State Pension Credit Bill [H.L.]

HL Deb 29 January 2002 vol 631 cc76-115

3.7 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 again resolve itself into Committee on this Bill. Moved, That the House do now again resolve itself into Committee.—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 4 [Exclusions]:

The Chairman of Committees (Lord Tordoff)

I should say that if Amendment No. 48 is agreed to, I shall not be able to call Amendment No. 49 due to pre-emption.

Baroness Noakes moved Amendment No. 48:

Page 3, line 36, leave out subsection (1) and insert— "(1) Only one member of a married or unmarried couple shall be entitled to state pension credit. (1A) Where both members meet the conditions—

1. (a) they shall elect jointly which member shall receive the credit, or
2. (b) if they are unable to agree, the member with the lower income shall receive the credit."

The noble Baroness said: I hope that this amendment is self-explanatory. It builds on, though re-expresses, the concept in the Bill that for a married or an unmarried couple there is only one set of entitlement to state pension credit. But, importantly, it deals with who should receive that credit. The amendment proposes that in the first instance the couple should agree which of them should receive the credit, but that if they do not agree it should be paid to the person with the lower income. In practice that may mean that the credit would mainly be paid to wives or the female part of a couple as they are likely to have the lower income. But, of course, the amendment is not designed to favour the female over the male and where the male has the lower income he should receive the credit. I beg to move.

Baroness Barker

I wish to speak to Amendment No. 49, which is grouped with Amendment No. 48. It concerns a slightly different subject and it is, in the nature of these things, a probing amendment. It deals with the question of separation. The purpose behind the amendment is to seek information from the Minister about the circumstances in which a couple separate and are determined to have separated. We know from our deliberations the other day that a couple comprises a household unit of a man and woman living together as a couple.

The amendment's wording is taken from the WFTC Bill. I seek to establish what will happen to the less-welloff member in a couple. I accept the relevant point made by the noble Baroness, Lady Noakes, that the man may be the lower earner. I seek to establish that in the complex workings of this Bill no pensioner will be left for a significant amount of time with less income than they would need simply through ceasing to live with the person with whom they were living when the calculation was made.

Baroness Hollis of Heigham

Amendments Nos. 48 and 49 concern issues affecting couples. We have touched on some of those issues previously in Committee. Amendment No. 48 considers how disagreements will be settled in cases where neither member can agree who should make the claim. Amendment No. 49 considers the meaning of "married" and "unmarried" couples in terms of pension credit. The argument of the noble Baroness, Lady Barker, was slightly different from the wording of Amendment No. 49, but I shall try to deal with her point. With the Committee's permission I shall deal with each amendment in turn.

Amendment No. 48 seems to do two things. First, it provides an alternative form of drafting to the current provisions in Clause 4(1) of the Bill, which ensures that only one member of a couple shall be entitled to pension credit. Secondly, the substantive part of the amendment seeks to specify in primary legislation the criteria to be followed in situations in which neither member of a couple can agree on who should make the claim. I believe that the approach we have adopted in the Bill is correct.

I start by pointing out that such cases are extremely rare. I have checked with officials who have worked in this area for more than 20 years and none has ever come across such a case. We are dealing with hypotheticals. That is not to say that there have not been cases, but on a quick check those officials had not come across any. In relation to the minimum income guarantee, such disputes, where they exist—hypothetically or otherwise—are settled by the Secretary of State, who is in effect the local decision maker, taking into account the individual circumstances of the case. Standing instructions say that in the first instance the responsibility for settling the dispute would be returned to the couple. As one would expect, the couple would be given every opportunity to resolve the problem themselves. For example, there may have been a mistake in filling in the forms.

Where a customer indicates on the claim form that their partner does not agree to their making the claim, a letter is sent to both members asking them to decide who should make the claim. Only where it is clear that they are unable to resolve the dispute or no reply to the letter has been received after 14 days would further steps be taken.

When deciding such a case, consideration would be given to a range of factors—for example, to who is normally responsible for paying the household bills. I do not believe that the noble Baroness's amendment would leave sufficient flexibility to allow the decision-maker to take account of the full range of sensitive issues that might arise in an individual case. That might involve asking detailed questions about the claimant's and the partner's incomes. For example, where income was derived from a joint bank account, it would mean making possibly arbitrary decisions on the apportionment of that income between the two partners.

We know from earlier discussions in your Lordships' House on the minimum income guarantee that customers may be reluctant to claim benefits that require excessive investigations into their financial circumstances. We seek to move away from such an approach. Given that we are dealing, so far as I can tell, with a hypothetical case, we shall lay down guidance but we hope that it will not need to be used. That will give sufficient flexibility to deal with the matter in a decent and sensitive way. I hope that the noble Baroness, Lady Noakes, will withdraw her amendment.

Amendment No. 49 is, as I would expect, a thoughtful amendment. We thought that we understood why the noble Baroness, Lady Barker. had tabled it but now I do not think that we did. It is still probably a thoughtful amendment but it involves a different thought for the day from that which we had anticipated.

For the purposes of the clause, the amendment would align the way a "married" or "unmarried" couple is defined in pension credit and make that more in line with the meaning for tax credits. If the noble Baroness wishes, I could explain why we chose one system rather than another. Basically, she was interested—perfectly rightly—in what counts as separation. For these purposes, a married couple are married to each other and are neither separated under a court order nor separated in circumstances in which the separation is likely to be permanent. In such cases, they would be treated as two single people. For the purposes of housing benefit, they would have different accommodation.

We have a choice in this regard about aligning the different definitions of a couple to either the social security system or the system for tax credits. We have gone for the social security system because, as Members of the Committee will appreciate, 1.7 million people will be transferring from the minimum income guarantee to pension credit, whereas only about 60,000 or 70,000 are simultaneously eligible for tax credits and pension credit. It makes better sense for us to follow the old DSS vocabularies, which are well established in law, and not to try to change all the legislation that feeds into that and then go for the tax system.

I have pressed my officials on this matter. I said, "Tell me in practical terms what the difference between the two definitions is. Can you put a piece of paper between them?" They said, "No, you cannot". The implications of preceding legislation suggest that it would be simpler to keep to the somewhat different definitions. In the light of that, I hope that the noble Baroness will feel able to withdraw the amendment.

3.15 p.m.

Baroness Noakes

I thank the Minister for that detailed explanation of the way in which these issues are handled in practice. My solution was perhaps much simpler and would save her officials having to ask all of those questions and make detailed decisions if there was a statutory rule. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 49 not moved.]

Lord Higgins moved Amendment No. 50:

Page 3, line 44, leave out "not"

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 51 and 52.

The purpose is fairly clear but I am not absolutely certain about how the Bill's provisions will operate. Effectively, the provisions are concerned with various exclusions from benefit. Clause 4(3) is apparently concerned with the situation in which the amount of money that can be payable to a claimant would be very small. It refers to the amount being.

"less than a prescribed amount",

and operating in "prescribed circumstances".

It is not clear where the power to prescribe amounts and circumstances arises in the Bill. Initially, I thought it arose in Clause 3(8), which states:

"Regulations may prescribe descriptions of persons in whose case the maximum savings credit shall be taken to be nil".

However, on reflection, it appears that Clause 4(3) is concerned not with the description of a person but with the description of an amount. That led me to the conclusion that the regulatory powers are not located in Clause 3(8).

Since we are at the beginning of our proceedings today, I return to the question of regulations generally. The Minister generously said at Second Reading that she hoped that draft regulations would be provided by the time the Bill reached its Committee stage. We understand why that was not possible but perhaps she will let us know whether they are likely to be available in time for the Bill's Report stage. So much is done through regulations in the Bill that, without seeing those regulations, it is extremely difficult to make any sensible comment on large chunks of the legislation.

So much for the procedural side of things. I turn to the substance of the amendment. As I said. it appears that the purpose of subsection (3) is to ensure that the claimant gets nothing in prescribed circumstances if the amount is below a certain figure. We understand that lbr convenience it may be inappropriate to pay out a small amount from week to week or month to month, but that appeared to us to be unfair, even in those circumstances. I gather that in that regard I have the support of the noble Baroness, Lady Turner of Camden. Our proposal is that the payment should be made at the beginning or end of the year, whatever the amount might he. The payment should be made as an annual lump sum.

That is not a complicated concept. It is about the simplest amendment that we have debated in our entire proceedings so far and it is probably the simplest amendment that we shall consider. I hope that we shall receive a sympathetic reply from the Minister. who has conceded absolutely nothing so far. Here is a real opportunity to say, "Yes, we shall pay the amount annually". I beg to move.

Baroness Turner of Camden

I have tabled Amendment No. 51, which is grouped with the amendments in the name of the noble Lord, Lord Higgins. As the noble Lord rightly said, Clause 4(3) provides that amounts of pension credit below a prescribed level will not be payable. I believe that the sum of 10p a week has been mentioned. The amendment seeks to make the credit payable annually; for example, 52 weeks at, say, 9p would amount to £4.68. Since entitlement to the credit will normally change only annually, such annual payments should cause no administrative difficulty. After all, £4.68 is £4.68. If people are owed a sum of money, why should they not have it paid annually, as suggested in the amendments under discussion?

Baroness Hollis of Heigham

I believe that Amendments Nos. 50 and 52, when considered together, propose a change to the meaning of Clause 4(3). Amendment No. 51 has the same effect as Amendments Nos. 50 and 52. Therefore, I propose to address these amendments at the same time.

Clause 4(3) provides that pension credit will not be payable if entitlement is under a prescribed amount. The intention here is not to pay pension credit if entitlement is under 10p a week unless payment of pension credit can be combined with payment of another benefit. In fact, this rule will affect very few people—probably no more than 500, even if there were to be a 100 per cent take-up of pension credit—as we anticipate that in the vast majority of cases we shall be able to combine payment of pension credit with another benefit.

The noble Lord asks why we have not conceded anything so far. I am deeply mortified as I gathered that all his previous amendments were probing amendments. I understood that the intention of probing amendments was not to push for concessions but to explore the Government's thinking on the matter. If he does not consider that I have made our thinking sufficiently clear, I shall of course be prepared to speak at even greater length. But I believe that, on reflection, he may wish to consider his remarks further.

There will be a small number of remaining cases—possibly 500 or so—where no other such benefit is in payment. Even though pension credit would not be paid in such cases, there is an underlying entitlement—this is the substantive point which has not been mentioned by Members of the Committee—which means that, for example, the claimant would be passported on to benefits, such as housing benefit, in the normal manner, even with a trigger of an amount such as 10p.

That is a well-established rule and we consider it right to include it in relation to pension credit. If the amendments were accepted, it would mean potentially paying tiny amounts of pension credit—perhaps a matter of pence—at yearly intervals. It has always been a pragmatic decision whether to make such payments. But under this amendment the payment of 52p a year would be a possibility, and it is likely that that would be criticised by claimants as derisory.

