Reduced Earnings Allowances (Hansard, 23 July 1996)

§ 6. Ms Quin
To ask the Secretary of State for Social Security what recent representations he has received about changes in reduced earnings allowances. [36961]

§ 14. Mr. Morgan
To ask the Secretary of State for Social Security what recent representations he has had in relation to the implementation of the reduced earnings allowance rule. [36969]

§ The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)
A number of hon. Members have written to Ministers about these changes.

§ Ms Quin
Does the Minister appreciate the distress and hardship that has been caused to many people who have come to rely on this allowance? In my constituency surgery, male pensioners have broken down in tears as a result of the changes. At the very least, could not some transitional help be made available to such people?

§ Mr. Evans
I fully appreciate and accept the argument that those who have had the benefit altered are affected adversely by that and are not happy with it, but the position is clear. Reduced earnings allowance is to compensate for reduced earnings, and retirement allowance is to compensate for a reduced retirement pension. The intention of Parliament in 1988 was that, when people passed pension age and ceased to be in regular employment, they passed from one allowance to the other, but the way in which the rules operated were arbitrary and unfair, and a number of people who, for excellent reasons, under the arrangements as they were, have lost reduced earnings allowance and passed to retirement allowance, might fairly complain that some have gained and that they have lost. We have made the scheme reasonable and consistent.

§ Mr. Morgan
Does the Minister agree that British citizens such as my constituent, Reg Beck, had the right to expect that, when they were told that they would receive reduced earnings allowance for life, that meant for life—not that it would suddenly be cut off in March 1996 by this gimcrack and mean legislative change?

§ Mr. Evans
Reduced earnings allowance should never have been awarded for life. There are only two circumstances in which that can have happened.

§ Mr. Flynn
What did the Minister say on "Welsh Lobby"?

§ Mr. Evans
I shall come to "Welsh Lobby" in a moment.
One is when a party had retired before pensionable age and, due to the defects in the rules, could never thereafter pass from one allowance to the other. A number of persons in that category have been so notified. We are also aware of a small number of cases in which the Benefits Agency has erred. There is a scheme for compensation for official error if financial loss can be shown to have arisen directly from it.

§ Mr. Harry Greenway
I welcome the scheme announced by my hon. Friend for rectifying official errors, but does he agree that on this question the Opposition are shedding crocodile tears? When will he take into account their intention, if they are ever elected, to get rid of child benefit for children between the ages of 16 and 18? As always, they say one thing and do another.

§ Madam Speaker
Order. Supplementary questions must relate directly to the main question. This is a serious issue.

§ Mr. Wigley
Is the Minister aware that I have in my hand a letter from his Department to a constituent of mine giving a categorical assurance in black and white that he would receive reduced earnings allowance for life, and that he, like countless others, has undertaken his financial planning on that basis? Given what the Minister has said, and what has been said on the "Welsh Lobby" programme, will he now give an undertaking that everyone, but everyone, who has been losing money under the changes will now receive compensation for those losses?

§ Mr. Evans
Ministers have made it clear that each case that is put to us will be looked at most carefully. 134 [HON. MEMBERS: "What does that mean?"] It means that we shall examine what was said and, if there is a proper basis for saying that the Benefits Agency has made an official error and that there has been reliance upon it, there is a scheme for compensation, but each case will be looked at on its merits.

§ Mr. Bradley
May I press the Minister further on that point? Did he say on television that, where the reduced earnings allowance has caused hardship, he will review those cases? What criteria will he use to do that? What level of hardship must have applied? How much money will he put forward to ensure that hardship can be alleviated for the hundreds of people who budgeted to receive the reduced earnings allowance for the rest of their lives?

§ Mr. Evans
Some 4 million files are in the process of being looked through and carefully reconsidered, because the test as to whether someone received one allowance or the other after retirement was not working properly under the old regulations. We estimate that about 2,500 people, to whom compensation in the region of about £10 million will be paid, were wrongly transferred under the old arrangements from one allowance to retirement allowance. Every case will be looked at to see whether that happened.
There are, however, a small number of cases—I stress that it is a small number of cases to our knowledge—where, wrongly or because of an unusual application in certain circumstances of the old regulations, people have grounds for concern that they were promised in writing that they would receive the reduced earnings allowance for life. There is a well-established scheme for compensation if official error can be shown and it can be shown that financial loss has arisen as a result.
The interesting question, which the hon. Gentleman did not address, is that the cost of reversing the new regulations would be £25 million this year, and £35 million next year and thereafter. Has the Labour party pledged to alter these changes?