State Pension Credit Bill [Lords]

Public Bill Committee, 18 April 2002.

Standing Committee A

State Pension Credit Bill [Lords]

Tim Boswell (Conservative, Daventry)

On a point of order, Mr. Griffiths. You will recall that at the end of our previous sitting we were discussing amendment No. 14. I had concluded my remarks and I do not intend to re-open that discussion. Can Ministers comment on the imputed calculation of income as a result of yesterday's Budget? Given that the Chancellor of the Exchequer has now scrapped that in respect of other tax credits, some commentators have said that the position of the pension credit is left exposed and anomalous. No doubt we will return to that matter when discussing later clauses so, in a sense, I am giving notice to Ministers that such issues will be raised then. Representatives of organisations that deal with older people have said that 5 million pensioners are likely to become involved in the system of income-related benefits. Can Ministers respond briefly to my concerns?

Win Griffiths (Labour, Bridgend)

I am sure that the Ministers have heard your comments, Mr. Boswell. It would not be appropriate for them to respond immediately, but I am sure that something will be said during the debate.

Ian McCartney (Labour, Makerfield)

Nothing that was announced by the Chancellor of the Exchequer yesterday or in his pre-Budget statement will affect the structure of the Bill or any matters relating to it. If there had been, the Government would have had to table amendments to the Bill. As the Committee will notice, we have tabled only one small technical amendment. We can rest assured that the job of the hon. Member for Daventry (Mr. Boswell) as Opposition spokesman has not been made any harder by changes that were announced in the Budget statement yesterday.

Andrew Selous (Conservative, South West Bedfordshire)

With respect, I think that the Minister is slightly missing the point made by my hon. Friend the Member for Daventry, which was that the treatment of earnings under the State Pension Credit Bill will now be different following the announcements made by the Chancellor yesterday in respect of other credits and arrangements for pensioners. My hon. Friend was referring to that particular aspect of the Budget.

Ian McCartney (Labour, Makerfield)

I know exactly what the hon. Gentleman was saying. But nothing that was said yesterday affects the structure or the clauses of the Bill and resulting calculations.

Win Griffiths (Labour, Bridgend)

I think that the Committee has exhausted that point of order. I am sure that we shall hear some questions on the matter later in our proceedings.

Guarantee Credit

Win Griffiths (Labour, Bridgend)

I remind the Committee that with this we are taking amendment No. 3, in page 2, line 26, at end insert—

'(6A) Such regulations may not apply to hospital in-patients.'.

Steve Webb (Liberal Democrat, Northavon)

Good morning, Mr. Griffiths. The purpose of amendment No. 3 is similar to that of amendment No. 14. That amendment would remove subsection (6), while our amendment would allow the Secretary of State the power to specify lower amounts, except in respect of hospital in-patients. That proposal is more narrow than amendment No. 14, because the explanatory notes to the Bill suggest that the Secretary of State needs powers to specify lower amounts, for example, in respect of prison inmates. Even I do not have a problem with a lower rate of pension credit for prison inmates. However, hospital in-patients should not be treated the same.

We welcome the fact that the Government made a concession in another place. It is clearly a step in the right direction, but has it gone far enough? The issue is one of principle as well as one of pragmatism. The key question is whether the Bill should give the Secretary of State power to reduce guarantee credits for hospital in-patients. The Minister will no doubt say that it has been a feature of the welfare state since the war that people in hospital have their benefit cut, but because something has been going on since the war does not make it right. There has been an upper earnings limit on the national insurance system since it was established, but yesterday the Chancellor of the Exchequer breached that by taking national insurance beyond the upper earnings limit. That something has been in done for decades does not mean that it cannot or should not be reformed, and I hope that the Minister would not suggest that that is a reason for continuing with the system.

We have to examine the thinking behind the practice. The historic argument is that the state should not pay twice—in this case, by providing for patients in hospital and also paying their full pensions, or pension credits. They are being fed, sheltered and looked after while they are in hospital, which is part of what the pension credit is about. However, the Government have not produced any evidence about the extent, if any, of the double provision, so my first question is empirical—what evidence is there of double provision? Clearly, food would be an obvious example.

Tim Boswell (Conservative, Daventry)

The hon. Gentleman may wish to intensify that point. When we have sought to require information in parliamentary questions relating to the distribution of the benefit, except for the global figure of relief of £40 million annually, it has been remarkably difficult to work out how many people are affected and for how long, and to determine the caseload on which information is based.

Mr. Webb: I would certainly agree that there have been gaps in the detail. There has been a greater amount of detail concerning the numbers affected than the hon. Gentleman suggests, but the Department has hardly been overflowing with information about how such people are affected.

I presume that the Under-Secretary will respond. Will she provide empirical evidence of research committed by the Department to determine the costs incurred by people in hospital and the costs saved because they are not living in their own homes? Obviously, they are not buying food while in hospital, so a slightly lower rate may be justified to account for that. However, how important are such items of expenditure compared with costs that roll on when one is in hospital, such as household insurance premiums, which may rise during an extended period of absence—insurance companies sometimes increase premiums if nobody is sleeping in the house? Many costs roll on regardless, such as standing charges on utilities—telephone bills, for example—and car insurance does not stop when one is in hospital.

What is the relative magnitude of the costs involved? If one took all costs faced by a pensioner, what is the balance between costs that continue when one is a long-term hospital in-patient and those that stop? If, as I rather suspect, a large proportion of costs continue and only a small amount is saved, that should inform any hospital downrating.

My second question is what costs increase during a hospital in-patient stay? If a person is married, the partner will want to visit regularly, which will incur additional travel costs, such as car parking charges. Hospitals in my constituency, like others, charge rates of approximately £3 a visit. The cost of visiting once a day would be some £20 a week, which is a substantial sum relative to the figures that we have been discussing. Such additional costs may offset any savings.

Pragmatically and empirically, have the Government commissioned research on the problem and demonstrated evidence? Frankly, the number of people involved when the system was established post-war was probably only a handful. Most people died before any downrating would have applied, which is no longer the case. People are likely to live longer now and have long in-patient stays. Harking back to the fact that downrating is a feature of the post-war welfare state does not prove the case. It affected far fewer people in a very different world.

Hospital downrating also involves an issue of principle that relates to benefits other than those in the Bill, so I will not dwell on that point. However, one may question whether we should be going down this track with regard to contributory benefits. For people who receive benefits for care needs, although the hospital provides care for in-patients, a carer may have to be retained and wages paid for the duration of the hospital stay.

Tim Boswell (Conservative, Daventry)

I am grateful to the hon. Gentleman for giving way again. I hope that this will be the last

intervention that I need make. He mentioned care needs. Does he agree that there might be inequity between people who are resident in hospital, and possibly blocking a bed, in the absence of other care provision, and those who have moved out of hospital and are resident in other accommodation? That, too, might give rise to inequities.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman is right to raise the issue of bed blocking, which is entirely germane to the point, as I shall explain in a moment. I am not sure that the position of people in residential care is different, because their treatment under the pension credit will be complex. However, bed blocking matters, because the people with whom we are dealing are long-stay hospital in-patients. In a sense, they are, potentially, victims twice. Not only are they in hospital when they would like to get out—they are ready to do so, but the social care is not available—but, under clause 2(6), they will also have some of their money taken from them. People face a sort of double jeopardy. Once again, the phrase ''bed blocking'' had not been invented in 1948, but it is now part of the lexicon of everyday language.

The matter involves issues of principle that relate to hospital downrating and apply especially to contributory benefits, and issues that relate to the Government's failure to extend the concession to care benefits, with which we should deal elsewhere. Means-tested benefits are designed to top-up people to a certain standard of living and ensure that they can maintain that standard of living. The matter involves arguments about double provision. I hope that the Minister will give us evidence of research that the Department has commissioned to measure the extent of that double provision and that suggests that there is a basis for the tendency to downrate.

Having spoken informally to Ministers elsewhere about why the Government did not go the whole hog and scrap hospital downrating, my impression was that it was not so much the people left—the victims of hospital downrating—who were the worry. It involves a thin-end-of-the-wedge argument. It was not the 6,000 people, or whatever the figure involved is, but the fact that, once we allow the principle of not downrating hospital in-patients, we have opened a Pandora's box. What other things are the Government worried about in accepting the principle? What other expenditure do they fear that they might incur? Where else in government might the principle be applied about which they are worried? Ministers have implied informally elsewhere that the reason is not so much those 6,000 but where it might lead. I hope that the Minister will fill us in on the empirical evidence on cost-saving and on the thin-end-of-the-wedge argument.

Maria Eagle (Labour, Liverpool, Garston)

I shall be more than happy to do my best to answer the questions asked by the hon. Members for Daventry and for Northavon (Mr. Webb). I shall discuss the amendments in detail in due course, but I shall deal first with the substantive issue of hospital downrating. Both amendments are effectively about that, although they would have some strange other effects.

Immediately following his appointment to his post, my right hon. Friend the Minister for Pensions started considering the issue. As long ago as last July, he told the National Pensioners Convention that he was doing so and from that time answered various parliamentary questions explaining that to the House, too. The matter has been driven by my right hon. Friend's interest when he was appointed to consider the issue, and it has been recognised that there is some strength in the argument relating to downrating after a certain period.

The hon. Member for Northavon is right to say that the grand principle behind the proposal relates to the issue of double provision. It remains a fundamental principle of the welfare state that the state does not provide twice for the same contingency. That sometimes resurfaces in other benefits for which I am responsible as the overlapping benefit rule. Those are not small matters, and ''Pandora's box'' is a useful phrase in considering changes to such fundamental principles in social security, as they often have extensive implications for other areas.

My right hon. Friend the Minister for Pensions spotted that problem and began to consider it as soon as he took on his current role in the Government. Consultations, discussions and his internal investigations resulted in the announcement on 25 February of proposals to change the way in which hospital downrating rules applied. The changes are collected under the State Pension Credit Bill because the downrating of pension credit will be the same.

Downrating will now take place after a 13-week stay in hospital instead of a six-week stay. Hon. Members should remember that that relates not only to pension credit but to a range of other benefits. However, we are now talking about the effect on pension credit. There will be a further reduction at 52 weeks. There will be no reduction before 13 weeks in hospital. After that, the single person's standard minimum guarantee will be reduced by an amount equivalent to 38 per cent. of the basic state retirement pension, with a further reduction to 20 per cent. of the state pension after 52 weeks. For couples, the downratings will be 20 per cent. at 13 weeks, and the claim is disaggregated at 52 weeks. That applies only to pension credit, as the savings credit will not be downrated.

I took care to take a note of the questions that the hon. Member for Daventry asked on Tuesday about the subject. He asked whether we had been dragooned, to use his word, into relaxing the downrating rules so that they apply at 13 weeks. I should prefer to say that my right hon. Friend the Minister took an interest in the matter from the time of his appointment. After considering the issue, he decided to do something about it. That decision coincided with the passage of the Bill, so we were able to get the new rules into the Bill.

The hon. Gentleman asked why we left any downrating at all. The hon. Member for Northavon also raised that question. We must be mindful of double provision. Downrating applies to a range of

other social security benefits, not just those relating to pensioners. It is therefore difficult to argue that it is right to end downrating for pensioners completely while leaving it in place in other benefits. One has to consider the thin-end-of-the-wedge argument when considering the issue because that has implications for many other benefits.

I should like to inform the Committee of the numbers that will be affected, as that might be helpful. The six-week rule affects about 35,000 people. We think that about 26,000 of them are pensioners and 9,000 are of working age. We therefore expect about 26,000 people to gain from increasing the threshold to 13 weeks. Obviously, a much smaller number of people will be affected by the 52-week rule, because thankfully most people leave hospital well before 13 weeks have passed, so many fewer people will be affected by the changed rule.

The Conservative party was in power for 18 years. It considered the hospital downrating rule but never, as far as I am aware—I am sure that the hon. Member for Daventry will correct me if I am wrong—attempted to abolish hospital downrating for any type of benefit. Clearly, it too was concerned about the rule against double provision.

Tim Boswell (Conservative, Daventry)

The hon. Lady is putting her case reasonably, and I think that we are all pleased that relaxations have been made. She carefully gave the figures of those who would benefit from the extension from six to 13 weeks, and she said that not that many would be affected after 13 weeks. Will the hon. Lady give the Committee her estimate of the number who will still be caught at 13 weeks, rather than those who are, presumably, unchanged after 52 weeks? It would be useful to have that figure on the record.

Maria Eagle (Labour, Liverpool, Garston)

I have a figure in front of me. We think that about 9,000 people will continue to be affected at the 13-week stage—6,000 of pension age and 3,000 of working age.

The Conservative Government did not abolish the rule against double provision or end hospital downrating for benefits. However, they did examine hospital downrating. During the late 1980s—the hon. Gentleman will correct me if I am wrong—there was an exercise in standardisation. Benefits had different points at which downrating applied. When that happens, Governments sometimes think that there should be standardisation, and the Conservative Government undertook an exercise on that. Before the exercise, several benefits were downrated at eight weeks, others at six weeks. The Conservative Government decided to standardise at six weeks. Although they made a change to hospital downrating, that was not for the benefit of in-patients who were subject to it—to put it gently.

My right hon. Friend the Minister for Pensions can claim credit for having a fair look at the issue and for making a change that benefits significant numbers of affected people. Labour Members are pleased that he has done so, and members of the Committee of all parties have welcomed it.

I shall deal with several points made by the hon. Member for Northavon before addressing the detail of

the amendments—I do not think that I should miss having the fun of discussing the strange consequences that they would have. The hon. Gentleman asked whether the provision went far enough and whether we should end hospital downrating completely. I should be interested to know whether that is the Liberal Democrats' policy because it would apply not only to pension credit but, in all equity and fairness, to all other benefits. One can imagine the lobbies to which we would all be subjected if we ended hospital downrating on pension benefits but not other social security benefits. There would be a general feeling of inequity. [Interruption.] Unequal treatment indeed. The hon. Gentleman must be suggesting ending hospital downrating for all benefits.

I hope that the figures that I mentioned on hospital downrating for pension credit show that it would affect relatively few people. The Government believe that there is a principle in the welfare state of not making double provision. Ending hospital downrating throughout all benefits would breach that rule, and would make it more difficult to argue that we should retain the overlapping benefit rule. I shall not stray too wide of the amendment, but I will say that I do not know whether the hon. Member for Northavon has a policy on ending that rule. Since I entered the Department for Work and Pensions, I have learned that one can come up with many good ideas to end small inequities. However, once costed, they would prove to cost an enormous amount of money—we are usually talking about billions.

Of course, we must bear in the mind the impact on the entire system that breaching the principles of the welfare state, such as the overlapping benefit rule and the rule against double provision, would have. The Government are not convinced that we should get rid of the rule against double provision. Are the hon. Gentleman and his party committed to doing so and, if they are, what do they think about overlapping benefit provisions?

The hon. Gentleman asked about empirical evidence of the impact of hospital downrating on individual cases. I am not aware of any research that has been carried out specifically to pin down individual cases and try to extrapolate from them across the field of those who are affected, but I will get back to him if I am wrong about that. Over the years, hospital downrating has been driven by the basic principle against double provision. On this matter, I emphasise again that we are talking about only a few people, but I undertake to inform the Committee if there is an empirical study of specific instances.

What would be the effects of amendments Nos. 14 and 3? It appears that amendment No. 14, which was tabled by the hon. Member for Daventry, would prevent any hospital downrating for pension credit. It would also prevent a prescribed amount of nil from being awarded to—

Tim Boswell (Conservative, Daventry)

Prisoners?

Maria Eagle: Yes, to prisoners, and also to fully maintained members of religious orders; that is the other category.