Members of the Committee may also be persuaded by the fact that, if the amendment were accepted, we would be paying out less than £2,000 a year in pension credit at an administrative cost of well over £4,000 a year, as our computer systems do not support annual payments. It cannot be right to spend £4,000 in paying out £2,000 when the sum in question is only 52p a year. That amounts to two postage stamps.

By prescribing in regulations the precise rules which will apply to such cases, the Secretary of State will have the flexibility to adjust the circumstances in line with general changes in the methods of paying benefits. In other words, if the noble Lord is suggesting that in future it will make good sense to pay the credit as an annual lump sum, then, when we have the necessary computer power, that may be an appropriate way forward. As a result of my explanation, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Higgins

We are grateful for that explanation from the Minister. She said that no problem arises with the de minims arrangement if another benefit is payable. I am not clear whether or not that includes the other part of the state pension credit. Does "another benefit" include what used to be called "MIG"? If people receive MIG, will they receive this credit, even though it is a de mininds amount?

The noble Baroness has not clarified the point that I raised regarding the regulations which enable these prescribed amounts to be made in prescribed circumstances. As I pointed out, at first I believed that the regulations were those under Clause 3(8), which comes immediately before the exclusions clause. However, that appears to apply to persons and not to amounts, whereas what is being prescribed here is an amount payable in certain circumstances. Therefore, I am still not clear which power enables the clause which we are discussing to be operated.

Baroness Hollis of Heigham

The power appears under Clause 4. By virtue of Clause 17, which defines terms under the Bill, "prescribed" means specified in regulations. That relates to the last point which the noble Lord has just raised.

I now return to the wider point concerning regulations. In relation to draft regulations, I had hoped to be more helpful to Members of the Committee than they may consider me to have been. We produced an extended memorandum which sought to describe how those regulations would be used. Regulations will be developed over the next four months. As soon as I have anything which I consider to be more helpful to noble Lords than the document that I have already produced, I shall of course let them know.

Lord Higgins

We are very grateful for that. We fully understand that there is no immediate obligation on the Government to produce such regulations or, indeed, such descriptions of regulations. We always very much appreciate the way in which the noble Baroness handles these matters. However, I still have a problem in relation to the technical point. I cannot see which regulatory power enables Clause 3, which we are debating, to be implemented. If, indeed, it is the one under subsection (8), which appears before the exclusions clause, then, as I say for the third time, that concerns descriptions of persons and not amounts. What is being prescribed here is not persons but amounts. Therefore, I cannot find the regulatory power that will implement Clause 3. I am sorry to persist with this matter.

Baroness Hollis of Heigham

We are dealing with Clause 4. Is that the source of the problem?

Lord Higgins

I am sorry; I meant to say not Clause 3 but subsection (3) of Clause 4. Perhaps I may state again that at the bottom of page 3 of the Bill is subsection (3), which we are now debating. It states that amounts may be prescribed or be payable in prescribed circumstances. I am not clear where the powers are that enable the Government to prescribe the amounts and the circumstances.

Baroness Hollis of Heigham

I shall write to the noble Lord if I am misleading him. However, if he looks at Clause 4(3) and then at Clause 17 at line 45 on page II of the Bill, he will see that "prescribed" means, specified in, or determined in accordance with regulations". Therefore, where the amount is less than the prescribed amount—that is, less than lop—the amount payable by way of state pension credit will not be payable except in prescribed circumstances; for example, where it can be aligned with the payment of another benefit. I do not understand the problem.

Lord Higgins

Rather than delay the Committee further, I shall look at the references which the noble Baroness has given and, if need be, we can return to the matter on Report. With regard to the substance of the Bill, I am still not clear where we are with regard to whether or not the de minimis amount will be paid in relation to the other parts of the pension credit.

Baroness Hollis of Heigham

There is one pension credit which comes about as a result of the move from the guarantee to the savings. Therefore, we are dealing with only one sum. If, at the end of the day, a payment of less than 10p is due under the pension credit—whichever part of the pension credit it relates to—then, if it is aligned with another benefit, it will be paid. If it is not—we believe that only 500 or so people may be affected—then it seems to me inconceivable that someone for whom only the guarantee element comes into play will not also qualify for housing benefit or council tax benefit. Such a situation may apply to a few pensioners but in normal circumstances an alignment would take place. I suspect that that situation may occur when the amount tapers out at the very end.

As I said, we are dealing with a very small number of people. If, at later stages, the arrangement appears to be more problematic, it can be revisited. We have no wish to deny anyone, but when in the past government departments have sent out cheques for 2p, 3p or 50p over the course of a year, we have usually been teased by the Front Benches opposite, and rightly so.

Lord Higgins

I promise not to tease the noble Baroness. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.30 p.m.

[Amendments Nos. 51 and 52 not moved.]

Clause 4 agreed to.

Clause 5 [Income and capital of claimant, spouse etc]:

On Question, Whether Clause 5 shall stand part of the Bill?

Baroness Turner of Camden

Clause 5 provides that where the claimant is a member of a married or unmarried couple, the income and capital of the other member of the couple shall, except in prescribed circumstances, be treated as income and capital of the claimant. I have some difficulty with this clause, which is why I have put down my name to oppose it. It must be remembered that this legislation extends means testing to a much wider population than hitherto; that is, if we take seriously, as I do, the Government's own predictions of the numbers likely to be eligible for pension credit—as much as 65 per cent of the future pensioner population.

Many couples regard themselves as couples within the financial sense having joint accounts and sharing incomes and savings completely, but that is not always the case. Some people guard their financial independence jealously. That is now true of many women. In such circumstances the partner may not know of the income, capital and savings of the other partner and may never have known of them completely. How will the income of such a partner be ascertained? Will there be wholesale snooping? Will people be encouraged, or feel they are being encouraged, to be dishonest, concealing income and savings? Perhaps instead of bank notes there will be piles of euros concealed under floorboards.

I know that it will be said that there are types of benefit for which this already applies. Income support is a case in point. But again I repeat that we are talking here about an extension of means testing to a far wider population. We are talking of people who hitherto had not ever thought that it would apply to them, perhaps people who now regard themselves as rather middle class and who have acquired a personal pension that over the years has not provided the pension that they thought it would eventually provide, so they are forced to look at pension credit as a way of getting enough to live on.

I cannot think of a suitable way in which to amend the clause but I am still not happy about it. I am sure that the Government must have given some thought to how this is to be applied and enforced, and how to avoid deliberate dishonesty on the part of claimants and partners. Therefore, I would welcome the views of the Government on the points I have made.

Baroness Noakes

Perhaps I may add to the comments of the noble Baroness, Lady Turner, by returning to the topic of unmarried couples, which we debated on the first day of the Committee stage. Unmarried couples have few, if any, financial obligations to each other. They certainly do not have obligations to disclose their financial circumstances to each other. If they are treated as one unit for pension credit purposes, that would mean that the details of each part of a deemed unmarried couple would have to be disclosed to the other. It could not be guaranteed that privacy would remain for one because in aggregating two, it would be a relatively simple calculation for one to discover what the other had, even if the Pension Service was able to deal with them as two individuals and add up their incomes separately.

I am not an expert on human rights but I wonder what consideration the Minister gave, when she signed the customary declaration on the Bill, to the possibility that parties to the unmarried couples were being deprived of their rights to privacy. I should be interested in her comments.

Baroness Hollis of Heigham

My noble friend Lady Turner has long experience in social security matters. She will know, and there is a simple two-line summary, that all income-related benefits are household based. If somebody wants to enjoy an entitlement to a household benefit, we in turn must have the information on that household income. We cannot apply disaggregated or segregated tax rules to a household assessment. My noble friend knows perfectly well that if we were to follow her point, that would mean the disaggregation of social security in the concept of households into a series of individuals. Therefore, a non-working spouse of a wealthy husband, for example, would be entitled, with a very modest income, to a full pension credit. It is precisely to avoid that situation that Clause 5 makes clear that we are dealing with a household. The household is entitled to claim the benefit, subject to the discussion we have just had about who should make the claim, and so forth.

It will not come as a surprise to Members of the Committee that all income-related benefits—JSA, income support, housing benefit and council tax benefit—will all have been based on household income. It may be the case that an unmarried pensioner couple have come together as pensioners and this may be new to them. However, that would pre-suppose that neither of them has ever been in a relationship before in which they have enjoyed a household benefit. They have to make that choice. If they want to enjoy a household-based addition to their income, which is their entitlement, they have to give us the information on which to base it. That is the point of Clause 5. To receive pension credit, both members of the couple need to agree to the claim being made. Therefore, it is not unreasonable that both members of the couple should disclose the financial circumstances to each other. That is the basis of social security law.

Clause 5 agreed to.

Clause 6 [Duty to specify assessed income period]:

[Amendments Nos. 53 and 54 not moved.]

Clause 6 agreed to.

Clause 7 [Fixing of claimant's retirement provision for assessed income period]:

Baroness Noakes moved Amendment No. 55:

Page 5, line 6, leave out subsections (2) to (8) and insert— "(2) The amount of the claimant's entitlement to state pension credit shall be calculated by reference to—

1. (a) the claimant's actual income for the year ending on the date of the relevant decision; or
2. (b) where the circumstances of the claimant have changed, by reference to the estimated income of the claimant for the 12 months following the relevant decision.

(3) Income shall be determined in accordance with section 15. (4) The circumstances of the claimant shall be treated as having changed if—

1. (a) the claimant becomes a member of a married or unmarried couple;
86
2. (b) the claimant ceases to be a member of a married or unmarried couple;
3. (c) the claimant attains the age of 65;
4. (d) in a case where the claimant is a member of a married or unmarried couple, the other member of the couple attains the age of 65; or
5. (e) the income of the claimant for the 12 months after the date of the relevant decision is likely to be higher or lower than the income for the preceding 12 months by at least 10 per cent."

The noble Baroness said: In moving Amendment No. 55, we return to one of our themes on the Bill; that is, complexity. We have already discussed in Committee the different concepts of income that are used for the guarantee credit and the savings credit. We now come to the way that income is treated for the purposes of fixing pension credits for up to five years at a time.

Clause 7 is, indeed, complex. It has a new concept of retirement provision, which appears to cover some but not all of the income sources listed in Clause 15, to which we shall come in due course. There is a power in subsection (4) to deem that income will increase or, in some cases, decrease, over the five-year period. There are powers in subsection (7) to treat as income something which is not.

