As it is the Minister of State's birthday, I propose to applaud the Government. I shall try not to make a habit of this, but in 1988, when the rules on the conversion of capital into income were introduced in their present form, an implied interest rate of not 10 but 20 per cent. was introduced. It applied not from £6,000 but from £3,000. In 1988, capital rules were applied for the first time to housing benefit, which affected many pensioners, the group about which we have been talking for the past few weeks.
Between 1988 and 1997, the then Conservative Administration did nothing about that. They left the £3,000 threshold at that level for nine years thereby eroding its real value and bringing many more pensioners into penal rates of 20 per cent. After 1997, the Conservative party decided that it wanted to sound like it was on the side of pensioners and savers, and it started attacking that regime. The hon. Member for Havant started to say that the imputed rate was too high and that there should not be a cap on the top. We had made that point somewhat earlier, but we welcomed his conversion.
The Government have done that. They have taken the cap off at the top, which means that there is no upper limit, and they have halved the imputed rate. They considered looking at actual savings income, but on reflection that would have been quite messy and the pensions groups did not want it. We have a situation in which most pensioners with savings are not in the system and there is some flexibility whereby rates can be changed if interest rates change. Indeed, we would want some flexibility in the regulation. I do not agree that we need a figure, or necessarily a formula, in the Bill.
I have no particular problem with new clause 8 and the idea that the SSAC should look at the matter. However, my suspicion is that if we let it do that and it does so every five years, which I do not have any problem with, it might well say that what we have is a darn sight better than what we used to have.
On 10 per cent. rates, the hon. Member for Daventry admitted that that is 10 per cent. on the margin beyond £6,000. Someone with £6,500 is only going to be imputed to have a tiny amount of savings income. The average rate on that is well below that of a long-deposit building society account. For once, we should stand up and say that we have been banging on about that for years, it was not addressed for almost a decade, but it has finally been addressed. Of course, we would all have liked it to have gone further, but it seems to me to be an enormous step in the right direction.
The only question is if the rate of imputation beyond £6,000 is quite high, on very low quantities of capital that is a very low average rate, but on high quantities of capital it is a high imputed rate above that that one might reasonably attain. That kind of loading is probably what we want in the sense that the system was initially a safety net. We do not want to catch small savers in it, but we probably do not want to hand out means-tested benefits to somebody with a socking great amount of savings. The SSAC may look at hard cases, of the sort that the hon. Member for Daventry legitimately raised, through that sort of
mechanism. I do not object to that, but they will be extreme cases. In the majority of cases, the Government have moved in entirely the right direction and we should applaud them for doing so.