Pensions Bill

Public Bill Committee, 23 January 2007.

Roger Gale (Conservative, North Thanet)

Good morning, ladies and gentlemen. On behalf of Mr. Taylor and myself, I welcome you to the Committee. As long as I am in the Chair, hon. Members may remove their jackets. Mr. Taylor will no doubt make his own adjudication on the subject.

I remind the Committee that there is a money resolution in connection with the Bill, copies of which are available in the Room, and also that adequate notice of amendments should be given. As a general rule, Mr. Taylor and I will not call starred amendments, including those that might be reached during an afternoon sitting.

James Purnell (Labour, Stalybridge and Hyde)

I beg to move,

That—

(1) the Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 23rd January) meet—

(a) at 4.00 p.m. on Tuesday 23rd January;

(b) at 9.10 a.m. and 1.30 p.m. on Thursday 25th January;

(c) at 10.30 a.m. and 4.00 p.m. on Tuesday 30th January;

(d) at 9.10 a.m. and 1.30 p.m. on Thursday 1st February;

(e) at 10.30 a.m. and 4.00 p.m. on Tuesday 6th February;

(f) at 9.10 a.m. and 1.30 p.m. on Thursday 8th February;

(2) the proceedings shall be taken in the following order: Clauses 1 to 11; Schedule 2; Clauses 12 and 13; Schedule 3; Schedule 1; Clauses 14 and 15; Schedule 4; Clauses 16 and 17; Schedule 5; Clause 18; Schedule 6; Clauses 19 to 24; Schedule 7; Clauses 25 to 29; new Clauses; new Schedules; remaining proceedings on the Bill;

(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 p.m. on Thursday 8th February.

I am sure that I speak on behalf of everyone, Mr. Gale, when I say how delighted we are to be sitting under your experienced chairmanship on this important Committee, and also how much we are looking forward to the chairmanship of Mr. David Taylor, who is also very experienced.

The Bill has been widely welcomed, including on Second Reading, and there appears to be a broad consensus on the crux of the proposals that it contains. That is in large part owing to the extensive consultation and research that went on beforehand, not only in the exemplary work of the Pensions Commission, but in the national pensions debate in which more than 5,000 people participated, and in the White Paper consultation to which 350 organisations and individuals responded.

I put on record the Government’s gratitude to the members of the Pensions Commission—Lord Turner, Jeannie Drake and John Hills—for their work in shaping the proposals in the Bill. The Committee will agree that the Pensions Commission’s report is a model of what commissions can do to shape Government policy.

I also put on record my gratitude to the main Opposition parties for the spirit in which they have approached the Bill. The Government have tried to work closely with the Opposition parties on the principles and to give them as much access as possible to our thinking, and they have helped to shape some of the proposals in the Bill. Of course, that does not preclude the need for scrutiny of the proposals, and it is right that the Committee do so. In the past, Bills have gone through with a measure of consensus that some retrospectively say means that they have not been effectively scrutinised, so scrutiny is an important task for the Committee. The reforms contained in the Bill will put in place a state pension system that is fit for the 21st century, one that will meet the demographic challenges that we face, and address many of the injustices of the current system, particularly those regarding women and carers.

The Bill also puts in place measures to support the widening of private pensions saving. The Committee will have the opportunity to examine the issue of the delivery authority for personal accounts. I am sure that there will be some scrutiny of, and enthusiastic discussion about, the arrangements for the delivery authority. However, on a point of detail, it is worth saying at the outset that the Bill is not concerned with the details of the personal accounts scheme in themselves. As hon. Members will know, the Government are in the process of consulting on our proposals for the technical details of the operation of personal accounts.

I am pleased that we have been able to meet Opposition requests for 12 sittings without guillotine motions, on the basis that the Committee will now find its own way through proceedings. I am very lucky to be joined by the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt), who will assist us in our discussions. There is a great deal of knowledge and expertise in the Committee. I look forward with interest to the points that will be raised and discussed, and I hope that we will be able to continue the consensual approach to the Bill that we have had to date.

Nigel Waterson (Conservative, Eastbourne)

I associate myself with the Minister’s remarks about you, Mr. Gale, and your co-Chairman, Mr. David Taylor. I am sure that you will both bring to the chairmanship of the Committee your usual rigour and occasional good humour.

I am delighted to be ably backed up, assisted and supported by my hon. Friend the Member for South-West Bedfordshire, and indeed my other colleagues. I take this opportunity to welcome all members of the Committee, pressed men and volunteers. I am tempted to say that they do not know they are born. Some of us bear the scars not only of the Pensions Act 2004 but even the 1995 Act, to go back a bit. As a fresh-faced Back Bencher, I was put on that Committee—I think to punish me for some long-forgotten sin—where I developed a taste for pensions legislation. It is nice to see some old faces here today—I mean that in the best sense—particularly among the officials.

Here we are again, trying to resolve the pensions crisis. The Government are perhaps the only body in the country who persist in claiming that there is no pensions crisis, but we are going to have a bite at that rather substantial cherry. The good news, as the Minister said, is that we have agreed an informal timetable for sittings, so we should be able comfortably to deliver the Bill by 5 o’clock on 8 February. That will be a massive step forward from the last Pensions Bill, which seemed to go on and on and on, primarily because the Government kept trying to amend their own Bill. I lost count, but I think that between the Commons and the Lords, the Government tabled about 1,500 amendments in the end.

We are proceeding on the basis that this Minister has a much better grip on things. It is worth putting on the record that at the Programming Sub-Committee he gave us a cast-iron guarantee that there would not be lots of amendments. Apart from the obvious technical and drafting amendments, which are understandable as long as they do not get out of hand, all the envisaged amendments of any substance are now before us. That is helpful, and it is on that basis that we will be able to deliver the Bill in 12 sittings. For those newcomers to the world of pensions legislation, I hope that we can deliver a few laughs, a few tears and some human interest, and that we can disagree without being disagreeable.

The Minister mentioned consensus, and it is important to understand what we mean by that. Unlike his TV appearances, the Committee will not provide an easy ride. The Conservatives have made it clear, as I for one did on Second Reading, that by consensus we mean total transparency and openness. As the official Opposition, we must be satisfied that the Bill will work, not just because that is the right thing to do for future generations of pensioners but because we have a sneaking suspicion that we might well be in power when a lot of it comes to be implemented.

The Minister has touched on the main issues. One is restoring the link between pensions and average earnings. That was in our last election manifesto, so it would be churlish of us to do anything but support it.

Russell Brown (Labour, Dumfries and Galloway)

On that specific point—that the issues of consensus and restoring the link were raised on Second Reading—I remind the hon. Gentleman, although I suspect that he has not forgotten, that the link would not have been guaranteed beyond one term had his party got into power.

Nigel Waterson (Conservative, Eastbourne)

I ruefully admit that that might be slightly academic, but I take the hon. Gentleman’s point. I thought that all manifestos were for one Parliament. I seem to remember learning as a fresh-faced law student that one Parliament could not bind another, but there we are.

At any rate, the issue was there, as was a suite of policies to better the position of carers, particularly women. The Conservative party are delighted that the measures are being introduced, particularly those concerning women’s pensions. We will have a lot to say about the detail, particularly the issue of the cliff edge, as it has become known, although a steep incline is probably a better way of putting it.

The state pension age—Committee members will be relieved to know that this will not affect many of them—will rise slowly to 67 or 68. I thought that the Minister was trying to put down a marker concerning personal accounts. It is important to see the Bill as a seamless whole. Unless the state system is working, the private system will not work and vice versa. Unless the state provides a decent platform for private pension savings, issues such as means-testing will fatally undermine pension savings, so the two stand and fall together. Although the Minister is correct in saying that a second, much more detailed Bill dealing with the personal accounts system will be introduced this time next year—I imagine that we will be members of the Committee—it is vital that we take the opportunity at this early stage to put down some clear markers about how the personal accounts system should operate. The Opposition will certainly seek to do that.

On Second Reading, I said that I feared that Ministers were only too keen to appoint high-powered people to run the delivery authority and then leave them to deal with all the difficult stuff. The House needs to be clear about how personal accounts will work, how they will be delivered and whether they will be successful in the real world. Most importantly, we need to set out what constitutes success or failure.

I also talked about the four elephants in the room. I said that it was very important to discuss means-testing—I will come back to that in a moment in a different context. Secondly, I talked about levelling down and to what extent personal accounts will undermine good existing pension provision provided by responsible employers. Thirdly, I talked about the dangers of mis-selling to people who should not be auto-enrolled but advised to opt out of the new system. Fourthly, I mentioned confidence. We have tabled amendments dealing with issues such as the financial assistance scheme, the ombudsman’s report and all the unfinished business that the Government should be clearing away to try to ensure that personal accounts have a clear run and a good chance of taking off and being successful.

I return to means-testing. For us—and, I suspect, for the Minister as well—it is a central issue. Currently,50 per cent. of all pensioners are being means-tested. If we carry on as we are, it will be 75 per cent. by the middle of the century. That is clearly unacceptable, and the Government have already said so on record. The key issue is whether the reforms will reduce means-testing to an acceptable level. The Government say that it will be reduced to about 30 per cent. Independent bodies such as the Pensions Policy Institute put the figure closer to 45 or 50 per cent. There is a clear division. In fairness, the Department for Work and Pensions and the PPI have been trying to narrow the differences, but not with any great success.

That is why I raised the possibility on Second Reading of having a session, or perhaps half a session, of oral evidence on that subject. For the benefit of those Members who may not have been keeping up, we are operating under new Standing Orders. I do not claim to have read them all, but one of the key differences is that we will be subject to written evidence, which sounds like a good idea in theory. I have not seen any yet, but it will no doubt emerge. Like a Select Committee, we will receive it as we go along and it will eventually be produced in a bound volume, and I welcome that.

However, there is also provision for oral evidence in Committee. Again, that is a good idea in the right conditions, and it is absolutely crucial to the success of the reforms, but it is relatively narrowly defined. The likely witnesses will come from only two groups—the boffins from the DWP and the boffins from the PPI—so the evidence could be dealt with rather crisply. On the Programming Sub-Committee, the Government’s attitude was that they were not prepared to agree to that. Indeed, they took a rather strict view that the rules would apply only to Bills introduced for First Reading after Christmas. If that is the test, this Bill would fail it. So far, so good.

However, as was mentioned at business questions with the Leader of the House last Thursday, a precedent exists—the Local Government and Public Involvement in Health Bill. Even though the Bill received its First Reading before Christmas, the Bill’s Committee decided that it will take oral evidence. There is a precedent, and I understand that the Committee is sovereign with regard to hearing oral evidence during its deliberations.

Mark Pritchard (Conservative, The Wrekin)

Does my hon. Friend agree that, if we can hear oral evidence, it would square the circle and onward discussion in the difference of interpretation of how far the Bill will deliver a reduction in means-testing between the Department for Work and Pensions and the Pensions Policy Institute to which he referred?

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend is absolutely right. I shall return to that point in a moment.

I wish first to deal with the reaction of the Leader of the House when the matter was put to him by my right hon. Friend the Member for Maidenhead (Mrs. May) on Thursday. The right hon. Gentleman talked about Standing Order No. 83C and said:

“We are very committed—I include in this my right hon. Friends the Chief Whip and the Deputy Chief Whip—to making this system effective. If the Standing Orders say that not only the Programming Sub-Committee but the Public Bill Committee can decide on whether to have evidence sessions, that is correct.—[Official Report, 18 January 2007; Vol. 455, c. 921.]

In fairness, he referred also to the bedding down of the procedure and hence the First Reading rule to which I have referred.

We have a dilemma. The Government are worried, as I would be if I were still a Whip, about getting the business through by 8 February. Having oral evidence on this carefully defined subject with a controlled number of witnesses from two groups need not add any length at all to the time spent in Committee discussing the Bill. Indeed, to pick up the point raised by my hon. Friend the Member for The Wrekin, I believe that such proceedings could save the Committee time. Speaking for myself and, possibly just for once, the Liberal Democrats, I think that we shall be spending a lot of time on means-testing. It will keep coming up naturally throughout the Bill. If we can square that circle, such a process could shorten our proceedings.

Sally Keeble (Labour, Northampton North)

Let us bear in mind that we are members of a scrutiny Committee, not a Select Committee. On which clause does the hon. Gentleman want to take oral evidence to further our discussion about the detail of the Bill? Having read the Bill several times and tabled amendments, I cannot see any bit of it that refers to mean-testing. There are several proposals that will substantially increase pensioners’ incomes, especially those of women pensioners so that they will be taken out of means-testing. On which clause does the hon. Gentleman propose that we hear oral evidence?

Roger Gale (Conservative, North Thanet)

Order. Before we go too far down that road, I understand the points that are being made but, by the same token, I must remind the Committee that no amendment has been tabled, so there is no amendment of that sort to discuss in respect of the programme motion.

Nigel Waterson (Conservative, Eastbourne)

I am aware of that, Mr. Gale. However, I want the Government to reconsider the point or at least say that they will go away and discuss it seriously. It could help in the long run. It is fairly crucial to matters; otherwise, Conservative Members will vote against the programme motion.

It has been put to us in writing as well as orally that, in their goodness, the Government are arranging another seminar that hon. Members and no doubt lots of others can attend to talk about the issue. I do not know whether a date has been mooted or fixed, but we look forward with great excitement to another opportunity of a seminar organised by the Department for Work and Pensions. However, that is not the same thing as members of the Committee having the opportunity that they deserve to conduct their own investigation and to hear oral evidence within a narrow compass. It need not extend our proceedings in Committee at all; it could save us time and it seems eminently sensible. Will the Minister think again about such matters? If he is not prepared to do that, I shall invite my hon. Friends to join me in voting against the programme motion.

David Laws (Liberal Democrat, Yeovil)

On behalf of myself and my hon. Friend the Member for Solihull, I welcome you to the Chair, Mr. Gale, as well as Mr. Taylor, in due course. I thank the Minister for Pensions Reform for his constructive opening comments and welcome him and his fellow Minister to the Front Bench. We also look forward to entering into debate with the Conservative Front-Bench team, such as the hon. Member for Eastbourne who, as we have heard, has considerable experience on the Opposition Front Bench. He questioned what he had done to deserve such experience, which rather reminds one of the fact that the Paymaster General is now on what I think is her 11th Finance Bill, which is a real penalty so perhaps the hon. Gentleman should be grateful for merely a prolonged period on the Pensions Bill.

We also welcome the hon. Member for South-West Bedfordshire, who I think is within the age range that will be affected by the change to basic state pension age limits. Many of us were disappointed that the hon. Member for Eastbourne did not spot that a large number of us on the Committee, including a number of his hon. Friends, will be affected by these proposals.

This is an extremely important Bill. In this place we discuss an awful lot of issues, including a lot of legislation. The latter is sometimes presented as having the potential to make an enormous impact on our lives but—particularly from the Home Office and a couple of other Departments that I could name—quite often does not live up to our expectations. In contrast, this Bill is immensely important because it will affect almost everybody in the United Kingdom in one way or another, not only through changes to the state pension age but through changes to the number of contributory years for the basic state pension age, restoration of the earnings link and the introduction of personal accounts.

Therefore, this Bill will affect people’s lives in a very real and tangible way, whether that be in a perceived negative sense by asking them to work longer or in a positive one by enhancing the basic state pension. As the Minister said, it is therefore vital that we give all of the Bill proper scrutiny, notwithstanding consensus on its broad principles.

I should also like to welcome and thank the other individuals involved in helping to steer this Bill through, not only departmental officials but also those from the Opposition, such as the many lobby groups who take a great deal of time, care and attention presenting proposals for amendments and who provide us with useful briefing notes, which are sometimes reflected in our discussions.

I shall not repeat in precise terms the case that the hon. Member for Eastbourne made regarding oral evidence sessions. However, we strongly support his comments. The Modernisation Committee’s report gave a clear indication that oral evidence sessions can be immensely useful and potentially save time because they may involve taking evidence from Ministers and therefore save on some of the probing amendments that we often have to table in order to flush out ministerial thinking.

As the hon. Member for Eastbourne said, there is also an issue central to this Bill which impacts on many of the different proposals on the subject of means-testing. While one could say that the Department for Work and Pensions Committee did a pretty good job in taking evidence and in looking at all aspects of the Government’s proposals, it is clear that it did not manage to resolve the fundamental matter of the proportion of people and the target audience for personal pensions who will be affected by means-testing and therefore the knock-on consequences of that for returns in the personal accounts. That is a crucial matter and one for which an oral evidence session could be immensely useful. One gets the impression that the Minister is not particularly minded to give ground on this. Therefore, I wonder whether I might make some other suggestions if we have the fallback position of a seminar—

John Penrose (Conservative, Weston-Super-Mare)

Just to reinforce the hon. Gentleman’s point, when the PPI and the Secretary of State gave separate evidence to the Select Committee on this point we ended up with an argument by proxy. It would have been much faster, and probably would have resulted in much greater clarity, if we had been able to have them in the same room to fasten down and home in on issues and allow them to address each other point by point. It would have helped our proceedings then in the same way as I suspect the hon. Gentleman is suggesting that it would help our proceedings now.

David Laws (Liberal Democrat, Yeovil)

I am grateful for that point. As the hon. Gentleman indicated, he served on the Select Committee and is therefore particularly well placed to say which elements were unresolved by those proceedings. The Minister has offered us a seminar, as the hon. Member for Eastbourne indicated, and our hearts pulsate with excitement at that prospect. However, while not knowing whether we will be able to ask the Minister questions as part of that—as would be the case in oral evidence—we fear that it might simply be a lecture. It would be helpful to clarify that. We also do not yet know whether the PPI would be there to give evidence alongside DWP officials and put their case in its own terms, rather than second hand, or what cross-questioning would be allowed—of either group by Committee members, or of DWP officials by the PPI. We do not know how outside groups, who have the benefit of sitting and listening to the exchanges in oral evidence sessions as part of these hearings, would be involved.