I wonder what pensioners would make of all that. At best they would be bemused and uncomprehending. At worst, I suspect they would be confused and possibly even frightened. Amendment No. 55 is designed to cut through that by basing pension credit decisions on pensioners' actual income immediately before the decision on pension credit or on the income for the next 12 months if there is a change in circumstances. A change of circumstances is defined as including the position where the income for the following year might vary by more than 10 per cent either way.

Taking that simple concept of income, there would be no need for special provisions for calculating income or different concepts of income. There would be no deemed increases or decreases, just a single figure. I should say that we are not entirely convinced that a five-year settlement of pension credit is an equitable approach. It means that a pensioner who won the lottery or had a major inheritance would be entitled to continue claiming the pension credit until the end of the five-year period. We shall debate the period a little later.

The point of the amendment is that if the Government believe that a five-year interval for settling pension credit is desirable and want to go down that route—I suspect in practical terms it may be the only way that is feasible administratively—they should do so in as simple a way as possible. I beg to move.

The Chairman of Committees

I must inform the Committee that if Amendment No. 55 is agreed to, I cannot call Amendments Nos. 56 to 59A.

Baroness Hollis of Heigham

For the first time today, we are getting to the substance of the five-year period. Therefore, perhaps I may say a few words about the detail of the amendment, which is interesting and far reaching. However, again it pursues the issue of alignment with the tax system. As I understand it, it proposes to borrow from the system of five-year assessed income periods covered in Clauses 6 to 10 and the five-year assessed income period itself, but then to impose limits and new classifications.

The five-year assessed income period and the processes that support it are a key feature of pension credit which will, I hope, reassure pensioners that this is a world away from the weekly means test they are currently experiencing. We would strongly resist all attempts to fetter the purpose of a five-year assessed period, so that pensioners know where they stand.

In the future a pensioner approaching pensionable age will receive his or her invitation to claim state retirement benefits. Many pensioners will then make their claim, most by telephone—some 70 per cent tell us that is what they prefer—but others will do so in more traditional ways as they please. We will ask the pensioner about the income he or she expects in retirement. When it is clear—as in most cases it will be—that the income is settled, an award of pension credit will be made.

Perhaps crucially because—and this has been raised in your Lordships' discussion—all the research indicates that pensioners do not want the intrusion of dealing with the state when it comes to their financial affairs, or in order to reduce it to a minimum, we intend that there will be no review of these affairs for five years. We shall have safeguards. We shall automatically increase income from second pensions when these occur as part of the regular annual increases in these pensions. To do otherwise would drive up the costs of pension credits significantly. 01' course, if a pensioner's income decreases during the five-year period, then we will interrupt the award to take that into account. In other words, it is "win win" for the pensioner. The pensioner can always come to us for an uplift if his or her income falls. They do not have to come to us until we review their income, apart from certain major life changes, which will be on a five-year basis. We will also take into account the normal changes in circumstances, such as death of a partner, which already exist within retirement pension.

This is a real break with the past. It has been widely welcomed by all the relevant organisations. We are seeking to achieve a break with the old means-test attitude. Perhaps I can suggest to Members of the Committee what the amendment does to that concept. First, as I understand the amendment of the noble Baroness, there would be an obligation to base the pension credit income assessment on a past year's income. Understandably, given the irrelevance of past income for new pensioners, the amendment also allows claims to be assessed on estimated income for the next 12 months. The amendment then proposes that the life changes, such as death of a partner, should also be notifiable when they occur. We have no difficulties with that. We share the same approach.

But then we have a radical departure from where we want to go. According to the amendment of the noble Baroness, at the end of 12 months if the pensioner's income has changed by 10 per cent up or down, over what it was 12 months previously, the pensioner must tell us about it. It is unclear whether that 10 per cent accumulates so that, say, at the end of the fourth year of a five-year period the pensioner has to remember what he or she told us four years earlier and calculate whether t hat is within the 10 per cent tolerance.

However, I am not quibbling with the detail of the amendment. The noble Baroness can clarify her views on that. I am arguing as strongly as possible that we must break the weekly reporting of information or even the yearly reporting of that kind of information that ties the ownership of the pensioner's circumstances to us.

Obviously, a 12-month means test, which is what the noble Baroness proposes, is better than a weekly means test in the eyes of most pensioners. We would argue that giving people an assured level of income for 60 months is better than 12 months. We estimate that at least two-thirds of pensioners are unlikely to see their financial circumstances change within the five-year period, particularly after the first year when people are settling down and maybe giving up modest part-time earnings.

The noble Baroness can argue that a 10 per cent tolerance up or down is reasonable. But, if I lost £9 of a weekly income of £100 I would not imagine that the state was on my side if it told me not to bother it until I had lost £10. At the moment, if a pensioner loses £ 1 or £9 he or she can come to us. It is only if it goes up that they do not have to come to us. As the amendment is worded, the noble Baroness would require them not to be able to report losses.

Equally, if my income rose by more than I 0 per cent, I would be troubled that under the amendment I could keep this income for at most 12 months. I would much prefer to be told that I did not need to tell the state about it for five years, rather than 12 months.

I accept that what the noble Baroness proposes in the amendment in part advances on the present arrangements for pensioners. However, what we propose goes much further. It will free a great many pensioners to enjoy their income without constant inquiry from the state. The question before the Committee is whether a 12-month revisiting of a pensioner's income is more reasonable than a five-year revisiting of a pensioner's income, given that after the first year or so of being a pensioner incomes are fairly predictable. Further, given, that we are so anxious to break the old mentality of means test, intrusion and so on, I hope that the noble Baroness can join with us in what I believe is a generous but decent and proper concept, which is the five-year assessed period.

3.45 p.m.

Baroness Noakes

I thank the noble Baroness for that reply. She reminded me how difficult a job drafting is. As soon as the Minister started commenting on my suggested re-draft of the amendment, I realised that I had not drafted what I had intended. I had intended that there would indeed be a five-year prospective settlement and that it would be based on the most recent year's income, unless, looking forward, one thought that that income might vary by more than 10 per cent, particularly when one becomes a pensioner. I linked the proposal to life-changing events. So I was suggesting that there would be a five-year settlement; it would be based on the most recent year's income unless that was unlikely to be representative of the following year, in which case it would be based on something else. Then it would be left for five years. That avoids the deeming of increases and decreases in income which are included in Clause 7(4).

The Minister talked about this being "win win" for pensioners and of their being able to go back if their income turned out to be less than the assumed basis. When we come to look at how income from capital, in particular, is calculated later, we find notional calculations. I do not believe that pensioners will know how to go back and ask for a re-assessment or a redetermination of their pension credit. It will leave them confused and they may lose out. I have a number of points. First, I was not trying to turn this into an annual assessment. I was merely trying to say that when it is assessed, if the previous year's income does not look representative, use another year. I confused that in the drafting of the amendment. I apologise for confusing the Minister. Beyond that, I was trying to say, "Let us do it once and then forget it for five years". I am not accepting in this argument that five years is an appropriate period. But if that is what the Government want to do, it is the least interventionist for pensioners because it is over and done with and one does not do prospectively any fancy calculations.

Baroness Hollis of Heigham

The noble Baroness is suggesting that the reason for her proposal is not to change the five-year period but not to take into account any changes in pension levels and any changes in capital. On the first point, that is not reasonable because we automatically update retirement pension. Therefore it follows that we automatically update housing benefit. I do not think that one can automatically update all of that but freeze any assumptions about the income flow coming in from, for example, RPI occupational pensions. They have to be done together. My response to the noble Baroness on that issue is that I do not think that proposal is sensible; we already do it; and there is no reason on God's earth why we should not continue to do that. It is fairly simple.

On the second point, on capital, we are not looking at actual income, in which case she may have a point; we are looking at notional income drawing from capital. Capital is much more stable. Most pensioners—certainly if my parents are anything to go by—know exactly how much they have in their building society books and so on. That is the level for the most part that we are talking about. They will not know what the actual income is. The point made by the noble Baroness would be much fairer and more viable if we were trying to go for an actual income. There she might well be right. They would not know whether to come down from 4.1 to 3.7 and following calculations. But, given that it is capital, and given, as I say on the first point that retirement pensions are automatically upgraded by the computer and this follows, I hope that the noble Baroness would feel able to withdraw the amendment.

If there are other particular points about this matter, because it is a very interesting issue, I should be very happy to correspond with the noble Baroness.

Baroness Noakes

I thank the Minister for that reply. I can see how she will want to make later payments of pension credit vary with other benefits. That is quite clear. The difference comes down to savers' income. I heard what the Minister said about that matter. We shall be returning to that issue several more times during Committee. I await those discussions. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 56:

Page 5, line 10, leave out subsection (3).

The noble Baroness said: The previous amendment, Amendment No. 55, sought radically to simplify the assessed income period provisions. As anticipated, that did not find favour with the Minister. I anticipate a similar rejection in moving Amendment No. 56, while speaking also to Amendments Nos. 57 and 59. The amendments seek more limited simplifications of part of the Bill.

Amendments Nos. 56 and 57 delete subsections (3) and (4) of Clause 7. The subsections allow the Department for Work and Pensions to deem a pensioner's income to increase or decrease. The points we discussed a moment ago probably resolve down to the treatment of savings income.

I shall return to the theme. The treatment of savings income takes a pensioner's income into a fantasy world. Pensioners will be unable to refer easily to that in due course. Claimants can ask for new determinations if their income is less; but I find it difficult to envisage how a pensioner would know when he is dealing with deemed income. What volume of pensioner inquiries seeking redeterminations could the department cope with? I understand that the five-year determination reduces significantly the administrative burden on the department. What level of potential redeterminations can the department cope with if pensioners do not understand whether the system is working to their benefit?

Amendment No. 59 is another deeming provision. It allows the department to make regulations treating income as some other type of income or to aggregate income sources. I am not clear why the department needs this power. It is not explained in the Explanatory Notes. It is another example of the potential creation of a fantasy world of people's income. I should be grateful for an explanation. I beg to move.

Baroness Hollis of Heigham

The amendments are grouped together because they all seek to amend Clause 7 of the Bill. Clause 7 is an integral part of our proposals for the assessed income period which we rehearsed a moment ago. I do not need to describe why we have the five-year period; we discussed that.

Amendment No. 56 would have the overall effect of removing the power to set a five-year assessed income period for pensioners aged 65 or more. Clause 7 contains the power to fix a pensioner's retirement provision for five years. It also contains the definition of "retirement provision" which is: retirement pension provision (other than under the Contributions and Benefits Act); income from annuity contracts (other than retirement pension income); and income from capital.

Subsection (3), which the amendment seeks to remove, contains the power to fix the retirement provision so that it remains the same for the duration of the assessed income period. Without subsection (3) there would be no point to the remaining clauses concerning the assessed income period because there would be no power to fix retirement provision. I know that the noble Baroness did not intend it as a wrecking amendment but it is the closest we have come to one! The very heart of the pension credit proposals will be removed because the effect would be that we would be unable to move away from the weekly means test which, as I have already explained, is a major barrier to pensioners claiming their entitlement. I hope that I have explained the purpose of subsection (3) and justified its inclusion in Clause 7.

