HL Deb 01 July 2004 vol 663 cc430-7

3.3 p.m.

Baroness Hollis of Heigham

My Lords, I beg to move that this Bill be now read a second time.

Since coming to office in 1997, we have put pensions and pensioners at the centre of our commitment to reform and modernise the welfare state. Security for today's pensioners is being achieved through a system of universal and targeted help. The result of all this help means that in 2004–05 the poorest third of pensioner households will be on average £1,750 better off per year in real terms—an extra £33 per week—compared with the 1997 system.

This simple Bill builds on those achievements. It puts in place the Chancellor's Budget promise to pay all eligible households with someone aged over 70 an extra £100 this year. This payment is a response to the concerns expressed by some of our oldest citizens who over recent years have been coping with high increases in household bills, particularly council tax bills, while living on fixed retirement incomes. We are targeting older pensioners because we know that older people have, on average, lower incomes. Pensioner couples where the man is over 70 have an average net income of almost £50 a week less than pensioner couples headed by someone under 70. Even those pensioners with private pension provision see their average income reduce the older they are. For example, a single pensioner under 70 with private pension provision will receive an average of £104 a week, whereas a single pensioner over 70 will, on average, receive £83 a week.

In addition, older people are much less likely to have income from earnings. Around 14 per cent of pensioners aged under 70 have income from earnings; this reduces to less than 2 per cent of pensioners over 70.

Inevitably, the older people are the more likely they are to live alone, managing the full cost of running their household on a single retirement income. Some 19.2 per cent of women aged 60 to 64 live alone compared to 39.9 per cent of women aged 70 to 74 and more than 70 per cent of women aged over 80.

We anticipate that around 5 million pensioner households will benefit from this payment at a cost of around £500 million. In order to guarantee that these large numbers of payments are paid quickly and reliably they will be made using the tried and tested winter fuel payment system. We will keep the process simple and transparent by mirroring the winter fuel payment rules as closely as possible. By doing this we will keep administrative costs to a minimum and ensure that the vast majority of eligible people will receive a payment automatically, without needing to make a claim, before the end of the year.

For those very few eligible people who do not receive a winter fuel payment and who will not therefore receive an automatic payment, we have put in place a very simple claims process. We will include details of the payment and how to claim it with the planned winter fuel payment publicity campaign.

The Bill also includes a regulation-making power. This will mean that, if circumstances warrant it, future payments may be made to people over the age of 60 or a subset of that group. Any regulations made using this power will be subject to the affirmative resolution procedure and so be subject to parliamentary debate in both Houses, as well as scrutiny by the Social Security Advisory Committee. We are taking this power so that we will be able to respond quickly to any future need without having to resort to further primary legislation in this way.

The Bill responds to a specific need by providing a tax-free one-off payment to our eldest citizens. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Baroness Hollis of Heigham.)

3.7 p.m.

Lord Higgins

My Lords, when I first entered your Lordships' House I was intrigued by the procedure whereby ahead of the Committee stage the Long Title was deferred. That is very different from the situation in the House of Commons where the Long Title tends to be very inhibiting. I understand that because this is a money Bill we will not have a Committee stage and that therefore that interesting Motion will not be made.

However, I have wondered what one could select as a better Long Title for the Bill than the one it has at present. I thought perhaps the "Pre-election Bribe Bill", or something like that, would be appropriate; or alternatively the "Pre-election Bribe (Failed) Bill", as quite clearly the electorate did not respond to the Chancellor of the Exchequer's peroration in his Budget Speech which gave this extraordinary handout to pensioners.

Of course, all pensioners—including myself—will be grateful up to a point, but it is wholly inconsistent with his basic policy. It is more consistent with that of my own party, which believes that it is best to go for increasing the basic state pension rather than the mass of means-tested benefits, tax credits and so on which the Chancellor has introduced since 1997. This is not consistent with the policy that he has adopted. It makes a straight hand-out to people regardless of the rest of the social security system. It is a curious situation.

The Chancellor has never moved away from a quick increase of this kind, which he hopes will be politically successful however inconsistent it may be with his own policy of targeting. I did not quite catch the noble Baroness's opening remark—I believe she referred to "universal and targeted help", although I am not quite clear how this could be so described—but certainly in a number of respects the Bill appears to be neither targeted nor universal.

I should declare an interest since I will qualify for this payment. The noble Baroness kindly sent me a long list of those who will qualify, and under what circumstances. It is actually pretty complicated, because even with a flat-rate approach, the Chancellor manages to complicate matters. Although people over 70 will benefit, people between 65 and 69 will not. We have had no explanation about why people up to the age of 69 do not qualify and those over 70 do.

