Clause 1 - ''Qualifying individual'' and ''relevant week''

Age-Related Payments Bill – in a Public Bill Committee at 9:25 am on 25 May 2004.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 9:25, 25 May 2004

I beg to move amendment No. 10, in

clause 1, page 1, line 6, leave out from 'attains' to end and insert

'was born on or before 31st March 1935.'.

Photo of Derek Conway Derek Conway Conservative, Old Bexley and Sidcup

With this it will be convenient to discuss amendment No. 1, in

clause 1, page 1, line 6, leave out '70' and insert '60'.

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

Amendment No. 10 is relatively straightforward. It says that entitlement to the payment of £100 should not merely be restricted to those people who have attained the age of 70 by the relevant qualifying week in September, but extended to cover those people who can be expected to reach the age of 70 by the end of 2004-05. We have defined that as individuals who were born on or before 31 March 1935.

In a sense, we are suspending disbelief and are supposing that what the Government say about their purposes in bringing forward the Bill is true. I appreciate that that might not last for the whole day,

but we will humour them for now, take them at their word and assume that the Bill's purpose is to help older pensioners to pay their council tax. We will leave aside the fact that the payment that we are discussing is made irrespective of whether anybody has any council tax to pay. Something of a fiction is involved, but that is the Bill's stated basis and we will go along with it for now.

The question then is whether it is appropriate to say to people who reach the age of 70 in October or November 2004-05, which would be before most of the payments are even made, that they do not qualify. Anybody who reaches the age of 70 by the end of 2004-05 will have been 70 during a year in which they have to pay the inflated levels of council tax that people up and down the land are being asked to pay. If the Government are true to their word and are worried about the impact of the council tax on pensioners, particularly on older pensioners, why would they want to exclude people who are 70 at some point during a year in which they have to pay council tax?

The Minister could say that there are operational reasons for that and that the Government have chosen the dates in September because that coincides with the winter fuel payments. I believe that they think that they need to know in good time who will be applying for such payments so that they can work out how much those people are entitled to. Surely, in the case of the payments that we are discussing, we know at the start of 2004-05 when people were born. We know who is alive and was born on or before 31 March 1935. Therefore, in a way, we are doing the Government a favour. We are not saying that they must wait until September before they can work out to whom they should pay the money; we are telling them now. We will ease their administrative burden and help them to deliver those payments on time. I am sure that they will welcome the amendment.

The other objection that they might have is that some of those people might die before the end of the year. In other words, they might be paying money to widows, estates and so on. Anybody who, under the Government's rules, would have been 70 by the qualifying week would have spent at least six months paying their council tax in any case. Given that such people would have had to contribute to the vastly inflated council tax bills that pensioners must pay, why should they not be entitled to a payment? Paying that money to widows of people who were over 70 seems entirely unobjectionable. Presumably, widows are hit particularly hard by the council tax. If the amendment is accepted, the money will be payable to the estate, the widow or the widower of some people who will be dead before the end of the financial year. That does not seem to be a problem.

I would be interested to know what the Minister thinks it would cost to expand the scheme in that way; I am sure that he has costed it. Given that the whole scheme costs nearly £500 million, extending it for six months and involving people who are between 69 and a half and 70 on the qualifying date would be a relatively marginal change. I am sure that he will enlighten us on that point.

I will comment on amendment No. 1 now so that I do not need to return to it. I am sure that the hon. Member for Eastbourne will make his remarks in due course. I must admit to having been rather startled to see it on the amendment paper. In the normal modest way of the Liberal Democrats, our amendment, if it were to be accepted, would make an incremental spending commitment, whereas the Conservative amendment would make a socking great spending commitment—I hope you will forgive the use of a technical term, Mr. Conway. It says that everybody between 60 and 70 should get the £100. That would doubtless add hundreds of millions of pounds to the cost. I am not sure whether the hon. Member for Eastbourne has cleared it with his revered leader in this area, the hon. Member for Havant (Mr. Willetts), and whether has the authorisation to splash money around like confetti. That is obviously what he has in mind. Anyone would think that local elections were coming up in his constituency and that he potentially had a high pensioner vote. I do not know whether that is true or not, but it might be.