So, even if we fall back on the less attractive seminar idea, there are ways in which the Government could make a seminar rather more meaningful and similar to the oral evidence sessions that the Modernisation Committee envisaged.

Andrew Selous (Conservative, South West Bedfordshire)

To add to the list of questions that the hon. Gentleman has asked about the seminar, does he agree that one important issue is its date? Although many of us would like to see it held in this Committee, to have it at some point in the Committee stage would be useful.

David Laws (Liberal Democrat, Yeovil)

I entirely agree with that point. We know that, sometimes, things are promised at this stage in Committee hearings that only emerge too late. If we are to have a useful seminar on this, it must be pretty soon. So, those are our concerns and I really hope that the Minister can respond positively on some of the specific points raised on that means-testing issue.

James Purnell (Labour, Stalybridge and Hyde)

I shall try to respond to those points in the time available. On the levelling down issues, it will obviously be for you, Mr. Gale, to decide their relevance to this Bill. I would say that such things go into the issue of personal accounts, which this Bill does not introduce—it introduces the delivery authority—but we can continue that debate.

The point here is really about the precedents that we are setting. An oral evidence session fails the precedent test on two counts. First, a clear exception was introduced in the bedding down of these arrangements. The Bills introduced before December were clearly not required to have such sessions. Secondly, and perhaps even more importantly, the purpose of those oral evidence sessions is not to have a general debate on the proposals; it is specifically for there to be further questions about issues that have not been consulted on fully in the Bill.

In contrast, these issues have been scrutinised pretty much as well as any Bill that has ever been put forward. The PPI proposals have been put forward in formal evidence to the White Paper. We published a document specifically giving people the chance to read evidence about our means-testing assumptions and forecasts, which have been scrutinised by an independent commission and looked into by us and the PPI. With that all published, it would therefore set a wrong precedent to put this into the Bill.

We are happy to have that seminar, and I can happily reassure the hon. Member for Yeovil that people would be able to ask questions, and that we would indeed invite the PPI and outside groups. We are confident that we have set out the correct forecasts, modelling the effect of the state second pension. It is worth pointing out that if Conservative Members vote against this, they are not voting for the idea of evidence sessions but against the programme motion that they first suggested. So, I urge my colleagues to vote on the basis of forming the right precedent.

Clause 1

David Laws (Liberal Democrat, Yeovil)

I beg to move amendment No. 62, page 1, line 13, leave out ‘2010’ and insert ‘2008’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss new clause 12—Report on phasing in the 30 year contribution condition—

‘The Secretary of State must, not later than 1st July 2007, lay before Parliament a report on the costs and feasibility of phasing in the condition introduced by paragraph 5A(2)(a) of Schedule 3 to the SSCBA (inserted by section 1(3) of this Act).’.

David Laws (Liberal Democrat, Yeovil)

Amendment No. 62 gives us an early opportunity to test the Government’s thinking on one of their most important Pensions Bill proposals—clause 1, which deals with the new qualifying conditions for the basic state pension. It is fair to say that this part of the Bill has been widely welcomed from different quarters because of the impact that it will have on the number of people able to secure a full basic state pension. The clause will replace the previous contributory requirement of 39 years for women and 44 for men with a lower 30-year requirement, which will begin after 6 April 2010.

The Liberal Democrats welcome this watering down of the contributory principle. We feel that the contributory principle has become something of a fiction compared with what Mr. Beveridge aspired for it to be, particularly when the basic state pension has ended up being set so far below the level of means-tested benefits, to which people are entitled even if they have not built up any contributions at all. We said earlier and in other places that we prefer a residency requirement, but this is the Bill that has been presented to us and we must deal with it, acknowledging that there is not enough Conservative and Government support for the move to a residency basis for state pensions.

We recognise that the way that the Government implement the change will make a big difference for the generation who will acquire their pensions after 2010. There will be something of a big bang as we pass6 April 2010, when many people who would not have acquired a full basic state pension before will be able to do so. We have all seen the Government figures indicating that among those retiring after April 2010, women in particular, who have been disadvantaged by the existing system, could end up with a much better deal.

It would be useful to hear from the Minister, however, what total of all women will still not have a full basic state pension after 2010. Most of the Government’s figures have focused solely on the portion of women retiring after 2010 who will get a full basic state pension, which risks creating the impression that the step change will be greater than it is. The Government will still be dealing with a stock of women, if I can put it in such unglamorous terms, who will be disadvantaged for some time by the existing system.

There has been a great deal of debate and discussion about the cliff-edge effect. The hon. Member for Weston-super-Mare will be aware that it was considered in some detail when the Select Committee took evidence from the Secretary of State and various organisations. The Committee recommended that the Government should consider mitigating the gap in entitlement between those born before April 1950 and those reaching the state pension age under the new rules. We have tabled other amendments on the matter, which I am keen not to pre-empt.

The Government have set themselves against retrospection under the proposal mainly on cost grounds. Given the existing pensioner population, if they allowed people to have a full basic state pension on the basis of 30 years, it would cost about £1 billion. The Government have said that that is too high a bill and that they are worried about the information about carers and other groups to credit them in and whether it would be reliable enough. They therefore accept that there is a cliff edge, but feel that nothing much can be done without imposing a large financial cost. The new clause that will be introduced by the hon. Member for Eastbourne will involve a discussion about some potential solutions to such problems and invite the Government to consider whether the cliff edge has to be as sharp as it is.

The purpose of amendment No. 62 is to test the Government’s thinking on why a more modest improvement could not be made. It would still involve a cliff edge, but one that fewer people would fall over. The amendment would bring forward the date for the lower number of qualifying years from 2010, the Government’s existing date for the start of the cliff edge, to 2008. In other words, fewer people would be affected by the measure and there would be a lesser sense of unfairness, because the problem is that the Bill will go through; there will be a general sense that women and others will receive a much better deal and then many women still under state pension age will find that they do not receive the benefit of the changes.

John Penrose (Conservative, Weston-Super-Mare)

As the hon. Gentleman said, the Select Committee covered such matters in some detail several months ago. He might have intended to come on to what I am about to say, but does he have any positive or negative estimates for the net cost impact of his amendment?

David Laws (Liberal Democrat, Yeovil)

No. It would obviously have the cost of bringing us forward by two years, but that is one of the issues on which we expect the Minister to be well briefed and to explain. We also expect him to tell us in all honesty and candour about the numbers of women and others who would benefit from bringing the cut-off year forward from 2010 to 2008, so we can know whether the change and its cost is worth the improvement that it would mean for many people.

Nigel Waterson (Conservative, Eastbourne)

Is the hon. Gentleman saying that he has not actually come up with a costing for the option? It will make a bit of a nonsense of our Committee proceedings if he sprays around spending commitments without even being aware of their dimensions.

David Laws (Liberal Democrat, Yeovil)

The hon. Gentleman makes an important point. When we bring forward major proposals, we need to have placed them in some sort of financial context. However, even if I had tabled a parliamentary question on the matter on the same day that I tabled the amendment, I fear that we would not have so far received an answer. As the hon. Gentleman knows, questions remain unanswered from the Department for Work and Pensions that go back a couple of months. Although it is usually good at answering parliamentary questions, I am not convinced that I would have had an answer by now.

Rather than impose a further burden on the Minister and his traffic-light system, I shall simply allow him to tell us the details today. I think that the hon. Member for Eastbourne will confirm to me that, in spite of the excellent and thorough job done by the Select Committee on the whole pensions issue, the useful evidence that it took and its good sittings, the costing of different solutions did not come up in the evidence-taking proceedings so it did not give us any guidance on the issues. I shall give way to the Minister, who I think will be helpful.

James Purnell (Labour, Stalybridge and Hyde)

I apologise to the hon. Gentleman for not having already costed his proposal. I accept that that is my fault. In the spirit of continuing consensus, the estimated additional net cost would be £100 million in 2008 and roughly double that in 2009. The additional costs would persist until about 2030.

David Laws (Liberal Democrat, Yeovil)

I am extremely grateful to the Minister for his co-operative approach. It merely demonstrates the extraordinarily prudent approach taken by those on these Benches compared with amendments tabled from other quarters, and perhaps even by me later in our proceedings.

It is worth highlighting the reason why the issue is of such concern. Because of the way that the new cut-off date will work, a woman retiring only a day before it could find herself with a state pension totally different from that of a woman retiring a day later. In extreme circumstances, people who in other senses have similar characteristics could have pensions that are as much as £1,000 a year different. Over a 20-year period—moderate life expectancy beyond retirement age—that could mean a difference of £20,000.

There will also be differences between individuals, including women. A woman who has one year less than the existing qualifying years, say 38 years, who retires and takes a state pension before the cut-off date is not entitled to a full basic state pension, but someone with a much lower number of qualifying years who retires a day or two later could find themselves with a higher pension. That is not something that only affects women, as a number of the members of the DWP Committee pointed out. It also means that men retiring in 2009 could have very different pensions fromthose retiring in 2010—pensions based not on total qualifying years, but on the dramatic shift in the number of qualifying years required for a full basic state pension. The hon. Member for Weston-super-Mare had a colleague on the DWP Committee who asked the Secretary of State for Work and Pensions whether a man retiring with 43 years of qualifying contributions in 2009 would have a lower pension than a man retiring a few days after the 2010 cut-off date with a 30-year period of qualifying contributions.

There will be a great sense of unfairness regarding the measure, which is why many people have argued that there should be a retrospective attempt to count in individuals who are excluded at the moment. Obviously, the Liberal Democrats have a natural sympathy for that view as believers in a residence-based pension. The Government are not going down that line and we will debate the proposals on retrospection, but we see no enthusiasm from the Government to make any changes to the scale.

In their response to the DWP Committee report, the Government say why they do not believe it to be appropriate to make changes to the existing legislation and to be more generous. The first argument that the Government deploy is weak. Paragraph 52 of the Government’s response to the report states:

“It is important to recognise, however, that women born before that date”—

women born before the April 2010 cut-off date—

“will keep the State Pension entitlement they have been expecting during their working lives.”

The majority of people who do not benefit from the change will not regard the fact that the Government are not going to erode their existing state pension entitlements in some way as an enormous bonus. The argument is a poor basis for opposing any attempt to moderate the effect of the measures.

In paragraph 53 of the Government’s response to the report, the DWP uses another semi-excuse, which the hon. Member for Weston-super-Mare will recall from the DWP Committee proceedings. The Secretary of State for Work and Pensions said that the only thing he could say to the Committee was that it was important to bear in mind that women retiring up to 6 April 2010 have the opportunity to do so at age 60, but women retiring after that date do not. Paragraph 53 states:

“It would be unfair for people to gain from both these existing rules and the proposed changes.”

That is a dubious point. Given that the increase in the state pension age relates to women rather than men, the Government’s argument does not hold for both categories of people. Also, the way in which the Government plan to phase the increase in the state pension age actually means that some women who end up working after 2010 will do so by an almost inconsequential amount of time.

Some of the people who lose out because of the 2010 cut-off date may actually be retiring only a day or month later than those who retire before the cut-off. Therefore, the idea that those people who will work beyond 2010 and then go on to claim their basic state pension will have a terrible penalty imposed on them by the Government by having to work longer—and therefore that it is intuitively fair that they will receive the offset of a lower number of qualifying years—sounds like an argument that some clever person in the Department for Work and Pensions’ spin operation has concocted after the proposals were brought forward rather than being a persuasive argument in itself, one devised from first principles.

From the Minister’s response on the clause that suggested that this particular issue be given reconsideration, we get the impression that there is no prospect of his signing up to something that will create a massive Bill. We also get the impression from both the Minister and the Secretary of State that they understand that there are some very legitimate concerns due to the way in which the Government have sought to introduce this in 2010—which, to be fair to the Government, they have done in order for the provision to have rapid effect.

Therefore, notwithstanding the fact that almost any changes are likely to have some cost, we hope that the Government will be flexible on this issue and remain open to reasonable ideas that seek to moderate this cliff edge or reduce the number of people facing the cliff edge. The Minister is entitled to say, as I have already said, that we are replacing one cliff edge with another. However, that may be perceived as unfair for those people who are still below the state pension age and who feel that this Bill could have enormous benefits for them, but who later find that they narrowly miss the cut-off date because of having to wait two years. I hope that the Minister will not be closed to proposals of this type, and that he will tell us not just about the cost of this proposal but about the number of women who would benefit and the number who would be affected. I hope that he will go that extra mile to make these important and welcome proposals more acceptable to those who currently find them extremely unfair and harsh.

Andrew Selous (Conservative, South West Bedfordshire)

Before I speak to amendment No. 62 and new clause 12, I should like to welcome you to the Chair, Mr. Gale. I have had the pleasure of serving under your chairmanship before and I know that you will be firm and fair with all of us during our proceedings. It is also a pleasure to be opposite the Minister. We both served on the Select Committee on Work and Pensions. Indeed, I seem to remember that some of his proposals found their way into the Bill as, I have to say, have a number of ideas from the 2005 Conservative manifesto. Therefore, there is indeed genuine consensus on a number of issues.

On my own side, I know that my hon. Friends the Members for Weston-super-Mare and for The Wrekin also serve on the Select Committee for Work and Pensions. My hon. Friend the Member for Weston-super-Mare has been on it slightly longer but I know that both of them will add the expertise gained from that Committee. From my own experience in the last Parliament, I know how valuable that is.

Amendment No. 62 brings the introduction of a reduction in the number of qualifying years for a full basic state pension two years forward to April 2008 rather than April 2010. As the hon. Member for Yeovil was good enough to say in his introductory remarks, that does nothing about the cliff-edge problem—which new clause 12 seeks to look at—but merely brings it two years forward. The hon. Gentleman also told the Committee that he had not actually done his own costing on what this amendment would do—but the Minister, having run his calculator over it, rescued him with a quick intervention. If I heard correctly, it was £100 million in 2008 with £200 million in every year going forward. A quick adding-up of those figures tells me that by 2013, the possible end of the next Parliament, that would be a bill of £1.1 billion or so—a not inconsiderable sum.

Lorely Burt (Liberal Democrat, Solihull)

Does the hon. Gentleman agree that if we were able to bring these proposals forward by two years then the cliff edge, while it may not be done away with, would be perceived as a great deal fairer by today’s pensioners? Does he also agree that the Bill as it stands does nothing to alleviate the situation for today’s 11 million existing pensioners?

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Lady is clearly right that if we spend £1.1 billion on any social or economic problem, there will be an impact bringing relief to those affected. The trouble is that, as politicians, we have competing demands on the public purse across every single Government Department. We know that to be the case, even from a brief listen to this morning’s news on the radio. However, there are questions of affordability and I have not heard, either from the hon. Lady or from the hon. Member for Yeovil, how that £1.1 billion is to be raised. I, for one, would like to know which taxes will rise to pay for it and I hope that he will share that information with us and with the electorate before this year’s May elections. I have to wonder what his hon. Friend the Member for Twickenham (Dr. Cable) would say about that. I am mindful of the attentions of the Shadow Chancellor and will be careful about any spending commitment. In fact, my hon. Friend the Member for Eastbourne and I will not be making spending commitments during this Committee, as I know that my hon. Friend the Member for North-East Milton Keynes would be taking a note and having a word with the hierarchy of my party.

David Laws (Liberal Democrat, Yeovil)

I am most grateful to the hon. Gentleman for putting his party’s position so clearly. Paraphrasing, would it be fair to say that he is offering pensioners not a penny more than the Government are? Is that right?

Andrew Selous (Conservative, South West Bedfordshire)

The Bill is the subject of a consensus across a great deal of the House; I noticed that even in the Minister’s letter of 22 January to Committee Members, he says,

“that consensus reaches across most parts of the House”.

We in the official Opposition are committed to the increases in public expenditure within this Bill but are not going further at this stage.

In all seriousness, we have not heard from the hon. Member for Yeovil how he will be paying for his proposals. I have a basic rule of political honesty and transparency in my own life, in that if I see someone advocating a spending increase, I always ask how it will be paid for. We have to have that, or it is too simplistic and does these debates no credit; the people listening to them outside this House do not view us as serious practitioners if we just flash a credit card when we come with a shopping list of items and have no serious answer for how we are going to pay for them.

Lorely Burt (Liberal Democrat, Solihull)

What does the hon. Gentleman make, then, of the comments in the briefing from Help the Aged, which says that the cost of the proposals it is putting forward, not dissimilar to £1.1 billion,

“should be considered against the £4 billion that goes unclaimed every year by pensioners in means-tested benefits, and the£4 billion every year that the Government is likely to save from ending contracted-out rebates for the state second pension”?

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Lady is right to talk about Help the Aged. The charity has provided the Committee with a useful briefing, which I am sure many of us have read in detail. I wonder whether she has read the 2003 briefing from the Fawcett Society and Age Concern, which mentioned 2010 as the date on which many of the changes they argued for throughout the last Parliament should take place. We all receive a great number of briefings. As serious practitioners and custodians of the public purse, our job must be to take hard decisions.

If the hon. Member for Yeovil chooses to press the amendment to a vote, my hon. Friends in the official Opposition will not support it. New clause 12 is an attempt to deal with smoothing the cliff edge, which the hon. Member for Yeovil quite rightly raised in his opening remarks. New clause 12 would require the Secretary of State, within five months of the end of this Committee, to lay before Parliament a report on the costs and feasibility of phasing in the 30-year contribution condition, which would be done as soon as possible, with the final changes being made a few years after 2010.

That point was made on Second Reading by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), and I know it is one that will exercise every single Committee member, because there will not be a suburb, district or village in any of our constituencies in which pensioners will not come up to us to say, “I retired on this date, but my neighbour a couple of doors down retired one day later.” One lady could retire on 5 April 2010 and her next-door neighbour on 6 April, but they will find a massive financial difference in their pension entitlements for the whole of their retirement. This is a serious issue, and people outside will not understand why it is taking place. They will not forgive the Committee if it does not probe the Government very hard to find out what more can be done than is currently proposed to smooth the cliff edge.

