Benefits Uprating (Hansard, 28 November 2001)

HL Deb 28 November 2001 vol 629 cc311-28 311

§ 3.45 p.m.

§ The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)
My Lords, with the permission of the House, I should like to repeat a Statement on the annual uprating of benefits and pensions, on the pension credit, and on new measures to help more people into work.
"As a result of the reforms we have made, we are able to do more once again to provide greater security for those who are unable to work, and who are retired. And this year, we will again increase some benefits by more than the usual uprating.
"We are also making fundamental reforms to reward savings. I will set out how the pension credit provides a radical departure from the social security system we inherited, and I will announce further measures to provide greater employment opportunity for those who can work.
"First, on uprating, most national insurance benefits will rise in the normal way by the retail prices index, which is 1.7 per cent, and most income-related benefits will rise by the Rossi index, which is also 1.7 per cent. Details will be placed in the Vote Office and will be published in the Official Report.
312 "We are already doing more to help parents, so that families can balance their work and home lives. That is why, in this uprating, the standard rate of maternity allowance and statutory maternity pay will rise from £62.20 up to £75 next April—the largest increase in maternity benefit since 1958, helping around 340,000 families a year—and in 2003 it will go up again to £100 a week.
"In addition, the Sure Start maternity grant will rise from £300 to £500 next year. In 1997, a new mother on income support would have received just £100 to pay for essential items; from next year, she will get £500—a substantial increase for mothers on low incomes.
"This year, we want to do more to help families who are bringing up children with disabilities. When we came into office, the extra money paid to low income families with a disabled child was just £21 a week. Last year, we increased it by more than £7 a week.
"This year, I can go further. I propose to increase the disabled child premium by another £5 a week, on top of the normal uprating, to a new rate of £35.50. In 2003, it will rise again by £5 over and above inflation—to more than £40 a week on top of basic income support or tax credits. That will benefit around 80,000 children. That is extra help where it is most needed, for families on low incomes—both in and out of work—with disabled children.
"There is one further change I want to announce today. In the past, people with the most severe disabilities found that if they or their partners were in work, often against all the odds, they lost entitlement to the independent living fund, which pays for their essential care.
"So I can tell the House today that from April next year the earnings of disabled people and their partners will no longer be taken into account in the independent living fund—worth an average of £130 a week to those families. At the same time, we will increase the capital limits, in relation to the fund, to extend help to people with savings of up to £18,500.
"We are also determined to boost pensioner incomes. In 1997, the poorest pensioners were expected to live on just £68.80 a week. Last year, we increased the minimum income guarantee to £92 a week. From April next year, the minimum income guarantee for a single pensioner will rise by £6 to £98.15 a week. That is an increase of £23 a week for the poorest pensioners, over and above inflation, since we came to office. For couples, the new rate will be £149.80.
"To ensure that all pensioners share in the rising prosperity, I confirm that the basic state pension will rise by £3 in April, and by £4.80 for married couples. The widow's and bereavement benefits, which, because of the changes that we made in 1998, are now paid equally to men and women, will also rise by £3. As we promised in our manifesto, the basic state pension will remain the foundation of retirement income, which is why we have announced 313 guaranteed rises for the future of at least £100 a year on the basic state pension for single pensioners, and at least £160 a year for couples.
"We also promised to do more to reward pensioners who have saved for their retirement. A year ago, I published a consultation document, which set out our proposals to reward thrift. Today, I am publishing our response, setting out how the pension credit will work. Copies are available in the Vote Office. Tomorrow, I shall also publish the pension credit Bill.
"All of us have met pensioners who struggled during their working lives to put something by for their retirement and who then found that they were little or no better off than people who had saved nothing. The pension credit will make sure that, in future, it pays to save.
"The pension credit works in two ways. First, it will bring pensioners' entitlement up to a guaranteed minimum level of at least £100 a week in 2003, or £154 for couples, and rising in line with earnings for the rest of the Parliament.
"Secondly, it will provide an additional top-up to reward pensioners aged 65 or over who have saved for their retirement. Pensioners with modest second pensions and savings will get more as a result of their thrift.
"There is a further change that is essential to reward savings. We will abolish the rule that excludes pensioners with £12,000 or more in savings from any help. There will be no upper savings or capital limit. Instead, we will introduce a fairer system for taking into account income from savings.
"Around half of all pensioners will stand to gain from the pension credit: more than 1 million pensioners from raising their guaranteed income; and more than 4 million pensioners from the savings reward, and the improvements to the rules on the treatment of savings. Two-thirds of those who stand to gain from the pension credit are women, and half of those are over the age of 75. On average, pensioners will gain £400 a year, with some getting up to £1,000 a year. That is the difference that the pension credit will make.
