§ Mr. Llew Smith (Blaenau Gwent)I am grateful to be able to bring before Parliament a major wrong that has been done to more than 21,000 victims of long-term industrial injury and disease, whose top-up pensions under the reduced earnings allowance have been cut by up to £30 a week. That represents 75 per cent. of their benefits. The cut is wrong also because it was made without consultation and because those concerned were promised that benefit, not just for a few years, but for life.
I return to this issue today because of an answer by the Under-Secretary of State for Social Security, my hon. Friend the Member for Southampton, Itchen (Mr. Denham), to a question tabled by my hon. Friend the Member for Cynon Valley (Ann Clwyd). He said:
Those affected by the transfer of over-pension-age recipients of reduced earnings allowance to the retirement allowance 16 months ago were harshly treated by the previous Government. Many people lost up to £30 a week in benefit with little advice or no advance warning, and without the transitional protection which we proposed at the time.Regretfully, however, we have concluded that we cannot remedy that injustice without breaking our election manifesto commitment to keep within current spending totals. We have also concluded that retirement allowance is the right benefit for those recipients who are over retirement age."—[Official Report, 28 July 1997; Vol. 299, c. 8.]As my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) correctly said in a short Adjournment debate, that reduction, experienced by some of the poorest pensioners, is equivalent to a reduction in the salary of Members of Parliament of £9,000 a year. Let us imagine the reaction if, at 3.30 this afternoon, the Leader of the House were to announce a reduction of that scale in hon. Members' salaries. I suspect that the House would be full to overflowing, and a few harsh words would be exchanged. I hope that similar sentiments can be expressed today.On the same day as that Adjournment debate, my hon. Friend the Member for Neath (Mr. Hain), who is now a Welsh Office Minister and was then a shadow Opposition spokesperson on employment, was quoted in The Guardian as saying that the cuts were
a pernicious attack on some of the most vulnerable, low income households.He added:The retrospective manner in which the changes have been applied must surely be open to legal challenge and may well, if necessary, have to go to the European Court of Justice.The Secretary of State for Social Security and Minister for Women, my right hon. Friend the Member for Camberwell and Peckham (Ms Harman), when she was the shadow Secretary of State for Social Security, told the South Wales Echo, after a meeting that I and other hon. Members attended in Blackpool about a year ago, that the reduced earnings allowance represented
for the individuals concerned, very large sums of money, but of course it is only a small sum of money out of the public purse. It really is one of those issues in which having a Labour Government can make a difference.To make that difference would cost the Government only £35 million a year, and that figure would decrease every year, because some of those who would receive the benefit are dying.868 The Trades Union Congress reminded us in a report that
One element of the industrial injuries scheme abolishing for injuries or ill health occurring after 1st October 1990, was the REA, designed partially to compensate victims of diseases and accidents who left their jobs to take lower paying employment, either because they were no longer able to keep up a heavy physical job, or because their condition would worsen if they stayed in the job which gave them their illness.The TUC report went on to state that the reduced earnings allowance
was particularly useful in encouraging people to leave such jobs, such as people working in noisy occupations whose hearing was deteriorating or asthma sufferers whose condition was likely to get much worse the longer they stayed in contact with the substance which caused their asthma in the first place.The REA thus helped to compensate for reduced pension rights. I agree with my hon. Friend the Member for Barnsley, West and Penistone, who ended his Adjournment debate speech by saying that, with the withdrawal of REA,
immense and needless suffering has been caused which I believe cannot be justified."—[Official Report, 21 June 1996; Vol. 279, c. 1182.]Time does not permit me to go into detail about the way in which the Tory Government decision of two years ago affected people over retirement age—that is, 65 for men and 60 for women. It resulted in REA being replaced by retirement allowance of only £9.53 a week.The new rules governing REA benefits which came into effect on 24 March 1996 mean that the only people who will continue to get REA over pension age will be those who work for more than 10 hours a week, and a small number of people who reached retirement age before 10 April 1989.
