Means Testing (Hansard, 9 April 2003)

§ Lord McIntosh of Haringey
My Lords, in May 1997 there were around 8 million benefit units—that is, 27 per cent of single adults or couples living as married and any dependent children—in Great Britain in receipt of one or more income-related benefits. The latest comparable data available are for May 2001 and show a total of 7.4 million benefit/tax units—that is, 24 per cent—in receipt of one or more income-related benefits or tax credits.
We forecast that by 2003–04 around 11 million tax/benefit units are likely to be in receipt of one or more income-related benefits or tax credits. That figure includes the child tax credit, working tax credit and, from October 2003, pension credit.
I am sorry that that is a complicated Answer but the full facts are even more complicated. If I may, I should like to place a more detailed response in the Library and send it to the noble Lord, Lord Higgins.

§ Lord Higgins
My Lords, I thank the Minister for that helpful and topical reply. Is it not clear that the Chancellor of the Exchequer is obsessed with means testing and in particular with means-tested tax credits, with the result that the system is now so complicated—the Minister confirmed that—that virtually no one understands it? Does he agree with the PAC report published yesterday that that is a major harrier to people taking up their benefits and that the Government's targets for improving take-up lack ambition? Does he also agree that the effect of all of that means testing is to deter prudent savings, with the result that, as is shown in today's Red Book, the savings ratio has more than halved since 1997?

§ Lord McIntosh of Haringey
My Lords, I did not agree that tax credits are complicated; I said that the presentation of these figures—with all of the complications about overlap, about who is in receipt and about whether income-related benefits or tax credits are involved—is complicated. The noble Lord, Lord Higgins, asked a complicated Question and he is getting as fair an answer as he can possibly get. As for the Public Accounts Committee, yes, I have seen what it said. The fact is that we have recently published a study of the take-up of benefits and we have shown a substantial increase in, for example, the take-up of the minimum income guarantee for pensioners—there has been an increase of 3 to 4 per cent for the poorest pensioners. I could—but I will not—read out the take-up figures for all such benefits. The impact of this approach is not as the Public Accounts Committee claimed.

§ Lord Barnett
My Lords, I am sure that my noble friend agrees that means testing has serious economic consequences. I wonder whether the Treasury has now decided that means testing through the tax system is more effective than through cash benefits. If so, has it done any research into those matters, and will he publish it?

§ Lord McIntosh of Haringey
My Lords, means testing is a pejorative term; it goes right back to the 1930s. I much prefer, more neutrally, to refer to income-related benefits, which is what I did. Income-related benefits cover a wide range of benefits and methods of calculation. For example, the pension credit that will come into effect on 1st October will no longer he tested on a weekly basis; it will be tested through a simple application, which could be done on a freephone number and which will last for up to five years. Under those circumstances, targeted benefits are not the menace that they were many years ago.

§ Lord Roberts of Conwy
My Lords, the Minister gave the figure for 2003–04. Could he estimate that as a percentage of the population, as was asked for in the Question?

§ Lord McIntosh of Haringey
My Lords, I was going beyond the Question and trying to be even more helpful. If 8 million is 27 per cent, 11 million, allowing for increases in the population, is more than 27 per cent.

§ Baroness Byford
My Lords, does the Minister accept that the Government were disappointed by the take-up of the tax credit system? They are spending many thousands of pounds promoting that system. Does the noble Lord also agree that the forms that people are asked to complete are very complex and very long? What are the Government doing to reduce that in order to encourage people to take up the tax credit to which they are entitled?

§ Lord McIntosh of Haringey
My Lords, the answer to the noble Baroness's last question is that we are cutting down the forms and simplifying them. The answer to the question about advertising is that it is certainly true that we have been advertising in order to increase take-up. For example, when we last had a campaign to advertise the minimum income guarantee for pensioners, by January 2003—by the end of the campaign—we had more than 250,000 additional applications and 150,000 successful applications. Such advertising works: it increases the number of targeted benefits and decreases poverty.

§ Lord Barnett
My Lords, unusually for my noble friend, he overlooked answering my simple question. What research has the Treasury done into these matters and will he publish it?

§ Lord McIntosh of Haringey
My Lords, the research was done by the Department for Work and Pensions—I happen to be answering for it at the moment—and was published on 27th March.

§ Baroness Noakes
My Lords, the Minister referred to the pension credit that will be introduced later this 225 year. Will he say what proportion of pensioners will be subject to means testing once the pension credit is introduced in October?

§ Lord McIntosh of Haringey
My Lords, if we revert again to the more neutral wording of income-related benefits and to the fact that the testing of applicability for income-related benefit will be a much simpler process than that for the minimum income guarantee, we anticipate that we will have 1.8 million people taking benefit units—taking pension credit—in October this year, rising to 2.8 million by October 2004 and eventually to about 3 million. I am not very good at working out percentages in my head and am sure that the noble Baroness, Lady Noakes, as an accountant, can do much better than I can.

§ Baroness Noakes
My Lords, perhaps the Minister will agree that the majority of pensioners will be means tested once the pension credit is introduced.

§ Lord McIntosh of Haringey
No, my Lords, I do not believe that that follows.