"Any pensioner with income below around £135, or couples with an income below £200, will see their hard-earned savings rewarded with extra money, not penalised as in the past. We are also making it easier for pensioners to get all their entitlements. Last year, I said that we would end the weekly means test and the endless form-filling—and we will. The pension credit will be calculated at the same time as the basic state pension when people retire. In most cases we will reassess the income of those over 65 only every five years—not every week, every month or every year. Each year, they will see an automatic rise in their pension credit, after the uprating, and taking account of any changes in their second pensions.
314 "The pension credit will increase the guaranteed income, it will end the weekly means test and it will reward thrift. It will remove an injustice in the system. For the first time, it will pay to have saved, even modestly. More than 5 million pensioners stand to gain.
"I now turn to employment. Over the past four years, we have introduced more help than ever before to make work pay and to make work possible. Today, I am also publishing a paper with my right honourable friend the Chancellor, which demonstrates the need to provide more employment opportunities to those who have missed out in the past.
"The analysis shows clearly what happened when we did not have a system that actively helped people into work and when the Government took a hands-off approach to unemployment, leaving it to chance. Between the 1970s and the mid-1990s, the number of lone parents and sick and disabled people on benefits trebled. A whole generation was written off.
"Three immediate conclusions follow from that paper. First, we need to do more to help everyone of working age to get into work wherever possible. That is why we are extending the single gateway to the benefits system—Jobcentre Plus—across the whole country starting next year. Everyone of working age will have work-focused interviews to help them into jobs wherever possible.
"Secondly, when people lose their jobs, the evidence shows that the quicker we intervene, the quicker people will get back into work. As the Chancellor set out yesterday, our economy is well placed to deal with global uncertainty and the labour market is in a stronger position than for a generation. However, when people lose their jobs and when there are redundancies, we need to take action quickly. There are jobs available. Every month, half a million people enter work or change jobs.
"We need to do more to match people with the vacancies that employers are trying to fill—the 10,000 vacancies notified to the Employment Service every working day. Today, I can announce that I am allocating an additional £6 million over the next 2 years to the rapid response service, which offers prompt help to people who have been made redundant. The money will be used by each region to put together the right response for people in their communities, making sure that people affected by redundancy have the information and help they need to find new jobs. They will work to match people's existing skills to those needed by new employers and they will make sure that retraining is available to help people move into new industries.
"Thirdly, we now have the lowest unemployment level for 25 years, but there are still people who need extra help to take up available jobs in their areas. Over the past four years, the New Deal has established a new welfare contract, with more help and support than ever before, in return for greater responsibility on the part of individuals to help themselves.
315 "Today, I can announce a further measure, building on the New Deal, for long-term unemployed people who need more intensive help to get into work. Such people may have gone through the New Deal and still have not been able to find a job. We will guarantee those who qualify a full-time job, lasting up to a year and paid at the national minimum wage. They will have the same employment rights and they will be entitled to the same in-work benefits as anyone else. In return, it is not unreasonable to require people to take up that opportunity. We aim to give people a choice of job, but they will not be able to turn down all offers arid remain on benefit.
"We will start this approach in six places from April next year, in areas within Sheffield, Cardiff, Oldham, Sunderland, Lambeth and East Ayrshire. We will follow those with a second group over the summer, covering areas within Leeds, South Manchester, Sandwell, Bristol and Greenwich. In the autumn, there will be further pilots within Hackney, Great Yarmouth, Knowsley, Rotherham and Coventry, with provision starting by the end of the year in Burnley, Wrexham, Dundee and Bradford. I will be writing to honourable Members in all 20 areas, asking them to become involved.
"These are jobs that we will pay for, working in partnership with employers, local authorities and organisations with experience in offering intermediate labour market opportunities. It is an investment of £40 million to equip 5,000 people who are currently long-term unemployed with the skills, the support and the experience of work that they need, as a stepping stone to jobs in the local labour market.
"Britain's unemployment level is the lowest since the 1970s. The New Deals have helped hundreds of thousands of people into work. We are determined to ensure employment opportunity for all, including those who have missed out in the past. These measures will help us to do that.
"We are doing more to help people into work and to help those who cannot work and we are making sure that, for the first time, pensioners are rewarded for their savings. I commend this Statement to the House".
My Lords, that concludes the Statement.

