Clause 9 - Duration of assessed income period

State Pension Credit Bill [Lords] – in a Public Bill Committee on 23rd April 2002.

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Amendment proposed [this day]: No. 37, in page 7, line 4, at end add—

'(6) For the avoidance of doubt, and notwithstanding regulations made concerning absence from Great Britain under section 1(5), the assessed income period shall continue through any period of absence from Great Britain during that period.'.—[Mr. Boswell].

Question again proposed, That the amendment be made.

Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions 4:30 pm, 23rd April 2002

Good afternoon, Mr. Griffiths. It is nice to see you back in the Chair. We had some fun while you were away. The hon. Member for Hexham (Mr. Atkinson) got a grip of us in the end and sorted us out, so we learned our lesson from this morning's sitting.

Before we broke for lunch, I said to the hon. Member for Daventry (Mr. Boswell) that his remarks made this look like the Ronnie Biggs amendment. I want to withdraw that remark and imputation unreservedly. I realise that this is a probing amendment—we could call it an easyJet amendment.

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

The immediate predecessor of the person who lives in the house in which I now live in my constituency was an amateur aviator, who distinguished himself by going up in his plane and spotting the great train robbers in the vicinity, carrying out their activities at Linslade farm. Although that has no direct relevance to the slur that the Minister has now withdrawn, I thought that it might amuse the Committee.

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

I congratulate the hon. Gentleman on knowing someone famous. I hope that I will be able to recount such a story one day.

The effect of the amendment is best illustrated by an example. If a pensioner goes to Spain for three months over the winter, his entitlement to pension credit ceases after four weeks and the claim is closed. Under our proposed rules, on his return, he would reclaim the pension credit, the income would be reassessed and a new assessed income period set. However the effect of the amendment would be to keep the original assessed income period running in the background when the claim closed, so that any remaining period would still apply on reclaiming. In effect, this is a taxi rank proposal, whereby the meter keeps running until the person comes back.

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

For the avoidance of doubt, let me say that it was my intention not that the entitlement for the weeks of absence should stack up, but that the weekly entitlement should be reactivated on return, as if the person had never been away.

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

I can see why the amendment

might have some appeal. Arguably, such a mechanism might facilitate a more seamless reintegration back on to pension credit—and seeing as I have been advocating that in Committee, I want to maintain my consistency. It would also prevent the person's pension credit from being reduced when he returned home and reclaimed because he had won the lottery, either English or Spanish. Of course we are ignoring lottery wins during the assessed income period not because we think that such people need pension credit, but because we want to reduce intrusiveness for all recipients of pension credit. We can live with ignoring a few individuals' good fortune for the sake of simplification for the overwhelming majority of pensioners.

If a new pension credit claim is needed, it would seem perverse not to take that opportunity to reassess the claim there and then. I doubt whether the taxpayer, the lottery winner or the hon. Gentleman would consider that to be unreasonable.

On the point of seamless reclaiming, a person who returns to Great Britain would obviously need to contact the Pension Service in order to reclaim. It is therefore debatable that the amendment would make reclaiming easier by ensuring that such a person's income would not have to be reassessed.

In designing pension credit, a key consideration has been to keep the system as simple and hassle-free as possible for the customer. That is precisely why we have moved from the intrusive weekly means test to a five-year assessed income period. That is also why we intend strictly to limit the number of changes in circumstances that would require a reassessment of income. Protracted absence abroad is one such instance. We also think it is right when a pension credit claim closes. As I said before, if it is a fresh claim, it seems entirely consistent to make a full assessment.

After all, the hon. Gentleman should accept that an individual's circumstances may have deteriorated during that time. When one goes abroad, one spends one's capital. It would seem sensible that, at the point of re-entry into the pension credit, a full assessment should take place, especially as it might be to the advantage of the pensioner.

Not all people who go abroad know how long they will be away. For instance, the hon. Member for Canterbury (Mr. Brazier) mentioned a tragic case last Tuesday about one of his constituents, who travelled abroad to visit a terminally ill daughter and ended up having to care for her for years rather than weeks or months. It cannot be very satisfactory to hold closed claims in a kind of limbo pending a reclaim that may or may not occur on a future unspecified date.

It is also fair to say that it may be in the claimant's interest for a full assessment to be carried out on return from a protracted absence, because people are more likely to win than to lose out. People who have been abroad for some time are more likely to be in a lower income stream because they have used their savings than they are to have won the lottery in Spain. I ask the hon. Gentleman to withdraw the amendment.

Mr. Boswell: The Minister gets an A for the clarity of his explanation, but only a C for acceptability. I am sorry to disappoint him; he is clearly distressed.

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

All I can say is that the Minister reminds me of the pupil who received an autumn term report that said, ''Trying'', a spring term report that said, ''Still trying'' and a summer term report that said, ''Still very trying''. The Minister usually does better for the Committee than that.