The implications of the changes were attacked by Opposition spokespeople in the short debate when Parliament scrutinised the regulations in May 1996. At that time, the Under-Secretary of State for Social Security, my hon. Friend the Member for Manchester, Withington (Mr. Bradley), was the social security spokesperson. He led the attack on the REA regulations and told the Conservative Minister, the former hon. Member for Monmouth, that the Labour party felt
strongly that there should have been much wider consultationover the changes. He promised that Labour would
continue to stress the anxieties felt by particular groups and the losses that they will suffer.My hon. Friend pointed out that it was a mark of the Conservative Government'sdiscomfort over the considerable public outcry about the changes that the Secretary of State has been forced to write to Members about this debate.He added that it showed
how important the debate is and how the Government's intentions have been received by the public.My hon. Friend highlighted the implications of the drafting of the REA regulations, which meant:Even when there is an intention to stay in regular employment, with just one day's sickness or unemployment, a person over pension age will lose all his REA entitlement and be forced to transfer to RA.He stressed the potential sexual discrimination in the regulations, whereby women would lose their benefit at 60 years of age, whereas men would continue to receive 869 the benefit until age 65. He suggested that that was contrary to the sex discrimination rules of the European Union.My hon. Friend concluded:
The detail is clear. The Government"—the Conservative Government—
Want to use the statutory instrument further to reduce the benefit for disabled people. The stark detail does not give the full colour and flavour of the anguish and problems that many people who fall foul of the benefit will suffer."—[Official Report, Fourth Standing Committee on Delegated Legislation, 8 May 1996; c. 3–7.]I agree with my hon. Friend's comments at that time. I ask now, as my hon. Friend the Member for Cynon Valley put it in her response to the Minister's oral answer on 28 July:
If it was wrong last year, why is it right this year?"—[Official Report, 28 July 1997; Vol. 299, c. 8.]In December last year the current Secretary of State for Social Security was told in response to a series of written questions that he had tabled on the implications of REA that information on the number and results of appeals made to social security tribunals against reductions arising from REAis not available and could be provided only at disproportionate cost."—[Official Report, 17 December 1996; Vol. 287, c. 534.]Can the Minister provide such data, in the spirit of openness that we would expect from new Labour?A year ago, on 14 November, John Monks, the general secretary of the TUC, issued a statement on the trade union response to the REA changes. He said:
This mean-minded move by the Government has come as a shock to many pensioners who were injured at work when younger. Their injuries will be with them for the rest of their lives and they thought the Government would stand by them. Ministers have broken faith with some of the most vulnerable pensioners in Britain, and they should make amends.It gives me no pleasure to say that I agreed with John Monks then and I do so today. If the Government can find, as they rightly did, £300 million from their defence estimate to invest in the national health service, surely they can find £35 million to invest in our pensioners—to give them back the money that was stolen from them.When my hon. Friend the Member for Withington closed the debate on the REA in Committee, he said that it had been "an interesting debate" and that the Government's response had been "appalling". I trust that no one will be able to express such negative views when the Minister responds today.
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§ The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham)I welcome this debate and the opportunity to explain this Governments' position on the reduced earnings allowance.
I appreciate the concern of my hon Friend the Member for Blaenau Gwent (Mr. Smith) and other hon. Members who are present about the hardship caused to many of their constituents by the changes introduced by the previous Government, and it is right and proper that the matter should be raised.
Let me make it clear that no one questions the hardship caused to those who lost income after they had retired, nor the particular impact in the mining and industrial areas 870 represented by my hon Friend. I shall set out the background to the present position and explain the outcome of the Government's review.
The previous Government made changes to the regulations which transfer over-pension-age REA recipients to the lower-rate retirement allowance. Those changes came into force on 24 March 1996 and were introduced with very little warning to the people affected.
Our Government shared the concern that was widely felt about the effect on those people. Following a commitment given by my right hon. Friend the Secretary of State for Social Security at the 1996 Labour party conference, I told the House on 2 June that the Government would review the arrangements for the transfer of over-pension-age REA recipients to RA.
We carried out a thorough review of the changes, as we were bound to do, and we considered carefully whether REA could be restored in any way to the people affected.
On 28 July I announced the outcome of the review. We concluded that RA is the appropriate benefit for those recipients who had retired, and that we could not restore REA to those recipients affected by the change, without breaking our manifesto commitments to keep within current spending totals and without creating anomalies. We did recognise that it was essential to improve the way in which we handle those people who currently receive reduced earnings allowance and who have not yet retired.