§ 4 p.m.

§ Lord Higgins
My Lords, I am sure that the House will be grateful to the noble Baroness for repeating the Statement. As it concerns pensions, I should declare an interest as chairman and trustee of an occupational pension scheme.
There are certainly a number of aspects of the Statement that should be welcomed, particularly the proposals on disabled children's benefit, the changes in the independent living fund and the change with regard to capital limits. All of those are welcome.
I had intended to begin with what is almost a traditional remark by saying that the good news was announced by the Chancellor yesterday and that the bad news was announced by the Secretary of State 316 today, in the sense that the Chancellor normally announces the benefits and the Secretary of State announces the increases in national insurance contributions that are used to finance those benefits. Clearly, my previous remarks have been taken into account by the Secretary of State because there is no mention of the cost of the increases that the noble Baroness has announced. Are we to understand that there will be no increase in national insurance contributions? If some are to be made, no doubt the House would wish to know.
The policy has changed on the basic pensions uprating. Two years ago there was an increase of only 75p—a matter that caused enormous agitation. Immediately ahead of the general election, that was suddenly increased to £5. As the next general election is not immediately pending, this year's increase is only £3. However, an overall guarantee has been announced that the annual basic state pension will rise by £100 for a single pensioner and £160 for married couples in 2003. Subsequently, the basic pension will rise each year by 2.5 per cent or by the increase in the retail prices index, whichever is the greater. That provided the Chancellor with a very good sound-bite yesterday.
We have just been told that the basic state pension will form the foundation of retirement income, as stated in the manifesto. Will the Minister confirm that that increase is irrelevant to the large number of people on minimum income guarantee? They will have a separate arrangement.
In that respect, is it not the case that the proposals announced by the Minister will result in more and more erosion of the importance of the basic state pension because the basic state pension is not rising as fast as the minimum income guarantee? The effect will be more and more means-tested benefits. In the light of those proposed changes, will the noble Baroness say what percentage of pensioners she expects to be on means-tested benefits in the period she has described, compared with the figure in 1997? There has clearly been a substantial increase in means testing, with the corresponding effect on the incentive to save and so on, although that will be ameliorated to some extent by the pension credit, to which I shall come in a moment.
Is it not also the case that although the Chancellor keeps increasing benefits, many people do not claim them because they do not understand the benefits to which they are entitled? Two years ago, Age Concern suggested that about 750,000 people were not taking up the income support to which they were entitled. Can the noble Baroness say what percentage will not take up the improved benefits that the Chancellor has announced?
I fully accept that the noble Baroness has been seeking to deal with the take-up problem. We are now told that there is a new form for applying for minimum income guarantee, which instead of being 40 pages in length is 10 pages. Some aspects of it are rather curious. A question in Part 2 asks: Does your partner agree to you making this claim?". 317 If the answer is "No", the form states: Please still tell us as much as you can about your partner". It does not add the usual caveat to use an extra sheet of paper if necessary.
While it is true that the document has been chopped from 40 to 10 pages, a helpful leaflet has been attached to it—amounting strangely enough to 30 pages—saying what the document is all about. It is all very confusing, so there may still be problems of complexity, which bedevil the whole system.
The Chancellor of the Exchequer and the Secretary of State have become obsessed with a multiple system of tax credits. One must wonder how many people actually understand the system. I have always taken the view that both the Chancellor and the noble Baroness do, although I am beginning to wonder even about that. We should consider what has happened since 1999 when five new tax credits for families were proposed. The Chancellor decided to scrap three of them and he then added another two. I rather doubt whether even the noble Baroness could say exactly straight off the top of her head what those five were, which three were scrapped and which two were added. She is looking a little puzzled, but if the noble Baroness does not understand these matters, it seems highly likely that no one in the country does so.
The serious point to be made is that the system has become more and more complicated. It will be further complicated by the pension credit. While one welcomes the fact that those with savings, within a very narrow band of incomes, will get some benefit, as against having it taken away totally because they are on means-tested benefits, none the less the pension credit system will extend means testing still further.
It was pointed out in one of the weekend papers that, under the pension credit, for every pound of income above the basic state pension, which is £77 up to the level of the minimum income guarantee of £100, an elderly person would receive an extra 60p. Once that total income, including the pension had reached £100, the top-up would immediately be reduced by 40p for every extra pound of income. The marginal rate of tax will therefore be 40 per cent.
Will the noble Baroness explain the position of a pension credit recipient who has income above the full basic state pension and other benefits? I understand that the marginal rate—or tax rate—of withdrawal of benefit will be an effective rate of 52 per cent when the recipient receives council tax benefit, 79 per cent if he receives housing benefit and 91 per cent if the recipient receives both of those benefits. No doubt we can consider those matters at Second Reading and beyond after the Bill is published. It is worrying that this kind of structure is being constructed. We shall examine it in great detail.
While there are welcome aspects of the Statement, the Government's pension policy is in disarray. The basic state pension has been eroded and there has been a massive extension in means testing, to which I referred. The stakeholder pension, which was the flagship of the Government's proposals, appears to be 318 missing its target. I understand that of the 416,000 that have been sold, only about 34,000 went to people in the £10,000 to £20,000 income group, at whom the proposal was aimed. We spent many hours in this House debating the state second pension, but Mr Timmins, a well-known authority on these matters, said in the Financial Times that he believed that it had been overcome by events.
On top of that, the occupational pensions scheme, which is so important, is under threat not only by the Chancellor's change to ACT, which is finally beginning to bite because of the rundown in pension fund surpluses, but by other changes on actuarial valuation, the accountancy system, FRS 17, and so on. There remains great concern about the proposal that people must draw their annuity at age 75. We had hoped that the Chancellor would finally have faced up to the problem and removed that limit. It is particularly important because of the low level of annuity rates which are a consequence of the Government's policy with regard to borrowing.
The Chancellor announced yesterday a massive increase in borrowing in the years to come. That is likely to raise annuity rates. But people are still being forced to take their annuities when they reach 75 when they may be able to find a better deal later. This is a matter on which your Lordships voted in favour, only to have it overturned in the Commons on at least two occasions. I hope the Chancellor, having missed this opportunity, will none the less do something about it in the near future.

