§ Dr. Lynne JonesTo ask the Secretary of State for Social Security, pursuant to the oral statement by the Under-Secretary of State, the hon. Member for City of York (Mr. Bayley), on 20 April 1999,Official Report, Standing Committee D, column 864, what assumptions he has made about the cost or savings to the Exchequer of a change in people's behaviour as a result of changes in the law on entitlement to incapacity benefit. [82721]
§ Mr. BayleyThe costings in the explanatory notes to the Welfare Reform and Pensions Bill assume that overall the financial effects of any behavioural changes as a result of the proposed changes to Incapacity Benefit will be broadly neutral.
The behavioural effects of the change to the contribution conditions are assumed to be negligible. This is because it would be difficult for many people to adjust their circumstances in such a way as to ensure that they 56W meet the contribution conditions at the time when they claim Incapacity Benefit. In addition special arrangements to enable people to re-qualify after short breaks in entitlement without paying further contributions will, together with linking rules, reduce any incentive for people to stay on benefit longer as a result of the new conditions.
The behavioural effects of the proposal to take some account of occupational and personal pensions over £50 are assumed to be broadly neutral. Potential behavioural changes would include some people increasing their pension income, to compensate for the benefit reduction, which would lead to higher savings. Other people might seek to change their pension arrangements to maintain the level of benefit, which would lead to lower savings. In the absence of any evidence as to which of these effects will predominate it has been assumed that they will broadly cancel each other out. Since only half the pension income over £50 will be deducted from benefit, people on Incapacity Benefit will still gain from having made their own provision.
The effects of the changes will be monitored post-implementation.