Given that the business of the £100 being to do with council tax is something of a fiction, the idea that we should extend the principle and that we should do so in the run-up to an election seems strange. I hope that when the hon. Member for Eastbourne speaks to amendment No. 1 he will tell us where he would find the money for the scheme, because I find wild, reckless tax and spend difficult to cope with.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

I am delighted to speak on the hon. Gentleman's amendment, and on mine. The Liberal Democrats are in their fiscal purity phase, but I doubt it will last. I would feel more genuinely chastised by the hon. Member for Northavon (Mr. Webb)—I suppose we should really call him a learned Member; after all, as far as I am aware, he is the only professor on the Committee—if I were not convinced that, in some part of the country, Liberal Democrat leaflets are circulating that promise to pay £100 to anyone over 15. Anyway, I shall not get too carried away by what he says.

The hon. Gentleman answered his own query. We are talking about a fantasy land; we would not introduce such a measure if we were in Government because it is not the way to address the problem, just as is the case with capping. The problem was caused by the Government's ramping up council tax, particularly in areas of the country that they do not represent, and do not expect to represent. That is the real difficulty.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

Let me finish my point first. Piled on top of that difficulty, of course, is the problem faced by those of us who have suffered under Liberal Democrat-controlled councils. The hon. Member for Northavon was good enough to try to help the Liberal Democrat campaign in my constituency, but I can tell him from my canvassing last night that it is not working.

Photo of Claire Ward Claire Ward PPS (Rt Hon John Hutton, Minister of State), Department of Health

If the hon. Gentleman is fundamentally against the Bill and the concept of giving money to pensioners over 70, why does he want to extend the principle and give money to persons over the age of 60?

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

I was coming to that. We are not opposed to giving some extra dosh to over-70s; why not do that? We just want to ensure that pensioners are not taken in by this largesse, and do not think that it is linked in any way to levels of council tax in their area. If the pensioners' parliament is anything to go by, we will not have to try very hard to ensure that.

Ours is, of course, a probing amendment; if we were in Government, we would not approach the issue in this way. However, what I am trying to probe into—the issue was raised by many hon. Members on Second Reading—is why the Government have decided on 70, and not 65. What is the logic of paying the £100 only to those aged 70 and over? To row in behind the amendment, if not the rhetoric, of the hon. Member for Northavon, is there not some rigidity in the Bill on the matter of when people qualify that could be removed? I shall also have something to say about subsection (2) when we come to clause stand part.

Why should over-65s be excluded, and why should a family in which someone, typically the husband, turns 70 during the year but then sadly passes away lose the £100? That seems to make no sense. It would be interesting, as an academic exercise—and that is certainly what it is from our point of view—to discover how much extra such changes would cost. Presumably, cost was the driver behind the decision to draw the line at 70, but we simply see no logic to that. Many pensioners over 65—indeed, over 60—suffer just as much because the council tax is high in their area as those over 70, and I fail to see why they should be excluded. However, that may be a point for stand part.

I appreciate that the Bill was cobbled together in a great hurry when the Government realised, belatedly, that they needed a Bill to introduce the measure, and so I make no complaints about draftsmanship; that would be churlish, and the Minister knows from 22 sittings on the Pensions Bill that that is the one thing of which I could never be accused. There is no logic to the 70-year cut-off; or, if there is, I am sure that we will now hear what it is.

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

There has been a little outbreak of election fever here. It is a little early in the morning for it, but I will leave the Opposition parties to their debates on that and will talk about the Bill.

The Bill makes real the promise in the Budget to pay all eligible households in which there is someone aged 70 or over an extra £100. I emphasise that that will be delivered through the winter fuel payment process, which is a tried and tested method of delivery. It may not be without controversy, but issues relating to today's debate are very much about the winter fuel payment process, including the qualifying week. Evidence shows that this group of older people are likely to have been living on a fixed income for longer, as they are less likely to be economically active. Those in older households have, on average, lower incomes

and are more likely to be living alone. Council tax takes up often a large portion of their income in comparison with younger elderly households. The £100 payment recognises that.