The justification for this handout—I think that that is the right expression—is that people are suffering from a substantial increase in council tax and this measure will ameliorate their problem. The noble Baroness may correct me if I am wrong, but the Chancellor appears not to realise initially that this measure will need primary legislation. It is being tagged on to the Christmas bonus. However, pensioners will have to pay the higher council tax now and will not get the payment made under the Bill until Christmas, so they will have a cash flow problem.

The payment is completely unrelated to the tax and benefit system. It rather disregards the appalling take-up rate for council tax benefits. One might have thought that the Government might more appropriately deal with the problem in that way. But in that case, as in so many others, the Chancellor keeps introducing or increasing benefits when the take-up rate is appallingly low. The latest statistics, published in February, show that the take-up of council tax benefit, which might be expected to help the poorer members of the community, was only about 66 per cent to 72 per cent by case load, and 70 per cent to 76 per cent on the basis of expenditure. The take-up of benefits by pensioners is lower than that of other people, as a whole, and the take-up in 2001–02 was lower than in the previous year. Therefore, the Bill's overall approach is open to considerable criticism.

As I will benefit from the measure, I should not be so cautious, but I do not think that this is really the best way of spending the money. It has to be seen against the general increase in council tax which is undoubtedly having a substantial effect on many people and is in some ways the consequence of the Chancellor's own actions. I refer to the fourth Starred Question, asked earlier today by my noble friend Lord Peyton of Yeovil, on the effect of the change in advance corporation tax. That is one of the things that affects the position of pensions as far as local authorities are concerned. The effect of that change made by the Chancellor will be to put up council tax, yet he is making this payment in order to offset it—a most extraordinarily circular way of going about things.

It is difficult to oppose anything which helps people, but my strong feeling is that the Bill is inconsistent with the Chancellor's basic approach. It is, in many respects, a rather sordid Bill, and I do not think it is appropriate for the Chancellor to introduce it. But no doubt it will be of some help to people, even though it will do nothing to help many of those between 65 and 69 who suffer from council tax increases—indeed, it will be very discriminatory.

There are various other strange provisions in the Bill, but we will not be allowed to discuss them in detail, as this has been certified as a Money Bill. I am not the least bit clear about what steps the Government propose to take to establish, for example, that the person receiving the benefit is ordinarily resident in the United Kingdom. I do not remember whether that applies for the Christmas bonus.

Overall, since there is nothing that we can do about the Bill other than make a speech on Second Reading, I believe that we have to let go of this matter. It is a shame that we cannot amend this, even though it is a Money Bill, but that is the situation. I am unenthusiastic about the Bill, to say the least.

3.15 p.m.

Lord Newby

My Lords, this is a very curious Bill about a very curious payment. It is curious because the Government never intended there to be a Bill in the first place. It was always the intention that this payment should be made under regulations. At the last minute, the Government discovered that they did not have the power to do that, so the Bill has been rushed out to deal with that problem.

I agree with the noble Lord, Lord Higgins, that the Bill's title could probably be improved to make it more relevant in a number of respects. The second curiosity is that its ostensible and stated purpose is to help mitigate the increases in council tax which hit pensioner households particularly hard. But the terms of the payment are nothing to do with council tax. First, it will be paid to people who do not pay council tax, such as those living in households with members under pensionable age. Secondly, it will be paid to people who are already getting full council tax rebate. So the idea that the payment will help with council tax rises is not borne out by the way in which the measure will apply.

This is an expensive and inefficient way of trying to reduce pensioner anger about the council tax. I am sure that it will not succeed because, at best, it is a very partial sticking plaster.

The noble Baroness will not be surprised to know that we on these Benches believe that a better mechanism for dealing with the unfairness of the council tax would be to replace it altogether with a fairer local income tax, which would be of great benefit to pensioner households. However, I am sure that she and the rest of the House will be very relieved to know that I do not intend to give my standard speech extolling the virtues of a local income tax this afternoon. I would, however, be grateful if the noble Baroness could say something about progress on the balance of funding review. Will she, in particular, amplify the Prime Minister's statement at Question Time yesterday that he was totally opposed to any element of a local income tax as part of a funding package for local government?

The Bill, in common with all Bills, has been before a number of Select Committees in your Lordships' House. It has been considered by the Delegated Powers and Regulatory Reform Committee and by the Constitution Committee. Both committees found that the powers to make further payment to the over-60s, contained in Clause 7, are too widely drawn and are inappropriate. I was rather surprised that the Minister did not refer to these two conclusions; it seems as though the Government are perfectly happy for committees of your Lordships' House to opine on these important questions and then completely ignore their conclusions. I would be extremely grateful if she could explain how the Government respond to those two findings. They are very clearly drawn up and the two parallel committees came to the same—and, from the Government's point of view, unsatisfactory—conclusion that the Government are trying to take too widely drawn powers by way of an ability to operate through secondary legislation.