§ 4.10 p.m.

§ Earl Russell
My Lords, the Minister shot my fox. For as long as I can remember debating these Statements—since 1989—I have been calling for capital limits to be uprated in line with inflation. The Minister has now not merely done it; she has abolished the limit and is bringing in new methods of calculating the treatment of savings. I look forward with a great deal of interest, first, to looking at those methods; and, secondly, to preparing a new message on tape ready for delivery next year. This one is finished. I should like to say thank you. That is a well-earned piece of thanks because the Minister has put a great deal of work into this.
I should like to welcome a number of other points in the Statement. The increase in maternity grants is particularly to be welcomed. It is an expensive time in anyone's life and it does not get any cheaper.
I welcome the increase in the Sure Start grant, but with one qualification which the Minister can probably script for me. Under the Sure Start system one risks disentitlement if one does not accept the help on offer. How many people has that happened to? The Minister may not have that figure instantly to hand. Also, does it have a discriminatory impact on Christian Scientists who do not believe in calling in medical help? We spent a lot of yesterday listening to discussion on incitement to religious hatred and the evils of religious discrimination. We must remember that some people actually believe that it is wrong to call 319 in professional medical help. For the benefit system to discriminate systematically against them raises questions which call for a certain amount of thought. I should like to hear that that thought has been given and what the answer is.
I welcome the disregard for the independent living fund. I welcome also the uprating for the capital limit of the independent living fund.
I am glad that there is a rise in the basic pension; I am sorry that the Government could not manage any more. But can the Minister tell us what the take-up figure of the MIG is? We have had a great deal of discussion about the MIG and I will not go through it again. The take-up figure is where it matters most.
The pension credit is, in a sense, undoing the effect on savings which is created by MIG; so we have a sort of "two-step". I hesitate in the Minister's presence to describe it as a "military two-step"; but it is becoming something almost as much interlocked. In fact, the Government's pension policy is beginning to resemble Penelope's Shroud—there is an endless series of re-stitching going on.
That raises one of the big questions on pension credits. In its present form that scheme does not bear the mark of finality; it is something with which a future government may want to tinker. So the two-step will turn into a three-step; then it will turn into an eightsome reel and after that I do not know. So it is a rather uncertain foundation on which to plan for retirement. As one whose retirement is within the next 12 months I must declare an interest in saying that.
It is an extremely complicated system. I know the Minister is making a big point of the forms being filled in at the same time; but I doubt whether many people will understand the interaction between the three elements of MIG, the basic pension and the pension tax credit. Where we have a complicated system and an insecure means of planning, we usually also have a low take-up. The Minister will remember the debates on child benefit in the 1980s, though I regret she did not have the privilege of taking part in them here; I wish she had. The key point was always that, because child benefit was simple, the take-up was remarkably high. Here we have the exact reverse. So we may be producing a system where there is not a great take-up, where an immense amount of thought has gone into it but with a great deal of effort—like racing a car engine out of gear. I await with some anxiety to see what the effect will be.
I must also confess that I was surprised—though this will not surprise the Minister—that the Government have not paid attention to the adequacy of basic benefit levels. I have with me a further briefing from the Zacchaeus 2000 Trust, with which I know the Minister is familiar because a copy was sent to her. It draws attention to a number of further studies in progress. They show serious levels of poverty among those on benefit, especially those who have got into debt. That makes it more serious that, first, there is no systematic study of those who are on lower figures than 40 per cent of average income. We do not know 320 anything about those who are on 20 per cent or 10 per cent of average income, or in some cases even less. That is a real gap in the department's research.
Secondly—this has been part of my tape since 1989 and I regret that I see no reason to take it off—there is no study whatever of the levels of debt among people on social security benefit. Those two things are badly needed. Until the Government have them, they cannot judge the force of the arguments that the Zacchaeus 2000 Trust is putting forward. That is why those arguments concentrate on the need for a study to determine a minimum level of income necessary to determine good health, which is the policy of these Benches as well as the policy of the trust. But I can see no sign of any government even so much as engaging in the argument. This is another missed opportunity and I regret it.
I am also a little surprised by one or two things in the employment section of the Statement, really as an example of academic method. Paragraphs 31 and 32 draw attention to the much lower number of people who are unemployed. We all welcome that. They appear—I put it no stronger because I am not sure they are saying it—to be claiming all the credit for the active labour market policy. The chronology is wrong for that. The fall in unemployment began before the 1997 general election. Therefore it must have been started by policies for which the present Government cannot claim responsibility. If indeed any large part of it is achieved by the policies of the present Government, we are not given a clear answer as to how.
Paragraph 45—the Minister's new initiative of the offer of a job—sounds awfully good. But I am not sure that when this gift horse is looked in the mouth it will be quite as good as it appears to be. First, I hear a distinct whiff of Louis Blanc behind me. Secondly, I hear the problem about the whereabouts of the jobs and the people. I do not know whether the Minister was in the House recently when my noble friend Lord Greaves asked a question about the price of housing in Burnley and Oldham, where the market has effectively collapsed. We can compare that with the sort of things said about housing by my honourable friend David Rendel, MP for Newbury. Newbury have the jobs and Burnley and Oldham have the housing. And it is not very easy to uproot somebody from Burnley and Oldham and put them in a job in Newbury. I do not know whether the Government have thought that through.
The second, and more serious, is the element of conscription behind this plan. The Minister said that it is reasonable to require applicants to take a job. In certain circumstances that may be so. I would not want to trust the machinery of the state in any form under any party, not even my own party, to make that decision for me. Some very curious decisions have been made. I can recall some made under the youth training scheme in the past. For example, there was an asthmatic who was required to work regularly as a painter. He attempted to do so and was not fit to work for another six months. There was also an electrician 321 who was colour blind. He was required to take a job as an electrician. I am rather glad that he did not do my wiring.
I believe that before introducing compulsion the Minister should remember not only that the gentleman in Whitehall does not always know best; the lady does not, either.