Sally Keeble (Labour, Northampton North)

I am grateful to the hon. Gentleman, who I know does a lot of work on detailed issues for constituents. In the situation that he mentioned, in which only one of two people gets their entitlement, has he worked out whether the other one will actually be worse off if, for example, they get pension credit and their income is made up by other means?

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Lady makes a fair point. The successor of the minimum income guarantee, the pension credit, exists precisely to make up for that. However, she will know from her own constituency casework that there will be anger and frustration on the part of people who find that their basic state pension—what they believe is their entitlement and what they have worked for for all those years—is very much less than they believe it should be, especially people who have had almost identical working lives and retire within a short time of each other.

My hon. Friend the shadow Secretary of State is committed to the statutory uprating of pension credit. He made that commitment on Second Reading, so the hon. Lady is right to say that other money will be made available. Notwithstanding that, there will be real anger and upset among our constituents about the difference in the basic state pension.

David Laws (Liberal Democrat, Yeovil)

Could the hon. Gentleman tell us a bit more about how the proposed transition will work so that we can make a judgment about it? Can he confirm that as he is talking about a zero-sum proposal, he is going to have to take money away from some gainers? Could he also say who those people would be?

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Gentleman asks an extremely fair and proper question. Given what I said about his proposal, he is right to ask it. I will answer those questions if he will allow me to develop my argument a little further. I propose a phasing-in, and new clause 12 proposes that the Secretary of State should produce a report. I do not have the Department’s national insurance computer, but I have tried to elicit some information. If he will bear with me, I will sketch out a possible scenario. I am not actually proposing it in new clause 12—indeed, Mr. Gale, you would not allow me to do so—but as I am probed to give an example, I will go down that route.

I contend that phasing in clause 1’s proposals need cost no more than the Government’s proposed big bang approach, in which all the reforms will take place on 6 April 2010. I do not feel that the Government have given us a proper answer as to why they cannot phase them in. Is it purely for administrative ease that 6 April was chosen, or will the national insurance computers take two years to re-programme, preventing any earlier introduction of a phased implementation? I am not sure whether I caught a nod from one of the Ministers, but we will find out when they reply.

The Government have also said that they believe that phasing in the changed 30-year contribution condition would lessen its impact. I find that a curious argument. The Bill should not be about a big splash impact. It is not press release territory; it is about basic equity and fairness in introducing as fairly and reasonably as possible changes on which the Government and official Opposition have attained consensus. The facts at the moment are that women born before 6 April 1950 will lose out, as will men born before 6 April 1945. I tabled a series of written questions to the Minister before Second Reading, and he answered:

“Changes could be made more gradually to avoid this situation, for example, by phasing in the reduction in years needed for a full basic state pension and we have explored different ways to do this.”—[Official Report, 15 January 2007; Vol. 455, c. 908W.]

Earlier introduction would mean a quicker but less immediately generous increase in women’s pensions. To answer the hon. Member for Yeovil—I am not suggesting this as a policy, merely giving him an example of the type of thing that could be done on a cost-neutral basis—men currently require 44 years for a full basic state pension. The requirement could decrease to 42 years in the first year after 6 April 2010, to 38 the following year, and to 34 the year after that, down to a 30-year contribution condition by 2013.

If the report could be done quickly enough for us to work out the finances so that it would not cost any more, we could start reducing women’s contribution earlier. To answer the question by the hon. Member for Solihull, if we brought down women’s contribution requirement to 36 years in 2007, 35 years in 2008,34 years in 2009, 33 years in 2010, 32 years in 2011,31 years in 2012 and 30 years in 2013, that would phase in the change. It would mean a less generous introduction for men and women immediately after 2010, no change for men up to 2010 and immediate help for women who need it.

Those are my proposals. I do not know what the cost of the proposals would be, which was why I tabled a series of questions to elicit the costs of that idea from the Department. It said that it was

“unable to provide the information in respect of the particular phasing options you have set out in the time available”,

and that some of the other information for which I had asked was available only at disproportionate cost. That may be the case. I do not quibble with that. The Minister was good enough to ensure that I received a timely reply to my questions, for which I am grateful. That is why new clause 12 that I tabled, along with my hon. Friend the Member for Eastbourne, does not call for a particular proposal such as the one that I have just outlined as an example.

I call on the Secretary of State to provide such information. He has the capacity to do so. He has the access to the national insurance computer to bring a report to Parliament on the phasing and feasibility of smoothing the cliff edge, so that we can see how such a proposal would work.

Mark Pritchard (Conservative, The Wrekin)

When we have replies saying that the information can be obtained only at disproportionate cost, the example given by my hon. Friend shows that it is worth pursuing such information. If it would be better than that proposed by the Government, the disproportionate cost is not on the former but the latter.

Andrew Selous (Conservative, South West Bedfordshire)

My hon. Friend makes a good point. He will share my frustrations at being in opposition when such information is not as readily available as we would like. That is something that we are trying to change.

I turn now to a case study provided by Help the Aged. The hon. Member for Solihull mentioned its excellent briefings and I concur with her about its serious work on such issues. Its briefing sent to members of the Committee refers to an example of a lady called Jane who is retiring in 2009 at the age of 60. She has had in many ways a typical working life. She worked for four years before she had children at the age of 22 in 1973. She did not receive home responsibilities protection in 1978, so she lost five years of potential pension rights. She returned to part-time work in 1980 to 1985 and she did not earn enough to build up years towards her pension. After that, she worked for20 years during which she saved into a private pension. She then retired early due to ill health.

Given that history, the lady needs a full 39-year record to receive a full basic state pension. That is reduced by two years because of the home responsibilities protection that she did receive. As a result, she has 24 of the 37 years required for a basic state pension and will receive £55 a week. Had that same person with an identical work history during her lifetime been born just one year later, her 24 years of work would now count against 27 qualifying years that are needed because she would receive an extra year of home responsibilities protection. She would receive£75 a week, which is a £20 increase a week and £1,040 a year over a retirement of perhaps 20 years. That is £20,000 of additional pension and it is why I believe so strongly that we should examine the proposals.

Sally Keeble (Labour, Northampton North)

The hon. Gentleman did not say whether the person was married and explain the position of the spouse. If the lady had to retire early because of ill health, presumably she received disability benefit. If she is on pension credit, she would then receive a disability upgrade so she would be far better off getting the support that the state rightly gives to people who are disabled, including pension credit, than going down the road that the hon. Gentleman is suggesting of only the basic state pension. He might ask the Minister if my understanding of matters is correct. I believe that it is.

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Lady is clearly right. Other premiums are available such as pension credit, disability benefit and so on to which the person may be entitled. I am surprised if the hon. Lady’s experience is different from mine, but the pensioners to whom I speak in my constituency feel genuine anger about the level of the basic state pension and any additional amounts of pension that they do or do not receive because of their life-work history. That is just one example from Help the Aged; later, in our debates on clause 1, I will have case example after case example—provided by Age Concern and the Fawcett Society—of real anger among women who are upset about the limited nature of their basic state pension, and do not want means-tested top-ups.

Sally Keeble (Labour, Northampton North)

I understand the point about the handling of the basic state pension. The point is that, with pension credit as I understand it, someone disabled can access particular support. It is about making sure that people have the right income in old age; people are mostly cross because they are poor.

Andrew Selous (Conservative, South West Bedfordshire)

I understand the hon. Lady’s general point and, as I said in my earlier remarks, the shadow Secretary of State is committed to the statutory uprating of pension credit in future. Importantly, until we get higher pensions for people we will need pension credit and the associated benefits of top-up pensions. Yet I still find anger among the pensioners to whom I talk in my constituency, and elsewhere, about their low pension levels at present.

James Purnell (Labour, Stalybridge and Hyde)

This is an important debate, and one that this Committee is quite rightly having. I am grateful to hon. Members for tabling those amendments, and I want to echo the remarks of the hon. Member for South-West Bedfordshire. It was a pleasure to serve with him on the Committee—one which, like the current one, does a good job of both scrutiny and producing proposals on a cross-party basis. When I was offered this position, I went back with some trepidation to look at our proposals on pensions, with their quite wide-ranging reforms. I was relieved that we were acting much in line with what that report, to which he was a co-signatory, had suggested.

We have now seen the appearance of something that may become an old friend of this Committee over its next few sittings: the Liberal Democrat money tree. It may be a mere sapling here, but we know well what happens to saplings planted by the hon. Member for Yeovil. They grow into a veritable forest, which I fear casts rather a shadow over the public spending plans of the hon. Member for Twickenham. Pretty much every time that the former makes one of his eloquent speeches, it contains the avoidance of a hard choice. Inevitably, that means some extra spending—

Nigel Waterson (Conservative, Eastbourne)

And a lot of fertiliser.

James Purnell (Labour, Stalybridge and Hyde)

I would probably tax your patience with the extension of that metaphor, so I will leave forestry to go into the contributory principle. There is a difference of principle between us and the hon. Member for Yeovil about whether the contributory principle is a good thing that should be retained and strengthened. When we asked the public what they thought about the contributory principle, through the national pensions debate, they also said that it should be preserved and strengthened. When asked whether people’s contributions in the form of work or caring should be rewarded, there was overwhelming support, but they thought that other types of contributions—for example, when people are unemployed—should not be rewarded in that way. I can see that the hon. Gentleman is itching to intervene.

David Laws (Liberal Democrat, Yeovil)

I have been provoked into action. Surely, the result of these Government consultations was not strong support for the contributory principle at all. The consultations showed a strong support for a basic minimum pension as of right. Can the Minister confirm that, and indicate how he believes it strengthens the contributory principle to significantly reduce the number of years that people need to contribute?

James Purnell (Labour, Stalybridge and Hyde)

I am happy to do exactly that, and I refer—as I am sure the hon. Gentleman knows—to the votes at the end of the national pensions day, which showed a proportion well in excess of 80 per cent. of people supporting exactly what I have just said. I am happy to provide him with further details.

That supports the contributory principle by ensuring that caring and work contributions are put on the same footing, so that people can build up a full basic state pension or a full state second pension through caring contributions alone. That could not be done previously. The limit of 30 years has been set as a way of ensuring fair outcomes for two different people, but there is still a contributory element within the proposals. People who work or care for their whole working life will end up on £135 a week. It is worth mentioning state second pensions, because if we focus on the basic state pension alone, we will give a misleading view of what people get from the state pension system.

David Laws (Liberal Democrat, Yeovil)

Will the Minister give way?

James Purnell (Labour, Stalybridge and Hyde)

May I just make a point about the hon. Gentleman’s residency proposals? It may help to answer the question that he wants to ask.

It is not clear what the hon. Gentleman’s residency proposals are. On Second Reading, the proposals were falling apart in his hands. In one intervention, he said that people would get credits for paying their taxes; he then said that credits would be earned by residency. Of course, if the proposal is that a person gets an extra year for every year of residency, we have exactly the same issue that we have at the moment—not everybody would build up their contributions and there would have to be a means-tested safety net.

The difference between a residency and a contributory system is not to be found in whether entitlements are different according to the length of time that people have contributed, but in how contributions are made. People who do not benefit from the system outlined in the Bill who would benefit from a residency system include those who have not been working or caring—prisoners, I dare say, would benefit from a residency system. It is worth scrutinising whether that is something more or less in line with what the public want.

David Laws (Liberal Democrat, Yeovil)

I would be happy to offer the Minister a seminar on our proposals, if he has the time to attend.

An interesting point arises from the contributory principle and a reduction in the number of years. Presumably, it would have been possible to have stuck with the existing number of years for contributions by making other changes, such as including other groups of people. Will the Minister say why the Government have chosen 30 years as the number for qualifying years, and whether they contemplate reducing the number further to, say, 20 or 25 at some stage in the future?

James Purnell (Labour, Stalybridge and Hyde)

We will have an opportunity in the future to debate the latter point and the research that the Government are proposing to undertake about people who will not be covered by the 30-year qualifying period. That number was chosen because it achieved the right outcome in terms of equalising pension entitlements between men and women quickly, which leads neatly to the point that I wanted to make about the hon. Gentleman’s resident system—his proposals would make no difference to equalisation at all in 2010. The reason why we thought it better to go for the solution in the Bill, rather than that proposed by the Pensions Commission, is that it ensures that75 per cent. of women are covered in 2010. A residency system would make no difference at all—residency would have to be built up overnight.

Mr. Laws rose—

James Purnell (Labour, Stalybridge and Hyde)

I do not wish to test the patience of the Committee by giving way to the hon. Gentleman again. I am sure that hon. Members will be delighted to attend his pensions seminar, to which I am sure there is an open invitation.

David Laws (Liberal Democrat, Yeovil)

I do not wish to test the Committee’s patience too much either. However, will the Minister accept that if the residency criteria were to be applied in a backward-looking sense, the citizens pension proposals would achieve more than the Government’s? There is an issue of whether the Government are rejecting a residency system because of impracticalities, or because they fundamentally disagree with residency and want to stick with contributions come what may.

James Purnell (Labour, Stalybridge and Hyde)

The answer to that question is both. Residency is wrong in principle, and the task of going back and working out people’s residency over the past 50 or 60 years would be an administrative nightmare, hugely expensive, and impossible.

The Government’s normal approach to introducing changes such as those proposed is to phase them in. Pretty much every Public Bill Committee, whether happening today or even this Session, will have some kind of debate about the introduction of measures and the way in which people fall on either side of the line. One of the inevitable consequences of making changes to legislation is that some people will benefit and others will not.

The normal practice is to phase measures in. The reason why the Government have decided not to do that now is that we want to benefit as many people as possible as quickly as possible. We wanted to make quick progress on increasing the number of people, particularly women, who get a full state pension. By bringing all the measures in on the same day in 2010, we achieve the significant increase that the hon. Member for Eastbourne generously described as a steep incline, rather than a cliff edge.

We could move the reduction in qualifying years to 30 over a few years, but that would mean that fewer people would benefit overall. It would not give anybody extra benefits unless we introduced it before 2010, as I will discuss later; it would just remove benefits from some people to reduce a perceived discrepancy between them and people falling before the 2010 date. That would not be of great comfort to constituents. We would be saying to people retiring before 2010, “We have made no difference to your outcomes, but we have reduced what other people will get.” I am not sure that that would reconcile them.

John Penrose (Conservative, Weston-Super-Mare)

Is there any reason why the beginning of a multiple step-down process like the one that he was just saying was not possible could not be brought forward of 2010? Is there some IT or other reason why not? Also, his point about a series of steps not being an inherent improvement contradicts the approach of this Government and many Governments before them to, for example, changes to the retirement date. Those were made not in a cliff edge but in a series of steps, for the very reasons that he mentioned, and it seemed palatable to more people at the time.

James Purnell (Labour, Stalybridge and Hyde)

I suppose that that is because people would be happy to be over the cliff edge under these measures and unhappy under the state pension measures. If he wants to introduce a proposal that we move to 68 in 2010 for everybody all in one go, I should be happy to debate it with him.

I confirm to the hon. Member for South-West Bedfordshire that the Government have explored options for mitigating the cliff edge. We are happy to provide any information that is easily available, consider what he has said today and see what further information we can provide him with. I have received more information during the course of my speech, but I do not think that we have costed the exact option that he rattled through.

When changes are made, an introduction date is necessary. As the hon. Member for Yeovil acknowledged, his amendment would not change that. The cliff edge would be greater, or in fact significantly worse. Instead of going from 50 per cent. of women to 75 per cent. retiring with a full state pension in 2010, we would go from 40 per cent. to 75 per cent.

David Laws (Liberal Democrat, Yeovil)

Shock, horror!

James Purnell (Labour, Stalybridge and Hyde)

I am just responding to the hon. Gentleman’s argument and his worries about the cliff edge. His amendment would not only cost more money but make the problem worse.

Andrew Selous (Conservative, South West Bedfordshire)

For the Minister’s benefit, because I realise that an awful lot of written questions go through his office, the example that I gave in my speech just now was precisely the same one that I tabled in a written question to his Department about 10 days ago. His officials have had the precise figures for about a week and a half.

James Purnell (Labour, Stalybridge and Hyde)

I am aware of the question; I was just unable to judge as quickly as the hon. Gentleman went through it that the example was the same one that he tabled.

Bringing the line forward would not only substantially increase the costs, it would make the cliff-edge effect even starker. The only way to abolish the cliff edge fully would be to remove it for everybody. We could say that we will introduce the change in 2008 or 2010 and that the 30 years will apply to everybody, retired or not. Unfortunately, as has been mentioned, that would cost £1 billion, which puts us definitely in tree rather than sapling territory. That would not be an appropriate use of money, given that it would provide people who had already retired no incentive to save and the benefit would not be felt by poorer pensioners because they would lose that money pound for pound in pension credit. It is a significant amount of money. We are left with a choice between a cliff edge and a phase-in. If we phase it in, people will lose out who would benefit under our proposal.

That is why we think that introducing the changes in 2010 is the most logical step, as that is when the state pension age will start to rise. There is a kind of justice to the idea that people who retire before 2010 will be retiring at the state pension age of 60 but will not benefit from these changes whereas the cohort of women who do benefit from this are those who will also partly be paying for it from the state pension age rising.

David Laws (Liberal Democrat, Yeovil)

What about men?

James Purnell (Labour, Stalybridge and Hyde)

In fact the proportion of men who will benefit is significantly smaller than women. The proportion getting a full state pension is increased from 90 per cent. to around 95 per cent. While that increase is not inconsiderable, this is a proposal that significantly benefits women rather than men.

In response to the hon. Gentleman’s point and the one made by the hon. Member for South-West Bedfordshire, I am advised that it would not be possible to introduce this from 2008 because of the lead time for making changes to both the pensions computer system and the national insurance recording system computer. That lead time is at least eighteen months, similar to that for changes in the private sector.