As my hon. Friend said, REA is an industrial injuries benefit that is paid to employed earners who, because of an industrial accident or disease, cannot return to their regular occupation and suffer a loss of earnings as a result. The previous Government replaced special hardship allowance with REA from October 1986. SHA was basically the same as REA, but was an increase of industrial injuries disablement benefit rather than a stand-alone benefit. The maximum rate of REA payable is currently £40.44 per week.
When first introduced, REA—like SHA before it—continued to be paid after recipients had retired. In April 1987, the previous Government took the first of a number of steps to restrict the amount of REA paid to those recipients who had retired—that is, those over pension age who were no longer working. For those REA recipients who had retired by 6 April 1987, the rate of REA was restricted to the rate in payment at that time. REA was then frozen for those recipients who had retired by 10 April 1988 and again at 9 April 1989. As my hon. Friend said, those recipients are paid at the protected rates for life.
The previous Government then introduced retirement allowance on 10 April 1989 for all other REA recipients upon retirement. An REA recipient who reached pension age on or after 10 April 1989 and retired, transferred from REA to the lower-rate retirement allowance. Retirement allowance is payable at 25 per cent. of the rate of REA last in payment, subject to a maximum—currently £10.11 per week.
The legislation to transfer over-pension-age REA recipients to RA did not work as the previous Government had intended. Many over-pension-age recipients who were no longer working were not transferred to retirement allowance. The legislation provided that REA recipients must first attain pension age and then give up regular employment in order to be transferred to retirement 871 allowance. That meant that someone who retired only a few days before attaining pension age could not be transferred to retirement allowance. Thus there was inequity of treatment. Some 15,000 people were transferred to retirement allowance, but 20,000 others in similar circumstances could not be transferred due to the way in which the legislation was framed.
The effect of the changes made by the previous Government on 24 March 1996 meant that only those over-pension-age REA recipients who were still in regular employment would continue to receive REA. Regular employment is defined in the regulations as at least 10 hours' work a week, averaged over five weeks. This meant that all those receiving REA who were over pension age on 24 March and no longer in regular employment were transferred to the lower-rate RA from 31 March 1996. Other REA recipients would transfer to RA either when they attained pension age or when they gave up regular employment, if that occurred after they attained pension age.
The Benefits Agency reviewed 20,000 REA recipients who were over pension age on 24 March 1996, and 19,600 of those recipients were transferred to retirement allowance. A further 4,000 REA recipients who reached pension age between 25 March 1996 and March 1997 have transferred to retirement allowance.
In the south Wales valleys district—the area that dealt with disablement benefit at that time for a large part of south Wales, including my hon. Friend's constituency and several other constituencies—1,169 REA recipients were identified who were over pension age before March 1997. Those cases were reviewed and only one was not transferred to retirement allowance.
As I acknowledged when I made my announcement on 28 July, many people were treated very badly by the previous Government because they were given little or no warning that their benefit would be reduced by about £30 a week. I fully recognise the concerns that have been expressed again today. Some reduced earnings allowance recipients who had been told that they had been awarded REA for life, or for a long forward period, were transferred to retirement allowance by the changes. Recipients had been given life awards because, as the law stood then, they could not be transferred to retirement allowance.
However, awards of benefit are always made subject to the conditions of entitlement continuing. Any award can be reviewed if the recipient no longer meets the conditions of entitlement set out in the regulations in force at that time. For over-pension-age reduced earnings allowance recipients to continue to receive REA, they must be treated by the regulations as continuing in regular employment. I shall return shortly to the position of those who may have been offered further unconditional assurances about payment of REA.
As my hon. Friend mentioned, there have been hundreds of appeals to social security appeal tribunals against adjudication officers' decisions to transfer the over-pension-age reduced earnings allowance recipients to retirement allowance. Many of those cases were awaiting the outcome of two appeals to the social security commissioners. On 28 May, the commissioners decided the cases and confirmed the adjudication officers' 872 decisions to transfer REA recipients to retirement allowance. We believe that the claimants may appeal that decision in the Court of Appeal. Other cases awaiting social security appeal tribunal hearings should now be heard.
My hon. Friend asked about the information that is available on the treatment and outcome of several appeals. That issue has not been raised with me before now, and I shall look into it. However, I cannot be certain that I can provide the answers that my hon. Friend seeks.