Amendment No. 57 would remove the power to deem known regular changes in a pensioner's income during the assessed income period. Again let me clarify why subsection (4) should remain part of Clause 7. This subsection allows for exceptions to income being fixed within the assessed income period. These exceptions are in line with two principles: safeguarding public expenditure and safeguarding pensioners' overall incomes.

In terms of protecting public expenditure, we want to ensure that foreseeable and regular changes in retirement provision are taken into account during the course of an assessed income period. We know that in most cases second pensions and annuities are liable to be increased annually. Therefore, we propose taking a power to deem the amount of the increase, thus preventing the need for the pensioner to report those changes every year.

This power will be within regulations. The intention is that the regulations will provide for the amount of income from a pension or annuity to be deemed to increase from time to time in line with the terms of a pensioner's pension or annuity arrangements. If the noble Baroness wishes to press me on how we shall know in certain circumstances, I am happy to discuss it.

Accepting Amendment No. 57 would mean, for example, ignoring increases to non-state second pensions. The cost of ignoring such increases alone during the assessed income period would amount to around £1 billion at the end of the five-year period.

I know that there will be concerns about how we propose to take account of increases in claimants' retirement provision, or indeed changes in other state benefits, during the assessed income period. It may be helpful to the Committee if I spell this out. It is a key point. Our intention is automatically to uprate the pension credit award each year taking into account changes in the state and non-state pensions the pensioner normally has during the five-year assessed income period. The calculation of the retirement provision will be based on information provided by the pensioner at the start of the claim. We know that most private pensions keep pace with inflation. Ninety per cent of them are defined benefit. They are almost all retail prices indexed (RPI'd) because they are largely public sector ones. So, if the pensioner is unable to provide information about the rate at which his or her second pension will be increased, we intend to assume that it is uprated at least in line with prices.

Let me assure Members of the Committee that if doing that means that a pensioner will lose out—because we are assuming a rate of increase that is too high; in other words it is not being RPI'd—pensioners will be able to ask for their pension credit to be reassessed at any time during the assessed income period. In other words, we will notify pensioners every time there is a change in pension credit annually. Pensioners will be able to compare their actual pension with the amount on their notification. if they wish, we can make inquiries with the pension company on their behalf. We have no reason to think that this will not be an entirely Simple, straightforward and easy way of ensuring that, although we shall make RPI assumptions, where that is not the case we shall have the information to make appropriate and speedy adjustments.

Subsection (4) protects the public purse to the tune of £1 billion and supports our intention to minimise the questions we need to ask pensioners. We need to explore it further only when the pensioner is able to tell us or we know that that pensioner is not being RPI'd in ways we expect.

Amendment No. 59 seeks to remove the powers to provide continuity in treatment of income streams within the calculation of pension credit. This would mean that the flexibility of administrators to group income streams or to ignore changes of source of payment would be removed from the assessed income period within the pension credit calculation.

Paragraph (a) of subsection (7) of Clause 7 will allow regulations to provide for income of one description to be treated as income of another description. It sounds technical. The noble Baroness thought that it was fantasy land. It will apply infrequently to only a small number of pensioners. Let me give some examples 'where we would have needed the power.

Noble Lords will recall the mess—I do because I was handling a Bill from the Benches opposite—of the Maxwell affair. Pension rights which could not be met from Mirror Group Pensions were paid, at least in part, by a fund made up of donations and chanitable payments. We all hope that that situation will not recur. But under the savings credit we would want to be able to treat such payments as retirement provision for the duration of the current assessed income period and reward thent through the savings credit. This power would allow us to do just that.

The most common use of this power would be for pensioners who have a second pension paid by one employer or pensions provider who then merges with another or is taken over by another. In that situation, the pension in payment would, in effect, be the same. However, the liability may well be transferred to, and be discharged by, the new company or a third party. This provision would allow us again to continue to fix this income for the duration of the existing assessed income period and reward it as retirement provision through the savings credit.

I am sure the noble Baroness will understand this point. I do not need to labour it further. In the light of that explanation, perhaps I can ask the noble Baroness whether she would care to withdraw the amendment.

Baroness Barker

I listened carefully to the Minister's extremely helpful explanation. In her response to Amendment No. 57, she referred to those pensioners who know that their pension funds are not automatically uprated by RPI. If at the time a person retires he knows that his occupational pension will not necessarily be uprated by RPI, will there be the facility in the new system for him to flag that and thereby trigger an annual reassessment of his income?

Baroness Hollis of Heigham

I had hoped that I had made that clear. Absolutely: that is the whole point. If, for example, he does not, although assumptions are being made about his state retirement pension, we shall have to ensure that similar assumptions are not transferred over to his private occupational pension. Therefore, each year the adjustments will be made accordingly.

4 p.m.

Baroness Noakes

The basic assumption of pensions being RPI'd is reasonable for public sector pensions, but I cannot believe that that applies to most pensions. It is not a universal practice by any means that private sector pensions are RPI'd. It seems to me to be a potential difficulty as it requires pensioners to reapply for a determination each year just because they have an ordinary private sector pension. In that regard, can the Minister say how many pensioners are likely to be affected? I do not know and I would not know how to decide that problem. If it is a large number I may wish to press the Minister further although perhaps not today.

Baroness Hollis of Heigham

The latest information I can give the noble Baroness comes from the Government Actuary statistics for 1995. I shall check to see if anything later than that is available. The information I have is that public sector defined benefit pension schemes are required by scheme rules to increase pensions annually in line with the RPI and in April. The major defined benefit schemes tend to be those of the Civil Service, local government, the teaching and health professions and the like. The 1995 survey showed that 82 per cent of those holding private sector defined benefit pensions had increases of 2 per cent to 4 per cent, which are close to the RPI of that year which was 3.5 per cent. Fourteen per cent had increases greater than 4 per cent, while only 4 per cent had increases of less than 2 per cent. We do not have information about timing.

Therefore, in terms of defined benefit schemes, I believe that we are dealing with relatively small numbers. Defined contribution schemes are obviously a different output and the noble Baroness will understand that. As I said, the pensioner will receive from his or her occupational scheme a notification of what they are to receive each year. The pensioner will be able to compare that to the notification received from us saying what we are assuming to be correct. If there is a difference they refer the matter again to us. I do not see that there is a problem given that we are well aware of it. I believe that we have robust systems in place on this matter.

Baroness Noakes

Can the Minister say how many pensioners are in defined contribution schemes? I understand it is 10 per cent. As regards the figure that the Minister quoted for defined benefit schemes, it is quite often the case that such schemes have an RPI of 4 per cent or 5 per cent. The point to which the statistics refer might appear to be giving RPI-type increases, but perhaps they are base level increases which just happen to coincide. It is my experience that when inflation reached high levels, this protection was included so that large increases were not paid out. We might be dealing with quite a number of pensioners. I wonder whether it is right automatically to apply RPI to all of them.

Baroness Hollis of Heigham

Perhaps I may make it clear again. When a pensioner first comes into the system at the age of 65, we shall go over their income with them. We shall take into account what they know about their second pensions and how they are being increased. If they say that it is 2 per cent or 4 per cent or RPI'd, we shall build that into our annual uprating for that pensioner. It is only if the pensioner cannot give us the information at that point that we shall assume an RPI increase. If we do that, and a year or so later the pensioner says that there is a disjunction between what they are told by their occupational pension scheme provider and what we assume to be the situation, the person will return to us. If the pensioner does not know and he or she authorises us to find out, we shall go to the pension provider and seek that information.

Baroness Noakes

I am grateful for that information and I shall consider it further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 57 not moved.]

Baroness Turner of Camden moved Amendment No. 58:

Page 5, line 18, at end insert "and the Secretary of State shall inform the claimant of any changes in the assessed amount and of the effect of that change on his entitlement to state pension credit".

The noble Baroness said: To some extent we have dealt with this area already. The amendment is to subsection (4) of the clause which speaks about the assessed amount being deemed to increase or, in the case of income from capital, to increase or decrease,

"on such date or dates and by such amounts as may be prescribed".

We are seeking to add to the subsection the words,

"and the Secretary of State shall inform the claimant of any changes in the assessed amount and of the effect of that change on his entitlement to state pension credit".

It is important that the claimant should understand the effect of any assumed changes to his or her income so that if necessary he or she can ask for a fresh determination of the amount of the pension credit. The amendment requires the Secretary of State to provide the relevant information.

I believe I heard the noble Baroness say, in the course of her response to previous amendments, that arrangements would he made for pensioners to be notified. I am glad to hear that, but if so, what is wrong with putting it on the face of the Bill in the way I have suggested? I beg to move.

Baroness Noakes

I wish to underline some of the points which we were discussing when dealing with the last couple of amendments. These are complex matters. I believe that pensioners may well be very confused about what is happening to the pension credit that they have. It is an excellent amendment in that there is a positive duty to inform the pensioner of a change in the pension credit and at least provide an aide memoire or a reminder to pensioners that they should check that their details are correct. I hope that the notification will also inform the pensioner very clearly what he or she must do if they are concerned about any of the details. I support this amendment.

Baroness Barker

I support the noble Baroness, Lady Turner. I do so because the amendment affords an opportunity to take issue with something the Minister said at the first day of Committee stage. She indicated that it would be a source of relief to many pensioners that these complex calculations will be done by the department. I am sure that it will be given some of the examples which the Minister gave us on an earlier occasion.

However, I am not sure about that in practice. I believe that there is a danger of likening pensioners to other claimant groups and I am not sure that that is always correct. A number of pensioners worry immensely about benefits and what they receive. That worry is aggravated by the fact that most of them know that they will always be on a low income. Therefore, they worry a great deal that an over-calculation has been made and they will not have extra income to put that right. Therefore, I believe that there is an additional reason besides those already cited by the noble Baronesses for reassuring pensioners that they are receiving what they are entitled to. For that reason I support the noble Baroness, Lady Turner.

Baroness Hollis of Heigham

The amendment of the noble Baroness, Lady Turner, has received support from both Opposition Benches. I approve of it too because that is exactly what we are going to do and what we are already empowered to do under the decision-making Act. The only question is whether we put redundant words on the face of the Bill. There may be an argument for doing that, but it will not change anything. The parliamentary draftsman does not like adding redundant words.

Amendment No. 58 seeks to ensure that where a change in a pensioner's income from a second pension, annuity contract or capital affects their entitlement to pension credit, the Pension Service will inform the pensioner of that change and its effect.

