Lords Sitting of 24 January 2002

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Bradford): The LORD CHANCELLOR on the Woolsack.

Zimbabwe: Presidential Election
Lord Blaker Lord Blaker asked Her Majesty's Government:
What progress has been made by international bodies of which the United Kingdom is a member to ensure that the forthcoming presidential elections in Zimbabwe are free and fair.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Amos): My Lords, on 11th January, the European Union insisted on invitations to and accreditation of elect ion observers at least six weeks before the Zimbabwean presidential election. It asked the Government of Zimbabwe to respond to those concerns by 18th January.
In their reply, the Government of Zimbabwe did not give specific answers on a range of issues of concern. The EU has therefore requested further clarification from the Government of Zimbabwe. EU Ministers will consider the outcome of those representations at their meeting in Brussels on 28th January.
On 20th December, the Commonwealth Ministerial Action Group (CMAG) expressed the expectation that formal invitations would be issued to Commonwealth election observers well before the election. The next CMAG meeting, on 30th January, will assess progress.
Lord Blaker: My Lords, I welcome what the European Union and the Commonwealth are doing, so far as it goes. However, does the Minister recall that, in 2000, almost all the international observers appointed then reported adversely, saying that the elections to the Parliament were not free and fair? That was not followed by any action by the world community, only by expressions of concern. May that have led President Mugabe to believe that he could get away with action in connection with the presidential elections, which are only just over six weeks away, similar to the action that he got away with in relation to the parliamentary election, only worse? That is what is now happening.
Is it not important that the Commonwealth, the European Union, the Southern African Development Community and the United Nations make it clear now that if the forthcoming elections are not free and fair, they will take action and not simply say, "Tut, tut"?
Baroness Amos: My Lords, the matter has been discussed in the House several times. The international community, including ourselves, has made it
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absolutely clear that we want to see free and fair elections in Zimbabwe. We have made that absolutely clear to the Government of Zimbabwe through our representations through the European Union, but also through the Commonwealth. We have worked with our partners in Africa, particularly in southern Africa, who have made that absolutely clear through the Southern African Development Community.
This is not about allowing President Mugabe or the Government of Zimbabwe to get away with anything. We are interested in making absolutely clear the concern of the international community and in pushing the Government of Zimbabwe to take action. However, I must say to the noble Lord, as I have said in the House before, that in the case of a government who have been elected but do not put the concerns of their own people at the top of their agenda and refuse to take on board the concerns of the international community, there is a limit to what the international community can achieve.
Lord Avebury: My Lords, seven Movement for Democratic Change activists were murdered in December and gangs of ZANU-PF thugs are going round areas that are presumed to be MDC-supporting beating people up, destroying property and intimidating anyone presumed to belong to the MDC. There have been attacks on the press and on freedom of assembly. Is the Minister now in a position to say that there cannot be free and fair elections in Zimbabwe? Would it not be useful for the international community to admit that, at this stag, and to try to do everything possible to ensure that ZANU-PF does not get away with the atrocities that it is committing against its own people?
Baroness Amos: My Lords, in the representations that were made by the European Union to the Government of Zimbabwe in the dialogue process, the European Union insisted on international election observers and insisted that those observers should be in Zimbabwe six weeks before the election. We are, of course, mindful of the need for observers not only to be there on the day of the election but to be able to see what happens in the run-up to the process itself. We are entirely clear about the need for observers to be on the ground and monitoring events in plenty of time. That is one the issues that will be taken up by the General Affairs Council on Monday, as the Government of Zimbabwe have not given us the assurances in that regard.
I would also say to the noble Lord, Lord Avebury, that we have made the strongest possible representations to the Government of Zimbabwe about the violence, harassment and intimidation that we have seen. We will continue to do that.
Lord Howell of Guildford: My Lords, is it not crystal clear, as the noble Lord, Lord Avebury, pointed out, that the elections are already being seriously distorted, that opposition rallies are being broken up by police thugs and that every effort is being made to see that the election is not free and fair? In the past year, there have

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been 48 political murders, 329 abductions, 2,245 cases of torture and 992 cases of unlawful detention in that country. Foreign journalists have been labelled as terrorists.
Is it not already too late—far beyond the right time—to take serious action? Far from waiting any longer, the Government should move off their snail's pace and put real effort behind bringing the EU's targeted sanctions against the élites to fruition quickly, encourage the Commonwealth quickly to remove Zimbabwe from that body and take all other actions with SADC and other countries to stop this turning into a major tragedy and a new rogue state that will threaten all of southern Africa.
Baroness Amos: My Lords, it is really important that we listen to all the key stakeholders. I share with the noble Lord, Lord Howell of Guildford, the concerns that he expressed. My right honourable friend the Prime Minister yesterday described the situation in Zimbabwe as a disgrace. I said categorically that we have made representations about the kind of violence and intimidation that we have seen. However, it is important that we listen to what the people of Zimbabwe say, to what the opposition parties say and to what civil society says about the nature of their election in March and take that into consideration, when we make decisions about the point at which we can determine whether we feel, as the EU, that elections can be free and fair.
We have said clearly to the Government of Zimbabwe what we expect. They have said back, in no uncertain terms, that they have not met the terms presented by the EU. That will be discussed on Monday. It is important that the process that we have gone through in bringing together the international community is recognised.
Baroness Park of Monmouth: My Lords, Mr Mugabe himself said at the meeting in Malawi that he would welcome observers. As far as I know, that is the only time that he has said it, as distinct from his Ministers. Is there no possibility of planning with the African countries and other members of the United Nations, who cannot be described as colonialists, for them to send observers, accompanied by the press, to Zimbabwe? They should go in as ordinary travellers but be observers. That could surely be organised. It would be entirely proper and would be welcomed by the people of Zimbabwe.
We must call Mr Mugabe's bluff sensibly. We should take him at his word and behave very surprised if he does not want those observers, now that he has said that he would have them.
Baroness Amos: My Lords, the noble Baroness is right. At the recent meeting of the Southern African Development Community, President Mugabe made several commitments to his SADC partners. They were set out clearly in the communiqué that was issued after the meeting.
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We have been talking to our southern African partners about the timetable for SADC election observers to go into Zimbabwe. They have the matter in hand. The noble Baroness will recall that the SADC Parliamentary Forum has published norms and standards which set a very high standard indeed with respect to the issue of free and fair elections. Indeed, they are the norms and standards that we are discussing with our EU colleagues so that, as part of the European Union, we can judge whether we consider the elections to be free and fair.

Diabetes and Coronary Heart Disease
2.50 p.m.
Baroness Cumberlege Baroness Cumberlege asked Her Majesty's Government:
How they view the inter-relationship between treatment of diabetes and coronary heart disease.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, there is a close association between diabetes and cardiovascular disease, including coronary heart disease. The Diabetes National Service Framework Standards for England, published last month, highlight the importance of common strategies for prevention and treatment.
Baroness Cumberlege: My Lords, I thank the Minister for that reply. Is he aware that on average it takes between nine and 12 years to diagnose someone with type 2 diabetes, the form suffered by the vast majority of those affected, by which time as many as half will suffer complications such as cardiovascular disease? Given the financial and human costs of that late identification, can the Minister give an assurance that when the second part of the National Service Framework relating to diabetes is published, it will include targeted and systematic screening of those most at risk?
Lord Hunt of Kings Heath: My Lords, I certainly agree with the noble Baroness that it is very important to put firmly into place a preventive strategy. She will know that the first set standard, which we published in December, refers to a preventive programme. I am aware of the view that a targeted approach to screening may be the best way forward. We have a national advisory committee in place in the form of the UK National Screening Committee whose job is to assess the benefits and disbenefits of such screening. We have referred the very matter raised by the noble Baroness to that committee. It is looking at an integrated approach to the identification of those at the highest risk of developing type 2 diabetes and it is expected to report to the department in 2005. More generally, I agree with the noble Baroness about the need for proactive action on prevention.
Lord Harrison: My Lords, I congratulate the Government on the establishment of the National

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Service Framework. But can my noble friend say whether in the important delivery paper that will come next summer there will be established minimum staffing levels? Will we promote local leadership and, most important of all, will we provide the finances required to ensure that the NSF is carried through successfully?
Lord Hunt of Kings Heath: My Lords, my noble friend is right to refer to the importance of the delivery strategy because it will set out the conditions under which we shall deliver the standards we have set out in the paper published last December. I cannot comment in relation to resources because that is a matter being considered as a part of the discussions being held on the next spending review. However, I understand the importance of investment in this programme. I also accept the point made by my noble friend in relation to local leadership. We would expect the primary care trusts, which in the future will take on much of the burden of NHS commissioning, to be very exercised as regards the need to give that leadership.
Lord Clement-Jones: My Lords, the National Service Framework is already overdue by a year or more. Can the Minister try to ensure that the implementation date for the NSF is brought forward?
Lord Hunt of Kings Heath: My Lords, the noble Lord will know that we have stated that the 10-year implementation programme would start in April 2003. I think it is important to allow the service to digest the results of Part 1, which sets the standards, so that when it comes to starting up the implementation programme everything will be in place. We can then be assured of success in the delivery of the programme. More generally, the question of local delivery and the involvement of primary care—primary care will play a major part in this—is crucial. I think that it is right for us to spend time making sure that primary care is in the right condition to take forward the strategy.
Baroness Masham of Ilton: My Lords, does the Minister agree that diabetes can trigger many complications involving the eyes, legs, feet, kidneys and other organs? Does he further agree that the specialist units carry out a marvellous job? It is extremely important to ensure that trained nurses are involved in the care of those with diabetes and that they can go out into the community.
Lord Hunt of Kings Heath: My Lords, I certainly agree with the noble Baroness on the points she has made. Specialist services have a major role to play and we are committed to ensuring that, under the new arrangements for the NHS being taken forward, there are arrangements for the commissioning of specialised services. Equally I believe that much of the action will be undertaken at the local level; that is, within primary care. We are looking to primary care to take a leadership role in this area.
Lord Rea: My Lords, does my noble friend agree that there is a very strong association between type 2
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diabetes and obesity, and that there is also a link between obesity and coronary heart disease—partly through the same mechanism which causes type 2 diabetes? Does he further agree that obesity is one of the major public health problems facing this country, with very rapid increases due to our more sedentary lifestyles, increased mechanisation and better heating in homes, as well as a far too high proportion of calories from fat in our diet? Do the Government have those priorities in mind?
Lord Hunt of Kings Heath: My Lords, yes. Obesity is one of the issues that we in the Department of Health are attacking with vigour. This problem needs a cross-government approach because there are various elements to tackling obesity, including the encouragement of greater physical activity. To that end, along with our colleagues in the Department for Education and Skills, we are encouraging school travel plans which encourage children to walk and cycle to school. We have introduced a national schools fruit scheme which is being piloted in the West Midlands. The scheme enables children in infant schools to have one piece of fruit per day. Indeed, only a few months ago the National Audit Office published a report on tackling obesity in England which we are now considering as a part of taking forward an obesity strategy.
Lord Chan: My Lords, can the Minister give an assurance that those ethnic minorities which comprise high risk groups, suffering up to six times the average incidence of diabetes and coronary heart disease, will also form a part of the new plans for treatment?
Lord Hunt of Kings Heath: My Lords, I understand that type 2 diabetes is up to six times more common in people of South Asian descent, and up to three times more common in those of African and Afro-Caribbean descent. It is also more common in people of Chinese descent, as well as in other non-white groups. That is a very significant set of statistics. I can assure the noble Lord that reducing inequalities will be a key underlying principle, both in terms of the standards that we have already produced and in relation to the implementation programme which will follow in Part 2 of the National Service Framework.

Euro/Pound Exchange Rate
3.18 p.m.
Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay asked Her Majesty's Government:
Whether they believe there is something fundamentally wrong in the current euro/pound exchange rate.
Lord Davies of Oldham: My Lords, while the Government do not have a specific exchange rate target, a stable and competitive pound is sought over

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the medium term. The key to a stable and competitive pound is low and stable inflation, supported by sound public finances.
Lord Oakeshott of Seagrove Bay: My Lords, I thank the Minister for that reply. I do not know if he has yet had a chance to read the minutes of the January meeting of the Bank of England Monetary Policy Committee which were published yesterday. They make interesting reading:
"the worsening imbalances [in the economy] posed a particular threat. Real domestic demand growth had exceeded real output growth by 5.7% over the past five years … This was unsustainable, and at some stage there could be a sharp correction to the exchange rate in response to a widening current account deficit".
Perhaps I may translate that central Bank-speak into English—
Noble Lords: No!
Lord Oakeshott of Seagrove Bay:—"Runaway consumer boom; industry in dire straits; balance of payments up the spout and the pound riding for a fall". That is what the Monetary Policy Committee is saying. Will our complacent Chancellor stop preening himself on his so-called success and now take the advice of his colleagues such as the Secretary of State for Trade and Industry and get on with joining the euro at a competitive rate?
Lord Davies of Oldham: My Lords, I am not sure why the House disagreed with the noble Lord seeking to reinterpret his question. I was rather grateful for it. Far from preening himself, the Chancellor reflects on his achievements with the real economy during the years the Government have been in power. After all, productivity has increased by 13 per cent since 1997, which improves the position of our manufacturing industry as well as other sectors of the economy. As to the issue of the exchange rate against the euro, sterling is in a particularly strong position at the present time. But the noble Lord will recognise that, in regard to exchange rates, we do not look at short-term policies but at our long-term position.
Lord Sheldon: My Lords, is it not clear that the exchange rate problem is with us once again and is very serious indeed? Does my noble friend accept that it is not only our exports which are suffering, but imports coming in which are affecting our balance of trade and balance of payments, and that there is no sign of that improving over the next few years? It is not only a question of the five tests that the Chancellor quite rightly insists on being met, but of the exchange rate at which we go in. That will be the important and dominant factor in regard to entry into the euro mechanism in due course.
Lord Davies of Oldham: My Lords, my noble friend is right—the exchange rate will play its part in the five tests to determine the economic case for entry into EMU. However, he should not reflect too great a
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pessimism about our present position. Last year was very difficult. It was, after all, a year in which three of the world's great economies—the United States, Japan and Europe—suffered serious decline. But my noble friend will recognise that, at the present time, of all the major economies in the world, the British economy is growing at the fastest rate and is on target to grow by 1.9 per cent this year. Too much gloom is not well founded in these circumstances.
Lord Tebbit: My Lords, the Chancellor has now been in office for five years. Is sterling currently competitive and stable?
Lord Davies of Oldham: My Lords, the noble Lord will recognise that there are very stable factors in regard to the economy—not least, he might reflect, the unemployment rate in comparison to the years when the administration in which he played his part was in power. However, I hasten to add that of course there are fluctuations in exchange rates—we all recognise that—but they reflect the fundamentals of the economy. The reason why sterling is strong at the present time is that the fundamental aspects of the British economy are strong in themselves. Surely even the noble Lord can find it in himself to offer some congratulations on that score.
Lord Marsh: My Lords, given that over the past two or three years sterling has remained fairly stable against the US dollar, the Canadian dollar, the Swiss franc and most other major currencies, while the euro has declined consistently and steadily by something like 30 per cent, might there not be a problem with the euro?
Lord Davies of Oldham: My Lords, the noble Lord is right, the euro has not performed as well as it was hoped it might. But during the past two years the pound has not appreciated against the euro. It did, certainly, up to 2000, but that has not been the case in more recent times. We all look forward to a situation in which the euro economy develops strength. For all peoples of the advanced world at the present time—and this impacts significantly on the under-developed world—there is widespread recession in some of the major economies. Fortunately, under the Government's guidance, this economy is stronger than others.

Taliban and Al'Qaeda Detainees
3.24 p.m.
Earl Attlee Earl Attlee asked Her Majesty's Government:
What is the status, with respect to the Geneva Conventions, of Taliban and Al'Qaeda militants captured in Afghanistan.
Baroness Amos: My Lords, the status of each detainee under international humanitarian law—the law of armed conflict—has to be considered in the light of the facts of the individual case. We do not have all

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the facts. The bottom line is that, whatever their status, they are entitled to humane treatment and, if prosecuted, a fair trial.
Earl Attlee: My Lords, I thank the Minister for that Answer. I remind the House that I have a peripheral interest. World security and stability is paramount. Her Majesty's Government are not at fault in this problem, but does the Minister agree that compliance with the conventions is morally and legally right? Does she further agree that any perception that we are not committed to full compliance could result in our military opponents failing to surrender at the earliest possible moment and members of Her Majesty's Armed Forces not enjoying convention rights themselves?
Baroness Amos:My Lords, we have made our position absolutely clear. We have said that the detainees are entitled to humane treatment under international law. The Americans have said very clearly that the detainees will be treated in accordance with the Geneva Convention. That statement was repeated yesterday by the US Secretary of State for Defense. As to the position of our military opponents, I cannot speak for the opposition forces in Afghanistan. It is important for us to ensure that the consensus we have built up for dealing with international terrorism is maintained and we must be sensitive to the concerns expressed. That is why we have made it absolutely clear that humane treatment is the bottom line.
Lord Ponsonby of Shulbrede: My Lords, does my noble friend agree that the noble Earl, Lord Attlee, is right in regard to perceptions being important and that the concerns raised in the national press and by various commentators need to be taken very seriously? Does she further agree that the best way to ensure that they are taken seriously is to ensure that the Red Cross and British officials continue to have access to those prisoners in order to reassure the international media and the public in general that provisions are continuing to be made for those prisoners?
Baroness Amos: My Lords, the ICRC has permanent representation at Guantanamo Bay. It has unlimited access and is due to make a confidential report to the US authorities. It is important that the House should remember and recognise that the ICRC is an independent organisation. In that respect, my noble friend and the noble Earl, Lord Attlee, are right—the comments of an independent organisation such as the ICRC about treatment at Guantanamo Bay are very important. As to the three British detainees, the House will know that a team of diplomats went to Guantanamo Bay and spoke to them.
Lord Howell of Guildford: My Lords, the news of an upgrade in status and conditions at Camp X-Ray is welcome. Does the Minister agree—I am sure she does—that these are very dangerous men? One of
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them, apparently, tried to bite through the cables in the DC-9 he was brought over in in order to crash it; another has bitten a guard; and two others are suspected of being the people who bit to death the CIA agent in Mazar-i Sharif. So Washington and the United States are fully justified in treating these potential terrorist criminals with the greatest care. Would not the right line be to encourage the Americans to sort out who are criminals and who are prisoners of war, establish their status as soon as possible and then return them to the nations from which they came, where relevant? In the mean time, they could give a full understanding that in Cuba they are dealing with intensely dangerous and, in some cases, maniacal individuals.
Baroness Amos: My Lords, I agree with the noble Lord. We have always said that these are high security prisoners and therefore there are security needs which have to be maintained in Guantanamo Bay. At the same time, it is important that we should recognise what the US authorities are doing. They have said that they intend to, and will, treat the detainees in accordance with the principles of the Geneva Convention. It is important that that is recognised.
With regard to the noble Lord's other questions, yes, I accept that it is important that the status of the detainees is clarified; we are in constant contact with the US authorities in relation to the matter. Once their status is clarified, we can make decisions as to the next step.

Business
Lord Carter: My Lords, I am happy to say that I have some news which I hope the House will welcome. When I announced the dates of the February break last week, it had been agreed with the usual channels that the House might sit on Friday 15th February. During the course of this week, however, it has been possible to rearrange the business that had been arranged for that day. As a consequence, I am happy to announce that, subject, as always, to the progress of business, we shall now rise a day earlier for our February break. The House will sit at 11 a.m. on Thursday 14th February and rise at the end of business that day, returning on Monday 25th February. The dates that I announced last week for the Easter and Whitsun Recesses remain unaltered.

Police Reform Bill [H.L.]
The Minister of State, Home Office (Lord Rooker): My Lords, I beg to introduce a Bill to make new provision about the supervision, administration, functions and conduct of police forces, police officers and other persons serving with, or carrying out functions in relation to, the police; to amend police powers and to provide for the exercise o f police powers by persons who are not police officers; and for connected purposes. I beg to move that this Bill be now read a first time.

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Moved, That the Bill be now read a first time. —(Lord Rooker.)
On Question, Bill read a first time, and to be printed.

Human Rights Committee
The Chairman of Committees (Lord Tordoff): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Perhaps I may explain that this will in effect allow the Lords' component of the Joint Committee the power to adjourn from place to place without limiting the committee to travel within the United Kingdom, and to make occasional visits to the institutions of the Council of Europe. A similar Motion was passed in the House of Commons on 8th January. It would be unfortunate if only half the committee were allowed to have this discretion. I commend the Motion to the House.
Moved, That the order of the House of 3rd July 2001 appointing a Select Committee to join with a Committee of the Commons as the Joint Committee on Human Rights be amended by leaving out the words "within the United Kingdom, and to institutions of the Council of Europe outside the United Kingdom no more than four times in any calendar year".—(The Chairman of Committees.)
On Question, Motion agreed to; and a message was ordered to be sent to the Commons to acquaint them therewith.

Hybrid Instruments Committee
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, on behalf of the Committee of Selection, That the Baroness Fookes be appointed a member of the Select Committee in the place of the Earl of Courtown.—(The Chairman of Committees.)
On Question, Motion agreed to.

Privileges Committee
The Chairman of Committees: My Lords, I beg to move the third Motion standing in my name on the Order Paper.
Moved, on behalf of the Committee of Selection, That the Lord Trefgarne be appointed a member of the Select Committee in the place of the Viscount Cranborne.(The Chairman of Committees.)
On Question, Motion agreed to.

Homelessness Bill
3.33 p.m.
Read a third time.
The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton)The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton) moved Amendment No. 1:
After Clause 11, insert the following new clause—
"CO-OPERATION IN CERTAIN CASES INVOLVING CHILDREN
After section 213 of the 1996 Act (co-operation between relevant housing authorities and bodies) there is inserted—
"213A CO-OPERATION IN CERTAIN CASES INVOLVING CHILDREN
(1) This section applies where a local housing authority have reason to believe that an applicant with whom a person under the age of 18 normally resides, or might reasonably be expected to reside—

(a) may be ineligible for assistance;

(b) may be homeless and may have become so intentionally; or

(c) may be threatened with homelessness intentionally.

(2) A local housing authority shall make arrangements for ensuring that, where this section applies—

(a) the applicant is invited to consent to the referral of the essential facts of his case to the social services authority for the district of the housing authority (where that is a different authority); and

(b) if the applicant has given that consent, the social services authority are made aware of those facts and of the subsequent decision of the housing authority in respect of his case.

(3) Where the local housing authority and the social services authority for a district are the same authority (a "unitary authority"), that authority shall make arrangements for ensuring that, where this section applies—

(a) the applicant is invited to consent to the referral to the social services department of the essential facts of his case; and

(b) if the applicant has given that consent, the social services department is made aware of those facts and of the subsequent decision of the authority in respect of his case.

(4) Nothing in subsection (2) or (3) affects any power apart from this section to disclose information relating to the applicant's case to the social services authority or to the social services department (as the case may be) without the consent of the applicant.
(5) Where a social services authority—

(a) are aware of a decision of a local housing authority that the applicant is ineligible for assistance, became homeless intentionally or became threatened with homelessness intentionally, and

(b) request the local housing authority to provide them with advice and assistance in the exercise of their social services functions under Part 3 of the Children Act 1989,

the local housing authority shall provide them with such advice and assistance as is reasonable in the circumstances.
(6) A unitary authority shall make arrangements for ensuring that, where they make a decision of a kind mentioned in subsection (5)(a), the housing department provide the social services department with such advice and assistance as the social services department may reasonably request.
(7) In this section, in relation to a unitary authority—
"the housing department" means those persons responsible for the exercise of their housing functions; and

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"the social services department" means those persons responsible for the exercise of their social services functions under Part 3 of the Children Act 1989.""
The noble and learned Lord said: My Lords, as I said on Report, the issue of accommodation for children in need and their families under Section 17 of the Children Act 1989 is an important one and will be considered in the House of Commons in relation to the Adoption and Children Bill. This will address a central issue of concern that has been raised both in this House and outside; namely, that it needs to be clear that social services have the power to provide accommodation for children and their families under Section 17.
But there is also the separate question of ensuring that there is good co-operation between the housing and social services departments in working to meet the needs of such children and their families.
I have previously mentioned having met a number of social services directors and being impressed by the arrangements they have in place to ensure that their own department works together with the housing authority—or housing department in the case of unitary authorities—to find an appropriate solution for the whole family when dealing with families with children who are intentionally homeless or ineligible for housing assistance. I am bringing forward amendments with the purpose of ensuring that all local authorities should adopt similar co-operative arrangements.
New Clause 11A—which would insert a new Section 213A in the Housing Act 1996—would require housing authorities to have arrangements in place to ensure that the social services authority is aware of cases where the housing authority is dealing with an application from an applicant whose household includes a child under age 18 and the authority has reason to believe that they may be homeless, or threatened with homelessness, intentionally, or may be ineligible for housing assistance. The housing authority would also have to inform the social services department of the decision taken on the homelessness application.
These requirements would be subject to the applicant's consent, although, where consent was withheld, this would not affect the housing authority's ability to alert the social services authority in any case where it was concerned that a child might be at risk of suffering significant harm.
New Clause 11A would also place a new duty on housing authorities to provide advice and assistance to the social services authority, where the latter was aware of a decision by the housing authority that a household that includes a child under 18 is intentionally homeless, or threatened with homelessness, or ineligible for housing assistance, and the social services authority asks for assistance in the exercise of its functions under Part III of the Children Act 1989. This new duty will not prejudice the current provisions on co-operation between authorities in Section 27 of the Children Act 1989.
New Clause 11A would also place a requirement on unitary authorities to have similar arrangements in place; that is, to ensure that, subject to the applicant's
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consent, the facts of such cases and the decision on the homelessness application are referred to the social services department by the housing department, and to ensure that the housing department provides advice and assistance, such as is reasonable in the circumstances, to the social services department on request.
As I said on Report, my department and the Department of Health intend, in addition, to issue joint guidance to housing and social services departments about co-operative working in the context of these new provisions.
It is essential that when dealing with homeless families with children there is positive co-operation between housing and social services departments, and that there are joint protocols in place to ensure that this is carried through in practice. Some authorities are already doing this, and I applaud them. We want to see this extended to all authorities. New Clause 11A will provide the statutory framework to ensure that this happens, and I urge noble Lords to give their support to it.
Perhaps I may mention the fact that these proposals were first raised in this House, and from all sides. The noble Baronesses, Lady Maddock and Lady Hanham, both referred to them. My noble friend Lady Massey, who is not present today but who knows about this provision, has persisted in raising the issue—rightly—throughout the course of the Bill. Shelter has also done a significant amount in bringing this matter to the attention of those in this House and beyond. One of the great things that we manage to do in this House is to produce provisions such as this. I commend the amendment to the House. I beg to move.
Baroness Hanham: My Lords, I welcome these provisions. They will strengthen the Bill and move towards meeting what has for some time been a crying need to make sure that parents, particularly mothers, with children who find themselves homeless or about to become homeless are not separated. That has been one the great shames in some places in the country.
I have no difficulty in welcoming the amendment. As this may be a final opportunity, perhaps I may say in passing that on the whole the Bill has been uncontroversial. What we have all tried to do during its passage through this House has been to strengthen it and ensure that it achieves the objectives that lie behind it.
My anxiety remains that the Bill may be a triumph of hope over experience—largely because it extends the "homeless" categories. We all know that that objective will be impossible to meet if we cannot resolve the problems of temporary and permanent housing for those for whom the Bill is intended. It is a matter to which we may return on other occasions. It is

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certainly one that I shall want to continue to monitor. None the less, the Bill is welcome, and I particularly welcome the new clause.
Baroness Maddock: My Lords, I do not wish to carp, but it would have been helpful if the amendment had been tabled a day earlier.
Lord Falconer of Thoroton: My Lords, I apologise for that. It was entirely my fault. There were still things to sort out. If there are any difficulties, I hope that I can resolve them and answer any questions raised.
Baroness Maddock: My Lords, I shall put my questions into my remarks. I made that point because for those of us who do not have large departments or lots of people helping us with legislation, it is quite difficult. We have been asked by the usual channels to make sure that we table amendments on time. I am glad that the noble and learned Lord recognises the difficulties.
The noble and learned Lord did not make it clear whether the Government were going to make changes to the Adoption and Children Bill. It is obvious from comments that I have made at earlier stages, together with the noble Baroness, Lady Massey, who is very sorry that she cannot be here, that the amendment meets the points that we have raised and the concerns that Shelter has expressed.
It is important to emphasise how sensitively housing departments will need to deal with the issue. Applicants in those circumstances are likely to be very vulnerable and distressed. Given the preconceptions that some people have about social services and the publicity that has surrounded the issue, a suggestion that they will be referred to social services may cause some people further distress and may discourage them from giving their consent. The important aspect of the amendment is that the consent of people presenting themselves to the local authority is required. It will therefore be important for housing departments to make it clear sensitively that social services may be able to assist them. That should be reflected in guidance. I hope that the Minister will tell us that that will happen.
It would also be helpful if the Minister could expand a little on what is meant by,
"such advice and assistance as is reasonable in the circumstances".
How will that be dealt with in guidance? I hope that housing departments will be encouraged to be active in that area and to use their local knowledge to advise social services on the state of the local housing market.
With those provisos, we welcome the amendment. I hope that the Minister can reassure us on the two points that I have raised.
The Lord Bishop of Portsmouth: My Lords, I share the concerns and the enthusiasm expressed by the previous two speakers. It is good that the Government have listened to those concerns. Where children are
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involved it is important that safeguards are built in. I am glad that the Government have tabled the amendment, which has my support.
Baroness David: My Lords, my noble friend Lady Massey is unable to be here today, but she asked me to say on her behalf how pleased she is and how grateful she is to the Minister for the amendment that he has tabled. She is entirely satisfied that it will deal with the problem of parents and children being separated, which had caused anxiety to many of us. I add my thanks to hers. We are very pleased that at long last an amendment has been tabled that seems to fulfil all our ambitions on this difficult problem. I thank the Minister on behalf of us all.
Lord Bridges: My Lords, will the Minister be so kind as to explain the meaning of "intentionally" in subsection (1)(b) and (c)? I think that I understand the circumstances in paragraph (b) in which a person becomes intentionally homeless, but paragraph (c) is less clear to me. Who would be threatening the child? What are the circumstances foreseen? If that could be read into the record, it would be a substantial help in subsequent litigation.
3.45 p.m.
The Earl of Listowel: My Lords, I too warmly welcome the amendment. I should appreciate the Minister's clarification on a few points. It would be helpful if he could expand on what is meant by providing,
"such advice and assistance as is reasonable in the circumstances".
I hope that housing departments will be encouraged to be active in that area and to use their knowledge and expertise on the local housing market to help social services in exercising their functions to provide housing assistance to families. That could mean, for example, suggesting the names of private landlords with property in the area or arranging for housing benefit claims to be expedited to secure private accommodation.
In certain circumstances in which the needs of children are unlikely to be met outside the social sector—for example, if they are disabled and need a specially adapted property—I hope that such assistance would not preclude the provision of accommodation. That might be reflected in guidance. Perhaps the Minister might write to me on those points if that would allow him to expand further on them.
Finally, on the point of intentionality, it would be helpful if the Minister could encourage local authorities to take more account of the circumstances in which a family's homelessness arises in the first place and the potential implications for them when applying the law relating to intentional homelessness. Families are sometimes declared intentionally homeless in extremely harsh circumstances. Taking a longer-term approach could save a good deal of distress, particularly if, as in the example that I gave earlier, the child has special needs. Shelter's legal teams are

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frequently successful in overturning harsh decisions about intentionality. I look forward to the Minister's reply.
Baroness Park of Monmouth: My Lords, I apologise for making this point so late in the proceedings. I hope that I am not too late. Clause 15(3), which deals with allocation schemes, says:
"The scheme may also be framed so as to give additional preference to particular descriptions of people within this subsection (being descriptions of people with urgent housing needs)".
May I ask most strongly that whatever guidance the Minister gives should cover the needs of families who have been—as the Government politely call it—relocated from Northern Ireland under paramilitary threat? Approximately 150 such families arrive in this country every year, homeless, helpless and distraught. They usually have children and are often probably not very intelligible to many people, having strong Belfast accents. If anybody is in urgent housing need, they are. Although the Bill applies only to England and Wales, I hope that citizens of Northern Ireland will come within the purview of the scheme if they arrive here homeless. My urgent request to the Minister is to ensure, when framing the guidance, that some specific reference is made to that problem and to the particular need of those people for priority treatment.
Lord Avebury: My Lords, on Report I moved an amendment on the particular problems faced by local authorities when dealing with homelessness among gypsies. Since then I have written to the noble and learned Lord, although I do not expect him to have had time to consider the points that I raised in that letter. I should like him to interpret the new clause as it applies to gypsies who become homeless.
As the noble and learned Lord knows, many gypsies have large families. If they are living on an unauthorised encampment, they are already homeless. As I pointed out in my letter, the police have the power to issue directions for them to move under Section 61 of the Criminal Justice and Public Order Act 1994. The local authority also has the power to direct them to move if they are camping on land without the permission of the occupier or on the roadside and in certain other circumstances.
Consequently, if police were contemplating using Section 61 or local authorities contemplated using Section 77, the gypsy family living on that land would be threatened with homelessness and the provisions of this clause would, I think, come into play. However, as the Minister is also aware, it is not normal for gypsies to accept temporary accommodation as they have a strong cultural aversion to going into bed and breakfast. Recently, moreover, the courts have ruled that that is a perfectly reasonable attitude for them to take. Yet, in most local authorities there is not sufficient accommodation for the gypsies already residing in or resorting to their area. That is one of the difficulties that we face because we do not have the guidance. We do not know what local authorities will be asked to do when they are faced with such circumstances.
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When a gypsy family are in unauthorised occupation of a piece of land, there is a threat that they will be removed. Under this legislation, the local authority would have a duty to make provision for them that does not sunder the children from the parents even though there was no accommodation on authorised sites within the local authority area to which they could be asked to move when directed to leave their current accommodation. I just wonder how the Minister will reconcile that problem in the eventual guidance.
Lord Falconer of Thoroton: My Lords, I am grateful to noble Lords who have welcomed the amendment. I shall deal with the specific points.
The noble Baroness, Lady Maddock, asked about the amendment that is needed in relation to the Children Act 1989. As I said on Report and again today, the critical issue is to ensure that the social services directorate has power, when appropriate, to house the family and not only the children. As my honourable friend the Minister of State at the Department of Health said in the Commons on 17th January, to which I referred on Report, we have undertaken to bring forward amendments to the Adoption and Children Bill to address that issue.
As for guidance on the difficulties to which the particular duty gives rise—as the noble Baroness, Lady Maddock, said, there will be sensitivities between housing and social services because of the fact that they are dealing with children—those particular sensitivities need to be reflected in the guidance that will be issued.
The noble Baroness also asked what type of advice and assistance would be provided. That issue was raised also by the noble Earl, Lord Listowel. Perhaps I may write to the noble Baroness and the noble Earl on what we wish to see in the advice and assistance. The types of issue raised by the noble Earl—such as practical help in finding accommodation and obtaining housing benefit—are precisely those we would expect to see addressed in the advice and assistance.
As for the issue raised by the noble Lord, Lord Bridges, I do not want to get sucked into a debate on what might happen in relation to litigation. However, the difference between subsections (1)(b) and (1)(c) is that, in subsection (1)(b), the subject has become homeless and, in subsection (1)(c), the subject is threatened with homelessness. The word intentionally has the same meaning in both paragraphs and that meaning has been enshrined in homelessness legislation for a very considerable time. I think that the distinction between the two is simply that one subject is homeless whereas the other is threatened with homelessness.
The noble Baroness, Lady Park of Monmouth, raised an issue that, with the greatest respect. I think has absolutely nothing to do with the amendment we are debating. Nevertheless it is an important issue. If I may, I shall write to her on the particular issue.