On Tuesday, the hon. Gentleman asked me whether the nil prescription would be applied only to hospital downrating. It also applies to monks, nuns and prisoners. Therefore, he might be interested to know that the effect of his amendment would be to induce sin, in some cases. Many religious orders take vows of poverty, and we would be forcing pension credit upon their members. I am sure that the hon. Gentleman would not want to be responsible for promoting sin amongst members of such religious orders. However, that is the other—rather small—category.

Ian McCartney (Labour, Makerfield)

I hope that my hon. Friend will tell the hon. Gentleman that what she said was a joke; otherwise, we will get lots of letters.

Maria Eagle (Labour, Liverpool, Garston)

I was, of course, kidding. However, that would be one of the effects of the amendment.

I know that this is a probing amendment, so I do not intend to chide the hon. Gentleman too much, but it would have another slightly strange effect: a person in hospital would continue to receive their pension credit, irrespective of the length of time that they were there, although many other benefits that they might be receiving would be downrated. Therefore, pension credit would be taken out of line with other benefits.

Amendment No. 3, which was tabled by the hon. Member for Northavon, is trying to do a similar thing. With regard to that amendment, I wish to point out a remarkable coincidence. Initially, it appeared to be an amendment to clause 3, rather than to clause 2, and it made sense in relation to both clauses, even down to the line to which it referred. That is remarkable; I have never come across that before. Therefore, it was not immediately apparent whether we were dealing with a typing error. We finally managed to establish that the hon. Gentleman did mean it to be an amendment to clause 2, rather than to clause 3.

Therefore, the effect of amendment No. 3 would be similar to that of amendment No. 14—but not quite the same. It deals with the sin side of things, because it would enable us to exclude prisoners, monks and nuns, but it would still mean that pensioners who were in hospital for the appropriate amount of time would get their pension credit in full, but not their other benefits or their retirement pension. Therefore, it would have slightly anomalous effects.

I hope that the explanations that I have given the Committee are satisfactory, and that the hon. Member for Daventry will withdraw amendment No. 14. However, he must decide about that.

Tim Boswell (Conservative, Daventry)

I am touched by the Under-Secretary's response because it puts me in the category of sinners, which I would wish to do myself. With regard to that, the only possible exculpation that I can give is to refer to that famous motto that states that if one is to sin, one should be a good sinner, and trust at the same time in the Lord. Her response also sought to suggest that I had led the hon. Member for Northavon, who always informs our debates, into the path of sin. It was not my intention, unless severely provoked, to advise my hon.

Friends to divide on a point that would have the side-wind effect not only of abolishing downrating in respect of pensions credit but of bringing in the force feeding of pension credits to nuns.

The Under-Secretary understands that this is in essence a probing amendment, and she has responded broadly in that vein. They are difficult issues of substance, as she rightly says, and I do not wish to suggest that we are uninterested in avoiding double provision. The hon. Member for Northavon raised some legitimate questions about the extent of double provision—and, of course, we have an interest in the overall cost to the social security system.

Andrew Selous (Conservative, South West Bedfordshire)

Does my hon. Friend agree that it is at least slightly curious that if a pensioner received a substantial inheritance or had a lottery win at the start of the five years, there would be double provision because he would receive the pension credit until the next review period?

Win Griffiths (Labour, Bridgend)

Order. Before that point is answered, I wish to raise a technical point. If the hon. Member for Northavon wishes to intervene again, you, Mr. Boswell, should not at this stage beg leave to withdraw the amendment—should that be your intention. You should wait until the hon. Gentleman has resumed his seat.

Tim Boswell (Conservative, Daventry)

That was very delicately put, Mr. Griffiths. As we are talking about sin, I seem to have become increasingly Jesuitical. I signalled that I would not withdraw the amendment but for the fact that we have an opportunity to return to the subject. However, I to not want to detain the Committee.

The substantive point is that we understand the interest in double provision; indeed, it is part of social security doctrine going back to 1948. In responding to the hon. Member for Northavon, the Under-Secretary did not really stem concerns about the thin end of the wedge. She might have done; there might be some awful skeletons in the cupboard in other Departments that we have not spotted. However, she was worried about it. I understand the principle although, as my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) pointed out, the reality can be rather different. For instance, a person who entirely legitimately is in receipt of a pensions savings credit may be affluent as a result of a windfall.

I shall not tease the Under-Secretary at length about the choice of the 13-week period now, although I might do so under another clause.. One can always ask—indeed, Oppositions always ask—for evidence and precise specification, and it would be difficult for Ministers to give it. However, given that they have extended the period, and given that the Under-Secretary's helpful explication of the figures showed that it is a substantial relief, I concede. I do not want to go further on that, except to say that I am sure that Ministers will want to note the importance of keeping the matter under review, continuing to consider the overall position of pensioners in those circumstances. None of us in Committee have lost interest in the subject, but it is clearly an advance.

There is one area that I did not touch on in my opening remarks, which is how the system will operate in practice. The Under-Secretary knows that it was discussed at some length in another place. If the number of persons affected is reduced, that problem would obviously be reduced as well. However, when I first intervened on the hon. Member for Northavon, at the back of my mind was the answer to my parliamentary question to find out more about the restoration of benefit to persons who had been in hospital—for example, how soon they got it back, and so on. The position was not wholly clear or satisfactory.

Hospital authorities do not charge persons in receipt of benefit for their hospital services. That would be another way of doing it, but I am not canvassing; I merely say it for the record. However, that raises much wider issues, and you, Mr. Griffiths, would not thank me if I went into them today. Hospitals have no interest in advancing the matter, except in relation to hospital social workers and advising individual patients. The interest lies with individual claimants who must notify the authorities when they go into hospital for more than a short stay and who must reapply for benefit thereafter.

Earlier, we discussed persons who went abroad, and I may want to return to the matter of assessment. There is concern that it should be much easier to get pensioners through temporary interruptions in benefit—however well founded—and I hope that a means of doing that will emerge as the Pension Service develops.

The Under-Secretary should consider the incidence of outliers in reapplying for benefit. We are discussing people who are convalescing, and their first thought on leaving hospital will not be, ''I must reclaim my benefit.'' They will do that along the way, and the hon. Lady should perhaps think about operational systems that would make it much easier for them to do so.

I say no more about that now, but it would be useful if the Under-Secretary could give an indication of her approach to the matter. Even if there has been relief on the general issue, there is still concern that those who come to the end of their qualifying period and go into disbenefit may lose out.

I shall make one more point about the continuing review. As regards the overall cost or the benefit to the Exchequer of downrating, I had a slightly irritating answer from the Minister, which did not answer the substance of my question. Nevertheless, in so far as the numbers are reduced, the changes that the Minister has made involve a substantial cost to the Exchequer. As one reduces the number of cases to a minority, the cost to the individual of the downrating increases—the individual case cost increases. Ministers should perhaps bear that in mind. They may reduce the pain of downrating for many people, but they may, if not intensify the pain, at least increase the relative pain for those who remain in the system.

Steve Webb (Liberal Democrat, Northavon)

I shall respond briefly to the Under-Secretary's comments on amendment No. 3. She said that there were three reasons why it would not work. The first related to the principle of double provision,

but there is clearly no principle at work in the provisions before us. They are, at the least, tempered by pragmatism, and the Government will allow what they see as double provision to go on for 13 weeks. If there is a fundamental, absolute principle at work, why would it not apply in the first week? Because of the effects on the people about whom we are talking. The Government therefore accept that the principle can be breached. Indeed, they have extended the breach of that principle, so it is not a principle at all—we are talking about pragmatism.

Furthermore, the hon. Lady offered no evidence of double provision. If one is to accept the Government's contention that we must have downrating to avoid double provision, one needs evidence of double provision, but the Minister says that there is none. No one has compared the costs of people being in hospital with those of people living in their own home. There is, therefore, no evidence of double provision, so that fundamental reason for carrying on with downrating is not proven—I think that that is the legal term.

The second reason that the Under-Secretary gave was that the amendment would be anomalous. If the Government went through with it, they would get rid of downrating for pensioners, but no one else. However, that reflects the scope of the Bill. We can amend provisions that apply to pensioners on guaranteed credit, but not those that apply to anyone else.

Ian McCartney (Labour, Makerfield)

The hon. Gentleman is being a bit disingenuous. Changes can be made by regulation. The hon. Gentleman and other colleagues have legitimately raised this issue, but have concentrated solely on older people. The Government took the view, however, that changes should not impact negatively on other groups. We therefore went further than any campaign or this House ever intended us to. We extended provision to all those who have been affected by hospital downrating. That is the best way forward. The hon. Gentleman is content to focus narrowly on one very important group—the largest group. He cannot possibly be serious in saying that the Bill should be amended to give something to pensioners while denying it to others in the same circumstances because they receive another form of income from the state.

Steve Webb (Liberal Democrat, Northavon)

That is a very strange intervention. Clearly, as the Minister just said, pensioners are the biggest group affected by downrating, so it is not surprising that pensioner groups have been pushing the campaign. I am delighted that the Minister came to his office with the desire to do something about the issue—that is great. No pensioner group would have objected to the extension of the principle to non-pensioners, but that is not their client group, nor does such extension fall within the scope of the Bill.

The Minister says that we can amend the provisions by regulation. He may be aware that the Opposition do not have the power either to introduce regulations or to amend them when they are laid before the House—we are able only to say either yes or no. It is

the Government's job to make such amendments and I am concerned that they have failed to do so.

If the amendment were passed, we would want the principle to be extended. The Under-Secretary said, ''Ah, but what about the cost?'' She used the term ''billions'' during her speech and then she said that very few people were involved. She cannot have it both ways.

Maria Eagle (Labour, Liverpool, Garston)

I was making a general point when I said ''billions''. As a social security Minister I have found that changes that appear small can sometimes result, when followed through the system, in billions of pounds in costs. I was not suggesting that abolishing hospital downrating would cost billions.

Steve Webb (Liberal Democrat, Northavon)

No, because the Minister knows that it would not cost anything like that much.

Maria Eagle (Labour, Liverpool, Garston)

I did not say it.

Steve Webb (Liberal Democrat, Northavon)

Well, we will not continue to bat back and forth.

As the Minister said, we are talking about 3,000 non-pensioners and 6,000 pensioners. The principle has already been breached. The measure involves very few people, so the cost would be limited. The Minister has not addressed the issue hinted at by the hon. Member for Daventry, which is that there is a cost to the Government of running hospital downratings.

Even if someone reports on day 1 that they have passed the six-week or 13-week mark, the Government have to stop and then reinstate their benefit, which has a cost. If someone were to stay for 14 weeks, I should have thought that the cost of stopping their money would be greater than the money saved by doing so. So it is not clear that the measure will save the Government much money. If someone inadvertently fails to report a long stay in hospital and they end up being overpaid, the Government have to recover that and that costs money as well.

There is no great issue of principle involved, because it has already been breached. Hardly any people are involved and no evidence that double provision is occurring has been produced, so I cannot understand the Government's objections. I understand the issues around nuns and prison inmates, which is why they are excluded from the amendment. I feel that no coherent objection to our argument has been made, but it is not my position to decide which amendments in the group we should divide on, so I will leave it at that.

Tim Boswell (Conservative, Daventry)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Tim Boswell (Conservative, Daventry)

I gave notice, in moving the amendment that we have just discussed, that I would press the Minister on some wider issues concerning clause 2. By way of trailer for later discussions—which may not even take place in Committee, so rapid and telescoped are our considerations—I should say that we may propose putting clauses 2 and 3 together.

Some Members who would not normally be seen as allies of mine wonder what is going on in conceptual terms. As I understand it, we are essentially extending the minimum income guarantee above the level of minimum income by providing a phased withdrawal in relation to savings income. Yet two separate concepts—the guarantee credit and the savings credit—are addressed in separate clauses. I do not want to debate that matter now, but I should like to pick up on the Under-Secretary's remarks about improvements in the minimum income guarantee. Let us isolate the issue of the savings credit—if that is possible—and consider the criteria for the minimum income guarantee. The essential point is that it is now available above the MIG level, and that is what the Bill effects.

It would be helpful if the Under-Secretary could say whether there are any other changes of substance beneficial to pensioners in how the guarantee is made available, and whether any other changes arising from clause 2 are negative for pensioners? I do not canvass any because I do not think that there are any, but it would be helpful if she could give an assurance. Under clause 3 we shall be able to debate the substance of the savings credit.

Several hon. Members have already expressed concern about the way in which the guaranteed income traditionally delivered by income support and now delivered by the MIG has been compressed against the entitlement to pension, or that the two have now separated, leaving a gap that the Bill was designed to address. Leaving those macro issues aside, let us consider entitlements and the delivery of the guarantee element of the credit. Will the Under-Secretary tell us whether that has changed, and whether the change is beneficial? We were not heavily lobbied on the matter, and it would be fair to say that clause 2 has almost crept by inadvertently, but it would be useful to discuss that matter before we discuss the savings credit.

Maria Eagle (Labour, Liverpool, Garston)

Clause 2 is creeping by somewhat quickly, which, as the Minister, I should welcome, because we do not want to debate one clause for too long. However, I want to say in more detail why I think that the clause should stand part of the Bill.

The clause ensures that the minimum income guarantee, which is an anti-poverty measure, is carried forward into pension credit. The meat of the Bill and the changes that it brings about relate more to the savings credit in clause 3. The guarantee credit simply ensures that no one loses out in the system.

Tim Boswell (Conservative, Daventry)

Can the Under-Secretary give us the explicit assurance that there will be no losers in the system, at least in relation to the guarantee? Perhaps I should have asked that more explicitly in the first place.

Maria Eagle (Labour, Liverpool, Garston)

I can indeed. I am happy to make it clear to the Committee that there will be no losers and that no one will be worse off on the guarantee credit than they would have been under the minimum income guarantee. Perhaps that explains why the hon. Gentleman found it difficult to spot aspects of the

guarantee credit that were different from those of the minimum income guarantee.

The hon. Gentleman will be aware that when the Government came to office we were keen on assisting those pensioners at the bottom end of income distribution. We may debate whether his party agrees with the way in which we have undertaken that or even the concept of undertaking that, but that has been our policy. We wanted to get help to those at the poorest end of income distribution as quickly as possible, so we had to build on what was already there—which was income support.

We are going further than that now, not only to award savings, which comes under a different part of the Bill, but by ensuring that those who have benefited from MIG do not lose out from the changes that we propose. Clause 2 ensures that no one should be worse off in respect of the guarantee credit than they would have been in MIG.

Some problems have been highlighted with regard to MIG that have arisen because it is based on income support. For example, we heard about the 40-page form that asked a female pensioner whether she was pregnant. That happened because the system was based on the income support form and the income support computer system. Of course, we ameliorated those effects in time, but our main priority was to get money to those pensioners at the poorest end of income distribution as quickly as possible, and building on income support was the way to do it.

Tim Boswell (Conservative, Daventry)

In a sense, the Under-Secretary answered the point that I anticipated making. She has been able to make those changes before legislating in the Bill. The form does not have to be complicated just because it is based on the son or daughter of the old income support form.

The Under-Secretary mentioned the reference on the form to whether a female pensioner was pregnant. I realise that she used that slightly absurd case to make her point. Of course, as she will know, there is a presumption in law that there is no absolute bar on pregnancy. In the next village to mine, a lady aged 56 gave birth to healthy twins. When considering approximation or even equalisation, we must remember that it is not impossible that at some stage it may be necessary to reintroduce that question into the form. I welcome that, and have no objection to it in principle. My substantive point is that the Under-Secretary was able to make changes under the old format without clause 2.

Maria Eagle (Labour, Liverpool, Garston)

I am sure that my father, who had to cope with twins at a much younger age, would have a great deal of sympathy for the lady in the next village to the hon. Gentleman. It seemed as though he was arguing for the reintroduction of complex forms, although I know that he was not really doing so.