I agree that the Pension Service must keep pensioners fully informed of their pension credit entitlement and the effect that any changes in circumstances have on that entitlement. As I said, for the vast majority of pensioners we shall set assessed income periods, usually for five years, during which only limited significant changes—for example, the death of a partner—would need to be reported.

As I said, as part of our drive and in order to reduce intrusion we will automatically take into account predictable changes such as benefit changes and the annual increase in second pensions such as we have just been discussing. Details of these will be gathered in the five-year period.

Where there is a change in the level of pension credit entitlement, the Pension Service will send a letter to the pensioner with an explanation of their entitlement prior to and following the change. This will provide—this may help the noble Baroness, Lady Barker—a detailed breakdown of the change and its effect. This should ensure that pensioners understand the change when their payment is altered. That is consistent with the arrangements for handling changes to pensioner's entitlement at present.

Obviously, we have to ensure that pensioners continue to receive their full pension credit entitlement and that if it is reduced, they can ask for it to be recalculated. That is the substance of the redundant words. Pension credit decisions will fall within the existing legislation on notifying decisions. Section 12(6) of the Social Security Act 1998, which I am sure that Members of the Committee will instantly recall, and the regulations made under it—the Social Security and Child Support (Decisions and Appeals) Regulations 1999—already provide that a person must be given a written notice of decisions which are appealable. That existing statutory obligation will be applied to pension credit by Clause 11 and Schedule 1 to the Bill. So the Pension Service is already obliged to provide what is sought through the amendment under the established legal and operational arrangements that I have outlined. For that reason, I hope that my noble friend and the Committee will agree that this entirely well-intentioned amendment is unnecessary.

Baroness Turner of Camden

I thank my noble friend for that explanation. I still think that there would be no harm in writing that provision into the Bill, but in view of her positive response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 59 not moved.]

Baroness Noakes moved Amendment No. 59A:

Page 5, line 36, leave out subsection (8).

The noble Baroness said: This is a probing amendment. I have read Sections 9 and 110 of the Social Security Act 1988 to try to understand what Clause 7(8) is intended to do, but I must confess that I am none the wiser. The Explanatory Notes say only that nothing in the Bill will affect the powers of the Secretary of State to revise decisions under Section 9. My question to the Minister is: in what circumstances can the Secretary of State use the Section 9 powers to revise a pension credit decision under the Bill? Can they be used to reduce an individual's pension credit? Can they override the setting of an assessed income period? In the cause of enlightenment, I beg to move.

Baroness Hollis of Heigham

Amendment No. 59A would severely undermine the department's ability to recover overpayments. The provision as amended would prevent the decision maker in the local office revising the original decision regarding the claimant's retirement provision if, for example, that decision was based on ignorance of a material fact caused by the fraudulent, deliberate or negligent conduct of the claimant. Under current rules, an overpayment is calculated from the date on which an incorrect award was made, or on which an award became incorrect due to a change in a person's circumstances. Where benefit has been overpaid as a consequence of a person's failure to disclose, or misrepresentation of, a material fact, the department has always sought to recover the amount overpaid. Indeed, not to do so would be contrary to government accounting procedures which require departments to try to recover debts where it is cost-effective to do so.

The Committee will be aware that a person in receipt of the minimum income guarantee has an ongoing obligation to notify the department of any change in their circumstances. However, pension credit recipients, once the five-year period has begun, will have to notify only major changes. These include when a person becomes a member of a married or unmarried couple, when a person loses their spouse, when a person attains the age of 65, or. where the claimant is a member of a married or unmarried couple, the other member attains the age of 65. The claimant is not obliged to report changes in retirement provision during the assessed income period, though he or she may report such changes if they would result in an increased entitlement to pension credit. As I have said, it is a win/win for pensioners.

That simplification will ease the burden on claimants to report every change as it happens. But—and this is where the amendment would bite—it is important that the claimant gives us accurate and full information at the start of the claim, as that will be vital to establish not only the correct level of entitlement but whether the five-year period is appropriate. If there are obviously going to be fluctuations during the next year. the five-year period will kick in only when we have a reasonably reliable income forecast. Equally, at the end of the current assessed income period, the same considerations will apply.

As drafted, the amendment would effectively curtail the department's ability to recover overpayments of pension credit where there had been an incorrect assessment of a person's retirement provision at the start of an assessed income period—where the overpayment may have arisen as a result of fraudulent omissions on the part of the pension credit recipient or their partner.

For example, Mr X might, at the start of his pension credit claim, deliberately conceal from us the fact that he has two separate occupational pensions. Let us for the sake of argument say that he told us that he had only one occupational pension, and the decision maker decided to set a five year assessed income period. Mr X would be overpaid, for obvious reasons. If the existence of his second occupational pension were discovered at the end of his assessed income period, the amendment would mean that the decision maker could reassess Mr X's entitlement only from that point in time. He could not go back to the original decision, even if it were based on a calculated deceit, revise it and seek to recover the overpayment. In effect, sanctions would be heavily undermined. Such omissions, deliberate or otherwise, do occur. I am sure that none of us would wish to encourage such behaviour.

Our proposed policy for pension credit is that where an overpayment occurred as a result of a person's failure to disclose, and therefore the entitlement decision was based on a mistake as to a material fact, the claimant would be liable for recovery from the day on which the overpayment occurred. The Government want to be consistent. Were we to accept the amendment, it would create a disparity in the way in which the department treats overpayments of pension credit that arose due to a mistake in the calculation of a person's retirement provision compared with the treatment of overpayments resulting from any other circumstance, such as a non-dependant leaving the household or the repayment of an outstanding mortgage loan. The local decision maker would be able to revise a decision where the claimant misrepresented a fact about his household composition, but not where the claimant had misrepresented a fact about his retirement provision. I am sure that the noble Baroness would accept that that would be absurd.

To put the provision in statistical context, in the current year the department has sought recovery on 25,000 overpayments from people aged 60 and over receiving MIG. If the amendment were to be accepted, we could not do so in future—or not substantially—and there would be a net loss to the department of £20 million. Depending on when the claimant reported the change, we would be able to pay any other arrears.

I hope that the noble Baroness will accept that our proposals are reasonable and that the amendment would be an invitation for people to misrepresent incomes and that we would have no means for recovery. Obviously, the vast majority of pensioners try to be as truthful as they can. Sometimes mistakes occur in error, but sometimes we know that they are deliberate. We need the currently available sanctions to continue to operate.

4.15 p.m.

Baroness Noakes

I am grateful to the Minister for that explanation and my enlightenment. Will she clarify one point? She spoke throughout largely in terms of fraudulent misrepresentation. The powers apply to any overpayment where the facts are incorrect, whether because of error or oversight. There is no gradation. The powers will allow the Secretary of State—or the local office—to revise whenever there is a change, for whatever circumstance.

Baroness Hollis of Heigham

Yes, if money has been paid in error, the department has an obligation to seek to recover it. I know from experience that where the department may in part be responsible for an error, it tries to take as sensitive an approach as possible in the circumstances, especially in the case of pensioners, disabled people, people with a mental health problem, and so on. If we do not have such a power, the problem is not so much that there may be an innocent error as that there may be deliberate cheating, which is an entirely different situation.

Baroness Noakes

In the light of what the Minister said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 60:

Page 5, line 39, at end insert— "( ) Where a recoverable overpayment of state pension credit has occurred as a result of an error, however caused, in the determination of the amount of an element of the claimant's retirement provision, the amount recoverable shall be limited to the amount overpaid in a period of 12 months or the assessed income period, whichever is shorter."

The noble Baroness said: The amendment covers similar ground to that which we have already discussed. It provides that where a recoverable overpayment of state pension credit is the result of an error, the determination of the amount recoverable should be limited to the amount overpaid in a period of 12 months or the assessed income period, whichever is the shorter.

Pension credit entitlement is fixed for a period of live years, unlike some other benefits. A relatively small weekly overpayment for which the claimant is held responsible may result in a demand for a very large repayment. The amendment therefore proposes that, in such circumstances, only 12 months' overpayments should be recoverable. I hope that my noble friend will feel that there is some justice in that request, because we are talking about a period of five years, rather than a much shorter one, as in other circumstances. I beg to move.

Baroness Hollis of Heigham

I can give my noble friend Lady Turner of Camden a fairly full answer, and I shall return to one of her points. However, I wonder whether she really needs me to, given the discussion we have already had. What she is saying is that if at the outset of establishing a five-year claim someone deliberately misrepresents their income, and we do not learn that they have done so until five years later, we could recover only one year's worth of the payment obtained by that deliberate cheating. I am sure that that is not what my noble friend intends, but that is the implication of the amendment. I hope that she will not pursue that.

The amendment would also produce unfairness of treatment. I shall give the Committee an example. Mr A is 65. He has a partner who is 58, who has irregular and intermittent earnings, which prevents our setting an assessed income period. Mr B is 65 and has an assessed income period in force. Both misrepresent the correct amount of their second pension at the start of their respective claims. In both cases, we discover the misrepresentation, say, two years or four years into their claims. In the first case, we would take steps to recover all the overpayment, as Mr A does not have an assessed income period, because his partner's earnings are still fluctuating. However, in Mr B's case, we would be restricted in our recovery of overpaid pension credit to 12 months.

For those reasons, the advantage that claimants would gain by misrepresenting, knowing that once they were past the 12-month period only the money for 12 months could be clawed back, arid, secondly, the discrepancies that would be created between those who had partners below the age of 60—for women—who might still be in the labour market earning a regular income in which case we could recover the money, whereas, if someone had a partner of pension age and a fixed period, we could not. I hope that my noble friend will not pursue the amendment.

Baroness Turner of Camden

I thank the Minister for that explanation, but we are not talking about fraud in the amendment. We are talking about an overpayment that has arisen as a result of an error, not because of a dishonest claim. We tabled the amendment because an error could occur, and a repayment period of up to five years could be rather a heavy commitment for a pensioner. In view of what the Minister has said, I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Clause 8 agreed to.

Clause 9 [Duration of assessed income period]:

Lord Hodgson of Astley Abbotts moved Amendment No. 61:

Page 6, line 28, leave out "5" and insert "3"

The noble Lord said: My noble friend Lord Higgins said how much the debate would be illuminated by the presence of regulations, so that we could see the practical implications of what we are discussing. I may have missed them but the noble Baroness. Lady Greengross, put down half a dozen helpful Questions for Written Answer, to which I have not yet seen replies. I would be grateful if they could be made available before Report, because they illuminate several of the issues that we have discussed tonight and at the prior sitting of the Committee. The amendment would reduce the period from five years to three. It takes us over ground covered in the context of recent amendments. I do not wish to weary the House with a long further discussion of the issue.