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I think that that deals with all the points that were raised.
Baroness David: My Lords, if the Minister is writing letters, perhaps he could place copies of them in the Library.
Lord Falconer of Thoroton: My Lords, of course I shall do that.
Lord Avebury: My Lords, may I ask the Minister to address the issues that I raised?
Lord Falconer of Thoroton: My Lords, I apologise to the noble Lord, Lord Avebury. The provision applies only in the case of intentional homelessness. It was difficult to work out from the example that he gave whether the circumstances constituted intentional or unintentional homelessness. If it were a case of unintentional homelessness, the provision would not apply.
We need to consider carefully how the types of issue that the noble Lord raised would be addressed in guidance. I am sorry to be vague on the point, but the provision is only now being added to the Bill and we have to think very carefully about the guidance before we produce it. However, I shall consult him before we go forward with the guidance.
On Question, amendment agreed to.
Clause 15 [Allocation schemes]:
Baroness Maddock Baroness Maddock moved Amendment No. 2:
Page 11, line 1, after "any" insert "deliberate, wilful, or negligent"
The noble Baroness said: My Lords, I apologise for taking up the time of the House. However, as my noble friend Lord Avebury said, we might not be pressing some of these issues so much if the guidance were past the draft stage.
Amendment No. 2 is designed to ensure that local authorities exercise their discretion in determining the priority given to applications in line with the Government's policy intentions, by stipulating more clearly the behaviour defined in Clause 15(3)(2A). We believe that the provision should be limited to deliberate, wilful or negligent behaviour, which—to be quite clear—could include anti-social, threatening or violent behaviour, applicants who have previously wilfully refused to pay their rent and applicants who have deliberately caused damage to their own or to others' property. I believe that the amendment would also make it clear that issues such as low-level rent arrears and problems caused by inefficient housing benefit payments should not affect the priority given to an application.
I raised this issue in the House last week and I have also written to the Minister about it. I therefore hope that it will be possible for him to say something about the guidance on it. Although I realise that priority should be left to the discretion of individual authorities, I am sure that the Minister will agree that
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the housing Green Paper set out a framework giving priority to housing need and that that is what this Bill is about. So far, the draft guidance that I have seen seems very weak. We have established during the Bill's passage that the practices of some local authorities leave much to be desired.
I hope that the Minister can reassure me on those points. I should be particularly grateful if he would emphasise the types of circumstance in which he could not envisage priority being reduced.
We have come to the end of the Bill's passage. As the noble Baroness, Lady Hanham said, it has not been particularly controversial. I think that we all hope that the Bill is passed and that its operation is as successful as we have discussed. However, its success will depend on resources. I therefore hope that the Minister will reassure us that, at least after one year, there will be a review of the legislation's operation and cost. Some local authorities are concerned that the department's estimates do not reflect the true costs.
As I said, I very much welcome the Bill. In another place, I took part in the passage of the Housing Act 1996. I was very disappointed that it took so long to pass that legislation, which had previously been piloted through Parliament as a Private Member's Bill by Stephen Ross, the then Liberal Democrat—or Liberal—MP for the Isle of Wight. I am also sorry that it has taken us so many years to put right some of the things that we got wrong in that legislation. Nevertheless, as I said, we welcome the Bill, and we thank the Minister for the constructive way in which he has dealt with all our queries. I beg to move.
4 p.m.
The Earl of Listowel: My Lords, in relation to Amendment No. 2 I echo the concerns expressed by the noble Baroness, Lady Maddock, that adequate funds will be made available to put into practice this Bill, which has received such wide support in the House and whose importance we all recognise. The Government set aside £8 million for local authorities to meet their additional costs. The Local Government Association estimates that the actual costs will be double that sum or more.
As the noble Baroness requested, perhaps the Minister will indicate whether or not the Government will be reviewing the cost to local authorities in the first 12 months after the Bill comes into operation in order to ensure that no additional financial burdens are being placed on already over-stretched local authorities.
Lord Falconer of Thoroton: My Lords, I deal first with Amendment No. 2. Authorities may wish to take account of both good and less good behaviour, where that has been demonstrated by individual applicants. I have previously given as examples two applicants, one with a history of persistent but minor rent arrears and another who has demonstrated that he or she is a model tenant. All other factors being equal, the authority may consider the latter deserves more priority than the former. The qualification imposed by the amendment would then be wholly inappropriate.

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However, I know—the noble Baroness has made it clear to me personally and in correspondence—that the noble Baroness has genuine concerns and perhaps I can try to address those and seek to reassure her. One such concern is that some authorities are not paying heed to current guidance that urges authorities not to exclude people from the housing register for low-level rent arrears, and urges them to take housing need into account before making decisions to exclude.
I would point out that the statutory guidance that is currently in force regarding Part VI of the 1996 Act is that issued in December 1996, and does not address those issues very forcefully. Indeed, at paragraph 4.27 it suggests that the groups that authorities may wish to exclude as non-qualifying persons might include tenants with a record of rent arrears. Although this Government issued revised guidance on Part VI for consultation in 1999 which addresses those issues more fully, that does not have statutory force. Authorities therefore are not required by law to have regard to it.
I can assure the noble Baroness that the guidance that will he issued in support of the Bill will include robust guidance on the issues that she is concerned with here. We will make clear, for example, that in making any decisions as to the degree of priority that should be given to individual applicants, the level of their housing need should be a factor that is taken into account. We will also make clear that it would be unreasonable and inappropriate for an authority to reduce priority because of rent arrears that are due to housing benefit delays beyond the control of the applicant.
Another concern of the noble Baroness is that she has seen an early draft of the guidance that she feels is weak on some of these points—if that is not understating the position. I hope she will let me reassure her that the guidance is still very much in development. It has moved on from the earlier draft. There will be an opportunity for detailed consideration of this, and an opportunity to take me to task if I have not met the various commitments made during the passage of the Bill, when we consult on that guidance.
I hope that provides some reassurance on the points made in relation to the amendment. The noble Baroness and the noble Earl, Lord Listowel, raised the issue of resources. This is not the appropriate place to talk about resources but perhaps I can say, as we announced towards the middle of last month, that we have set in place the introduction of a homelessness directorate that will take on what the Rough Sleepers' Unit did, what the Bed and Breakfast Unit did, and the other aspects of central government's activities in relation to homelessness. I hope that at about the same time as this Bill becomes law, it will be possible to make an announcement about its activities.
Baroness Maddock: My Lords, I thank the noble and learned Lord for that very full reply. He has satisfied me on the points that I raised.
Given the fact that the guidance was not ready during the passage of the Bill, perhaps he will be in a position to enable us, at some future date, to debate the
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issues and discuss some of the genuine concerns that have been raised. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 1 [Minor and consequential amendments]:
Lord Falconer of Thoroton Lord Falconer of Thoroton moved Amendment No. 3:
Page 15, line 44, leave out "195(6)" and insert "195(8)"
The noble and learned Lord said: My Lords, on Report the noble Baroness, Lady Maddock, helpfully identified a numbering error in one of the suite of amendments that I tabled which were intended to bridge gaps in the provisions of the Housing Act which allow housing authorities to secure accommodation for homelessness applicants pending a review by the authority of its homelessness decision and pending an appeal to the county court on a point of law. This is a purely technical amendment to correct the error.
The noble Baroness raised a number of other issues and permitted the amendment to go through on the basis that I would deal with those points. Though it is not strictly germane to my amendment, perhaps I can take this opportunity to clarify a point that was raised during the passage of the Bill in relation to non-priority need applicants.
The issue is that local authorities should have a duty to secure accommodation for applicants who are homeless, eligible for assistance and in priority need. At the inquiry stage there is an interim duty to accommodate if the authority has reason to believe that applicants may meet those criteria. Where, following the inquiries, the authority is satisfied that those criteria are met, it must accept the main homelessness duty to secure accommodation. Where the authority is satisfied that there is eligibility and priority need, but considers that the homelessness was intentional, there is a power to accommodate pending a review or appeal.
Elsewhere the Bill gives authorities a discretionary power to assist applicants where they are satisfied the applicant is eligible, unintentionally homeless and does not have a priority need. The purpose is to ensure that authorities are able to assist such applicants, including by securing accommodation, where local circumstances and resources allow—for example, in areas where housing demand is low.
While one effect of that is to give authorities a general power to accommodate such applicants pending reviews and appeals, that is not its main purpose. Nevertheless, it has been suggested that it is inconsistent that authorities should have a power to accommodate where they are satisfied that such applicants do not have priority need, but they do not have a power to do so, pending inquiries, where they are not so satisfied.
I have explained the rationale behind the powers which are explicit in the homelessness legislation; that is, taking together the current provisions in Part VII of the Housing Act 1996 and the provisions in the Bill. However, in the absence of a specific power in the homelessness legislation, it would be open to

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authorities to decide to use the "promotion of well-being" power in Section 2 of the Local Government Act 2000 to accommodate homeless applicants where they consider that would promote or improve the social well-being of the area and was consistent with any community strategy prepared under Section 4 of the 2000 Act.
As this will be the last time I speak in the course of the passage of this Bill, perhaps I can thank all noble Lords who contributed to the debate, which has been in the main incredibly constructive. Together we have improved the Bill. Also, I thank the Bill team for the work they have done and for their support, which has helped the deliberations of the House: Avril Huston, Alan Edwards, Bronwyn Hill, Duncan Campbell, David Gleave, Paddy Knowles, John Wright, Katie Goodall and Tom Walker in my private office. I beg to move.
Baroness Maddock: My Lords, it would be very ungracious of me not to welcome this amendment. I too am grateful for advice from Shelter and the housing law practitioners association which enabled me to bring forward the amendments. Again, I thank the Minister for all his support during the passage of the Bill.
On Question, amendment agreed to.
On Question, Bill passed, and returned to the Commons with amendments.

State Pension Credit Bill [H.L.]
4.9 p.m.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Baroness Hollis of Heigham.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Serota) in the Chair.]
Clause 1 [Entitlement]:
Baroness Greengross Baroness Greengross moved Amendment No. 1:
Page 1, line 4, at end insert—
"(1A) State pension credit shall be publicised to the general public under the title "state pension credit" unless or until an alternative title is shown to be more appropriate or effective."
The noble Baroness said: The first amendment we consider to this important Bill concerns its title. It is important that we do so. On Second Reading even the Minister appeared not to be convinced by the title, nor was the noble Baroness, Lady Barker, among others. It is important that we get the title right as it could affect take-up for example. We have the bitter experience of the precursors to the state pension credit to learn from—all were rather badly named.
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To call extra help for a pensioner "supplementary benefit" is never likely to instil the feeling that it is a right rather than a handout. A similar situation has applied to income support from 1988. That is a benefit also paid to all low income groups, most of whom are likely to be in a completely different situation from that of a retired and sometimes very elderly person.
Therefore, I personally welcomed the principle of breaking the link between income support for those aged over 60 and those aged under 60 when the minimum income guarantee was introduced in 1998. However, the name did not constitute much of a move forward, particularly as it was neither a guarantee nor a minimum income if one had savings over £3,000. The Minister may recall that at the time Age Concern supported a case to the parliamentary ombudsman on that very point; that is, that the name "MIG" is misleading. Apart from anything else, it reminds everyone of the cold war, which is unfortunate.
I know that some, including many of my former colleagues at Age Concern, are worried by the term "credit" in the Bill's title. They feel strongly that it might be taken to mean a loan or a debt. I do not share that view as I believe that people get used to new things and new names if they are introduced well and thoughtfully, as we have seen with the introduction of the euro. The notion of a tax credit, money not paid in tax or a form of "tax back" is, I think, better understood than it used to be.
It might be better to call the state pension credit the state pension premium or the state pension addition, but that is a matter for debate. However, my main concern at the moment is that we seem to have two names for it. The Bill is titled the "State Pension Credit Bill", yet in all the promotional material that I have seen from the Minister's department the provision is called just the "pension credit". The dropping of the word "state" is unfortunate as the provision is a state benefit. My amendment seeks to restore the word "state" in the name presented to the general public so that people will not become muddled and think that the provision has something to do with private pensions or some other scheme. In addition, my amendment would give the Government the flexibility to rename the state pension credit if it is shown, through research or experience, to be unfortunately or unsuccessfully named.
The amendment is, of course, a probing one to determine what research or thought was carried out as regards the naming of the measure. I should like to know if any such research was done. I beg to move.
4.15 p.m.
Lord Higgins: At the beginning of our proceedings I must once again declare an interest as a chairman of an occupational pension scheme. I have considerable sympathy with the points made by the noble Baroness,

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Lady Greengross. It seems to me that to some extent the Bill's title is rather like that of the Holy Roman Empire which was neither holy, Roman nor an empire.
Baroness Hollis of Heigham: It survived for a long time.
Lord Higgins: The noble Baroness reminds me that it survived for a long time. That may be so. We must hope that suitable provision for the elderly also survives for a long time. However, I do not know why the title includes the word "state". I disagree with the noble Baroness, Lady Greengross, on that point as it seems to me a rather unnecessary complication. As she rightly pointed out, most of the promotional literature refers to the pension credit rather than to the state pension credit.
Before the end of our proceedings, we shall obviously need to reach a decision on the proposal. However, in announcing the Committee stage of the Bill, the Deputy Chairman requested that the title of the Bill be deferred. Perhaps at that stage we could reach a common consensus on the matter.
There are serious issues involved here. As the noble Baroness rightly pointed out, the word "credit" can lead to confusion. The provision is not a credit. All it means is that the Exchequer will take rather less of people's money than was formerly the case. To that extent, to call the provision a credit is a little disingenuous.
I am worried about the terminology used throughout the Bill. The Bill brings together two separate propositions: the guarantee credit and the savings credit. They appear in most of the clauses that we shall debate. As regards pensioners, I ask the Minister whether it is proposed that the minimum income guarantee terminology should disappear altogether? People are used to that terminology and considerable explanation will be required to inform people that what they thought was a minimum income guarantee has not disappeared but is subsumed under a different title, part of which comprises what used to be MIG and part of which will be the savings credit.
I am also worried about the huge proliferation of terms in the Bill. We not only have the state pension credit but also the appropriate minimum guarantee, the standard minimum guarantee, the savings credit threshold and others. Those terms will greatly complicate the terminology. As one of the problems we face is whether people understand these matters—if they do not, they tend not to claim and take-up is correspondingly reduced—in the course of our proceedings we ought to see whether we can simplify these matters, particularly the title. It was helpful of the noble Baroness to raise that point.
Baroness Barker: I said on Second Reading that I was something of a neophyte in terms of pensions debates. I point out to the Minister that, just as she predicted, my reading matter over the past few months has changed dramatically. I have been immersed in a number of fascinating documents. Whether or not I would have found them fascinating before I was
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involved in this matter, I am not sure. Perhaps one of the most fascinating, and one to which I shall return, is Overcoming Barriers: Older People and Income Support, the Government's own research into the many reasons why older people do not claim income support.
On reading that document I was struck forcefully by the importance of the seemingly trivial amendment that we are discussing. I also said on Second Reading that I was not thrilled by the title of the Bill. I find it most unhelpful. I believe that the Minister also said that she was not terribly wedded to it either. Having read of the reasons why many older people do not claim income support, I am even less disposed towards the Bill's title. I take issue with the noble Lord, Lord Higgins, on one point that he made as regards dropping the word "state". The Government's research indicates strongly that older people are more likely to claim additional benefits the closer those benefits are linked to the state pension. One of the major barriers to people claiming benefit is their feeling, rightly or wrongly, that they are not entitled to it. However, they consider that they are entitled to the state pension.
Lord Higgins: But it is not called a state pension, is it?
Baroness Barker: The term "state pension" is widely understood by many pensioners. I thought the noble Lord talked about a state pension credit. I believe that we should consider what the noble Baroness, Lady Greengross, said in that regard. I think she would agree that we have not yet found a way correctly to identify the two elements of the new provision: the guarantee credit and the savings credit, to which the noble Lord, Lord Higgins, referred. Until such time as we do, there will be a severe problem not just for pensioners but also for all those who seek to advise them on their entitlement. Perhaps we could come up with a title that was longer but more descriptive, such as "the pension top-up" or "the pension top-up and savings allowance". That is, I agree, clumsy and inelegant but it is descriptive. That would have an effect on take-up.
Lord Hodgson of Astley Abbotts: I find myself in some sympathy with the purposes that lie behind the amendment. As my noble friend said, the Bill's nomenclature is confusing in the extreme. The savings credit threshold as defined in the Bill is extraordinarily hard to understand—I have read it many times. We have not discussed estimated rates of return, which are imputed across savings at different levels.
Wherever possible, we must try to say what we mean. There will inevitably be complications in the detail but at least the scheme's name could he clearer. I should not favour calling the arrangement a "pension credit" because it is not a pension credit. Unless one has a full state pension, one does not get a credit on part of one's pension income; one qualifies for that only if one has a full state pension. We shall discuss that later. Moreover, the arrangement should not be

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called a "state pension credit" because it is an incentive to save. I hope that we will find a way to use the phrase "savings incentive", because the arrangement is an attempt to encourage people, on top of their basic state pension, to have savings that will qualify for the proposal. I hope that we will consider wording that involves the phrase "savings incentive" rather than "credit", which has a different nomenclature and implication. That phrase would make the position clearer. "State pension" suggests that there is a basic idea of qualifying, "savings" suggests that there is something that one needs to do and "incentive" means that one gets some return from it.
Baroness Hollis of Heigham: Listening to this debate about the appropriate title is rather like listening to debates on reform of the House of Lords—everyone knows what they do not like but no one can agree on what they do like. We are somewhat in that position. Some suggestions do not involve titles that are easily recognisable titles to pensioners out there; they are accurate legal descriptions of the content that the scheme may involve. That is not necessary and it is not what we are dealing with.
Since the idea was first mooted, we have used the title "pension credit" from the beginning. Members of the Committee will recall that at Second Reading I explained that we had to use the prefix "state" for purely legal reasons and that we will continue to refer, in literature and so on, to "pension credit". The name has been in the public arena for sufficiently long already to have achieved a degree of acceptance and understanding. To further change it would suggest to many people out there that we have yet another different scheme and it would add to the complexity.
I accept the thrust that lies behind the proposal of the noble Baroness, Lady Greengross, which was to ensure that everything possible should be done to reduce stigma and to promote the take-up of pension credit. We do not want the name to stand in the way of that objective. She was absolutely right in that regard. I hope that she will accept my assurance that we will undertake a substantial programme of targeted publicity to achieve the dual aims of reducing stigma and promoting take-up, which we share with her. I hope to draw on her expertise and experience as we develop the matter.
It is appropriate to mention the pension service, which will come into being in April and which will focus exclusively on pensioners and those approaching pension age. It will deliver tailored services, which will mean less intrusion, less hassle and services that meet pensioners' needs in a more helpful and positive way. It is also our intention to present pension entitlements in a more holistic way. We want people to see pension credit as part of their overall pension entitlement. Current pensioners do not need to know about how one arrived at arrangements such as the five-year proposal, integrated sums of money and automaticity, although future pensioners do. The noble Lord, Lord Hodgson, was absolutely right to suggest that future pensioners need to know that such arrangements will
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be available to them—that is an incentive to save. Existing pensioners are where they are, as it were, and the important point is to have simplicity and transparency for them. Our literature will ensure that that is the case.
We firmly believe that such practical linking of processes—the retirement pension with the two elements, as it were; that is, the guarantee element and the savings element—into one pension payment will help pensioners to claim it. We currently do that with SERPS, the graduated pension and pension increments.
I welcome this opportunity to say that what lies behind the arrangement is what matters, not what its title is. The title "pension credit" is reasonably well established. It is not the most elegant formulation but no one can come up with a better title that keeps simplicity, as opposed to being, in effect, the Long Title of a Bill. With those assurances, I hope that the noble Baroness will withdraw her amendment.
Baroness Greengross: I thank the Minister for her explanation and sensitive approach. The matter obviously needs a little more thought to ensure that we have got it absolutely right. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 2:
Page 1, line 5, after "credit" insert "calculated in accordance with section 2"
The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 4, 5, 6, 13, 14, 15, 21 and Clause 3 stand part.
First, I explain to the Committee that I shall be speaking to all the amendments today that stand in my name and that of my noble friend Lady Castle. Unfortunately, my noble friend has had a fall. She has been badly shaken but she is making good progress. She is not, however, well enough to come here today. I am sure that we all wish her a speedy recovery.
Secondly, I was not myself able to come to the Second Reading debate on this Bill. My noble friend the Minister will not be surprised to learn that I am not terribly happy about the general thrust of the Bill. It is true that extra money is being made available for pensioners, and that is surely to be welcomed. But it is dependent on a system of means testing and it will be extended, ultimately, to a large section of pensioners. According to the Government's own long-term projections, by the middle of this century as many as 65 per cent of pensioners could be eligible for the pension credit, with all that that implies.
One of the problems about means testing is that it is not only expensive to administer but it is often very complex. Account has to be taken of income from various sources, capital and so on. We shall debate some of those matters later. Provision has to be made for a taper, and that can be complicated as well.

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When I first read the Bill, I found parts of it very confusing. If we are to have this system, could we at least make it as easy as possible to understand? It is true that there are very useful notes on clauses, but I still find parts of the Bill difficult to comprehend. I therefore sought some assistance from a specialist adviser who knows a great deal about pension provision and social security in general. As a result, the amendment that is before the Committee and those that are grouped with it were framed. It will be noted that we want to do away with Clause 3 altogether and substitute a formula that we believe secures the same objective but which is much simpler. Instead of treating the savings credit as a separate benefit, the proposed formula in this group of amendments treats it as one element in the calculation of the guaranteed credit.
If the amendments were agreed to, the terms "guaranteed credit" and "savings credit" would be redundant; there would be one benefit—the state pension credit—in the calculation of which 60 per cent of certain types of income would be disregarded. That is our aim. In place of Clause 3 there would he the much simplified wording that we have framed in Amendment No. 21.
I hope that the Minister will agree that, irrespective of her view of the actual wording, which no doubt could be improved, there is a case for simplifying the formulation. I am not alone, it appears, in regarding Clause 3 as incomprehensible. The noble Lord, Lord Higgins, has drafted what amounts to a rewrite, which we shall no doubt debate later this afternoon.
This is by no means a wrecking amendment. Despite my view, which I have already expressed, as to the philosophy that lies behind the Bill, I accept that the Bill is before us and that it is up to Members of the Committee to do what we can to make it viable and accessible. I therefore hope that the Minister will look with some favour on what I have said. I repeat that we are not out to wreck the Bill; we simply want it simplified in order to make it accessible to the people who it is intended to benefit. I beg to move.
4.30 p.m.
Lord Higgins: I am sure that the whole House will be sad to hear of the fall sustained by the noble Baroness, Lady Castle, and that we all wish her a very rapid recovery. She is certainly missed at these debates—she is one of the usual suspects who is usually involved in them. When we previously debated this Bill, the absence of the noble Baroness, Lady Turner, was noted and we wished her well. Therefore, we are particularly pleased to see that she is now back with us.
As the noble Baroness rightly pointed out, these are very complicated matters, and she has sought to put forward an alternative proposal. Of course, it is well known that both she and the noble Baroness, Lady Castle, would much prefer—as, indeed, would many outside bodies—to see the money which the Government's proposals in the Bill would cost spent on uprating the basic state pension. I could not agree more with the concerns expressed by the noble
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Baroness in moving the amendment with regard to the extension of means-testing. There is no doubt that the proposals in the Bill will lead to a substantial increase in means-testing.
In the context in which she proposes her amendments and in the context of the Government's own proposals, I considered it extremely helpful to have the document published by the Department for Work and Pensions on pension credit for long-term projections. That document compares the Government's proposal for pension credit reforms with the proposal for increasing the basic state pension in line with earnings. The latter would normally be advocated by the noble Baroness who moved the amendment.
The figures given in the document are quite surprising. Those which relate to the cost of pension credit reform under the Government's proposals are based on three separate scenarios. I am not clear why there are three scenarios because different assumptions are made about the pension credit on the one hand and the savings credit on the other, uprated with prices, earnings or whatever. I should have thought that by now the Government would be fairly clear about what they intend to do with regard to uprating both the savings credit and the standard credit. Perhaps the noble Baroness can enlighten us on that matter.
If that is the position, then I am not sure why the document published by the department appears to assume that various possibilities arise. I believe that at least we should be clear about the Government's intentions with regard to uprating both the credits involved. We should then be in a better position to appraise the amendments before us. However, certainly if one takes the easiest of the assumptions, then, under the Government's proposals, the cost of the new measures in the Bill would apparently be: by the year 2030, £14 billion; by 2040, £20 billion; and by 2050, £26 billion. Those compare with corresponding figures of £29 billion, £46 billion and £62 billion so far as concerns uprating the standard pension in line with earnings. Therefore, clearly the proposals which, generally speaking, the noble Baroness supports would be a great deal more expensive in the longer term. They are fairly expensive even in terms of the Government's Bill, leaving aside the question of whether it is better to spend the money in one way or the other.
The Government's document appears to contain rather strange assumptions about take-up. It assumes 67 per cent in 2004 and then, as the pension credit gradually becomes established, 100 per cent thereafter. It seems to me to be extraordinarily optimistic to assume that after 2004 the take-up of the credit proposed in the Bill will be 100 per cent. We know only too well that generally the take-up of existing benefits is far less than that figure.
The other question which arises in the context of he figures that I have just given is whether the Government's proposal is sustainable. A number of outside bodies—the Pension Provision Group, the

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Institute of Public Policy Research, and so on—have expressed serious doubts as to whether the Government's proposals—still less the proposals of the noble Baroness in these amendments—would be sustainable. Clearly, in one sense, anything is sustainable so long as one is prepared sufficiently to increase taxes and social security contributions. But one has to put the matter into the broad context.
In relation to that matter, perhaps I may put a particular point to the Minister—this may be an appropriate moment to do so. If we are to incur these substantial costs, can we be told what the effect is likely to be on the Government's balance sheet? At present, one deficiency in our statistics is that the future liabilities of the Government with regard to pensions are excluded from the Government's balance sheet. We have a list of assets; it is a thick book. But perhaps the most major liability does not appear. I hope that in future we can include that figure.
Finally, with regard to this group of amendments, the important point is what the effect will be on savings. We must hope that the Government's proposals will produce an increase in the savings ratio. I believe we all agree that at present it is clear that insufficient savings have been made towards pensions in order to pay an adequate standard of living for people, let us say, in the year 2040.
Therefore, I was rather depressed by an analysis carried out by the Association of British Insurers. It suggests that, under the current arrangements—that is, without the pension credit—saving £50 a month, even over a long period of time—say, 20 years—is not worth while because of the way in which MIG is withdrawn if it is a means-tested benefit. Even under the pension credit arrangements outlined in the Bill, on the same assumption of approximately £50 a month, again, saving is apparently more worth while for a short period of time than it is now. The implied rate of return would be negative over a period of 10 years because the effective rate of tax as regards the pension credit is 40 per cent.
I should appreciate the Minister's comments on this point. But, if it is the case that one will receive a negative rate of return on savings of £50 a month for 10 years, and if the situation is even worse over a longer period, then we must query whether the proposal in the Bill is appropriate. More particularly, we must query whether an alternative of the kind proposed by the noble Baroness in these amendments might not be a better way of proceeding.
Baroness Hollis of Heigham: Perhaps the noble Lord will help me on this matter. I do not understand his point. With regard to the savings credit, at present someone of the age of 77 with a retirement pension and some other modest savings below the MIG income will see those savings wiped out because they are offset against what they would have received under the minimum income guarantee. In future, they will enjoy the benefit of at least 60 per cent of that amount. Therefore, I simply do not understand the noble Lord's point about negative rates of savings. At
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present, there is a 100 per cent negative rate of savings between £77 and £100 so far as concerns modest second pensions.
Lord Higgins: As I mentioned, the figures that I give are based on the analysis carried out by the Association of British Insurers. The association sets out a very reasonable and, I believe, not unrealistic scenario in which someone saves £50 a month over that length of time with various assumptions about the upratings which are likely to take place and the fact that the MIG will cut in at certain points. I do not believe that that is out of line with what Mr Frank Field has suggested from time to time.
Noble Lords: Oh!
Lord Higgins: It is no good saying "Oh" about Mr Frank Field. We realise that he was supposed to think the unthinkable, and so on.
However, I believe that these are serious points both with regard to sustainability and with regard to the extent to which the Government's proposals are likely to increase savings. On the other hand, albeit for a much higher cost, perhaps something along the lines suggested by the noble Baroness in the amendments might be a better way in which to proceed.
Baroness Hollis of Heigham: Amendments Nos. 2, 3, 4, 5, 6, 14 and 15 propose a radical change to pension credit and have the effect of substantively bringing forward much of Clause 3 to Clause 2. As Members of the Committee are aware, Clause 3 introduces the savings credit and details of its calculation. Therefore, we are considering this group of amendments together with the Question whether Clause 3 stand part.
In the process, I believe that we have wandered gently over much of the territory of the Bill with which we shall deal more specifically in due course. I should like to leave some of the questions raised by the noble Lord, Lord Higgins, until we debate the amendments which relate to them rather more tightly, including the situation regarding the National Insurance Fund, and so on. I could attempt to answer them if he wishes, but these proceedings may sound more like a Second Reading debate rather than a response to the amendments. However, I can comment on some of the points, particularly the percentage of GDP.
The noble Lord rightly made the point that my noble friend's previous position on seeking uprating in line with earnings and basic state pension would have a forecast figure of something like £60 billion by 2050 and that that would be two or three times more expensive than our estimates for pension credit. I agree with him.
He also asked whether pension credit was sustainable as part of GDP. Our projections suggest that we are talking about possibly 0.6 per cent of GDP in 2020 and possibly 1.1 per cent of GDP in 2040. Compared with almost all European examples, we consider that those are realistic, sustainable and affordable percentages of GDP. I have no problems with that.