We reduced the minimum income guarantee form from 40 pages to 10 simply by concentrating on the fact that we want to provide pensioners with services that are relevant to them and are not just tacked on to the working-age services that we provide through income support. That has driven not only the design of pension credit but, for example, the creation of the

Pension Service, which will be a public service aimed directly and solely at helping pensioners to meet their needs. Pensioners interacting with the benefit system and trying to claim their entitlements will no longer have to go to offices designed to help those of working age get back into employment, and they will no longer have to fill in forms that are designed to meet the much more varied circumstances of those of working age. We Labour Members think that pensioners will come to value that.

Steve Webb (Liberal Democrat, Northavon)

I should like clarification about pensioners having to go into jobcentres. Pensioners may not like doing that, for understandable reasons, and it may not be appropriate. On Tuesday, when I asked about the face-to-face service that will be available to pensioners immediately, instead of on the third Thursday of the month in the library or whatever, the Minister for Pensions said that that would still be available and would not be taken away. Will the Under-Secretary confirm that pensioners will still have to go to the jobcentre for that face-to-face service? Can she clarify whether there will still be people who understand pensions at jobcentres?

Maria Eagle (Labour, Liverpool, Garston)

Local services and the Pension Service will still be available to everyone. It is true that the Pension Service will do much of its processing work and will hold much of its telephone interaction with members of the public from central locations. There is nothing innovative or terrible about that; it already happens in the case of retirement pensions, in which many pensioners interact perfectly happily on the telephone. There is no doubt that the Pension Service will have a local arm, although it is a national service. Whether it is based in the jobcentre or a different building will vary from place to place. We intend to ensure that those pensioners who would prefer to see someone face to face will have the opportunity to do so at their convenience, rather than at that of those providing the service.

There will be surgeries and places in the local community to which pensioners can go to meet Pension Service staff if they need to do so face to face. If they need a home visit, that can be arranged. All of us Members of Parliament are subject to such demands from our constituents, and we know that we can always make appointments to see constituents at their convenience. Of course, there are always constraints to do with when we are in the constituency and so on. The idea is that the service that is made available will be tailored to meet the needs and requirements of the individual pensioner. That is our aspiration, and there is no reason why we cannot make it happen. Apparently, a letter has been sent to the hon. Gentleman by my right hon. Friend the Minister for Pensions; I am sure that that deals in greater detail with the concerns that he has raised.

Clause 2 introduces the guarantee credit, which is similar to the minimum income guarantee. Primarily, it is an anti-poverty measure; it is intended to ensure that there is a minimum income to which all pensioners are entitled.

I could explain all the detailed provisions of clause 2, but I am unsure whether that that would be a productive use of the Committee's time, because I sense that there is not much opposition to the clause. However, I will continue.

The clause introduces a calculation of the first element of pension credit, which is the guarantee credit. That will be available to everyone over 60 years of age. It will bring pensioners' incomes up to a basic guaranteed level, which we expect will be £100 for a single pensioner and £154 for a couple. Those rates are continuing to rise, due to the increases that we have introduced since 1997.

The guarantee credit will be simpler than the minimum income guarantee, which it replaces. It will remove the numerous rates and premiums, and provide a level of income under which no pensioner needs to live. As it is designed for pensioners rather than for people of working age, it will be possible to get rid of some of the extraneous questions on the form. It will have a simpler structure that will enable the system to minimise intrusion into pensioners' affairs, by only asking them the questions to which answers are really necessary, thereby removing one of the obstacles that prevent pensioners from claiming the money that is rightfully theirs. Another obstacle will also be removed, because it will be much more clearly an entitlement.

We also hope that the guarantee credit will tackle pensioner poverty. It will give additional help to those with extra needs, such as severely disabled pensioners, pensioners with caring responsibilities and pensioners with owner-occupier housing costs. Therefore, some beneficial elements of income support additions will be carried forward into the guarantee credit. It will be calculated by making up the difference between the pensioner's income and the guarantee credit.

Savings credit is the other fundamental element of the pension credit, and we will discuss that when we address clause 3. I hope that the Committee will support clause 2, as it is a basic building block of the pension credit.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

Clause 3 - Savings credit

Steve Webb (Liberal Democrat, Northavon)

I beg to move amendment No. 1, in page 2, line 42, leave out 'age of 65' and insert 'qualifying age'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to consider amendment No. 2, in page 3, line 26, at end insert—

'(6A) In the case of men aged under 65, such regulations shall provide that the calculation of qualifying income shall include an amount equal to the amount of retirement pension that the claimant has accrued at the time of the claim.'.

Steve Webb (Liberal Democrat, Northavon)

The Committee benefits from the fact that the Bill has been considered in another place. A fundamental issue was raised there: the treatment of 60 to 64-year-old women who are excluded from the savings credit under clause 3. These amendments

address that matter. They are intended to equalise entitlement to the savings element of the pension credit not at 65 years of age, as the Bill proposes, but at the state pension age—although it is clear that that will rise for women.

The initial effect of the amendments will be to bring everyone over 60 into the scope of the savings credit, rather than to exclude everyone under 65. That will bring in women pensioners of between 60 and 64 years of age, as well as male non-pensioners in that age bracket.

The Government say that they have to equalise, and we understand that. The winter fuel payments situation is a good recent example where the Government fell foul of the courts because they did not equalise. They were forced to equalise ex post, which was not desirable. Therefore, we accept that there must be equalisation. However, a question must be answered: should that happen at 65 or at pension age? For the sake of simplicity, I will say ''60'' instead of ''pension age'' throughout the rest of my contribution.

It appears that the argument in favour of 65 goes as follows: the Bill is about pensioners, so why should men aged 60 to 64 who are not pensioners get the savings credit? The first response to that is that men aged 60 to 64 who are not state pensioners get guarantee credit. The idea that the state pension credit does not apply to non-pensioners is wrong. A group of non-state pensioners—men aged 60 to 64—get the guarantee credit if they are entitled to it. There is not a principle at stake. People who are not pensioners already benefit from the pension credit.

Why should men aged 60 to 64 be excluded from the savings credit element of the pension credit? There is an assumption that to keep non-pensioners out, we must equalise at 65. However, one can think of measures in addition to the guarantee credit, such as the winter fuel payment and concessionary travel, that are aimed at pensioners and equalised at 60, although the equalisation of concessionary travel was forced by a court case. The argument that one cannot include non-pensioners when one equalises is not borne out by other aspects of the system, or even the Bill. Therefore, there is no reason why men aged 60 to 64 should not fall within the scope of the savings credit.

The second concern might be what happens to rich men aged 60 to 64 because the measure is designed for pensioners who, on average, are poorer members of society whom the means-tested benefit is designed to help. We do not want to help rich men aged 60 to 64. However, the benefit is means-tested and, therefore, such a person would have pots of money and would not be entitled to the benefit. We are not discussing rich men aged 60 to 64 but relatively poor men between those ages.

The question arises: what is the problem? Baroness Hollis implied in another place that part of the integral structure of the state pension credit is that it is built around the state pension. One of the thresholds in the Bill—I forget its name—is the same as the pension. Therefore, if we are addressing a group who do not

draw a pension, how can they be given a savings credit that is premised on the assumption that people draw a pension? That is where amendment No. 2 comes in because it would assume that men aged 60 to 64 were drawing the pension that they had accrued so far.

The point is slightly subtle and I have had difficulty getting my head around it. However, given the way in which the system is structured, a person who has a pension entitlement that is less than the full entitlement must use their savings to bring them up to that entitlement before they earn pension credit. A man aged 60 to 64 who did not have a pension would not receive savings credit unless he used earnings or pensions to bring himself up to the £77 level of the pension. He would receive savings credit only on the bit above £77. I happily accept that a system that rewards men aged 60 to 64 with more than £77 of savings is peculiar, and that would have been the strange effect if we had tabled only amendment No. 3.

Maria Eagle (Labour, Liverpool, Garston)

We are talking about amendments Nos. 1 and 2, not amendments Nos. 3 and 4.

Steve Webb (Liberal Democrat, Northavon)

I apologise. The Minister is quite right.

That would have been the strange effect of tabling only amendment No. 1. Amendment No. 2 is designed to address that and would assume that such men were drawing the pension that they had accrued so far.

The Minister might say, ''It is a funny business to assume that people are getting a pension when they are not.'' However, on Tuesday she said that the system would do that for 65-year-old men who defer. If a 65-year-old man defers his pension until he is 66 and claims pension credit at 65, the Government will, properly, say, ''We'll assume that you're getting a pension and treat you as though you were getting a pension, even though you're not, because we do not want to give you a barmy advantage for deferring and treat you as though you have no income.'' The principle of assuming that a person gets a pension that he does not receive is implicit in the system.

I accept that it is a bit muddy to assume that a person is receiving the pension that they have accrued so far. The phrase ''decrepit computer systems'' may pop up in the next half hour. The phrase is beloved of the Secretary of State because he is fond of saying that computers cannot count—no, not ''count'', although one wonders about that sometimes. I meant to say cannot cope.

Many men aged 60 to 64 would have accrued something approaching a full basic state pension. Amendment No. 2 would not assume that they have a full basic state pension because that would entitle them to savings credit to which they might not be entitled if, when they reached 65, they did not have a full basic state pension. Our drafting of the amendment erred on the side of caution, as we are wont to do. For example, we are arguing not that someone who has just swanned into the country should be imputed to be earning a full basic pension and should receive a savings credit for each penny that he had saved, but that people who have worked all their life and have practically accrued a full basic pension should receive a reward for their savings at the age of 60, not 65. I accept that, over

time, the 60 years threshold will rise and eventually equalise at 65.

We want equalisation at 60 not 65 because of women aged 60 to 64. That is the critical reason behind the amendments. Women pensioners will have listened carefully to the Secretary of State for Work and Pensions announcing the virtues of the pension credit and the savings credit and saying that they are a reward for pensioners who save and that, at last, they will not be worse off than their neighbour. Women aged 60 to 64 will have said, ''Good. That's me.'' The Government made the case that the pension credit would be good news for people who save and that it would get rid of the next-door neighbour problem.

It will not. Many woman aged 60 to 64 may think of themselves as pensioners. That is not a strange notion. Let us bear in mind a woman of 62 years who heard the Secretary of State talking about pensioners being rewarded for saving. Perhaps long speeches qualify certain proposals, but headlines do not, and nor does the coverage given to such speeches. The Government have raised an expectation among women aged 60 to 64, and to turn round and tell them, when the system is in place, that they may have to wait five years to be rewarded for saving and until then will be no better off than their next-door neighbour may create resentment. If the amendment were to bring 60 to 64-year-old men into the scope of the proposal, it is worth considering.

Can the Minister give us an estimate of the savings credit entitlement of women aged 60 to 64 if the threshold was lowered? That could be used as part of the total cost but, if the proposal really is a reward for saving, pensioners should be given that reward.

James Clappison (Conservative, Hertsmere)

In the case of women aged 60 to 64, would it help if we assumed that earnings would be treated in the same way as savings and counted as income towards the system?

Steve Webb (Liberal Democrat, Northavon)

I might need to think about that. We will come back to earnings. The Minister may argue about the cost of the amendment. However, to the extent that it relates to women aged 60 to 64 it is an issue of justice. The Government have raised the expectations of a group of people. They may say that they have made it perfectly clear that savings credit starts at 65, but let us be honest about such matters. If it were said in a ministerial announcement that pensioners were to be rewarded for saving, that is probably as much as people would take in. The idea that there are two components and that one develops at one age while another develops at another, is pushing it a bit. Expectations have been raised and they should be honoured.

What would be the cost if the proposal related to men aged 60 to 64? We are referring to poorer people. We are imputing a pension. Men who had not contributed to a pension would not receive much savings credit, so we would be rewarding men of that age with small savings. That is not unreasonable and, if they are in the system, it may improve take-up when they are 65. I am talking about equality and dealing

with women pensioners who thought that they would be rewarded for saving, but who will not receive that reward until they are 65. There are plenty of precedents, including the Bill, for equalisation at 60 for men who are not state pensioners and imputing in the way set out under amendment No. 2. The fact that people would receive the pension that they had accrued so far would deal with the problem that only those with big savings would receive a reward. The proposal is modest and reasonable and one that the other place has not had the chance to consider in the form set out by the amendment. I commend it to the Committee.

Tim Boswell (Conservative, Daventry)

The hon. Member for Northavon has put his argument clearly and imparted some ingenuity into his thoughts. I almost became animated when I first thought that I would need to declare an interest to the Committee given that I attained my 60th birthday this year. However, as the hon. Gentleman rightly reminded us, given that I am in receipt of a parliamentary salary, it is relatively unlikely that I would be unable to avail myself of the pension credit, although I suppose that I could invent certain circumstances. I therefore feel no inhibition when speaking about it.

The hon. Gentleman set out his requirements, which would have been mine, too, for the Under-Secretary to respond about the cost involved. That is not a trivial matter. I referred to it in our earlier debate on double provision. Ministers must have regard to the cheque element.

Secondly, as Lord Higgins said in another place, an issue of equity is involved. Equalising the pension age is a delicate issue, but all Committee members accept that whatever is introduced should be equal for people of the same age. That principle is incontestable. The issues are whether we opt at one end or the other, the cost involved and whether the proposal is deliverable. That is a reasonable question to which the Under-Secretary should respond.

I would add only one further point, which relates to the legal advice that Ministers have received on the matter. I return jocularly to my forthcoming, but no doubt somewhat delayed, until September next year, winter fuel payment. The matter has arisen simply because the court embarrassed the Government into having to make changes in such a way that they now claim credit for their generosity. It would be out of order to discuss that. However, legal interpretation does not always coincide with that of Governments. Will the Under-Secretary assure us that no legal whoopsy is likely to make a retrospective adjustment necessary, perhaps in relation to women under the age of 65? Might that adjustment be extended to men in that category? I do not have a sufficiently refined legal mind to have the slightest idea whether that is a risk. I understand that the Bill introduces a new benefit that is income contingent, but I should like the Under-Secretary's assurance on that point and her response to the general points made, which should be considered before we move on.

Maria Eagle (Labour, Liverpool, Garston)

''Whoopsy'' is a legal term that I have not come across before. Perhaps it has been introduced into the law since I allowed my practising certificate to

lapse. I shall do my best to deal with the points made by the hon. Members for Northavon and for Daventry.

Amendment No. 1 would make the savings credit available to both men and women from the same age as the guarantee credit—currently 60. The hon. Member for Northavon makes it clear that he accepts the need to equalise, which is essential. I do not believe that it is purely a legal matter—although we are, rightly, open to challenge from all quarters if there is a hint of gender inequality in respect of the provision. Our approach has been driven by trying to ensure that the provision is as equal as possible, not only to prevent us from being challenged in that way but because we believe that there should be equality.

The difficulty that we face in trying to work out an approach to the matter is the inequality that remains in basic state pension provision, of which Parliament has taken cognisance. The previous Conservative Government introduced legislation to provide for equalisation in due course. However, as always with pensions, things have to be done over a period, rather than immediately. The intention is that state pension age will rise gradually from 2010 through to 2020. The period from 1995 has been given in order to ensure that women can make proper provision and that there is no adverse effect on people's long-term planning. Until then, however, we have an inequality in basic state pension provision.

Tim Boswell (Conservative, Daventry)

Is not the real difficulty—and the dilemma with which everyone must wrestle—that, in removing the gender inequality for those below the age of 65, and not extending the provision, irrespective of the cost of doing so, the Under-Secretary introduces a new discrimination between female pensioners under the age of 65 and those above that age? Both may have the same external income and the same entitlement to the basic state retirement pension, but under the proposals the one below that age will not receive the savings credit while the other will. In dealing with the gender issue, she has created an invidious—although, I accept, difficult to solve—discrimination between classes of female pensioners.

