If I were to make an alternative suggestion, the Minister of State would immediately say that I had made a policy pronouncement. With greatest respect to the Under-Secretary, charming as she is, it is for Ministers to decide the figure. I do not want to make a suggestion; I want the Social Security Advisory Committee to make suggestions. It can do that independently, without my figures or the Minister's.
Ministers have pointed out that 85 per cent. of pensioners are below that starting point of £6,000 capital. That may change over time, which is also relevant to our proposal in the new clause. They also said, when we debated clause 15, that the implied average rate of return on capital as pensioner income is attenuated by the bottom tranche. If it is zero on the bottom £6,000, the average rate is reduced, and there is no point in arguing with that. However, while that may be true of the average rate, it is not true of the marginal rate of return, which is expected to be 10 per cent. I challenge the Minister to find me a reliable security on which I can have a reliable return of 10 per cent. on capital at the moment. In the present circumstances of a low-inflation economy, it would be necessary to look for a special set of circumstances such as a person of advanced age—over 75—who bought an annuity. Because a high loading is put on the possession of capital, there is an implied suggestion that pensioners should dis-save or annuitise their existing capital assets, which might not be a good idea. People working for our team have done some exemplifications on the figures, and it is difficult to understand how a pensioner can possibly receive as much income as under the 10 per cent. formula set out by the Minister.
I do not want to belabour the point, but we understand that the Government—and especially the Chancellor—want a degree of stability. I quoted the Prime Minister with approbation this morning, so I shall be kind to the Chancellor this afternoon to preserve balance. However much the Government want stability and feel that they have achieved it in
relation to monetary policy, which my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) has essentially approved, major changes could take place quite suddenly in inflation or interest rates, for example. Such changes would affect the returns on capital.
We should also consider the relationship between capital generally, or particular kinds of capital, and the interest determined from it. The notes from Help the Aged express concern about the long-term valuation of real property. Many buy property as their pension fund—by buying to let, for example. Especially in London and the south-east, that property might have a high and escalating capital value but give a relatively low income when expenses are taken into account. A circumstance may arise in which a property that was tenanted suddenly falls into vacant possession and the capital value shoots up because the premium falls to the landlord, but the property produces no income at all until it is sold.
Let us consider another example. If changes were made in other benefits, such as council tax or housing benefit, the capital rules or coverage might be different and it would seem inequitable to have two sets of regulations subsisting at the same time. Until recently, for example, the rules on quantity have varied in relation to the distinction between pensioner and disability benefits.
In addition, as a matter of public policy, it may be necessary to consider whether a measure is working out fairly. A capital assessment may appear wrong, or it may become difficult to make a reliable capital assessment—on an overseas asset, for example. What happens if an asset is in a devalued currency? Will that automatically affect the assessment?
Finally, some important issues of policy might arise. We might decide to remove certain kinds of capital holdings from the system altogether. I refer, for example, to the compensation payments in which the hon. Member for Bassetlaw (John Mann) expressed interest.
None of that is intended as a policy recommendation, so there is no need to get excited about that idea. That is not to say that it is impossible to derive an implied income from capital. The new clause would mean that for a period of time, which for convenience we suggest should be consistent with the maximum assessment period in the Bill, the Social Security Advisory Committee should examine the matter and any representations that it might have received, reach an objective view and make a recommendation to Ministers. It would always remain Ministers' responsibility to receive that advice, deliberate on it and to make a decision.
The new clause would introduce into this part of the world, as the Monetary Policy Committee introduced into the setting of interest rates, a degree of objectivity and independent appraisal. That is why the new clause has considerable merit. I hope that the Minister can see that it is tendered in a non-partisan way and is designed to help make the system work better and more fairly for pensioners.