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I have tried to deal with the noble Lord's point about negative rates of return. That may or may not be true for certain assumptions, but not for people who at the moment are losing modest savings against MIG. Pension credit addresses that. It may be that some of the points raised by the noble Lord will be dealt with better when we consider such things as tapers and the like. If I need to respond to other points, perhaps I may do so later.
Perhaps I may turn to the amendment of my noble friend Lady Turner.
Lord Higgins: I entirely agree that it may be better to deal with some of the points later. Nevertheless, I was puzzled about why the Government's paper made different assumptions about uprating of the guarantee credit and the pension credit, so perhaps the Minister could tell us the Government's intentions in relation to prices, earnings or whatever.
4.45 p.m.
Baroness Hollis of Heigham: I shall address that later. At the moment the Government have made it clear that our intentions, in terms of what we shall call MIG to the end of this Parliament, are to be uprated in line with earnings. We do not propose to bind future Parliaments on that. That will be determined in due course. We have given scenarios of whether RPI or earnings-related assume different rates of growth, if you like, and as a result what projections would subsequently follow, given possible permutations. On the face of it, that appeared to be a helpful way of presenting what the future liabilities, costs, responsibilities and rewards would be to the pension sector of social security. If my officials had not produced that information, the noble Lord would be pressing me for it under certain scenarios, as we have done.
Perhaps I should comment on the odd assumptions about take-up being 100 per cent from year two. I take the noble Lord's point. All the experience shows that with an income-related benefit there is normally a slow, but steady, climb to a rate of take-up which may be 90 or 95 per cent or more. We saw that with his own government's introduction of family income supplement and we have seen it with other forms of income-related benefits.
Had we put forward any other working assumption, this would have been taken, for year two, as suggesting that that is the total number of pensioners whom we believe will claim—and that would have been a step too far. We are putting in the funding in the hope that we can get as close to 100 per cent take-up as we can. I fully accept that there is no experience to suggest that we shall hit that figure. But if we did not put in the funding, or if we had exceeded it, or if we went for a figure considerably lower than that, I would be accused by the noble Lord of building in a failure to reach our proposed target. That is why we did it like that.
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I shall return to the amendment of my noble friend. Her policy position is to replace pension credit with a state pension of a similar amount and earnings-related. The cost of that has already been addressed by the noble Lord, Lord Higgins. I have tried to put this point to my noble friends Lady Turner and Lady Castle. I am sorry that she is not in her place. We understand the reasons. It is worth reminding the Committee that that would not remove the need for income-related benefits for all sorts of reasons—even if we had an earnings-related increase and it had never been broken—because something like two-fifths of all of those currently claiming MIG would still need an income supplement either because they have an incomplete retirement pension, or because they need, and are entitled to, additional income-related benefits for such things as disability or ISME. Therefore, the notion that there is a choice between no means-testing, high retirement pensions, earnings-related and means-testing pension credit, and so on, is simply nonsense and is not borne out by the evidence. I know that my noble friend Lady Turner respects that information.
As was made clear at Second Reading, we are seeking to target benefit on the poorest pensioners and those nearly poor pensioners who currently see their modest savings being eaten away. We retain this dilemma that we are seeking on the one hand to ensure that the poorest pensioners, who have no savings, have a decent minimum income, which could be £100, but equally that those who have made modest provision will, for the first time, see some reward for it. That is fairness.
Pension credit brigades together the need to have a decent minimum income to address poverty on the one hand with fairness in our response to those who seek to help themselves on the other hand. That is what we are seeking to do.
The amendments of my noble friend remove reference to the pension credit from Clause 1 and substitute the references to the guarantee credit in Clause 2 with references to the state pension credit—not the basic state pension which of course is provided for under Part II of Social Security Contributions and Benefits Act 1992. Thus, the whole pension credit calculation would be within one clause and the guarantee credit and the savings credit would be replaced by one calculation covering both elements. I fully understand that the intention is that these amendments pave the way for the proposals made within Amendment No. 21, which seeks to insert a savings disregard into the calculation of the guarantee credit in Clause 2.
My noble friend is right to recognise the importance of this aspect of the pension credit. As I have said, many pensioners today are no better off for having saved, because in seeking to address the problems of poverty we have overtaken the efforts that some people have made for themselves. We do not believe that that provides the right incentive to save for the future.

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The savings credit will change that. It will reward rather than penalise pensioners for their thrift by giving them a savings credit, a cash addition for every pound of income pensioners have built up during their working lives.
Under the savings credit in Clause 3, we have proposed that pensioners who are 65 and over will receive a cash addition of 60 pence for every pound of second pension and income from savings that they have above the level of the savings credit threshold. In 2003 the threshold is expected to be around £77 for a single person, and £123 for a couple.
My noble friend proposes a very similar provision for inclusion in Clause 2. That is one approach and it could work for many pensioners, but we do not believe that it is sensible.
One of the problems that my noble friend simply has not recognised is that many pensioners have additional needs such as owner-occupier housing costs, disability, or caring responsibilities. We meet those needs through increases to the standard guarantee—what we call the appropriate guarantee. In Clause 3 we have ensured that those groups still benefit, with a higher lift, so to speak, from the savings credit but that they do not benefit more or disproportionately compared with those pensioners without additional needs.
Under my noble friend's proposal, her savings disregard would continue to accrue on qualifying income above the standard minimum guarantee and in addition people would be entitled to substantial savings credit. By removing the cap, those with additional needs would cost an extra £350 million because the savings element of the pension credit would become an extension of the guarantee. Thus, cases previously on the savings credit, and therefore, not passported, would be passported to housing benefit and council tax benefit. To remove cliff-edge effects would cost an additional £800 million. In addition, this amendment would add a further £100 million to the costs because the guarantee and the savings credit would be payable to those aged 60 to 64.
My noble friend's amendment, as drafted, would add a further £1.25 billion to the costs of £2 billion of pension credit. That £3.25 billion would have to be met either from an increase in taxes or from elsewhere within the Government's wider programme and agreed spending plans. Across Government we believe that we have the correct priorities.
While we accept that my noble friend's intention is to make the scheme more generous, we do not believe that, as she has cast it, that generosity is justified. We have set the qualifying age for the savings credit at 65. I explained that the guarantee is for men and women at 60 and the savings credit for men and women at 65. We believe that all pensioners over the age of 65 should have the opportunity to receive the same level of savings reward based on their savings. It cannot be right that because an individual has additional needs, they benefit disproportionately from their savings.
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In presenting the guarantee and savings credit calculations separately in the Bill, we believe that we have made clear our intent that all pensioners should have a guaranteed level of income that none should fall below. We also believe that in detailing the savings credit calculation separately at Clause 3 we are making it clear to pensioners on low and modest incomes that where they have saved there will he an identifiable reward for doing so.
I think that the amendment proposed by my noble friend would undermine those intentions and create an innate unfairness and bias towards those pensioners with additional needs including those with mortgages.
These amendments are inappropriate, extremely expensive, not well targeted and not the best way of taking forward the Bill. I hope that she will feel able to withdraw the amendment.
Baroness Turner of Camden: I thank the Minister for her comprehensive response. Although there has been some talk about basic state pension, and my attachment to the idea that it should be uprated in line with earnings, the amendments do not deal with that issue. The amendments relate to the wording of the Bill and the intentions underlying the wording. I was most anxious to ensure that the measure was comprehensible. I still believe that Clause 3 is extremely difficult to understand. We shall have another opportunity to consider the matter today; another amendment deals with that very point. However, I find aspects of the wording incomprehensible. I believe that there is an obligation upon us to ensure that primary legislation on a new and important measure such as this should be understandable.
It is not my intention to press the amendments. They were probing amendments to ascertain the Government's attitude towards my view of the comprehensibility of the provisions. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Barker Baroness Barker moved Amendment No. 3:
Page 1, line 6, leave out paragraph (a).
The noble Baroness said: The amendment relates to pensioners who are living abroad. It is a similar area to that addressed in the later amendment tabled by the noble Lord, Lord Higgins, on regulations.
In moving the amendment, one has a sense of history. I understand that similar debates have been held intermittently since 1929 on the issue of pensioners who choose to live abroad.
The issue that I seek to address is often raised in the context of the state pension. I raise it in the context of the pension credit. I refer to pensioners who live abroad whose income is not uprated as it would be if they lived in this country. I do not wish to list the countries with which there are or are not reciprocal arrangements. I simply wish to raise one point. The latest figures for those pensioners who receive upratings are dated 15th January 2001. The number of pensioners who live abroad and have a state retirement

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pension at a frozen rate is 460,000; 378,000 pensioners have their pensions uprated annually. However, I have been unable to find figures beyond 1998 relating to where those pensioners have retired to.
Patterns of work and pensions are changing rapidly. I do not wish to focus on the common myth that pensioners living abroad are affluent, having retired to the Mediterranean and the sun. I refer to the migration of pensioners to this country. Great changes have taken place during the lifetimes of those pensioners, most notably in countries such as eastern Europe, and so on. That is the issue that I seek to address. I shall be interested to hear the Minister's response.
Baroness Hollis of Heigham: I am sorry that this amendment is not grouped with the next amendment. We tried. They are in separate groups but raise the same issue. It would have been better to take the amendments together.
Amendment No. 3 would remove the need for a person to be physically present in Great Britain in order to claim pension credit. Pension credit could be claimed, therefore, by anyone living abroad. It will not come as any surprise to the noble Baroness to know that the Government do not accept the proposal. I hope that the Committee will agree that it cannot be right that a person who might have no connection with, or affiliation to, the United Kingdom could receive pension credit, the funding for which will be provided by the taxpayers of this country. Were no residence or presence criteria attached to pension credit, the cost to the British taxpayer could be enormous, potentially running into billions of pounds.
Rather the Government intend that in order to receive pension credit a good degree of affiliation to this country will be required. Some form of residence condition is an inherent requirement in social security benefits generally. We do not believe that pension credit should be an exception to this rule.
We propose, therefore, that, first, it will be a condition of entitlement for pension credit that a person is present in Great Britain when a claim is made. In addition, such a person will be required to be habitually resident in the common travel area of the United Kingdom, Channel Islands, the Isle of Man or the Republic of Ireland. People with certain European Community rights such as workers, refugees and people granted exceptional leave to remain in the United Kingdom will not be required to demonstrate that they are habitually resident here.
As Members of the Committee will know, being habitually resident in the common travel area is a pre-requisite for a number of benefits including minimum income guarantee. In order to determine whether a person is habitually resident, a decision-making officer considers a variety of factors about the person's circumstances—for example, the length, continuity and general nature of actual residence, reasons for corning to this country and the claimant's future intentions. Indeed, when my son returned from the States, he was asked to which societies and organisations he belonged, and so on. I believe that
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those were perfectly proper questions to see whether someone's place of habitual residence was in this country.
During the previous Parliament, the Government undertook a review of the habitual residence test and made a number of changes to improve the efficiency and fairness of the test. Given that, and the fact that there is some similarity of purpose—I am sure the noble Baroness will recognise that—with minimum income guarantee in providing a guaranteed level of support to poorer pensioners, we believe that it is appropriate to use the habitual residence test for pension credit.
Of course, that is not to say that pension credit should cease immediately upon a person departing these shores. We intend to allow pension credit, as with minimum income guarantee, to continue in payment for periods of temporary absence from great Britain of up to four weeks. Where the claimant accompanies a family member who is a child and travelling abroad to receive medical treatment, this can be extended to eight weeks.
It is useful to get these matters on the record; that is what Committee stage is about. I hope that I have explained the position to the noble Baroness and that she will withdraw the amendment.
Baroness Barker: I thank the Minister for her reply. When the noble Baroness referred to absences for between four and eight weeks I thought we were in danger of straying into hospital downrating since it will now be increasingly possible to go to a hospital abroad. Perhaps the Government are ahead of us on these matters.
The Minister's response was as I predicted. Perhaps I may repeat that patterns of pensioners' lives are changing and there is a case for further research and updating on this issue. Were these pensioners—they are not affluent but are returning home—to remain resident in this country, they would fall into the category covered by the pension credit. Those people may have been in this country for a long time. Nevertheless, I have listened to what the Minister said. The noble Baroness is well versed and has long-standing experience in these matters. She graciously spent time explaining those matters to us. However, I think that the matter needs to be aired periodically. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 4 to 6 not moved.]
5 p.m.
Lord Higgins Lord Higgins moved Amendment No. 7:
Page 1, line 20, leave out paragraph (a).
The noble Lord said: In moving Amendment No. 7 I shall speak also to Amendments Nos. 8 and 9. Perhaps I should explain that I was in no way responsible for the de-grouping of the previous amendment with this one. I was not in favour of that.

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The amendment seemed to fall naturally into this group. I presumed that there had been representations from somewhere else.
Baroness Hollis of Heigham: The noble Baroness, Lady Barker, wants to intervene.
Baroness Barker: I rise to point out that I do not think that the amendments were ever grouped together. They were not de-grouped by me.
Lord Higgins: Therefore, if they were not grouped together in the first place, it is the Government's responsibility.
I shall not go into the arguments which were put forward on the previous amendment by the Liberal Democrats because it had not occurred to me that those issues would be raised. There is a history of problems faced by those abroad who do not have their national insurance pension uprating. That is very well understood. However, I have never heard anyone say that those overseas should get what was MIG and is now the standard credit or that they should receive relief for their pension savings. They would probably be as astonished as anyone else if that were to happen.
I turn to Amendments Nos. 7, 8 and 9. This is the first stage in the Bill where the dreaded expression "regulations" appears. Perhaps it would be helpful just to say a word or two about that. Many of those outside have complained at great length about it being extremely difficult to know what the Bill does because vast tracts of it will be taken up by regulations. Having said that, the Select Committee on Delegated Powers and Regulatory Reform gave the Government a fairly clean bill of health concerning whether the regulatory powers should be dealt with by positive or negative resolution. It made two caveats—for example, Clause 15. By and large it has not expressed concern. None the less, it is important to seek to establish during the course of debate what the Government's intentions are.
In that context, the noble Baroness said at Second Reading that she would try to provide us with drafts of the various regulations, of which this is the first to appear on the face of the Bill. I realise, and understand, that she has had considerable difficulty in fulfilling that undertaking. None the less, she has managed to get some commentary—I think that would be the right way of putting it—on the various regulations. That only alas—my fault not hers—reached me earlier this morning. I am grateful for it. No doubt between now and Report that will be circulated to others participating in these debates, and we can all take advantage of it.
One basic point of principle is that it is entirely appropriate to make regulations where the particular element of the Bill will be variable in the future. We clearly cannot go through primary legislation every time there is some major change in rates or whatever. On the other hand, if it is a matter which can be put on the face of the Bill, it should be. In a number of instances that may be the case. For example, the
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regulations make provision for the circumstances in which a person is to be treated as being or not being in Great Britain. That is not something which varies over time. The Government should know the circumstances in which they will treat a person as being or not being in Great Britain.
Baroness Hollis of Heigham: The noble Lord will know that the precise terms of what counts as "habitual residence" were changed by the court case of Swaddling. That encouraged the Government to progress with their review of the habitual residence test. It did indeed change. As a result, all the guidance that had to go out and so on had to be perfectly properly changed. These things are not as fixed and non-variable as the noble Lord suggests. He seemed to be suggesting that the only regulations ever needed were those that dealt with numbers, which might have to change. Everything else would remain constant. No, that cannot be true. Forms of income, of annuity and all those kinds of things change every time different models come through.
The Government, without troubling the House continually with primary legislation, need to be able to have the flexibility to bring these matters forward with regulations, which, none the less, will remain properly scrutinised by your Lordships' House.
Lord Higgins: I was not suggesting that this applied only in cases of numbers. That is not my position. The noble Baroness is fortunate in having a court case which led to her having to change the question of who is or is not in Great Britain. If that had not arisen, she would find it more difficult to make her point. But I take and accept her point.
Amendment No. 8 concerns regulations which provide for whether someone should continue to be entitled to a pension credit if they are temporarily absent from Great Britain. Perhaps the noble Baroness can give us some indication as to how long someone has to be absent and so on. In that regard there probably are some helpful court cases and other financial legislation relating to whether someone is habitually resident and so on. No doubt the noble Baroness can confirm that matter.
The other point is the question of whether or not someone is in Great Britain. Perhaps the Minister can make clear for us what the situation is with regard to Northern Ireland. In particular, if someone visits Northern Ireland, are they said to be inside or outside Great Britain? These are all fairly clear-cut points compared with some of the complexities elsewhere in the Bill. It would be helpful to have the Government's view on that issue and whether it would not be better to deal with it on a United Kingdom rather than on a Great Britain basis. I beg to move.
Baroness Hollis of Heigham: The noble Lord has described his amendments with his usual clarity. They all concern the residence and presence conditions that need to be satisfied in order to qualify for pension credit. Amendment No. 7 removes the provision allowing additional residence conditions beyond mere

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physical presence in Great Britain to be a prerequisite for receipt of pension credit. Amendment No. 8 limits entitlement to pension credit only to periods of presence in Great Britain. Amendment No. 9 has the effect of preventing payments of pension credit during periods of temporary absence from Great Britain—namely, England, Scotland, Wales—while the person remained in the United Kingdom. As the noble Lord said, that is the Northern Ireland amendment.
Amendment No. 7 as tabled has the effect of requiring a person to be physically present only in Great Britain in order to be able to claim pension credit. It is the mirror opposite of the amendment moved by the noble Baroness, Lady Barker. The argument remains the same. We believe that it is appropriate to have the habitual residence test, which is a stronger test than merely being physically present. I can elaborate on that matter if that does not answer the noble Lord's point.
Amendment No. 8 has the effect of removing possible entitlement to pension credit for periods of temporary absence from Great Britain. As I said to the noble Baroness, we are permitting that to be continued for four weeks where someone is away and eight weeks when accompanying a family member on a trip associated with illness and the like. I hope that point is covered.
Amendment No, 9 has the effect that pensioners who normally live in England, Scotland or Wales but who go to Northern Ireland for a short time—perhaps to visit relatives—would have to give up their pension credit while away and to claim it back again when they came home. That is the import of this probing amendment.
Our intention is to mirror the current rules which apply to income support. Although it is a basic condition that people are in Great Britain in order to qualify for pension credit, payment can continue for up to four weeks if they are temporarily out of the country, whether in Northern Ireland or anywhere else in the world. That goes back to the previous amendment, Amendment No. 8. Exceptionally, if the person is accompanying a child for medical treatment abroad, payment can continue for up to eight weeks. These rules allow pensioners to take short holidays without any disruption to their income. Of course, the intention is that there will be an equivalent pension credit scheme in Northern Ireland. People visiting the Province could, I suppose, claim under that scheme while they were there and reclaim under the Great Britain scheme on their return. However, I do riot believe that to be an appropriate way of handling the situation.
The problem worsens if we compare the position of people visiting Northern Ireland temporarily to those travelling anywhere else. For example, a pensioner going to Spain or to the United States on holiday for up to four weeks would hold on to his pension credit during that temporary absence from the UK, but his neighbour visiting Northern Ireland for the same length of time would have to give it up because he or she would not be in Great Britain, though still in the
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UK. Therefore, the visitor to Northern Ireland would be placed into a worse position than that of the pensioner taking up temporary residence abroad on a four-week holiday. I hope that I have adequately explained the possible effect of the noble Lord's amendments. Accordingly, I urge him not to pursue them.
Lord Higgins: In the light of that explanation, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 8 and 9 not moved.]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 10:
Page 2, line 1, leave out from "means" to end of line 4 and insert "the age of 60"
The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 54, which is also tabled in my name and that of my noble friend. There are also other amendments included in this group. I begin with Amendment No. 10. Under Clause 1(6), the qualifying age for the guarantee credit will rise from 60 to 65 between 2010 and 2020 in line with women's pension age, as was mentioned earlier. The effect of this amendment would be to keep the qualifying age at 60 on the grounds that many people have to retire at that age, often with very small occupational pensions. The MIG is now payable at 60 to both men and women, despite the fact that men's state pension age is 65.
Amendment No. 54 proposes the deletion of paragraph (c) in subsection (3) of Clause 6. Under that paragraph it is the Secretary of State's duty to fix an assessed income period—normally five years—only where the claimant or his or her partner is aged 65 or over. For those under 65 the weekly means test would continue. In the case of a woman retiring at age 60, there is no reason why the First five-year assessment period should not begin at once. In the case of a man under 65, the initial assessed income period should be shorter than five years, but this is provided for elsewhere. Therefore, it does not seem necessary to limit the effect of Clause 6 to those aged 65 or over. That is what the amendment seeks to remove. Moreover, if the five-year assessment is intended to encourage take-up, it will be much less effective if claimants have to be told that it will not apply for the first five years. I beg to move.
Lord Hodgson of Astley Abbotts: I have two amendments in this group—Amendments Nos. 24 and 26—to which I should like briefly to speak. When I spoke previously, I omitted to declare two interests. I am chairman of the trustees of an occupational pension fund and a director of a mutual building society, which gives me a peripheral involvement in the matters now under discussion.
I approach the subject from a slightly different angle from the noble Baroness, Lady Turner. It seems to me that we must make every possible effort to simplify the proceedings, the arrangements, and the nomenclature

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in the Bill. As the noble Baroness pointed out, the guarantee credit is available at one age while the savings credit is available at another. Changes will take place in the pensionable age for women—though, admittedly, eight years away from where we are now. However, in primary legislation, eight years is but the blinking of an eye. I hope that we shall be able to change the reference to specific ages on the face of the Bill to the phrase, the qualifying age". This would enable us to be more flexible in the future and not have a series of anomalies that may serve to confuse, and, indeed, lead to idiosyncrasies, inequities, and unfairness after the Bill reaches the statute book.
5.15 p.m.
Baroness Barker: I shall speak to Amendments Nos. 11 and 24. This group of amendments deals with the issue of equalisation of the savings credit—that is, equalisation of payment to men and women at the age of 60. The matter was aired on Second Reading. On that occasion, the Minister spoke at length about the difficulties and the complexities involved. She also outlined the fact that we are in a transitional period up until the year 2010, and then, again, up to the year 2020, for raising the basic pensionable age. So, until we reach the year 2010, we shall have a difference between men and women in this respect; namely, the pensionable ages of 60 or 65.
As the Bill stands, the guarantee credit will be payable at the age of 60, but the pension credit will be payable from 65. This means that women pensioners between the ages of 60 and 64 will not be eligible for the savings credit. I take a slightly different approach to the issue from some noble Lords. I am sure that the Minister will respond by saying that because of the current situation—the situation that we shall continue to be in until such time as there is equalisation at age 65—there will always be anomalies and inequities and it is a question of which anomalies and inequities we are willing to accept.
The Government have framed the legislation specifically to avoid inequities between men and women. So payments will be made to both men and women at the age of 65. I believe that my amendments would achieve the same aim. They would not create an inequity between men and women. However, they would make the savings credit available to women aged 60 to 64. There are many reasons behind that proposal. We have the Government setting precedents of equalisation at the age of 60 for MIG, winter fuel payments, free prescription charges, and also for concessionary transport.
In the age group of 60 to 64, we know that there are many women who fall into the low-income bracket, and these measures are designed to meet that situation. Equally, we know that, overall, women pensioners tend to be poorer than their male counterparts. One of the arguments that I am sure the Minister will deploy is: why should men aged 60 to 65 receive this benefit when so many of them may well be in work? If that is
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so, I would respond by saying that they would presumably be in income brackets that would take them above the level of the award.
There is one further reason for considering the question of equalisation. I have in mind the impact on housing benefit and council tax benefit. The age differences in assessment will create a level of complexity in the calculations of those benefits. With the current proposal to start the savings credit at age 65, rather than 60, this will mean that housing benefit will be calculated in three different ways, depending on whether someone is aged: first, under 60; secondly, 60 to 64; or, thirdly, 65 and over. Bearing in mind all the other complexities of the Bill, it seems to me that this is a matter that we should seek to avoid.
It is often possible in Committee to lose sight of the overall purposes of a Bill as one gets sucked ever more into the detail. We should remind ourselves that the stated intention of the savings credit is to encourage people to save. For those reasons, I do not believe that it is right for women aged 60 to 64 to be omitted from the provision.
Baroness Noakes: A number of speakers have talked about simplification being important in this highly complex Bill setting up the new pension credit. In particular, I support those Members of the Committee who are supporting Amendments Nos. 24 and 26 for reducing the savings credit age to the woman's pensionable age. That not only produces simplification across the whole Bill, but it also deals with the difficult issue of women retiring at the age of 60 who may be in low income groups not having sufficient additional income. Help the Aged has calculated that if women were deprived of their ability to claim the savings credit until the age of 65, they would potentially lose out on nearly £3,600 over that period which is a lot of money for women who perhaps do not have much in the way of additional resources. Similarly, men would be affected if they had retired early, perhaps against their own wishes, and they may need the protection of the savings credit.
A really important point here and elsewhere throughout the Bill is what kind of message we are sending out as regards savings. It seems to me that in this case we are saying that perhaps potential pensioners need to accumulate some capital because they will certainly need to draw it down between the ages of 60 and 65 in order to survive. That does not seem to me to be supporting an attitudinal change to saving which I believe is one of the Government's aims in this matter.
However, we do not live in an ideal world and everything that we might want to do is not necessarily affordable. Can the Minister say what additional public expenditure would be required, if the amendment were accepted, to reduce the savings credit age to the pensionable age rather than 65? I look forward to the Minister's comments.
Baroness Greengross: I support the point which has been raised that women pensioners between the ages of 60 and 65 hearing about the savings credit and

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knowing that they are excluded from it are going to feel pretty bad because there is nothing that they can do about it. I believe I remember at Second Reading the Minister saying that there was nothing that the Government could do about the age difference. It looked as though it might be a legal point which was then being brought forward. I imagine that it was connected with all men receiving the benefit at the age of 60 also; but I am not sure. I should be very grateful if that point could be clarified.
The other point I want to raise briefly is my concern about how the Government will inform those affected by this change. In principle I understand that the age must be increased because of rising longevity, changing work patterns and so forth which can justify this provision. But people have to know because this measure will seriously impact on their future planning. They need to begin planning now and it is very important that they do. We have the lessons from inherited SERPS to use as a model. We do not want another failure to inform people of a looming change in policy which will affect them very greatly.
Baroness Hollis of Heigham: There are a number of amendments which seek to make changes to the various provisions for age limits in pension credit and I propose to deal with them together.
I should have said earlier to the noble Lord, Lord Higgins, in particular and to the noble Baroness, Lady Barker, how much I have appreciated the fact that they were able to table so many of their amendments early which allowed us to do more detailed research work on them. Sometimes one of our difficulties is that what is intended in the amendment is not what it states. I found myself in the dilemma of trying to answer the words on the page—which are not the words spoken to. I suspect that that may also be the case as regards my noble friend's Amendment No. 54, which has an import in a different clause from that which she intended. I am in some dilemma as to whether I should make a speech which is irrelevant to the debate, but relevant to the amendment. But let me see how people's eyes glaze.
A number of amendments seek to make changes to the various provisions for age limits and pension credit and I shall deal with them together. Members of the Committee have made clear this evening that the minimum age for pension credit as a whole and for the guarantee credit in particular, is defined in the Bill as the "qualifying age". This is currently age 60, but will rise with state pension age for women from 2010. The minimum age for the savings credit element of pension credit is set at age 65, as is the minimum age for pensioners for whom an assessed income period can be set. Therefore, I want to return to the issue that was explored at Second Reading as to why the age is 60 for some and 65 for others and why we cannot change the age from 65 to 60. My best estimate is that the cost of bringing the age to 60 would be in the order of £200 million depending on how one "nets off" for other additional savings elsewhere. That is the kind of ballpark figure we are talking about.
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Perhaps I may begin with Amendment No. 11. It replaces the current wording used to define the qualifying age with a rather more concise form of words. It does not question the approach taken; namely, that the qualifying age for state pension credit should in future rise in line with equalising state pension age. As this starts in only eight years' time, it is clearly sensible that we should make provision now in primary legislation, as the noble Lord said, because it is the blink of an eye for pension credit to fall into line with this particular change.
However, the laudably concise form of words in this amendment introduces a rather less welcome ambiguity. If we say that in the case of a man the qualifying age will be a woman's pensionable age, we might then ask, "Which woman's pensionable age?" because pensionable age will be different for women born on different dates because the state pension age for women will start rising in 2010. The brief wording used in the amendment does not cover that issue whereas the current wording is rather longer for a good reason; namely, to ensure that there is no legal doubt that the reference is to a woman who is the same age as the man. I am sorry to have to go into that, but sometimes it is worth spelling out why what looks like a crisp solution ties us in legal knots, as this matter does.
I now turn to Amendment No. 10. The effect of this amendment is to set the minimum qualifying age for the guarantee credit element of pension credit at the age of 60, rather than allow the minimum qualifying age to rise in line with state pension age for women from 2010. This means a perpetuity amendment.
The Bill before the House creates a new benefit for pensioners. It is sensible to consider not only the present legal ages, but also those for the foreseeable future. That is why we are doing this. It was accepted in 1993 by the then Conservative government that the unequal state pension age—of 60 for women and 65 for men—was unfair. The resolution of this unfairness—to equalise both at 65—was debated and agreed by Parliament. The Pensions Act 1995, on which my noble friend and I worked closely, set out how that should be achieved. To allow people adequate time to make plans and provisions for their retirement, the women's state pension age will be gradually increased from 2010 so that by 2020 both men and women will reach state pension age at 65. Given that, it must be sensible to build that presumption into pension credit. That clearly raises issues about how we treat women meanwhile.
I now turn to Amendments Nos. 24 and 26 which seek instead to handle the matter the other way, which is not to treat women for the savings element as though they were coming into it at the age of 65, but to bring the savings credit element back to the age of 60, bringing it into line with the minimum age for the guarantee element. The minimum age for both elements of pension credit would then rise in line with state pension age for women beginning in 2010. On the surface that may seem a sensible and generous

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simplification. But there are compelling reasons why we have chosen to set the minimum age for men and women at 65 for the savings credit element.
As I hope that I explained at Second Reading, 65 is the only reasonable choice. It ensures equal treatment for men and women. We have had particular regard—a point raised by the noble Baroness, Lady Greengross—to ensure that the provisions of the Bill are compatible with the European Convention on Human Rights and with Community law. Therefore, men and women have to be treated equally to that effect during the transitional period.
Amendment No. 24 would thwart us in that respect as it would have the effect of adding to the unfairness which already exists because the state pension age has not yet been equalised. Perhaps I may explain. The 1995 Act sets out how the unfairness of having different pension ages for men and women would be resolved starting in 2010. But in the mean time we have to take care not to introduce new inequalities. That is a darned sight more difficult than it sounds: there are no easy solutions.
The savings credit aims to reward people for thrift, ensuring for the first time that they are not penalised for having made efforts to save. To do that we have to look at what provision, including state provision, people have made for their retirement. So the amount of savings credit payable depends on existing state help such as the basic state pension and SERPS as well as, for instance, occupational and personal pensions and savings. If the savings credit was payable to people aged 60 to 64, even though it started at 60, men and women would still have different outcomes simply because of the unequal nature of the existing state help that they receive. Depending on the exact circumstances, a man could receive either more or less savings credit than a woman in the same situation.
I am happy to try to give the House a worked example. Even if people look glazed now, it may help them when they come to read Hansard. An example was included for my elucidation that I shall share with the House. Let me go through it; I shall try to go slowly.
A 63 year-old woman has a full basic state pension of £77 per week and a £10 a week occupational pension. A 63 year-old man has no basic state pension, due to the difference in state pension age, and a £10 a week occupational credit. If the savings credit were available to 60 to 64 year-olds, the woman in this example would be entitled to £6 per week and the man to nothing, because he did not receive retirement pension.
If we take the same two people, but this time both having occupational pensions of £100 per week, rather than £10 a week, the effect is quite different. If the savings credit were available to them, the man would be entitled to £13.80 savings credit per week—because he received no retirement pension—and the woman would be entitled to nothing, because her pension would float her off pension credit altogether. That would clearly be unfair. To avoid that unfairness, it
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was decided to make the savings credit available from age 65, the first point at which men and women are treated equally under existing state pension provision. That also fits with the long-term intention to equalise state pension age at 65.
Your Lordships may well ask—I am sure that the noble Lord, Lord Higgins, has got this far, because he has tabled amendments on these lines—"Why must the savings credit build on existing state provision? Why can we not simply reward people's efforts to save for their retirement whatever form that provision may take? We would then avoid the problem of the inequality in state pension age". But that will not work either. If the savings credit were paid at age 60 to reward all types of provision, it would have to reward the basic state pension. But as that is not paid to men until 65, men would be at a disadvantage.
So I suspect that your Lordships would next say, "Why do you not deem him to have the state retirement pension"—we shall return to "deeming" on many occasions—"and then reward the additional provision that people have made?". But that would unfairly reward those who had not contributed to the basic state pension above those who had contributed throughout their working lives. Think of all those women who have only partial state pension because they have not paid the whole contribution.
Again, an example may be helpful. Jack is 63—perhaps we ought to move on to Frank, given that he is much beloved by the Opposition. Jack is 63 years-old and has no basic state pension as he has not yet reached state pension age for men. Before pension credit, his only income is £23 a week from an occupational pension. Jack will therefore receive £77 guarantee credit to top him up to the single persons guarantee level of £100. If he was deemed to have a full basic retirement pension of £77 when calculating the savings credit, all his £23 income from his occupational pension would be rewarded. So Jack would get a further £13.80 a week on top of the £77 guarantee credit. So his total weekly income—that is, his deemed retirement pension, his top up to MIG and his £23 of occupational pension, would be £113.80.
Jack's next-door neighbour Frank—we now come to Frank—is also 63 years-old and therefore cannot get state retirement pension either. His only income also comes from an occupational pension. But he has managed to save a bit more and gets £24 a week£1 more than Jack. What would Frank get? Frank would get £76 guarantee credit to top up his £24 weekly income up to the guarantee level of £100. If he was deemed to have the full basic retirement pension of £77 when calculating his entitlement to savings credit, £23 of his £24 occupational pension would be rewarded at 60p in the pound, giving him £13.80. But his extra £1 would mean that that maximum level of savings credit was reduced by 40 pence, giving Frank an overall savings credit of £13.40.
So Frank's total weekly income, including his £24 of occupational pension, would be £113.40. I am sure that your Lordships have followed me this far. So despite Frank having an extra £1 of occupational

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pension compared to Jack, Frank would be 40p a week worse off. That is the result of the complexities of deeming. Perhaps another way to put this is that it results in a more than 100 per cent marginal deduction rate. So it will not have paid to save.
Those are only some of the difficulties; I could go on. However, as I flagged it up, it is also worth raising the difficulties associated with SERPS.
5.30 p.m.
Lord Hodgson of Astley Abbotts: In the example given by the noble Baroness—in that blizzard of statistics—she mentioned the impact on married couples. Is not one of the difficulties that in the Bill—although admittedly this is not covered by the amendment—men and women have been linked together again, whereas hitherto they have been separated for taxation purposes? Is not that the cause of the difficulty that we face, and does that not meet the point that I was trying to make?
Baroness Hollis of Heigham: That is helpful, but entirely irrelevant, if I may say so. We are dealing here with men, whether or not they are married to someone of the same age, a woman under the age of 60 or a woman over the age of 65 is irrelevant. We are dealing for these purposes with single men aged between 60 and 65. I was seeking to take your Lordships through the argument that we should treat them at the age of 60 as though they were women and thus entitled to savings credit.
The issue of the age of the man's partner is indeed an extra complexity, which would make it even harder to deliver the policy intent of the amendments, but the argument does not hinge on that. Separating out and treating what is actually a household assessment as though it were a disaggregated tax assessment would not improve the situation, because the man would still be between 60 and 65 and, for the purpose of the pension credit, we should have to deem a full retirement pension that he cannot have by law. That is what produces the anomalies that I have been describing. The issue of marriage makes the situation more complex, but does not alter the basic, fundamental flaw of what seems a generous proposal.
That is before I come to SERPS, which makes the position even more exotic. Women may have some SERPS in payment at age 60. Men do not receive that until 65. Again, there is no easy solution. We cannot simply ignore SERPS, because some people will have contracted out of SERPS, and it would be unfair to treat those who have contracted out of SERPS differently from those who have not. Another point is that men continue to expect to build up provision for their retirement until age 65, and this will become increasingly the case for women.
Given all that, I hope that I have persuaded your Lordships that we cannot equalise at 60 the savings credit that is built on a retirement pension that men cannot receive and have never received until 65. That would be true even if women's pension age was never going to rise. The fact that it is to rise to meet that of
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men seems to me to render the proposed process foolish. The difference with MIG is that that is about poverty. It has always been available from the age of 60. It is a form of income top-up. The savings credit, which has to deem the full retirement pension to come into play, cannot be paid to men under the age of 65 because they do not have a retirement pension. To deem it as if they had would produce some of the anomalies that I have tried to describe.
Behind the amendments is an understandable concern, which I share with the noble Baroness, Lady Barker, that women do not lose out overall, compared to men and compared to the current position, in the pension provision provided by the Government by the state second pension, stakeholder pensions and the Bill's provisions. The noble Baroness is absolutely right to bring such issues to our attention. My noble friend Lady Turner would of course join her in that.
Women tend to have lower incomes in retirement than men and they live longer, so they are more likely to see a relative decline in their pension income over their retirement. Pension credit will therefore be of particular help to women—as is the state second pension. More than half of pensioner households entitled to pension credit will he single women. About a further third will be men and women in a couple. In other words, pension credit will primarily help women and older women, for the reasons that I have just described.
Finally, Amendment No. 54 would extend assessed income periods to cover pensioners aged 60 to 64, as well as those aged 65 and over. I do not think that my noble friend Lady Turner of Camden really addressed that point in moving the amendment. She may not have envisaged the impact of the amendment. I am willing to speak to the draft that I have here, which addresses the purpose of Amendment No. 54, even though my noble friend did not speak in that way. I am in my noble friend's hands: if she would like me to do it, I am willing to do so. She may prefer me to sit down at this stage, for I have taken up a lot of the Committee's time, and we can return to the issue under another group of amendments, perhaps that relating to assessed income periods. I am happy to indicate to my noble friend which clause that will be under.
I hope that I have addressed the Committee's concerns. I recognise that it is an honourable problem, but I hope that I have persuaded the Committee that there is no solution, given that men's retirement age is 65. If we deem it, we will end up with marginal deduction rates, which would introduce further inequalities. Given that and the fact that women's retirement age is creeping up to that of men, we think that we have come up with the best solution, which is to treat men and women equally at the point of their poverty, which is 60. When it comes to the credit, which requires a full RP to get the full benefit it must be at 65, if we are not to introduce further inequalities.

