lay way, to describe the single benefit unit. Perhaps the Minister will tease that out further. We assume that there is such a thing, and that it is broadly a married couple or an unmarried couple, as it is described in the clause. Potentially, and increasingly in reality, both may be entitled to a state retirement pension. A couple who are not exactly the

same age who retire at, say, 65 in the case of the man, and, say, 62 in the case of the woman, may now find that they both have a retirement pension in their own right. Elsewhere, the Bill refers to a person or their partner reaching retirement age. The amendment is designed to pave a discussion and tease out rather more closely how the provision will apply and how the decision-maker will determine the matter in cases that are consensual and involve both parties and in which there is some tension or people simply like things their own way.

By definition, if one member of a couple is of pensionable age and the other is not, the one who is of pensionable age will be the only one in receipt of a state retirement pension, and the pension credit will hang on them. What happens when the second person reaches pensionable age and might also be entitled to a retirement pension? Clearly, there cannot be two pension credits. Is provision made for one to take over from the other, and if so, how will that be affected? Will it require a claim by the second party, or indeed, renunciation by the first? Will the initiative come from the Benefits Agency or the individual claimant? When they cannot decide how the matter is to be dealt with, how will the matter be decided and to whom will the credit be paid? Can arrangements be made for it to be split?

The amendment is intended not to invent a way of increasing the total credit but to deal with complexity. It is possible that both parties might have a full retirement pension and that either might be able to receive credit over and above that. The figures suggest a margin of leeway. I assume that all factors will be taken into account. How will such complicated issues be resolved? Above all, if one party has retired and the other party joins them, and if the assessment is likely to be better for the second party—if that is possible—how will that affect the overall credit? How would the Pension Service carry that into effect?

Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions

I shall try to give the hon. Gentleman a full explanation and set out the procedures for issues of dispute and how the Department deals with them.

The hon. Gentleman asks for a definition of ''couple''. That is defined in clause 17, in the case of married and unmarried couples involving different sexes. A same-sex couple is equal to two individuals. He also asked about the total cost, which is £2 billion a year for guarantee credit alone, as the Government set out in publishing the Bill.

Amendment No. 27 would specify in primary legislation the criteria that would apply in cases in which the parties cannot agree who should make the claim. It stipulates that such disagreement should be settled by paying pension credit to the person entitled to the higher amount. The issue is similar to one that Lord Higgins raised in another place. As my noble Friend Baroness Hollis said, such cases are so rare that officials have been unable to identify a single case when that has happened—we must keep our fingers crossed. Therefore, we are considering a hypothetical situation. However, various processes are in place that I shall set out and, hopefully, that will reassure the hon. Member for Daventry.

Under the minimum income guarantee, if and when such disputes exist, they are settled by the Secretary of State—in effect the local decision maker—by taking account of individual circumstances of the case. We intend to adopt that approach to pension credit, and it might help hon. Members if I take them through the process.

In the first instance, responsibility for settling the dispute would return to the couple and they would be given every opportunity to resolve the problem themselves. If a customer indicates on the claim form that their partner does not agree to their making a claim, a letter is sent to both people asking them to decide who should make the claim. Further steps would be taken only if it was clear that they were unable to resolve the dispute, or if a reply to the letter had not been received after 14 days.

A range of factors are considered when deciding such a case, such as determining the person who is normally responsible for paying the household bills. Indeed, if it would give a financial advantage for one partner to claim, the partner who would receive the most benefit would be chosen. I think that that answers one of the points made by the hon. Member for Daventry.

The amendment would not provide sufficient flexibility to allow the decision maker to take account of the full range of sensitive issues that might arise in individual cases. Indeed, it would reduce the criteria that the decision maker could consider.

Furthermore, the approach suggested by the amendment would lead to considerable intrusion into customers' personal resources. It would involve asking detailed questions about the claimant and their partner's income. For example, if income were derived from a joint bank account, potentially arbitrary decisions would have to be taken on the apportionment of that income between the two partners.

We know that customers are extremely reluctant to claim benefits that require excessive investigations into their financial arrangements, and we want the pension credit to move away from such an approach.

It may help the hon. Member for Daventry if we examine what currently happens in IS and MIG cases. Such situations arise extremely rarely. They may arise from a domestic dispute, or the Department may find against a couple who were effectively living together as husband and wife, and request a joint application. Such cases are more likely to arise under child benefit because national insurance credits are awarded to the claimant under home responsibilities protection, although no statistics are available on that. If a husband and wife reside together and both claim child benefit, the wife has priority over the husband. Under the minimum income guarantee, the decision maker may decide to split payments between each individual of the couple if the claimant mismanages the benefit. That is to protect the best interests of the family, and it generally occurs if the claimant has an alcohol or gambling addiction.

The number of such cases is small. Investigations in one office revealed only three split-payment cases out

of a case load of about 45,000. The reason for the split payment was mismanagement in all three cases. If a man's claim form indicates that he has a female partner, a further form is issued to both parents to ascertain whether the woman agrees to the claim. In 2001–02, 65,000 such forms were issued. As of March 2002, 95.5 per cent. of claimants were female and 4.5 per cent. were male.