As I have mentioned already, we announced on 2 June that we would review the REA position. We quickly carried out a thorough review of the transfer of over-pension-age REA recipients to retirement allowance, and I announced the outcome to the House on 28 July. Our first conclusion was that retirement allowance is the appropriate benefit for those REA recipients who are over pension age and have retired from regular employment. It is not appropriate to compensate someone for a loss of earnings who would not be working even if he or she was not disabled.
We recognise that many of the 24,000 REA recipients who were transferred to retirement allowance feel that they were treated unjustly. We considered, as part of the review, restoring REA or giving transitional protection to those recipients who had been affected by the changes. Leaving aside for one moment the real problems of public spending—I must return to them later—we should recognise that action would create its own problems.
If REA were restored to all those recipients affected by the changes, the previous differences in treatment between those who had and had not been transferred to retirement allowance would be restored. The 15,000 over-pension-age REA recipients who had already been transferred to retirement allowance before the March 1996 changes were made would continue to be treated unfavourably compared with those in similar situations who were not transferred to retirement allowance until the March 1996 changes were made.
Those changes were made 18 months ago. There would be similar difficulties and unfairness if we now sought to give transitional protection to those people who lost REA. These are real difficulties but, fundamentally, I ask my hon Friend to recognise that he and I were elected on a manifesto that committed this Government to keeping within the current spending totals.
§ Ann Clwyd (Cynon Valley)I recognise the difficulty facing my hon. Friend the Minister in putting his case. However, I remind him that there have been spending adjustments in Departments—an extra sum has been found in the Department of Health to try to avert the crisis that may be imminent in the health service this winter. I think that most people recognise the injustice—which was again drawn to our attention by my hon. Friend the Member for Blaenau Gwent (Mr. Smith) this morning—of what happened to people last year. Although I recognise that that action was taken by the previous Government, surely some adjustment can be made in the Department of Social Security to take account of the injustice that has been done to the people whom we represent.
§ Mr. DenhamI have made it clear that that injustice is not the subject of today's debate. We must take account 873 of the pressures on Government spending and the importance of those commitments in all our decision making. We would all welcome decisions to increase investment in the health service this winter, but not every pressing demand on the Government can be met within the prudent spending limits that we have quite rightly adopted.
§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)I apologise for interrupting my hon. Friend. He continually rests his case on the election manifesto commitment on public expenditure, but, as my hon. Friend the Member for Cynon Valley (Ann Clwyd) reminded us, the Secretary of State, when shadowing this responsibility, said very clearly to a deputation of hon. Members that this was an issue on which a Labour Government really could make a difference.
§ Mr. DenhamWe have followed through that discussion by keeping our commitment to have a review—the announcement that I made in June. If I may, I would like to make some progress to explain the action that we have taken.
We estimate that to restore REA to all those people affected would cost around £45 million a year gross, about £40 million after allowing for offsets. This could be found only by cutting support for others in need. The overriding need for prudent public spending and to meet our priorities to improve education and health services means that we are not in a position to tackle every hardship and injustice caused by the previous Administration. We have concluded that it would not be possible to restore REA or provide retrospective transitional protection.
However, as I have said, many of the 24,000 REA recipients who transferred to retirement allowance following the March 1996 changes were treated very 874 badly by the previous Government. It was harsh that they received very little warning of the reduction in their income of about £30 a week. That caused many pensioners considerable financial hardship. We are determined that REA recipients who transfer to RA in the future are better prepared than those who transferred under the previous Government. We have arranged for the Benefits Agency to write to all REA recipients to give them sufficient warning that they will suffer a reduction in their benefit when they attain pension age if they are not working. This will enable them to plan for their future.
As my hon Friend said, there may be individuals who have received a notice that an award of REA would continue to a particular date or for life who can show that the Benefits Agency made a mistake in giving them a further unconditional assurance that the award would continue for that period. In such circumstances, the individual may be able to get help under the Department's special payment arrangements, which offer financial redress in cases of maladministration. As the unconditional assurance should not have been given, an exgratia payment can be considered in these cases if the individual can show that he or she has undertaken an on-going financial commitment based upon the unconditional assurance.
This is a most regrettable situation which we inherited from the previous Government, but I hope that my hon. Friends will appreciate why we are not able to restore REA to those unfortunately affected by the changes without adequate warning. I hope that they will recognise also the steps that we have taken to ensure that, in future, REA recipients will be given sufficient warning of the position when they reach pensionable age.
§ Sitting suspended.