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That was a long explanation. I hope that some of the worked examples will make it clearer—if I have not made any mistakes in citing them—when your Lordships read this before Report. I hope that the amendment can be withdrawn.
Earl Russell: The Minister has given us a brilliant demonstration of why the demanded simplification of social security law can never be as simple as it looks. Does she accept the principle expressed by my noble friend Lady Barker that there is here no solution without anomaly? Is she attempting to offer us an anomaly-free solution, or is she—in the words once used by Lord Whitelaw—investigating alternative anomalies?
Baroness Hollis of Heigham: I shall give the Committee a bit of biography. In an interview for an internal Department for Work and Pensions staff magazine, I was asked what I thought to be the biggest problem in social security. I am sure that the person interviewing me expected me to say, "The Treasury". Heaven forbid—I would not dream of saying that the Treasury was the biggest problem in social security.
What I actually said echoes the noble Earl's point. I said that the hardest issues were those in which there were conflicting or competing good things. All that one can do is go for an optimum solution, not a maximum solution. The noble Earl is absolutely right. No one—certainly not I—would wish to disadvantage women at any point, but to deal with the issue in this way would produce worse anomalies than that which the amendment seeks to address.
We have come up with a decent solution, equalising at 60 men and women who are especially poor and equalising men and women with regard to rewarding their savings at 65. That is the decent solution, although I accept much of what the noble Earl said.
Baroness Turner of Camden: I was going to ask the Minister about the comment that she made about the difficulties relating to the position of women and the desire that women should not be disadvantaged in the way suggested by the noble Baroness, Lady Barker. Will the Minister give the matter further consideration, or does she think that it is an anomaly that cannot be addressed?
Baroness Hollis of Heigham: Yes, I do. I am not the Minister responsible for that portfolio issue, but I have spent many hours going through it, to see whether there were other ways of addressing the issue. I am persuaded that this is the most decent solution that we can come up with.
That does not stop your Lordships revisiting the issue. My noble friend may wish to press the amendment to a vote, but I beg the Committee not to make amendments that simply make the situation worse because of the unintended consequences of the read-across. With social security, it is not, as the noble Earl, Lord Russell, said, about simplicity, it is about
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read-across. It is like yellow lines on the road—one never knows where the cars are going to back up, for they do not always back up at the end of the yellow lines. That is what would happen here.
My noble friend Lady Turner of Camden has hit the end of the road on this matter. Obviously, if there are any particular points to pursue, I will be happy to correspond with her. If she wishes to revisit the issue at a later stage, she is, of course, free to do so. We have done the best that we can. I hope that when noble Lords read the proceedings in Committee over their cornflakes, they will agree that the issue should be put to bed.
5.45 p.m.
Baroness Turner of Camden: I thank the Minister for her detailed response to the amendments. Of course, I still feel that 60 would be a better age, especially in view of the fact that so many people—especially men—now have to retire much earlier than 65, because of industrial situations. Often, they do so on inadequate pensions.
I accept, however, that it is an extremely difficult issue and that has been illustrated by the Minister's response. Of course, I would like the opportunity to consider in more detail the numerous examples of difficulties that she gave. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 11 not moved.]
Clause 1 agreed to.
Clause 2 [Guarantee credit]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 12:
Page 2, line 8, leave out "does not exceed" and insert "is less than"
The noble Baroness said: This is a simple amendment. We want to leave out the words "does not exceed" and insert "is less than". The amendment would mean that the Bill would read:
"has income which is less than the appropriate minimum guarantee".
That would be clearer. It has no policy implications and is a simple change. It is a question of whether the Minister wishes to accept it. I beg to move.
Baroness Hollis of Heigham: I hope that when my noble friend has heard my reply, she, too, will not wish me to accept it. The amendment would have unintended consequences that she has, perhaps, not foreseen.
The amendment would amend the provision in subsection (1)(b) so that it would provide that a pensioner would be entitled to pension credit only if their income were less than the appropriate minimum guarantee. As drafted, the condition would be satisfied if their income were equal to the appropriate minimum guarantee.

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I can see why my noble friend might have thought that the amendment was necessary. On the face of it, if a person's income were equal to the appropriate minimum, they would not need a payment to bring their income up to the prescribed level. However, the subsection has been drafted deliberately and benevolently in its current form. It is the Government's policy that a person with income equal to their appropriate minimum guarantee will also be entitled to automatic qualification—passporting—to a range of other benefits provided by other departments and the devolved Administrations, including free dental treatment, the full value of an optical voucher, free wigs and fabric supports, full refunds of reasonable travel costs to hospital for NHS treatment, assisted prison visits, Legal Aid, court fee exemption and grants from the Home Energy Efficiency Scheme.
I am sure that the Committee will agree that those are important and necessary benefits. No one would wish to see them withdrawn, which is why we want to leave the wording as it is. I hope that, on that basis, my noble friend will persuade me not to accept her amendment.
Baroness Turner of Camden: I thank the Minister for that response. Of course, no one wants to disadvantage people or to affect passporting to benefits. In the circumstances, I accept what the Minister said, and, having made the point, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 13 to 16 not moved.]
Baroness Noakes Baroness Noakes moved Amendment No. 17:
Page 2, line 21, leave out "or unmarried"
The noble Baroness said: In moving Amendment No. 17, I shall also speak to Amendments Nos. 25 and 101.
The Bill covers a scheme of pension credits that has a set of payments for single people and higher amounts for married couples. That reflects the way in which the pensions system works. However, the Bill also treats an unmarried couple as if they were a married couple. In that circumstance, two people—I shall come to the definition of married couple in a moment—have all of their income and capital aggregated for the purposes of calculating the pension credit. Of course, the pension credit for couples is not double that for a single person. Thus if two people who are not in fact married are deemed to be a married couple for the purposes of the pension credit, they will suffer from being allocated a lower limit than that for two individuals.
The definition such as it is can be found in Clause 17. An "unmarried couple" is defined as,
"a man and a woman who are not married to each other but are living together as husband and wife otherwise than in prescribed circumstances".
Same-sex relationships are therefore not included, whether they are a same-sex couple, or merely those who choose to spend their lives together such as, for
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example, two sisters. I assume that a brother and a sister would never be deemed to be an unmarried couple because that would have to be based on a presumption of incest. But if a man and woman choose to live together, they could immediately suffer the penalty of a lower joint pension credit limit.
Clause 17 defines a "married couple" as,
"members of the same household".
Regulations are in place to determine that. However, the same clarity is not in place for unmarried couples. It appears from the definition that the Secretary of State can prescribe the circumstances in which a man and woman are not to be treated as an unmarried couple, but I cannot find any guidance as regards when they will be treated as a unmarried couple. Does this mean that the pension service will make up the rules as it goes along? Will it inquire into the intimate details of such relationships? What will happen if an unmarried couple do not believe that they should be treated, in effect, as living together as husband and wife, especially if there are no rules to guide the service?
This is an intrusive part of the Bill. I know that many nobles Lords resent the extension of means testing implicit in these new credits, but this is an additional intrusion into the most personal aspects of older people's lives, according them no dignity in retirement. For that reason, Amendments Nos. 17 and 25 seek to remove the concept of an unmarried couple being treated as if they are married.
Perhaps I may turn briefly to Amendment No. 101, which seeks to remove the ability of the Secretary of State to prescribe when a man and a woman are not to be treated as living as man and wife. I know that we will return to the theme of regulation many times during the course of our deliberations in Committee. Why does the Secretary of State need a power to determine who is not to be treated as living together as man and wife? Furthermore, is that the best way of determining how an unmarried couple are to be determined? The Secretary of State appears to have no powers to determine how they are to be treated as an unmarried couple. That seems perverse. I beg to move.
Earl Russell: I think that the noble Baroness, Lady Noakes, has opened a rather bigger can of worms than she realises. It has been perfectly clear in social security law since—I think I am right in saying—1946 that it is based not on the ceremony of marriage, but on the household unit. The central point of social security is that it is designed to relieve need. We do not wear our wedding rings around our stomachs, and so we feel a great deal of need to sustain ourselves against hunger. That is the case whether or not we are married. If the basic purpose of social service is to sustain against need, then it must be done as it has always been done ever since the welfare state was set up—through the household unit.
That principle runs right through the warp and woof of the whole of social security law. To make it apply to the whole of social security law except with regard to the pension credit would be to create a degree of complexity of the kind which we have spent a good

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deal of the afternoon saying that we would rather like to avoid. This is one element of social security law that is absolutely clear.
For my part, I am reminded of a story about Arthur Balfour and the young lady at a dinner party. Halfway through the dinner, the young lady turned to Arthur Balfour and said, "I am in an awfully embarrassing position and I do not know what to do about it. The gentleman sitting next to me has put his hand on my knee and I cannot make him take it away". Arthur Balfour responded by saying, "How long has it been there?". "Since the fish". "Well then", said Balfour, "I'd let it stay there".
On Amendment No. 101, I am going to surprise the Minister considerably by defending the existence of a regulation-making power. We are now in the age of the global economy, as we are in the age of the two-career marriage. I shall take one actual example, that of an individual person—my colleague Professor Natalie Zemon Davies, whose work I am sure is even better known to the Minister than it is to me. She worked at the University of California at Berkeley, but decided to move to Princeton in order to be closer to her husband in Toronto. There was absolutely no doubt that this was a genuine marriage in every possible way, but because they had two careers, they ended up living several thousand miles apart. They thought that reducing that distance to a few hundred miles was a genuine advantage, and one which held great attraction for them.
Is that the kind of circumstance which under the Bill might very well have been prescribed? If it cannot be prescribed, how are we to deal with two-career marriages? I think in particular of the freedom of movement of labour within the European Union, which is likely to make that kind of situation occur a good deal more frequently.
I hope that the noble Baroness, Lady Noakes, will not feel the need to press these amendments because they will create a great deal more complexity than they seek to be rid of.
Baroness Hollis of Heigham2: I agree with much of what has been said by the noble Earl, Lord Russell. In any income-related benefit, the usual assessment is made of the household; that is, where there is financial interdependence based on a long-term—or in some cases even a temporary—relationship of sufficient stability that the two people concerned can be treated for these purposes as a couple.
The effect of Amendment No. 17 would be to limit the rate of pension credit payable to couples only to those who are lawfully married. An unmarried couple would therefore be entitled only to the lower rate of pension credit payable to single people. However, they would not be able to claim pension credit separately because that is precluded by subsection (1) of Clause 4. Thus they would be worse off and, as was pointed out by the noble Earl, Lord Russell, that would not be reasonable.
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I do not see why the noble Baroness should think that unmarried couples have fewer domestic needs and requirements than married couples. Across income-related benefits there exists a long-standing principle of equal access for married and unmarried couples. I see no reason to abandon that principle for the purposes of the pension credit.
Amendment No. 25 would simply impose a claiming restriction on unmarried couples. Where one member of an unmarried couple was under 65, entitlement to the savings credit could be established only if the partner who was over 65 made the claim. In the case of married couples, provided that one of them was over 65, either one could make the claim.
As drafted, the clause provides for equal access to the savings credit for married and unmarried couples in the same way as for the guarantee credit, which again follows the well established principles for income-related benefits. I do not believe that the introduction of pension credit should be used to overturn the basic assumptions on which social security is based; that is, what comprises a "household" for the purpose of such assessments.
This does not concern whether we do or do not regard marriage as an inferior, superior or equal state; it is about the basic building blocks of social security legislation. I do not think that this Bill should be used to try to overturn such principles. Again, even if the amendment were accepted in principle, the read-across to all other areas of social security would be devastating.
I turn now to Amendment No. 101, at which point I was pleased to note that the noble Earl has discovered a new-found faith in the power of regulation. I shall seek advice about the particular case he mentioned, but certainly the power to prescribe circumstances is a legacy from earlier schemes. Analogies can be found with the example described by the noble Earl. The last time that it was used was in supplementary benefit before 1988, when it allowed for a brief "tiding-over" payment for children in some cases when a couple first started living together and otherwise all benefit would have stopped immediately.
To date, we have not had to use that flexibility and we may not have to use it in the future; but I can conceive of a situation such as that detailed by the noble Earl. With two generous incomes, in practical terms such a couple would be unlikely to come within the framework of the pension credit. However, I can conceive of a situation where one or the other might have caring responsibilities, such as looking after an elderly relative. I shall need to check on the technical accuracy of this, but I can conceive of situations where this might arise and where we might be glad of such flexibility. Were we to use it, however, the result would be only to the advantage of the individuals concerned as they would receive more as two single people than as a couple. The majority of pensioners claiming pension credit will also be claiming housing benefit or council tax benefit. Were there to be a need to use this flexibility, we want to be able to do the same as regards pension credit.

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The procedures here are simple, standard and well defined. Given that, I hope that the noble Baroness will understand and accept that it would be profoundly unwise to change the basic building block of income-related—and therefore household-based—assessment.
6 p.m.
Baroness Noakes: The Minister said that it would be unfair because they would not have an entitlement to married allowance, the higher allowance. But one can look at it the other way. If two individuals had a full entitlement before being deemed to be husband and wife, they would lose by being deemed to be a part of a unit. So it depends on which way one looks at it. With increasing numbers of women having their own entitlement to a state pension—the numbers have been increasing and are forecast to continue increasing—that situation will continue.
The noble Earl may be pleased to hear that I tabled these amendments in the full knowledge that the household unit was the building block of social security legislation. However, we are dealing with something which is more akin to pensions, and I do not believe that the household unit is the building block of pensions legislation. We are seeking to create a credit with which pensioners will feel comfortable and which aligns with their experience of the pension system, not something which makes them feel that they are being dragged into the benefits system, with all its problems of uptake. I am sure that we will refer to that subject later.
Perhaps I may put a more detailed question to the Minister about how we define an unmarried couple. The noble Baroness referred to a household unit but, as I read the Bill, there is no reference to a household unit for an unmarried couple. Indeed, the definition in Clause 17 simply states that "unmarried couple" means:
"a man and a woman who are not married to each other but are living together as husband and wife otherwise than in prescribed circumstances".
I cannot find how circumstances will be prescribed and how people will know whether or not they are likely to fall foul of the test.
The household unit is not referred to in relation to an unmarried couple but is referred to in relation to a married couple in Clause 17. I am a little unclear as to how this will work in practice.
Baroness Hollis of Heigham: I shall do my best to explain. As to the noble Baroness's first point, it is not the case that if two single people came together as an unmarried couple they would, as a result, receive two single payments and therefore benefit. That is specifically excluded by Clause 4(1) and cannot happen. If they were to benefit in that way, it could be argued that we were privileging the state of non-marriage over the state of marriage—and I am sure that that would not be exactly acceptable to the noble Baroness either.
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There is a difference between a same sex relationship couple where there are two single people—and remain so for both the privileges and burdens of social security—and an unmarried heterosexual couple, who are, indeed, treated under the Bill as though they are a couple, with all the financial responsibilities they have towards each other for social security purposes.
As I said, it is well-established—it goes back to 1948—as to what counts as a common law wife, to use the old phrase, or a co-habiting couple. Factors taken into account include the stability of the relationship, financial support, whether they have children, whether they publicly acknowledge the relationship.
For example, this is absolutely core to the issue of whether a lone parent who has a live-out boyfriend is entitled to claim credit and social security benefits as a lone parent as opposed to one of a couple. This is well established in social security law. As I said, the factors can include whether they share a common household, the length of the relationship, whether they have children and whether they operate as a couple.
If the noble Baroness wishes me to send her further information, I shall be happy to do so. But it is a common basis of all social security that where a heterosexual couple share a home in this way they are treated exactly the same for social security purposes whether they are or are not married. I am a little surprised that the noble Baroness would seek to change that. As pension credit and the guarantee element are income related it is reasonable—it has always been the basis of social security—that an income-related benefit should reflect the circumstances of the family, of the household, and that is what the Bill seeks to do.
If I can help the noble Baroness further by writing to her, I shall be happy to do so. But, as I said, what counts as a co-habiting couple is well established in social security legislation.
Baroness Noakes: It is not established in relation to a household unit. There are specific provisions—indeed, there is a regulation-making power—for who is or is not a part of a household unit for a married couple, but there is no similar provision in relation to an unmarried couple. Therefore an unmarried couple would not know where to look in the regulations.
Baroness Hollis of Heigham: They are treated exactly the same. If I need to qualify that, I shall write to the noble Baroness. In social security law, so far as it concerns income-related benefits, married and unmarried couples are treated in an identical way.
Baroness Noakes: I thank the noble Baroness. I look forward to hearing from her further. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 18:
Page 2, line 23, at end insert—
"() The Secretary of State shall in each tax year review the amounts prescribed as the standard minimum guarantee for the purpose of determining whether those amounts have retained their value in relation to the general level of earnings in Great Britain, estimated in such manner as he thinks fit.
() If on any such review the Secretary of State concludes that the prescribed amounts have not retained their value in relation to the general level of earnings, he shall prescribe such higher amounts as he thinks necessary to restore their value."
The noble Baroness said: The amendment seeks to make provision for the Secretary of State to review the amounts prescribed as the standard minimum guarantee in relation to the general level of earnings in Great Britain. If he believes that the prescribed amounts have not retained their value, he can then prescribe such higher amounts as he believes necessary to restore their value.
The Government have said that the minimum guarantee will rise in line with earnings during this Parliament—I emphasise, "during this Parliament". The objective of the amendment is to put this into legislation as a statutory requirement.
The Government have frequently said—and I agree—that pensioners should be able to participate and share in a general rise in the level of prosperity in the community as a whole. One of the ways in which that can be done—and probably the best way—is to link these amounts to rises in the general level of earnings.
The amendment is grouped with Amendment No. 23, which covers much the same ground. In my view, that is also a very good amendment. I wait to hear whether the Minister will respond to either amendment in a helpful and satisfactory way. I beg to move.
Baroness Barker: I speak to Amendment No. 23, which, as the noble Baroness, Lady Turner said, is grouped with Amendment No. 18. There is a subtle distinction between the amendments. Unlike the noble Baroness's amendment, the amendment standing in my name and that of my colleague does not seek necessarily to restore the link with earnings but refers to prices or earnings.
I bring the amendment forward for two reasons. First, to build on the current government practice of making an annual statement about uprating in November. I wish to see this on the face of the Bill in order to return to one of the principles behind the whole of the pension credit scheme—that is, to encourage people to make provision for their future. Knowing how to make the correct provision for one's future involves an understanding of what one's likely position will be in time to come.
This relates particularly to the standard minimum guarantee; specifically it does not relate to the other parts of the pension credit. As we have noted throughout much of what the Minister has said on this and other occasions, the Government are moving more towards targeted benefits rather than universal
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benefits, and therefore the question of uprating becomes more and more important. There is far less possibility of making an assumption about uprating. That is one of the reasons why the Government choose to go down that particular route.
If the scheme is to work in terms of the objectives set by the Government, it is important for people to have some understanding and certainty about how it will work for them in the future, so that they can plan appropriately. That is the reason for our amendment. I, too, await the Minister's response.
Lord Hodgson of Astley Abbotts: I do not want to introduce a discordant note into our proceedings, but I find some aspects of Amendment No. 23 quite concerning. We all want to see pensioners have a comfortable old age and a share in prosperity. However, if I read the amendment aright, it seems to have forgotten the other half of the social security system; namely, those in work, who are contributing to that system through tax and national insurance payments.
If the uprating is to take place according to whichever is the higher—prices or earnings—then, over a long period of time, arithmetically it could become easier to be in receipt of a pension than to be in work. If I have read the amendment correctly, each year the pension is bound to rise at least in line with the rise in earnings; and if inflation is higher, it will increase according to the rate of inflation. So gradually the gap will narrow. We must be very careful—
Baroness Hollis of Heigham: Will the noble Lord help the Committee by telling us when prices have exceeded earnings—which is essential to his argument?
Lord Hodgson of Astley Abbotts: Prices have exceeded earnings in the past, and they could do so again. There have been times when the rate of inflation has exceeded the rise in earnings. Therefore, there can be a situation in which it would be advantageous to be in receipt of a pension. It is perfectly fair to have a situation where the amount rises by the rate of one or the other, but over a period of time to be able to opt only for the one that is most favourable seems to lay the burden against those in work. Instead, one should take either earnings or prices, but not choose whichever is the most advantageous. If I have understood the amendment correctly, it seems to give cause for concern.
Lord Higgins: When we discussed uprating earlier, the noble Baroness suggested that we should defer the discussion until later in the Bill. I believe that she said that the undertaking by the Government on the minimum income guarantee—presumably now the standard minimum income guarantee—would go up "for this Parliament". That seemed an odd qualification. Everything is "for this Parliament", so why is it necessary to make that qualification?

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On a further point, it would be helpful to know what is the Government's proposal on uprating the pensions element of the pension credit.
Baroness Hollis of Heigham: Forgive me. I do not understand the noble Lord's point.
Lord Higgins: Will the Government adjust whatever arrangements are made for the pension credit element of the state pension credit to allow for inflation or for earnings?
Baroness Greengross: I support the noble Lord, Lord Higgins. Some form of uprating or attention to the pension credit is needed annually. Over the years, I have seen a great many benefits and concessions withering on the vine because of inflation or earnings growth. This is not a great issue at present, because we have low inflation and low earnings growth. But it could be bad policy-making if the provision is not reviewed annually just to make sure that matters are not going wrong. For example, the capital limits for support in nursing homes were unchanged for almost 10 years, yet that coincided with a period of high inflation during the early 1990s. Some attention to this point is needed.
6.15 p.m.
Baroness Hollis of Heigham: The effect of Amendments Nos. 18 and 23 would be to place in primary legislation a commitment for all future governments to increase the guarantee element—previously the MIG—of the pension credit by at least the increase in earnings. Amendment No. 23 specifies that it should be increased according to whichever is the greater, prices or earnings.
It is unusual for prices to rise more than earnings. We have been scratching our heads. So far as I recall, during the four years when pensions were related to earnings—between 1977 and 1981—in only one year, or possibly two, did prices exceed earnings. Those are the only two years that I can recall since 1970, possibly since 1960, that that has been the case. The scenario envisaged by the noble Lord—I do not deny that it is possible; in any particular year there may well be lags—is of a gradual invasion of wage rates by a pension which overtakes because it is artificially boosted. On that scenario, it would take about 277 years, give or take a year or two, for that to be extrapolated over time. I hope that he will take that point.
The Bill as drafted applies to pension credit the existing legislative provision for uprating that applies to MIG. Under Section 150(2)(b) of the Social Security Administration Act 1992, the Secretary of State is committed in each tax year to review the level of the guarantees credit and to increase it if,
"he considers it appropriate, having regard to the national economic situation and any other matters which he considers relevant".
These amendments ask us to set that provision aside and to make a future commitment. I do not believe that it is wise, sensible or appropriate so to do. As I
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said earlier—and the noble Lord, Lord Higgins, was right to pick me up on this point—we are not willing as a government to bind future governments. It is not only a matter of "cannot"; we are not willing, on the face of the Bill—which is what the amendment would do—to bind future governments, of whatever persuasion, to an uprating which they may believe cannot be justified in the prevailing economic situation. I do not think that anyone should be asking governments to do that on the face of the Bill.
The amendments may also reflect concern—this is the point about the annual uprating—that omitting the value of the guarantee credit from the face of the Bill undermines the proper processes of parliamentary scrutiny. I hope that the Committee will be reassured to hear that the regulation setting the amount of the guarantee credit and the order which uprates that amount annually will continue, so far as this Parliament is concerned, to be subject to affirmative resolution.
I hope, therefore, that the Committee will accept that we cannot, on the face of the Bill, bind a future government to the "numbers" part. I hope that Members of the Committee will agree that we are producing adequate parliamentary scrutiny. In the light of that, I hope that the amendments will subsequently be withdrawn.
Lord Higgins: Before the noble Baroness sits down, what is the position as regards uprating the pension credit element? Will adjustments be made?
Baroness Hollis of Heigham: Pension credit is made up of the guarantee and the savings element.
Lord Higgins: I am referring to the savings element.
Baroness Hollis of Heigham: I could not work out whether the noble Lord was referring to the retirement pension element. Any uprating of the savings element will be decided by the Chancellor at the appropriate time.
Baroness Turner of Camden: Before my noble friend sits down, does that affect the decision that the Government have already made to ensure that the MIG—which, of course, is also a promise to pensioners—would also be uprated in line with the earnings index? I know that the MIG will disappear with this legislation, but there was a commitment—which pensioners took very seriously—that the MIG would be uprated in line with the earnings index.
Baroness Hollis of Heigham: I can reassure my noble friend that we shall be doing that, at least for the life of this Parliament.
Baroness Turner of Camden: I thank my noble friend for her response, and also for her response to Amendment No. 18. I prefer our amendment to Amendment No. 23, although I said that it was a very good amendment. I specifically wanted a link with the earnings index. It still seems to me that that is the way

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in which pensioners can be assured of the income that they will have in retirement, permitting them to have some share in the rising prosperity of the community.
Nevertheless, I understand that the Government are unwilling to commit themselves to that in legislation, despite the promises that have been made to deal with the matter outside a legislative commitment. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 19:
Page 2, line 24, leave out subsection (6).
The noble Lord said: I shall speak also to Amendment No. 35. The two amendments are concerned with a combination of drafting and comprehension. It has always been the case that parliamentary draftsmen have been extremely well paid, but also frequently seem to suffer from a mental breakdown.
The two subsections concerned—one relating to guarantee credit and the other relating to savings credit—are totally incomprehensible. Perhaps the noble Baroness could explain them. I beg to move.
Baroness Hollis of Heigham: Amendments Nos. 19 and 35 would remove the regulatory powers designed to enable the Secretary of State to prescribe a lower amount in place of the standard minimum guarantee that would be payable to the claimant and additionally, when appropriate, to set the amount of standard minimum guarantee at nil. Furthermore, they would remove entitlement to the savings reward for whose guarantee credit had been adjusted following a period in hospital. I wonder whether I need to go beyond that.
Lord Higgins: That is what the two subsections say, but what on earth do they mean?
Baroness Hollis of Heigham: What they say is what they mean. I am baffled by the noble Lord's question.
Lord Higgins: I do not think that they are comprehensible. It would be helpful if the Minister could give us some indication of the purport of the two subsections. I do not think that anyone reading them could readily understand them. An explanation, no doubt as a result of the draftsman briefing the Minister, would be helpful.
Baroness Hollis of Heigham: I have given the noble Lord the description that I am content with. I shall happily write to him further if that would be helpful.
Lord Higgins: The noble Baroness's description is almost exactly what the two subsections say. For the record, I shall read them out. Clause 2(6) states:
"Regulations may provide that, in prescribed cases, subsection (3) shall have effect with the substitution for the reference in paragraph (a) to the standard minimum guarantee of a reference to a prescribed amount".
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What are those two prescribed amounts? That might give us some idea of what is going on. Clause 3(5) states:
"Where, by virtue of regulations under section 2(6), the claimant's appropriate minimum guarantee does not include the standard minimum guarantee, regulations may provide that the definition of 'amount B' in subsection (4) shall have effect with the substitution for the reference in paragraph (a) to the appropriate minimum guarantee of a reference to a prescribed higher amount".
What is that intended to achieve?
Baroness Hollis of Heigham: I had thought that the noble Lord understood exactly what those provisions were intended to achieve. The £100 a week minimum income guarantee—the retirement pension plus the top-up—is the standard minimum income on which anybody over the age of 60 is entitled to live, taking into account flows of income from capital and the rest. However, the Secretary of State has the power to reduce that standard minimum if, as a result of him taking no action, there would be double provision. That might be the case, for example, if someone was in hospital, in prison or in a convent where there was full care. The Secretary of State will be able to ensure that such people are paid less than the standard minimum of £100 if provision for their support is being made in other ways. In my innocence, I had assumed that the noble Lord was getting at that point. The Secretary of State will be able to prescribe an amount lower than the standard minimum guarantee—currently £100—to be payable to the pensioner claimant. Additionally, when appropriate, he will be able to set the amount of standard minimum guarantee at nil if, for example, the pensioner is in prison. What could be simpler?
Lord Higgins: I can think of very little that is more complicated. Perhaps we should have a quick show of hands.
That is at least a bit of progress. I shall have to consider what the noble Baroness has said. Does it apply to both Clause 6 and Clause 5?
Baroness Hollis of Heigham: We are dealing with Clauses 2 and 3. It might be helpful if we could stay with the current clauses.
Lord Higgins: The amendments cover two separate clauses. Does the noble Baroness's explanation apply to each of them?
Baroness Hollis of Heigham: The amendments cover Clauses 2 and 3. What I have said applies to both.
Lord Higgins: I shall study carefully what the Minister has said, as, I imagine, will other people. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 20 and 21 not moved.]
Clause 2 agreed to.
Lord Higgins Lord Higgins moved Amendment No. 22:
After Clause 2, insert the following new clause—
"WITHDRAWAL RATE
No one drawing a state pension credit shall suffer a withdrawal rate of benefit greater than 40 per cent."
The noble Lord said: The amendment is concerned with the 40 per cent withdrawal rate, which is a matter of great importance. Our understanding is that the Government do not intend that the effective withdrawal rate shall be greater than 40 per cent. It seemed appropriate to put that on the face of the Bill. That is better than the 100 per cent withdrawal rate that people in the relevant income bands suffer at present, but they will still not get the full benefit of their savings.
That relates back to our earlier debate on the name of the Bill and whether the provision is a pension credit or merely a relief from taxation. People at that relatively low level of income will pay at the equivalent rate to which someone on an income of nearly £34,000 would be subject. There is a strong case for ensuring that that is put on the face of the Bill.
There is also considerable interaction with housing benefit and council tax benefit. The noble Baroness will remember that I raised the point on Second Reading, when she was kind enough to assure me that the Government would take steps to deal with it. The withdrawal rate that would apply if they took no action could be 85 per cent or more for those benefits. That is a very serious matter. However, it is not clear precisely how the Government propose to make arrangements that will ensure that those receiving housing benefit and council tax benefit do not suffer such high withdrawal rates.
It would be particularly helpful if the noble Baroness could give us some idea of the impact of the proposals on those drawing housing benefit and council tax benefit. In particular, am I right in thinking that the Government are dropping any idea of reforming the situation with regard to housing benefit? We have had frequent discussions on that subject. Will central government or local authorities be responsible for ensuring that people with those benefits do not suffer a higher withdrawal rate? I beg to move.
6.30 p.m.
Baroness Hollis of Heigham: As the noble Lord, Lord Higgins, raised two perhaps unrelated points, I am not sure how best to reply. His first point was that no one drawing the state pension credit should suffer a benefit withdrawal rate greater than 40 per cent. In his comments, he seemed to be asking for a commitment that the taper on pension credit itself would not be greater than 40 per cent. Leaving aside issues such as the 60 to 64 age group, as the Government intend to do, he also drew some analogies with the tax system. I should be happy to debate those analogies with him if time allows. However, it is certainly our intention that that should be the taper on the pension credit itself.
1630
The interaction which the noble Lord rightly identified between the pension credit, housing benefit and council tax benefit withdrawal tapers is an extremely complicated issue. Perhaps it would assist him if I tried to spell out that interaction. If he wishes, I could follow up the points later, undoubtedly turning something simple into something complex.
Amendment No. 22 would have the effect of ensuring that no pension credit recipient suffered a marginal deduction rate of more than 40 per cent. Although that is fine as far as the pension credit is concerned, if the 40 per cent were to apply to all the benefits that pensioners enjoy—as the noble Lord, in his second point, seemed to suggest it should, although he was talking about 80 per cent—the total cost would be about £17.5 billion. As I am sure that that is not what the noble Lord intended, I shall make a disjuncture between the two parts of his remarks—first, that the pension credit was due to be tapered off at 40 per cent; and, secondly, the effect on MDRs given the interaction between the taper with other tapered, means-tested benefits.
Currently, pensioners with incomes below the minimum income guarantee level—which, in 2003, will be £100 as the guarantee element of the savings credit—suffer a marginal deduction rate of 100 per cent. For every pound of extra income, they lose one pound of minimum income guarantee, to take them up to the threshold level at which we think we can reasonably expect them to live. Consequently, everything they have put into their savings effort is wasted.
Above the minimum income guarantee level, currently, those who receive both housing benefit and council tax benefit experience a marginal deduction rate of 85 per cent: 65p in the pound for housing benefit and 20p for council tax benefit. To reduce that rate to 40 per cent—which is the figure we thought the noble Lord, Lord Higgins, might be indicating in the amendment—we would have to pay housing benefit and council tax benefit to people even further up the income scale, at a much greater cost to the taxpayer. The change would affect 2 million people.
The pension credit improves the situation considerably. The 100 per cent withdrawal rate will be experienced by only one third of those eligible for the guarantee credit. The other two thirds—in fact, all recipients over 65—will have incomes between the savings credit threshold and the guarantee credit. They will therefore be on the savings credit and, as the noble Lord said, face withdrawal rates of 40 per cent, which is an improvement on the current situation. Currently, if they had an income of between £77 and £100, they would be facing a 100 per cent rate. They are therefore going from 100 per cent to 40 per cent. Those on the 40 per cent withdrawal rate could therefore gain up to £13.80 per week if single and £18.60 if a couple. We have also been careful to protect the gains for pensioners who receive help through the housing benefit and council tax benefit systems. As the noble Lord acknowledged, we have also increased the allowable amounts.