Nigel Waterson (Conservative, Eastbourne)

This echoes one of the consensual discussions that we had a while ago. However, it is something that has been preying on my mind since we have some aspirations to be in Government. If it takes that long to re-program the computer, there must be a problem with the IT. What are they using—a Sinclair or something?

James Purnell (Labour, Stalybridge and Hyde)

Neither of us is a computer expert. We probably do have to defer to the people whose job it is to do this day in, day out. One of the things that is clear from making changes in Government is that we have a system which affects everybody in the country. Therefore, going through all of their NI records and making changes, even moderate ones, takes a significant amount of time.

I hope that the hon. Gentleman recognises that the Pension Service is one of the best organisations in Government in terms of its reputation for delivering transformational change. The National Audit Office produced a pretty complimentary report about the changes that the Pension Service had brought in. All I can do is repeat to him the official advice that I have been given.

On the subject of phasing, we are happy to come back with any further information if we can provide it. As I said in my introductory remarks, phasing the proposal in from 2010 is not terribly attractive. All that does is take benefits away from people who would be benefiting under these proposals. I wonder very much whether that is something that hon. Members would want to defend to their constituents who would be equally likely to come to their surgeries and say, “I understand I was about to get this benefit but because of your amendment being passed, I will have a lower pension for the rest of my retirement.” As I have said, phasing it in with a start-date of 2009 would do very little to address the concerns that have been put forward and would break that intuitive link between 2010 and the state pension age rising.

I hope this explains why we have chosen to introduce these measures in this way. We want to have a quick introduction in order to get the best balance between fairness and speed of improvements. I would therefore urge hon. Members not to press their amendments. If they do not, I will ask my colleagues to oppose them.

Andrew Selous (Conservative, South West Bedfordshire)

I would like formally to move new clause 12. I understand that we will vote on that in about three weeks’ time at the end of the Committee but I give notice that I will seek to move it. In brief response to the Minister, I appreciate that I galloped through my figures and do not expect him to take note of what I said in my speech. However, I hope that he has had my written question, as I tabled it as a Front Bencher only about 10 days ago. My proposals in that discussed making changes from 2007.

What the Minister is really saying is that it is too late and that there is no time to make those changes. My rebuke to the Government would be that they did not start this early enough and that the computer changes were not made early enough to start making changes in 2007. I was talking about a benefit now and not about delaying benefits later.

James Purnell (Labour, Stalybridge and Hyde)

I think—although I may need correcting—that it would be outside our powers to start making those changes before this Bill had been approved by both of the Houses.

Andrew Selous (Conservative, South West Bedfordshire)

I understand these are detailed technical points in terms of what the computer can and can not do. However, this matter of unfairness will be a hard one for all of us to explain to our constituents.

John Penrose (Conservative, Weston-Super-Mare)

My hon. Friend will be aware that the Department for Work and Pensions has solved the problem of long computer lead times and lack of funding to introduce computer changes before a Bill is completed by introducing a section 82 proposal for the changes to the computer system that are required for incapacity benefit. That went through a couple of weeks ago and I presume that a similar process would be possible for the proposal, if necessary.

Andrew Selous (Conservative, South West Bedfordshire)

My hon. Friend shows the benefit of the detailed briefings that sometimes only members of the Work and Pensions Committee are lucky enough to receive. My new clause is simple; it asks the Secretary of State to produce a report. I still have the feeling that where there is a will, there is a way. The Minister said that legally it would not be possible to have made such changes, but I issue the same rebuke that perhaps the whole process could have been started a little earlier so that it could have been phased in and there would not have been the problem of delaying changes post-2010. I will be asking my hon. Friends to vote in support of new clause 12 as and when that is voted on in a few weeks. Should the hon. Member for Yeovil press amendment No. 62 to a Division, I shall call on my hon. Friends to oppose it.

David Laws (Liberal Democrat, Yeovil)

We have had a useful debate. I am sorry that we have so far not persuaded the Government of the way that will moderate the effect of their proposals and the feeling of injustice that will be felt, particularly by those who expect to gain from the proposals, but do not as a consequence of the lag until the Bill becomes an Act and the start date of 2010.

The Minister gave a couple of reasons why he rejected the various proposals. His argument against amendment No. 62 was that it would make the position worse and that people throughout the country would be protesting and upset at an even more dramatic cliff-edge effect. The Bill seems a version of Purnell’s law. It contradicts the point made by the hon. Member for South-West Bedfordshire when he suggested that it was difficult to spend money without making people happier. Under Purnell’s law, it is possible to table an amendment that costs £100 million, yet still upset more people by making the cliff edge worse.

I do not agree with the Minister that there will be large numbers of presumably unhappy people as a consequence of the date being brought forward to 2008. Surely there would be celebrations among the large number of people involved. The Minister did not tell us how many people would be affected by the amendment, but it would be useful to know that at some stage although I could always table a parliamentary question about it. I am a little disappointed that the Minister does not see the perceived injustice between the Bill going through Parliament and becoming an Act, and then a big lag before the new system comes in.

The hon. Member for South-West Bedfordshire posed some interesting ideas in his new clause about how a new system could be phased in. I am grateful to him for responding to my questions about how that would happen. As is seen in many Committees, it is tempting to table new clauses and amendments asking for reports, but not asking Ministers to sketch out much detail. The hon. Gentleman deserves credit for saying what proposals he had in mind. I was gratified to hear that he was talking about introducing some proposals earlier rather than simply phasing them in after 2010, which would run the risk of upsetting many people without doing much to ameliorate the position of women. To that proposal, the Minister’s answer—rather parodying again—was the “computer says no” answer, which is said so often on modern television.

Lorely Burt (Liberal Democrat, Solihull)

“Little Britain”.

David Laws (Liberal Democrat, Yeovil)

So my hon. Friend, who is more in contact with youth culture, tells me.

It would be extremely useful to receive more information about the boomerang new clause, which will be subject to a Division at the end of our proceedings as the hon. Member for South-West Bedfordshire said. Will the Minister explain whether the constraints on the provision that stop it being brought forward would make it impossible to do anything in 2008? He mentioned the computer issue and the timing of the Bill’s passage. He also said that he would prepare a briefing for the Committee indicating the proposal’s potential costings and problems, which the hon. Member for South-West Bedfordshire touched upon. That would be very useful. If we are going to vote on the proposal in a couple of weeks’ time, it would be very helpful to have the benefit of a note on it prepared by the DWP experts.

James Purnell (Labour, Stalybridge and Hyde)

I am very happy to assure him that we will do both of those things.

David Laws (Liberal Democrat, Yeovil)

That is very helpful indeed. It will mean that when we vote on the new clause later, we will be much better informed, and we look forward to that.

At the end of his comments, the Minister fell back on the argument, used by the Secretary of State in front of the Select Committee and in the Government’s response to the Select Committee’s report, that the 2010 date was tied in some logical way to the increase in the state pension age. I find that an unpersuasive argument tacked on to justify this particular phasing. Although men are not as disadvantaged as women under the current basic state pension system, men who retire before and after the cut-off date will still face the anomaly that I talked about. Therefore, very many men as well as women will feel that it is unjust. At the moment, I do not detect an enormous swell of support for the amendment among other Committee members. In its absence, we will look forward to the Minister’s briefing note on new clause 12, which will give us an opportunity to return to the issue. I beg to ask leave to withdraw the amendment.

David Laws (Liberal Democrat, Yeovil)

I beg to move amendment No. 24, in page 2, line 32, at end insert—

‘(5) If the contributor has reached the state pension age and not made the necessary National Insurance contributions or accrued the necessary credits for entitlement to the full Basic State Pension, the contributor may defer claiming the Basic State Pension and may continue to pay NI contributions until the entitlement to a full Basic State Pension has been accrued.’.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment No. 46, in page 2, line 32, at end insert—

‘(5) In sub-paragraph (2), the term “working life” includes periods where a contributor is earning while entitled to be paid a Category A or Category B retirement pension but is not in receipt of that Category A or Category B pension.’.

David Laws (Liberal Democrat, Yeovil)

It is me again, I am afraid. Lest I am in danger, after my speech on Second Reading, of being accused of taking up too much time—although I find it difficult to believe that any hon. Member would accuse me of that—I shall be brief. The amendment is designed to allow people who are not fully entitled to the basic state pension and who are over the state pension age to go on working, defer claiming their basic state pension and carry on paying national insurance contributions until, potentially, they have accrued a full entitlement.

No doubt the Minister will have costings on the implications, although he is indicating that he might not have bothered on this amendment. One would assume, however, that the matter would need to be looked at in the round because of its effect on work incentives. One would hope that the Government would encourage people to stay on and work beyond state pension age. There is a lot of scope for improvement in that area. Only today, some of the major lobby groups released reports indicating that even Government Departments are trying to shove people out at the age of 65, and we know that many other Government Departments and even parts of the private sector have been encouraging people to leave at an even earlier date. We see the amendment not only in the spirit of seeking to improve the existing contributory system and to generate an additional element of flexibility, but as one part of a package of measures that could be strung throughout the Bill to incentivise people to stay on and work beyond state pension age.

I think that the issue came up at some stage when the Select Committee was taking evidence. I was not able to find the reference to it, but I am pretty sure that it came up. The Secretary of State’s response, although not unsympathetic, was that the Government had considered the proposal but could not find a way of implementing it that would satisfy their reservations, although—if I am right in saying that the matter was referred to—they had not sketched out precisely what those reservations were. Rather than making a prolonged speech, I would like to hear the Minister’s response on why the Government have so far decided that this is not a route down which they can proceed.

Sally Keeble (Labour, Northampton North)

Will my hon. Friend the Minister pick up on some particular points in responding? Many of my constituents continue to work after retirement age, sometimes because financially they have to, and sometimes—for social or many other different reasons—because they want to. The issues raised by this amendment are important, so I was disappointed that the hon. Member for Yeovil did not give a fuller speech, because I wanted to hear some justification.

David Laws (Liberal Democrat, Yeovil)

I cannot win.

Lorely Burt (Liberal Democrat, Solihull)

Will the hon. Lady give way?

Sally Keeble (Labour, Northampton North)

Yes.

Lorely Burt (Liberal Democrat, Solihull)

I hope to make a Back-Bench speech to supplement the comments of my hon. Friend, so she need not fear; we will plough a full furrow.

Sally Keeble (Labour, Northampton North)

It is nice to see the hon. Member for Yeovil deferring to a female colleague.

Nigel Waterson (Conservative, Eastbourne)

Does the hon. Lady agree that this is a novel departure even from the Liberal Democrats point of view? Now, they will not only give us no costings for any of their proposals, but give us no arguments for them either.

Sally Keeble (Labour, Northampton North)

Sometimes I would expect neither costings nor justifications, but there we go.

David Laws (Liberal Democrat, Yeovil)

A consensus.

Sally Keeble (Labour, Northampton North)

I do not think there has been much of that round here.

To continue, I want to hear some justification from my hon. Friend the Minister for what would happen for the individual in this scenario, as many of my constituents will go out to work, then have a career break or do some caring. They might come back to work quite readily, but will not have the necessary national insurance contributions, so the issue then is what they do about their pensions. If they defer taking a pension for a couple of years, the value of their later one is, I believe, higher. Therefore, there is no point in them ending up paying hefty national insurance contributions out of their sometimes quite modest wages for those few years—between the ages of 60 and 63, or whenever—because they will gain no benefit at all.

In effect, that is a mis-selling of national insurance; they will make contributions, but because of the increased value of their deferred pension their net gain will be nothing. That is before we get into issues about all of the other benefits, which we were talking about previously with the hon. Member for Leighton Buzzard. It is an issue of the value that they see as a result of their extra pension contributions. It would be helpful to explore whether this amendment actually does something for people or—even disregarding points about all the other benefits that people can claim—whether it does not add to their income and simply means that, for those couple of years when they are perhaps back at work with the kids having left home, they are having an unnecessary salary deduction made from their income.

Nigel Waterson (Conservative, Eastbourne)

I am following the hon. Lady’s argument closely, but has she given any thought to one of the more sensible provisions in the 2004 Act, which for the first time allowed people not just to defer pensions but to take a lump sum? How does her argument apply to people who are going to take that enhanced lump sum under such provisions?

Sally Keeble (Labour, Northampton North)

I must confess that I had not thought about that, so I will perhaps refer it to my hon. Friend the Minister. It seems to me that an awful lot of this Bill is about the details of how these regulations and provisions work to affect people in their day-to-day lives, and to ensure that they get the best possible outcome.

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Lady referred to me a moment ago as the hon. Member for Leighton Buzzard. That is the largest town in my constituency and I am inordinately proud to represent it. However, just in case the residents of Dunstable, Houghton Regis and the 40 villages that I represent feel cheated, I should mention that I am the hon. Member for South-West Bedfordshire, rather than for Leighton Buzzard, albeit I am incredibly proud to represent it.

Amendment No. 24, tabled by the Liberal Democrats, and amendment No. 46, tabled by my hon. Friend the Member for Eastbourne and I for the official Opposition, essentially have the same purpose. They would allow men and women to earn qualifying years for a basic state pension after reaching state pension age, assuming that they were still able to remain in employment. Recently, one of my constituents was forced to retire on reaching 65. He had a particular reason to continue working, because his mortgage went on until he was 72, but he was forced out of work. Some of our constituents will not be able to pay national insurance contributions or accrue home responsibilities protection as a parent or carer earlier in their careers. The amendments will be important, for example, for those people with early caring responsibilities that did not meet the eligibility criteria for home responsibilities protection.

I am informed that increasing numbers of pensioners—some 1.2 million—are in work at the moment and that this is the fastest-rising group being added to the work force at the moment, having increased by some 200,000 since 2004. The amendments would help such people, who often have small pensions. There is no reason for the Government to deny people the right and ability to continue paying national insurance contributions after state pension age to increase their basic state pension. This would be money coming into the national insurance system and I cannot see that there would be a cost, because the pensions would be paid for by contributions made by people. As we have a population that is enjoying good health later in life, about which we are all pleased, this will become an increasingly important issue for all of us. I should be interested to hear the Minister’s reasons, if he opposes the amendments.

Lorely Burt (Liberal Democrat, Solihull)

I wish to elaborate a little on some of the comments made by my hon. Friend the Member for Yeovil. Amendment No. 24 is a modest attempt to address the cliff edge, which, as the Minister has already mentioned, is particularly difficult and important for women. Women have fewer opportunities to bring their contributions up even to the 30 years proposed by the Government, owing to other responsibilities that they often take on, such as caring and bringing up children. The 30-years provision is welcome. However, we hope to ensure with our modest proposals that even more women manage to make it just a wee bit past the cliff edge.

The amendment also retains the contributory principle, which is so beloved of the Minister and his Government. Although the amendment has not been specifically costed, because people are making contributions—the hon. Member for South-West Bedfordshire has elaborated on that—the cost would be very small in relation to the number of people who would be able to claim a basic state pension. Presumably, those people would not be dependent on Government hand-outs and means-tested benefits such as pension credits. I hope that the Government will give the proposals a second look.

John Penrose (Conservative, Weston-Super-Mare)

The hon. Lady said that the cost of the proposals would be very small. I think that most pensions experts and actuaries would say that provided that liability is properly calculated, they should self-fund easily as long as not too much of an uplift is given for deferring pensions, as the hon. Member for Northampton, North mentioned, or for the additional years of contributions made. Provided that the uplifts are set properly, they should be self-funding. In fact, the net contribution to the public purse should be either neutral or positive.

Lorely Burt (Liberal Democrat, Solihull)

I am extremely grateful to the hon. Gentleman. I am not an actuary or an analyst, so I am happy to rely on the assessments of people who know a lot more than I about the matter.

If people who have not yet built up the entitlement to a full state pension choose to carry on working, should they not be given credit for those extra years of work? After all, the state pension age is rising. The Government have passed recent and welcome legislation against ageism and discrimination against older people who wish to continue working. Older people still have an enormous amount to give.

Andrew Selous (Conservative, South West Bedfordshire)

Although the hon. Lady is right to say that there have been changes concerning older people in the workplace, older people still do not have the right to carry on working once they are past retirement age.

Lorely Burt (Liberal Democrat, Solihull)

The hon. Gentleman is right. However, we hope to encourage an improvement in this country’s culture and attitude toward the contribution that older people undoubtedly have to make in the workplace.

The proposals are modest. Older people have an awful lot to give, and our amendment asks only that that contribution should be acknowledged and should contribute to their future pension entitlements.

James Purnell (Labour, Stalybridge and Hyde)

This has been another helpful and important debate on helping people to gain a full contribution record and extending working lives to help people work longer. The UK has a good record on that. Other European countries look on our ability to get older people to continue working with envy. As the hon. Member for South-West Bedfordshire said,1.2 million people over the state pension age are still working, and that number is going up very rapidly indeed, which is a good thing. In his last intervention, he referred to the fact that people over 65 do not have the right to continue working. It is worth picking that up briefly and saying that for the first time, as a consequence of our age discrimination laws, they have a right to request flexible working after the age of 65 and are protected from being fired illegitimately on age grounds before 65.

Anybody who wants to see the Conservative party policy making machine at play can look at Webcameron and see the party leader discussing that issue with the hon. Members for Eastbourne and for Runnymede and Weybridge (Mr. Hammond). The hon. Member for Eastbourne was on the side of the Confederation of British Industry against getting rid of retirement ages altogether, and the Leader of the Opposition said, “I understand the argument for doing so, but it must be balanced with the needs of business.” That is absolutely right. It is something that we keep under review, and we will continue to consider the evidence on whether a mandatory age of 65 is necessary.

David Laws (Liberal Democrat, Yeovil)

Will the Minister clarify what his own Department’s policy is? Does he allow his staff to work beyond 65?

