Clause 21

– in a Public Bill Committee at 9:15 am on 26th February 2009.

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State pension credit: pilot schemes

Photo of Paul Rowen Paul Rowen Shadow Work and Pensions Minister

I beg to move amendment 60, in clause 21, page 30, line 16, after ‘credit’, insert ‘and Carer Addition.’.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss amendment 61, in clause 21, page 30, line 18, after ‘credit’, insert ‘and Carer Addition.’.

Photo of Paul Rowen Paul Rowen Shadow Work and Pensions Minister

The clause deals with state pension credit, and we welcome its provisions, which introduce the possibility of pilot schemes of up to two years to increase the uptake of pension credit. The clause allows regulations to be made, permitting the payment of a state pension credit without a claim being made, and with modified rules concerning how the entitlement is to be determined. The success of such pilots will be judged on whether there is an increase in individuals claiming and receiving state pension credit. The pilots will last for up to 36 months.

The benefit, which was introduced to raise people above the poverty line, is failing due to a lack of uptake. It has increased, but after many years confusion about the pension system remains, and that is exacerbated by the complex bureaucratic forms that pensioners must fill out, and the means-testing to which pensioners are subject, in order to receive their benefits. The system does not deal with the needs of pensioners, as half of people over 65 years old do not like or seek financial advice. Indeed, Citizens Advice figures for 2006-07 showed that only 10 per cent. of its clients were over 65—half the percentage of pensioners over that age as a proportion of the total population. Without essential advice, those who need pension credit—vulnerable individuals—do not get it, because they are unaware of their rights.

There should not be any means-testing for pension benefits, because the system puts off older people from applying for certain benefits, and they end up losing in other areas. Uptake of pension credit is also further diminished by the fact that one in eight pensioners have still not heard of pension credit. These problems have, we estimate, led to £2.37 billion of pension credit going unclaimed. As such, each person loses on average £26.40 in unclaimed pension credit, an amount that could make a huge difference to people’s lives. Up to £5 billion of other essential benefits for older people are never claimed either, and against that background the clause is welcome because it seeks to extend state pension credit and to ensure that those who, for one reason or another, are not prepared to navigate the complex web of forms receive state pension credit.

The amendments would extend the pilots to include carer’s allowance in the pension credit scheme to ensure that carers who are entitled to pension credit are automatically assessed for entitlement to carer’s addition, which provides £27.75 in addition to the pension credit. If the automatic assessment is based only on income, some older carers may be left out when they would be entitled to pension credit if their caring responsibilities were known.

At present, carers must apply for carer’s allowance to receive the carer’s addition, which cannot be paid alongside the state pension, and then reapply for carer’s addition.  That process would be much simpler if the carer’s allowance was integrated with the pension credit pilots. We welcome the pilots, but we hope that the Government will accept that it is sensible to include carers in the amendment.

Photo of Tony McNulty Tony McNulty Minister of State (Employment and Welfare Reform; Minister for London), Department for Work and Pensions 9:30 am, 26th February 2009

May I say—I forgot to do so earlier— what a glorious pleasure it is to serve under your chairmanship, Mr. Amess? In my juvenile approach to these matters, I hurried along on the first amendment in the hope, which subsequently proved to be reasonable, that the hon. Member for Rochdale would not be here to move his amendment 63. I actually think he rather wishes that he had arrived a bit later.

I welcome the hon. Gentleman’s welcome, but let us be clear. There is already a question on the pension credit form about whether the applicant is in receipt of carer’s allowance. There is no such thing in law as carer’s addition. The amendment’s effect would be that we could not in any circumstances automatically carry out the pension credit pilots that the hon. Gentleman welcomes. There is no such thing in the parent Act or other legislation as carer’s addition. I am sorry to be pedantic, but I can only work with the words that the hon. Gentleman used in his amendment. It is clear that he would not welcome exactly what the amendment would do.

I broadly accept what the hon. Gentleman says. Of course there are issues with take-up, but I do not agree entirely with his rather strangulated description of pension tax credit and take-up in the first instance. He seems to want to give the Royal Bank of Scotland chairman pension credit, regardless of the proper use of public funds. He seems to want every millionaire and everyone else who manages to reach the appropriate age to receive pension credit. That is not the best use of public resources. We are targeting the poorest pensioners, and that is entirely the right way to go.

There is no separate carer's addition. Pension credit provides an additional amount for older people who are also carers, but it is not separate from the pension credit entitlement; it is part of it. The amendment would not do what the hon. Gentleman wants it to, but would achieve the opposite, and we would not be able to get on with the automaticity pilots that he seeks and welcomes. I ask him in the nicest possible way to withdraw his amendment because it would not achieve what he wants.