§ 4.21 p.m.

§ Baroness Hollis of Heigham
My Lords, I thank the noble Lord, Lord Higgins, and the noble Earl, Lord Russell, for their response; and if not the noble Lord, Lord Higgins, then at least the noble Earl, Lord Russell, for the generosity of his response on so many fronts. That was a very pleasant change. But I am sure that the noble Lord, Lord Higgins, meant to, but forgot.
I turn first to the points made by the noble Lord, Lord Higgins. He opened with a kind of rallying cry about the erosion of the basic state pension. That is a bit rich, given that last year we increased the basic state pension for single pensioners by £5; this year by £3; and have made a commitment to at least an additional £2 per week in future. If that sort of increase represents the erosion of the basic state pension, then I suggest to the noble Lord that in the use of the word "erosion" he and I do not mean the same thing.
The noble Lord went on to a more substantive question; namely, whether the way in which and the extent to which we are seeking to target help to the poorest pensioners represents means testing. I accept that we can bandy labels between us. There is a real issue here because the noble Lord knows as well as I that if one opts for universal benefits everyone gets the same and one preserves existing inequalities in incomes. We know that in the past decade or so the top 20 per cent of pensioners saw their incomes grow by 85 per cent and the bottom 20 per cent by about 28 per cent. Universal benefits simply preserve that inequality. As a result, everyone gets the same: the poorest one-fifth get the same as the richest one-fifth. The alternative is to try to ensure that five times as much goes to the poorest one-fifth.
That is my view. If one accepts that, the question then is how one can make that targeting effective so that those entitled are able to claim and do so and that they are confident about their claim. What matters is that the money goes to those who need it. Most of your Lordships would be on the receiving end of the generosity of the noble Lord, Lord Higgins, but at the expense of some of the poorest in Burnley and Oldham, as the noble Earl, Lord Russell, pointed out.
The question is whether what we are proposing, both the pension credit element of guarantee and the pension credit element of reward, represents proper targeting of benefit. I believe that it does, just as taxation targets those who are better off who pay more. As the noble Lord admitted, we are going from complicated forms of 40 pages down to 10 pages. Above all, we are having only five-year checks. Basically, we accept the fact that when a person retires 322 and receives a pension, the income is likely to be stable. Pensioners may be affected by the loss of a spouse and may go into hospital for long-term care. They may also have a big inheritance. Apart from that, they are likely to have a stable income.
We look at their income at the time of retirement, check with them what the figures are, and then, all being well, the retired person will continue to receive that money for at least the next five years and probably thereafter. Therefore, we reduce our intervention in their lives to a possible minimum and give them security of income free of bureaucracy which will enable them to enjoy a much more generous lifestyle than in the past.
As a result of what we doing under the pension credit, half the number of pensioners in this country will gain. For example, at the moment a pensioner who is the widow of a local authority manual worker receives only one-half of her former husband's pension, about £100 per month. At the moment she does not gain one penny from that because it is offset against the minimum income guarantee. But in future she will not lose every penny. She will keep £60 of that £100 and she will be better off by £60 per month.
These proposals should not be criticised as being miserly means testing when we are ensuring that targeted money goes to people such as the widow to enjoy the kinds of things that so far she has been unable to do. I hope that the whole House will welcome that as decent, proper and targeted.
The noble Lord asked about housing benefit and council tax benefit. That is a perfectly fair point. At a cost of half a billion pounds we shall be raising the applicable amounts accordingly so that poorer pensioners on pension credits see the full gain. It is a proper question to ask. We are doing it and it is costing half a billion pounds. As a result there will not be the deduction rates which the noble Lord first feared.
The noble Lord asked about the state second pension. I could go into a general defence of our pension policy, but I do not believe that that is appropriate given the time. But no doubt we shall return to the broader issues. The stakeholder scheme is in its early days. It is going well, but there is a long way to go and there are many questions still to be answered about how we reach the self-employed. It is important that we devise all possible means for ensuring that people retire with a pension. A pension credit now means that those even with modest pensions such as £20, £25 or £30 per week will be able to achieve real gains having made those savings.