James Purnell (Labour, Stalybridge and Hyde)

Yes, we do. As a matter of policy, the DWP got rid of the default retirement age of 65.

Mark Pritchard (Conservative, The Wrekin)

Perhaps this is slightly divergent, but I think this is an opportune moment to ask the Minister whether he would give that same advice to the Church of England which requires bishops to retire at a particular age.

James Purnell (Labour, Stalybridge and Hyde)

From the look on your face, Mr. Gale, I do not think that I will respond on that particular issue. Our reforms do make a significant difference to the number of years required. As has been said, that goes a long way towards addressing the issue dealt with in the amendments. There will be some people who reach state pension age without a full contribution record even if that record is reduced to30 years.

When I first looked at each of these amendments I thought that they looked like a good idea and wondered why we should not support them. The reason is that they create much greater complexity both for businesses and individuals and there is a much more effective way of achieving the same goal without that complexity, namely a state pension deferral. In my previous speech, my hon. Friend the Member for Northampton, North made my case by talking about pension credit and she has done the same again by referring to the importance of deferral.

It is worth saying that we would not want this to happen for everybody. One of the reasons why there are good incentives to work after state retirement age is that people do not have to pay national insurance contributions. I am sure that the whole Committee would agree that it would not be a great step forward if we imposed this requirement on everyone. Therefore, it would have to be limited just to people who wanted to make voluntary contributions.

That would create genuine difficulty for businesses. At the moment, all payroll systems can work on the basis that those over state retirement age will notpay national insurance contributions. Under these amendments, they would have to record who wanted to make those contributions. Under the Liberal Democrat proposal, they would have to record whether or not they had 30 years of contributions because if they did, they would not be able to make any further ones.

That system would inevitably lead to overpaying and the issue of refunds. Instead of a system that is extremely simple whereby business can simply not collect contributions over state retirement age, different records would have to be maintained for everybody over state retirement age. That might reduce the attraction of those employees for some employers.

John Penrose (Conservative, Weston-Super-Mare)

The Minister seems to be saying that the principal reason for opposing this is that it would be administratively difficult to achieve successfully. Has he considered that a fairly large number of payroll systems out there are already adjusted for any companies that have private pension schemes to cope with additional voluntary contributions and other such matters? This would not be a big change for any salary schemes that are in place undertaking such measures for private schemes. Many companies already outsource their payrolls. Would he also accept that for those who do not have 30 years of contributions and want to make a bigger uplift to their pension than can be achieved through a deferral, allowing additional cash injections to be made after retirement age could be vital?

James Purnell (Labour, Stalybridge and Hyde)

It would actually be a very big change because they would have to be collecting something new, namely people’s national insurance records, identifying whether people wanted to make these extra voluntary contributions or not. Therefore, it would be a big change, particularly for small businesses. It would also be very complex for the individual because they would have to make a trade-off between extra national insurance contributions. They would have to decide whether the extra amount that they got in state pension entitlement was worthwhile and that would be different at different levels of earnings. It would make the system complicated in a way that the hon. Member for Eastbourne tried to address in the last Committee on the 2004 Bill, in which he tabled an amendment asking that everyone who is deferring be given actuarial advice on whether to do so.

The combination of these two measures would make this situation very difficult for the individual. Therefore, we think that it is much better to achieve this outcome through people deferring. There are very generous deferral arrangements in which people get an increase of over 10 per cent. for every year that they defer. That is in effect getting exactly the same outcome as paying national insurance contributions. It has less complexity for the individual and for businesses. I therefore think that it is a much better solution and would urge that the amendment be withdrawn.

Andrew Selous (Conservative, South West Bedfordshire)

I am tempted to think that we are coming back to the computer again; that we are being given complexity again as the reason why something cannot be done. I am slightly surprised by what the Minister says. He was good enough to say that he looked at these two amendments and thought that they seemed sensible. I stress that they would involve only a right or ability for those who requested it, not a blanket policy.

I am somewhat sceptical about the Minister’s comments that the amendments are hugely complex and would involve big change. Employers have systems for collecting national insurance, so I cannot believe that things would be that complicated. I fully agree that people should take advice on their individual circumstances. If, as the hon. Member for Northampton, North properly said, the right solution for a person is to defer and they choose to do so, that is excellent. However, as my hon. Friend the Member for Weston-super-Mare, who sits on the Select Committee, said, for some people the route suggested by the amendments will be the right one to go down. It should be self-funding overall and I urge my colleagues to support the amendment.

David Laws (Liberal Democrat, Yeovil)

The debate has been most interesting and quite novel. The hon. Member for Northampton, North started by accusing me of speaking for an inadequate period. I may need to come back to that point in some of my later speeches on the earnings link in citizen’s pensions. I was also accused by the Minister of tabling an amendment with no spending implications; I am sure that that will not happen too often. Even the Minister was unable to suggest that it would involve some fantastic and unaffordable amount of money. The Minister went as far as to say that it looked like a good idea, from which I took further encouragement. Furthermore, we almost debated the retirement ages of bishops, so it would be fair to describe the debate as “wide-ranging”.

The context of the debate is also important. Both sides of the House appear to be saying that they want to create an environment in which it is easier for people to work later and in which there is greater ability and flexibility on retirement ages. I was pleased to hear that the Minister is allowing staff at the Department for Work and Pensions—I assume that he did not mean only his private office—to work beyond age 65. I shall be interested in tabling questions on how many staff in the current environment are taking up that offer and given the opportunity to do so. That will be interesting.

The hon. Member for Northampton, North and my hon. Friend the Member for Solihull did a marvellous job of fleshing out my perhaps unnecessarily brief speech. They described why the amendment is so important and why sometimes the deferral issue does not work to take account of all the concerns that they expressed.

In response, the Minister came up with a number of counter-proposals. He mentioned the deferral issue, already referred to by the hon. Member for Northampton, North. He fell back on the “computer says no” argument, which may recur as often as the points that he will endeavour to make about the financial implications of various amendments. He said that it would be immensely complex for business and individuals.

However, we are not talking about a vast number of individuals. Furthermore, we are discussing the introduction of all sorts of changes to the pension system in respect of personal accounts. People will have to take greater responsibility for their income in retirement, understand pensions and make their way through what at present is an impenetrable and complex pension system—I mean not only the state but the private architecture. It is difficult to believe that we cannot get around that complexity, particularly for individuals, and that the Government have explored as fully as they could how the mechanisms necessary to make the proposal work could be implemented for businesses.

I got the impression that the Minister accepted that there was a good idea but that he and his Department had not had the time to flesh out in detail whether it could be made to work. For that reason, I should like to press amendment No. 24 to a Division.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following:

New clause 23—Entitlement to a Basic State Pension—

‘The Secretary of State shall prepare a report on those groups reaching state pension age in 2010 who will not be eligible for a full Basic State Pension.’.

New clause 29—Category A and B retirement pensions: contribution condition—

‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.

(2) In paragraph 5—

(a) delete sub-paragraph (2);

(b) in sub-paragraph (3) delete the words “The second condition is that” and, for the words “the requisite number of” in sub-paragraph (3)(a), substitute “30”; and

(c) delete sub-paragraphs (5) to (8) inclusive and insert the following sub-paragraph—

“(4A) Regulations may modify sub-paragraph (3) above for the purposes of its application in a case where—

(a) the contributor concerned has paid, or been credited with, contributions, or

(b) contributions have been deemed to be, or treated as, paid by or credited to him,

under the National Insurance Act 1946 or the National Insurance Act 1965.”.’.

New clause 30—Widowed parent’s allowance and bereavement allowance—

‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.

(2) After paragraph 5A (inserted by section 1(3) of this Act) insert—

“5B (1) This paragraph applies to a widowed parent’s allowance or bereavement allowance in a case where the contributor concerned dies on or after 6th April 2010.

(2) Paragraphs 5A(2) to 5A(4) of this Schedule shall apply to an allowance to which this paragraph applies as if it were a Category A or Category B retirement pension.”.’.

We have had a fairly substantial debate on new clause 1. Ordinarily, I would draw the line and not permit a stand part debate, but it is convenient to take new clauses at this stage. I therefore urge members of the Committee to concentrate their comments on the three new clauses. With that in mind, I call Mr. Selous.

Andrew Selous (Conservative, South West Bedfordshire)

I will be mindful of your injunction not to range too wide of clause 1, Mr. Gale. However, there are important issues in relation to women’s pensions generally that we did not touch on earlier when we talked about the cliff edge. I shall cover them as briefly and concisely as possible.

As for new clause 23, I am always happy about the provision of information with costings to Parliament. It is a sensible proposal as it means that that particular demand on the public purse can be weighed up among all the other demands on the Exchequer from different Departments. It is a sensible and straightforward new clause.

New clause 29 tabled by the hon. Member for Northampton, North would make a retrospective change. I generally consider that we should be cautious about retrospective legislation. Conservative Members have not brought forward costings, nor has the hon. Member for Yeovil or the Minister, and I shall certainly be asking the hon. Lady how much her retrospective proposal would cost, how it will be paid for and whether indeed she will be sharing that information with her electorate before the May elections this year. The Committee expects an answer to those valid questions.

The hon. Lady has raised a serious issue under new clause 30. Paragraph 23 of the explanatory notes to the Bill shows that existing contributions will continue to apply even after 6 April 2010 for widowed parent’s allowance and bereavement allowance. Will the Minister explain why that is the case? Help the Aged has asked, for example, whether it means that a widow may not qualify for bereavement benefit at the full rate, even though her husband would have qualified for a full basic pension under the new rules. I look forward to his explanation.

However, I note that paragraph 34 of the explanatory notes states that

“bereavement allowance and widowed parents’ allowance, payable to a surviving spouse or civil partner, would be calculated by reference to the new credits...when the contributor dies on or after 6 April 2010.”

On the issues that we have not debated under the clause stand part debate, I pay tribute to the seminal campaign that the Fawcett Society and Age Concern ran in 2003. I attended their meetings with the Under-Secretary of State for Constitutional Affairs, the hon. and learned Member for Redcar (Vera Baird), and others during the previous Parliament. Many of the document’s demands and requests for policy change have found their way into the Bill. Indeed, they found their way into the Conservative party’s 2005 general election manifesto. That is one reason why my colleagues in the official Opposition are broadly happy with the clause.

In 2002, only 13 per cent. of women received the full basic state pension. Today the figure is 30 per cent. By 5 April 2010 it will be 50 per cent., jumping to 70 per cent. as a result of the changes under the clause. The Government estimate that by 2025, 90 per cent. of women reaching state pension age will be entitled to a full basic state pension. It is a phenomenal change. There are arguments about the rate of change, and there is not a Member in the room who would not like to reach that percentage more quickly. However, we must be mindful of all other demands on the public purse.

One feature of the clause is its proposal to abolish the 10 or 11-year rule. Many women hugely resented that rule. They had paid in perhaps £4,000 or £5,000 in national insurance contributions, for which they received no benefit whatever when they reached state retirement age. It was the equivalent of a fraudster scheme taking money off the public. Indeed, it was similar to Farepak taking money off people over a certain period and then giving them nothing in return.

That particular pension regulation was outdated, and many Opposition colleagues campaigned against it through the 2005 Conservative party manifesto. The new proposal has found its way into the clause, and it is right that we wave the rule off into history, so that however short or long one’s period of work, it rightly counts towards one’s entitlement to a full basic state pension and to the state second pension. The Minister rightly reminded us earlier that we must remember that other element of the state pension system, too.

The clause deals with issues that are important to women. The previous Parliament heralded those issues in 2003, with, funnily enough, 2010 foreseen as the date on which many of the changes would come in. My hon. Friends thoroughly welcome the steadily rising percentage of women who will reach state retirement age entitled to a full basic state pension.

My final point is a general one about voluntary contributions for people who have several part-time jobs, but whose earnings from each job are below the earnings limit. They can make voluntary class 3 national insurance contributions to qualify. I shall be interested to hear from the Minister what more we can do to help people—women, in particular—who have several part-time jobs, earn from each a wage underneath the lower earnings limit and do not benefit from clause 1, so that by paying those contributions they benefit from a full basic state pension on their retirement.

Sally Keeble (Labour, Northampton North)

New clauses 29 and 30 are probing new clauses to find out from the Government their approach to and thinking on the matters before us. Obviously, the financial impact of the proposed new clauses would be substantial. The hon. Member for South-West Bedfordshire asked about the financial impact of proposed new clause 29: it would be about£1 billion, which is a huge amount of money. That is why I reiterate that the proposed new clauses are designed to find out the Government’s thinking and their approach to these matters.

The aim of the two proposed new clauses is to extend the right to a full state pension to some pensioners who receive the reduced basic state pension. Offset against that is the impact that the proposed measures might have on any other benefits to which those pensioners are currently entitled. I am sure that the Minister will also deal with those issues.

It is a technical issue. I am looking to the Minister for information about the trade-off between the different pensions and benefits to which people will be entitled as balanced against the contributions that they have made, and also about the costs to the public purse.

David Laws (Liberal Democrat, Yeovil)

I ought to reciprocate the hon. Member for Northampton, North by saying that I would have liked a still longer speech on these very important proposed new clauses. Perhaps we will go through our proceedings urging each other on to greater things and longer speeches.

I shall begin on a consensual note, as the hon. Member for South-West Bedfordshire did. Clause 1 is important: it will tackle a number of major injustices that have been a feature of the pensions system. It will lead to a better deal for women in particular. The Minister knows that we go our separate ways in terms of our visions for the future of the pensions system, but I welcome the effect that the measures will have on many women. I commend all those individuals and groups who have been active over many years for raising, and lobbying on, the issue of justice for women pensioners. Members from all parts of the House have raised the issue of the way in which the pension system has let women down. The hon. Member for South-West Bedfordshire raised the issue of the contributions that women have made which, scandalously, have not given them any sensible return in retirement. Many of those injustices are being remedied by clause 1.

Proposed new clause 23 asks the Secretary of State to prepare a report on those groups who will reach state pension age in 2010, but who will not be eligible for a full basic state pension. In other words, the proposed new clause is yet another Liberal Democrat contribution to the amendment paper that has no consequences for spending. To meet the demand for a costing of the report that the Minister will inevitably make, perhaps I ought to say that it will be cheap to produce. Although the proposed new clause is probing, I hope that the Committee will accept it, or that the Minister will indicate what research the DWP is doing on the subject, and what the time scale is for concluding and publishing any research.

The hon. Member for Weston-super-Mare, who was here earlier, will be aware that a report on excluded groups was also one of the recommendations of the DWP Committee. The Government responded relatively positively to the proposal, perhaps more positively than the Secretary of State did during the DWP Committee sittings. When asked about the pensioners of the future who would not be entitled to a full basic state pension, he replied simply that such measures would apply to those who do not meet the qualifying conditions. We are hoping that the Minister will shed a bit more light on the issue of the categories of people who will be excluded. We would like to know how the Government foresee their policy developing to reduce the numberof individuals who do not receive a full basic state pension.

We would like the Government to look at the matter retrospectively as well, as the hon. Member for Northampton, North suggested, because we risk becoming excited and complacent about the latest figures showing how many people will be entitled to the basic state pension as a result of the proposals if we do not bear in mind that cohorts of existing pensioners not entitled to the basic state pension will be around for many years. Could the Minister put on record the projected figures on the proportion of men and women, and of the pensioner population as a whole, who will not be entitled to the basic state pension in 2010, 2020 and 2030, rather than looking only at the new generations of pensioners who will be covered and whose lot will be improved by the Bill?

The Government response to the Select Committee report said that they are undertaking further analysis using administrative data, survey data and primary research to examine in detail the characteristics of the individuals who might not receive a full basic state pension even after reform. Where possible, that analysis will consider those reaching state pension age in 2010 as well as after 2025. It would be useful to know how that research is proceeding and when the Government intend to publish it. Will it be a long-term project, or might it emerge—he said optimistically—during the passage of the Bill?

I think that this is the part of our proceedings in which the Minister would invite me to return to the issue that I raised earlier about the Government’s attitude to the contributory principle. It is clear that the Secretary of State and the Government as a whole have a strong adherence to the principles behind it—the Secretary of State made that clear in his evidence to the Select Committee—but at the same time, the Government are taking an approach that will reduce the number of qualifying years of contribution required to get a full basic state pension. It is a slightly unobvious way of underpinning a commitment to the contributory principle to erode it by reducing the number of contributory years. Presumably the Government could have gone about it in other ways by focusing simply on the reasons why people were not credited with contributions in particular years and changing the relevant regulations.

Help the Aged’s evidence to the Select Committee asked what the rationale was for selecting 30 years rather than 25 as the new qualifying period for the full basic state pension. The Minister touched on that issue earlier. I think that he said that that was the total number of years necessary to ensure that a significant proportion of those retiring after 2010 had the full basic state pension, but it would be interesting to know a little bit more about what research was conducted to determine the 30 years and whether the Government would be willing to consider reducing it further.

The hon. Member for Northampton, North has tabled important new clauses for which we have considerable sympathy given our general attitude to pension issues. She has already outflanked me in the spending stakes, proposing from the Government’s own Benches an amendment that would add £1 billion to the cost of our modest and disciplined proposals. It was interesting that she managed to get away with it not only by speaking quite quickly—the Minister might have been delving into his notes—but by describing them as probing amendments. Those are clearly clues that I could use during the rest of our proceedings to get off the hook when he accuses me constantly of making unaffordable spending pledges. Apparently I should simply describe them as probing amendments.

The benefit of the hon. Lady’s point is that it highlights that a large number of pensioners will continue not to benefit from the new arrangements after 2010. Many will be individuals who do not claim all means-tested benefits that the Government make available. The debate raises issues of pensioner poverty, contradicting the Minister’s earlier suggestion that anything retrospective would have no impact on pensioner poverty.