Maria Eagle (Labour, Liverpool, Garston)

I hear the hon. Gentleman's point. Equality will not be achieved in general provision until 2020, so it is difficult to devise a way of bringing equality into this provision sooner than that. We discussed different ways of dealing with the inequality inherent in the system. We have all wrestled with the problem and it is clear from the amendments moved by the hon. Member for Northavon that he has also examined it. We went through a similar process of trying to find a way of making the provision as fair as possible, while realising that there is basic inequality in the system on which it is built.

We looked at the problem with great care, but the lowest age at which the savings credit can be paid equally and fairly is 65, which is what we propose. In any case, men can expect to continue building their pension provision until that age. Therefore, other inequalities are introduced because they would receive a reward on the basis of what is not their full

entitlement—because it is continuing to be accrued. The effect of the hon. Gentleman's amendments would be to build in further unfairness, which we cannot do.

Steve Webb (Liberal Democrat, Northavon)

The hon. Lady says that bringing 60 to 64-year-old men into the system on the basis of the pension that they have accrued so far would be unfair. I cannot believe that any of those who receive the money would say, ''No, I do not want it. It is not fair because I might accrue some extra pension.'' They would tolerate the unfairness and thank the Government for bringing them into the system.

Maria Eagle (Labour, Liverpool, Garston)

Until the basic state pension has completed the process of being made gender neutral, there will be inequalities in the system somewhere however we decide to tackle the problem. The difficulty that we face arises because the current state provision is not paid equally to men and women until the age of 65. That is why we have decided to make that the age at which savings credits are paid. Until equality is achieved, there will be an anomaly.

Sandra Osborne (Labour, Ayr)

This subject is of concern to many people. I especially hate to see women losing out in any way. However, I recognise the great difficulties involved in trying to reach an equitable solution. Will the Under-Secretary tell us how many women between the ages of 60 and 64 are likely to be affected?

I admit to some difficulty in following the proposal of the hon. Member for Northavon, which was extremely complicated. I am not sure that it would be workable. The Under-Secretary says that she has examined the issue in detail, so will she tell us the numbers involved and whether the provision would be open to legal challenge if such an amendment was accepted?

Maria Eagle (Labour, Liverpool, Garston)

I shall deal with that point in due course.

The age of 65 is the first point at which we judge that the savings credit can be fairly and equally paid to ensure that we are not open to legal challenge in respect of gender equality. However, the amount of savings credit depends on the amount of existing state provision. If it were paid to those aged 60 to 64, men and women would have different outcomes solely because of the unequal nature of the state provision. That is the difficulty in making the change suggested by the hon. Member for Northavon. We cannot fairly pay savings credit until an age at which the provision is equal for men and women, which is 65.

The hon. Gentleman recognises the problem of paying the credit under that age, because that is what his second amendment seeks to ameliorate. He is with us that far—he has spotted the problem. However, worthy though his amendment is, it would only make things worse. He tries to sort out the problem by saying that we can estimate the amount of basic state pension that a man has accrued on his contribution record

''at the time of the claim.''

The amendment would make the problem worse because there would be a huge administrative cost involved in estimating the accrued pension entitlement of 400,000 men. It would also produce unfair results

and the kind of effects that we want to avoid. Different amounts of pension credit would be payable to people in otherwise identical circumstances, purely because of the difference between state provision for men and for women. That would open us to the sort of legal challenge to which the hon. Gentleman referred.

Tim Boswell (Conservative, Daventry)

While not necessarily disagreeing with the dilemmas with which the Under-Secretary is wrestling, I cannot let pass unchallenged the assertion that the potential roll-up of retirement pension for the male approaching retirement age would be difficult to estimate. Surely that is what her Department proposes to do in issuing retirement forecasts.

Maria Eagle (Labour, Liverpool, Garston)

The hon. Gentleman makes some interesting points. The area is difficult and there is no ideal solution. We must ensure that we treat everyone fairly, and if the amendments resulted in people in the same circumstances receiving different amounts because they were male or female, because of the unequal way in which provision works at present, we would not have succeeded in solving the problem. We cannot implement such a system without being open to legal challenge. The first point at which we can ensure that the outcomes are the same is at age 65, in respect of savings credit.

Steve Webb (Liberal Democrat, Northavon)

The Minister is engaging constructively with what we want to achieve with the amendments, but who would launch the legal challenge to which she refers? It would not be the women, because they would be receiving more money—they cannot say that they should have even more because they would be using their actual pension roll-up. It would not be the men, either, because we would have brought them into the system when they would not normally have been included. Who will challenge the provision?

Maria Eagle (Labour, Liverpool, Garston)

The hon. Gentleman is not a lawyer, but if he were he would know that someone will always challenge provisions if the outcome is unequal. Never mind the fact that the system is unequal in that men and women in the same circumstances do not receive the same amount of money—if there were a difference, there would be a man who, although he was benefiting, would claim that he should receive the higher amount. In all conscience as a Government, we cannot proceed on the basis that a legal challenge is possible and that we know that what we are doing is wrong but hope that no one will bring a case. That would not be a responsible way to conduct ourselves in government.

The other difficulty with the amendment is that it would cause strange outcomes for some recipients. Some men, for example, would be rewarded for their savings while aged between 60 and 64 and have the calculation based on state pension accrued before the end of their working lives. When they reached 65, however, they would find all their savings rewarded less or not at all. There are instances in which a man could receive a savings credit element between 60 and 64 and lose it when he hit 65, which would be difficult to explain.

I shall give the hon. Gentleman an example. Let us consider the case of a 64-year-old man who has a £60 personal pension but no basic state pension, because he is not yet 65, and no other income. Based on his contributions to date, he would receive a full basic state pension—that is, he would receive £77 when he was old enough. Under the amendment, he would receive £13.80 savings credit. When he turned 65, he would keep his £60 personal pension and receive his £77 a week basic state pension, so under the amendment his savings credit would be reduced from £13.80 to zero.

With the best will in the world, the hon. Gentleman is trying to find a way to include men aged 60 to 64 and to equalise and introduce savings credit at 60 rather than 65. However, the impact on the man in my example would be that he would receive savings credit to begin with, but lose it when he hit state pension retirement age or when he retired.

Steve Webb (Liberal Democrat, Northavon)

As I said, the Under-Secretary is responding helpfully. However, in the case that she has just cited, my argument would be that when the man is aged between 60 and 64, he will have no money other than the £60 pension. The guarantee credit will bring that up to £100. The Minister is saying that he should not be rewarded for having saved because he will lose that reward at 65 when he gets his pension. If the Government's principle is that people should be rewarded for having saved—especially when they have nothing else to live on—why should he not be rewarded for having done so when he is 64? The alternative is that he does not get rewarded for having saved at all—a situation which the Government must surely want to stop.

Maria Eagle (Labour, Liverpool, Garston)

It would be slightly more difficult to persuade that man that he should lose his reward for saving when he gets to 65.

Steve Webb (Liberal Democrat, Northavon)

It would never happen.

Maria Eagle (Labour, Liverpool, Garston)

Anomalous situations would arise from the hon. Gentleman's amendment, in addition to the general problem, which we have already mentioned, of the legislation's being open to challenge because there are different outcomes dependent only on gender.

Annabelle Ewing (Scottish National Party, Perth)

I appreciate that one can never exclude the possibility of a legal challenge—I declare an interest in that I am a lawyer, although I am not currently practising—but will the Minister clarify on what grounds such a challenge could be brought? What legislation would form the basis of such a challenge?

Maria Eagle (Labour, Liverpool, Garston)

It is just a matter of equality. The grounds would be the same as those on which other actions have been brought with respect to other benefits—the difference between the pension ages for men and women. There have been cases and we have no reason to think that there will not be further ones. It would not be responsible for us to proceed to implement a system that is blatantly discriminatory on the grounds of gender and hope that no one would challenge it. Although I understand the point made by the hon. Member for Northavon that we will be giving men between the ages of 60 and 65 more money, that is

not to say that they will be getting quite as much as the women.

As long there is inequality, there are grounds for a challenge. We cannot cross our fingers and hope that no one challenges the legislation in the courts. Someone almost certainly would and we would not have many legs to stand on when they did. We have examined the issue and there is no way that we can get around the fact that if what we do creates a gender inequality, albeit of a slightly different kind from the existing one, we would be open to challenge. It would not be possible for us to legislate on that basis. The problem is the existing inequality, and problems of this kind will end only when that inequality ends. Parliament has already made provision for that, but this Bill cannot do it any more quickly and does not seek to do so. Therefore, we have to make do until that inequality ends.

I was asked what would be the cost of paying savings credit to 60 to 64-year-olds. Based on a 100 per cent. take-up, and including the housing benefit and council tax benefit costs, we think that the measure would cost about £200 million. We estimate that about 300,000 benefit units—Committee members will know what we mean by that—would gain from the savings credit's being paid to 60–64 year-olds. However, that does take away the problems that I have been trying—not as lucidly as I might—to explain in respect of the amendments.

I understand why the hon. Member for Northavon wants to equalise provision. We all agree with that. Parliament agrees with that and has made provision for it, but we cannot equalise outcomes until that provision has come into force. The Bill cannot be used to speed up the process of equalising the basic state pension age. The Bill has provisions to ensure that we fit in with that equalisation, which will start soon and will be ongoing.

I hope therefore that the hon. Gentleman will understand that we have gone through a similar process to him in trying to ensure that the maximum number of people benefit from the Bill, but we have concluded that, because of the current inequalities in the system, it is impossible to do so except by paying savings credit at 65. In view of that, I hope that the hon. Gentleman will ask leave to withdraw the amendment.

Steve Webb (Liberal Democrat, Northavon)

I thank the Under-Secretary for the spirit in which she responded to the amendment. She gave an example of an anomaly that would have been created under the amendments, but which I believe would not be a problem. Her example was of a person with a £60 private pension who, before the age of 65, had to live on the £60 pension and a top-up that guaranteed him £100. In my world, however, that chap will also receive the maximum pension credit of £13.80. That will give him £113.80. I acknowledge that he will lose the savings credit when he hits 65, but he will start receiving his pension, so he will then have the £77 state pension and a £60 private pension, which will take him up to £137 a week. He will go from £113 a week pre-retirement to £137 post-retirement.

The Under-Secretary may say that he has lost his savings credit, but I cannot imagine him saying, ''This is not fair; you are taking something away from me.'' He will know that he is £24 a week better off. Indeed, that increase will come from the state: his private pension will not have changed. I understand what the Under-Secretary is driving at—that his savings credit would go—and it does sound strange, but his total income will rise significantly. I am not convinced, however, that he would say, ''It's a scandal, Guv.'' I understand what the Under-Secretary is saying, but people will not object if they are better off once they retire but have still received that welcome pre–65 money. It is not a telling objection.

The fundamental objection is that it creates an inequality—a different inequality—that is open to challenge under law. The hon. Lady may say that I am not a lawyer, but the amendment proposes that men and women are treated the same, and that the savings credit should be assessed on the basis of their accrued state pension rights. It so happens that women cannot go on accruing more state pension rights after 60, but men can. The assessment is made indiscriminately, on the basis of the accrued state pension rights on the day when the claim is made. However, the Government have a leg to stand on at least on that issue. I accept that stranger things than that have been challenged, but it is not inherently discriminatory to treat men and women identically and then to assess them on the basis of their accrued rights.

Maria Eagle (Labour, Liverpool, Garston)

The difficulty is that, at a certain stage, women cannot accrue more rights. If a man can receive money under an arrangement that allows him to accrue more rights, that inequality would be open to challenge under the equal treatment directive or the Human Rights Act 1998. It would not be responsible for any Government—I am sure the hon. Gentleman would say the same if he was a Minister—to implement legislation that was open to such a challenge.

Steve Webb (Liberal Democrat, Northavon)

I appreciate that; I suspect that it boils down to a matter of legal opinion, and I am not qualified to adjudicate on that. However, in principle, we have not built in a structural inequality; we are treating men and women in the same way based on their accrued pension rights to date. The Under-Secretary is saying that women cannot accrue any more, but that is about the future. The critical point for me about the amendment is that, when filling out the forms, one would not need to know a person's gender to work out their savings benefit entitlement. Whether male or female, the sums would be done in the same way; the form would ask what was the applicant's accrued state pension right to date. However, I shall not pursue that point; I accept that the hon. Lady will have received legal advice that even that is somehow discriminatory.

I am grateful for the estimate of £200 million provided by the Under-Secretary. Is that money only for women aged between 60 and 64 with savings, or is it also for men, as proposed in amendment No. 2?

Maria Eagle (Labour, Liverpool, Garston)

It is for both.

Mr. Webb: It would be helpful to know, not necessarily immediately, the breakdown of that £200 million. I am thinking of the 300,000 people who are women aged between 60 and 64, who will have heard the Secretary of State, who think that they will be rewarded but who will be disappointed. Perhaps she can clarify how many of those 300,000 are women who fall into that category. That would help us to assess how important the amendment is. If most of those people are women who think that they are getting something when they are not, that would add weight to the argument; if only a few of them are, the argument would be much weaker.

The Department is fond of emphasising that many people stop work well before 65. Many men between the ages of 60 and 64, who are not earning or well off, may have saved, but they will get no reward. Many people retire early, stop work due to ill health or whatever, and we must support them and encourage them to save.

Maria Eagle (Labour, Liverpool, Garston)

About one third of people between 50 and retirement age are not economically active. They are, however, on benefit, and the Government support them. They do not get pension credit because they are not old enough.

Steve Webb (Liberal Democrat, Northavon)

The point is that 60 to 64-year-old men get pension credit, but not the savings credit element. The system says that we should support them, but that we should not reward them for saving. The thrust of the Government's argument is that we should now reward people for saving, but that seems out of kilter with the message that we should not reward those who do so, including women pensioners.

I shall not pursue the point further. The Under-Secretary has given careful responses to the points that we have raised. I may seek legal opinion on whether the provision could be open to challenge, because this is a fundamental question. At this stage, however, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

James Clappison (Conservative, Hertsmere)

I beg to move amendment No. 21, in page 3, line 7, at end insert—

'(2A) The Secretary of State shall as soon as practicable after the end of the fiscal year 2004–05 and as soon as practicable after the end of each year thereafter lay before Parliament a report setting out—

(a) the number of persons with a withdrawal rate of 100 per cent. in respect of income beneath the savings credit threshold, and

(b) the total value of the income concerned.'.

Win Griffiths (Labour, Bridgend)

With this we may discuss amendment No. 5, in page 3, line 26, at end insert—

'(6A) Such regulations shall provide that, in the calculation of qualifying income, a claimant may substitute for his actual rate of retirement pension an amount equal to the rate of retirement pension that the claimant would have been entitled to if the provisions of paragraph 5(7) of Schedule 3 to the Contributions and Benefits Act (home responsibilities protection) had been in force since the claimant attained the age of 16.'.

James Clappison (Conservative, Hertsmere)

It is a great pleasure to serve under your chairmanship again, Mr. Griffiths. I begin by craving your indulgence for a moment. I should be able to deal with my amendment in short order, but it is grouped with an interesting amendment in the name

of the hon. Member for Northavon. Given the speed of our proceedings this morning, I am not sure whether we shall complete our consideration of the amendments by the time we adjourn. I do not want to hurry the Committee in any way, but I must leave the Committee at 11.30 am to speak in a debate in another part of the House. My hon. Friend the Member for Daventry has agreed to deal with the amendments after that, if we are still debating them.