Photo of Paul Rowen Paul Rowen Shadow Work and Pensions Minister

I listened carefully to the Minister, but Carers UK states in its briefing:

“Approximately 240,000 pension credit claimants received the Carer Additional in May 2008. Out of a total of 2.7 million pension credit claimants, this is nearly 10 per cent.”

Is the Minister saying that Carers UK is wrong?

Photo of Tony McNulty Tony McNulty Minister of State (Employment and Welfare Reform; Minister for London), Department for Work and Pensions

No, I am not. I thought that I had made that clear. The carer’s addition, which is an additional payment to pensioners who are also carers, is part and parcel of the pension credit. There is no separate legal entity under law in the State Pension Credit Act 2002 or any previous Act, so the amendment drafted by the hon. Gentleman—not the carers’ association—is completely perverse in terms of the ends that he seeks to achieve. I would rather he quit while he is ahead, withdraw the amendment and let us get on.

Photo of Paul Rowen Paul Rowen Shadow Work and Pensions Minister

I am grateful for that clarification and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

I beg to move amendment 20, in clause 21, page 31, line 10, at end add—

‘(3A) Within six months of the expiry of the specified period referred to in subsection (1), the Secretary of State shall lay before each House of Parliament a report on the operation of the state pension credit pilot schemes established under these provisions.’.

We share the objective of seeking to ensure that pensioners receive what they are entitled to, and we are aware of the issues with take-up of pension credit which have been well ventilated on several occasions in the past, certainly by Members on this side of the House. The purpose of the amendment is to seek more information about how automaticity will work in the case of pension credit, because there seems to be a lack of specificity in some of the details in the Bill.

The regulation-making power that the Government are taking is wide-ranging but unspecific as to who exactly will be subject to it, other than that automaticity will be piloted in

“one or more specified areas”.

We believe that the areas will be relatively small in terms of population—around 2,000 people in each case—but the Minister will no doubt correct us if we are wrong about that. We would like to know whether all pensioners eligible for pension credit will be subject to automatic payment of pension credit in the areas where it is being piloted. If they are not, we would like to hear from the Minister what the criteria are by which pensioners will be selected for automatic delivery of pension credit. We wait to hear more details on that, and if pensioners will be selected we would like to know whether matters such as age will play a part in the selection.

We would like to hear more details about how the piloting will work in the pilot areas, how pensioners will be selected or whether there will be selection at all, and when the pilots will begin and exactly how long they will last in each case.

Photo of Tony McNulty Tony McNulty Minister of State (Employment and Welfare Reform; Minister for London), Department for Work and Pensions

Those are all perfectly reasonable questions. The hon. Gentleman is right that the pilot schemes are likely to be fairly small in scale and of limited duration. He will know that the clause allows for regulations that will be forthcoming—we hope as soon as possible—after Royal Assent which will discuss in detail exactly how the pilots will work and how they will be designed and evaluated.

The Bill refers to

“one or more specified classes of person” which will allow us, following further analysis and design, to target absolutely everyone in a small area as defined simply by age, or to target cohorts within the group. There will subsequently be many more details provided through regulations, and a chance through our usual processes to discuss them thoroughly.

The notion of automaticity is appropriate. With the best of intentions, many people, including lobby groups, decided that it was somehow not in their interest or in the interest of pensioners to encourage take-up because of—quite naturally—the view that somehow pension  credit is charity, and something with which pensioners should not get involved. The opposite is the truth, and it is an entitlement that all pensioners should at least be able to afford themselves of.

Given that the specifics of the amendment are likely to be small in focus and duration and that there may well be—we have yet to determine—a series of pilots in which one pilot learns from the other in a cumulative sort of way, the notion of putting in place a backstop at six months is probably not the best way forward. There will be evaluations of the pilots, which I can guarantee will be published. Therefore, via Pepper v. Hart, the assurance that the hon. Member for Hertsmere wants is covered in that regard. The Bill is about securing the principle and enabling the legislation to allow us to do that. Details of scope and duration are still to be determined, but we can discuss them more fully in regulation.

Photo of James Clappison James Clappison Shadow Spokesperson (Work and Pensions)

I am grateful to the Minister for his assurances. As I said in my opening remarks, we saw this as a wide-ranging power, and the Minister’s remarks have confirmed that. We were seeking to elicit information about it to scrutinise what the Government are proposing. We shall continue to do so when we look at the regulations as and when they are made. Moreover, we want to scrutinise the evaluation of the pilot schemes as and when that is published. I am grateful to the right hon. Gentleman for making it clear that they will be published.

On the basis that we will know a bit more about this in the future, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.