The new clauses are interesting, and I look forward to hearing from the Minister about them. In particular I hope that he is able to accept the principle behind new clause 23.

James Purnell (Labour, Stalybridge and Hyde)

I am grateful for the welcome from the Front-Bench spokesmen, who in an auction of adjectives described the clause as very important and a phenomenal step. I shall take phenomenal. If we were not in such a consensual mood, I would point out to the hon. Member for South-West Bedfordshire that his party had 18 years to address the issue. Barbara Castle was the last person to address it, but I shall not make the point too sharply.

I shall follow your strictures, Mr. Gale, and confine myself largely to the new clauses. The background to the issue is that we can never have a universal state pension. There must be some criteria by which we test eligibility; otherwise, as Members will readily understand, there would be all sorts of problems. The system would be open to all comers and there would be genuine issues about fairness.

The measures set out in clause 1 take us a great deal closer to full coverage while maintaining a modernised contributory principle. I can only repeat to the hon. Member for Yeovil that the principle is contributory because those who contribute more will receive more basic and second state pension. Further, the level of 30 years will achieve the best outcome. It is better than his suggestion of examining people’s contributions over the past 30 to 50 years, which we would have to do to achieve the same effect that we achieve just by widening the available categories.

All sorts of circumstances could result in someone not receiving a full basic state pension. They may have decided, for example, not to return to work after having children, because they felt that they would be financially comfortable; or they may be a recent migrant who has spent a significant part of their working life in another country. People who contribute less should not receive the same amount as those who contribute more.

The hon. Member for Yeovil said that there may be other more complex examples of people who do not receive a full state pension. The Secretary of State told the Select Committee that we are happy to research that point. The research will be challenging and it will involve in-depth questioning. People often do not remember their exact contribution records or their exact working and caring histories, but we aim to have it ready by the summer. I can give him that assurance. I hope that he will feel it unnecessary to table his new clause on Report, given that we have already committed to undertake its provisions, and indeed, given that we have already started to do so.

New clauses 29 and 30, which my hon. Friend the Member for Northampton, North tabled, would apply the new single contribution condition to all pensioners, widows and widowers. The hon. Gentleman’s referral to her speech is not enough to get him off the hook. I am happy to let him off if he says that he will not be able to change the level of means-testing because he does not propose to spend any more money, and that he will not be able to establish a citizen’s pension because he will not have the funds to do so. As long as he continues to say that he can reduce means-testing without taking any money off anyone, or without increasing the amount of spending overall, we will continue to let him wriggle on his hook.

I have sympathy with the sentiment behind my hon. Friend’s new clauses. It is the only solution to the cliff edge. However, as I explained, their implementation would be extremely expensive, and I do not think that she intends the Government to spend that extra money merely to understand the reasons behind their policy decision. The Pension Service would also have to reassess the pensions of more than 2 million pensioners in one go.

David Taylor (Labour, North West Leicestershire)

With this we are also considering the following: New clause 23—Entitlement to a Basic State Pension—

‘The Secretary of State shall prepare a report on those groups reaching state pension age in 2010 who will not be eligible for a full Basic State Pension.’.

New clause 29—Category A and B retirement pensions: contribution condition—

‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.

(2) In paragraph 5—

(a) delete sub-paragraph (2);

(b) in sub-paragraph (3) delete the words “The second condition is that” and, for the words “the requisite number of” in sub-paragraph (3)(a), substitute “30”; and

(c) delete sub-paragraphs (5) to (8) inclusive and insert the following sub-paragraph—

“(4A) Regulations may modify sub-paragraph (3) above for the purposes of its application in a case where—

(a) the contributor concerned has paid, or been credited with, contributions, or

(b) contributions have been deemed to be, or treated as, paid by or credited to him,

under the National Insurance Act 1946 or the National Insurance Act 1965.”.’.

New clause 30—Widowed parent’s allowance and bereavement allowance—

‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.

(2) After paragraph 5A (inserted by section 1(3) of this Act) insert—

“5B (1) This paragraph applies to a widowed parent’s allowance or bereavement allowance in a case where the contributor concerned dies on or after 6th April 2010.

(2) Paragraphs 5A(2) to 5A(4) of this Schedule shall apply to an allowance to which this paragraph applies as if it were a Category A or Category B retirement pension.”.’.

James Purnell (Labour, Stalybridge and Hyde)

It is a great pleasure and privilege to serve under your chairmanship again, Mr. Taylor, as we did in the Programming Sub-Committee. I know that you are an extremely experienced Chair and I look forward to your chairing our proceedings.

When we broke earlier, the Committee was no doubt fascinated by my saying that if the new clause were included in the Bill, the Pension Service would have to reassess the pensions of more than 2 million pensioners in one go. We estimate that in some 350,000 cases where the pensioner is getting pension credit, despite the significant expense that would be incurred, the provisions of the new clause would not make a penny of difference to the person’s total pension income. So there would be a significant amount of work, involving confusing notifications for many people with little or no overall gain in many cases. Although I understand that my hon. Friend the Member for Northampton, North tabled the new clause so that we could have this debate, which has been helpful, given its consequences I urge her not to press it.

New clause 30 focuses on a narrow issue of bereavement benefits. I understand the rationale behind my hon. Friend’s new clause, which would apply the new single contribution to widowed parent’s allowance and bereavement allowance. Although I, like every Committee member, have every sympathy for people coping with the effects of bereavement, I cannot see a clear rationale for changing the contribution conditions for bereavement benefits. Reducing the number of qualifying years for a full basic state pension to 30 years is designed to address the inequalities of outcome that currently exist for women, as we discussed this morning. However, those inequalities have built up over many years and bereavement benefits were only introduced fairly recently—in 2001—and are available to both men and women. Prior to 2001, widow’s benefits were only available to women. Our data on widowed parent’s allowance show no real evidence of unequal outcomes between men and women.

As one would expect, significantly more women than men receive bereavement benefits—around 25,000 women, compared with some 10,000 men—but that reflects the fact that men are far more likely than women to die before their spouse, because women live longer. However there is no significant difference in the proportion of men who qualify for full rate widowed parent’s allowance compared with women.

The existing contribution conditions for bereavement benefits allow the number of qualifying years to be reduced where a person dies before reaching state pension age. For example, if a man dies at 40 he would need to have accrued only 21 qualifying years for his widow to qualify for full widowed parent’s allowance if she were left with children. There is already a mechanism in the Bill to achieve the spirit of what my hon. Friend was trying to do. The current link between the contribution conditions for bereavement benefits and pensions is largely historical and has little basis today, given that bereavement benefits are paid to people of working age who have very different needs and responsibilities from those of pensioners.

My hon. Friend asked whether a widow might not qualify for bereavement benefits at the full rate, even though her husband would have qualified for a full basic state pension under the new rules. That is possible, but the number of cases will be fairly small, as the 30-year qualifying test has a marginal effect on the proportion of men, as we discussed earlier. A woman in that situation would not be any worse off than she is now, on her eligibility for bereavement benefits, but she would be better off than she is now on the basis of her eligibility for state pension benefits. In the same way as her husband would be better off in terms of his lower number of qualifying years for his state pension benefits, so would she. The Bill only improves the situation, compared with today.

Our priorities for working age benefits are to increase employment and to reduce child poverty. Change in the contribution conditions for bereavement benefits would have only little if any impact on either of those two issues. We are reducing the number of qualifying years so that people have better incentives to save to reflect the different caring contributions and patterns of work. That is appropriate for pension benefits, but we do not consider that it is appropriate for working age benefits. I urge my hon. Friend not to press her new clauses and extend that wish to new clause 23.

David Laws (Liberal Democrat, Yeovil)

I, too, welcome you to the Chair, Mr. Taylor. We made good progress under your fellow Chair this morning, and I hope that we will continue to do so this afternoon. I am grateful to the Minister for his response to the cluster of new clauses, especially new clause 23. I am sure that my memory will let me down although it seems a long time ago, but I think that the Minister undertook this morning to publish in the summer of 2007 the research that the Government describe in their response to the Select Committee’s report. I assume that that means before the House rises for the summer recess, although we can never be too sure about such definitions. I therefore hope that the information will be made available to us before we discuss the personal accounts Bill in the latter quarter of this year. Obviously, that information will be extremely useful. It will inform some of the other debates that we shall have later, including those under clause 3 so I shall not raise them now.

I raised earlier with the Minister the ability of the Department to give estimates after the reforms in 2010 of the proportion of male and female pensioners—the stock of pensioners—who will receive a full basic state pension. Although I might have missed it, I do not believe that he was able to respond to that point in the debate, which is understandable given the information that he needed at his fingertips. If he does not have the information now, would he at some stage put it on the public record? With those provisos, we do not intend to press our new clause to a Division.

Clause 2

James Plaskitt (Labour, Warwick and Leamington)

I welcome you to the chairmanship of the Committee for our sitting this afternoon, Mr. Taylor.

We now come to the provision that ends the requirement that entitlement to category B pension is dependent on a category A pension having been claimed by the person’s spouse or civil partner. Hopefully, clause 2 is one of the more straightforward clauses in the Bill. It simply will remove the current restriction on entitlement to a category B pension, which is a pension based on the contribution of a person’s spouse or civil partner rather than on that person’s own contribution in situations when the spouse or civil partner defers claiming his or her category A pension.

Category B pensions for married people and people in civil partnerships are payable at about 60 per cent. of the standard rate of basic pension. They are still commonly known as married women’s pensions, but from 2010 they will be available to some married men and people in civil partnerships.

Sally Keeble (Labour, Northampton North)

Is that payable only when the person who receives the category A pension defers or is it applicable in all cases such as if the person who receives the category A pension has not reached retirement age? Does it mean that a woman aged 58 years or 62 years can claim it if her husband is also 62 years and therefore not reaching his pension?

James Plaskitt (Labour, Warwick and Leamington)

Both parties have to have reached retirement age. I am just about to clarify such matters. My hon. Friend has anticipated the material to which I am about to refer.

A person can only qualify for a category B pension if their own entitlement to a category A basic pension is lower than a category B rate. For example, a married woman with entitlement to a category A pension at50 per cent. of the standard rate would have her pension topped up by 10 per cent. to the category B rate.

Under the current rules, a person cannot qualify for a category B pension until both he or she and his or her spouse or civil partner have reached pension age, and the spouse or civil partner has actually claimed his or her category A pension. This clause removes just the latter restriction—one that limits choice and that can create complicated decisions on whether to defer drawing state pension.

To help my hon. Friend and other members of the Committee with an illustration, let me introduce Mr. and Mrs. Jones. Mr. Jones is considering deferring his category A pension because he plans to work on for two years after reaching state pension age, but Mrs. Jones has already reached state pension age and is drawing a small category A pension based on her own contributions. If Mr. Jones defers his pension, then Mrs. Jones will not qualify for her category B pension until he eventually claims. So, Mr. Jones faces an invidious choice. He would like to accrue deferral benefits—a lump sum or extra weekly pension—on his own pension, but that would mean that his wife would not be able to draw her pension.

Clause 2 solves this dilemma: Mrs. Jones will be able to draw her category B pension from the point that Mr. Jones reaches state pension age, regardless of whether he decides to defer. The change will apply from 2010 to both existing and future claims. The proposal will simplify the claims process and enable people to make an independent claim for their state pension. They will no longer be dependent on their spouse’s decision. That will make it easier for people to understand what they may claim and when they may claim it, and for those reasons I urge hon. Members to support this clause.

Andrew Selous (Conservative, South West Bedfordshire)

It is also my pleasure, Mr. Taylor, to welcome you to this second sitting of our Committee. I have had the pleasure of serving under you before, and look forward to doing so again.

Clause 2 is short and uncontroversial. It is generally to be welcomed and I see no amendments or new clauses tabled in relation to it. The removal of a restriction on entitlement to category B retirement pension has to be generally welcomed, meaning that, in future, it will be possible for one member of a couple to receive such a pension even if the other has deferred a category A pension. This is particularly important, as more and more people are likely to be deferring their pensions by keeping on working, as older people generally enjoy better health and working in later life—past state pension age—becomes more common. As the Minister said, there are clearly benefits to deferring a pension in the increases that come later. Because we are going to see more of that, Opposition Members are happy to see clause 2 in the Bill.

Clause 3

Lorely Burt (Liberal Democrat, Solihull)

I beg to move amendment No. 26, page 3, line 31, at end insert—

‘(d) is in receipt of certification by a relevant health or social care professional, verifying that they are involved in caring for a person or persons, for a minimum of 20 hours a week, not otherwise recognised by the regulations.’.

David Taylor (Labour, North West Leicestershire)

With this it will be convenient to discuss the following: Amendment No. 61, page 3, line 31, at end insert—

‘(d) is certified by the local social services authority as providing caring services for at least 20 hours a week for one or more people.’.

Amendment No. 63, page 3, line 31, at end insert—

‘(d) is engaged in caring for a person or persons in receipt of the higher, medium or lower rate care component of the Disability Living Allowance, Attendance Allowance, Constant Attendance Allowance, higher rate of short-term or long-term incapacity benefit, severe disablement allowance and any means-tested benefit for which a disability premium or addition has been added in the applicable amount for 20 hours a week or more.’.

New clause 15—Report on contribution credits—

‘The Secretary of State shall present a report annually to the House of Commons on—

(a) the number of carers in receipt of contribution credits;

(b) the number of carers caring for 20 or more hours per week who are not in receipt of contribution credits;

(c) the associated costs of contribution credits to the National Insurance Fund of (a);

(d) an estimate of the cost of providing contribution credits to persons falling within paragraph (b), and

(e) any proposals he may have for reviewing eligibility for contributions credits.’.

New clause 17—Allocation of child benefit to the relevant parent—

‘If child benefit is paid into a joint account and allocated to a parent who did not wish to accrue home responsibilities protection or contribution credits, and the other parent wishes to have accrued home responsibilities protection or contribution credits, the Secretary of State must reallocate the qualifying years of home responsibilities protection or contribution credits, as the case may be, to the parent who wished to receive them.’.

Lorely Burt (Liberal Democrat, Solihull)

I, too, welcome you to the chairmanship this afternoon, Mr. Taylor, and into the course of the Bill. This morning, we were treated to a number of helpful and interesting debates and, as often happens with Bills, the defining characteristics of the different groups are starting to emerge.

The watchword of the Conservatives seems to be “not a penny more for pensioners”, to which they seem to be sticking quite rigorously. The Minister seems to be saying on numerous occasions that the “computer says no”. Unfortunately, when I suggested that he might want to crack that joke, my hon. Friend the Member for Yeovil was not quite so well up with what he calls youth culture. The Liberal Democrats’ watchword is that we are trying to get a better deal for pensioners. [Hon. Members: “Money tree”.] From a sedentary position, Conservative Members have mentioned a money tree but I would rather refer to it as a money sapling. In my defence, on our side of the House we have mentioned savings of £8 billion which have been identified already. Therefore, we are not going to take any lessons from the other parties on how to save or spend money.

Nigel Waterson (Conservative, Eastbourne)

Before the hon. Lady gets into her flow, I should point out that she referred, with a rather broad-brush attitude, to£4 billion for scrapping contracted-out rebates. However, the Government’s figures show that that has now been reduced to just under £2 billion. Therefore, she is just over £2 billion adrift from the Treasury’s figures. Will she deal with that?

Lorely Burt (Liberal Democrat, Solihull)

My figures are taken from those presented by Help the Aged. Notwithstanding the hon. Gentleman’s figures—or the Government figures—they are still double what we have proposed. [Interruption.] I should move swiftly on.

We welcome this part of the Bill, particularly because carers do a phenomenal job. If we want to bandy figures about, let us consider the situation if carers did not do their job. It would cost the NHS roughly double what it currently spends to look after people who are selflessly cared for by carers who give their time and who also suffer financially. This Bill goes some way to redress the situation for carers who care for 20 hours or more a week, and it is therefore extremely welcome.

I want to explore the situation for people who miss out. By 2010, as it stands under this legislation, of the 160,000 carers who will be caring for 20 hours or more a week and not building entitlements to the basic state pension, 120,000 will get credit through the carers credit. This means that 40,000 will not be building their entitlement. We are trying to address that.

Amendment No. 26 was suggested by Carers UK. The Equal Opportunities Commission and Help the Aged also support it. The type of people who would miss out on carers credits will be those who have fluctuating conditions and who may be on and off benefit; those who care for someone who goes into hospital long enough to lose their benefits; those who care for someone who does not want to claim disability benefit but the carer nevertheless sacrifices that amount of time—very willingly, as a rule; and those who care for more than one person but neither of them is in receipt of the right benefits. We discussed those people on Second Reading. We propose that a health or social care professional could nominate—certify—that those people are in need of care for 20 hours or more a week.

Amendment No. 63 was, again, not our idea; it was proposed by Carers UK. It lists nearly all disability benefits and argues that if a carer is caring for someone in receipt of said benefits for more than 20 hours a week, they should be eligible to accrue entitlement to the basic state pension. The amendment is also supported by Help the Aged, Age Concern and the Equal Opportunities Commission. At the moment, under the eligibility criteria, someone would need to be caring for a person almost constantly, day or night, to qualify. The extension of the list of benefits is important.

What the Government have done so far is excellent, but we ask them to go the extra mile for the 40,000 people of the 160,000 who will not benefit for reasons that are not their fault.

Sally Keeble (Labour, Northampton North)

It is a pleasure to serve under your chairmanship, Mr. Taylor.

I tabled amendment No. 61 after discussions with carers groups to find a way to balance the different pressures on caring and pensions. It is important to recognise that many carers will benefit from other changes in the Bill—in particular, the reduction in the number of hours that have to be worked per week to qualify for the state pension. If they do not have to work for so many hours, it is easier for people with substantial caring responsibilities to qualify for a state pension. That has to be recognised.