Amendment No. 21 is straightforward and deals with the issue, on which we have touched, of those with a 100 per cent. withdrawal rate in respect of income beneath the savings credit threshold. We know that a number of people fall into that category, and it would be useful to know just how many do. The Government might be as interested in that as we are, because part of the justification for introducing the savings credit is to remedy the disincentive created by the operation of the minimum income guarantee on its own on anyone with savings that take them up from the basic state pension of £77 to the minimum income guarantee of £100. That is anyone with savings of £23. Under the minimum income guarantee, such a person would receive no benefit at all from their savings if there was no savings credit. I think that the Government were adverting to that in their consultation paper, when they said:

''The third—and crucial—stage of the Government's reforms is the introduction of the Pension Credit. There is inevitably a tension between the need to ensure there is a level below which pensioner incomes do not fall, and the need to ensure that today's workers have a clear incentive to save.''

A 100 per cent. rate of withdrawal for that £23 of savings does not, however, offer any or even an adequate incentive to save: it offers no incentive, because the money is taken off at the rate of 100 per cent.

Even after the savings credit has been introduced, some people will still face the 100 per cent. rate of withdrawal. We have covered this issue already, and I do not want to go over old ground, but I should remind the Committee of the facts. The people who fall into this category will include women between the ages of 60 and 65 who have savings and are entitled to the guarantee element of the pension credit, but who receive no benefit for their savings, and people of either sex who have a less than full entitlement to the basic state pension. We have been over that ground, and I need not repeat the point as I am sure that the Committee has it in mind. The point of the amendment is that we need to know how many such people there are.

Steve Webb (Liberal Democrat, Northavon)

Our amendment No. 5 has been grouped with amendment No. 21, which was moved by the hon. Member for Hertsmere (Mr. Clappison). Amendment No. 5 would tackle a group of people who would be covered by amendment No. 21—women with incomplete contribution records.

I should welcome the information that is asked for in amendment No. 21, which would be helpful. Amendment No. 5 would do something slightly different. I mentioned on Tuesday that I am concerned about women pensioners. All Committee members would agree that, both in the past and

present, women pensioners have had a raw deal. When considering poverty and pensioners, one first considers elderly women and widows. I am always looking out for the effect that measures will have on women. All too often, Parliament has failed to think through the effect of pension measures for women.

One group that society has historically not valued is women with caring responsibilities. The Government are fond of saying that measures such as the state second pension show their future recognition of the value of caring, and that that recognition will be reflected in the pension scheme in decades to come. Such changes take decades to work through, and women who are coming up to pension age now have the historical baggage of the past 40 years of our society bound up in their pension entitlement.

A core example is that of a woman who will hit 60 just as the state pension credit is introduced in October 2003. We must consider when she had her child-bearing years, for want of a better phrase. Home responsibilities protection came in 25 years ago when she was 35, so it is a reasonable assumption that many women now hitting 60 would have had most, if not all, of their children before home responsibilities protection came in. In other words, the state pension entitlement of any woman hitting 60 who has had children is likely to be depressed by years of caring.

The system compensates such women to some extent, because if they are single, the means test, or guarantee credit, will top up the pension. Obviously, if they are married, they can get income protection from their husbands' contributions. Even so, many women are reaching pension age with an incomplete contribution record. How should that be treated for the purpose of the savings credit? That is what our amendment is about. We cannot re-write history; these women took time out of the labour market to bring up children at a time when social security did not value that. They brought up children probably in the 60s and early 70s, and they were wrecking their pension rights when they were doing so.

Some women opted for the married woman's reduced stamp and saved themselves money when they were contributing. Some of them will have understood that by doing so they were foregoing a future state pension entitlement, but I have clear evidence that many of them did not understand that. I could give many examples, chapter and verse—although I shall not detain the Committee by doing so—from hundreds of women from around the country who have written to me and said, ''I came back after my honeymoon, and the payroll said, 'You're married, love, so you go on the married woman's stamp.'''

I am told by the Department that those women had to sign a form, but let us face it, we all sign forms, particularly when we are not very experienced in the workings of the tax benefits system. In many cases, the women signed because the payroll told them that they had to, and many of them did not appreciate what they were doing to their future pension entitlement. Those women are now approaching pension age and write to say that they are astonished when they send off for the pension forecast that we have been talking

about, and find that it comes back with pension entitlements worth pennies, literally. I have copies of such pension forecasts. Those women had no idea that that was coming down the track.

How will such women be treated under the savings credit? They must supplement their basic pension entitlement with any savings that they have in order to bring them up to the pension level before they are rewarded for their savings. I gave an extreme example of a woman who is entitled to only pennies when she reaches the age of 60, and I have documentary evidence that such women exist.

Kali Mountford (Labour, Colne Valley)

I do not deny that there might be women who, without full information, made decisions that were not to their benefit, but does the hon. Gentleman accept that many women, several of whom I know personally, made conscious decisions that it would be to their immediate benefit to pay less national insurance because that gave their family extra income at the time? Does that build an inequity between women who made a sensible and conscious choice of what they thought was best for their family and women who simply made a mistake?

Steve Webb (Liberal Democrat, Northavon)

I absolutely agree with the hon. Lady. Any remedy to that must distinguish between the two groups. For example, if we allowed people to fill the gaps in their record by buying back missing years, that would deal with her point. People who made a conscious decision not to pay national insurance could get on with it, and those who misunderstood could pay the equivalent amount to what they saved. I do not suggest that we rewrite history and reward those who saved money at the time.

Mention of the married woman's stamp might have been a red herring. We must think about the group of women who end up under the contribution threshold. However, the second group, who are more important in many ways, are those who stopped work altogether or who did not start work. They were bringing up children but rather than paying a reduced stamp, they paid nothing at all because they did not work. Such women trashed their pension rights in a society that did not value care in the way that it did after 1977 under home responsibilities protection. Women who had not worked or paid national insurance and who were completely outside the system have been punished once by society for not building up their pension rights. However, the Bill would mean not only that such women would be punished by getting a grotty state pension, but that they would not be rewarded for their savings either because the pension is so low that all their savings, which may not be much because many of these women do not have high savings, would bring them up to only the pension level and not entitle them to pension credit. We would hit them twice.

The last group of amendments addressed the fact that we are penalising people aged 60 to 64 by excluding them from the savings credit. However, we would also hit women who brought up children by giving them a grotty pension and a grotty savings credit. The amendment would examine what would

have happened if the home responsibilities protection rule had applied when the women were bringing up their children. Our society now thinks that what women did then was worth doing and that it was wrong not to recognise that. Although we would not recalculate their pension entitlement—one could argue that we should, but I am going only one step down that track—they should not be penalised for what they did. We should certainly not penalise them twice when legislating for their incomes over the next 30 years. If the amendment were not accepted, a woman who cared for and brought up children would receive no savings credit at the age of 60. The period might not be 30 years because there is the question of what women get from their husbands when they reach 65. However, the period could be five years.

When such women's husbands reach state pension age, women receive a 60 per cent. pension based on their husband's contributions. The threshold for a couple is 160 per cent. of the threshold for a single person and, therefore, the issue diminishes substantially. Until the husband reaches 65, however, it is a big issue. Women with what are loosely termed toy-boy husbands—women with husbands who are merely younger than them—will be penalised for at least five years. If a 60-year-old woman has a 60-year-old husband, although that may be an extreme use of the phrase ''toy boy''—[Interruption.] The hon. Member for Daventry is not my idea of a toy boy.

If a 60-year-old woman has a 60-year-old husband, she will not receive savings credit during the five years until he is 65. Does the Committee really want to say that a woman's reward for saving is all about the age of her husband? That is not right, given our regard for the independence of women and the value that we place on caring activities.

The Minister may say that history cannot be rewritten, that we now have a system in place and that people will just have to lump it. Perhaps I am being slightly uncharitable, but that is the Government's argument. They say that women did not have such protection in the past and that their income is topped up through the minimum income guarantee, so what do women want? Well, let us consider those women who, given that start in life, have still managed to save. It would not have been easy. The fact that they did not have a paid job until they were in their mid–30s or until their children started school would not have been atypical in those days. They would not have saved a great deal anyway. Some women may have a little amount of savings or a pension from when they were 40-years-old. Can we not reward those meagre savings? It would not even cost that much—people seem to be wary when I say that.

I hope that the Minister has an estimate in mind? We are not talking about huge sums. I am referring to a group of people who have been penalised once, and I do not want them to be penalised again. The amendment reflects the value of their caring in the way that Parliament accepted was right post–1977. We must not replicate society's attitudes of the 1960s. If

the amendment were not accepted, we would be reinforcing those attitudes on the pensioners of 2002.

James Purnell (Labour, Stalybridge and Hyde)

I refer to a particular aspect of amendment No. 5. I have sympathy with his motives although, in rectifying an anomaly, we may create new anomalies. As my hon. Friend the Member for Colne Valley (Kali Mountford) said, such a proposal may not improve matters. I hate to disappoint the hon. Gentleman; although I agree with what he forecasted Labour Members would say. The best way in which to cope with the anomaly would be to give people a top up through the guarantee credit element.

I seek assurance from the Minister about the treatment of foster carers. They provide a vital service and deal with some of the most difficult cases that life can throw at people. A constituent of mine has given up her job to take on two teenage boys who have been subjected to fairly significant abuse in two different homes. That is an incredible step to take on behalf of society and, bearing in mind the expenses that carers receive, it is poorly rewarded. The service is not salaried.

My constituent was warned that, under the current system, she would lose contributions to her basic state pension. Home responsibilities protection is calculated through passporting from other benefits. If she gave up work to look after her own children, she would receive home responsibilities protection through the receipt of child benefit but, because she does not receive child benefit for fostering children, she does not receive home responsibilities protection.

The sensible reaction of people who realised that they were not receiving credits towards their basic state pension—very few people do realise that—might be to save towards a private pension. The problem with the savings credit as it is constructed is that such people may be subjected to a 100 per cent. withdrawal rate on the small income from their private pension. If they were earning less than £77 overall in retirement, the income will be taken away at the rate of 100 per cent. Will the Government consider rectifying the overall situation with regard to foster carers or allow those who have saved towards a private pension to keep a proportion of that pension in retirement?

We must continue to attract people into foster caring. I have sat on adoption panels that have had to make terrifying choices about where to place children—such as in foster homes that we were not confident would give them the best possible care or to leave them in care homes. We all know that children in care often have a bleak prospect of educational development and fall back into criminality and drugs. The more that we can attract foster carers into offering their services, the better. If the Government can reassure us that they will consider proposals in respect of the pensions of foster carers, the more progress would be made towards attracting people into the foster care service.

It being twenty-five minutes past Eleven o'clock, THE CHAIRMAN adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

Standing Committee A

Clause 3 - Savings credit

Win Griffiths (Labour, Bridgend)

I remind the Committee that with this we are discussing amendment No. 5, in page 3, line 26, at end insert—

'(6A) Such regulations shall provide that, in the calculation of qualifying income, a claimant may substitute for his actual rate of retirement pension an amount equal to the rate of retirement pension that the claimant would have been entitled to if the provisions of paragraph 5(7) of Schedule 3 to the Contributions and Benefits Act (home responsibilities protection) had been in force since the claimant attained the age of 16.'.

Ian McCartney (Labour, Makerfield)

I apologise for the absence of my hon. Friend the Under-Secretary of State; she is chaperoning my right hon. Friend the Secretary of State in the debate in the House this afternoon. She intends to return to participate in our discussions. I shall reply to the debate that my hon. Friend commenced. I hope that Committee members will be kind to me as I want to make sure that I do as good a job as she would do in response to the amendment. I shall probably take my time because several issues have been raised and I want to treat them with appropriate care

The hon. Members for Hertsmere (Mr. Clappison) and for Northavon (Mr. Webb) are also not here this afternoon. I do not want to make cheap shots at Committee members when they are not here—not that I would ever do that—but I want to place on record the Government's response. It will give them an opportunity at a later date to see whether I have answered adequately the points that they raised.

I shall start with amendment No. 21. The proposal would safeguard the monitoring of the effect of pension credit only on a particular group of pensioners. While I wholeheartedly support the objective of monitoring, it is inconceivable that we would not want a wider view of the impact of pension credit on recipients. The amendment would promote parliamentary interest in only one group of pensioners. That would not serve the majority of pensioners or

fellow hon. Members who have constituents in a range of circumstances.

The amendment refers to the position of two groups of pensioners who will still face benefit withdrawal rates of 100 per cent. under pension credit—the 60 to 64-year-olds and those over 65 with total incomes below the savings credit threshold, who qualify for the guarantee credit only. A key objective of pension credit is, as far as is practicable, to reward those who have worked hard and saved. It is only right that a full state pension based on contributions and credits for those with broken work records and who had caring responsibilities should be the basis for state provision. For those reasons, we decided to set the start point of the savings credit at an amount that, at least initially, equates to the full basic state pension. Of course, pensioners with less than full pensions are still entitled to the full guaranteed amount of pension credit.

The important point for pensioners is the guaranteed income they will receive from pension credit, not the marginal deduction rate, which is largely irrelevant to them. They are unlikely to change their income, so there will be no question of the marginal deduction rate acting as a disincentive for them to save. It may be helpful to the Committee if I explain more about it. The cost of ensuring that no one faces a marginal deduction rate greater than 40 per cent. would be £17.5 billion. Under the current minimum income guarantee, 2.5 million pensioners face a taper of 100 per cent. That means that their benefit entitlement is reduced by £1 for every £1 of extra income received.

Following the introduction of pension credit, pensioners aged over 65 with incomes between the savings credit threshold and the guaranteed credit—between £77 and £100 for single pensioners and £123 and £154 for pensioner couples—will face a reduction in benefit entitlement of between 40p and £1 for every £1 of extra income, for example, a taper of 40 per cent., not 100 per cent. We estimate that the number of pensioners who face a 100 per cent. taper will be reduced to about 900,000. In addition, 700,000 fewer pensioners will face a 40 per cent. taper, and those on a 40 per cent. withdrawal rate could gain up to £13.80 a week if single or, in the case of a couple, £18.60.

Although the amendment does not involve interaction with housing benefit and council tax benefit, that has a bearing on what the hon. Member for Hertsmere said this morning. The 1.3 million pensioners entitled only to savings credit will also receive housing benefit and council tax benefit. The 450,000 who have an 81 per cent. withdrawal rate will be at least £11 better off than they are now. Approximately 4 per cent. of people entitled to pension credit, or 150,000 pensioner households, will be subjected to the marginal deduction rate. Such people are entitled to the reward element of pension credit, to receive housing benefit and council tax benefit, and to pay the 10 per cent. income tax rate. Approximately 0.5 per cent. of people entitled to pension credit, or 20,000 pensioner households, may be subject to a marginal deduction rate of about 93 per cent. Such people are entitled to the reward element of pension credit, to receive housing benefit and council

tax benefit, and to face a 22 per cent. rate of income tax. In total, therefore, 4.5 per cent. of people entitled to pension credit may face a marginal deduction rate of slightly more than 91 per cent.

The arrangements that will be in place for monitoring pension credit will provide Parliament with a comprehensive assessment of the impact of pension credit on pensioners. Those monitoring arrangements are still being developed. Arrangements will be in place to provide robust information on pension credit recipients. We intend that the Department will publish data from its administrative records on those and other groups quarterly. Information on the total incomes of each group is currently not published quarterly, although the average benefit payment is. The intention is that such information will continue to be available on request.

The Government are committed to monitoring and subsequently evaluating pension credit, and we have taken steps to ensure that effective arrangements will be in place. I assure hon. Members that the results will be reported, as is the case for existing social security benefits.

Although the amendment is unnecessary, given that it was tabled in order, rightly, to ensure transparency, I shall make an offer to the hon. Member for Daventry (Mr. Boswell), who speaks on behalf of the official Opposition. When we are putting the arrangements in place with officials, I could arrange meetings with our officials to discuss the arrangements so that he is clear and understands the work being done to ensure that the monitoring facility will be effective.

