Clause 6 - Payment to be disregarded for tax and social security

Age-Related Payments Bill – in a Public Bill Committee at 11:00 am on 25 May 2004.

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

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

This clause deals with the treatment of a payment for tax benefit and tax credit purposes. In line with our commitment that the payment will be non-taxable and will not affect other benefits that a pensioner may receive, the clause ensures that the payment will be disregarded when considering tax liability and entitlement to other benefits. The payments will be made in full to help older people in the way that I have described.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

I want to hark back to an earlier debate. It is the ringing tones of the words

''No account shall be taken'', as stated in the clause, that I want to probe a bit more.

One of the odd concepts of this payment is that, as originally designed, it was going to be a wholly one-off, free-standing payment with no strings attached. No tax was to be payable on it. It would not matter how rich a person was, or how little they needed the money, they would get it, subject to other matters already debated. Even if a person was getting complete council tax benefit, they would still get it, more or less no questions asked. That was the original idea.

There are two arguments on two sides of the coin. One wonders what is the justification for the payment if it bears no relation to council tax levels and rises in different parts of the country, or to the ability of individuals to pay. On Second Reading, I teased the Government slightly by suggesting that they were finally coming around to our way of thinking about restoring the earnings link, which, sadly and unaccountably, we did not get around to debating and voting on when we reached the Report stage of the Pensions Bill.

The best way to help the poorest pensioners is to ensure that all pensioners receive a decent state retirement pension and to restore the earnings link. However, I do not think that the Bill is to do with that. I assume that the attraction of the measure was its simplicity. I understand that. The Chancellor, on a basic political level, wanted to make an announcement, so there was no time to start worrying about tax, benefits, council tax or whatever—the payment was just going to be handed to people. They would, more or less, get the money as long as they were in the country, over 70 and as long as various other things happened. It could be a fraction of their daily income, or make all the difference between paying the council tax and not being able to do so. Nevertheless, broadly speaking, people would get it.

We know, as a result of earlier debates on people in care homes, nursing homes and hospital, that it is not so simple. There is a point at which people can become entangled in the benefits system. The tax issue is fairly clear, unless we stumble across a new surprise in Committee. People do not pay tax on the payment and there is no basis for paying tax at all—end of story. That is clear. However, it is not clear whether, as it says in paragraph (b), no account should taken of

''entitlement to benefit under an enactment relating to social security'' and, as it says in paragraph (c), ''entitlement to a tax credit.'' We know that there is an involvement with pension credit and the benefits system in the context of care homes and hospitals. Given its absolute drafting, is the clause still relevant or accurate?

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

I do not think that the hon. Gentleman has understood. Clause 6 clearly sets out that the money will not be taken account of for income tax purposes or count as income for income-tested benefits. That does not have much to do with our earlier discussion about when pension credit is relevant for certain households.

I, too, regret that we never discussed the earnings link because it would have been fascinating to behold the hon. Gentleman's explanation of why it was abolished by a previous Conservative Government in 1980.

Question put and agreed to.

Clause 6 ordered to stand part of the Bill.