The Minister has not addressed the real point. He says—he may be right; I do not contend that—that many people who return from protracted absences abroad may have spent themselves out, and might be better off with a new assessment. However, unless I completely misunderstood him, and even though I missed some of this morning's debate, it seems that it would be open at any time to a disadvantaged pensioner to make a fresh claim. A pensioner who returned to the country could say to the Pension Service, ''I want to make a fresh claim. I have spent myself out. I have gone over the top. I no longer have the money that I thought I had.'' I appreciate that the provision is framed neutrally; it is designed to deal with the pensioners who might lose out. The Minister says that that might be equitable because the assessment made on the return of the pensioner would be processed in accordance with the facts of the matter—for instance, he might suddenly have come into £1 million and it might no longer be appropriate to pay it.

My concern relates to the thought processes of pensioners thinking about leaving the country. They may have a certain entitlement to benefit. I am not saying that they go abroad with the prospect of a sudden windfall; there may have been a change in their circumstances before that. However, they are riding on a five-year assessment that cannot be withdrawn. They have a vested interest in the proper sense of the word, but if they have choice of whether or not to go abroad, they may feel inhibited in doing so because it might lose them benefit.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

Is the hon. Gentleman not in danger of wanting to have his cake and eat it? Earlier, he said that there should be no reassessment for those who had committed criminal offences and were sent to prison. He is now saying that if someone wins £1 million on the lottery and then decides to go on a world cruise for a year, they should still be entitled to a pension on their return.

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

I understand the hon. Gentleman's argument, but I am saying that other circumstances might pertain; far different from winning £1 million, it could be a matter of pence a week. However, pensioners with hard-won savings who are trying to eke out their savings and other income will be put in a difficult situation if they know that they will lose benefit after going away for four or five weeks. There may even be implications in the European convention on human rights relating to freedom of movement around the European Community. I am not sure that it would be defensible for the free movement of

individuals to be inhibited by the potential loss or scaling down of a benefit.

In response to the hon. Gentleman, let me say that I am certain that in moral terms the position is stronger than the one that we discussed earlier in connection with criminals. As I said, the Committee clearly did not want criminals to profit from going to prison—in fact, they would not have profited, but the argument was whether they would adventitiously have lost more than they would otherwise lose in relation to their sentence.

We are not discussing only discretionary visits abroad for a holiday, although that may be an attractive idea. As my hon. Friend the Member for Canterbury rightly reminded the Committee the other day, a pensioner may have to go abroad for medical reasons. I do not think that medical treatment abroad under the national health service is excluded under the Bill; indeed, pensioners would lose benefit if they were in a United Kingdom hospital, but after 13 weeks rather than the four that they would have to spend abroad to lose benefit. I add that point to the general confusion that surrounds the provision. A pensioner might also want to support a member of his or her family resident abroad, and it is unfair that pensioners' benefit should be scaled down for such a reason. Someone else who remains in the United Kingdom—a sister or brother, for example—may have had a bigger windfall under the same will but will not lose out because they do not leave the jurisdiction.

Although the Minister has tried to explain the provision—I appreciate his good will—I do not think that he has sufficiently answered the question. It would be desirable to provide for a suspending power for the credit as well as for a reapplication for change of circumstance power if the credit were terminated and restarted. The issues are difficult ones and we may want to return to them, perhaps in the context of the regulation. However, perhaps uncharacteristically, I feel strongly on what may seem a technical issue, and I must advise my hon. Friends to vote for the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 7, Noes 10.

Division number 2 Adults Abused in Childhood — Clause 9 - Duration of assessed income period

Aye: 7 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 4:45 pm, 23rd April 2002

I do not wish to detain the Committee, but I want to return to a point that we discussed this morning. Under the clause, the

duration of assessed income period will generally be five years. There are limited exemptions from that but the general principle is that it should be for five years. Will the Minister give some insight into why the Department chose five years? The more I reflect on the matter, the harder it is to see any objective for choosing that particular period. An interval had to be chosen and that was probably as good as any. However, I am seeking clarification about the evidential basis on which it was chosen.

This morning I said, slightly as an aside, ''Why not 10?'' That was not an entirely facetious comment if the argument is that the process of filling in the form or talking on the phone and giving all one's personal details costs the taxpayer money and is a burden on the individual. That is what the Government are saying—they want to make it as infrequent as possible. Why stop at five years? Presumably there has to be some sort of trade-off. My concern is that if the interval were to be 10 years, circumstances could change so much that the award will be so out of kilter with them as to be inappropriate. The Government's argument is that within five years people will get a letter every year; they will know about anything that has changed and will report it. However, if those mechanisms are good enough, why is there a compulsory five-year point at which there has to be a reassessment?

Photo of John Mann John Mann Labour, Bassetlaw

What would the hon. Gentleman suggest instead of five years?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

Had I the resources of the Department to assess such issues, I would ask—I hope that the Minister has asked and will tell us—what assessment the Department has made of, for example, how frequently people's circumstances change. That should inform one's answer to the question that the hon. Gentleman rightly asked. I cannot say that it should be three or seven years; the decision as to how long the period under clause 9 should be informed by evidence, by research into how often pensioners' circumstances change and by how much and by what effect leaving it for a longer or a shorter time would have. It would be helpful if the Minister were to lay before the Committee the evidence on which the decision to specify five years was taken.