I loved the Minister's explanation of why the powers will be needed in the future. She said it was so that the Government could respond quickly to future need. What kind of future need will apply to pensioners that will be so unexpected and will need such a quick response that draconian secondary legislation powers are required to deal with it?

Lord Higgins

My Lords, I think that the future need will be an impending election.

Lord Newby

My Lords, the future need may be an impending election, but if so, there is even less justification for the powers. The Minister did not provide a serious reason why the Government need a power of this kind. The problems of low income and poverty in pensioner households are not new. Nothing is likely to change, other than some cataclysmic event that we cannot foresee. Nothing will affect the incomes of those households in such a way that the Government need to act within a few weeks rather than through a normal legislative procedure. Frankly, I fear that I do not find the Minister's statement at all credible as to the basic purpose of the further powers granted by the Bill. It is an unsatisfactory Bill and it contains unsatisfactory powers for future payments. I certainly hope that they are never used again.

Baroness Hollis of Heigham

My Lords, I am slightly disappointed by the churlish—perhaps that is too harsh—but the less-than-warm welcome that has been extended to the Government's commitment to make available more resources to pensioners over 70. In response to the question of the noble Lord, Lord Higgins, about why the resources would be available to over-70s rather than under-70s, I had hoped that I had sketched that out in my opening remarks. Essentially, we know that those over 70 have a lower income than those under 70. The income they have is more likely to be drawn from benefit than from earnings or private savings. People over 70 are more likely to be on pension credit. They are more likely to be female. They are also more likely to be living longer and more likely to be living alone. That is a profile that I am sure that the noble Lord, Lord Higgins, completely recognises, which is why the fulcrum point of 70 makes good sense.

The second question of the noble Lord, Lord Higgins, was about council tax and council tax benefits. Although I would be happy to do so if he would wish it, I do not want to engage in political sparring about comparative levels of band D between different local authorities. Overall, in order to keep our discussion blessedly free from party politics, council tax bills last year rose by 5.9 per cent. That is less than half the previous year and the lowest increase in a decade. However, it is the case that many pensioners, perhaps 1.7 million, are not claiming council tax benefit to help meet their bills. As they grow older and their incomes do not rise with perhaps the same speed as council tax rises, they may have greater difficulty in paying those bills.

One reason why pensioners may not be claiming is because council tax benefit has been made more generous: 1.9 million people get more help; 300,000 people are newly qualified for the first time. As noble Lords will know, any changes in benefits take time to bed down in terms of people being aware of them. Furthermore, every time one increases a benefit, one produces a new group of people who are entitled to claim but who would receive very little money, so they decide that it is not worth so doing. That may be part of the reason why some pensioners are not claiming, but, nevertheless, I recognise that there is an issue to be addressed. We are working closely with local authorities to ensure that we see the maximum take-up of benefits to which pensioners are entitled to meet their council tax bills.

As I suspected, the noble Lord, Lord Newby, could not resist at least a mention of local income tax. I cannot say what the Government's full view on that may be, but, as a local authority leader, I dealt with the poll tax when it was first introduced in the late 1980s. I remember that I had to have Special Branch protection because I implemented the law to the disgust of a number of people in the great city of Norwich, who thought that they should do something about it. It struck me that when I consulted with employers about the option of local income tax, one of the points that was made to me was that a small company with 12 employees drawn from all around Norfolk might well have seven different local income tax rates set by seven different local authorities, and that would significantly add to payroll burdens on business. I am speaking about something with which I was intimately involved at that time and it weighed heavily with me, leaving aside any of the macro-economic arguments with which the Treasury might wish to engage.

The noble Lord, Lord Newby, asked about the balance of funding review. That review has received a series of presentations by experts on the pros and cons of the various options which were thrown up by the public consultation, which include reform of council tax, relocalisation of business rates, local income tax and a mixed option of a number of smaller changes in taxes. The review has been hearing evidence on a range of different options, but that should not be taken as evidence that the Government accept that the balance of funding must be changed or that they favour any of the options. To answer more closely the noble Lord's point, the review, I believe, is due to report in the summer. I shall not speculate on the outcome, but no decisions have been made. That may give the noble Lord some sense of the timetable.

Finally, the noble Lord, Lord Newby, raised some questions about Clause 7 and its use. I accept that the Delegated Powers and Regulatory Reform Committee and the Constitution Committee have made those points, but as I am sure that the noble Lord would accept and as I hope to have established in my opening remarks, the clause is useful and benign. I cannot think that the noble Lord, Lord Newby, even if he had the power, would wish to stand in the way of any future government directing more resources to pensioners, particularly those in hardship. On that basis, I hope that I have responded to all but the highly party political remarks which the noble Lord, Lord Higgins, made with relish in his speech.

On Question, Bill read a second time; Committee negatived.

Then, Standing Order 47 having been dispensed with (pursuant to Resolution of 17 June), Bill read a third time, and passed.