Before I speak to amendment No. 5, I shall respond to several points that have been raised. I hope that my doing so will give a clearer understanding of my detailed response to amendment No. 5. As I said, I do not intend to take any cheap shots at the hon. Member for Northavon, who is not present, but I shall respond to some of his points factually and give full answers to his questions.

There are 1.4 million pensioners who have less than a full basic state pension and deficiencies in their national insurance contributions. A lack of administration data makes projections for pension credit difficult, but about 14 per cent. of minimum income guarantee claimants, or 266,000, have less than a full basic state pension. Of the 5.5 million who will be entitled to pension credit, about 13 per cent. will have a deficient record. Some 164,000 women, mostly aged between 60 and 70, have a deficient record, but it is difficult to quantify how many of those have a deficiency because of a lack of home responsibilities protection, as that information was not available prior to 1978.

Amendment No. 5 would deem a notional amount of basic retirement pension for the purpose of saving credit calculation as though home responsibilities protection had been retrospectively awarded to all pensioners. To enlighten the Committee, home responsibilities protection has been available since

1978. It covers people who have, for complete tax years, been awarded child benefit for a child under 16 or have cared for more than 35 hours for people with prescribed disability benefits. It is one of the major changes made to increase the capacity for people to earn a basic state pension. It is interesting that all the major changes since the creation of the basic state pension in the late 1940s came from Labour Governments. That is an important historical fact. Home responsibilities protection is an important step that was taken by a Labour Government; so, too, is the state earnings-related pension scheme and the new pension credit. Three generations of Labour Governments have attempted to expand the opportunities for people to gain access to income in retirement, and to deal with the difficulties caused by the record of the Conservative Government.

The protection offers a reduction in the number of qualifying years needed for a full basic pension. For instance, a woman needs 39 qualifying years of contributions or credits for a full pension. Every year of the protection reduces that number. There is, of course, a cut-off; home responsibilities protection cannot reduce the number of qualifying years below 20.

The amendment proposes that we apply the conditions of entitlement for home responsibilities protection to people who would have been covered had the legislation existed before 1978. By my reckoning, we would have to recreate those conditions way back to the 1920s in some cases. The protection hangs on prescribed social security benefits, some of which did not exist in 1978, or existed in other forms. We would have to try to simulate the caring situation to see if it looked like the 1978 criteria. That may have been a credible but daunting proposition in 1978, but it is not credible now. It simply is not practical.

I understand what the hon. Member for Northavon was trying to do, but in reality, it falls down, and is impossible to implement. For the future, the state second pension will ensure that the groups that are of concern receive much better treatment than was set out in the 1976 legislation.

Tim Boswell (Conservative, Daventry)

Is there not real concern that, notwithstanding the more generous treatment under the state second pension, there will be plenty of people who attain only the current or projected level of the minimum income guarantee? They may not benefit at all.

Ian McCartney (Labour, Makerfield)

The purpose of having two parts to the legislation is to ensure that those who were wronged or left out previously and have insufficient records will get the minimum income guarantee part of it. Without that, they would be deficient by considerable sums. We have not left them out—far from it. We can consider the minimum income guarantee as a catch-all measure, under which we do not have to find out who all those people are. Those people do not have to construct a case to prove that they were carers for more than 35 hours a week, and we do not have to work out a simulation test to find out whether they had appropriate caring responsibilities. It would be a nightmare for an

elderly person to have to do that now, when we could just give them the minimum income guarantee. However, we are concerned about what else we can do.

The guarantee credit, which is a vital part of the Bill, ensures that those who are washed out because of the past are now afforded security in retirement. The guarantee level is significantly above the level that pensioners received before 1997. It is not just a guaranteed level; it is a new guaranteed level.

On 13 March, my right hon. Friend the Secretary of State said in evidence to the pension credit inquiry of the Select Committee on Work and Pensions that the pension credit continues to be a basic feature of the contributory scheme. On the issue of deficient records, he said that the problem would reduce as women build up their own pension entitlements. He was then asked about the conflict between that and pensioner poverty, and he replied that the second state pension deals with poverty for periods in which people cannot contribute and the savings credit provides the reward. That shows an interrelationship in the modernisation of state pension provision.

Concerns have been raised throughout the passage of the Bill about people whose national insurance records fall short because the protection that is now available for carers, for example, has not always been there. We believe that instead of trying to right the wrongs of the past in what would be a complex and impossible way, the critical thing is to ensure that something is done quickly. That is why we introduced the minimum income guarantee and the state second pension. Those who have lost out for many years should at least be afforded a decent income in retirement.

I understand what my hon. Friend the Member for Stalybridge and Hyde (James Purnell) was trying to do in his intervention. We appreciate the work that foster carers do and sympathise with those who, having chosen to be full-time carers, receive poorer pensions as a result. Home responsibilities protection in respect of carers of children is awarded through entitlement to child benefit. Foster parents do not receive child benefit directly and have consequently not been covered by home responsibilities protection. We estimate that of the 37,000 foster carers in Britain, approximately 7,000 could benefit from an extension of that protection.

We have discussed with local authorities and other interested organisations, including those that represent carers, whether it is possible to improve the position of foster carers. We are satisfied that improvements could be made without the need for primary legislation. We are reviewing the arrangements and, should we decide that a change in legislation is required, the proper place in which to fix the problem is in the Social Security Contributions and Benefits Act 1992, which deals with legislation for home responsibilities protection.

I can offer my hon. Friend a meeting in the near future to discuss the issue of foster carers, about which he has also written to me. We intend to work with officials to see whether anything can genuinely be

done. I do not wish to over-egg the pudding and suggest with nods and winks that a solution is just around the corner; I am telling him openly and honestly that this is another issue that I looked at when I first became a Minister, and I decided that something must be done. We are reviewing the matter. I cannot say any more, but I hope that hon. Members will understand that I recognise the problem and that it must be resolved in an effective way—[Interruption.]

James Purnell (Stalybridge and Hyde) rose—

Ian McCartney (Labour, Makerfield)

Does the hon. Member for Daventry wish to intervene?

Tim Boswell (Conservative, Daventry)

No.

Ian McCartney (Labour, Makerfield)

I give way to my hon. Friend the hon. Member for Stalybridge and Hyde.

James Purnell (Labour, Stalybridge and Hyde)

I thank my right hon. Friend for his assurances and will take up his offer of a meeting. I hope that he will forgive me if I disappear half way through his speech, because I am already in hot water for doing the same thing in the main Chamber.

Ian McCartney (Labour, Makerfield)

It is quite all right for my hon. Friend to disappear, because I had come to the end of my remarks.

Tim Boswell (Conservative, Daventry)

In view of the extremely valuable contribution made by the hon. Member for Stalybridge and Hyde, I thought it only appropriate to give him first crack at the Minister in response to that extremely welcome announcement. This is a genuine question because I have not checked and do not know the answer: what happens to child benefit at present if it does not go to the foster carer? Does the money go to someone else, into a type of black hole, or is it accounted to the local authority en bloc?

Ian McCartney (Labour, Makerfield)

That is a very good question.

Win Griffiths (Labour, Bridgend)

Order. The matter is not strictly within the confines of the debate, although it may be later on.

Ian McCartney (Labour, Makerfield)

The benefit goes to the local authority.

I have tried to be open and honest about the difficulties that we face. I hope that my remarks were helpful and that the hon. Member for Daventry feels able to withdraw the amendment.

Tim Boswell (Conservative, Daventry)

I am genuinely grateful to the Minister for his response. He was positive in relation to foster carers and I do not wish to trap him, but some of the detail needs to be considered and I wish him good speed in that. Should he keep us in touch with developments, I am sure that we would wish to give a fair wind to any improvements that can be made, especially if they are modest in cost.

The hon. Member for Stalybridge and Hyde unwittingly but charmingly revealed some of the difficulties of the debate, because when I looked up at the monitor I realised that Conservative Members have created what is probably an unprecedented situation; my hon. Friend the Member for Havant (Mr. Willetts) is speaking in the Chamber, my hon. Friend the Member for Hertsmere is participating in a debate on the social fund and I am trying to deal with this Committee. Therefore, we are splitting our forces,

but I make no complaint about that. Credit should also be given to the hon. Member for Northavon: he has been associated with these amendments, but he cannot be here for the same reason. It might be a tribute to the Minister's Department, or to the importance of the subject—or to both—that we are all rushing around discussing social security this afternoon.

The Minister's responses have been helpful. I especially thank him for his offer to discuss how the mechanism for publicising how this is to work, and the accountability of the mechanism and its likely effects, can best be explained to the general public—if the Minister is setting out to do that. On occasion, I have been very pleased that he has been able to do that in other respects, for instance with regard to the Pension Service, so I am sure that we shall take him up on that offer. A dialogue with hon. Members will be constructive for his Department and for us.

I am also conscious of a personal difficulty: I was not present to hear my hon. Friend the Member for Hertsmere move the amendment. All hon. Members will be aware that constituency crises occasionally occur: a son of a constituent of mine is in prison abroad, and I had to deal urgently with that. However, my hon. Friend was right to raise the issue. The hon. Member for Northavon supplemented it with his own concerns, and the Minister gave a full response. These are complex issues that do not yield to a momentary soundbite or 10 seconds' consideration.

As I said, the amendment was moved by my hon. Friend. Had I moved it, I would seek the leave of the Committee to withdraw it, but, as the Minister will be aware, for procedural reasons, I cannot withdraw it because I did not move it. However, if the Minister were to negative it, on the assumption that we might take it away, reflect on it and return to it on a future occasion—or, rather, on the tacit assumption that that will be the case, as he cannot guarantee that—I would be happy to sit down and let the Committee take its course.

Amendment negatived.

Tim Boswell (Conservative, Daventry)

I beg to move amendment No. 25, in page 3, line 25, leave out subsection (6).

I think that we will now make some progress. The exchanges that have taken place on this clause have revealed some of our underlying concerns about it and the way that it operates, and as it is, in a sense, the central motor for the Bill, they will feature here and throughout our consideration—although we shall, of course, always be bearing in mind the relevance of what we have to do.

This is an overtly probing amendment. In response to it, I am sure that the Minister will want to say something about how he is going to approach the question of income, and we shall have some detailed points to make at a later stage. The amendment proposes to exclude subsection (6). That would make it impossible for him to produce regulations about what should and should not be treated as qualifying income. At a later stage, I am sure that we will want to

talk about capital assessments, implied incomes and so forth—in much the same way that my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) and I briefly touched on such matters this morning.

There is also the entire question of earnings, and the frequency with which that plays into assessments, for example, particularly if they fluctuate, which will create problems. Anything else, including tax-sheltered incomes, such as tax-exempt special savings accounts and individual savings accounts, may or may not enter the equation.

I told the Minister that the amendment is probing and, in that sense, I do not want it to be agreed to because there clearly must be regulations. However, the Committee would be helped by an explanation of how he sees things panning out. Will he give us at least a foretaste or a trailer of the definitions of income, which we might consider later in Committee or on Report?

I make one or two points of general application. We are trying, when possible, to be equitable to different sources of income—that is not necessarily wrong. I understand the distinction between savings incomes and earnings incomes for older people, but, given that we are discussing a savings credit, as a broad principle, one would expect savings incomes to be treated in the same way irrespective of their source. That reflects a general worry that if older people saved to get an income from capital or if they bought a house to let—that is becoming rather fashionable—such income should be treated on all fours with the annuity income that they would otherwise receive from a private pension.

There is also a general principle, which is lesser but nevertheless relevant, that income from different sources should be handled in the same way. We will examine the assessment period later, and there will be provision to allow the decision maker who decides the level of pension credit to take a view on what is likely to happen. If the income is likely to change radically, a lower period than the five years that the Minister normally wants may be used. We want the provision to be broadly neutral between different types of income so that an accident would not propel a person into a comparatively unfair assessment. I am sure that the Minister wants that too.

I shall give an example. I recall a case of constituents who were left a piece of property in a will. A condition of the will was an obligation to make over the income arising from rental to a third party during the third party's lifetime. I have not come across such an arrangement before, but I am sure that it is well precedented. Although I have not looked up the file, I recall that there was awful difficulty with social security benefit because my constituents were deemed to have an income. The social security doctrine had difficulty dealing with the fact that they were obliged to pay out the income.

It would help the Committee if the Minister told us more about the form of the regulations and the broad criteria for dealing with the matter. We have received a taster from the Secretary of State about earnings. The

Minister will note that owing to the temporary retirement of the hon. Member for Northavon, we shall not discuss amendment No. 4, which he tabled, or my amendment to that amendment. The amendments are about the treatment of earnings. Did the Secretary of State mean to imply that all earnings will be left out or that they will be included in some way? If we are on a level playing field and people earn substantial amounts of money, that might be knocked off against their pension credit. However, if they had received a five-year assessment and acquired the earnings later, that would not occur.

I have outlined considerations of consequence and practice, and it would be useful for the Minister to fill us in and respond to my points.

Andrew Selous (Conservative, South West Bedfordshire)

I shall speak briefly about earnings. The Minister will know of the recommendations made by the Select Committee on Work and Pensions in paragraph 42 of its report. It recommended that the first £40 of all weekly earnings should be disregarded when calculating pension credit.

This generation of pensioners is healthier than previous generations, and many pensioners wish to continue in the labour force, perhaps in part-time jobs. Pensioners who live alone find that the opportunity to get out of their houses to be with former work colleagues is extremely valuable. Age Concern made that point when it gave evidence to the Select Committee, and all members of this Committee probably received an e-mail from Age Concern yesterday asking for that point to be raised today. I shall be interested to hear the Minister's response on that.

Ian McCartney (Labour, Makerfield)

I see the amendment as a scene-setter for a more substantive discussion on clauses 15 and 16. I shall try to paint a broad picture, and a more detailed discussion of Opposition Members' contributions may be best dealt with during our consideration of those clauses.

Although the amendment appears to be a draconian attempt to blow a hole in the Bill below the water line, I accept that that is not the intention of the hon. Member for Daventry. He has floated several ideas to see what comes back from the fishing expedition.

Subsection (2)(a) shows that entitlement to savings credit is based on a claimant's qualifying income. Subsection (4) shows that the calculation of the savings credit is also based on the amount of a claimant's qualifying income. If the amendment were accepted, without removing the word ''qualifying'' from subsections (2) and (4), we would be left with a calculation without a definition of the terms on which it is based. In effect, no one would be rewarded for thrift—the hon. Member for Daventry said that he did not intend for that to happen.

The concept of a qualifying income is important to both the working of the savings credit and the principles behind it. We want to reward specifically people who put away money to provide for retirement. Many people have to take difficult decisions when

finding money to put into second pensions and general savings. We also want to reward people who continue to work after pension age.

We intend to prescribe qualifying income as all income defined in the Bill as retirement pension income, which is mentioned in clause 16, in addition to income from capital, annuities and earnings, which is defined in regulations under clause 15. Those income streams represent either a pensioner's savings during their working lives or, in the case of earnings, a pensioner's continuing contribution to, and participation in, the work force.

We do not think that it is right that some elements of income are rewarding. We would not want pensioners to be rewarded for their earnings through the new working tax credit. It would be absurd for that income to reward pension credit—it would be a credit on top of a credit. Similarly, if a pensioner had a younger partner in receipt of incapacity benefit, we would not want to reward that benefit—that would be bizarre.

I shall paint in the field, and give an extensive, but not exhaustive, list of items that will not be treated as income or that will be treated as income and totally ignored—they will not be defined as income under the Bill. The list includes: attendance allowance, disability allowance, and similar elements of war pensions; payments in respect of dependant children, including integrated child credit, and any other income or capital of those children; rent from second properties, as capital value is taken into account; actual income generated by a person's capital, as we take notional income into account; payments from local authorities, where persons provide foster or respite care; payments from the independent living fund, the Macfarlane or Eileen trusts, and community care direct payments. Other items that we are proposing to disregard also include cash in lieu of concessionary coal, voluntary payments from relatives and charitable payments—which the voluntary sector will be pleased to hear.