§ Lord Higgins
My Lords, what is the level of increase in contributions this year or is there none?

§ Baroness Hollis of Heigham
My Lords, we are not having a general debate on the Pre-Budget Statement. We are talking about the Statement issued today. We have not made an announcement on national insurance as the noble Lord is aware.
The noble Earl, Lord Russell, gave a welcome to the end of capital limits. I am glad he is pleased. It means in practice that if a single pensioner receives the full 323 state pension he can have savings of up to £35,000 before running out of entitlement to pension credit. We can discuss the technicalities of how one reaches that figure, but it is a really generous response.
The noble Earl asked about disentitlement to Sure Start. He referred in particular to the Sure Start maternity grant of £500. I have the same concerns. We carried out what I call a quick and dirty piece of research. In about half-a-dozen benefit offices we checked the last 20 or so people who had been disentitled from the Sure Start maternity grant, which is currently £300, in order to find out what had happened to them. We tracked them. We found that almost all of them—about 95 per cent—returned to the system. The reason why they had become disentitled was because they had not filled in the forms correctly, they had applied too early, and so forth. We still need to follow through a couple of cases, but we are fairly confident about the outcome. I take seriously the point about religious preferences. We are pretty confident.
At the end of the day it is reasonable to attach this provision to ante-natal care for one very basic reason. We know that the best hope for children to thrive is that they are born at full weight and in decent health. They are likely to do so if the babies have been exposed in the womb to ante-natal care. It is particularly important for the children of the poorest families and some children in the poorest ethnic minorities that they have access to such care. Yes, we are bribing them with £500 to receive that care, but if it ensures that the child has the best possible Sure Start then I hope the noble Earl will agree that it is the decent thing to do.
The noble Lord, Lord Higgins, asked for the take-up figures on MIG. We have a total caseload on MIG of 1.7 million people. The campaign was launched in May 2000. We estimated that between 600,000 and 900,000 pensioners might have been entitled to the minimum income guarantee at that time but were not claiming, but we could not be sure. In fact, we had more than 985,000 inquiries. Therefore, we are reasonably confident that we reached those we needed to reach. Following that, we have processed 243,000 additional claims, of which half have been successful. Of those that were not successful, half were over the capital limits and half were over the income limits. That situation may now he revised as a result of the announcement we made today.
The noble Earl, Lord Russell, also referred to two further points. He questioned the adequacy of benefit levels and asked whether—this has been a longstanding argument between him and myself—we relate benefit levels to standards of budget assessment, particularly as regards the Family Budget Unit. There is much debate about what constitutes an adequate budget, what goes into it and the methodologies used. I throw two pieces of information at the noble Earl. In 1997, a child under 11 on income support rates—typically the child of a lone parent—would have received from income support £16.95. As of this October, a child under 11 on income support will receive benefit of £34. That benefit has more than doubled in cash terms and constitutes a 90 per cent 324 increase in real terms. It is no mean accomplishment to achieve an increase from £16.95 to £34 for children under 11 on income support—the poorest in the country—and it should be acknowledged.
I follow that with a second offering to the noble Earl. In 1998, Jonathan Bradshaw estimated that for a lone parent with two children the gap between benefits and an FBU assessment was about £25. He says that as of last year that same gap fell to something between £5 and £6. That was before the increases of this April, before the increases in income support and child benefit and before the increases next April in the child maintenance premium. I am confident that together those increases will close the gap entirely even before we get to the changes that will be introduced by the integrated child credit. While I dispute much of the methodology of the FBU, I hope that no one in your Lordships' House will believe that we are not committed to, and do not care deeply and passionately about, the welfare of poor children because we do.
Finally, the noble Earl referred to an element of conscription. It is reasonable to expect people to take a job in return for benefit. We are offering measures such as intermediate labour markets which recognise that some people need more help than others. I believe that the introduction of the personal adviser threshold with the support that that provides will enable people to get back to work. I say bluntly that it is no kindness to let someone who is 24, 25 or 27 remain on benefit for half a century. They are entitled to come into the mainstream of life which they will achieve as adults only if they are in work. Of course, they must be available for work; they do not have small dependent children, for example. We have to ensure that we help them. That is what personal advisers do. That is why we are starting these schemes and will extend them if appropriate. It is not right and decent to allow people to languish in unemployment outside the mainstream if we can help them to a better life. I hope that the Statement contributes to doing exactly that.

§ 4.33 p.m.