It is obviously important that the system should properly compensate carers and recognise the contribution that they make. Some carers are not able to work because of their caring responsibilities, so they cannot qualify even on the fewer-hours basis. They therefore need credits to count towards their pensions.

We should not muddle that up with the caring roles that people normally play for their families. We have to draw the lines carefully. Otherwise, everybody will end up being a carer and what we are trying to do will become virtually meaningless. We have to be clear about that.

The credits are valuable; they are not light things. They are important, and there has to be a proper process for deciding who qualifies and who does not. Tagging on a long list of benefits means that people can tick a box and get a benefit, but that does not always meet the realities of carers’ lives. That is why, in addition to the specified benefits, which I agree are probably not wide enough, we need a process that allows for the person who cannot tick the boxes, but who none the less does what amounts to a caring job. That person cannot qualify even at the fewer-hours rate because of their caring responsibilities. We need to find another way to recognise and assess what is going on.

The Opposition said that that should be done by one health or social services professional, but I do not think that that would be robust enough. To give an example from the Home Office, the domestic violence exemption system, in which two professionals sign, works well. That is sensible; there is evidence from two sources. In the case that we are discussing we could say that a doctor and social worker should sign. However, one person with a lot going on in their lives—caring, working, this, that and the other—would have to run around collecting bits of paper from different professionals. Furthermore, there would be the issue of what would happen if the doctors decided to charge. That is a problem because there is no agreement in place with doctors yet.

All of us have seen the letters that professionals write in support of housing applications, but a person advocating a patient or client is not always in a position to make an impartial judgment, one that follows due process or a set of criteria. They are more likely simply to say, “This person works very hard. They look after three children, who all have difficulties. Yes, they qualify as a carer.” An established process for such applications might provide a way forward. Amendment No. 61 would place a responsibility on the social services authority to undertake the process, rather than with an individual social worker whom people may not know. A social services authority in any event has a responsibility for undertaking care assessments for the different client groups; it will have family records, so the process would look at the care needs of the people concerned. The authority could say whether the mother looking after three children is indeed working as a carer as stipulated in the Bill, and that she should therefore be entitled to the carers credit.

Lorely Burt (Liberal Democrat, Solihull)

We agree about the robustness of the measurement, and we would want to have that degree of robustness in everything that is done. Given that the hon. Lady has left out the alternative of having a doctor advocate, would there not be circumstances in which social services is not involved with an individual? A person may not be on specific allowances; they may simply be very ill. Does she not envisage circumstances in which a doctor’s letter would be the only appropriate avenue for an individual to get pension credit without having to get involved with social services?

Sally Keeble (Labour, Northampton North)

I do not want to go on about amendment No. 61 for too long because it is not robustly worded, and I do not intend to press for a Division. I am asking that my hon. Friend the Under-Secretary have a look at the issues raised, come back, and perhaps move a little on the measures.

There are probably no circumstances in which a person would be seeing a doctor when they did not also require some kind of care assessment that would go through social services. I find such circumstances very hard to envisage. A person may want assessments made for adaptations to their house, or a special needs assessment for a child who is in school. There are a range of circumstances in which, if any kind of caring, as opposed to medical treatment, is needed, the social services authority would be the appropriate body to provide an assessment. I am sure that my hon. Friend will confirm whether that is the legislative position.

No doubt we can all think of a few cases where a person will not be able even to work the reduced hours that are needed now to qualify for the state benefit and the reduced years. Such a person may also be looking after a number of people with substantial needs, although not with the level of need that entitles them to benefits. A person in such a complex situation would effectively fulfil the requirements to get the carers credit. The amendment might provide a way to soften the edges of what is otherwise a tick-box exercise.

The clause is important and will transform things for a lot of people who are currently left out and find themselves unable to get a pension because they have to give up work to care for relatives.

Andrew Selous (Conservative, South West Bedfordshire)

This group of three amendments and two new clauses touches on some important issues and there is a lot to say about it.

Amendments Nos. 26 and 63, tabled by the Liberal Democrats, and amendment No. 61, tabled by the hon. Member for Northampton, North, would allocate contribution credits to more people from 6 April 2010 than are provided for in the Bill and there will be public expenditure implications from 2010 onwards. Those implications will be small at first but will become increasingly significant over time. I hope that the Minister will tell the Committee what the costs ofthe three amendments will be, because it is difficult for the Official Opposition to find precise costings for them. It would be useful if we could find out what we are talking about.

Lorely Burt (Liberal Democrat, Solihull)

The hon. Gentleman says that the additional number of people who would be eligible for the credit would increase over time. Would that not justify the argument that says that, because such people are being left out, even more people will be unfairly treated than before? I acknowledge his point about the financial implications.

Andrew Selous (Conservative, South West Bedfordshire)

I actually said that the costs would increase over time. However, the hon. Lady is right: if we are to believe some of the estimates from some of the special interest groups that follow this matter carefully, the number of carers is likely to increase as well. If she will bear with me for a little while as I develop my argument, she will see that one of the new clauses that I tabled deals specifically with that point.

I was saying that the three amendments in the group have public expenditure implications. Unlike the Liberal Democrats and the hon. Member for Northampton, North, we in the Official Opposition take our financial responsibilities to the taxpayer slightly more seriously. We are not prepared to make significant spending commitments many years ahead without considering other demands on the Exchequer and understanding that the money to pay for those commitments will need to be raised in a sustainable way through increased taxes.

In contrast to the other parties, our approach in new clause 15 is to ensure that this matter, which is important—as the hon. Members for Solihull and for Northampton, North said—is brought before the House of Commons annually. Because this is a significant matter, we have called for a report to be made annually—rather than once in every Parliament or once every five years—that would require the Secretary of State to tell the House of Commons about the number of carers caring for 20 hours or more and not receiving contribution credits. This matter is disputed. I understand that the Equal Opportunities Commission says that about 50,000 carers would be excluded from the pension system, and I believe that Carers UK thinks that about 40,000 would not be included, even though they are caring for more than20 hours.

I was interested to see a number of parliamentary written questions tabled on 7 November and 17 January by a former Work and Pensions Minister, Baroness Hollis of Heigham. She asked:

“What percentage and number of those on incapacity benefit are in receipt of: (a) lower rate disability living allowance; (b) middle rate disability living allowance; and (c) higher rate disability living allowance”,

and how many of them are estimated to receive between 20 and 35 hours of care a week. Lord Hunt of Kings Heath answered that

“no estimates are available for the number of incapacity benefit and disability living allowance claimants who receive care.”—[Official Report, House of Lords, 8 November 2006; Vol. 686,c. WA164-166].

David Laws (Liberal Democrat, Yeovil)

I may be intervening on the hon. Gentleman too early, but does his new clause not run the danger of being something of a tease? It appears to indicate that he thinks there might be a problem, but he has not proposed so far to do anything about it. Does he agree in principle with the concerns of the two hon. Members who have spoken this afternoon that some people with caring responsibilities will be excluded? Is he sympathetic in principle to those individuals in giving the carers’ credit?

Andrew Selous (Conservative, South West Bedfordshire)

Of course I am sympathetic to them. The purpose of new clause 15, specifically subsection (d), is to report annually to the House of Commons the precise cost of increasing the scope of the eligibility criteria. If that information is put before Parliament annually and we are informed how many people are affected and how severe their circumstances are, that will inform all parliamentarians of the severity of the issue in relation to other needs and demands on the public purse.

The hon. Gentleman had only to turn on his radio this morning to hear of problems in the Court Service, to give just one topical example. There will be a demand for money to be spent on the Court Service to ensure that the criminal justice system functions properly. You will be pleased to hear that I do not intend to develop the analogy any further, Mr. Taylor, other than to give that one example from today’s news.

As responsible parliamentarians, we all know that there are innumerable demands on the public purse. They are worthy and important demands, but it is also vital that we are informed of the number of people who do not qualify. New clause 15 would put that information before the House with a clear price tag so that it can take its place and MPs have an informed basis for the hard decisions that we are called to take in relation to the competing demands of special interest groups from every departmental area.

David Laws (Liberal Democrat, Yeovil)

The hon. Gentleman is being helpful and clear. To avoid doubt, will he confirm that he accepts the substance and principle of our two amendments and that, for him, it is an issue simply of what price tag will attach to the changes when, not if, a Conservative Government—assuming we are to see one—introduce them?

Andrew Selous (Conservative, South West Bedfordshire)

We would all like to do many things in various areas of government on behalf of our constituents, but some of us take seriously our responsibilities to the taxpayer and the general level of tax that can be sustained to pay for such demands. I have said that clearly and I have nothing more to add.

Baroness Hollis of Heigham tabled three questions more recently in the House of Lords—references HL604, HL605 and HL606—seeking the number and percentage of people on the different levels of benefit, both included and excluded under the current eligibility criteria, who receive more than 20 hours of care a week. I shall read parts of the answer as it is relevant to the amendments. It states:

“Estimates from the Family Resources Survey (FRS) 2004-05 indicate that approximately 100,000 people are in receipt of incapacity benefit, but not the middle or higher rate care component of disability living allowance, and are receiving care for 20 hours or more a week.”

Those 100,000 people would not be eligible for contributions credits under the eligibility criteria defined in the Bill. The answer continues:

“These data also suggest that approximately 300,000 people are receiving the lower rate of disability living allowance and are receiving care for 20 hours or more a week.”—[Official Report, House of Lords, 17 January 2007; Vol. 688, c. WA153.]

That makes 400,000 people in total. Their carers might be caring for 20 hours or more a week as well as holding down a full-time job and therefore paying national insurance contributions. I am not saying that there are 400,000 people whose sole activity is caring and who are not part of the pensions system by virtue of making contributions. However, unless we have a detailed breakdown, it will be impossible for us to estimate the scale of the problem to which the hon. Members for Yeovil and for Solihull have rightly drawn our attention. If we do not know the size of the problem, we do not know the price tag either. We need the basic information to be set out annually, and I am grateful to have had the questions asked by Baroness Hollis drawn to my attention.

As I have said, the reason why we have called for an annual report is the importance of the issue. Carers UK estimates that there are 6 million carers in the UK, a quarter of whom—1.5 million—care for 50 or more hours a week. I suspect that many of them find it extremely difficult to pay national insurance contributions as well, although no doubt some of them do so. As has been mentioned, Carers UK estimates that there could be as many as 9 million carers in the UK by 2037. We know that 1.5 million carers are more than 60 years of age and that one fifth of carers over60 report that their health is not good. Those people face severe stress and strain in the their everyday lives.

Any of us can be a carer at any time. Carers are not a separate class or group of people, detached from the rest of us, who have a caring vocation. Some of us in the Committee may even have been carers. I had a disabled mother when I was younger and, although I am not sure whether I would have classed myself as a carer as such, I certainly knew what it was like as a child to care for an adult. It will probably be the common experience of most of us in the room to care for aged parents or relatives in the future.

I am also grateful to Carers UK for raising with Committee members six different examples in which people would be excluded from the eligibility criteria for contribution credits as specified by clause 3 or by the related regulations. For example, there are people with mental health issues who are advised to claim the relevant disability living allowances, but because of their state of mind do not do so. The people who care for the mentally ill people in that group would not qualify for credits.

What about someone caring for several people,none of whom is on the prescribed benefits? The responsibility on that carer could be—in fact, is likely to be—even greater than that on a carer of just one person who is on the prescribed benefits. What about those people who overturn on appeal their rates of benefit so that at some point in the future they receive the benefits that make them eligible for credits? When they were on the lesser benefit, their carer would not have been entitled to contribution credits. Does the carer have any right of eligibility to the contribution credits from those missed years? They are all practical cases, the type of case that all Members might have brought to them at their constituency surgery on any given Friday of the year.

What about those people who need significant care but do not receive disability living allowance? What about those people with fluctuating conditions, who sometimes have severe needs but at other times are relatively well and do not need care? If one is a close family member who cares for them, one knows that there is a possibility of remission and that they will need serious care later on. It is not easy to go back into the labour market while the person for whom one has cared is well, knowing that at any moment they will slide down into illness and need full-time care.

What about those people going into hospital long enough to lose their benefits? There are reasons for the withdrawal of benefits when one goes into hospital. One is fed, does not have central heating bills and so on. I understand the rationale, but again I speak from family experience. When my mother was in hospital on various occasions, there was an acute necessity for my sister and for other members of the family to be in close attendance because my mother was severely disabled. Will such carers also lose out because someone has gone into hospital long enough to lose their benefits?

I am grateful to Carers UK for providing Committee members with those six examples. Is the Minister’s mind still open to suggestions about how to ensure that all carers have a better pensions safety net? He, like me, attended a meeting of the all-party parliamentary group on ageing and older people on 5 December. I do not know whether the minutes of that meeting are accurate, but they certainly say that the Government were still open to suggestions about how to ensure that all carers had a better pensions safety net. If that is true, I shall listen with interest to the Minister’s response.

Lorely Burt (Liberal Democrat, Solihull)

I congratulate the hon. Gentleman on his clarity and on the tremendous case he makes for the amendment tabled in my name and that of the hon. Member for Yeovil. Why does he not support the amendment, given that he clearly understands the injustice, and the necessity for the amendment?

Andrew Selous (Conservative, South West Bedfordshire)

The hon. Lady still has difficulty understanding the relationship between the worthiness of a cause and the price attached to it. I am surprised that she cannot understand the link between the two. I am sure that on a Saturday morning, when she goes down to her local supermarket or shopping centre, she wants to buy many items that are worthy and that would add to her life, but, like the Government and my party which aspires to Government, she will have a budget. This concept is no different.

Overall, we welcome the fact that carers will be eligible, under the criteria in clause 3, for a full basic state pension, even though they have never worked. That is a significant change, which the Committee should recognise, as have Carers UK and the Equal Opportunities Commission.

Sally Keeble (Labour, Northampton North)

We must not say that carers have not worked. The whole point is that they have worked—it is just a different type of work. They have looked after family members. They have worked, just like other carers.

Andrew Selous (Conservative, South West Bedfordshire)

I stand duly and correctly rebuked. The hon. Lady is quite right and I am grateful to her for picking that up. I meant to say nothing bad about carers and I hope that, given what I have said about them up until now, she will accept that that was a slip of the tongue. I meant the payment of national insurance contributions. I agree with her that parents and carers do some of the most important work in the United Kingdom. She is quite right—that cannot be said too strongly or often. I thank her for pulling me up on it.

I shall move on to new clause 17, which is in my name, that of my hon. Friend the Member for Eastbourne and that of my hon. Friend the Member for North-East Milton Keynes—our esteemed Whip. I confess that I wrote the new clause, in my own hand, on Second Reading. I was prompted to do so by the powerful and persuasive speech from the hon. Member for Burton (Mrs. Dean). She happens to be a Labour Member, but her point could have been made by any Opposition Member and would have been, I hope, if such a case had been brought to one of us by a constituent.

Briefly, without going over the whole of the hon. Lady’s speech on Second Reading, the case to which she drew the House’s attention related to a Mr. and Mrs. Cartwright—she named them so I feel free to do so—who contacted her in August 2005 about the payment of child benefit into their joint back account. Mrs. Cartwright was not in paid employment making national insurance contributions, but looking after their children. However, Mr. Cartwright’s was the first name on the joint bank account and, therefore, their child benefit was deemed to have been allocated to him rather than to Mrs. Cartwright. That was despite the fact that he was making national insurance contributions and had a paid job, and Mrs. Cartwright was at home looking after their children.

Apparently, Mr. and Mrs. Cartwright should have received form CH718 which, when child benefit is being paid into a joint bank account, enables a couple to specify to whom the child benefit should be paid, which, of course, triggers the allocation of home responsibilities protection to the correct member of the couple. The Cartwrights said that they never received form CH718 which, some 20 years later, is almost impossible to prove. The question that the hon. Lady asked is whether anyone knowingly would waive their right to home responsibilities protection when shehad been caring for her children and not in paid employment earning national insurance contributions.

I gather that such a case is not isolated. The hon. Member for Burton is one of your fellow Chairmen on the Chairman’s Panel, Mr. Taylor. If I am not mistaken, I have had the pleasure of serving under her in Committee. She went on to say:

“Pensions Advisory Service produced a document entitled ‘Report on Women and Pensions Helpline’, which was theresult of a pilot helpline available from 18 October to10 December 2004.”

It was clear that the problem was widespread. The hon. Lady cited the report:

“Some enquiries came from individuals where the child benefit was being paid to the working partner rather than the partner who had given up work or was working reduced hours to look after the couple’s children.”—[Official Report, 16 January 2007; Vol. 455, c.721-22.]

We are rightly gender-neutral in Committee, but there were cases when a stay-at-home husband had not received the allocation of home responsibilities protection. Whether it is a matter of fathers losing out on HRP or mothers such as Mrs. Cartwright doing so, the case is the same. We cannot really believe that anyone would willingly lose out on £32 a week in pension entitlement, as happened to the Cartwrights, if it had been easy to establish early on who wished to be allocated home responsibilities protection.

I understand that the hon. Lady has raised the matter with the Minister. Indeed, she has discussed the case with him. I hope that it will not again be a matter of the computer not being able to rectify the problem. In all seriousness, I understand the difficulties that surround information technology. The issues are serious; I am not making light of them. However, when there has been an administrative mistake of such a nature, I should have hoped that, even with a manual override, it could be solved. Given the evidence of the Pensions Advisory Service, clearly the problem has affected more than one couple. I hope that it has not happened in hundreds of thousands of cases.

It should not be beyond the wit of the Department and its staff to do something about the problem. I am not talking about a matter that would cost the Government any money. It is about unfairness; it is about making sure that what happens is what should have happened and what the couple intended to happen. It is a minor technical point, but exactly the sort of matter that should be properly raised in Committee. I, for one, am pleased to have been able to bring the hon. Lady’s concern before hon. Members.