To assist the hon. Member for Daventry, my colleagues in the Department and I examined every avenue to assess whether a problem existed and what we could do about it. The problem does not exist; it is perceived. However, even if it did exist, we have robust, effective and humane ways of dealing with it. The situation would be handled in the best interests of the client, rather than the Department.

I hope that my answers satisfy the hon. Gentleman and that he will withdraw the amendment.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions) 3:45 pm, 18th April 2002

The short answer is that they do, but it is right to raise such issues. The Minister's response was helpful, although we shall study it in greater detail. He has drawn on the collective wisdom and great experience of the Department, and we should refine out the limited cases in which such problems arose. It is our job as legislators to think about extraordinary and odd cases in which what seems to be all right on the surface may not be right behind the scenes, as that is the job of lawyers who draw up wills and other family arrangements. I am sure that the Department will want to look at the issue in a sensible and sensitive way and to try and help wherever possible. My intention was to float concerns, and the Minister has done his level best to answer them. The Committee is making progress and, in that spirit, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I beg to move amendment No. 24, in page 3, line 43, leave out subsection (3).

I hope that this debate will take even less time, because the amendment refers to another point in the exclusion clause. As I have said, that proves no difficulty to us, so I shall not need to return to it in the clause stand part debate. The amendment relates to de minimis payments. I understand why the Department would not want to mess about with tuppence a week.

I remember that my mother—a formidable lady who occasionally features in Committee discussions—once received a cheque from the Inland Revenue for tuppence. I communicated with the chairman of the Board of Inland Revenue—otherwise known to viewers of ''University Challenge Revisited'' as one of the New college team of 1964 for which I was consistently the first reserve. I asked, ''Is it really a good idea for your department to be sending out tuppenny cheques?'' He replied that my mother had forgotten to tell officials to roll it forward until the next payment. We all understand that it is absurd and irritating for people to receive piffling amounts.

Unless I have completely misconceived the matter, the normal method of payment for savings credit is by bank transfer—we need not debate that now—or by

order book in cases in which cash payment has been requested. Payment will be part of the pension and not a separate exercise.

Mr. Ian McCartney indicated assent.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

The Minister nods in agreement.

At the back of my mind, I believe that arrangements can be made for people who have nominal entitlements—to a teacher's pension at the age of 60, for example. In cases involving small amounts, it is possible—and it has been practised in the past—to compound them into a single capital payment. Even if the entitlement were only 10p a week and the assessment period merely five years, I would still be pleased to receive that cheque. Will the Minister tell us the purpose of the provision and how it will work?

Photo of Maria Eagle Maria Eagle The Parliamentary Under-Secretary of State for Work and Pensions

The hon. Gentleman has shown a full understanding of the de minimis rule, so I will not detain the Committee by explaining exactly what that is in all circumstances. It is a concept that he has discovered partly through family experience, but which is well known in the social security system. It is a way of ensuring that extremely small entitlements—under 10p per week—are not carried through, and that people do not receive cheques for ridiculously small amounts.

A similar amendment in the other place, which suggested paying the amounts annually, was withdrawn. If there were no de minimis rule, by omitting subsection (3), the hon. Gentleman's amendment would leave us having to pay those small amounts weekly, and the amounts would be even more derisory. His amendment presents more problems than the one tabled in the other place, which at least suggested annual payments.

The hon. Gentleman suggested a five-yearly payment. However, it is the income assessment that is five-yearly. Payment is made weekly. For that reason, we still need the de minimis rule. As he knows, we do not simply write off those amounts of money. If the customer concerned is in receipt of any other benefit, we consolidate the small amounts with that. We do not send a separate cheque for under 10p

a week, but an additional bit will be added to their other benefit.

In practice, the operation of the de minimis rule affects a small number of people. On the assumption of 100 per cent. take-up of pension credit, it is estimated that about 10,000 people will be entitled to less than 10p a week and be caught by the de minimis rule. In 95 per cent. of those cases, we would be able to combine the payment of the pension credit with another benefit.

Only about 500 pensioners would be affected. I agree with the hon. Gentleman that to receive a weekly cheque for 1p or 2p from the Department would be severely aggravating to most pensioners. We are talking about a small number of people and a small amount of money. He already understands the de minimis rule and I hope that I have explained why we need to retain it for pension credit. The financial detriment to a small number of people to whom we cannot pass on the tiny amount of pennies will be minor. I hope that the hon. Gentleman will accept that we need the provision and that he will withdraw the amendment.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I thank the Under-Secretary for her most persuasive response. It has been useful to rehearse such arguments. It is difficult when people lose out because of the de minimis rule and I accept that the Government do not want that to happen. But a few such cases will arise and I see no way of avoiding the problem, without breaching the concept of the de minimis rule. I am not sure that many pensioners will want to cross the road for tuppence, as it were, or that they would thank the Government if they did so. Given the intimate relationship of pension credit to retirement pension and so on, I still find it difficult to think how such a situation would arise. However, the hon. Lady suggested that there may be some 500 such cases a year. I am grateful for her response. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Further consideration adjourned.—[Angela Smith.]

Adjourned accordingly at four minutes to Four o'clock till Tuesday 23 April at half-past Ten o'clock.