§ Baroness Wilkins
My Lords, the announcement of my noble friend the Minister that the earnings of severely disabled people and their partners will no longer be taken into account as regards the Independent Living Fund could not be more welcome. I am extremely grateful to her for the work she has put into that matter to ensure success. I assure her that many hundreds of severely disabled people will be delighted, especially those involved in the Let Us Work campaign and the National Centre for Independent Living. That, together with last week's guidance on local authority charging, which also means that earnings are disregarded in the assessment of income in relation to charges for local authority services, will ensure that work pays for severely disabled people. That is extremely welcome.
I am aware that the change to the ILF owes a great deal to the personal efforts of my noble friend the Minister. It gives me the confidence to ask her to ensure that the Government also heed the justice of the argument that winter fuel payments should be 325 extended to disabled people. They are desperately in need of that help. Disabled people who are immobile feel the cold far more keenly than able-bodied people, as noble Lords who see me swathed in clothing will appreciate. The cold gets deep into one's bones and it is hard to get warm through one's own efforts. Disabled people are far more likely than able-bodied people to be at home using up their heating allowances and are far more likely to become ill due to cold. They are far more likely to be on restricted incomes. I hope that the Government will heed the justice of the argument that the heating allowance should be extended to disabled people. Once again I am most grateful to the Minister for her work on the ILF.

§ Baroness Hollis of Heigham
My Lords, I am delighted that my noble friend's persuasion and pressure have been rewarded. She has been a doughty campaigner for reform of the Independent Living Fund. She has rightly given us no peace on the issue. I am absolutely delighted that today her efforts are rewarded. Given that she suffered from a virus last week, I am delighted that she is able to be present for the Statement today. As regards winter fuel payments, I am afraid that I have to disappoint my noble friend. The matter was raised earlier in the House. I made the point then that one difference between pensioners and disabled people is that disabled people have access to the disability living allowance. DLA was designed to cover the extra costs associated with disability, including diet, laundry, care and heating. That is why we confine winter fuel payments to the elderly.

§ Lord Hodgson of Astley Abbotts
My Lords, I declare an interest as a chairman of an occupational pension scheme. In the light of the flurry of initiatives on pensions the Minister has now announced, does she believe that the Government made a mistake by removing the tax credit for pension funds in the early years of their regime which removed £3 or £4 billion worth of benefits from pensioners? The fund of which I am chairman lost some £250,000 which could otherwise have been paid out in increased benefits. It seems to me that we are recycling money which could have been made available in the first place.
Further, I have not had the benefit of reading the Statement but I believe that the Minister referred to an increase or to a sum of £6 million to be made available over two years to the rapid response unit. That is perfectly welcome in itself but we need to bear in mind, in the light of the huge loss of manufacturing jobs in this country and the two-speed economy as a result of the Government's valuation of the pound, that that is £60,000 per week across the entire country. While the Government may trumpet it as a huge initiative, it is in fact a trivial sum of money in terms of solving a severe problem in manufacturing industry.

§ Baroness Hollis of Heigham
My Lords, as regards the noble Lord's first point, in our view ACT rewarded dividends and diverted money from proper investment. I compare the position in the United 326 States with the position in this country as regards the percentage of GDP going to dividends and investment. While ACT existed, the UK figure went up from 3 to 6 per cent. However, the United States figure went up from about 3 to 4 per cent. That process occurred at the price of investment in our economy. We believed that ACT deformed the tax system. What matters is the health of the economy and that, in turn, depends on proper investment in the economy on which, in the long term, pension robustness relies.
As to the noble Lord's second comment about the £6 million for the rapid response unit, I take the point about a limited sum of money. However, that is only one part of a wide range of strategies. We seek to respond to the situation of sudden redundancies, major redundancies and so on. The initiative is additional to the employment opportunities resource, the New Deal and the work we are doing on Jobcentre Plus and the like. If the noble Lord has concerns about any particular area he thinks is underfunded, I shall be happy to consider them.

§ Baroness Greengross
My Lords, I too congratulate the Minister and the Government on having addressed some long-lasting concerns that many of us have had about vulnerable groups in our society such as parents of disabled children and ante and post-natal care for the poorest families through Sure Start. I refer to a group of people who have always been marginalised; namely, those who have saved. It is very much in the culture of our older generation to be thrifty and to save even when that is difficult. For years they have been penalised for doing so. I am delighted that that situation will not continue. I have not had time to study the measures in detail, but the five-year assessment may do much to remedy that situation. However, the means of obtaining such payments is still very complicated and needs to be simplified.
For many years—in particular, when I was with Age Concern—I worried about the low take-up of means-tested benefits. But I agree with the Government's view that the differences in pensioner incomes are now so great that it is better to target those. In my view, it is most important to get rid of the stigma associated with take-up. I believe that the announcement about the pension credit, which I have been awaiting with enormous interest, may deal with that. I hope very much that it will.
My final point concerns the help that the Minister has announced for unemployed people. I hope that, from now on, we can assume that the care, advice and support that will go to unemployed people who have the greatest difficulty in obtaining jobs will be extended to measures for those over the age of 50. Such people represent a very vulnerable group of unemployed people.