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However, single pensioners who are on pension credit, receive housing benefit and council tax benefit and are in the £100-£135 income range will be subject to the interplay of the withdrawal of pension credit and the tapering of housing benefit and council tax benefit. As I said in my letter to the noble Lord, the net effect is a marginal deduction rate of 91 per cent. However—and this is the key issue—68 per cent of pensioners are owner occupiers. On my calculations, only 8 per cent of pensioners on the pension credit will experience that taper. Most pensioners are not on housing benefit, although some who are owner occupiers are on council tax benefit. As I said, however, 68 per cent of pensioners are owner occupiers, and others live with their family. Although others have income higher than the pension credit, they are still entitled to housing benefit because they have higher rents.
Therefore, the first group of pensioners, with 100 per cent deduction between RP and income guarantee, will have a deduction of only 40 per cent and be better off. Single pensioners with an income between £100 and £135 will have a 91 per cent rate if they receive housing benefit and council tax benefit. However, only about 8 per cent of the total pensioner population fall into that group. Thereafter, people will be subject only to the housing benefit and council tax benefit tapers, bringing them back down again to the 85 per cent rate as they lose the pension credit.
The key point is that, although there are higher marginal deduction rates, they apply to much higher housing benefit so that there are no cash losers. I believe that everyone is better off as a result of our proposals. Although some will suffer a 91 per cent deduction rate, they will be £7 to £8 or so better off than they would have been under the old system with an 85 per cent deduction rate but without the pension credit.
I hope that my remarks are helping the noble Lord, Lord Higgins. Our changes in the MDRs are better for those with incomes under £100. Although the percentage rates are worse for those on between £100 and £135 if they are receiving housing benefit and council tax benefit, as I said, that affects only 8 per cent of the pensioner population. The situation remains the same for those on more than £135. If single pensioners in that group exhaust the pension credit, they move back on to the old housing benefit and council tax benefit tapers.
Those on between £100 and £135 comprise the pressured group. Nevertheless, although they are subject to higher MDRs because of the new benefit being considered in the tapers, their absolute cash income will still be higher. In other words, they will be much better off—at least £11 per week—as a result of our proposals.
Amendment No. 22 would certainly cost about nine times as much as our pension credit proposals, unless we scaled back the minimum income guarantee dramatically. I am sure that the noble Lord was not intending that, but seeking to probe the effect of the MDRs. Although the MDRs seem to become worse for the small hinge group comprising those on £100 to
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£135, in cash terms they will be at least £11 per week better off. Pensioners will therefore see a net improvement in their situation. I do not think that many of them will be bothered about the precise taper. We are not talking about work incentives under which people lose an amount for every pound they earn. Pensioners are on a fixed income and will be better off. I think that they will be most impressed by that fact.
It is helpful to try to have a go at a technically complex subject—the interplay of tapers in two or three different benefits. In the light of my comments, however, I hope that the noble Lord will withdraw his amendment. If he would like to write to me to follow up the points or seek clarification, I shall do my best to be helpful. It is a very technical set of issues.
Lord Higgins: I am most grateful to the noble Baroness. The issues are so much clearer when she makes it up as she goes along than it is when, as with the previous amendment, she reads out the official brief. I am lost with admiration that she is able to do that on her feet. I shall study very carefully the points that she has made.
How do the proposals tie in with local authorities, for example? Do they have to be informed of the changes?
Baroness Hollis of Heigham: Yes.
Lord Higgins: In previous discussions on housing benefit, I do not think that Members on either side of the House have shown enormous confidence in their ability to handle this type of complex problem.
Baroness Hollis of Heigham2: The noble Lord is correct. Local authorities will have to identify the new applicable amounts for pensioners. However, given the current state of computerisation, we are not worried about that. We should also remember that probably most pensioners who will be affected live in social housing. Consequently, their rent is paid after housing benefit has been deducted at source. Anyone on the basic guarantee does not pay any rent at all. The situation is not comparable with that in the private sector, where giros have to be sent to pay private landlords. As the noble Lord will be aware, in local authorities, housing benefit is not paid to pensioners who are on MIG. They do not pay rent at all, rather than being charged full rent and then being sent a cheque to pay it. There could be an issue, I suppose, that the payments to private, non-social landlords might get hooked up in the current problems that some local authorities have with their administration. That certainly will not affect pensioners in social housing, which will be the large majority as far as I am aware, although I will check the figures. We will obviously have to watch that. However, it is my understanding that this is one of the simpler tasks. After all, housing benefit changes with uprating anyway.
Lord Higgins: I am grateful to the noble Baroness for that explanation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

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[Amendment No. 23 not moved.]
Clause 3 [Savings credit]:
[Amendments Nos. 24 to 26 not moved.]
The Deputy Chairman of Committees (Lord Skelmersdale): In calling Amendment No. 27, I have to inform the Committee that if it is agreed to, I cannot call Amendments Nos. 28 to 45 inclusive, by reason of preemption.
Baroness Noakes Baroness Noakes moved Amendment No. 27:
Page 3, line 3, leave out subsections (2) to (8) and insert—

"(2) A claimant has satisfied the second condition for eligibility under section 1(2)(c)(ii) if a savings credit would be payable under any of the following provisions of this section.

(3) If an eligible claimant has qualifying income in excess of the standard minimum guarantee, and has income in excess of the appropriate minimum guarantee, the available savings credit shall equal the maximum savings credit less the clawback amount.

(4) If an eligible claimant has qualifying income in excess of the standard minimum guarantee, and income which does not exceed the appropriate minimum guarantee, the available savings credit shall equal the maximum savings credit.

(5) If an eligible claimant has qualifying income which does not exceed the standard minimum guarantee, the available savings credit shall equal the prescribed percentage of the amount by which the claimant's qualifying income exceeds the savings credit threshold.

(6) The eligibility of any claimant under this section is subject always to sections 4 and 12.

(7) The Secretary of State shall make regulations prescribing the operation of this section, and, notwithstanding any other provision of this Act, this section shall not take effect at any time when no such regulations are in force.

(8) For the purposes of this section—

"appropriate minimum guarantee" has the meaning given in section 2 in respect of any given claimant, save where regulations issued under that section prescribe an appropriate minimum guarantee for any claimant which is less then the standard minimum guarantee, in which case for the purpose of this section the appropriate minimum guarantee for a given claimant shall be the standard minimum guarantee;
"clawback amount" is the amount equal to the clawback percentage of the amount by which the claimant's income exceeds the appropriate minimum guarantee for the claimant, and the clawback percentage shall be the difference between 100 per cent. and the prescribed percentage;
"maximum savings credit" is the amount equal to the prescribed percentage of the difference between the standard minimum guarantee and the savings credit threshold, save that regulations may prescribe descriptions of persons for whom the maximum savings credit shall be nil (and who therefore shall receive no savings credit);
"prescribed percentage" is such percentage, not to exceed 100 per cent., as may be prescribed for the purposes of this section;
"qualifying income" in respect of any claimant is his income less any items of income prescribed in regulations as falling to be excluded in respect of any claimant satisfying any prescribed criteria;
"savings credit threshold" is such amount as may be prescribed in regulations for the purposes of this section, such amount not to exceed the standard minimum guarantee; and
"standard minimum guarantee" has the meaning given in section 2 in respect of a given claimant."
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The noble Baroness said: The purpose of Amendment No. 27 is to try to put some clarity into this Bill. It tries to rewrite Clause 3; not to change its substance, but to try to express the savings credit in more direct language. I know that myself, the noble Baroness, Lady Turner, and a number of others who looked at Clause 3 found it incomprehensible when they first read it; and incomprehensible when they read it a second and third time. This is a modest attempt to try to re-express Clause 3. It is put forward with some humility, not in the belief that it is perfect. It is intended to see whether there is a possibility of finding a clearer way of expressing what should be a relatively simple concept.
If we look at how this relatively simple concept of the tax credit is turned into law, we can see that it has many complicated elements—it has amounts A subtracted from amounts B; it has definitions of all of those amounts; it has two definitions of "income"—income and qualifying income. If we work through it, we could find that to reach the savings credit we have to pass through an obstacle course involving eight different concepts and two different measures of income. That is just to reach the basic level.
There are also more complications. The clawback operates by reference to appropriate minimum guarantee under Clause 2, which assumes that it is a higher amount than the standard minimum guarantee. But that will not always be the case. Occasionally it can be lower under the powers in Clause 2(6).
If we then have something that is lower and put that into the formula that is in the existing clause, that would not work. We therefore have to have a further power in subsection (5) to rewrite amount B. My noble friend Lord Higgins has already said that he does not understand what it is trying to do. It tries to do something extremely complicated.
As I said a moment ago, I do not put forward this amendment in the belief that it is perfect. It is to see whether there is scope for simplification. If so, I am sure that it could be improved upon. The amendment tries to distil the Government's intentions into three simple cases and then set out in subsections (3), (4) and (5) what savings credit follows from those simple cases. In the new subsection (8) it also gives what are, we hope, clearer, more direct definitions than are found in the existing Clause 3. I hope that the redraft commends itself to the Minister and I look forward to her comments. I beg to move.
6.45 p.m.
Baroness Hollis of Heigham: I hope I am not giving out any secrets when I say that when I was discussing this amendment with my officials they thought this was a very good try. They were mightily impressed. It will not work for all sorts of reasons, which the noble Baroness would expect me to say but which I happen to believe is true. But jolly good points for effort, if I may say so, and that is not in the least meant to be patronising. It was an impressive piece of work.
Perhaps it might be sensible to stand back a bit and, before discussing the detail of the amendment, give an overview of how Clause 3 works as it is presented in the

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Bill. It is complicated, as the noble Baroness rightly said. We have tried to present the calculations as simply as possible with reference to a single calculation. To put it simply, this is the amount by which "amount A" exceeds "amount B".
This works in two ways, depending on where a pensioner's income falls in relation to the standard minimum guarantee. First, as the noble Baroness and I am sure other noble Lords are aware, if a single pensioner has income below £100 he will receive 60p a week for every £1 of savings he has over £77. This builds to a maximum of £13.80 a week for someone whose weekly income from pensions and savings is £100.
Secondly, if a single pensioner has income above £100 the savings credit starts to reduce, although it is worth stating that under our proposal a pensioner's overall income will always increase as their pre-pension credit income rises. Where income is over £100, the savings credit will be reduced by 40p for every £1 of original income. The savings credit runs out at £135 a week.
That is the basic structure with which I am sure everybody is comfortable. Exactly the same principles apply to the savings calculation for couples. If we now turn to the noble Baroness's redraft, it seeks to do much the same thing but by reference to individual calculations. Because of that we welcome the chance to discuss it. But it cannot work. The new subsection (5) makes no reference to income which does not exceed the appropriate minimum guarantee. It needs to if the calculation is to work.
The amendment does not include a calculation for those pensioners with qualifying income which does not exceed the standard minimum guarantee and income which does not exceed the appropriate minimum guarantee. I am sure that is not the noble Baroness's intention, but the amendment cannot work without those changes.
In addition, as I interpret it—although I may misunderstand here—the amendment provides for hospital downrating to be considered under the proposed subsection (8) and the definition of the "appropriate minimum guarantee". The definition put forward would have the effect of excluding pensioners with a downrated pension guarantee credit, because they were in hospital, from benefiting from the savings credit at all. Again, I am sure that is not the noble Baroness's intention. Our intention is that those who are in hospital should be rewarded for their thrift through the savings credit as with any other pensioner, whatever may happen to the retirement pension—given the little debate that the noble Lord. Lord Higgins, and I had about the brilliant, transparent clarity of our drafting.
I could go on. But I hope that the noble Baroness will accept that, though this is a gallant effort, her version as drafted will not work for the reasons I have given. I could go on in more technical detail. The noble Baroness is more than welcome to have another go next time. I know that this Bill is extremely technically
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complicated with words like "standard minimum", "guaranteed qualifying minimum" and all the rest of it. The point is that the pensioners who need to benefit from this and whom we seek to encourage to take up this new entitlement do not read this stuff. But if we do not have it drawn in ways that immaculately satisfy the parliamentary draftsmen, it leaves the possibility of judicial review in cases that neither the noble Baroness nor I could possibly intend. That is why the wording is often as onerous as it is.
That is not to say that there cannot sometimes he improvements. It may be that with a consolidating Act five or 10 years down the line, the legislation may be consolidated and improved in the process. But I am pretty loath to disturb technical reading. What is important is that we ensure that our descriptions in speeches in this place, the literature that goes out, the briefing to our staff and the briefing to bodies like Age Concern, Help the Aged and citizens advice bureaux are impeccable.
Some time ago I was challenged by the noble and learned Lord, Lord Brightman, about the wording of a provision. He produced three or four lines which could be interpreted as saying, "If you get into work, tell us", but we had to couch it in different ways because of the meanings of "work", "occupation", "earnings" and the like. Given that, I congratulate the noble Baroness on the rewrite. I could not have done it. It is impressive. But it does not work as it stands. I honestly think that it is not worth investing energy in that territory, desirable though it may be, unless one is absolutely sure that it is going to be robust enough to stand up to the sort of scrutiny I detailed.
We have been at the receiving end of human rights cases and so on that have been brought as a result of our flawed amendments. At the end of the Committee stage I shall ask the Committee's indulgence as regards an amendment which seeks to correct drafting on which we slipped up in a previous Bill. As I say, I congratulate the noble Baroness but I suggest that she withdraws the amendment.
Baroness Noakes: I thank the noble Baroness for her compliment but I am not surprised at her overall message. However, the amendment is a genuine attempt to illustrate the fact that the Bill is drafted in an extremely complex way. I fully take the point that pensioners will not study what will be the State Pension Credit Act 2002 in their local libraries, but their advisers could study it. It took me an extremely long time even to understand how the parts of the calculations hung together. I found eight concepts of two versions of income.
I am disappointed that the department has not made a greater effort to express these concepts more directly. Parliamentary draftsmen often have their own ways of expressing concepts, especially financial ones, as lawyers, typically, are not particularly good at expressing money concepts. I had hoped that the departmental staff would seek ways to express concepts simply. The Minister referred to Clause 18 in the context of correcting an earlier mistake. I submit that that mistake was made because no one

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understood exactly what the draftsmen were doing. More direct drafting is a laudable aim but now is not the time to start a campaign for simpler drafting. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees: In calling Amendment No. 28, I inform the Committee that if it is agreed to I cannot call Amendment No. 29.
Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts moved Amendment No. 28:
Page 3, line 4, leave out paragraph (a).
The noble Lord said: In moving Amendment No. 28, I wish to speak also to Amendments Nos. 30 and 41. I refer in these amendments to the important issue of the position as regards the state pension credit for those who are not entitled to a full basic state pension but who, for one reason or another, have income from another pension or, indeed, from savings. Before I discuss the detail, I wish to check a few matters with the Minister.
As I understand it, under the proposal savings are assessed at a 10 per cent rate over the £6,000 basic tax free capital sum. In that case, with a maximum payment per individual of £717.60 a year, a 10 per cent assessment means that the maximum capital that person can have is £7,176, plus the £6,000 tax free sum; that is, £13,176 in total. For a married couple the relevant sum is £15,672. If one has a 10 per cent assumed savings rate for any amount over £6,000, and the maximum one can be paid as a savings credit is £717.60, applying a multiplier of 10 to the £717 gives one £7,176 a rid a total of £13,000. Perhaps the Minister can tell me whether my assumptions and/or my arithmetic are faulty in a moment.
I turn to the specifics of the amendments. As I understand it, under the provisions before us, an individual must attain the level of the savings credit threshold to be eligible for the savings credit. The savings credit threshold is to be defined—although I think that it is not yet set—as the level of the basic state pension. But, if a person does not have a full basic state pension, he or she has first to use up any secondary income to get up to the basic state pension level before being eligible for the savings credit.
I accept that there is a strong argument—it is a powerful argument—that you should get what you paid for. If you have chosen to save in some other way, why should the state offer you an additional credit? However, the critical word is "chosen". Many people who do not get a full basic state pension do so because they have broken work records. In many cases that has not occurred through choice. For example, it may have occurred due to long periods of unemployment. There may be other cases of a more voluntary nature, for example, women who have chosen to take a career break to bring up children—indeed, that is something we probably should encourage and certainly should not discourage—or men who have worked abroad. As the noble Earl, Lord Russell, pointed out earlier, the latter case is increasingly likely to occur with the free
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movement of labour through the European Union. Therefore, I submit that although the argument of "what you pay is what you get" is a powerful one. I do not find it all-powerful.
I hope that the Committee will forgive me if I give two practical examples which I hope will illuminate the issue. First, I refer to the issue as it affects two women, one of whom is a single woman aged 65 who has never worked, has relied on state benefits all her life and has no savings. She will receive the guarantee credit of £100 a week. I refer to a widow also aged 65 who worked for a few years prior to getting married. She may be eligible for a part state pension of, say, £35 a week. In addition, she may be in receipt of income from her late husband's occupational pension, for which he saved, and other benefits at a level of £42 a week. The state pension at £35 a week and the other income combine to provide her with a total income of £77 a week. She will receive no credit for her late husband's saving, nor for her eligibility for a small state pension. Instead, she will merely receive the guarantee credit bringing her up to £100 a week—exactly the same position as the woman who has never worked and has relied on state benefits her entire life.
Secondly, I refer to an employed man in his fifties, perhaps with a chequered work history, who is coming up to retirement and is considering what his future pension entitlement should be. He realises, of course, that because he has a broken employment record, perhaps through no fault of his own, he is entitled to only a part state pension. He is potentially able to save a small amount in the few years before he retires in order to provide him with some further income. However, if the noble Baroness or I were his financial adviser, we would have to say, "You should not use your money to build up a pension because it will be removed from you and you will get no guarantee from it. You can aim instead for the minimum guarantee", and need make no savings. No benefit will accrue to him from any savings.
On Second Reading the Minister was robust about the matter and said that what you pay is what you get. However, I refer to married women in particular who have perhaps sacrificed their careers in part to bring up children and who will be disadvantaged by the proposals as they currently stand. The issue deserves further reflection because of women who have taken a career break, people who have been unemployed through no fault of their own and perhaps people who have chosen, or have been able or have been forced, to work abroad for a period of their working lives. I beg to move.
Baroness Turner of Camden: Two amendments in my name have been grouped with Amendment No. 29; that is, Amendments Nos. 42 and 43. My amendments are in effect an attempt to probe the Government's intentions regarding the uprating of the threshold which has already been alluded to. As the noble Baroness knows, initially the savings credit threshold will be the basic pension rate. If it remains tied to the basic pension and rises in line with prices while the minimum guarantee rises in line with earnings, the cost

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of the savings credit is likely to rise steeply. The effect of our amendments is to try to ensure that the threshold remains at the level of the basic pension in future years. What are the Government's intentions in that regard? There could be difficulties in future.
7 p.m.
Baroness Greengross: I rise to support Amendment No. 28, which was moved by the noble Lord, Lord Hodgson. I am particularly concerned about its effect on women. I accept that the amendment may not yet be fully or correctly drafted and that it may not benefit those with a partial state pension record. However, that is its intent, as the noble Lord explained. With regard to the state pension credit, I accept that it would not be right to put those with a partial state pension record on exactly the same footing as those with a full state pension record. That point was made by the Minister at Second Reading. She said:
"it seems to me that someone who has made the full national insurance contribution all their working life should not be treated in the same way as someone who has not".—[Official Report, 18/12/01; col. 189.]
But, by the same token, it seems strange that no account whatever is taken of savings that are made by those on a partial state pension. If anything, those savings are likely to be even more important to those people than to someone who has the full pension.
That no account is taken of such savings is a great disincentive to such people to save. That point was well put by the National Federation of Post Office and BT Pensioners, which said,
"a considerable number of retired people do not receive a full state pension and will still be penalised for having an occupational pension".
Many such people will be its members—former employees of the Post Office or BT.
The ABI made the same point:
"failure to award the state pension credit to those with less than the full basic state pension but who have some private savings for retirement could act as a disincentive to save, particularly amongst women who are most likely to fall into this category of saver".
As a result of my concern, I tabled a number of Written Questions to see if I could find out how many people—especially women—were not going to benefit from the state pension record because of their incomplete contribution record. That information has not yet reached me, but I hope that the Minister can provide some further information tonight.
In my view, we should be aiming to reward people in that group for thrift just as much as those who are fortunate enough to have been able to end up with a full state pension and a small amount of private pension. Could the Minister ask her officials to come up with a formula that will allow those with a partial state pension to be eligible for the state pension credit at the same proportion as their state pension? For example, if I received two-thirds of the state pension, I would be entitled to two-thirds of the state pension
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credit. I suspect that that might complicate a matter that is already very complicated, as we have discussed, but I believe that it would be right to do.
Lord Higgins: In our exchanges on earlier amendments, the Minister remarked that sometimes it is not immediately clear whether the debate that takes place relates to the amendments. I have to confess that I did not challenge the grouping of the amendments but my Amendment No. 40, which appears further down the groupings list, probably should have appeared in the group that we are currently considering. The amendments that appear in the name of the noble Baroness, Lady Turner, are on a somewhat separate point.
I take the important point made by my noble friend Lord Hodgson of Astley Abbotts about those who do not have the full national insurance pension because they have a deficient contribution record. As he rightly said, in some cases that may be virtually their own decision. In other cases, it happens for inadvertent reasons or, for example, because in an earlier period a person acted as a carer.
I have a long history on the subject of deficient contributions. It was the matter on which I made my maiden speech in another place in 1964. A subsequent filibuster by Mr Richard Crossman and others on a Friday prevented my Private Member's Bill on the subject from being heard. However, that was what we did when we came to office in 1970. My history on this matter goes back rather a long way.
The people with whom I was concerned had no option. They were not allowed to contribute when the national insurance scheme started and were thereby deprived of the national insurance pension. None the less, people now have deficient contributions. An answer to my honourable friend in another place, Mr Willetts, suggested that getting on for 3 million people are in that position. Several outside bodies have expressed concern about the way in which such people will fail to benefit from the Bill.
As the Bill is currently drafted, those people will not get the savings reward that the pensions credit will provide. Under current proposals, less than a full entitlement to a basic state pension will mean that the first part of a pensioner's personal savings will be used to bring it up to that level. As I understand it, it will not then attract the additional savings credit. Age Concern, I believe—perhaps it was another body—gave an example. If a pensioner has an incomplete contribution history and receives a basic state pension of only £67 but has £10 from a personal pension, he will receive the guaranteed income—perhaps the minimum income guarantee element of £100—but no credit for his savings. Failure to award the pensions credit to those with less than a full basic state pension but who have some private savings for retirement could act as a disincentive to save.
It seems to me that, subject to being persuaded otherwise, those people are being unfairly treated. As a result of not having paid a full contribution, they do not get the full basic state pension and may be

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penalised in a number of other respects with regard to passported benefits and so on. I am not clear why they should be penalised on top of that—or underneath it, depending on one's point of view—because of their lack of a contribution record if they have some small savings. I should have thought that there is an argument for saying that if they have some small savings, they should get the benefit of the savings element of the state pension credit system.
That issue is of considerable interest. The noble Baroness, Lady Greengross, referred to some outside interests that have made representations. It would be helpful if the Minister commented on the matter. I will not comment on the amendments that appear in the name of the noble Baroness, Lady Turner, which appear to involve a separate point.
Baroness Barker: We are at the heart of the most complex part of the Bill. I echo the comments of the noble Lord, Lord Higgins, about not knowing exactly what debates on amendments will be about.
From these Benches, I add my support to the proposals that would alleviate the position of people with partial contribution records and who therefore will not receive the full state pension. Will the Minister confirm that about 80 per cent of pensioners do not receive the full amount? I look forward with interest to the Minister's comments. Will she deal with the extent to which capital limits will cover some of the people to whom the noble Lord, Lord Higgins, referred?
Baroness Hollis of Heigham: Fortunately, this is Committee stage. Many questions have been raised, and Members of the Committee will be able to come back to me on those that I do not answer. I shall go into some of the straightforward questions. I do not need to talk about the purpose of the savings credit and so on.
The noble Lord, Lord Hodgson, made, I believe, three points: first, the return on capital; secondly, what happens to people with broken work records; and, thirdly, in particular, what happens to women in that situation. That gender point was also picked up by the noble Baroness, Lady Greengross, and my noble friend Lady Turner. With regard to the return on capital, I am not surprised that I looked mystified. Alas, I shall ask my officials to recheck the calculations. I am sure that the noble Lord's building society makes the calculations very accurately, but I am not sure that he did so this evening.
I believe that the noble Lord said that, if it came out of a savings flow, the maximum pension credit of £13.80 multiplied by 52 would generate an income of £717. The capital required to generate that, including the £6,000 disregard, would be £19,800. That assumes that no second pension is available. In fact, capital of up to approximately £60,000 can be held and still give a small entitlement to tax credit.
At Second Reading I told your Lordships that a single person could have savings of over £35,000 and still receive pension credit. A couple could have savings of £45,000 and still receive pension credit. I said that savings were treated five times more
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generously than MIG. If the noble Lord wishes me to do so, I shall be happy to ask my officials to write to him more fully about the basis of some of his calculations.
I have sympathy for the other points that he raised concerning people with broken work records, and so on. The noble Lord gave, in particular, the example of women who are affected because they have had caring responsibilities or have been unable to work because of sickness or disability. Indeed, in some cases, the issue of broken work records may also apply to men who have unemployment records but none the less seek work.
Of course, the noble Lord will be aware that in such a situation a person is covered by national insurance credit, which can count as qualifying years for the purpose of the basic retirement pension. Therefore, provided that a person can claim that type of "good cause", he will be entitled to the credit. He can claim the equivalent of another benefit because of home responsibilities. He may have been caring, have suffered disability or been unable to work because of unemployment. Conventionally one is covered for that type of break from work by a credit to national insurance which builds into the retirement pension. A person who has a broken record tends to be a dependent wife who has not been in the labour market and does not have those caring responsibilities.
A widow will receive a pension based on her husband's contributions. Therefore, even if she were to have no such contributions in her own right, she would take over those of her husband. She would be protected.
I believe that that covers most of the groups about which the noble Lord is properly concerned. However, there is an additional point. Women are likely to have a reduced entitlement in their right. I apologise if there has been a delay in getting the information to the noble Baroness. My understanding is that 92 per cent of men and 83 per cent of women receive the full basic state pension. I could give the numbers behind that if the noble Baroness wished, but obviously those who do not receive the basic state pension have incomplete pension records.
That leads me to the substance of this matter. How do we allow for those who have proper—I do not want to sound moralistic about this—good and acceptable reasons for not being in the labour market for the reasons mentioned? The question is whether people who have been out of the labour market—perhaps they have been abroad—possibly during different tax regimes, should be treated in exactly the same way as people who have worked all their lives here, paying the national insurance credit, and so on.
The amendment of the noble Lord, Lord Hodgson, proposes that the savings credit will be payable at a flat rate of the maximum, which is currently around £13.80 for single pensioners and £18.60 for pensioner couples, until the total income exceeds the pensioner's appropriate minimum income guarantee. For pensioners whose total income exceeds the appropriate minimum income guarantee, the

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maximum savings credit will be reduced by 40 per cent of that extra income over the appropriate guarantee until it tapers out.
That would be equivalent—this is the push of the amendment—to increasing the minimum guarantee level for all pensioners over the age of 65 by the maximum savings credit as well as awarding the savings credit to pensioners with incomes above the guarantee level. This matter refers back to our earlier debates on the subject.
These proposals come at a considerable price. The cost of the amendments, together with the consequential housing benefit and council tax benefit changes, would be approximately £2 billion a year. The number of pensioners entitled would not increase, and the additional spending would go to those already projected to benefit from the pension credit proposals. Potentially, the effect would be to reward equally those who have saved nothing and those who have saved. In practice, that means that those who have saved but whose income is still below the level of the guarantee will lose their savings income pound for pound in the pension credit calculation. They will see no additional reward over their neighbour for their hard work and thrift and for the savings that they have built up over their working lives.
Pensioners consider that to be unfair; I also consider it to be unfair. The pensioner guarantee would treat in the same way those with incomplete retirement pension records and those with complete retirement pension records but with no additional income. They would be taken to a threshold of £100. I believe that that is right and proper.
However, when it comes to the savings credit, I believe that it is right that we reflect the effort that individuals have made to build up their savings. If they have built up their savings but their retirement pension record is incomplete, it seems to me entirely appropriate that, first, their savings should be set against their incomplete retirement pension in order to bring the level up to that of the retirement pension before eating into the £77 to £100 figure. I believe that that is right. It is a proper reflection of the difference in the situation of someone who has contributed fully to his retirement pension, allowing for groups which have caring responsibilities, and so on, and those who do not.
As a result, given that the pension credit savings element hinges on the full retirement element, I consider it to be right that we treat people differently when they do or do not have a complete retirement pension. We treat them differently not in relation to the guarantee element, which relates to their poverty—in that case we treat them the same—but in relation to their savings, which relates to their own activity. We treat them differently because they have acquired the right to be treated differently by virtue of their savings. That is the Government's position.
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Perhaps I should sit down at this point. If noble Lords, including my noble friend, believe that I have not addressed any issues, I shall seek to answer them. However, it may be that I have answered all points in the course of the general discussion.
7.15 p.m.
Lord Higgins: First, perhaps I may take up a specific point made by the noble Baroness in relation to carers having their contributions record made up. I believe that that is the way that she expressed it. Would that be true of a person who spent years as a carer before the introduction of the invalid care allowance and home responsibilities protection in 1978?
Baroness Hollis of Heigham: I shall write to the noble Lord on that point. The benefits changed and ICA came in quite late. I shall need to check that precisely as I do not want to mislead the noble Lord. Obviously, when we discussed the state second pension, we built that in so that for every year of caring a person would receive a year of pension. Therefore, if one completed 40 years of caring, one would receive a £40 pension. Currently that is not the case. However, perhaps I may check how far back those records go. Certainly the noble Lord is right that we are covered following the introduction of ICA and also following the introduction of the appropriate benefits. I shall check on that point and write to the noble Lord.
Lord Higgins: I am most grateful. This point had been raised with me by an outside body which is obviously fairly expert on the matter. By now, the people concerned must be fairly old and are probably very few in number. Therefore, I am content for the noble Baroness to make absolutely sure that that is so.
Perhaps I may return to the main point which I believed she was making, although I shall need to read carefully exactly what she said. I tabled a Written Question which she kindly answered in time for today's debate. I am concerned that the Written Answer that I received today refers to a "pay-as-you-go" principle. Nevertheless, in regard to individuals there is a distinction. What proportion of the state pension would a pensioner receive if the calculation were carried out on an actuarial basis as a result of his contributions?
One would have great difficulty convincing anyone who receives the basic state pension that the following is so: if, over the years, they had simply invested their contributions, the answer is that they would receive nowhere near the basic state pension. A big element of the basic state pension is not covered by contributions. It is at least arguable that those with deficient contribution records are at least entitled to some part of that compared with those who have paid full contributions.
Another point I was seeking to make is that I do not understand why someone who suffers because he does not have a full contribution record and so receives a lower state pension should not be entitled to have at least some recognition of the fact that he has a small amount of savings. As I understand it, under the Bill