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

There is a factual misconception here. The Minister will recall a written answer that he gave me, which expressed council tax net of any benefits as a percentage of income—the burden of council tax. I asked for the figures for the over-70s and for all pensioners. They were 3 per cent. in both cases; there was no difference.

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

But the income figures are instructive. I do not need to lecture the hon. Member for Northavon on the fact that the older elderly tend to be poorer. I am not absolutely clear about the Liberal Democrat pensions policy at the moment, but for some time at least it has been to give rather more pension to the older elderly—that is an interesting argument, although we reject it as a mainstream pensions policy. I am therefore intrigued that the hon. Gentleman is presenting me with figures that undermine his own policy.

Clause 1 sets out the eligibility criteria for the payment. Individuals must be aged 70 and ordinarily resident in Great Britain at a time no later than the end of the relevant week—20 to 26 September 2004. Opposition amendments Nos. 10 and 1 would extend entitlement to people aged under 70. Amendment No. 10 would extend the payment to all those who were born on or before 31 March 1935, which removes the requirement to reach the age of 70 before receiving the payment. Amendment No. 1 lowers the qualifying age for the payment from 70 to 60 years at an additional cost of around £330 million—an increase of almost 70 per cent. The hon. Member for Northavon has already gently chided the shadow Minister about whether that is just a pre-election gesture or a spending commitment. The sum of £330 million is significant, and it would be useful to know whether it is a new spending commitment. The people of Eastbourne look forward to the answer—I might add that that is somewhere we would all like to be today.

We are targeting those pensioners who, because they are older and have long since stopped work, are likely to be on lower weekly fixed incomes. They are pensioners with little or no opportunity to increase their incomes. Only 4 per cent. of women and 11 per cent. of men in that age group are employed or self-employed. The average net weekly income for a couple over 70 is £309, compared with £361 for couples under 70—a difference of 14 per cent. Pensioners with private pensions receive, on average, less the older they are. Those under 70 receive an average of £104 a week; those over 70 receive an average of £83 a week.

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

I know that the Minister is keen on intellectual coherence. When in another place his noble Friend, Baroness Hollis, responded to this argument about older and younger pensioners, she said that that was a misunderstanding and that the discrepancies among pensioners within one age group

were much greater than the discrepancies between older and younger pensioners. Does the Minister agree with his noble Friend?

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions 9:45, 25 May 2004

I always agree with my noble Friend. This is an interesting debate in that on other occasions we have discussed the pros and cons of income-related measures such as pension credit. The truth is that universal provisions—we are introducing a universal provision for those of the relevant age group—have advantages and disadvantages. By definition, they are not sensitive to specific income details. Similarly, income-tested benefits have advantages and disadvantages. It is true that, as a generalisation, the older elderly tend to be poorer and more disadvantaged in all sorts of ways—they are more likely to live alone, for example—than the young 60-somethings, if I may describe them so.

However, within any age band—for any age group, not just the elderly—there are many divergences. That is the truth. I do not know why the hon. Member for Northavon is smiling; that seems a self-evident truth, and it should help guide our social policy. We argue that by targeting the over-70s, we are concentrating extra help where it will do most good.

I have given that explanation and tried to find the answer to the question put by the hon. Gentleman, which I think is £20 million. The Liberal Democrats are out-modesting, if that can be a phrase, the Tories' reckless spending commitment by proposing £20 million as opposed to £330 million.

Given the intellectual coherence of my arguments, which I think have charmed Liberal Democrat Committee members at least, I hope that they will consider withdrawing the amendment.

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

I smile because I am delighted that the Minister's responses will be in Hansard and quoted extensively in our forthcoming policy document, which will argue for higher state pensions for older pensioners. The Minister has given a cast-iron defence for that policy, and I am grateful to him for that.

The amendments are about what a rational cut-off point would be. The Government are all over the place on that. They say that that 60 is the point for the pension credit; that 65 is the point for the savings credit; that 70 is the point for this age-related payment; that 75 is the point for the TV licence; and that 80 is the point for the enhanced winter fuel payment.