§ Baroness Hollis of Heigham
My Lords, I am delighted that the noble Baroness, Lady Greengross, welcomes what we are doing. She and, behind her, Age Concern have obviously been very active in trying to ensure that we develop pension policies that focus on those most in need.
327 The noble Baroness talked about how people might obtain the benefit. She is right. At present, approximately three-quarters of pensioners deal with what we used to call "benefit offices" by telephone, which is a more acceptable method. There is also "tele-claiming". All the systems which Age Concern is helping us to pilot are showing a very successful take-up. The noble Baroness is absolutely right that the key to effective targeting is to remove stigma. Once we have done so, I believe that we can be confident that the resources will reach those who most need them.
The second point raised by the noble Baroness related to our help to people over the age of 50. She is absolutely right. That is why we have developed the New Deal for the over-50s. One interesting figure came up when we were dealing with a previous Bill. I was much struck by the situation relating to widows and widowers. Of those over the age of 55, fractionally more widows than widowers are in work. Behind that lies the fact that middle-aged women find it easier to remain in or return to the labour market than do middle-aged men, in particular if they are manual workers. That is why we have been developing new deals and pilot schemes. We want to ensure that the talents and richness that such people have to offer is honed to fit today's economic climate.

§ Baroness Howells of St Davids
My Lords, we have listened to a very buoyant and uplifting discourse on pensions. However, I want to raise one point which is seen as a matter of injustice by the Caribbean people who came to work in this country, giving more than 30 or 40 years of service. Discrimination still exists against those who have managed to return to live in their home country. Whatever pension they have when they leave this country, they must live on it for the rest of their lives. Over the years, no adjustment has been made to the level of such pensions.
This country is disadvantaged by not adjusting those pensions because the people who receive them have to return to this country for any medical treatment that they need. Their counterparts who remain in this country receive increases in their pension each year. But for those who return home, the level of the pension stays the same. I know that this is a subject which creates a very deep hole for the Government because people from other countries who have never worked here go away and, at the age of 60, claim pensions as citizens.
The pensioners who have given years of service feel that they are badly discriminated against by a state which does not allow an increase in their pensions. In addition, the countries in which they live have a basic standard of living. If we are talking about global poverty, then this is a group which is being penalised in a way that they feel is unjust. I am sorry to raise the matter at this stage, but I believe that it is the only time that I can usefully do so in the House. I repeat that the people to whom I refer are suffering greatly from such a loss.

§ Baroness Hollis of Heigham
My Lords, I sympathise with many of the points that my noble 328 friend Lady Howells makes. However, various basic sets of arrangements are in place. One set is with the EU in which mutuality of pensions follows from the arrangements for the mobility of labour. Those pensions are automatically adjusted.
Secondly, we have bilateral arrangements with certain Commonwealth countries and other countries. They are usually of long-standing, most having been made in the 1950s and 1960s. Incidentally, that includes some Caribbean countries. I believe that I am right in saying that there has been no further development of bilateral arrangements, either under the previous administration or ours, since the ear]y 1980s. However, that bilateral relationship does not apply to other countries, some of which were mentioned by my noble friend.
At the end of the day, a judgment must be made about priorities and cost. The unfreezing of overseas pensions would have to apply not only to Caribbean countries; it would have to include South Africa, Australia, New Zealand, Canada, and so on, where far more ex-British residents live. That would cost £300 million or more. It is the Government's judgment that that does not constitute a high claim on our existing priorities, which are to help the pensioners in greatest need.

§ Lord Brooke of Sutton Mandeville
My Lords, pursuant to the first question asked by my noble friend Lord Hodgson, the Prime Minister at least twice in another place defended the removal of ACT tax credits in the summer of 1997 by saying that the subsequent behaviour of the stock market justified the move. Since, in the past two years, the stock market has fallen by almost one-quarter and, on the basis of the Prime Minister's logic, if the stock market continues to fall towards its 1997 level, can we anticipate the restoration of tax credits? That would be a profound relief to pension fund trustees throughout the country and, subsequently, to their pensioners.

§ Baroness Hollis of Heigham
My Lords, I believe that we have discussed this matter several times in the House. I have no indication whatever that my right honourable friend the Chancellor of the Exchequer is minded to make any adjustment in this respect. However, that is for him to determine. If he should be so inclined, he will of course have the opportunity to do so in the subsequent Budget.
However, I repeat: it was the judgment of my right honourable friend that ACT rewarded dividends and diverted money from investments and that that deformed the economy. As I have stated in this House, it is also the case that the value of ACT was equivalent to approximately one-tenth of the difference a decent manager would make to the fund. In other words, what really matters is the health of the economy and the competence of the management of the fund rather than artificial tax privileges, which distort and deform investment in the economy on which pensions must be based.