Tim Boswell (Conservative, Daventry)

It is useful to have this list. I am not trying to trap the Minister—I might just have misheard—but did he say that if there is income from compensation funds paid to, for example, a person who was injured in childhood and still has the capital, that that income will be included? I think that that is at least a possibility, and he might wish to write to me on that subject.

Ian McCartney (Labour, Makerfield)

I referred to the Macfarlane and Eileen trusts and the independent living fund. I also said that it was not an exhaustive list, and that I am still considering adding to it, so I could include compensation arrangements. I know that the hon. Gentleman is not trying to trap me, but I hope that he can see that we are trying to make this as extensive an operation as possible to ensure that the widest possible notion of income can be disregarded to maximise the potential for people to get access to the credit.

Income is relevant to the guarantee calculation; for single people, the top up is £100, and for couples the sum is £154. There might be other obscure forms of income that I have not yet come across but, in this business, we learn something every day. That is why

we have given ourselves powers to add to the list under clause 15 (1). Again, I will give examples of what we are talking about: regular payments from United Kingdom occupational and personal pension schemes, and their foreign equivalents; payments from retirement annuity contracts; annuity income funded from other sources, for example from a home income plan or where a similar or associated loan is secured on a person's home that will be offset with regard to the interest that the person has to pay on that loan; assumed income from capital, so that actual income from capital will be ignored, but income at £1 per week for each £500 or part thereof will be assumed, based on the total value of the capital assets of the claimant and their partner in excess of £6,000—or £10,000 in residential care cases.

The value of some types of capital assets, notably the person's home and personal possessions, will be ignored. We have done it that way because, in the consultation, older people's organisations overwhelmingly supported assumed income in the way that I have described. That is important, because we want older people to understand how the system works.

The current minimum income guarantee disregards will be carried forward into pension credit: single pensioners will receive a £5 disregard, couples a £10 disregard, and a £20 disregard will apply in other prescribed cases. People who are currently entitled to higher disregard will continue to receive it. Earnings that are disregarded will not be taken into account in a guarantee credit assessment. War disablement and war widows' and widowers' pensions, and the whole of any war widows' supplementary pension—which is paid in addition to the normal pension to certain pre–1973 war widows—will be ignored, as will the first £10 of other war pensions, including foreign war disablement and war widows' and widowers' pensions. With regard to matrimonial maintenance payments, working tax credit, employers' sick pay, and the Nazi persecution pensions paid by the German and Austrian Governments, the first £10 will be ignored. Rent from lodgers, boarders or sub-tenants will also be included in the calculation of the guarantee.

Qualified income is defined in clause 3(6). That relates to calculations for the awards. The relevant sum for single people is £13.80, and for couples it is £18.60. Other income is also relevant: regular payments from United Kingdom occupational and personal pension schemes, and from their foreign equivalents; payments from retirement and annuity contracts; annuity income funded from other sources; assumed income from capital; earnings; the current disregards that I have set out and retirement pension and any foreign equivalents, including the 25p age addition; graduated pension; age addition; SERPS, including a notional amount for a retired pension for those who have deferred their retired pension. In addition, amounts paid in respect of children will be disregarded.

I hope that hon. Members can understand how much work is going into putting the framework

together to maximise both the opportunity for the minimum guarantee and the reward element. Certainly, there are difficult issues. Hon. Members raised some that might be better debated under clauses 15 and 16. I hope that that information will give them an idea of how the Government intend to deal with the issue of maximising the uptake of pension credit.

Tim Boswell (Conservative, Daventry)

I am grateful to the Minister, because he has elucidated some of the Government's thinking. He has provided a list that will help not only members of the Committee but organisations that represent older people to think of possible gaps such as those that he identified. I was pleased that he expressed a willingness to keep an open mind as to whether other categories of income might come under that list. He also said that we will have time in our considerations of the Bill, let alone before subsequent regulations are made available, to discuss whether certain kinds of income should be included, and how they should be treated if they are.

The Minister is right to say that it would be appropriate to talk about income and earnings, subjects to which he will want to return, under clauses 15 and 16. I was not proposing to belabour the point on the amendment. I thank him for what he has said so far, and express qualified satisfaction with that. Although there are matters to which we must later return, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Tim Boswell (Conservative, Daventry)

I beg to move amendment No. 23, in page 3, line 33, leave out subsection (8).

Ian McCartney (Labour, Makerfield)

On a point of order, Mr. Griffiths. I do not wish to complicate things, but will you explain what will happen to the amendments that have been withdrawn? I am mindful of ensuring that hon. Members do not lose the opportunity to discuss those issues because of today's difficulties.

Win Griffiths (Labour, Bridgend)

As far as I understand it, the issue in question could probably be raised elsewhere in the Committee's scrutiny of the Bill. There will be sufficient time for new amendments to be tabled.

Tim Boswell (Conservative, Daventry)

I should like to respond—obliquely—to the Minister's point. In the words of General MacArthur, I will return. The Committee needs to return to those issues, and we will have to put our thinking caps on about how best to do it. I welcome the Minister's good will in saying that we should talk about them.

Superficially, amendment No. 23 is a bit like amendment No. 25, but it has a different and more limited effect. It would formally exclude regulations giving

''descriptions of persons in whose case the maximum savings credit shall be taken to be nil.''

Unless I have completely misunderstood the Bill and the explanatory notes, and have failed to attend to our discussions on amendment No. 14, with which we started the day, subsection (8) is about members of enclosed religious orders and prisoners.

Mr. McCartney indicated assent.

Mr. Boswell: The Minister is nodding. I am relieved, because that is what I thought it was about. My first task in speaking to this probing amendment is to ask him to confirm formally and for the record that those are the persons that he has in mind.

I puzzled over the difference between clauses 2(6) and 3(8) without reaching any conclusion on whether it has significance, or whether it is merely necessary in order to facilitate the slightly different structures of the guarantee credit under clause 2 and the savings credit under clause 3, which we are now discussing. If the Minister refers back to this morning's debate, he will find that clause 2(6), which we wanted to delete and which relates to the same matter, is in a rather different form from the provision that amendment No. 23 would delete. In one case, the suggestion is that a prescribed amount under the guarantee should be set at a lower level, while in the other, it is that the savings credit—the product of the calculation, rather than the condition for it—should be nil. It would be useful for the Committee to find out whether there is a rationale for the slightly different approach. There may be, but the Minister might care to reflect on that.

My second point relates to a point that we may want to make later in discussing eligibility and assessment periods. Almost by definition, the position of a prisoner is different from that of a person in an enclosed order. I understand that their treatment may be the same under the regulations, but in one case we are, I hope, dealing with volunteers, with the assumption that people who adopt the contemplative life will want to stay in their order indefinitely—although, of course, some do leave. In the other case, it is assumed that people are detained not at their pleasure but at Her Majesty's, by way of a custodial sentence.

I am not sure whether the issue has emerged from this Committee, but it does emerge from time to time. From time to time I am not unsympathetic to prisoners' interests. It would be in the common interest of the Committee to ensure that people get up and running as soon as possible after their incarceration, as we want them to be successful and useful members of society.

I realise that it is rather an extreme case of the double provision rule that if someone is inside, they should not receive pension credit. That is perfectly reasonable. However, as and when they come out, it is especially important that they should quickly be able to receive anything to which they are entitled.

In the past, I have asked the Minister's colleagues in the Home Office about the growing number of older prisoners in our prisons. I have not checked the figure, but I believe that there are more 4,000 pensioner prisoners. They need special attention and provision in the case of health care, for example. It would clearly be inappropriate to debate that today, but if they have an entitlement to state pension credit, they should be able to assume or resume it as soon as possible.

That matter is relevant to the assessment period, which we shall discuss later in other contexts, when we debate subsequent clauses. I am not clear what would

happen in the case of an assessment covering a five-year period. If the person involved subsequently goes to prison—the example that we are considering in the amendment—and is inside for, say, 18 months, they may return within the original assessment period. I am anxious to determine not whether they should be paid credit while they are inside, but whether they should be paid on the basis of the original assessment when they regain their liberty. Is it a fresh start in every sense? Is there a reassessment? Is there discontinuity in the assessment period, or is it treated as continuous with a little local difficulty being remunerated at nil for the weeks of incarceration? That is more than a trivial issue. It will centre on some other issues, too.

Ian McCartney (Labour, Makerfield)

It is probably best to deal with that now. I would call that a change of circumstances. The person's income would cease from the point of conviction and incarceration. When they are ultimately allowed out, having completed their sentence in whatever forum, they will make a fresh application. That will not be unusual, because, under the Bill, changes in circumstances must be notified and that can affect either negatively or positively people's access to pension credit. It is simply another category.

Tim Boswell (Conservative, Daventry)

I remember from my days when I knew a little about agricultural tenancy that there were the so-called seven deadly sins if one was a tenant, the most deadly of which in both senses was to die during the tenancy because it was then impossible for the tenancy to continue in that form. Other sins were bankruptcy and so on.

Ian McCartney (Labour, Makerfield)

That was called penury.

Tim Boswell (Conservative, Daventry)

It is not too good in farming at the moment either.

The Minister said that such matters would constitute a change in circumstance. Whether the change would be notified by the prison authorities or the individual concerned is perhaps a matter for regulation, and a person would start again when released from prison. We could create many interesting scenarios about the proceeds of crime that had not been picked up and confiscated—I am neither advocating that nor entertaining it, but such an elucidation is interesting because the pensioner's income may have changed during prison, perhaps because, for example, he had received a substantial windfall from an auntie.

Because of the nature of the change of circumstances or the interruption, a flow of pension credit that would have been payable from day one for five years on an assessment would have to be reassessed and may give rise to a lower form of income thereafter. That constitutes not double provision, but double penalty. The right hon. Gentleman may want to reflect, not necessarily now—we are at the edge of determining the matter—whether he wants such an outcome.

It was not a waste of time to table the amendment. We are worried about targeting, although the explanatory notes confirm that the measure concerns enclosed orders for prisoners. We are worried about the operation of a change of circumstances and whether it is straightforward, which gives rise to an

apparent inequity between periods before or after incarceration. I hope that the Minister can respond to the issue now or reflect on it later.

Ian McCartney (Labour, Makerfield)

The purpose of the subsection, along with clause 2(6) and (9), is to provide powers to ensure that prisoners and members of a religious order who are fully maintained by their order can be excluded from entitlement to pension credit. That is because the cost of maintaining those groups is met by other organisations.

The hon. Member for Daventry asked about the relationship between clause 3 and clause 2. I have received expert advice that clause 2(9) allows the amount for monks and nuns to be set at nil. Clause 2(6) covers hospital in-patients and also has links with clause 2(8). I am pleased that the experts are on my side and not on the hon. Gentleman's side. I do not mean that in the pejorative sense because I understand the complexities of this part of the Bill. Get lawyers involved, and clause 3 will result.

The proposed treatment of prisoners in respect of pension credit is consistent with the approach taken in relation to income support and other benefits. For example, prisoners are excluded from the working families and disabled person's tax credits and attendance allowance, and the basic state pension payment is suspended for the duration of the sentence. The amendment would remove the proposed power to prescribe cases in which the savings credit will be set at nil. It would mean that prisoners and members of religious orders who were fully maintained by their order would be eligible for savings credit on the same basis as other pensioners.

I know that the hon. Gentleman is not serious about paying savings credit to pensioners, although he became pretty close to that in his closing remarks. The needs of men and women in prison are met by the Home Office and the Prison Service. Extending the savings credit to prisoners would amount to double provision.

People in enclosed orders do not need state support because their needs are met by other organisations. Indeed, the state has no legitimate role in their financial affairs. Extending the savings credit to such people would inevitably involve making inquiries into their financial affairs. The provisions uphold tenets that have been the policy of Governments of both political persuasions since the establishment of the welfare state. I assure the hon. Gentleman that the exclusions are not in breach of our obligations under the European convention on human rights. It is the underpinning ethos of religious orders that there is no need for state support and there is no legitimate role for the state in the financial affairs of those committed to such a way of life.

When people on pension credit are imprisoned, their partners can claim as single people. When prisoners are detained in custody awaiting trial, any housing costs and payments, including housing benefit, will continue to be paid for a maximum of 52 weeks. I hope that those remarks will also reassure

the hon. Gentleman in respect of other matters relating to prisoners' needs on sentence or pre-sentence.

Tim Boswell (Conservative, Daventry)

I am grateful to the Minister. It is useful to have elucidation, although I am not absolutely sure that it is right in relation to what could be the downrating of an entitlement after a period of incarceration. I believe that we are removing double provision at the possible expense of creating double penalty, although that is perhaps how the prisoner would see it. In no sense do we intend to produce a special regime for prisoners. We simply wish to comment on the fact that had they not been in prison paying their dues to society—

Ian McCartney (Labour, Makerfield)

This is not double jeopardy. Whether people are in prison or not is irrelevant because a fresh application is made, the resolution of which will be determined by the circumstances. It is a fresh application because their qualification has been suspended. They have been found guilty of a criminal act and imprisoned. At that point, their qualification and right to credit ceases and can only recommence when they come out of prison. When they are out of prison, their record is irrelevant to the decision-making process on pension credit. Their financial circumstances will determine the level of minimum income guarantee and whether any credits should be paid in reward.

Tim Boswell (Conservative, Daventry)

It will not assist the Committee to have a huge and disproportionate spat, but the Minister may not have helped by using the word ''suspended''. The essence of his case is that there was an entitlement that stopped on incarceration. A new entitlement is available after incarceration that will be determined by the circumstances involved. I do not think that that is a distortion, but I cannot argue that it is a coherent and logical position. The entitlement undergoes a suspension rather than a cessation followed by a recommencement or fresh assessment—a fresh start.

I simply record that if one took two persons who started with the same entitlement to pension credit on a particular day, and whose assessment periods were conventionally set at five years each, one of them may, in the interim, have had an accession of resources—perfectly legitimate ones, not the proceeds of crime. They may both, coincidentally, have had the same accession of resources; but if one of the two had gone to prison, that person would find themselves, willy-nilly, obliged to start again. Having examined the procedure for the assessment period, I imagine that relatively few people would go to the Department and say, ''We think that we have come into a fortune and don't want the pension credit and we would like to be reassessed'', with the inference that they go back to zero. However, the person who has been incarcerated would be forced to do that.

Kevin Brennan (Labour, Cardiff West)

Is not the point that people incarcerated in prison have disqualified themselves from the benefit in the meantime? The idea that those people should be entitled to the same treatment as those who have not disqualified themselves is absurd.

Tim Boswell (Conservative, Daventry)

That is an interesting point. The hon. Gentleman is giving what many of us might feel is the moral case for that disqualification. I am feeling after issues of law, although I do so as a lay person rather than a lawyer. If two people were under the same regime—unless and until they wished to make an application for a fresh assessment—and one of them was imprisoned, the latter would have the by-product of losing some of his or her entitlement without any other change in circumstances. The Committee should at least pause on that.

I do not wish that point to be understood as an argument for some sort of outdoor relief for those who commit crimes, and in fairness the Minister has not caricatured it that way. I am just saying that it is an interesting point. That is the kind of detail that needs attention. We must decide whether it is the suspension of a benefit that applies elsewhere or a fresh start brought about by the criminal's fault and the fact that he or she went to prison, as the hon. Gentleman perfectly reasonably says. I do not want to labour the point, but it has at least been useful to draw out those issues. Some of them may require a little attention before the final regulations, and there is time enough for that.