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as drafted, he does not have that because his small savings are not compensated for in any way. They are used to bring up the pension to the levels that the Minister has mentioned. I am not clear why it is that those who have a deficient contribution record should not receive something from the Government because they have a small amount of savings, if those who have a full contribution record benefit when they have a small amount of savings.
Baroness Hollis of Heigham: This is not exactly a theological argument, but it touches on a wider debate about the relationship between national insurance and the taxation system. The noble Lord knows perfectly well that although funds go into the national insurance scheme, the state retirement pension is a funded "pay-as-you-go" scheme, as opposed to a money purchase scheme, and in that sense it is funded by today's taxpayers. In turn, the pensioners have funded a previous generation of pensioners.
This matter would depend upon age, gender, work records and the like, as to what actuarial proportion would apply. That is where we are, and the noble Lord knows that as a result the national insurance contributions are levied from an employer and an employee with the availability of a Treasury contribution, if necessary, to make good what GAD forecast is required to have a national insurance fund in balance. That flow of money effectively comes in from different generations of people. Perhaps the noble Lord will accept that description. If we go beyond that we shall be in the realms of theology, if not heresy.
Lord Higgins: I understand all that, but that is not the point that I was making. Is it not the case that those drawing a pension now would receive that pension if all they had done was paid their contributions and received the actuarial result of those contributions?
Baroness Hollis of Heigham: That is true. The basic retirement state pension is the same level irrespective of whether one has been a non-taxpayer or a taxpayer or whatever the level of national insurance contribution one has paid. Technically, some people may have over-funded their pension and others may have under-funded it. There is a cross-pooling effect, across each generation as well as between generations. I do not see anything wrong with that. One may be able to do the sums suggested by the noble Lord, but I do not see that that matters because society pools money for old age.
I return to the second of the noble Lord's questions. If Frank has a retirement pension of £77 and a private occupational pension of £30, he should be in the same financial position as Roy who has a retirement pension of £50 and an occupational pension of £30. That is basically what the noble Lord is saying. One has a full RP of £77 and the other has an RP from incomplete contributions of only £50 and they both have occupational pensions of £30. The result is that under the pension credit Frank's pension will go up from £77 to £100 because his £30 will take him past that, and it is 60p in the pound thereafter. Is it right that Roy's
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pension should also go up to £100? His retirement pension record is incomplete but he is poor, and therefore he needs to go up to £100, which is the fulcrum point, and he will still enjoy a proportion of the savings credit in exactly the same way as Frank.
The noble Lord is saying that what is currently MIG should carry the strain between where Roy is with his retirement pension, however modest that may be—£10 worth, £50 worth or £77 worth up to 100—and whatever else he may have; he will still receive a savings credit. That is what the noble Lord suggests and I do not believe that that is right. He is saying that such a person should be rewarded twice over, once with a M1G element, a guarantee element that takes him up to £100 with possibly £20, or £30 or £50 of retirement pension—far more than the first person—and on top of that that he should enjoy his savings credit. Those two people with different retirement pension contributions records would end up receiving the same income. That cannot be right. That is not fair to the person who has worked hard, paid the contributions and saved in other forms—through an occupational pension or through savings.
I do not know whether that helps the noble Lord. We may have to agree to disagree on that. That would be the consequence under his case of someone with an incomplete retirement pension record who would receive all the £100 deemed through the MIG element and would enjoy a savings credit on top. I do not believe that it is right to deal with those two people in the same way. I hope in the light of that explanation that the noble Lord will feel able to withdraw the amendment.
Lord Hodgson of Astley Abbotts: I am grateful to the Minister for the full attention that she has paid to this amendment. The counter argument from my noble friend Lord Higgins is whether someone should receive no benefit at all—it is not a matter of full benefit—from having some state retirement pension. I look forward to receiving from the Minister's department the capital calculations. In any way that I try to work this out I cannot work it up to £35,000 or £60,000 to be eligible under the proposals now before the Committee.
I am grateful to the Minister for having dealt with some of the cases. I did not hear much about women who take a career break to care for children, but these were probing amendments designed to discover the position of the Government. We have had much juice out of the orange. I may want to see whether I can extract some more juice on another occasion, but for the time being I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Bassam of Brighton: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Nurse Prescribing
7.28 p.m.
Lord Soulsby of Swaffham Prior Lord Soulsby of Swaffham Prior rose to ask Her Majesty's Government, in the light of their responses (Cm 4172 and 5245) to the reports of the Science and Technology Committee on Resistance to Antibiotics (HL Paper 81, Session 1997–98, and HL Paper 56, Session 2000–01), what precautions they will propose to guard against increasing the prevalence of antibiotic resistant organisms in the proposed nurse prescribing regulations announced on 4th May 2001.
The noble Lord said: My Lords, in providing a brief background to this Unstarred Question I shall explain that in 1998 I had the honour to chair a sub-committee of the Select Committee on Science and Technology on resistance to antibiotics and other antimicrobial agents. After its deliberations the sub-committee came to several conclusions of which I shall mention two. The first was,
"This enquiry has been an alarming experience, which leaves us convinced that resistance to antibiotics and other anti-infective agents constitutes a major threat to public health and ought to be recognised as such".
The second conclusion was that,
"there is a dire prospect of revisiting the pre-antibiotic era".
I cite those two conclusions to emphasise the serious nature of antibiotic resistance. It is not an issue to be taken lightly. The Government have been very positive in their response to the report. That has resulted in a number of publications. The Path of Least Resistance was published by the Standing Medical Advisory Committee (SMAC). A series of patient-information pamphlets was produced by the National Health Service to dissuade inappropriate use of antibiotics for simple infections, such as the common cold, coughs, viral sore throats, earache and so on; in other words, the more prudent use of antibiotics. Also included was the setting up of the long-awaited Specialist Advisory Committee on Antimicrobial Resistance (SACAR).
Since 1988 there has been a welcome decline in antibiotic use in human patients—and in animal patients too. Prescribing is down by 23 per cent. That is a very good record. Nevertheless, when the subcommittee revisited the issue of antibiotic resistance in 2001, we reiterated the need to educate professionals to practise even more prudent prescribing. Recently the Department of Health addressed the issue of antibiotic resistance in a publication entitled Getting ahead of the curve: a strategy for combating infectious diseases. As recently as 4th January 2002 the Department of Health published a leaflet entitled, Got a cold—don't ask for antibiotics. There is little doubt that officially and professionally one of the major factors influencing the spread of the resistance to antibiotics is the inappropriate prescribing of antibiotics. It is now intended to extend prescribing of prescription only medicines (POMs) to independent nurse prescribers by amending the prescriptions-only medicines order 1997 to include antibiotics.
The proposals are very worthy. They are intended to enhance patient care by providing quicker and more efficient access to healthcare, making better use of
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nurses' time and skills, and allowing doctors more time to deal with the more serious cases presented. That is an admirable concept to be supported by adequate training of nurse prescribers to prescribe the POMs listed—there are more than 100—by the Committee on the Safety of Medicines. Fifteen antibiotics are also listed. Therein lies the concern.
Antibiotics differ from all other POMs in that the needs of the individual patient must be balanced against the need to preserve their usefulness for the general population. Unlike other POMs, the use of antibiotics in one patient may influence the efficacy and efficiency of that antibiotic in another patient, related or unrelated. That does not occur with non-antibiotic POMs.
In its response to the proposed regulations and lists put out by the Medicines Control Agency, the Specialist Advisory Committee on Antimicrobial Resistance firmly believes that systemic antibiotics should be excluded from the list of POMs with the exception of a very few where their use can be easily and accurately diagnosed and proposed. Those include urinary tract infections in young women and bacterial vaginosis.
The extension to nurse prescribers of the ability to prescribe is based on the concept that nurses should prescribe for minor infections; yet it is those very minor infections which have led to the imprudent prescribing of antibiotics by doctors. Will independent nurse prescribers perform better than doctors have done? Will they be able to resist the demands for antibiotics by patients when the nurse prescriber judges that a prescription is unnecessary and yet is pressed by the patient to prescribe? That will not only be a problem for the nurse prescribers; it is a very real problem for medical practitioners. Will the period of training—a three-month programme of 25 taught days—be sufficient for all POMs but including those antibiotics?
The response of the British Society for Antimicrobial Therapy to the proposals recommends limiting the list of oral antibiotics to be prescribed to only the two infections I have mentioned; namely, urinary tract infections and bacterial vaginosis. It has listed the antibiotics which might be used. It points to a very clear role for nurse practitioners by serving as a gateway between patients and medical practitioners. I support that. It is also clear that the programme must be carefully audited especially for any increase in antibiotic resistance. The Public Health Laboratory Service should be brought into play.
I am aware that further discussions have been held with the Chief Nursing Officer, Professor Wise, chairman of the specialist advisory committee, and Dr Martin Wood, consultant physician and President of the British Society for Antimicrobial Therapy. Perhaps the Minister can inform us of the progress made.
In conclusion, I believe that the overall proposals will be a major advance in nursing, provided there is adequate instruction and supervision. I do not cavil with the extension of prescribing by nurses to the 100

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or more POMs. The concern is with antibiotics. We have made welcome progress in cutting back on antibiotic prescribing. I believe that that has led to a reduction in antibiotic resistance. Let us not reverse that trend without due caution.
Finally, other nurses such as veterinary and dental nurses handle POMs. Will they, too, be included eventually in this proposal?
7.39 p.m.
Baroness Pitkeathley: My Lords, in thanking the noble Lord, Lord Soulsby, for giving us the opportunity to debate the issue, I confess immediately that I have no expertise in prescribing—unlike many noble Lords who will speak. What I do have though is considerable experience and expertise as a patient. Since patient benefit or otherwise must be a central theme of our debate tonight, it seems to me that that gives me leave to make a brief contribution.
For seven months of last year I was a patient at the Middlesex Hospital. I had total body sepsis, peritonitis, an open abdominal wound and, for about half my stay, MRSA. Your Lordships will see that I have a very strong interest in the administration of antibiotics, painkillers, fluids, artificial food and practically every other substance which can be administered to a bedfast patient, the names of which I have now mercifully forgotten.
Your Lordships will perhaps understand that it is a bit of a miracle that I survived at all; that I did so is due in large measure to the fantastic care which I received from the NHS and the fact that no effort was ever spared to save my life even when all hope of saving my life seemed to be gone.
We talk a lot about putting patients first and that it is easy to say and hard to put into practice, but I must go on record as saying that not once in all those long months, at least while I was conscious, did any doctor, nurse or other practitioner do anything to me without explaining the procedure, its process, its effects, asking me if it was all right to proceed and generally putting my thoughts and wishes at the forefront. It is perhaps worth also saying, particularly today, that never once was I treated with anything other than respect and dignity.
The co-operation and trust between the doctors, nurses and the allied professions were also exemplary. For example, a special team of nurses had been set up to ensure that there was the utmost co-operation between the ward and the intensive care unit to ensure that no focus on the patient was lost when the lower level of care provided by the ward was substituted for the one-to-one nursing in ITU. The advice of this nurse team on all matters, including prescribing, was taken by consultants, doctors and nurses on the ward.
This caring and concerned atmosphere alleviated what was inevitably a distressing experience. Some of the worst moments were waiting for an on-call doctor to arrive—usually at night, in the small hours—to prescribe more pain relief, more antibiotics, a new IV line and/or more anti-nausea drugs. It is for that reason that I am speaking strongly in favour of
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extending nurse prescribing tonight. Who did I want to prescribe for me at these times—the charge nurse or the night sister, with whom I had constant contact, or a new and often inexperienced doctor who had never seen me before? Your Lordships will conclude that it was of course the nurse. In any event the doctor would take the nurse's advice because she knew more about me.
As the size of my notes grew—and noble Lords will appreciate that they eventually filled four folders and stood almost a foot high—who was seriously going to read through all that? No one of course. My history was given to the doctor by the nurse or by me and it was on that basis that the prescription for whatever it was was written out. The delay was sometimes considerable and it caused distress not only to me but to the staff. How much better for the nurse to have prescribed in the first place. Indeed, I am very much in favour of extending nurse prescribing. When it came to putting in lines, the nurses who did so were frequently more skilful and tender to my poor sore veins than the doctor, who, however well-meaning, was often just learning.
I must emphasise that the advice of the nurses resulted from long connection with me, wide knowledge and experience of my condition and close co-operation with the consultant and registrar who saw me daily. Speaking as a patient, I certainly would not want anyone to be prescribing for me without adequate training. So I very much welcome the emphasis placed by the Government on training and on the commitment of £10 million to support this extra training for nurses.
For the proposed extension of prescribing to be successful, trust and respect for each other is vital. That applies not only to the relationships between doctors and nurses but to the relationships with those other professions who contribute so greatly to the welfare of patients, such as physiotherapists and OTs.
I am sure that the new arrangements for prescribing will bring enormous benefits in terms of time and money saved, but I principally support them because of the benefits to patients which I am sure will result from well trained and well informed nurses prescribing as proposed.
7.44 p.m.
Baroness Finlay of Llandaff: My Lords, I am grateful to the noble Baroness, Lady Pitkeathley, for relating a pleasant experience of being in hospital. As a medical practitioner I found it most welcome.
I should like to confine my remarks to antibiotic prescribing and the extension of that to nurses. Antibiotic and anti-fungal resistance are modern phenomena. Stored strains of bacteria from 1915 to 1950 show no transferable resistance, so Darwinian natural selection is very active among microorganisms.
Currently, it has been assessed that in Wales about half of all antibiotic prescriptions are unnecessary. There are wide variations in antibiotic prescribing across Europe. High rates in Spain correlate with high

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levels of penicillin resistance. The noble Baroness has already mentioned the problems of resistance in bacteria.
Interestingly, in Finland, a major campaign to decrease macrolide antibiotic use resulted in significant falls in resistant Group A streptococci. Decreased tetracycline use has also been linked to a fall in the amount of resistant strains. So natural selection comes into play and resistant strains of organisms do not emerge.
Nearer to home, there are powerful data from Howard and colleagues. They have looked at antibiotic prescriptions dispensed from a GP practice and the presence of antibiotic resistance in specimens from patients from that practice. When the prescribing rates of antibiotics were high they found high rates of resistance to that antibiotic. The other worrying finding was a cross-correlation between usage of one antibiotic and antibiotic resistance to another. For example, Trimethoprim was associated with multi-resistance in coliform to up to four different antibiotics.
They also demonstrated higher levels of resistance in areas of social deprivation, which strongly supports the hypothesis that the pool of bacteria in a practice population develop resistance. When a member of that community becomes immuno-compromised for whatever reason, he is more likely to be ill with a resistant strain. So the data on resistance relating to the number of prescriptions for antibiotics are strong.
Next, perhaps I may comment on the drugs themselves. They are potent and potentially dangerous. For example, some patients prescribed Minocycline for acne have developed severe lupus-type liver damage. Life-threatening hypersensitivity reactions are well recognised with many antibiotics.
As well as antibiotics there are anti-fungal agents on the list, which I would like to address. Candida albicans used to account for over 95 per cent of all fungal infections, but it now accounts for only about 60 per cent in the UK and 50 per cent in the USA. Resistant strains, particularly glabrata and kruisei have become prominent. Systemic fungal infection is notoriously difficult to diagnose and the anti-fungals anphotericin and Miconozole must be reserved for life-threatening fungemia.
Dental stomatitis and gingivitis needs good oral hygiene and denture-cleaning, not anti-fungals or antibiotics. Dental abscess, which is normally due to prevotella, which is an organism found in the mouth, develops penicillin resistance very readily by Beta Lactamase production. I would remind your Lordships that some dental abscesses have been fatal.
I return to social deprivation because nurse practitioners in walk-in centres in areas of deprivation have been providing a service which evaluates well. It is precisely in the more deprived areas that resistant strains of bacteria are prevalent. Compliance with completing courses of antibiotics is notoriously low and poor social conditions mitigate against care at home of serious infection.
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Nurse management protocols, which include prescribing of items as on the current approved list, indicate when to refer on to a doctor those infections that may need systemic antibiotics. That would include the oral antibiotics, obviously.
This nurse contact undoubtedly prevents some patients going straight to the GP for antibiotics. The noble Lord, Lord Soulsby, has outlined current major initiatives to decrease antibiotic prescribing and maintain a list of hospital only antibiotics in the Armementarium against life-threatening infections. Minor infections will get better with good nursing care, especially cleansing and topical measures. Antibiotics systemically should not be used for them anyway.
Serious infections, such as cellulitis, need a serious diagnostic medical workup, for they are potentially fatal. The amount of antibiotic in every community must be decreased to avoid that individual community developing more and more antibiotic resistant strains of organisms.
That is why I would like to see antibiotic prescribing more restricted and not extended to the initiation of antibiotics by more people, and therefore that is why I oppose nurse prescribing of antibiotics. But I should like to make it clear that I do not oppose nurse prescribing of the other items.
7.50 p.m.
Lord Rea: My Lords, the noble Lord, Lord Soulsby of Swaffham Prior, is right to ask this Question, which has caused concern to many clinicians. He is a veritable terrier in the tenacity with which he has warned us of the dangers of emerging resistance to antibiotics, since he so ably chaired the Science and Technology Committee in 1998.
I would say that there are two golden rules for antibiotic prescribers: first, as far as possible, restrict the prescription of antibiotics to moderate or severe infections whose duration can be significantly reduced by antibiotics, or where there is significant risk that they will otherwise become more severe, or where complications will develop; and, secondly, most infections should be treated initially with one of a small range of effective, well understood "first line" antibiotics. "Second line" antibiotics, which are usually more expensive, should be reserved for infections that do not respond to the first-line drugs, or where there is a known resistance to first-line antibiotics. I hope the noble Lord agrees with those principles, which, as he indicated, are not always easy to live up to in the heat of a patient consultation.
MLX 273—the extended list of drugs that has, I gather, been agreed by Ministers—contains 15 antibiotics. I would classify six of these as second-line, to be held in reserve, and nine as first-line drugs. The short list proposed by the Committee on the Safety of Medicines (the CSM) is composed of these first-line antibiotics In fact, they are exactly the ones that I, as a GP, used in the great majority of patients who needed antibiotics. I do not think that the longer list of 15 is appropriate as it stands.

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In all cases where treatment fails with first-line drugs, it would be reasonable for nurses to seek a medical opinion, or agreement, before using one of the six second-line preparations on the extended list. I do not suggest that they should not be able to prescribe these, but that the decision to do so should be a shared one.
The extended MLX 273 list, which actually contains 143 drugs, also includes nine anti-fungal preparations. As this was covered by the noble Baroness, Lady Finlay, I do not propose to talk about fungi, except to say that the same considerations apply to them as to bacteria.
Nearly half of the total list consists of newer or more expensive second-line preparations. These are other than antibiotic drugs: they are alternatives to well-tried drugs. Again, I believe that the rule should be that they be used mainly as second-line drugs. They are usually considerably more expensive than first-line preparations. If a first-line drug is ineffective, it may well be that the diagnosis is wrong rather than that the condition is not responding to the prescribed treatment. Therefore, I believe that a shared decision would be appropriate.
One of the considerations that is not clear when reviewing this list of drugs is how often the nurse prescriber will be signing a repeat prescription for a patient on long-term treatment. If the decision to initiate the treatment was a medical one—or part of a team decision, or protocol—then it would be quite legitimate for a nurse to sign a wide variety of prescriptions if he or she were caring for the patient; but as a completely independent practitioner, I think that the current list is too extended.
As the noble Lord, Lord Soulsby, said, we have seen general practitioner prescriptions for antibiotics fall by 23 per cent between 1995 and 1998, which is very gratifying. But, as the noble Lord indicated, we could do better. If nurses are to prescribe antibiotics, their training must—and, I believe, does—include very specific knowledge of the problems of microbial resistance and how to minimise it. I am confident that, with this training, nurses will be as prudent in the use of antibiotics as the best general practitioners; and much better than many. There is evidence in the United States to show that nurses prescribe high-cost antibiotics much less often, and more appropriately, than physicians.
7.55 p.m.
Baroness Cumberlege: My Lords, before beginning my speech, I should just like to declare an interest. I am a vice-president of the Royal College of Nursing, and of the Royal College of Midwives and patron of the Association for Nurse Prescribing. I thank my noble friend Lord Soulsby for initiating this debate, not least because it has given us the opportunity to listen to the noble Baroness, Lady Pitkeathley. I have to say that the NHS clearly played a very important part in her survival, but I suspect that the noble Baroness's personal courage and determination played an equally important part in the process.
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I am one of those very sad people. I have only ever had one original idea; namely, nurse prescribing. I am really passionate about the subject, and, I have to say, slightly unhinged. In 1986, I was commissioned by the then government to review community nursing for England. As I undertook the task, I visited parts of England and was appalled when I witnessed some of the enormous discomfort, suffering and pain that patients suffered at that time, although they were well attended by a qualified nurse. The nurses were unable to vary the medication both in its duration and in its strength. These people were actually dying; and community nurses were trying to keep them at home. The situation seemed to me to be simply dreadful.
I then visited doctors' surgeries and saw district nurses and health visitors—highly-qualified professional nurses—standing outside the consulting room doors of GPs, waiting for prescriptions to be signed. They had actually written the prescription, but had to wait for a doctor's signature. That seemed to me to be pretty humiliating. When undertaking the review, one of the recommendations produced by my team was that nurses should be allowed to prescribe from a limited list, provided that they were qualified as district nurses and health visitors and undertook the training.
After a huge effort in winning cross-party support, bouncing the Treasury, persuading other health professionals that this was a good idea, and setting up the first Crown committee (which, among other things, reviewed nurse prescribing) the scheme came into being. There is now a national roll with 23,000 nurses being allowed to prescribe. That is terrific. But throughout the process two severe criticisms have been made. The first related to training. Initially, it was thought to be too thorough. The second criticism was that the Formulary was too restrictive. However, over the years both those issues have been addressed. The training is now realistic: it is well founded and appropriate. Until now the standards have been set by the UKCC, and the curriculum has been approved by the English National Board.
I understand that mechanisms are now in place to ensure that when these bodies cease to be, the new bodies will take on the scrutiny and the leadership of this particular part of training. The training programmes will continue to be set at degree level. They not only involve higher education, but also practical supervision for three months. It is a very solid training regime. The point that I should like to make is that the people about whom we are talking—those who are being trained and who are prescribing—are not fresh-faced school-leavers: they are experienced, professional men and women. Most of them have additional qualifications as nurse practitioners, clinical nurse specialists, or nurse consultants. They are individually accountable for their actions and they are required to work within their competence.
All the research, including three randomised control trials of over 4,000 patients in 35 GP practices, show that nurses are not cavalier when prescribing. Originally, the limited list was a sop introduced in order to get other professionals on board. My vision

1655 for the future is that we should not have a limited list, that nurses should have the full range of the National Formulary.
When I look at what nurses are doing in areas such as diabetes and asthma, I find that once the doctor has made the diagnosis it is the nurses who are the experts and who have the knowledge to manage the care. Many GPs are only too willing to let them do so. I believe that there is scope to go much further than we are at the moment.
I wish to give your Lordships one example where I believe it is so obvious that nurses should be allowed to prescribe antibiotics. Currently, a highly trained nurse may take a history from a patient, examine her, carry out diagnostic tests and diagnose a urinary tract infection. But that patient has to wait for the nurse to find and speak to a doctor, get a prescription signed, often without the doctor even seeing the patient, before the patient can receive the antibiotic treatment she needs. I believe that that is nonsense. In the interests of responsive services to patients we should look at the evidence here and in the United States of America and Australia and recognise that nurses are responsible professionals and we should entrust them to prescribe antibiotics.
8.1 p.m.
Lord Turnberg: My Lords, I, too, am grateful to the noble Lord, Lord Soulsby, for bringing this important matter to the attention of the House. Perhaps I may also say how moved I was to hear the eloquent speech of my noble friend Lady Pitkeathley. So I am particularly pleased to have the opportunity of speaking in the debate not only because I believe that bacterial resistance to antibiotics is particularly problematic as a major health hazard—and here I would like to express an interest as chairman of the board of the Public Health Laboratory Service—but also because I have always supported the idea of nurse prescribing; not all nurses, perhaps, and not all drugs. But the principle of nurse prescribing has always seemed very reasonable to me.
But with antibiotics we have a dilemma because, as we have heard, the prescription for one patient has implications for others when resistant bacteria emerge. How, then, can we square the circle of restricting antibiotic prescribing, as we have been trying to do across the medical and veterinary professions, while at the same time widening access to nurses? Blanket approval and blanket disapproval of nurse prescribing does not seem to be appropriate and, as always, resolution depends on the detail. Not all infections are the same and neither are all antibiotics.
At one end of the spectrum we have a patient seriously ill with a high temperature and looking very sick. As a doctor, as I once tried to be, my response to that patient would have been a thorough history and a careful examination for clues about a diagnosis. Then perhaps a chest X-ray, a blood culture and possibly other tests. After that, I might or might not have prescribed a first-line antibiotic while I waited for the
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results. That case clearly sounds primarily like a medical rather than a nursing problem, at least to start with.
At the other end of the spectrum is a patient with a seemingly minor illness, perhaps a sore throat or a boil, and here again an antibiotic will not be the first line of attack by a doctor or nurse. We would be stepping into areas of inappropriate prescribing where we have begun, as we have heard, to make progress among general practitioners. So if severe infections require medical skills and knowledge before the prescription of antibiotics—and minor infections do not generally require them—what is left for nurses to prescribe?
It is those kinds of considerations that made the specialist advisory committee on anti-microbial resistance look very critically at the long list of conditions which were thought to be appropriate. It felt that many of the proposed infections and antibiotics were inappropriate because they fitted into one or other of the categories I have described. Where it might be reasonable, however, is in one or two unusual or small examples. Urinary tract infections have been mentioned, but even here the types of antibiotics which are used should be limited to first-line treatments, leaving out entirely those second-line treatments which should be reserved for serious infection.
The dangers of emerging antibiotic resistant organisms are spelled out very clearly in the document The Path of Least Resistance which was produced by an excellent group under the chairmanship of Dr Diana Walford of the PHLS at the behest of the standing medical advisory committee. It is worth reading because at the very least it emphasises the need for caution in extending the ability of anyone, not just nurses, to prescribe antibiotics without careful attention to the details of what can be prescribed and for what diseases. It is the detail of which antibiotic and which condition rather than the principle, which I am sure the Minister will consider very carefully when he replies.
8.5 p.m.
Baroness Northover: My Lords, I, too, would like to thank the noble Lord, Lord Soulsby, for raising this important subject. We have heard some very cogent cases tonight for nurses prescribing, with some reservations and some opposition. It seems to me that what we have to ensure is that prescribing is safe not only on an individual basis but also in the wider public health context.
Public health measures such as sanitary reform made the key difference to health in the 19th century: antibiotics played this part in the 20th century, especially as regards hospital medicine. Yet these miracle cures, these magic bullets, do not operate against some static, unchanging enemy.