The Govt do not have a clue; there is no coherence. That list is indicative of the fact that the Chancellor thinks up a wheeze, sticks it in the system, works out how much money he can spare and puts down an age cut-off on that basis. There is no rationale for why 70 should be significant or appropriate, or why we would make these payments at 70, but TV licence payments only at 75. There is no coherence at all, but perhaps that is in the nature of Government policy making.

In the past, I have suggested that the Minister might, as he lies in bed at night, allow the following fact to gnaw away at him: he has admitted to me that the council tax burden, which is what we are talking about,

is precisely the same on the over-70s as it is on all pensioners because of the operation of the rebate system. Why should we highlight only the over-70s when the council tax burden is identical for the under-70s? Again, presumably because the Treasury only had so much money, and that was where the cut-off came.

As the Liberal Democrats are in an era of fiscal purity and corset-like financial discipline, I find spending even £20 million with gay abandon too much. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

I want to make a couple of more general points on clause 1. However, I would still like an answer to two questions. First, when did the Minister initially know about the proposal? Secondly, when did he realise or when was he told that it would need primary legislation? Perhaps we can return to those points more than once if we need to.

Apart from the age 70 cut-off point, one of the problems is the way in which people qualify. We will discuss that later. My amendment No. 9 did not make it through the filtering process. It proposed an alternative to the relevant week, which is the model for the winter fuel payments, by which a relevant week is selected, during which people qualify.

I assume that that is a throwback to the initial winter fuel payments, when it was a matter of measuring temperatures around the country. There was this bizarre notion that people could be up to their armpits in snow but would not qualify because, in the relevant part of the country on the relevant day, it was not very cold.

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

I think that that was the cold weather payment, which the former Prime Minister, John Major, got into some difficulty with during one very severe winter.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

That is right. It is good to be surrounded by academics, or ex academics—

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Economic Affairs

People who know what we are talking about, but who possibly do not know what real people are talking about.

The payment is a throwback to the cold weather payment. It is not immediately clear to Conservative Members—or to Liberal Democrats, as is apparent from their earlier amendments—why there should be a relevant week at all. The intention of my lamented amendment No. 9 was to ensure that if someone is 70 at some point during the relevant year up to the end of March 2005 they would qualify for the payment. That comes at the problem from a different direction. There is still a perceived unfairness as to why 69-year-olds do not qualify, but we have dealt with that. However, it would be fairer to say that if someone qualifies at any point within the given year, they should be able to claim the payment if it is going to be made.

On subsection (2), why do we have the relevant week at all, and why do we have it on these particular dates in September? Is that to do with the mechanics of how it is to be paid, or is there a special significance—a particular magic—to that week in September? We will come on to other qualifications, such as someone being in hospital and whether they have other people living with them, but I want to know the point of subsection (2) in its entirety. Does it add anything to what the Government are proposing? Would it not be fairer to make the proposal much broader? If they are going to stick to the 70 years position, why not just make it apply to anyone who is 70 at some point during the relevant financial year?

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

I promised the hon. Gentleman a letter on when I knew that the proposal would require primary legislation. I thought that I had sent it, but I now have a feeling that I did not, and if that is the case I apologise. We were clear before the Budget announcement, when these matters were being discussed with colleagues in the Treasury, that there might be a problem with how we could deliver the payment legally and that there might be a case for primary legislation, but we had to think through the legal options on that.

This is not an answer to the hon. Gentleman's question but, as he knows, our position on the relevant week follows that for the winter fuel payments. Essentially, it is about ensuring effective delivery. We promised to get the winter fuel payments out before Christmas with only a very few exceptions, and we promise the same with this. That means that we need to know who is eligible for the benefit some weeks in advance.

I used the phrase ''rough justice'' in the House recently, and I recognise that an element of rough justice is involved. If in the future it is possible to be more sensitive to individual circumstances, in principle it would be good to move in that direction, but I cannot promise that that will be easy to do, and there are always associated costs, often significant, to such moves. That is the rather boring but simple answer to the question of why we have to have a relevant week in September; it is about getting the money out.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.