Andrew Selous (Conservative, South West Bedfordshire)

My hon. Friend's points have some relevance. It is important that when people come out from prison they have minimal reason to re-offend. It will surely be conducive to staying on the straight and narrow if they have benefit entitlement as soon as they come out from prison.

Tim Boswell (Conservative, Daventry)

I accept that, but equally I take it as self-evident that the arrangements for discharge from prison will enable them to pick up any benefit entitlement as rapidly as possible. We have spent quite a lot of time on the issue. It is a small one, but sometimes it is the small ones—the grit in the shoe—that niggle. We were right to raise it, but I do not wish to persist with it, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Tim Boswell (Conservative, Daventry)

We have been talking in detail about a very small proportion of the total pension credit fund. As we let the clause go on its way, it will not escape the Committee that, for reasons that we have already discussed, we are somewhat attenuated this afternoon. I hope that we will conduct a sensible discussion on the clause. As well as the little exchanges that we have just had, we have heard valuable assurances from the Government on the approach to income, partial contribution records, cases in which people are not entitled to the full basic pension and making up the full amount.

In a sense, this is the central clause of the Bill. It has generated many issues, but for a variety of reasons they have not yet all been fully squeezed out. They are perfectly sensible issues that need not necessarily generate huge political controversy, but it is important that a Government mindful of human

rights obligations and what is fair both to all pensioners and between pensioners should reflect on them. I simply put down a marker for later debates on those subjects. Although we have had a good rattle through the greater part of today's considerations, we have not yet quite got to the end of the story.

Ian McCartney (Labour, Makerfield)

I do not wish to detain the Committee much longer. Clause 3 is a key building block of the Bill, and as a consequence it is a significantly detailed part of it. Not many amendments were tabled but despite that, and because of the Chairman's tolerance, we have had a wide-ranging debate on the concepts and principles of the clause. The clause has enabled my hon. Friend the Under-Secretary and me to be completely open and frank, and will allow us to lead debate on further subjects under clauses 15, 16 and beyond, so that Members are clear about them. We have provided a further written note on clause 3, to help hon. Members with regard to clauses 15 and 16.

Although not many hon. Members have taken part in our discussion, it has been a quality debate. I am pleased that we have reached clause 3, and I hope that it will remain in the Bill because many pensioners and pensioners' organisations have been waiting a generation for its provisions.

The Bill will end poverty, give people assurances about their security in old age and for the first time ever it will provide a reward for savings and small second private pensions. This has been a long time coming. Some of us have been campaigning for it for generations, but I am pleased that, at 3.35 pm today, we have finally achieved it. I look forward to moving on to clause 4—and beyond.

Question put and agreed to.

Clause 3 ordered to stand part of the Bill.

Clause 4 - Exclusions

Tim Boswell (Conservative, Daventry)

I beg to move amendment No. 27, in page 3, line 38, at end insert

'and in the event of a difference of opinion between those parties to that couple, then that person with an income profile likely to give rise to the higher amount of pension credit shall be deemed to be the claimant'.

I do not know whether antiquarians who are still on the Labour Benches remember clause four—I hope that they do—but I always feel an almost irresistible urge when I see—

Ian McCartney (Labour, Makerfield)

My hon. Friend the Member for Dagenham (Jon Cruddas) wrote it.

Tim Boswell (Conservative, Daventry)

It would concern me even more if the hon. Member for Dagenham still believed in it, because his leader does not. If we continued along these lines I think that you, Mr. Griffiths, would feel that we were being tempted. I intended merely to make the jocular remark that whenever I see a clause 4, I feel the urge to amend it.

I have no major conceptual problem with this clause. I am not about to suggest that the red hordes are going to march down Whitehall, or anything like that—indeed, perish the thought, with the present

Government. However, we can, perhaps, leave that topic to another day.

I wish to raise two serious issues that will arise with regard to different amendments. Such issues sometimes arise when one is addressing apparently simple and technical clauses, such as this one. I sometimes think about such matters in the small hours of the night. I hope that Committee members will not think that I spend all of the small hours reflecting on the State Pension Credit Bill, but occasionally one wakes up—after a nightmare, for example—and thinks about something that one had not thought about before.

As I have said, there are a couple of serious issues, particularly with regard to this amendment, that deserve a little bit of the Committee's time. The concept of the clause is not silly. Its primary aim is to prevent the payment of more than one pension credit to a benefit unit. I do not think that we will argue about that at all; it is clear that that will happen.

However, I should perhaps add that there is a wider issue here, which I have been concerned about. Following the advances that were made by the previous Conservative Government in the sphere of independent taxation—although I know that the Minister of State does not always feel that advances have ever been made by any of his political opponents—this measure begins to row us back towards a world in which people are seen and treated as one unit for the purpose of their income, bearing in mind that this is an income-related benefit. I record that but I will not necessarily debate it further, as that is the decision that the Government have made.

With regard to the purpose of amendment No. 27, two things need to be discussed. First, what is a couple? That came in for some comments from Help the Aged. I assume that a couple are usually—but, perhaps, not exclusively—two people of different sexes who are either married or cohabiting, and are therefore treated as a single benefit unit—to use the term of art—and that those would be the people who would be entitled to a single pension credit. However, Help the Aged makes a rather terse comment in relation to clause 2, which also applies here:

''Married/unmarried couples is always good for domestic tension. Will (say) two older sisters living in one household be two singles or one couple?''

My understanding is that they will be two singles, but it is important that the Minister of State should explain that.

Ian McCartney (Labour, Makerfield)

Yes.

Tim Boswell (Conservative, Daventry)

I think that the Minister of State is giving me an affirmative answer to that, but I will let him do that formally, because that is important.

I have tried, in my rather lay way, to describe the single benefit unit. Perhaps the Minister will tease that out further. We assume that there is such a thing, and that it is broadly a married couple or an unmarried couple, as it is described in the clause. Potentially, and increasingly in reality, both may be entitled to a state retirement pension. A couple who are not exactly the

same age who retire at, say, 65 in the case of the man, and, say, 62 in the case of the woman, may now find that they both have a retirement pension in their own right. Elsewhere, the Bill refers to a person or their partner reaching retirement age. The amendment is designed to pave a discussion and tease out rather more closely how the provision will apply and how the decision-maker will determine the matter in cases that are consensual and involve both parties and in which there is some tension or people simply like things their own way.

By definition, if one member of a couple is of pensionable age and the other is not, the one who is of pensionable age will be the only one in receipt of a state retirement pension, and the pension credit will hang on them. What happens when the second person reaches pensionable age and might also be entitled to a retirement pension? Clearly, there cannot be two pension credits. Is provision made for one to take over from the other, and if so, how will that be affected? Will it require a claim by the second party, or indeed, renunciation by the first? Will the initiative come from the Benefits Agency or the individual claimant? When they cannot decide how the matter is to be dealt with, how will the matter be decided and to whom will the credit be paid? Can arrangements be made for it to be split?

The amendment is intended not to invent a way of increasing the total credit but to deal with complexity. It is possible that both parties might have a full retirement pension and that either might be able to receive credit over and above that. The figures suggest a margin of leeway. I assume that all factors will be taken into account. How will such complicated issues be resolved? Above all, if one party has retired and the other party joins them, and if the assessment is likely to be better for the second party—if that is possible—how will that affect the overall credit? How would the Pension Service carry that into effect?

Ian McCartney (Labour, Makerfield)

I shall try to give the hon. Gentleman a full explanation and set out the procedures for issues of dispute and how the Department deals with them.

The hon. Gentleman asks for a definition of ''couple''. That is defined in clause 17, in the case of married and unmarried couples involving different sexes. A same-sex couple is equal to two individuals. He also asked about the total cost, which is £2 billion a year for guarantee credit alone, as the Government set out in publishing the Bill.

Amendment No. 27 would specify in primary legislation the criteria that would apply in cases in which the parties cannot agree who should make the claim. It stipulates that such disagreement should be settled by paying pension credit to the person entitled to the higher amount. The issue is similar to one that Lord Higgins raised in another place. As my noble Friend Baroness Hollis said, such cases are so rare that officials have been unable to identify a single case when that has happened—we must keep our fingers crossed. Therefore, we are considering a hypothetical situation. However, various processes are in place that I shall set out and, hopefully, that will reassure the hon. Member for Daventry.

Under the minimum income guarantee, if and when such disputes exist, they are settled by the Secretary of State—in effect the local decision maker—by taking account of individual circumstances of the case. We intend to adopt that approach to pension credit, and it might help hon. Members if I take them through the process.

In the first instance, responsibility for settling the dispute would return to the couple and they would be given every opportunity to resolve the problem themselves. If a customer indicates on the claim form that their partner does not agree to their making a claim, a letter is sent to both people asking them to decide who should make the claim. Further steps would be taken only if it was clear that they were unable to resolve the dispute, or if a reply to the letter had not been received after 14 days.

A range of factors are considered when deciding such a case, such as determining the person who is normally responsible for paying the household bills. Indeed, if it would give a financial advantage for one partner to claim, the partner who would receive the most benefit would be chosen. I think that that answers one of the points made by the hon. Member for Daventry.

The amendment would not provide sufficient flexibility to allow the decision maker to take account of the full range of sensitive issues that might arise in individual cases. Indeed, it would reduce the criteria that the decision maker could consider.

Furthermore, the approach suggested by the amendment would lead to considerable intrusion into customers' personal resources. It would involve asking detailed questions about the claimant and their partner's income. For example, if income were derived from a joint bank account, potentially arbitrary decisions would have to be taken on the apportionment of that income between the two partners.

We know that customers are extremely reluctant to claim benefits that require excessive investigations into their financial arrangements, and we want the pension credit to move away from such an approach.

It may help the hon. Member for Daventry if we examine what currently happens in IS and MIG cases. Such situations arise extremely rarely. They may arise from a domestic dispute, or the Department may find against a couple who were effectively living together as husband and wife, and request a joint application. Such cases are more likely to arise under child benefit because national insurance credits are awarded to the claimant under home responsibilities protection, although no statistics are available on that. If a husband and wife reside together and both claim child benefit, the wife has priority over the husband. Under the minimum income guarantee, the decision maker may decide to split payments between each individual of the couple if the claimant mismanages the benefit. That is to protect the best interests of the family, and it generally occurs if the claimant has an alcohol or gambling addiction.

The number of such cases is small. Investigations in one office revealed only three split-payment cases out

of a case load of about 45,000. The reason for the split payment was mismanagement in all three cases. If a man's claim form indicates that he has a female partner, a further form is issued to both parents to ascertain whether the woman agrees to the claim. In 2001–02, 65,000 such forms were issued. As of March 2002, 95.5 per cent. of claimants were female and 4.5 per cent. were male.

To assist the hon. Member for Daventry, my colleagues in the Department and I examined every avenue to assess whether a problem existed and what we could do about it. The problem does not exist; it is perceived. However, even if it did exist, we have robust, effective and humane ways of dealing with it. The situation would be handled in the best interests of the client, rather than the Department.

I hope that my answers satisfy the hon. Gentleman and that he will withdraw the amendment.

Tim Boswell (Conservative, Daventry)

The short answer is that they do, but it is right to raise such issues. The Minister's response was helpful, although we shall study it in greater detail. He has drawn on the collective wisdom and great experience of the Department, and we should refine out the limited cases in which such problems arose. It is our job as legislators to think about extraordinary and odd cases in which what seems to be all right on the surface may not be right behind the scenes, as that is the job of lawyers who draw up wills and other family arrangements. I am sure that the Department will want to look at the issue in a sensible and sensitive way and to try and help wherever possible. My intention was to float concerns, and the Minister has done his level best to answer them. The Committee is making progress and, in that spirit, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Tim Boswell (Conservative, Daventry)

I beg to move amendment No. 24, in page 3, line 43, leave out subsection (3).

I hope that this debate will take even less time, because the amendment refers to another point in the exclusion clause. As I have said, that proves no difficulty to us, so I shall not need to return to it in the clause stand part debate. The amendment relates to de minimis payments. I understand why the Department would not want to mess about with tuppence a week.

I remember that my mother—a formidable lady who occasionally features in Committee discussions—once received a cheque from the Inland Revenue for tuppence. I communicated with the chairman of the Board of Inland Revenue—otherwise known to viewers of ''University Challenge Revisited'' as one of the New college team of 1964 for which I was consistently the first reserve. I asked, ''Is it really a good idea for your department to be sending out tuppenny cheques?'' He replied that my mother had forgotten to tell officials to roll it forward until the next payment. We all understand that it is absurd and irritating for people to receive piffling amounts.

Unless I have completely misconceived the matter, the normal method of payment for savings credit is by bank transfer—we need not debate that now—or by

order book in cases in which cash payment has been requested. Payment will be part of the pension and not a separate exercise.

Mr. Ian McCartney indicated assent.

Tim Boswell (Conservative, Daventry)

The Minister nods in agreement.

At the back of my mind, I believe that arrangements can be made for people who have nominal entitlements—to a teacher's pension at the age of 60, for example. In cases involving small amounts, it is possible—and it has been practised in the past—to compound them into a single capital payment. Even if the entitlement were only 10p a week and the assessment period merely five years, I would still be pleased to receive that cheque. Will the Minister tell us the purpose of the provision and how it will work?

Maria Eagle (Labour, Liverpool, Garston)

The hon. Gentleman has shown a full understanding of the de minimis rule, so I will not detain the Committee by explaining exactly what that is in all circumstances. It is a concept that he has discovered partly through family experience, but which is well known in the social security system. It is a way of ensuring that extremely small entitlements—under 10p per week—are not carried through, and that people do not receive cheques for ridiculously small amounts.

A similar amendment in the other place, which suggested paying the amounts annually, was withdrawn. If there were no de minimis rule, by omitting subsection (3), the hon. Gentleman's amendment would leave us having to pay those small amounts weekly, and the amounts would be even more derisory. His amendment presents more problems than the one tabled in the other place, which at least suggested annual payments.

The hon. Gentleman suggested a five-yearly payment. However, it is the income assessment that is five-yearly. Payment is made weekly. For that reason, we still need the de minimis rule. As he knows, we do not simply write off those amounts of money. If the customer concerned is in receipt of any other benefit, we consolidate the small amounts with that. We do not send a separate cheque for under 10p

a week, but an additional bit will be added to their other benefit.

In practice, the operation of the de minimis rule affects a small number of people. On the assumption of 100 per cent. take-up of pension credit, it is estimated that about 10,000 people will be entitled to less than 10p a week and be caught by the de minimis rule. In 95 per cent. of those cases, we would be able to combine the payment of the pension credit with another benefit.

Only about 500 pensioners would be affected. I agree with the hon. Gentleman that to receive a weekly cheque for 1p or 2p from the Department would be severely aggravating to most pensioners. We are talking about a small number of people and a small amount of money. He already understands the de minimis rule and I hope that I have explained why we need to retain it for pension credit. The financial detriment to a small number of people to whom we cannot pass on the tiny amount of pennies will be minor. I hope that the hon. Gentleman will accept that we need the provision and that he will withdraw the amendment.

Tim Boswell (Conservative, Daventry)

I thank the Under-Secretary for her most persuasive response. It has been useful to rehearse such arguments. It is difficult when people lose out because of the de minimis rule and I accept that the Government do not want that to happen. But a few such cases will arise and I see no way of avoiding the problem, without breaching the concept of the de minimis rule. I am not sure that many pensioners will want to cross the road for tuppence, as it were, or that they would thank the Government if they did so. Given the intimate relationship of pension credit to retirement pension and so on, I still find it difficult to think how such a situation would arise. However, the hon. Lady suggested that there may be some 500 such cases a year. I am grateful for her response. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Further consideration adjourned.—[Angela Smith.]

Adjourned accordingly at four minutes to Four o'clock till Tuesday 23 April at half-past Ten o'clock.