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As the Select Committee on Science and Technology starkly stated in its report of 22nd March 2001:
"We cannot eliminate [antibiotic] resistance. We can however slow it down, by using antibiotics only when necessary, and by rigorous infection control and basic hygiene, both informed by thorough surveillance".
General practitioners have responded by decreasing their prescription of antibiotics. As a mother of school-age children, I was part of the Government's target audience in their 1999 campaign. I certainly found that that campaign struck a chord among other mothers at the school gates: when their children went down with coughs and colds they were much less likely to rush off to the doctor. I trust that this campaign will not be a one-off.
It has to be alarming though that hospitals have not improved in this regard. I gather that most hospital trusts now do have protocols for what are to be used as first, second or third-line antibiotics and advise on the restrictions in their use. All should have such protocols.
But I also hear that up and down the country the same debates are going on in the various trusts about the low level of compliance with these protocols. I wonder whether the Minister has suggestions on what sanctions there could be to ensure that there is compliance.
One microbiologist tells me that in his experience surgeons have proved more compliant than physicians. He says that is because surgeons know the names of only two antibiotics and can spell only one. As the wife of a surgeon, I could not possibly comment.
But how are we to know what is being done where and by whom in any systematic way if the information systems are not in place? That has to be the key to the proper understanding of this problem and tackling it more effectively.
If hospitals still have much room for improvement but in general practice things are looking a little better, how will nurse prescribing fit in? After all, it has long proved to be the case that it is easier to prescribe than not to prescribe.
I have a copy of the outline framework for nurse prescribers which was produced by the NHS National Prescribing Centre in November 2001. When it comes to listing the kind of clinical and pharmaceutical knowledge to be expected of nurse prescribers, it may be that the issue of resistance to antibiotics is implied but I certainly did not find it stated.
I note that on 9th January 2002 the Medicines Control Agency reported that Ministers agreed that they wish to give more detailed consideration to nurses prescribing oral antibiotics. I also note that on its website the RCN states that it is,
"mindful of the need to ensure appropriate prescribing as a means of minimising resistance".
I am glad to see that the problem is being addressed.
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Nurses are at the beginning of a new and exciting era, which I support. However, now is the time to set in place the guidance and the monitoring systems to ensure that what should be a positive development in the NHS is indeed such.
8.10 p.m.
Lord Astor of Hever: My Lords, it has been a great privilege to hear such an informed debate on such an important subject, involving all parts of the House. We have heard both sides of the argument. We have heard from a patient, from prescribers and from experts, particularly my noble friend Lady Cumberlege. I do not think that she is at all unhinged on the subject of nurses prescribing antibiotics. I am grateful to my noble friend Lord Soulsby of Swaffham Prior for introducing the debate.
It would certainly seem to be a good time to review the strategies that we have in place to try to halt the march of resistance and guide us in our approach to future regulations. One of the chief problems confronting any effort to reduce the spread of resistance is the lack of information available. Policy development is surely hampered by our not knowing the true extent of the problem with regard to individual strains of bacteria and individual types of antibiotic.
In preparing for the debate, I came across the work of the MYSTIC surveillance programme, which has provided some insight into the link between prescribing rates and resistance patterns. MYSTIC researchers have found that usage does not always affect resistance. Professor Richard Wise has said:
"What we know about the link between prescribing and antibiotic resistance is fairly crude. The finer points are lost, but this information is necessary to deal more effectively with the problem of antimicrobial resistance".
It seems clear that guidelines for the prescription of antibiotics would benefit from that sort of detailed research, and I am delighted that seven UK hospitals are providing data for the international programme.
On a broader scale, it appears that the existing surveillance tools are fairly blunt. They do not provide good quality information that not only monitors resistance patterns but provides relevant data on antibiotic consumption. Until we have a standardised national data collection system, any monitoring of the situation will be limited. I understand that it is not a problem peculiar to the United Kingdom and that matters may improve significantly with the introduction of the electronic patient record. However, I should still be interested to learn when we might see some discernible improvement in the surveillance of resistance in terms of individual drugs and individual infections.
The cost of antibiotic resistance cannot be overestimated. One hundred thousand people pick up antibiotic-resistant infections in UK hospitals every year. Treatment costs the NHS about £1 billion. It costs 100 times more to treat a patient with drug-resistant TB than one with normal TB. At present, the problem is more pronounced in other countries. In Estonia, Latvia and parts of Russia and China, more

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than 10 per cent of patients with TB are infected with strains that are resistant to the two most powerful medicines used to treat the disease. In Thailand, three of the most common anti-malarial drugs are now useless.
It is of increasing concern that in less wealthy countries patients are often unable to complete a full course of antibiotics, which allows the stronger bacteria to survive and develop resistance to the drug. We should be concerned by those developments, which seem so far removed from our hospitals. Bacteria do not recognise international boundaries. International travel introduces infections that are difficult to treat.
In Britain, we have our own problems to contend with, the best publicised being the superbug, MRSA. Vulnerable patients become infected, and the sheer numbers involved mean that the infection spreads rapidly. It is a worrying situation, and we should think about it internationally, as well as concentrating on our own hospitals.
Where are we in our efforts to slow down the spread of resistance? In 1998, the Select Committee on Science and Technology recommended that the public should be educated in the prudent use of antibiotics. I believe that that recommendation has been taken seriously. I hope that, in accordance with the Select Committee's report of last year, specific campaigns will be repeated frequently and regularly, in addition to the phase 2 mentioned in the Government's response.
One of the greatest problems is public expectation. Patients should know why they are not being prescribed antibiotics when they might have been in the past. The non-prescription form has been effective in helping to reassure patients that they are being cared for and not simply ignored.
For all its worrying prognosis, there is a positive thread running through the discourse on antibiotic resistance. Antibiotics can still provide an effective means of dealing with infection. Accurate diagnosis and immediate treatment are reducing the number of what may be termed needless doses. It is now essential that multidisciplinary initiatives and partnership play their part.
8.16 p.m.
Lord Filkin: My Lords, I am pleased to respond to the noble Lord, Lord Soulsby of Swaffham Prior, in this important debate. It could hardly have been more timely. Although the process of consultation has nearly been completed, it is not finalised, and Ministers have not yet made their decisions. Therefore, although my noble friend Lord Hunt of Kings Heath cannot be here, due to other pressing business, he will read the debate with considerable care and interest, prior to coming to a view on the issues.
The issue of antimicrobial resistance has been well covered. The noble Lord, Lord Hunt of Kings Heath, and I welcome your Lordships' continuing interest. The House's Science and Technology Committee has made a first-class contribution to public health in this
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respect. The noble Lord, Lord Soulsby of Swaffham Prior, was a powerful contributor to both the first report and the subsequent report. On that basis, the Government have been able to move forward in developing our own strategy. As the noble Lord, Lord Astor of Hever, signalled, it is not just a national problem, it is an international one. In that respect, if no other, we are not an island, as we are open to infection from elsewhere.
In the light of the Select Committee's report, the United Kingdom developed a strategy. I am grateful for the acknowledgement from the noble Lords, Lord Soulsby of Swaffham Prior and Lord Astor of Hever, that concerted action has been taken and that there has been a systematic attempt to address this serious problem. There are, however, no grounds for complacency. We have seen a significant early improvement. The 23 per cent reduction between 1996 and 2000 is good news. One expects that, as with all such initiatives, it will be tougher getting the next 10 per cent down. The noble Baroness, Lady Northover, rightly said that it was not just a GP issue. It is also a matter of whether hospitals are doing it, and I have noted the comments about data records and the importance of hospitals. The monitoring system, to which I shall refer later, will help, at least in part.
Several speakers remarked on the importance of public information on antibiotics and resistance. We have an educated public. It is not the case that people cannot understand an argument that is put to them. It is extremely important, therefore, that the public are aware of the special nature of antimicrobial agents, not least because it helps to reduce the pressure on prescribers. The Department of Health ran a media campaign in autumn 1999. That was not a one-off; there will be subsequent campaigns for the general public and for schools.
The noble Lord, Lord Soulsby, also kindly mentioned the recent announcement made by the Chief Medical Officer in the report, Getting Ahead of the Curve. This is not only about the reduction of inappropriate prescribing, it is also about reducing the need for antibiotics in the first place. Therefore concerted action is required to control the growth of infection and, where appropriate, to consider vaccination. Clearly that must form a part of any sensible strategy for dealing with this major problem.
It is clear that the prudent prescribing of antimicrobials is central to our debate tonight. Noble Lords have repeatedly stressed the importance of prescribing antimicrobials only when it is really necessary to do so, in the right dose and for the right length of time, and seeking to cut down on the unnecessary and inappropriate use that undoubtedly still continues to occur. The noble Baroness, Lady Finlay, gave the House a frightening statistic which she believes reflects the level of inappropriate prescribing taking place in Wales.
The issue for our debate is whether, if nurses—suitably selected and suitably trained—are allowed to prescribe a limited range of antibiotics, that will lead to an increase in resistance. We need to address the

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question of whether nurses are likely to make more inappropriate judgments than other medical professionals. Nurse prescribing is not new. Fundamentally, it has come about through the pioneering work of the noble Baroness, Lady Cumberlege. Many in this House concerned with these issues have great pleasure in acknowledging the power and force of her pioneering work in this area.
What has been interesting to note in our debate is that no one has argued against the extension of nurse prescribing. How the world has moved on. The debate has concerned inappropriate prescribing, or whether nurses would be more likely to prescribe antibiotics inappropriately. I hope that the noble Baroness will take some comfort from that, although she will not get full comfort because I am not going to go as far as she would like me to in regard to what the Government are likely to do.
My noble friend Lady Pitkeathley made very clear the advantages to patients of nurse prescribing: convenience, immediacy and the assurance of having someone who knows your whole history, has your confidence and is a person you know will be an advocate for your needs. I should like to be able to cite examples, but time will not allow. Let us focus therefore on the key issue of whether nurses would be more injudicious than doctors. I think that one would hope that in fact nurses would be more cautious, more prudent and more keen to follow protocols. That, of course, is the challenge facing the Government in terms of how these proposals should be implemented.
Such evidence as there is was found in three randomised control trials held over the past two years. They involved a total of almost 4,500 patients in 35 general practices. They were tested to see what GPs prescribed and what was prescribed by nurses for a range of common conditions. Those tests revealed no statistical difference between what was prescribed by GPs and what was prescribed by nurses.
The debate does not cover all nurses. Clearly it covers only a limited range of nurses. Not all nurses will want to train. Only first-level registered nurses and registered midwives would be eligible to train. In response to a question put by the noble Lord, Lord Soulsby, there are no plans currently under consideration by the Government to go further than that. In general, one would expect at least three years' experience before nurses were in a position to take up the training that has been developed. The education and training programme comprises 37 days' training in total, 25 days spent at university level along with a further 12 days' supervision in practice spread over three months, plus self-directed learning. That is then followed by an assessment on both theory and competence in practice.
I can confirm the point made by the noble Baroness, Lady Northover, when she asked whether the training would contain a specific focus on prescribing in the context of public health, including teaching on antimicrobial resistance, and the importance of compliance with local antimicrobial policy. As the noble Baroness so rightly remarked, the training will need to cover those points.
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Since October 2000, the Department of Health has consulted widely on the extension of nurse prescribing, and again since the summer of last year on the particularly hard issue of the prescribing of antimicrobials. For many reasons of time and skill I shall not attempt to debate the specifics of the lists of antimicrobials for which conditions, because I do not think that we would be able to do justice to those issues at this point. Having said that, however, the Government will look with care not only at the thoughtful advice provided by SACAR and that by noble Lords during the course of this debate, but also at the specifics of what type of antimicrobials might be appropriate in what circumstances. Arguments relating to that were put forward clearly by my noble friends Lord Rea and Lord Turnberg.
The Committee on the Safety of Medicines, which is the statutory consultee on the Government's part, when consulted on the prescription of antimicrobials, lent its support to allowing a limited range of antimicrobials to be prescribed by suitably trained nurses.
A number of noble Lords commented on the importance of monitoring and evaluation. The Government strongly agree with those views. There will be a research programme to monitor the practice of nurse prescribing and we shall certainly wish to consult with SACAR over the findings of that research as it rolls out from 2003 onwards.
Ministers have now decided that first-level registered nurses and registered midwives can prescribe a broad range of medicines, including 130 prescription-only medicines, following the successful completion of a specific programme of extended training. There appears to be no substantial or significant opposition to that which, again, should give some pleasure and comfort to the noble Baroness, Lady Cumberlege.
On the specifics of which antimicrobials should nurses be able to prescribe, the noble Lord, Lord Soulsby, referred in passing to further discussions taking place between the Department of Health and senior representatives of SACAR. I have heard positive noises from those discussions, but those have not yet been put to Ministers and therefore I cannot comment on the detail. However, one would expect to be able to do so in the future.
A number of noble Lords raised questions about future developments. Perhaps, to some extent, let us see how we go with the current arrangements. I have signalled that there are no thoughts for further nurse prescribing. However, there are strong arguments for looking at supplementary prescribing, whereby nurses operate as part of a health team and operate under strict protocols, thus improving service to the patient without straying into areas of risk. However, as I have signalled, we shall not be going as far as the noble Baroness, Lady Cumberlege, would have liked.

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In conclusion, as was said last week by the Secretary of State for Health, the NHS Plan published 18 months ago sets out our vision for the future of healthcare in our country, where patients always come first. The extension of nurse prescribing by suitably trained nurses operating within defined circumstances, with access to advice where needed, and properly monitored, will form an important part of improving the health service for the public. I am confident that, as long as we move on in the ways on which noble Lords have given advice, we shall have the support of the House and of the public in so doing.

State Pension Credit Bill [H.L.]
House again in Committee on Clause 3.
8.30 p.m.
Baroness Noakes Baroness Noakes moved Amendment No. 29:
Page 3, line 4, leave out "qualifying"
The noble Baroness said: In moving Amendment No. 29, I shall speak also to Amendments Nos. 33 and 37. We have already looked today at some examples of the complexity of the Bill. This was a theme among many of those who responded to the Government's consultation document. One of the complexities is the treatment of income in the calculation of the components of the pension credit. The guaranteed credit uses the word "income" and we must look for the definition of that in Clause 15, which we shall come to in due course.
The savings credit is calculated using the claimant's "qualifying income". Of course, we do not know what is in that because it is to be dealt with by regulations under Clause 3(6). The concept of income is further complicated later in the Bill by something called "retirement provision", which is another shot at defining income.
So we have three separate concepts of income in the Bill. If that is not complicated, I do not know what is. Even if noble Lords think that they understand the differences between the concepts, does any noble Lord think that the average pensioner will understand them? The way in which the Bill is currently drafted places barriers to comprehension.
My amendments seek to cut through this complexity and to insert one definition of "income" for both the guaranteed credit and the savings credit, both looking to the definitions in Clause 15. As there is no concept of qualifying income, subsection (6) becomes unnecessary and can be removed from the Bill, which is what Amendment No. 37 seeks to achieve.
I hope that this further attempt at simplification commends itself to the Minister. If it does not, I hope that she will explain why this multiplicity of income
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concepts is necessary and what differences the Government envisage between the different types of income. I beg to move.
Baroness Hollis of Heigham: Perhaps the noble Baroness can help me. Which amendment has she moved?
Baroness Noakes: I moved Amendment No. 29. I have spoken to Amendments Nos. 33 and 37.
Baroness Hollis of Heigham: And Amendment No. 36?
Baroness Noakes: No. Amendment No. 36 is not in this group. We will come to it later on. I have not spoken to Amendment No. 36.
Baroness Hollis of Heigham: It is another amendment that has been ungrouped—inadvisedly in my case. I had two spheres—one in which it was grouped and one in which it was not. I believe that it should be grouped but the Opposition Benches, in their wisdom, have decided against that.
Amendments Nos. 29, 37 and 33 seek to remove the concept of qualifying income from the savings credit calculation at Clause 3. It also removes our ability to prescribe in regulations what is and is not qualifying income.
I believe that the noble Baroness's intention is that she wishes to include all of a pensioner's income, as defined in Clause 15, in calculating the savings credit and to remove the notion of qualifying income from the calculation of "amount A" within the savings credit. On first sight, this seems a rather technical matter, but the notion of qualifying income is very important to the working of the savings credit and the principles that lie behind it.
We are attempting something radical with the savings credit. We are seeking to reward savings or modest flows of appropriate income in retirement. Qualifying income establishes an important principle within the savings credit as we are here saying that we want specifically to reward savings for retirement, such as second pensions and capital. This is because, as part of our wider pensions strategy, we believe that second pensions are the best way to provide for retirement. We also recognise that some people may choose other investment vehicles, such as shares, PEPs, ISAs, or that these savings vehicles may be more suitable for some and that they should also be rewarded. Probably on the next day in Committee we shall examine individual streams of income flow in much greater detail.
That is why these are the things that we want to reward through the savings credit. Our intention is that under Clause 3(6) regulations will list the sources of income that we want to reward and class as qualifying income where they exceed the savings credit threshold. This is the definition that would then apply when using the term "qualifying income" throughout the calculation in Clause 3.

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We intend that these should be all income defined in this Bill as "retirement pension income" at Clause 16. Qualifying income—this comes to the heart of the noble Baroness's question about what is the difference between the various labels, a question I, too, have asked on more than one occasion—will therefore include, for example, all second pensions, including SERPS, state second pensions, occupational pensions, personal pensions and retirement annuity contracts. It will also include income from capital and annuities as defined in regulations under Clause 15. This is because these income streams either represent a pensioner's savings through their working lives, or other income—for example, DLA—which is appropriately disregarded and exempt from the calculation of qualifying income.
In practice, pensioners may have many and varied income streams, including, for example, social security benefits and war disablement benefits. These may be paid to individuals who, through no fault of their own, have not had opportunities to build up second pensions or other investments. However, other pensioners may have younger partners who, by their nature, are likely to have different income streams. These are few in number and we need to consider further whether we should make rules to cover exceptions—for instance, by not rewarding the contribution a younger partner may make.
I am sure the Committee will recognise the important step forward that we are proposing through the savings credit. I hope that noble Lords will wish to support those who have worked hard and saved hard. Qualifying income does just that. I hope that the Committee will recognise the advantage of being able to define qualifying income in regulations.
I repeat: qualifying income is the income to be rewarded in savings credit. It will include second pensions, rent from lodgers and so on. Disregarded income is income which is exempt from being either qualifying or not qualifying; DLA, AA, money from charities and so on is exempt and not taken into account. There are other incomes—earnings is one such—on which we have to seek further advice finally to determine the position. But qualifying income is the basis on which pension credit will be returned.
There are concerns about other kinds of income—for example, where a claimant's wife is on IB—and whether we reward them. Incapacity benefit is itself a benefit. Do we reprivilege a benefit and reward it, effectively, twice over? Issues such as that will be picked up and further explored in regulations.
There are only about 50,000 cases where quite small benefits—incapacity benefit, contributory JSA, WTC—are affected. The dilemma that faces us is whether it is sensible to treat those benefits as qualifying income on the ground that it is not worth the hassle, or whether anomalies will be created by rewarding some income twice.
Basically, qualifying income is the income on which the assessment is made; a tranche of income—DLA, AA, charity and so on—which is disregarded entirely;
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and we are still taking advice and consulting with organisations about some other kinds of income. These will be specified in regulations.
With that explanation—I have tried to be frank—I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Noakes: I thank the Minister for that explanation. I am still mystified. I can understand why some benefits may need to be taken out of the calculation for arriving at qualifying income in order not to reward benefits received from another source—I had not appreciated that point—but I do not see any reason for the difference between the income definition in any other respect.
Can the Minister say when we will be able to see the draft regulations setting out precisely what the department intends to do in this area so that we may consider this further? I repeat: having these different concepts of income in different parts of the Bill is one of the major complications to have been introduced. We on these Benches will certainly seek a way of simplifying this and I hope that the Minister will also.
Baroness Hollis of Heigham: I cannot help the noble Baroness as to when draft regulations will be available. I do not know. However, we will be debating many of these issues—benefits and the like—during the second day of Committee and we will be able to explore them further. The "biggie", on which we have not yet fully resolved our position, is that there are a lot of colliding considerations, if I can put it that way—for example, earnings. Most of the other benefits concerned involve small numbers. The biggest problem concerns earnings, about which there are pros and cons. and we are seeking to resolve it.
It is perhaps worth saying that we cannot produce draft regulations until both Houses of Parliament have determined what will be in the Bill. Anything I can give to the noble Baroness at this moment has to come with very strong health warnings attached—it may be addressed and amended in another place. But certainly, at present, there is a distinction between "qualifying income" and "income". "Income" can include attendance allowance and disability living allowance, for example. The noble Baroness will understand that that is exempt as an extra cost benefit. It may exclude some of the other benefits for which, otherwise, as she recognises, there would be double provision.
The third category is earnings, in relation to which we are still seeking advice as to the best way forward. It is a case of "on the one hand" and "on the other". We are seeking to go for simplicity where we can, while being fair to as many people as possible. I do not think that I can help the noble Baroness much beyond that. The two big flows of income that we have been talking about are obviously the second pension in its various forms and the flow of putative income from savings.

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That is made very clear in the Bill. The rest are relatively small items, apart from earnings, which I am sure we shall explore at a later stage.
Baroness Noakes: I thank the Minister for that response. I wonder whether it would help our consideration on Report if we could have a list of the matters that will be included in draft guidelines when the department is in a position to produce them. I accept that, technically, that is not until the Bill has been through both Houses. However, the Government should have some idea as to what will definitely be included in one category and what will be included in another, and possibly an idea of where the difficult areas are.
The issues relating to earnings will be explored in later amendments. Clearly, this is a difficult matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 30 not moved.]
Baroness Noakes Baroness Noakes moved Amendment No. 31:
Page 3, line 13, at beginning insert "the amount equal to"
The noble Baroness said: In moving this amendment, with the leave of the Committee I shall speak also to Amendments Nos. 34 and 44.
The amendments are intended as helpful technical amendments. Amendment No. 34 concerns the calculation of "amount A" in Clause 3—much loved by those who look at the clause—and the amount which must be ascertained in calculating the savings credit. Those who are familiar with the provision will know that "amount A" is the smaller of two figures: first, the maximum savings credit; and, secondly, a prescribed percentage of the amount by which qualifying income exceeds the credit threshold. This is where the Government intend to calculate 40 per cent of a claimant's income above the minimum guarantee.
However, Clause 3(4) compares an "amount" in paragraph (a) with a "percentage" in paragraph (b). That will not achieve the Government's aim, because the calculation cannot be performed. A similar confusion exists in respect of "amount B" in subsection (4) and in respect of "the maximum savings credit" in subsection (7).
If a court ever had to construe this, it would doubtless seek to give practical effect to the drafting. However, I hope that the Committee would not want to present the courts with such a problem. Therefore, the amendments seek to replace "percentage" with "the amount equal to" a percentage, so that the result of the calculation replaces an element of the calculation. So, taking "amount A", if the percentage is 40 per cent, and the amount of a claimant's income is £10, the result would be £4, and that rather than 40 per cent., would be used in the calculations. I hope that the amendments will be regarded as helpful and that the Minister will be able to accept them. I beg to move.
Baroness Hollis of Heigham: Amendments Nos. 31, 34 and 44 propose refining the drafting of Clause 3—
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Amendment No. 31 at "amount A" in Clause 3(4)(b); Amendment No. 34 at "amount B" at Clause 3(4)(a); and Amendment No. 44 at "the maximum savings credit" at Clause 3(7)—to include the wording "the amount equal to".
We welcome the opportunity to improve the drafting of the Bill during its progress through the House. One of the many accomplishments of the noble Lord, Lord Goodhart, when he was pensions spokesman, was finding, as he liked to think, at least one drafting error by parliamentary counsel in a pensions Bill. So if the noble Baroness is correct, she will be following an admirable precedent. I am sure that the amendments seek to be helpful in this regard.
I recognise that Clause 3 may appear complicated. But in essence, it defines the calculation of the savings credit by reference to a single calculation. In effect, it comes down to the amount by which "amount A" exceeds "amount B". That is the basis of the calculation.
Although the clause could work equally well with the addition of the words inserted by the amendments, the effect of doing so is the same as the current drafting and I believe that they would make no difference to the operation of the clause. Neither do I believe that the amendments would increase transparency or understanding of how we want to calculate the savings credit. They seek to add extra words to a clause that is already precise. I suggest that the changes are not necessary to deliver pension credit successfully, and that they do not add to or alter our understanding of intent.
I am happy to examine the noble Baroness's point about an "amount" as opposed to a percentage. I shall discuss the matter with officials and see whether the amendment does what she believes it does. They do not believe it to be the case. However, I am happy to scrutinise the wording to see whether it is. If so, I shall either write to the noble Baroness or return to the matter during the course of the Bill. My present understanding is that this proposal would not improve the drafting of the Bill, but I am happy to scrutinise it. The noble Lord, Lord Goodhart, was invariably right and it may well be that on this occasion the noble Baroness is right—I rather doubt it, but she may be. Let us have a look at the wording. After all, that is the point of a Committee stage. I hope that with those offers, the noble Baroness will feel able to withdraw her amendment.
8.45 p.m.
Baroness Noakes: I thank the Minister for that response. To reiterate the point, in the calculation of the savings credit,
"'amount A' is the smaller of … the maximum savings credit"—
which is an "amount", and,
"a prescribed percentage of the amount".
That drafting does not work. I mentioned earlier in Committee that parliamentary draftsmen are not always very good at drafting for financial calculations. However, I was pleased to hear what the Minister said. I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 32:
Page 3, line 13, leave out "a prescribed percentage" and insert "60 per cent."
The noble Baroness said: This is a probing amendment. The savings credit is a prescribed percentage of qualifying income above the savings credit threshold. Initially, as we know, the percentage will be 60 per cent. But if the threshold remains tied to the basic pension, which rises in line with prices, while the minimum guarantee rises in line with earnings, the cost of the savings credit is likely to rise steeply. The Government may decide to contain the cost by reducing the percentage.
The November 2000 consultation paper stated that the initial rate would be 60 per cent. We have already been over this course to some extent. However, I should be grateful if the Minister would state the Government's intention. I suspect that she is likely to tell the Committee that the Government are not prepared to tie future governments. However, I should be obliged if she would say what precisely is the Government's view in relation to this amendment. I beg to move.
Baroness Hollis of Heigham: Again, this is a "good try" by my noble friend. I should like to put two points on the record. First, we have made our policy intentions clear in our consultation document. There has never been any suggestion that the Government would adopt anything other than 60p in the pound, or 60 per cent, reward for savings. That is our policy intent. However, the general point remains that you do not bind future governments and you try to keep the figures out of the way in regulation.
The commitment is for the lifetime of this Government, and that is precisely why we have committed ourselves to the policy of uprating the guarantee credit in line with earnings for the duration of this Parliament. However, I do not believe that we can bind the hands of subsequent administrations, given the discussions we had earlier about what may happen to the balance of public funds.
We expect the structure of pension credit to endure. The principles have wide support on all sides of the Committee. That is not to say that in future it may not need tweaking in various ways. Fine-tuning may be necessary in future months and years.
My noble friend may also be worried that this provision may never face proper scrutiny. But, again, the regulations setting the amount will be subject to affirmative resolution. Needless to say, any change that she fears would have to be brought before the House in an affirmative resolution. It is certainly not our intention to depart from the provision, but experience has taught governments to be wary of enshrining such matters in case the situation may need to change. For example, it is conceivable that in future years a government might seek to disaggregate or reaggregate the concept of "household" as a social
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security basis. That might have knock-on implications for percentages and the like. It is therefore not unreasonable to keep flexibility.
I cannot be clearer than I have been: I have set out the Government's intention and said that we expect it to endure. However, we need flexibility should circumstances change or should subsequent pension developments mean that there are interlocking consequences that may lead us to revisit the issue. With that assurance, I hope that my noble friend will withdraw her amendment.
Lord Higgins: The Minister pointed out earlier that the present Government cannot bind future governments, for which we must be grateful. However, on a related matter she was also prepared to give an undertaking that a certain assurance would persist for the rest of this Parliament. Will she give a similar assurance on the point that has just been made? If she cannot do that in terms of 60 per cent, will she at least promise that the withdrawal rate will not rise above the top rate of income tax under this Government?
Baroness Hollis of Heigham: On the second point, the noble Lord is simply wrong, if he will forgive me. The withdrawal rate for pension credit cannot be separated out from the withdrawal rate for other benefits. That takes us back to our debate about MDRs. However, on the first point I assure my noble friend that for the life of this Parliament, the reward for savings—which pensioners have never had the luxury of experiencing—will be enjoyed at a rate of 60p in the pound if as a result they stay under the £100 threshold.
Baroness Turner of Camden: I am grateful to my noble friend the Minister for those assurances. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 33 and 34 not moved.]
Baroness Barker Baroness Barker moved Amendment No. 34A:
Page 3, line 19, at end insert—
"( ) In relation to amount A, the prescribed percentage shall be 100 per cent. less the basic rate of income tax.
"( ) In relation to amount B, the prescribed percentage shall be the basic rate of income tax."
The noble Baroness said: I apologise for the amendment not appearing on the Marshalled List. We tried to table our amendments as early as possible. I thought that his one had been submitted, but there was a slight problem.
Throughout the Committee people are making valiant attempts to deal with Clause 3—not only to understand it, but to improve it. The amendment would not change the structure of the pension credit, but would deal with the principle. In her reply to the last amendment, the Minister talked about the structure and the principles of the pension credit being established.

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As was said on Second Reading, one principle appears to be enshrined: although there may be a reward for pensioners for the first time, their savings will still, in effect, be taxed at 40 per cent. That is extraordinary when we are talking about people who, to repeat the phrase used by the Minister on Second Reading, are not poor, but are nearly poor. We are talking about people with very low incomes.
On an earlier amendment dealing with the withdrawal rate, the noble Lord, Lord Higgins, pointed out that people with very low incomes are being subjected to a taper rate that would normally apply only to people with earnings of more than approximately £35,000 a year.
The amendment would not change the structure or the workings of the savings credit. I am sure that by now we all have the diagram in our heads explaining how the system will work. However, the amendment would introduce the principle that the taper rate should not be more than the basic rate of income tax. I hope that it is as simple and as clear as that. I look forward to the Minister's response. I beg to move.
Baroness Hollis of Heigham: I am amazed that the noble Lord, Lord Higgins, has withstood the opportunity to say that this is not a tax credit. Can I not tempt him? Go on, cheer us up. Going, going, gone.
Amendment No. 34A would substantively change Clause 3 by substituting a revised calculation for the savings credit, linking the amount payable to the basic rate of income tax—22 per cent. It would reward savings up to the level of the guarantee at 78p in the pound. For those with income above the guarantee, the savings credit would be reduced by 22p in the pound.
At best, the amendment is misdirected. It would reward not only modest savings, but also pensioners with much higher incomes. At worst, the cost would be seriously substantial.
As drafted, the Bill ensures that entitlement to the pension credit guarantee is based on pensioners' personal needs, taking account of their resources. The savings credit builds on that by rewarding those who have made some provision for their retirement but who find themselves penalised by a system that reduces benefit entitlement by £1 for every £1 that they have saved, if it is not sufficient to float them off MIG altogether.
Clause 3 introduces fairness where there was precious little, ensuring that those who are likely to have only a modest retirement income are rewarded for their thrift. That is why we intend to reward savings up to the level of the guarantee at 60p in the pound, pace my noble friend Lady Turner, who moved her amendment a few minutes ago, and reduce the savings credit by 40p in the pound for those with income above that level.
The amendment would make the savings reward far more generous. An additional I million pensioners would be entitled, including many comparatively
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wealthy pensioners for whom the pension credit is not designed. Single pensioners with incomes up to £181 a week and couples with incomes up to £263 a week would be entitled to the savings credit as described by the noble Baroness. The cost would he fairly substantial—an extra £1 billion.
I was expecting the noble Lord, Lord Higgins, to intervene on the amendment. I thought that it would be interesting to see what would happen if we aligned the withdrawal of pension credit with all the rates in the tax system—not just the 22p rate, but the 10p rate and all the others. That would taper it out for pensioner couples when they reached an income of £45,000 a year, at a cost to us all of getting on for £30 billion. If we went for 22p in the pound, I suspect that we could not justify not extrapolating all the tax rates.
Lord Higgins: I have always been reluctant to promote amendments that cost £35 billion. The Minister has made the important point that the withdrawal rates, and eventually the taxation rates, vary a great deal as one goes up the income scale. In the light of the Bill, they seem to go rather erratically. As the noble Baroness, Lady Barker, pointed out, at the bottom end of the scale there are some very poor people. Then we go to another band where the withdrawal rate or the tax rate is much less than 40 per cent. It then goes up again to 40 per cent. Perhaps we could have a note some time on exactly how the marginal rate goes up, depending on individual circumstances. Perhaps the Minister could take some typical examples. That would be interesting. When we legislate with one Bill after another, there is always a danger that the tapers will not work out and no one will sit down and calculate all the marginal rates at various levels of income.
Baroness Hollis of Heigham: I am happy to revisit some of the discussions that we had earlier. The noble Lord is talking about marginal deduction rates as regards the interlocking of the three different benefits—pension credit, housing benefit and council tax benefit. We saw that up to an income of £100, the marginal deduction is 100 per cent. Between £100 and £135 it comes down to 91 per cent for the 8 per cent of pensioners who also have housing benefit. At £135, it reduces to 85 per cent with a tapering of housing benefit, which itself is based on rent. Pensioners above that level begin to be covered by the ordinary tax rates and we begin to see the interlocking of taxes.
If the noble Lord is asking me a second question—what happens to the benefit tapers when they are overlaid by the tax system, which is a perfectly reasonable question—I shall write to him on it. I think that such a discussion would be helpful. However, I believe he will find that, given that pensioners' personal allowance is, I think, about £5,000, there is very little overlap between those on £100 to £135 and those paying taxes. The overlap begins to knock-in only when one is losing the pension credit but is on fairly high benefit rates. I should be very happy to have those calculations worked out, and agree with the noble Lord that it will make an interesting

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investigation. One needs to see the total picture. However, as pensioners have benefited so widely from the generous increases created by lifting pensioners' tax rates, I am sure that he will be deeply impressed by the result.
9 p.m.
Baroness Barker: As I had hoped, the amendment has sparked a debate which has been fairly informative. I, too, look forward to seeing the information that the Minister has promised.
For some of us, it is difficult to accept the disproportionate effects on people at the levels described by the noble Lord, Lord Higgins. Not only is it difficult to work out the effect of benefits, it is difficult to work out the effect of the tax system on other groups. This debate has been helpful to the extent that it has fleshed out that issue.
We should also make it clear that, although the Bill may be passed, some of us object to the principle of taxing the income of comparatively poor people at the higher rate.
Baroness Hollis of Heigham: I take issue with the noble Baroness; perhaps I should have spent more time replying to her.
We are not taxing people, as she said, at 40 per cent. We are, for the first time, allowing pensioners who would otherwise not see any benefit from their hard-earned savings—precisely because we have established a decent, if not generous, basic income level for all pensioners; that is the trap and problem for us—to keep 60 per cent of their income. I will not accept suggestions that they are being taxed at a 40p rate; they are currently not receiving a penny of that money. We are enabling them to keep 60p in the pound both as an incentive and as a recognition of their efforts to provide for themselves. It is also fair. They are currently losing pound for pound; they will in future keep 60 per cent.
I think that that is the generous and decent thing to do. We have a problem only because we have a decent MIG level. The problem would not arise if we had a low level, as we had under the previous administration. We have the problem of seeking to be fair to those who have sought to help themselves because we are seeking to alleviate poverty. I shall therefore not accept statements that we are seeking to tax people at 40 per cent. We are returning to people, and allowing them to enjoy, the rewards of their own thrift, which hitherto they have not been able to enjoy.
Baroness Barker: I accept the Minister's point that my terminology was wrong. However, we still do not want to establish such a 40 per cent taper as a principle. The Minister has spoken consistently about not wishing to tie the hands of a future government. However, we also should not seek to tie the hands of a future government who have the resources to be more generous in the taper. Although we appreciate that the provision will be in force for this Parliament, we do not think that it should be established as a principle. On that basis, I beg leave to withdraw the amendment.
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Amendment, by leave, withdrawn.
[Amendment No. 35 not moved.]
Lord Higgins Lord Higgins moved Amendment No. 36:
Page 3, line 25, leave out subsection (6).
The noble Lord said: The amendment is concerned with definitions of income. However, I should like first to say that I very much welcome the Minister's offer on investigating the issue of marginal rates as one goes up the income scale. The point is relevant if we are really going to work towards what used to be called a negative income tax. As I think I have said before, back in the 1970s we had legislation on a genuinely negative income tax which sought to smooth out the marginal rates. Alas, in 1974, when the Labour government unfortunately came into power, the whole idea was clobbered by a committee consisting of the now noble Baroness, Lady Castle, the now noble Lord, Lord Barnett, and one other person whose name I forget. Nowadays, the noble Baroness, Lady Castle, and I are more in agreement.
As I said, this amendment is concerned with the regulations deciding what is qualifying income. It relates to the provision that my noble friend Lady Noakes spoke to a short time ago and the fact that we are landed with at least three definitions of income. Different definitions of income apply to different sections of the Bill, inevitably leading to considerable confusion. One might think it appropriate to use the same definition throughout the Bill.
A moment or so ago, in reply to try noble friend Lady Noakes, the Minister said that the Government cannot produce the regulations now. We understand the problems of producing regulations. However—as the Minister is always helpful on these matters and as we are all in a sense on the same side on these matters—it would be very helpful if we could have a list of the items that the Government propose should be included in each definition of income and then at the end a list of the items about which they have not made up their minds.
It is true that eventually, when a Bill is passed, such items are embodied in regulation. The trouble with that is that we have no opportunity to amend them as regulations are not amendable. Therefore, if we could have a list of the three definitions of income—or more, if there are more—the House would be able to express a view on whether we think the list is appropriate. Given that we will be deprived of amending the eventual outcome in regulations, that may be helpful.
That point arises on this amendment, which suggests that we knock out the power to make regulations. If the noble Baroness can respond helpfully on that point, it would be easy to withdraw the amendment. I beg to move.
The Chairman of Committees: I should have said to the Committee that if this amendment were to be agreed to, it would pre-empt Amendment No. 38.
Baroness Hollis of Heigham: What the noble Lord asks for is entirely reasonable. I shall seek to write to