We live in a period of extreme financial volatility. Although deemed income—the concept that is the centrepiece of the Bill—does something to damp down that volatility, it is at its most beneficial to pensioners at a time when interest rates and returns on savings are falling, as they will receive the pension credit on the higher amount rather than the lower. However, as we know, what goes down will eventually come up again. Those circumstances are less advantageous for them.

The Minister talked about the need to break with the weekly report. It is quite a big move to go from a weekly report to a 260-weekly report. I would hope that there might be something in between. I may have misunderstood the exchanges that have gone on in the past 45 minutes. The Minister talked about a win-win situation for pensioners in that they can always apply for a reassessment during the five-year period, but I am concerned that many of them will not. I am not clear as to how they will be notified or encouraged to make that reassessment at a time of rising capital values on which they could get a higher pension credit. It is an extremely complicated piece of legislation, and we have spent a great deal of time getting our mind around it. I fear that many people will just take the money and say, "Thank goodness". It will be hard for them to work out precisely what they are entitled to, particularly if their savings have, in time, increased in value in which case the deemed value that they will get will be rising as well.

Above all, it is the least sophisticated who will be most affected, those who most need our help and protection. Wherever possible, we should keep in touch with reality. The Bill is full of assumptions—the first £6,000 has a nil return, the next amount has 10 per cent and so on—but we should try to keep people who are in receipt of the credit in touch with reality. Above all, we should try to protect the less sophisticated members of our society, who may be disadvantaged.

I am not sure that I have this exactly right, and the Minister may be able to tell me that people will be told clearly when they are being disadvantaged. If they are not, if it is not absolutely clear, a three-year period of assessment would have a better effect in ironing out the volatility of financial markets without taking us back to the weekly assessment, with which, I accept, the Minister wishes to break. I beg to move.

Baroness Noakes

We are not convinced that five years is the right period, for the reasons that my noble friend Lord Hodgson of Astley Abbotts has adduced. He made a powerful case for a shorter period, and I hope that the Minister will consider it. Whether the assessed period is three years or five years, the Government should be wholehearted about it. In speaking to Amendments Nos. 63, 64 and 65, which are grouped with Amendment No. 61, 1 would like to outline a different approach.

Amendment No. 63 would remove subsections (2) and (3). Subsection (2) allows the Secretary of State to specify a period of shorter than five years or not to specify one at all if the claimant's income is not expected to be typical. A pensioner will be given the prospect of a five-year settlement only to have it whisked away at the whim of the Secretary of State or, in fact, the local official. We cannot see that that is necessary. If the policy is five years, why not just stick with it? There are several other powers to reopen cases, to deem increases or deal with the issue in other ways.

Amendment No. 64 tackles subsection (4), which sets out the life events that lead to an assessed income period coming to an end. That is fine, but why do the Government need a power to override that in prescribed circumstances? Amendment No. 64, tabled on a probing basis, would remove that power. I shall be interested to hear from the Minister why she thinks that the Government need it. Similarly, Amendment No. 65 would take away the power in subsection (5) to regulate for yet more cases in which an assessment period comes to an end beyond the life events specified in subsection (4). If the Minister thinks that the power is necessary, I should be interested to hear about the cases in which it might be appropriate.

4.30 p.m.

Baroness Hollis of Heigham

I shall do my best. In response to the noble Lord, Lord Hodgson of Astley Abbotts, I would say that, at the end of the day, we believe that five years is the right period. Our research shows that, after the first year or so of retirement, there is relatively little change in income that cannot be predicted or built into the retirement pension situation.

The noble Lord said that there was one thing that was unpredictable—growth in savings, given capital markets and so on. I am sure that he is right, but I must make two points. First, 85 per cent of those on pension credit have savings of less than £6,000 and need not report anything to us. As the noble Lord knows, we could have gone for a much lower deemed return from capital if we had not had that first tranche of exempt moneys. However, we listened to representations from Age Concern, Help the Aged, CABs and other organisations—I hope that I am not attributing views to them improperly—which stated that they would prefer to take out of the system the vast majority of those pensioners who do not make any claims to financial sophistication. That we have done.

The noble Lord pressed me on the question of how those pensioners holding higher capital—perhaps because their capital has grown—would know that that might lead to a higher element entitled to reward. Pensioners will be notified each year at around the time of uprating of their pension credit entitlement, how it has been worked out and how and when they should let us know about any changes. I have not consulted on this, but I would be happy to ensure that, closer to the time that the provisions come into effect in October 2003, examples of the draft letters are placed in the Library so that noble Lords can reassure themselves of their explicit, transparent and simple qualities.

It is my experience that all such communications tend to be drawn up in conjunction with the relevant organisations such as Help the Aged and Age Concern because it is in everyone's interests that the situation is made clear.

Perhaps I may turn to Amendment No. 63, spoken to by the noble Baroness, Lady Noakes, which seeks to remove the power of the Secretary of State to set and assess an income period of under five years or not to set one at all. The point of the subsection is because often, during the first year, there may be irregular earnings or an unpredictable income. The pensioner will then not be in a position to tell us what they expect their income to be. For that reason, we accept their income for one year and then we undertake the five-year assessment once their income has stabilised. That is the reason for the power and perhaps I do not need to explain it in any further detail. Amendment No. 64 would have the effect of always bringing the assessed income period to an end, with no exceptions, in circumstances where the composition of the household changed. The reason for the power is that it could be that one of the changes does not result in a change of income or the appropriate minimum guarantee—for example, where a pensioner does not receive an occupational pension on attaining the age of 65. In that case, it would be wrong to stop the assessed income period, thereby reexamining the pensioner's financial circumstances and removing them from the advantage of having their income fixed for a five-year period, when they know that basically what we are dealing with is RP rising to the £100 fulcrum figure.

We therefore intend to prescribe in regulations that such a situation should not end the assessed income period and that is the purpose of subsection (4) as drafted. I believe that, in all of these circumstances, our changes work to the advantage of the pensioner.

Amendment No. 65 would remove the power to set out in regulations the times at which or the circumstances in which an assessed income period would end. I have already described those, which cover not only changes in household composition but also include situations where pension credit entitlement ends. That could happen. for example, where the pensioner and/or their partner went to live abroad permanently. A further example could be where a partner, aged under 60, of a pensioner becomes entitled to a social security benefit which is sufficient to increase the couple's income above the pension credit upper limit. I cite here contribution-based JSA or 113. Changes could also take place which, while not ending pension credit entitlement, could produce a significant change in the pensioner's overall income stream—for example, if the younger partner of a pensioner starts work. If that were the case, it would be necessary to stop the assessed income period so that the amount of earnings could be regularly checked until a consistent pattern could be established.

At the moment, all parties are reasonably confident that, once stable incomes have been established, the five-year period can kick in. But there are circumstances above and beyond the re-formation of the household, either through a new relationship or if someone dies—one partner could go into hospital on a permanent basis, or move into long-term care—which might affect the moneys to which they would be entitled. We need powers in the regulations to meet those circumstances.

Perhaps I could enlarge on some of the examples requested by the noble Baroness, but I hope that I have now sufficiently addressed her points.

Baroness Noakes

I thank the Minister for her extremely helpful response. Can she estimate roughly how many assessed income periods are likely to be under five years; namely, how often these powers of variation are likely to be used?

Baroness Hollis of Heigham

We expect something in the order of two-thirds of all pension assessments to run for the full five years. Within the one-third that will not will be included those which may experience a delay of a year or so. For example, if someone is 65 years old, but their partner is only 57 and has several years left to work, it may be several years before a stable income is established. There is also the possibility that some pensioners' incomes themselves may change, rising or falling, and that they would wish to report those changes.

We are expecting, more or less from day one, that two-thirds of all pensioners will be entitled to the five-year assessment period. The reasons why the remainder will not be entitled stem from a variety of causes.

Lord Hodgson of Astley Abbotts

I am grateful to the Minister for her full comments. I do not think that I heard her respond concerning the Questions for Written Answer tabled by the noble Baroness, Lady Greengross.

Baroness Hollis of Heigham

I do apologise. The Answers to those Questions were tabled yesterday.

Lord Hodgson of Astley Abbotts

I thank the noble Baroness. This was of course a probing amendment. As I said earlier, it covers some of the ground that we have discussed on previous occasions. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Barker moved Amendment No. 62:

Page 6, line 28, at end insert— "( ) Where a claimant is in receipt of housing benefit or council tax benefit (or both), regulations may provide for the pension credit assessed income period to apply also to such benefits."

The noble Baroness said: On the first day in Committee we touched on the matter of housing benefit in relation to Amendment No. 22 moved by the noble Lord, Lord Higgins. This amendment is slightly different. It deals with the vexed question—I think it is right to call it that—of housing benefit and council tax administration.

In 1998, 2.6 million people aged 60 or over were in receipt of council tax benefit, while 1.8 million received housing benefit. Currently housing benefit and council tax benefit awards last for up to 60 weeks, although at present there is no such requirement for renewing MIG claims. For both of those benefits, any change in circumstances, such as even a small increase in income, must be reported and the benefit then reassessed. The noble Baroness has just told the Committee that the period for assessment with regard to pension credit will be five years.

The purpose of the amendment is to seek to establish whether there will be a similar assessment period of five years with regard to housing benefit and council tax benefit. In our debate on hospital downrating, Members of the Committee referred to the severe problems faced by many pensioners, in particular those on very modest incomes, when their housing benefit and council tax benefit is withdrawn. The Minister will be aware that the reason is that, while most benefits are administered by the department of the noble Baroness, housing benefit and council tax benefit are administered by local authorities.

In view of all that has been said, it is a fact that pensioner circumstances do not change that much. An alignment of the two would make sense and I hope that the department would be able to accept such a proposal.

On Thursday last the noble Baroness stated at col. 1632 that:

"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".—[Official Report. 24/1/02; col. 1632.]

I wonder whether the noble Baroness may come to regret making that statement, or whether it may return to haunt her. It is possible to deduce from it that there must be some areas of the country which the noble Baroness has not gone round to visit lately. In particular, as I pointed out on the earlier occasion, the administration of housing benefit in some London boroughs is an absolute scandal.

We on these Benches feel that aligning the two elements would not, in most cases, make a great material difference. If a substantial change took place with regard to a person's eligibility for housing benefit, it would most likely be caused by one of those other factors already outlined by the noble Baroness, such as the death of a partner or a move into long-term care. That is the reason behind our wish to move the amendment. I beg to move.

Lord Higgins

I think that we should keep a score sheet to record which Member of the Committee can rise to their feet with greater speed. At present I believe that the score is two to one in favour of the noble Baroness.

