HL Deb 24 April 1990 vol 518 cc425-6

Lord Donoughue asked Her Majesty's Government:

What percentage of notional interest on savings is assumed by the Department of Social Security when applying the formula for extra community charge rebates announced by the Chancellor in his Budget Statement.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, a tariff income from savings is taken into account when assessing claims for community charge benefit. No income is assumed to be received for savings under £3,000. For every £250, or part thereof, of capital between £3,000 and £16,000 a weekly income of £1 is assumed. The tariff income rules do not assume any particular level of interest on savings.

Lord Donoughue

My Lords, I thank the Minister for that reply. Bearing in mind that that formula assumes that an old couple or a single person with savings of £10,000 can secure a rate of return of nearly 15 per cent., and for those with the maximum savings of £16,000 it assumes a rate of return of nearly 17 per cent., will the Minister inform noble Lords in this House—some of whom may wish to draw benefit under the scheme—where they can secure such a rate of return? Secondly, will he inform the House whether the formula will be improved should interest rates and returns on investments ever fall?

Lord Henley

My Lords, as I said, we do not apply a particular level of interest. The noble Lord is quite correct in that for someone with savings of £10,000 the formula would imply a rate of return of some 14-9 per cent. to 14-6 per cent. Similarly, on savings of £16,000 it would imply a rate of return of 16-9 per cent. However, for someone with savings of £3,250 it would imply a rate of return of 1-6 per cent. I repeat that we do not use any particular level of interest.

Lord Strabolgi

My Lords, does the noble Lord agree that investment percentages of that kind are rather risky, as the investors in Barlow Clowes found out?

Lord Henley

My Lords, I thank the noble Lord for that comment. However, as I said, we do not assume any level of interest. We calculate the benefit on the basis of £1 per week for every £250 over £3,000.

Lord Stallard

My Lords, does the noble Lord recall that when the Chancellor announced the rebate scheme in the Budget he boasted that 250,000 people would benefit from the formula? Will he confirm that since then the DHSS has conceded that only 130,000 people will receive any benefit, most of whom will receive minimum benefit which will make little or no difference to their poll tax charges? Does he agree that the poorest households, which under the old rate rebate scheme paid nothing at all, will now have to pay 20 per cent. of the poll tax, at an average of £72 a year?

Lord Henley

My Lords, there will be some 70,000 gainers under community charge benefit among those with savings of more than £10,000. I do not have figures in front of me for those with savings of more than £8,000. Noble Lords will know that the limit for community charge benefit was increased from £8,000 to £ 16,000. Of those 70,000 community charge benefit gainers, approximately 50,000 will be pensioners.

Lord Carter

My Lords, the Minister said that the imputed return for a couple with savings of £16,000 is 17 per cent. If one deducts 8 per cent. for inflation that gives a real rate of return of 9 per cent. The Government's own requirement for the real rate of return on public investment is 8 per cent. Therefore, why are people on benefit expected to achieve a real rate of return on their savings of 12-5 per cent. which is greater than the Government's own target?

Lord Henley

My Lords, they are not expected to achieve any particular rate of return. I believe that the noble Lord is slightly confused. While that would imply a rate of return of 16-9 per cent. or 17 per cent., one should also take into account the taper. As noble Lords will know, for the community charge the taper is only 15 pence in the pound, and therefore for every £ 1 of income only 15 pence is taken off the community charge benefit. If that is taken into account the percentage comes down to 2-5 per cent.

Lord Williams of Elvel

My Lords, can the noble Lord help us with our investment programme? We are supposed to get a return of nearly 17 per cent. on our higher savings. Can the noble Lord very kindly tell us where we can achieve that rate of return?

Lord Henley

My Lords, the noble Lord will know perfectly well—and I believe that I have said this to him on a previous occasion when answering a Question about premium bonds—that it is not my job to advise the noble Lord on his investments.

Lord Williams of Elvel

My Lords, does the noble Lord therefore take my return as read?

Lord Henley

No, my Lords. I said that I was not here to advise the noble Lord.

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