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him and share the information with the House. For reasons he will understand, some of the points may take longer to determine. But at least I could identify the areas on which we are clear and those areas on which we are still consulting. If Members of the Committee wish to give a view on those areas, that will be helpful.
Lord Higgins: I am grateful to the noble Baroness. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 37 not moved.]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 38:
Page 3, line 25, after first "income" insert "including earnings"
The noble Baroness said: Amendment No. 38 is another probing amendment. If it were accepted, subsection (6) would read:
"Regulations may make provision as to income [including earnings], which is not to be treated as qualifying income for the purposes of this section".
The White Paper originally said that consideration was still being given to the treatment of earnings in the pension credit. At present, pensioners can normally earn only £5 a week without loss of income support. The amendment would ensure that earnings are counted as qualifying income for the purposes of subsection (6). I am wondering, therefore, whether the Minister will be kind enough to say whether the Government have concluded their consideration of earnings in relation to pensions credit and, if so, with what result. I beg to move.
Lord Higgins: In the light of the discussion we had a moment ago I am a little uncertain how to respond to Amendment No. 38. I was inclined to take the view that it would be better to consider the question of what is and what is not earnings under Clause 15 of the Bill. But I suddenly realised that the earnings in this section may not be the same as the earnings in the later section.
Important issues arise as to what the situation is in relation to disregards for part-time earnings, both as to standard credit and savings credit. However, I am inclined to defer my remarks until we come to Clause 15. If I have made a mistake we can return to this matter on Report.
Baroness Hollis of Heigham: My noble friend seeks an assurance from us that earnings taken into account in the pensions credit calculation are always rewarded.
It has always been our intention that those who continue to work after age 65 are rewarded for their efforts. I hope Members of the Committee will appreciate my dilemma. We are still considering how best to do that. For example—a point I made at Second Reading—we need to consider the relationship between pension credit and working tax credit; or, as my noble friend suggested, whether the small earnings disregard still suits our purposes. So issues do arise here. We are trying to seek the best way forward.
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We are not dealing with an inconsiderable number of people. Around 450,000 people have earnings which could affect pension credit. But, equally, we want to encourage them to work where they can do so. How best to do it, and whether it is best done through the vehicle of working tax credit, through earnings disregard or through allowing earnings to be regarded as qualifying income for pension credit purposes, we are still consulting on and considering. I hope the Committee will tolerate that. That is probably as much as I can say as to how things are going at the moment. Obviously we will be revisiting this matter.
Baroness Turner of Camden: I am grateful to my noble friend for that explanation. It was in order to find out what the present score was that the amendment was tabled in the first place. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins moved Lord Higgins moved Amendment No. 39:
Page 3, line 26, at end insert—
"( ) Regulations made under this section may not specify as qualifying income for the purposes of this section any item of income relating to earnings which has been prescribed to be disregarded under section 15(6)(b)."
The noble Lord said: Amendment No. 39 is an attempt to try to bring in some consistency between the various parts of the Bill given, as we now discover, there are various definitions of "income". I thought initially it was merely tidying up the drafting and making sure the various parts were consistent. In the light of the earlier discussion, I am not at all sure that that is all that arises on this amendment.
It may be that some items will be disregarded in this part of the Bill which are not disregarded under Clause 15. No doubt the Minister can enlighten us as to whether or not that is the case. Each of the amendments interlock to some extent. I pick up the point the noble Baroness made on the previous amendment; that is, that the Government were unsure what to do about the additional pension received if people defer drawing their basic state pension.
Noble Lords: Oh!
Lord Higgins: I thought that was what the noble Baroness said. In that case I am stimulated to think about that point even though she did not say that.
9.15 p.m.
Baroness Hollis of Heigham: I do not always give the noble Lord all the words of everything I am thinking all the time. He might not want that.
Lord Higgins: I am making a serious point; namely, that we shall have to consider among the items which should or should not be included in income the additional income which pensioners get if they defer their retirement age in order to get a higher basic state pension. That is a pretty meagre increment at the moment. I am bound to say that the ability of the

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department to pay it dead on time when it is subsequently drawn has been pretty lamentable in the past. I see that the noble Baroness, Lady Gibson of Market Rasen, nods in support. We need to consider that matter because the Government pay a little extra if people defer their retirement. People are increasingly doing so. It is important to relate the extra amount which the Government pay to the effects of the Bill upon the eventual net amount.
Baroness Hollis of Heigham: Again I have some difficulty here because my understanding of the amendment bears no relationship to what the noble Lord has said. It is equally clear that he decided that his own amendment did not bear much relationship to what he originally intended to say and he added to it interestingly in good House of Commons style as his speech proceeded.
The Chairman of Committees: I hope the noble Baroness will forgive me if I put the amendment to the Committee. Amendment proposed,
Page 3, line 26, at end insert—
"( ) Regulations made under this section may not specify as qualifying income for the purposes of this section any item of income relating to earnings which has been prescribed to be disregarded under section 15(6)(b)."
Baroness Hollis of Heigham: I have never done that twice before on a Bill and certainly not with one Chairman of Committees. I seek the Committee's apology.
I shall respond first to the amendment as drafted. The amendment as drafted seeks to ensure that any earnings which are disregarded in the income assessment are not rewarded. The truth of the matter is that no income, including earnings, which is disregarded in the income assessment will be rewarded. This is achieved in Clause 15(6)(b) which allows in prescribed circumstances for capital or income which is possessed by a pensioner to be disregarded. Disregarded means exactly what it means. No account will be taken of that money in calculating an individual's entitlement to the guarantee. DLA or AA are the obvious examples.
By the same token no reward will be payable in respect of that money through the savings credit. It is simply outside the calculations in a kind of "suspense" account. It may be that the noble Lord's intention in proposing the amendment was to ensure that apart from disregarded earnings any other disregarded income should attract the savings reward. However, that would mean that people would get a double advantage of not having the money count against their guarantee credit while at the same time receiving a 60p in the pound reward for it. That is certainly not our intention and, I suspect, is not the noble Lord's either.
I am not sure about the noble Lord's approach here. However, he then turned his comments into an introduction on an issue which is certainly important and interesting; namely, the increment question. However, that is nowhere indicated or reflected in the amendment. I shall have a go at it all the same. My
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understanding is—I shall write to the noble Lord if I am wrong about it—that if someone chooses to defer his or her pension to get a higher increment later, possibly because they are earning now, we shall assume none the less that they are receiving the state retirement pension. Otherwise, people could get, so to speak, a double payment for not drawing down that which they could. We have to deem them, you like, to be drawing down the retirement pension to which they are entitled and then building the pension credit around that. As I say, if any of what I have just said needs adapting, revising or revisiting, I shall write to the noble Lord. However, it is my understanding that a retirement pension that has been postponed so to speak will none the less be taken into account notionally.
Lord Higgins: I am grateful to the noble Baroness for clarifying that point. I obviously misheard what she originally said. None the less, an important and interesting discussion was stimulated. Tomorrow we can read exactly what was said in Hansard.
The noble Baroness has made two false starts. When I used to run, that would have disqualified runners. However, that did not apply in the case of the noble Lord, Lord Archer, who got away with it several times, and that was the least of his crimes. Even so, he never managed to beat me over 100 yards, or metres as it would be nowadays. I am most grateful for the noble Baroness's comments. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 40 to 44 not moved.]
Lord Higgins Lord Higgins moved Amendment No. 45:
Page 3, line 33, leave out subsection (8).
The noble Lord said: Subsection (8) states:
"Regulations may prescribe descriptions of persons in whose case the maximum savings credit shall be taken to be nil".
I should have thought that the Government were fairly clear by now about which "descriptions of persons" would not be entitled to any maximum—or even any minimum—savings credit. I am not quite clear why the Bill cannot state who those interesting if somewhat hard-done-by people are. I beg to move.
Baroness Hollis of Heigham: One can tell that the noble Lord was a sprinter. I used to run relay races, and I never had to worry about false starts—just about where the end of the line was. It may be at 10 p.m. or 11 p.m.
The amendment would remove the proposed power to prescribe cases in which the savings credit will be set at nil. The policy intention behind the subsection is to complement Clauses 2(6) and 2(9). The intention is that, taken together, those clauses will provide powers to ensure that prisoners and members of religious orders who are fully maintained by their order will be excluded from entitlement to pension credit.
We intend that prisoners and members of religious orders who are fully maintained by their order will be excluded. That is because the cost of maintaining those

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groups is met by other organisations. The reason for seeking to exclude those groups in regulations instead of in the Bill is simple. That approach affords us flexibility to reflect future changes: for example, we may need to adjust our treatment should the Home Office make changes in the categorisation of prisoners.
The proposed treatment of prisoners in pension credit is consistent with the approach taken in other benefits. For example, prisoners are excluded in working families and disabled person's tax credits and attendance allowance, and the basic state pension payment is suspended for the duration of the sentence. The latest Home Office data showed that in November 2001, 1,385 prisoners were aged 60 and over and 651 prisoners were aged 65 and over.
We intend to provide in pension credit for the housing costs of prisoners held on remand or awaiting trial or sentencing to continue to be met for up to 52 weeks. Similarly, where prisoners are hospitalised under the Mental Health Act 1983, they will be entitled to pension credit in the same way as other long-term hospital in-patients.
I am glad that the amendment was moved—it is useful to put the position on the record; that will help people to advise families in particular in stressful situations. For completeness, I am sure that the noble Lord will want to know how we intend to respond to the situation involving prisoners' families. Where the pension credit recipient is detained in custody, the partner may claim in their own right; however, a new claim would be required. There will be a facility in pension credit for the customer to opt for the claim to be made from "as early as possible". That would allow the decision-maker to consider entitlement for up to three months earlier than the initial date of contact—that is almost like a form of back-dating—provided that the conditions of entitlement are satisfied for that period. Where the partner is imprisoned the decision-maker would want to supersede the existing award to exclude the partner from the day following imprisonment.
I do not know whether that meets enough of the noble Lord's concerns. I could add further details on religious orders, whose members are also fully maintained. These are important issues, although they apply to only a very small group of people. I am glad to have had an opportunity to respond to the issue.
Lord Higgins: I am most grateful to the Minister for that explanation. It is helpful to have this rather esoteric point on the record; it is obviously of considerable importance to those concerned. No doubt those involved with these groups of people will read Hansard and find a clear explanation of the Government's intentions. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 46:
Page 3, line 34, at end insert—
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"(9) When benefits are reduced under the provisions of the Social Security Hospital—Inpatients Regulations (S.I.1975/555) they shall be restored within one week of the patient being discharged from hospital.
(10) In the event that benefits are not restored within the period mentioned in subsection (9), payment shall be made as soon as possible at twice the normal amount for the period from one week after the patient is discharged until the date that payment is received by the patient."
The noble Lord said: This amendment is concerned with the situation regarding people affected by the Social Security Hospital—Inpatients Regulations. That matter has caused considerable concern. It relates to the way in which a large number of benefits are withdrawn from an individual who is in hospital. I believe that the Government estimate that around 31,000 retirement pensioners are affected by those reductions. As a result, there is a saving in public expenditure of some £60 million per year. That is so far as concerns the retirement pension. I do not believe that figures are available for other benefits. Perhaps the noble Baroness can help us in that regard.
I stress that there is much concern about this matter. As the noble Baroness pointed out on a former occasion, it relates to a provision on double-counting which goes back to the beginning of the national insurance scheme. That is understandable, and sufficient remains of my Treasury halo for me not to question the principle. However, two points give cause for concern. One is that considerable doubts have been expressed recently about whether the extent of the reduction is in line with the savings made by the individual concerned. The noble Baroness may wish to comment on that, although it is not the point with which the amendment is concerned.
The issue on which I have received most representations—I used to receive them from my former constituents—is the long delay that occurs after a person is discharged from hospital before benefit payments are resumed. I see that I have a lot of support on that issue from the Back Benches opposite. It is obviously a matter of great concern. People who have just been discharged from hospital may typically return to their homes alone or, even if other people give them assistance, they may be in a very bad way and unable to cope well with an immediate crisis. If they suddenly find that they are discharged but no longer have the benefits which they received before going into hospital—benefits to which they are none the less entitled once they are discharged—understandably they may feel, or indeed be, distressed.
Therefore, the amendment seeks to impose a limit whereby the benefits should be resumed, at any rate, within one week of their being discharged from hospital. I realise that technical problems are involved. However, by way of incentive—this is perhaps a rather crude way of doing it; I understand that—some form of sanction should be imposed on the benefit-paying organisations. Such organisations are of course varied because they cover a wide range of benefits, but an incentive or sanction should be imposed on those who fail to resume payment with a week. For a person who

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has just come out of hospital and finds that he is not receiving his benefits, even a week can be long enough to cause considerable concern.
This is a probing amendment. I do not necessarily wish to press it in every respect, but I believe that an important issue is involved and somehow we must deal with it. One way in which to do so—again, I am not sure that it is by any means the ideal solution—would be for the benefit to be paid throughout the period. Then, the amount which is deducted because the person in question is said not to have incurred so many costs in hospital could be collected subsequently. The noble Baroness grimaces, if I may use that expression, and I understand that. None the less, such a solution may cause rather less distress than the present situation, which can be quite fraught.
I believe that this is an important matter. Concern is now growing that the amounts deducted are not appropriate and that the system does not provide adequate arrangements for resuming payment the moment the person is expelled—not "expelled"; I am not going to become involved in yesterday's controversy—discharged from hospital. Again, perhaps better arrangements can he made with regard to the procedure for discharge.
These issues are important to those who are affected. They may well be among the poorest of our people and, in any case, may be among those who are least well and least able to cope when eventually they emerge from the hospital environment. I beg to move.
9.30 p.m.
Baroness Greengross: Some important points have been raised by the noble Lord. In October last year I raised this issue in a Starred Question. It is time for a policy that was designed so long ago—in the 1940s—to be updated. We are now in the 21st century. People do not live in hospital any more. They stay in hospital while they arc ill and, assuming that they have somewhere to go, they are discharged from hospital. The old geriatric wards have gone.
The situation is very different from the one to which this rule was designed to apply. If frail elderly people do not require intensive medical treatment, they are transferred to care homes. The process of intermediate care should be better and smoother. Often, if such a move does not take place within six weeks, it is not the patient's fault; we know that it is the failure of the authorities concerned to find a suitable place and that leads to bed-blocking. This has been under review since 1948, but I believe that the Government should conduct a genuine review. The current system of taking money away from inpatients is complicated and bureaucratic.
My last point is that there is an anomaly. The five-year period of assessment, that I welcome, does not apply if one has had a stay in hospital. That has to be reported. I believe that if one is ill, one has to report that to the social security department.
Baroness Barker: I, too, support the amendment. This is one of the most timely revisions that there could
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be. I hear all that the noble Lord, Lord Higgins, and the noble Baroness, Lady Greengross, have said about the time when this rule was introduced. I was not alive in 1948 and I do not know whether there was an equivalent system of housing benefit at that time. No one could have foreseen then the misery into which many pensioners are forced today by the operation of this rule.
This rule has a bearing on the lives of pensioners in two ways. First, it makes an assumption that there is double funding, but an increasing amount of research suggests that there is little double funding. When this rule came into effect there was an assumption that if someone was in hospital they would have no heating charges at home, but today pensioners have standing charges to pay.
A couple of weeks ago in response to a Question, the Minister responsible for pensions said that this downrating was about board and lodging. I believe that board and lodging, in the context of a hospital, means food. The most recent figures from the Government that I have been able to find from the Library suggest that on average the amount of money spent on food is £1.67 per day for every person in hospital. That is worked out from an overall amount of the numbers of patients and the cost of food. There is a flaw in the way in which this rule operates in that it makes assumptions about double funding that are not true.
Secondly, it does not recognise the increased costs to older people of being in hospital. In my work with Age Concern London last year I was involved in the production of a report on hospital transport entitled A helicopter would he nice. That was what an older person said to us about hospital transport. I offer this observation. One is more likely to have free parking at Sainsbury's than at a hospital. For the spouses or partners of older people, there are a number of increased costs as a result of being in hospital.
Perhaps more important is the point to which the noble Lord, Lord Higgins, referred: the huge disruption to housing benefit and council tax benefit. The noble Lord questioned the Minister—she did not respond—about the review of housing benefit having been put back. We know that there are enormous problems with housing benefit administration. Those are acute in London. If Members of the Committee want evidence of that, they should drive through Brixton at about 7.30 in the morning, before the benefit office opens, to see the queue of older people who wait for several hours before they are due to be seen. In many parts of the capital, housing benefit administration is a disgrace which drives pensioners to distraction. I do not believe that anyone would wish that on any pensioner, far less on one who has been ill enough to be in hospital.
The noble Baroness, Lady Greengross, rightly indicates why we should now review the situation. The new arrangements for intermediate care lack clarity about who will be deemed to be having hospital care. That is why we need to probe what is happening.

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At Second Reading the Minister said that the circumstances of pensioners do not change that much. That was the reasoning on which she based periods of assessed income. For some pensioners going into hospital is a precursor to great change, but for most it is not. If the Government are confident that the circumstances of pensioners do not change in the longer term, it is right to consider benefit for what may be short periods in hospital.
I have not received an answer to my Written Question to the Minister about the cost to the department of making changes. I hope to receive an answer during these debates. If there is change when a pensioner goes into hospital, there is another change when he or she comes out. So there are two costs. The Government receive back about £57 million a year as a result of hospital downrating. I shall be interested to know the cost to the Government of implementing the rule. I look forward to the Minister's response.
Baroness Hollis of Heigham: The amendment is more narrowly focused than the discussion. Perhaps I may say a few words about the broader issue and come back to the amendment.
The amendment would impose an obligation on the department to restore a person's pension credit within one week of his discharge from hospital, presumably at the pre-admission rate of payment, and proposes that the person be compensated for any delay in the payment of such an increase. The noble Lord was understandably quite explicit that it was the intention to put pressure on the competence of the department to reinstate benefits where delay would otherwise cause stress.
Perhaps I may just step back for a second and talk about the wider issue. We propose that for hospital inpatients receiving pension credit a single person would have their standard minimum guarantee replaced with a lower amount. The reduction in such cases would be equivalent to about £28 or so of the basic state retirement pension after six weeks in hospital, with a further reduction to 20 per cent of the basic state retirement pension following an extended stay of longer than 52 weeks. At that point essentially there is a read-across between the amount remaining to a long stay hospital patient and someone in a local authority home who is receiving, so to speak, pocket money after their costs have been met.
Baroness Barker: I rise to make one point. In the past the noble Baroness has, very rightly, taken Members of the Committee to task for using wrong terms about benefits such as MoT tests. The term "pocket money" is offensive to older people. We are not talking about children with small amounts of money for sweets. We are talking about adults and a personal allowance, which they have the right and the dignity to choose how to spend.
Furthermore, to talk about pocket money is misleading. It gives the impression that this is some additional extra—some indulgence. For many older
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people it is not. It is about buying the necessities for the circumstances in which they find themselves. Rather worryingly, the social policy ageing information network is beginning to tell us about instances where people in residential and nursing homes are being asked to contribute that money towards their fees.
I wanted to make that point to all Members of the Committee. It seemed appropriate to do so now. To talk about this as a personal allowance as opposed to pocket money is important. It is a principle on which the noble Baroness has previously picked up other Members of the Committee. I hope that she will accept that.
Baroness Hollis of Heigham: I used to call it "personal allowance" to my children. They called it "pocket money". But I am very happy to use that term if the noble Baroness feels more comfortable with it. I do not have any problems with it. The point which I was making was not a language point, but actually the substantive point, which I am sorry the noble Baroness did not come back or challenge me on. That is that after 52 weeks the residual monies, or personal allowance or whatever she wishes to call it, for a person in a long-stay hospital has a read-across to the local authority situation, which is why it takes that particular form.
In the case of couples, the reduction would be equivalent to about £14.50 off the basic state pension after six weeks in hospital and 39 per cent of the basic state retirement pension after 52 weeks. However, any savings credit, as opposed to retirement pension, will continue to be paid regardless of the length of stay in hospital.
Not to accept the principle that there should be no double payment would mean that a person in hospital is put on exactly the same footing as a person living in their own home. I think that noble Lords have always accepted that there should be no double payment of benefits. For example, if one gets a widow's pension one does not often get ICA and the like. Food, laundry and heating, particularly if one is a single person, are expenses that are reduced from one's retirement pension if one is in hospital because those items are provided by the hospital, compared to the situation of living in one's home. That is the basis of the Government's position.
Perhaps I may now turn to Amendment No. 46. Members of the Committee will be aware that currently a person is required to notify the department of periods of in-patient treatment and will be required to do so under pension credit. That allows the department to make the necessary adjustments following admissions or discharge. As noble Lords will appreciate, the department can act only upon the information within its knowledge. When a person is discharged from hospital their pension credit entitlement would be restored to the pre-admission rate of payment. Where a person's pension credit entitlement ceases as a result of the interaction between his income and the application of the downrating provisions, a new claim to pension credit would be required upon discharge from hospital. This

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is to ensure that the correct rates of benefit are paid and that all changes in a person's circumstances are recorded.
The noble Lord, Lord Higgins, rightly pressed me on the clearance times and, therefore, the delay in reinstatement of benefit. It may help the Committee if I were to indicate the Government's target figure and the actual level of our performance. Obviously, the averages that I give are just averages, so there may be a lot of variations around the mean. As for new or repeat claims in terms of the income-related benefits—income support and MIG, as well as JSA—our target is 12 days. The actual performance for IS and MIG is 9.4 days. Our target in respect of a change of circumstances is to have that benefit reflect such a change within four days; our actual performance is 2.5 days, which is quite impressive.
I understand the noble Lord's wish to encourage us to improve those performances from the department that differ very widely from the rather satisfying averages that I have given. However, there is a difficulty with the noble Lord's proposal. If every week of delay would result in a customer being paid double the benefit, we would be offering people an incentive not to report their discharge from hospital on time. It is a two-way process: it is when the customer reports to us, as well as when we can reinstate benefit. We need to be exemplary in our performance. I believe that the averages that I have given indicate that the performance is really rather good. We are also dependent on the former patient notifying us of the situation. As such former patients are convalescing, it may take them some time for them to do so; and we cannot act until we have that information.
However, the department will be providing full training to the staff who will be administering pension credit to ensure that claims and changes in circumstances are processed as quickly as possible. We shall be making significant improvements to service delivery. The introduction of the Pension Service will make it easier for customers to contact us. Over time, the Pension Service will provide former hospital patients, as well as all other pensioners, with a wide range of contact channels through improved modern technology, including telephony, digital television and Internet technology. Call and contact centres will be open longer than current office hours to allow pensioners to contact the service when it is convenient for them to do so.
In cases where we have delayed unreasonably, the department already has a special payment scheme that provides compensation. We use the average retail shares and deposits rate supplied by the Building Societies Commission to calculate compensation payments for delay. However, the noble Lord's amendment would provide compensation to pensioners at 100 per cent, which is an unrealistic rate. Moreover, we would have to extend it to all other benefits; indeed, in all justice, we could not limit it to pensioners. The noble Lord will have to accept that fact.
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Finally, I was asked what the cost of administration would be under the current system. As a matter of information, I can tell the Committee that we are talking about a figure, on average, of about £4.5 million. It is absolutely right that the noble Lord should put pressure upon us to speed up our reinstatement process. However, if he shares with us a recognition that, to some extent, it all depends on when the information is supplied to us by the former patient or his or her family, I am sure that he will realise that his way of making us respond is inappropriate. Our performance has improved. Our targets are quite challenging, but we are meeting them. Indeed, we are doing better than our target in some cases; for example, as I mentioned earlier, 2.5 days.
The Pension Service will seek to improve our performance still further, but unacceptable delays remain unacceptable. If the noble Lord has other ways of meeting his objective without going down this path, which, as I said, would produce perverse incentives, I shall be very happy for him to share them with us in due course. With that explanation, I hope that the noble Lord will feel able to withdraw his amendment.
Baroness Barker: The Minister mentioned the figure of £4.5 million. Can she give details of how that figure has been arrived at? The Minister may wish to write to me. The hour is late.
Baroness Hollis of Heigham: I gave the figure of £4.5 million in respect of staff, costs and the rest of it over the table. I believe that it is appropriate for me to write to the noble Baroness if she wishes for further information on this matter.
Lord Higgins: I am most grateful to the Minister for that very helpful reply. I need to consider the points that she made. Perhaps I may take up two points and a suggestion. First, is it the case, as I believe the noble Baroness, Lady Greengross, said, that if someone goes into hospital the five-year period runs afresh? Secondly, the noble Baroness has given the figures for the average, but that is not the problem: it is the dispersal around the average. While some people may receive fairly immediate resumption of their benefits, others may have to wait a great deal longer than was revealed by the figures which the Minister gave.
Perhaps I may make one suggestion. This matter has been in existence for so long that it has probably not been considered in any depth until quite recently. One way around the problem of the resumption of benefits would be to continue them all the way through, but to charge the individual for rent, accommodation and so forth. That might be more acceptable to them in the sense that they are paying for something and receiving something in return. I merely put forward that suggestion. We may well wish to return to this point on Report.
Baroness Hollis of Heigham: I am grateful to the noble Lord for triggering my memory. As I understand it—I shall qualify it in writing if I need to—reduction alone in the retirement pension through being a

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hospital patient for more than six weeks will not of itself end the assessment period. The assessment period would not have ended for those purposes. One would have to start after 52 weeks when changes in the household composition would effectively turn it into a disaggregated claim. I believe Members of the Committee will understand that.
The noble Lord made a second point about averages. He is right in saying that it is the aberrant cases, not the averages, which are the problem. We have a compensation system and the noble Lord is right to press us about it. He suggested that we might wish to recover the costs subsequently, and that payment would continue while in hospital. That would be worse from his point of view than the current situation.
The notion that someone could be charged and be told, "Here is your retirement pension, but we are going to take away 'X' for this and that" comes perilously close to a charging system which would have to include people not on benefit. Is the noble Lord suggesting that it should apply to people on benefit? Otherwise, there would be no justification for someone not on benefit with several times the income being charged for their food, laundry or heating. I do not believe that we can go down that path.
The problem here is double provision in that people are receiving a retirement pension which is expected to cover their food, laundry and heating. I believe that most people would accept that when one goes into hospital some costs are reduced but some may increase. None the less, there is double provision. Some costs certainly do reduce and that is why this situation has existed for many years. I believe that the noble Lord's suggestion could not be applied simply to pensioners: if we are to have that form of payment it would have to be applied to those receiving wages and earnings. I am very happy for the noble Lord to return to the matter if he wishes, but I still believe that his solution is worse than the dilemma which currently faces patients who go into hospital.
Lord Higgins: I am most grateful for the clarification of the various points. Before asking for leave to withdraw the amendment, perhaps I might just clarify what I was saying. I was not suggesting that they should pay subsequently; I was suggesting that payments to them would continue throughout their period in hospital and beyond, but that they would then be charged while in hospital. They would then have no problem on discharge.
The noble Baroness said in that respect that other people in hospital not receiving benefit would have to be put in the same position by charging them, as if it were not the case that we were charging those on benefit now. It is simply that the matter is stopped rather than charged. However, at all events, we are making some progress, and we can return to the matter on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
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Clause 4 [Exclusions]:
Baroness Greengross Baroness Greengross moved Amendment No. 47:
Page 3, line 36, leave out subsection (1).
The noble Baroness said: This is also a probing amendment. It may be somewhat badly drafted—on the back of an envelope, literally. I expect that the Minister's brief has already indicated that.
The amendment would allow members of married or unmarried couples to claim the state pension credit, each in their own right. I understand why subsection (1) has been included. If it were not, the cost of the state pension credit would be much higher and would allow all kinds of incentives for well informed couples to shift their resources around to maximise their entitlement. However, there is a serious point behind my probing amendment and I referred to it at Second Reading in relation to tax credits.
I am disappointed that the Government have not had the courage at least to begin to chip away at benefit rules that still assess a couple's income together, rather than individually. Only when that is tackled will we see the beginning of the genuine integration of tax and benefits. I strongly favour that, not least because it would benefit women significantly. However, it would also be to the benefit of older people generally, in particular poorer older people, the very people whom the Bill seeks to help. A genuine integration of tax and benefits would be the best way to tackle take-up, so that, as the Minister explained at Second Reading, we move away from the language of means testing to the language of entitlement. We would all appreciate that.
Everyone understands that above a certain income one pays tax, usually automatically, via PAYE, or by being taxed at source on savings. If benefits were integrated with that basic and accepted principle, the opposite would apply. Below a certain income, the state would automatically pay money back to people to top up their income.
In the case of the State Pension Credit Bill, I was encouraged to read in the November 2000 pension credit consultation document that,
"over time, the Government wants to take tax and benefit integration further … ultimately to create a seamless and integrated system of support".
As I said, that can work only if the tax system and the benefit system both assess people individually. I move my probing amendment to ask the Minister why has that has not happened more with the Bill. Is it the Government's intention to integrate the state pension credit with the tax system in the longer run? I beg to move.
The Chairman of Committees: I should draw the Committee's attention to the fact that if the amendment were to be agreed to, it would pre-empt Amendment No. 49.
Baroness Noakes: I spoke earlier about married and unmarried couples and some of the related problems. Treating married couples as one unit, rather than two individual units, may have been appropriate for a

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different age, when the husband worked most of his life as a breadwinner, providing for his wife and himself in their retirement. However, the world is changing, and increasing numbers of women are in receipt of their own retirement pension by dint of their own contributions. The figure was 53 per cent for 1997, according to a Written Answer given on 16th January by the Minister's right honourable friend in another place. That is forecast to rise to 68 per cent, comprising almost 5 million women, by 2006–07.
This issue is coming up and is ripe for the noble Baroness, Lady Greengross, to raise. I suspect that the problem lies in its public expenditure implications. I should be interested to learn what the Minister has to say with regard to the costs. From my perspective, it is clear in which direction we should travel, but I am less than clear that we could afford the bill.
10 p.m.
Lord Hodgson of Astley Abbotts: The hour is late and so I shall be brief. I very much support the thoughts and philosophy driving the proposer of the amendment. The separation of the taxation system and the possibility offered here for integrating taxation and benefits and all that that would mean seems to me to be an objective worth pursuing. It is something which perhaps we have passed by too lightly amid the many other complexities of the legislation before the Committee. I hope that the Minister will be able to take up, explore and think about the points made by the noble Baroness.
Baroness Hollis of Heigham: Pension credit is a household-based, income-related assessment. It is not a tax system based on the individual assessment of income. It could mean that, for example, the wife or partner of a wealthy husband with very little money held in her own name would be entitled to the pension credit, despite her wealthy partner. That may be the situation with regard to a tax—if you do not aggregate, you separate—but it does not strike me as a suitable or appropriate basis for a pension credit. A non-working spouse, or someone working only part-time, or perhaps with only modest savings or £5,000 or £7,000 in a building society who none the less had an extremely wealthy husband, would be entitled to claim pension credit. I cannot believe that that would be a sensible use of public money. Indeed, it would be similar to introducing a policy pursuing the route of "wages for housework".
There are other and better ways of addressing the problem identified by the noble Baroness. We shall do that through the state second pension. The fact is that the majority of beneficiaries of the state pension credit will be women when they find themselves in a position, perhaps through the death of a partner or spouse, where they are required to support themselves, if they have not already been doing so.
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We shall not go down the path of disaggregation. We cannot do so because this is a household-based, income-related benefit. It is not like a tax and thus based on individual assessment. Furthermore, it is not like a tax and thus based on an annual assessment of the previous year. It is also not like a tax based on actual income as opposed to a notional income based on capital. For all those reasons, I hope that the noble Baroness will accept that we are not going to disaggregate in that way.
I do not believe that the noble Baroness would wish to advocate some of the more bizarre possible interpretations of her amendment. With regard to the substance of the proposal—whether we are going to disaggregate—the answer to that is no. We shall not do so in the case of pensioners, most of whom in any case are not taxpayers. We are seeking here to establish a right and decent way to respond to pensioners' needs. Their needs are household based and their ability to meet those needs will be met by household-based income. That is why we think that it is right and proper that pension credit should be based on households rather than on individual disaggregation.
Even if the noble Baroness does not agree with my comments I hope that, with my explanation, she will feel able to withdraw her amendment.
Baroness Greengross: I am grateful to the noble Baroness for her response. I remain disappointed that any opportunity to move a little way towards integration, on which the noble Baroness herself commented a little while ago, could not be taken just a shade further each time. I imagine that my efforts to make these points will have to be resumed on future occasions.
Any opportunity to begin to achieve the long-term goal of integration, which in my view is related to full citizenship, is worth pursuing. The amendment provided a small opportunity to highlight the issue. I appreciate the response made by the Minister and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Farrington of Ribbleton: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

International Development Bill [H.L.]
Returned from the Commons agreed to with a privilege amendment; the amendment was considered and agreed to.
House adjourned at five minutes past ten o'clock.