In proposing this interesting amendment, the noble Baroness, Lady Barker, has suggested that housing benefit provisions might come back to haunt the Minister. Indeed, I think that they have been haunting her for some while. In March 1999, Harriet Harman said that proposals for reform would be brought forward shortly. In June 1999, the Secretary of State said, the present housing benefit can't continue". On 28th June 1999, a Treasury source said that housing benefit reform would be, the biggest project facing the Treasury this year". And, of course, the Labour Party manifesto had a large paragraph on this particular issue. So, in the context of trying to integrate the two systems, perhaps the Minister can give some indication of where we are in regard to housing benefit because there is fairly general agreement that a number of its aspects are not particularly good.

On an earlier amendment, the Minister passionately advocated the new five-year proposal—of which, as she knows, we are in favour as a broad principle. We shall have qualifications but, generally speaking, we are in favour of it. As the noble Baroness pointed out, in most circumstances—but not all—it may be a win/win situation for pensioners.

But, having said that, there is a considerable argument for saying that arrangements should be integrated between housing benefit and the state pension credit. As the noble Baroness who moved the amendment said, if we introduce a five-year system for state pension credit, the situation will not be the same with regard to housing benefit. If the Minister wants a system whereby pensioners know where they stand over a five-year period, there is a case for integrating the two parts of the social security system. Housing benefit and council tax benefit are among the relatively stable elements of the component parts which together make up the total benefit that any individual may receive.

However, we all know that there are real problems. Even now there are different claim forms for housing benefit among different authorities—we have been arguing for a long time that they should be uniform—and the information exchanged between the Government and local authorities is more in one direction than the other. We will need to establish to what extent the local authorities will be providing the Government with information relevant to the pensions credit, and to what extent the information the Government have on that is in turn related to housing benefit. There is a strong case for applying the five-year principle to all forms of benefit. We shall listen with interest to what the Minister has to say about that.

My understanding is that the period for housing benefit is 60 weeks as opposed to five years—there is quite a big difference—and some degree of uniformity is necessary if we are to achieve the Minister's declared objective of ensuring that people in receipt of these benefits know where they stand over a five-year period.

Baroness Hollis of Heigham

I am not sure whether the noble Lord is seeking to tempt me into a general debate on housing benefit and its administration. If so, that is for another time and place, but not on this Bill. He knows that we are seeking to reform administration; he knows that a major reform of housing benefit policy has to follow, or be associated with, the reform and restructuring of social housing rent—and that is a 10-year job or longer. That point has been made on previous occasions.

Lord Higgins

Is the Minister saying that, despite the statements in the manifesto, nothing will happen for 10 years?

4.45 p.m.

Baroness Hollis of Heigham

I did not say that. I said that a major overhaul of housing benefit policy would have to follow. For example, it has been proposed to us that there should be a flat rate housing benefit incorporated into IS or JSA. Those kinds of moves, if appropriate, would have to follow a major restructuring of rents. As I have expressed on many occasions in your Lordships' House, we are engaged in significant reforms of housing benefit administration—everything from not sending on the redirect giros to bringing in fraud teams to help local authorities and so on.

As the noble Baroness explained, Amendment No. 62 seeks to introduce powers which would enable the Secretary of State to make regulations allowing the assessed income period set in pension credit to be applied to housing benefit and CTB. As the noble Lord, Lord Higgins, reminded the Committee, those payments are currently restricted to a maximum of 60 weeks. At the end of that period, local authorities require a new claim. This arrangement is intended to ensure that changes in circumstances do not go unreported. The effect of the amendment would be to allow, in pension credit cases, for the 60-week period to be replaced by the pension credit assessed income period.

I am glad that this amendment gives me the opportunity to describe in more detail the arrangements we intend to put in place for pensioners receiving pension credit and housing and council tax benefits, which affects some 8 per cent of pensioners. Our aim is to streamline the delivery of benefits to pensioners. The noble Baroness, Lady Barker, is right. There is no point in reducing the requirement for pensioners to report changes in pension credit, on the one hand, but continuing with the current system of annual claims in housing and council tax benefits on the other. There is an opportunity here to make the administration of housing and council tax benefits easier for local authorities, something which I am sure they would welcome.

We have concluded that where there is an award of pension credit there is no need for local authorities to continue to make regular inquiries about income. Where the guarantee credit is in payment, local authorities will award full housing or council tax benefit automatically. Until the Pension Service tells them otherwise, they will continue to pay benefit. In savings credit only cases, local authorities will need to carry out a full assessment, but we are making an amendment to the Social Security Contributions and Benefits Act via paragraph 3 of Schedule 2 to the Bill which will allow local authorities to use the Pension Service's assessment of the claimant's income for the duration of the assessed income period. This figure will be up-dated throughout the assessed income period to take account of the annual increase in benefits arid increases in second pensions.

I am pleased to tell the Committee that the effect of all this is that we will be doing exactly what the amendment seeks to do. Local authorities will still need to continue to review cases regularly—most tenants have a yearly rent increase and private sector tenancies are subject to the rent officer arrangements—but their inquiries will be limited to matters which concern rent, not the claimant's income. In other words, the claimant's income after the assessed period will be taken over into the housing benefit assessment.

We are discussing the shape of these new arrangements with local authority associations before finalising the detail. It is right that we should do so in order to give local authorities the opportunity to work with us on the development of those procedures.

I hope that the noble Baroness is not only satisfied but thrilled, delighted and overwhelmed. I hope she feels that we have gone well beyond her expectations in seeking to ensure that the rules in pension credit and housing and council tax benefit schemes work together. We are adopting a slightly different approach from the one in Amendment No. 62 because we consider that our approach will minimise the burden on local authorities. However, I have every confidence in saying that we believe the outcome will be the same. So, on the basis that the noble Baroness is getting the substance of precisely what she asks, I hope that she will feel able to withdraw her amendment.

Lord Higgins

Obviously I shall leave it to the noble Baroness to reply, but I wish to raise one point. What the Minister has said sounds extremely helpful—and, subject to looking at the small print, we welcome it—but does this give us an opportunity to standardise the claim forms used by local authorities and, indeed, the claim form used for the state pension credit? It is absurd that we should have this multiplicity of forms in different local authorities.

Baroness Hollis of Heigham

We are trying do this and we have issued model forms which we are encouraging local authorities to adopt. I cannot say how far we have reached in that regard, but I shall find out and let the noble Lord know. He is right: the more transparent, simple and similar are the arrangements, the better. We started off with every local authority having its own forms. We are now seeking to establish model forms. Let me see how far that has advanced.

Baroness Barker

I thank the noble Baroness for her extremely helpful reply. I am not sure how to characterise my emotions at this precise moment, so perhaps I should reserve my position until I have had time to read Hansard. If I said that I was mildly chuffed, would that be parliamentary language?

Joking apart, I have tried to suggest to Members of the Committee that anything that can be done to simplify housing benefit is extremely welcome. The noble Baroness is right to head me off at the pass from having an extensive debate on housing benefit. but it is a source of untold misery for thousands of people. I very much welcome the general thrust of the Minister's remarks. The five-year periods for major benefits that will have a profound effect on people's lives are to be welcomed. I shall go away and no doubt I shall be even more pleased when I read the Minister's remarks in Hansard in detail. I thank her very much I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 63 to 65 not moved.]

Clause 9 agreed to.

Clause 10 agreed to.

Baroness Barker moved Amendment No. 66:

Before Clause 11, insert the following new clause—

"BENEFIT CHECK

1. (1) The Secretary of State may by regulations provide for the pension service to offer a benefit check to all people who have attained the qualifying age for state pension credit.
2. (2) In this Act "a benefit check" means information about possible entitlement to state pension credit to be provided by
   1. (a) telephone;
   2. (b) personal visit to the pension service;
   3. (c) home visits; and
   4. (d) other ways as deemed appropriate."

The noble Baroness said: I find myself in the same position as the noble Baroness, Lady Greengross, the other night in being uncertain of what is about to happen.

The amendment refers to benefit checks, which is in the same broad area that we have been discussing with regard to up-take and people's ability to make claims. There was a degree of scepticism on day one of our Committee proceedings about the target for up-take of this new benefit. The Government have been extremely ambitious in setting themselves a target of 100 per cent take-up by year two. Past experience of take-up of income support and MIG shows that that figure is highly ambitious.

Members of the Committee have talked extensively about the barriers to claiming, not least of which is the complexity of the forms. The Minister spoke at some length about efforts to simplify such forms. She referred earlier to 70 per cent of pensioners who choose to make inquiries by telephone, which takes us into the workings of the new Pension Service. I declare an interest in that I am speaking for the other 30 per cent who will not make claims in that way.

On such complex proposals it is ambitious to assume that people will feel that they have the wherewithal to begin the process of making a claim. These matters are extremely complex. There are, and will continue to be, pensioners with whom it will not be appropriate to deal by telephone. It will be better for them to have a benefit check in their own homes or in other ways. In saying that, I recognise that one of the main aims behind the proposals is to stop making people do something that they hate, which is spending hours and hours in really—

Baroness Hollis of Heigham

Grotty.

Baroness Barker

The noble Baroness says, "grotty", but I would say downright unpleasant housing benefit offices. I welcome the measure, but some people for reasons of frailty—both physical and mental—language, and other difficulties, need to be dealt with in other ways.

I wish to raise another matter, which although it is not specific to the Bill, is related to it. I refer to the position of people in residential and nursing care homes, especially those who are self-funded in such homes, who are likely to be spending their savings at a fast rate. I raised this subject at Second Reading. By definition, they are likely to be fairly frail people. There is a raft of important issues, not least of which is the effect of pension credit on care charges, and so on. The circumstances of people in residential care are the most likely to have changed. There are also those who are not comfortable using the telephone. Perhaps that will change over time. I remember the noble Baroness saying the other day that the pension credit is very much for pensioners of the future and that current pensioners "are where they are". That may be, but circumstances change, and a system that endeavours to be fair, as this one does, should be flexible enough to cope.

It may sound mad to many people, but the absence of a local office to attend, which is likely under the proposals, may cause pensioners great concern. For all those reasons, and because I hope that the Government's aim of 100 per cent is not unrealistic, I beg to move.

Lord Higgins

This is an important amendment and refers, to a large extent, to take-up, although later amendments also refer to that issue. I shall defer some of my remarks until we reach that point.

The amendment of the noble Baroness, Lady Barker, outlines a number of ways in which additional information might be provided to pensioners, such as by telephone, home visits, and so on, but the front end of the issue is the claims form. We have discussed claims forms in previous debates on social security. One of the notable issues was that the size of the present form had been greatly reduced, but the explanatory memorandum had increased proportionately, so that the total number of pages is almost exactly the same.