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

Briefly, and conscious of the fact that, to my chagrin, I missed a number of the earlier exchanges other than those on the amendment that I moved, let me say that I endorse the points made by the hon. Member for Northavon (Mr. Webb). If we are to form a trade union of interested persons in order to obtain lots of data so as to carry out our research, I shall be one of the first to subscribe. However, there is a serious point here for Ministers. The more information that we have, the more evidence-based it is, the better. Beyond that, I would record for the Committee, as I have not done so explicitly before, the extent to which this is a major change in philosophy. It should, therefore, at least be commented on by the Minister.

The tradition has been that social security benefits are tied to the week and are about need and short-term need. PAYE and the tax system operate broadly on an annual basis for earnings and ability to discharge

responsibilities; there has never been a time scale beyond a year. I am not canvassing the Committee to respond to the implied question of the hon. Member for Bassetlaw (John Mann) that we should seek to substitute one year. However, it would be a more precise means of assessing need and of addressing the kinds of issue that we have discussed in relation to vested interest long-tail assessments going for, perhaps, four and a half years when circumstances change, and the kinds of exchange that we have had about prisoners and persons going abroad.

Against that, the Department does not want to spend an inordinate amount on routine reassessment and it does want to identify those who have suffered a significant diminution in income. Lest the Committee be in any doubt, I accept that many pensioners would normally experience a decline in income over the period of their retirement. The tendency would be in that direction rather than the other.

I also remind the Committee that the pure doctrine of a weekly set of benefits has been eroded. We would welcome that in relation to things like linking rules and passporting. We are not considering an absolutely pure system. However, we are entitled to ask Ministers to sharpen their thinking, or to reveal it to the Committee, about why we have gone for five years, whether it is sensible and whether it might be subject to modification in the light of experience. Most of the rest of what we on the Opposition Benches plan for the Bill will involve standing back a bit from the text. It is pretty opaque, so that is not a wholly unattractive prospect. We will ask how the Bill is unfolding and whether the doubts that we have expressed were justified. We will try to see whether the Bill is operating in the way in which Ministers intended it to and whether it needs to be modified in the light of experience to make it a more appropriate vehicle for helping pensioners. That is all. The Minister just needs to explain to the Committee why he proposes what he proposes.

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

It is not so much a question of Ministers sharpening up their act. The Opposition have opposed the Bill from the outset. They have opposed the methodology, the concept and the principle behind achieving our aim of tackling pensioner poverty through eradicating it where it exists, preventing it in the future and rewarding thrift.

The hon. Member for Northavon tries to dress his question up as some big theoretical problem, implying that the Government have to find some empirical evidence to support a process of five-yearly assessment. I do not want to disappoint the hon. Gentleman, but it is called common sense—it is a matter of judgment. We have had discussions and debate with older people's organisations, trade unions and the pensions industry to discover a practical way forward to ensure that the period chosen does not lead to assessments being way out. The five-year strategy is a judgment. We have made a judgment, as simple as that.

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

On the basis that over a five-year period there are economic cycles, and cycles affecting

public expenditure, income from the stock market, Government expenditure, inflation and people's personal use of their capital assets. The five-year assessment may fall in between those cycles, but at any point the virtuous circle can come into operation and a pensioner can intervene when their circumstances have changed and they require more support under the proposals. They can secure a reassessment.

That is the important thing here. Rather than just a rigid five-year cycle requiring them to have absolute certainty about their likely income, we give them other important inputs to the process to help them to have some ownership and control over their income. We allow them to have a reassessment during the five-year period when their income has gone down for legitimate reasons. If their income goes up—we had this debate during our consideration of an earlier clause, so I will not go back over it—their assessment remains as it was. We do not remove income from them. That is a clear judgment made by the Government.

In the end, all Governments have to make judgments on the political issues of the day. That is the judgment that we made and we will have to stand by it. It will be effective, because we did not just pluck it out of the air—we have held consultations and involved people in the decision, including older people's organisations and the panoply of other organisations involved with this measure.

We made that judgment because a five-year period ensures that older people have certainty and clarity, but is not so long as to allow huge variations to impact negatively on them. The judgment was made on the basis of providing older people with support, rather than out of consideration for the system itself.

The hon. Member for Daventry may be concerned that we do not have a 50,000 page consultant's report giving us a range of options from one to 99 years, but I should have thought that that would be a bit of a waste of money. He might want to give us one—we could have it for nothing. If he wants us to go for 10, 15 or 20 years, he will have to give us examples of where interventions would take place and why. After any length of time greater than five years, the potential difficulty of the assessments increases.

In the end the matter is about judgment. Unlike the Liberal Democrats, we are still prepared to use judgment in such matters. I hope that, if hon. Members are not happy, they will accept that the process has been one of consultation involving proactive consideration and assessment of difficult issues on behalf of older people.

It is a clear break with the past. Pensioners are subject to weekly means testing. We also check on their capital and second pensions in three-year reviews. However, their incomes are largely stable, as I said earlier, although there is some capital drawdown. The five-year proposal is sustainable. It has the support of the older people's organisations and of older people themselves. If there is no analysis or evidence leading to a particular decision, in the end it is a question of

judgment. I submit my judgment to the Committee and hope that it can accept it.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.