At all events, we are now engaged in a vast extension of means testing, and about 5 million people who were not previously in the scheme are now likely to come into it. As has already been said, a number of these people are somewhat above the previous benefits level and have never been involved with the scheme at all, so will be joining it for the first time. It is extremely important that the form should be sensible. Perhaps the Minister will let us have a copy—I assume that it has already been drafted—to give us an idea of how it compares with the previous, difficult ones.

Given the huge increase in the number of people who will be claiming, will staff numbers increase proportionately? Otherwise, it is unlikely that the provision mentioned in the amendments will be carried out adequately. The latest report on income-related benefits estimates of take-up in 1999-2000 show that take-up is worse, if anything. The report shows that last year 500,000 eligible pensioners were not receiving income support and that this year the figure has risen. For housing benefit, the number has increased from 150,000 to 210,000. For council tax benefit, the figure has increased from just over 1 million to almost 1,250,000. The situation is becoming worse. Indeed, according to that report, the level of take-up is not improving. We have a real problem in this respect. The Government tend to announce that extra sums of money will be devoted to this or that particular benefit, but, in the event, the amount actually distributed is likely to be significantly less because of the take-up problem.

I stand open to be corrected, but I believe it is right to say that it is not the Government's target of 100 per cent: that 100 per cent is the assumption which has been made in assessing the eventual cost. We know that the costs will not be anywhere near 100 per cent. Therefore, the impression given by mention of these vast amounts of money should be somewhat modified to allow for take-up. Having said that, we must all hope that the actual arrangements made for take-up of the state pension credit will be a great deal better than what we fear could he the outcome. No doubt the Minister will wish to comment on my remarks.

5 p.m.

Baroness Hollis of Heigham

The noble Lord, Lord Higgins, is entirely right to say that the 100 per cent figure is not a target. 1 t would be brilliant if that were to happen, but we all know that there is incomplete take-up on all benefits. It is a statement about the cost designed to ensure that that money is available.

However, I take issue with the noble Lord on a particular phrase that he keeps using. Each time I try to come back at him and each time he refuses to move towards my views—I believe that that is the right way to put it. He speaks about a "vast extension of means testing". It simply will not do to use that phrase when talking about pension credit. We are, for the first time, encouraging those pensioners who have made some effort to help themselves to derive some benefit by keeping the bulk of those modest, small occupational pensions, as opposed to seeing them wiped out by MIG. The noble Lord knows perfectly well that it is precisely because the level of income support, the old MIG, is sufficiently generous between retirement pension and the MIG level—that is, £77 and £100—that people with small pensions who are trapped between those two figures see no gain from it. They will now see a reward in decency and fairness for their own activity. Therefore, to talk about a "vast extension of means testing" is a Stalinist version of Orwellianism, which I hope the noble Lord will not repeat in future.

Lord Higgins

Members on this side of the Committee have accepted that a considerable amount of extra money will go to people with the same pension; we do not dispute that fact. However, the point that I am trying to make in the present context is that a large number of extra people will fall within the means testing system. That is not open to dispute. No doubt the Minister can give us the exact figure. If it is 5 million, or whatever, compared with the present number of those subject to means testing—namely, over a million or less than 2 million—allowance must be made for the number of staff engaged in the process if the take-up target is to be achieved. We are simply asking whether it is the case that the number of staff will he increased proportionately.

Baroness Hollis of Heigham

The number of staff will be increased by about 800 over existing staff levels during the take-up period. I ask the noble Lord not to use that vocabulary about the extension of means testing. We have just—have we not?—spent the past hour discussing the five-year assessment period. Those opposite wish to cut that down to three years, two years, or even one year. That would increase means testing. We are trying to break the link that requires a weekly means test and substitute it with a five- yearly assessed income period. To call that a "vast extension of means testing" as a reward for such saving, as though we were simply writing large the existing system to 5 million more pensioners, is both an unfair and unreasonable use of words.

There is a serious point behind this argument; indeed, I sometimes take on this point with my noble friends sitting behind me. If one uses such words, they can become a self-fulfilling prophecy, because pensioners will not claim the benefit if the language used suggests that this is about means testing, charity, invasion, and so on. We are trying to promote a language of entitlement—five-year assessments and targeting—by which we can remove stigma and increase information. In future, I trust that noble Lords will join me in seeking to achieve the same objectives.

Amendment No. 66 seeks to ensure that when customers approach the qualifying age for pension credit, initially age 60, they can get access to information—or "a benefit check", as the noble Baroness describes it in the amendment—about entitlement to pension credit. Like the noble Lord, I am grateful to the noble Baroness for raising the issue. It is a key question and reflects precisely the sort of world that we want the Pension Service to deliver.

I do not need to repeat the steps that we propose to take, but the Pension Service will play a key role in ensuring that pensioners receive the entitlement that is due to them. We intend to provide a dedicated service for pensioners using modern technology, whether by phone or through the Internet, by post or by face-to-face contact. We aim to give pensioners a better service in the future by providing accurate information to help them make decisions about their future pension provision.

Many pensioners have told us that they prefer to make contact with us by telephone; indeed. about 75 per cent seek to do so. Business will, therefore, normally be done in that way. However, we shall offer alternative ways to do business with us—for example, by post, by e-mail, by face-to-face contact through our local service, including home visits, if necessary. We shall seek to do all we can to ensure the appropriate take-up, as mentioned by the noble Baroness. Obviously, the simplest way is by telephone. Most pensioners now feel comfortable with that form of contact.

The local service will also work closely with other locally-based organisations to provide information on the full range of local services of interest to pensioners through outreach and visiting activity. This will be made up of two key elements: direct local services provided by Pension Service staff; and partnership services, where our staff will work with local authorities and voluntary sector organisations, such as Age Concern, to help them in the delivery of their roles. It will take time. The first pension centre will open for business at the beginning of February, with work continuing over the next few years. It means that pensioners will be at the heart of our service.

For customers approaching state pension age, the Pension Service will seek to establish entitlement to pension credit when we are dealing with their state retirement pension. They will be offered the choice of either telephoning the Pension Service and having an agent fill in the claim form for them, after which it will be posted to them for correction. Alternatively, they can request a claim form and complete it themselves. Exceptionally, if one of our customers is unable to use our telephone, postal or e-channels, a Pension Service visiting officer can go to his or her home to establish entitlement.

We are trying to do all we can to reach out: we are working with Age Concern and Help the Aged to ensure that they have sufficient information to promote take-up. A key element is involving them in the development stage of our information products, such as forms and leaflets. I have seen some of the early drafts of the latter. I can assure the noble Lord that they are much improved. I am rather cross with myself because I did not bring examples with me today. I could have shown them to the Committee. As I said, they are much better, but they are still not the glossy, simple and easy-to-read forms that we want to see as our final outcome. We need to test these forms with experts to ensure that they meet pensioners' needs; and that is what we propose to do.

Ensuring that everyone who might be entitled to pension credit actually receives it is a top priority of the Pension Service. We have designed the new service and the benefit to be accessible and customer friendly. For that reason, I hope that Members of the Committee will agree that the noble Baroness's amendment is unnecessary. We are working both locally and nationally with organisations and local authorities. We are devising new forms and extending the telephone service, which, where appropriate, we are backing up with a home visiting service. I believe that nothing will be left undone as a result of our activity.

In conclusion, perhaps I may bounce this with the Committee: step one will be to convert existing pensioners on MIG—the 1.7 million—over to pension credit; step two, from spring onwards until 2003, will be the general advertising for other pensioners of the benefit to be paid from October 2003; and, thirdly, step three will be writing to all pensioners directly from October 2003, with claims backdated to that date—and that will include those likely to be entitled. I am so pleased to see the noble Earl, Lord Russell, in his place. He will be pleased about the final step. Finally, we are undertaking extensive research to ascertain what obstacles there may be in the way of those who, though entitled to the benefit, are failing to claim, as well as considering any efforts that we can make to overcome the problem. All of this will be backed by local partnership services.

I hope, therefore, that Members of the Committee agree—I certainly believe it—that the department is making the most extensive efforts possible to ensure that those pensioners who are entitled to it see for the first time a reward for their own savings which would otherwise be lost in the generosity of our MIG payments. I am sure that the Committee will recognise that we are reaching out in ways that are unprecedented.

Lord Hodgson of Astley Abbotts

Before the Minister sits down, will she confirm the number of additional staff? Did I hear a figure of 800? Will that be sufficient to cover the 5 million people who will be entitled to this benefit and provide the service that has been referred to?

Baroness Hollis of Heigham

Yes. At present, the minimum income guarantee is on a weekly means-tested basis. In future, that element of pension credit will be assessed only every five years.

Lord Skelmersdale

Before the noble Baroness, Lady Barker, decides what to do about the amendment—I am sure that the answer will be to withdraw it—perhaps I may ask the Minister a question. She said that many of the investigations and much of the "commerce" between the department, pensions offices and individual potential claimants will be by telephone. Does she realise that for many people on many occasions the use of the telephone is a very frustrating exercise? Will ringback be available?

Baroness Hollis of Heigham

I am delighted to welcome the noble Lord, Lord Skelmersdale, to our deliberations. I thought I was missing something. It is very nice to see him. I do not have a clue about ringback. All I can say is that it was quite a shock to me, when dealing with the Child Support Agency, that that number was among the 10 family-friendly numbers on which a discount was available. I shall see whether the same applies to the Pension Service.

Lord Higgins

Will there be toll free numbers?

Baroness Hollis of Heigham

I believe so. If I am wrong, I shall inform Members of the Committee when we next discuss the issue.

Baroness Barker

I begin by thanking the noble Lord, Lord Higgins, for his correction. I believe that I made an error. However, I was not alone in doing so. Others have come to the same conclusion about the Government's figures regarding take-up. I realise that an unprecedented number of noble Lords are present to hang on my every word. I shall endeavour to be as brief and succinct as possible.

I hear what the Minister says about the ways in which the Pension Service will work, and in particular the ways in which it will work at local level. I decline to say too much about the detail as I do not wish to stray into areas where I have a conflict of interest.

The Minister used the word "entitlement". Based on the Government's previous research on income support, the more a benefit is seen as an entitlement, the higher the claims are. The way in which the Pension Service operates must reflect "entitlement". If it does not, it is an expensive and wasteful exercise.

I could stray into a number of other areas, but I shall not. However, I want to raise a point about language and about black and ethnic minority elders. I should like to know whether we are talking about 800 full-time staff.

Baroness Hollis of Heigham

Additional full-time staff.

Baroness Barker

I trust that the composition of the additional staff will reflect the pensioner population.

I still believe that it would be helpful to have on the face of the Bill an entitlement to a benefit check. However, at this stage in the proceedings, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 agreed to.

Lord Filkin

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Lord Filkin

My Lords, before we move to the Statement, perhaps I may remind the House that the Companion indicates that discussion on a Statement should be confined to brief comments and questions for clarification.