Mark Pritchard (Conservative, The Wrekin)

My hon. Friend mentioned “staff”. Does he share my worry that, to date, the Government have not given any details on how they will deliver all the key fundamental changes to the pension system, given that they are laying off hundreds, if not thousands, of staff of the Department for Work and Pensions throughout the nation?

David Taylor (Labour, North West Leicestershire)

Order. Will the hon. Member for South-West Bedfordshire return to the subject of the new clause? I rule the question out of order.

Andrew Selous (Conservative, South West Bedfordshire)

I shall follow your guidance, Mr. Taylor.

I was about to conclude my remarks. The problem that was raised on Second Reading was serious. My new clause, on which we shall vote in several weeks, would be a remedy and I shall listen with great interest to what the Minister has to say on new clause 17 as well as on the other three amendments and new clause 15.

James Purnell (Labour, Stalybridge and Hyde)

This has been another important debate and I want to respond to the many points that have been made. If I do not reply to some, I shall be happy to write to hon. Members particularly about the six cases that were mentioned so rapidly. I shall pick them up in writing, if I may do so.

I want to start on the theoretical money grotto—rather than tree—from where the hon. Member for Solihull was planning to fetch her money to pay for the commitments that the Liberal Democrats are making. I am afraid that she will be sorely disappointed if she goes there because half of the money that she has identified is extra money that the Department would be spending if every single person who is eligible for pension credit took up its benefits. That is clearly not money that is sitting around in a vault ready for the Liberal Democrats to spend—not an uncapped source of it—but extra money.

The hon. Member for Eastbourne was quite right to say that estimates of the contracted-out rebates have changed since the White Paper. We set that out inthe regulatory impact assessment—the figure was£1.6 billion. It is worth noting that the contracted-out rebate needs to be seen in the context of the long-term spending implications of the system, specifically long-term spending on the state second pension that would be incurred if more people were to contract into the system. Therefore it is again not possible to say that we can take that money and spend it as we wish.

Nigel Waterson (Conservative, Eastbourne)

I do not want to interrupt the Minister while he is dragging the Liberal Democrats back to the real world, but will he give an undertaking that when discussing that part of the Bill, he will have at his fingertips an explanation for where this £2 billion has gone? It has not been very long between the White Paper and the drafting of the regulatory impact assessment and while these sums may not mean a lot to the Treasury in the great scheme of things, it does seem a lot of money to have overstated.

James Purnell (Labour, Stalybridge and Hyde)

I am happy to do that. It is not an overstatement but different trends in people contracting into the system. We have also received updated figures which we fed into our projections. However, I do not want to test your patience, Mr. Taylor, on the definition of the clause so I will move rapidly on to the costs of these proposals.

Compared to the basic state pension figures, these are relatively modest single-figure millions because we are talking about a very small gap in the number of carers that could be covered. However, there would be a significant long-term cost to these proposals. On the state second pension side, we would be accruing£400 million by 2050. The key point in looking at individual amendments is whether they effectively target the 40,000 people who we do not think are currently covered by these proposals.

It is worth restating that the major part of the progress on carers is achieved by reducing the number of qualifying years to 30. That is the change that achieves the greatest increase in entitlement for people who are caring. We have been consistently clear that our research suggests that that would not, on its own, meet carers’ needs.

This provision is about a specific proportion ofthe people who are caring. Those who care for over35 hours a week are already entitled to carer's allowance because they received class 1 national insurance credits. Those who care for less than 20 hours a week appear to have similar work patterns to the rest of the population and can therefore build up their entitlement through their own national insurance contributions.

However, our evidence suggests that those who care for more than 20 hours a week do have their job opportunities affected and therefore the carer’s credit is aimed at that group. It is an important backstop for those who would have less than 30 years’ contributions without it.

Information from the family resources survey suggests that around 160,000 people will be caring for more than 20 hours a week but not building up entitlement to the basic state pension in 2010.

Andrew Selous (Conservative, South West Bedfordshire)

I apologise if I am pre-empting the Minister but I should be grateful if he would respond to the figures from the written answers raised by Baroness Hollis because he has already mentioned 40,000 people not being eligible but the figures were somewhat higher in the answers received by Baroness Hollis.

James Purnell (Labour, Stalybridge and Hyde)

The hon. Gentleman may wish to consult the gender impact assessment that we published, which set out the figures in detail. The figures that were published in the May White Paper were then updated in November. There were more people who were eligible, again on the basis of new information that we had received. So there is a higher overall proportion of people who we think could benefit from the change that we are introducing.

Andrew Selous (Conservative, South West Bedfordshire)

The gender impact assessment is reasonably recent, but I doubt that it is as recent as the questions raised by Baroness Hollis on 17 January—that is really very recent indeed.

I said that it is entirely possible that those 400,000 people are paying some form of national insurance contribution. We know that they are all caring for more than 20 hours a week, but we need more detail on exactly where they fit; whether they are in work and paying national insurance contributions, or if they are purely carrying out a caring role. On the basis of the definitions in the clause, they would miss out on contribution credit. If the Minister is unable to give more information on that issue now, perhaps he would agree to write to every member of the Committee with a little more analysis regarding the answers received on 17 January.

James Purnell (Labour, Stalybridge and Hyde)

I am happy to give the hon. Gentleman that assurance.

The measure is precisely targeted and we have been clear all the way through that it could still leave 40,000 carers who might not be entitled. Of course, that does not mean that they will miss out on a full basic state pension. Other provisions in the Bill, such as the measure requiring 30 qualifying years, will ensure that they are more likely to get close to the full basic state pension than they would under the current system. Furthermore, research suggests that not all carers will remain in that position for the whole of their working lives.

We have not put the definition of “caring” in the Bill. That is because we are introducing a new credit and we believe that it is essential to use the flexibility offered by secondary legislation so that we can make changes if we find that the definition is not meeting the needs of carers. However, we have set out our current plans for that definition in the delegated powers memorandum. Our intention is to provide the credit for someone who is caring for 20 hours or more each week for one or more people in receipt of attendance allowance, the higher or middle rate care component of disability living allowance, or constant attendance allowance.

It is important to explain why we have chosen that option. When we were consulting on this new credit, the lobby groups involved clearly said to us that they did not want us to create an overly bureaucratic system, in which people would have to demonstrate the number of hours for which they were claiming, there would potentially be inspections of that number of hours, and there would be a significant amount of paperwork for the carer. Therefore, we have sought to design a system that will be based on self-certification. However, to ensure that there is a safeguard against misapplication of this credit, we are requiring that the person being cared for is claiming a benefit that would typically require the level of care of 20 hours a week.

This is not a perfect measure, but it is a good fit with our policy objective, and balances simplicity and targeting. It is because of the existence of the benefit being claimed by the person being cared for that we can be flexible in the way that the carer self-certifies, so that they can receive the credit.

Amendment No. 63 would extend radically the range of benefits that could be identified. I do not intend to go through each benefit that is listed, but in most cases I do not think that significant care is a condition for receiving the benefit. In fact, the majority of people in receipt of the other benefits covered in the amendment will not require care for 20 hours a week. In trying to extend coverage to the 40,000 or so carers, the amendment would widen the eligibility to a vast number of carers. The amendment is clearly out of proportion with the issue that we are seeking to address.

David Laws (Liberal Democrat, Yeovil)

It may be that the Minister was going to do this in his speech, but can he indicate whether he is still sympathetic to the possibility of introducing, perhaps later in the stages of the Bill, additional amendments that seek to target those 40,000 carers,or does he feel that the Government, because of practicalities or other reasons, have for the time being reached the end of the line on their generosity in this area?

James Purnell (Labour, Stalybridge and Hyde)

I shall come to that later in my remarks.

Although I sympathise with the intention to ensure that as many carers as possible are eligible for the credit, I am not at all persuaded that the blanket approach proposed is an appropriate way forward.

Amendments Nos. 26 and 61 suggest that the level of and need for care should be certified by either a health or social care professional, or local social services authority. We are happy to explore this option. It has the attraction that it could be effectively targeted at carers who might fall between the gaps of the benefits that are identified in the Bill. However, I must warn the Committee that there are significant issues about how it would be implemented that would need to be addressed before we could be confident that itwould work. Those issues include whether health professionals would have the expertise to quantify the hours of care, whether they would require payment and how the new requirement on local authorities would fit into our overall approach to carers. In any case, there would need to be consultation of representatives of those who would carry out the new duties before we could decide how to proceed.

We are discussing the issue with the Department of Health and will report back before the end of the passage of the Bill through both Houses of Parliament. The important point is that any extension of eligibility along these lines could be done under regulations made possible by the Bill as drafted.

New clause 15 would impose a requirement to publish an annual report on whether the provisions to bring more carers into the state pensions system constitute the right approach. These reforms are a coherent package and there are a number of ways in which they benefit carers. I suspect that the new clause is a probing one, but I urge my colleagues to resist it if it is pressed to a vote. That is because the information is already available from a number of sources, including the departmental report, the Government Actuary’s Department quinquennial review and the departmental publication “Contributions and Qualifying Years”. I see the hon. Member for South-West Bedfordshire stirring.

Andrew Selous (Conservative, South West Bedfordshire)

I do not think I can quite let the Minister get away with that. Our debate already this afternoon has illustrated more than amply the fact that the figures are not readily available in one place. We need only look at the written answers that Baroness Hollis dealt with in the House of Lords in relation to what is in the gender impact assessment and what was said in the White Paper. The situation is developing. I do not think that it is too much to ask for information to be put together in a coherent form once a year by a Department that has the statistical ability to do so.

James Purnell (Labour, Stalybridge and Hyde)

We produce regular reports on carers and their position as part of our policy. I take the view that using primary legislation to require a report on that would be slightly over the top, but if the hon. Gentleman wants to divide the Committee on the issue, he is obviously within his rights to do so.

The same argument applies to new clause 17. The hon. Gentleman was obviously very impressed by the case made by my hon. Friend the Member for Burton, as I was when she came to see me. She has campaigned on the issue assiduously. I made it clear at the conclusion of the debate on Second Reading that we were convinced of her argument and would introduce measures in regulations made under the Bill to allow the problem to be rectified. The hon. Gentleman is welcome to look at the end of that debate to see that I made that clear, but I will set the position out in some detail to give him the reassurance that he wants.

It transpired that, for various reasons, unusually the parent who took time out of work to look after their children was not awarded the child benefit; instead, it was awarded to the parent who was working. The effect was that the parent who needed home responsibilities protection did not get it because a person is entitled to HRP only if they have been awarded child benefit. The new clause is designed to correct the outcome that such inflexibility may produce.

As I said, we made it clear on Second Reading that we intend to deal with the problem through powers taken in the Bill, but we so not want to include in the Bill the level of detail proposed. We intend to build an element of flexibility into the new regulations, so that eligibility for the new credit will continue to be linked to the award of child benefit. Where it is evident that one member of the couple has missed out on the credits because the other member of the couple is the child benefit payee but does not need the new credits—for example, because they are working—our intention is to allow the parent who has been caring for the children to benefit from the credits.

In addition to introducing greater flexibility through the regulation-making power in the clause, we will work with colleagues in Her Majesty’s Revenue and Customs to ensure that people are made aware of the new contribution credits that will replace HRP, and consider carefully what more can be done to increase awareness of the changes that the Bill will bring.

Andrew Selous (Conservative, South West Bedfordshire)

I am grateful to the Minister, but I want to be absolutely clear. Is he saying that he will produce a statutory instrument relatively soon to give him the power to make provision in that area? If so, will he give us a rough idea of the time scale?

James Purnell (Labour, Stalybridge and Hyde)

I am saying clearly that we can deal with the matter under regulations made under the Bill. Obviously, the Bill has to be passed first.

The hon. Gentleman made a point about appeals. In cases in which the benefit is awarded retrospectively on appeal, the carer could benefit from the credit as well. If I have not answered any of his points, I am happy to do so in writing. I hope that I have reassured the Committee and I urge hon. Members not to press their amendments.

Andrew Selous (Conservative, South West Bedfordshire)

I understand that we will not vote now on new clause 15, but I wish to express my intention to press it to a Division at an appropriate time.

Lorely Burt (Liberal Democrat, Solihull)

That was an extremely helpful and interesting exchange. The hon. Member for South-West Bedfordshire made a number of interesting points regarding figures. He wants them to be produced annually, to which we have no objection. That would be helpful, but it would not solve the problem. He is sympathetic to the new clauses that we have proposed, but he is constrained—he is not to spend any money—so he is pushing the Government to make changes that he is not in a position to support.

The hon. Gentleman has once again upbraided the Liberal Democrats for their profligacy. I make the point that if the individuals concerned do not receive pension credit, they will end up on pensioner credit, so the Government will pay one way or another. Of course, 20 per cent. of people who are entitled to pension credit do not claim it, so it would be a hollow saving, as those people would not be claiming money to which they were entitled. The point is that such people are missing out. They are not scrounging; they are earning the right to pension credit, but they do not meet the criteria that the Government have set out of an understandable desire to achieve simplicity of application.

The hon. Member for South-West Bedfordshire put his name to new clause 17, following the arguments made by the hon. Member for Burton on Second Reading. We support the new clause and we are pleased to hear reassurances from the Minister that the issue will be tackled.

The cost of our proposal has been described even by the Minister as hardly huge. It will be in the millions, certainly.

James Purnell (Labour, Stalybridge and Hyde)

Four hundred million pounds.

Lorely Burt (Liberal Democrat, Solihull)

May I seek clarification from the Minister? He translates the implementation of credits for 40,000 people into a cost of £400 million. Will he confirm that that is what he said?

James Purnell (Labour, Stalybridge and Hyde)

I gave the hon. Lady the figures, and I am happy to write to her setting out the details. It is the state second pension that will create that figure; she may not have heard when I spoke about it.

Lorely Burt (Liberal Democrat, Solihull)

I am grateful. Perhaps I can reassure the Minister that what we are proposing relates at this stage to entitlement only to the basic state pension and not to the second state pension.

James Purnell (Labour, Stalybridge and Hyde)

I am afraid that that is not what her amendment will do, so she might want to withdraw it.

Lorely Burt (Liberal Democrat, Solihull)

I am grateful to the Minister. I was about to say that in view of the remarks he made on amendment No. 61, we find the Government’s approach helpful and useful. I beg to ask leave to withdraw the amendment.

Lorely Burt (Liberal Democrat, Solihull)

I beg to move amendment No. 27, in clause 3, page 3, line 40, leave out ‘52 Class 3 contributions for each tax year’ and insert

‘Class 3 contributions for each tax week’.

David Taylor (Labour, North West Leicestershire)

With this it will be convenient to discuss Government amendments Nos. 47 and 48.

Lorely Burt (Liberal Democrat, Solihull)

This is a simple amendment that would apply fairly to individuals, particularly women, who change their entitlements to different benefits and go in and out of work within a tax year. Currently, women who receive home responsibilities protection do so only for full tax years during which they do not work. The amendment would allow women to be granted the new pension credit on a much fairer week-by-week tax basis that would reflect more closely the periods for which they ought to be granted pension credit.

A woman who returns to work will lose any entitlement to home responsibilities protection for the whole tax year unless she returns on 6 April. Our proposed system would mean that her pension income for that tax year would be protected at whatever point she decides to return to work. It should not be more complicated to implement, as national insurance contributions are calculated weekly anyway. I hope that the Minister is prepared to reflect on it. Women’s employment tends to be a lot more sporadic than men’s. We discussed earlier the need for flexibility regarding times when caring is needed and when women can return to work. I hope that the Government will agree to this small and inexpensive adjustment to restore fairness.

Andrew Selous (Conservative, South West Bedfordshire)

As the hon. Lady said, amendment No. 27 would retrospectively convert existing home responsibilities protection records into weekly contributions. It would clearly be helpful to those concerned and enable periods spent caring, either as a parent or as a carer, to be converted into the equivalent number of weeks’ worth of contribution credits.

We understand what the hon. Lady is trying to achieve, but it is none the less retrospective legislation and, like a number of Liberal Democrat amendments, would come with a price tag. She did not say in her remarks how much it would cost; I fear I shall have to rely on the Minister yet again to supply a price tag for a Liberal Democrat policy proposal. It will not be the first time, and I do not suppose that it will be the last. I would also be interested to know from the hon. Lady how it would be paid for.

James Purnell (Labour, Stalybridge and Hyde)

I thank the hon. Member for Solihull for the amendment as it gives us an opportunity to set out our proposals for replacing the present scheme.

We all agree that, since 1978, home responsibilities protection has played an important role in improving the entitlement of women and carers to the basic state pension. However, HRP is complicated and hard to understand because, rather than adding qualifying years, it reduces the number of years required for a full basic state pension. Our proposals are intended to change that. Clause 3 will replace HRP from 2010 with a simpler and more generous system of credits for parents and carers to help them to receive an enhanced basic state pension. Those credits will ensure that the state pension system recognises contributions from caring on a par with contributions from working.

It may be easier for the Committee if I first explain Government amendments Nos. 47 and 48. They are minor technical amendments that seek to remove any ambiguity around the number of HRP years that will be converted to qualifying years under the new crediting arrangements. It would be difficult to combine a HRP system that reduced the number of qualifying years with a reformed system of credits for parents and carers that would help people build up qualifying years. We are proposing to convert HRP years acquired before 2010 to qualifying years. That means that each HRP year that someone has before 2010 would derive 52 class 3 contribution credits. However, under the current system, a person can only get HRP for up to half of the requisite years in their working life. That means that a man reaching state pension age in 2010 would be able to build up a maximum of 22 years of HRP—half the 44 qualifying years currently needed for full basic state pension. So far, so relatively simple, but for women the position is more complicated. A woman reaching state pension age in 2010 would be eligible for up to 19 years of HRP, rising to 20 between 2010 and 2012 and 22 by 2020, in line with the equalisation of the state pension age.The Government amendments seek to remove the ambiguity around the maximum number of years that people can build up HRP.

Amendments Nos. 47 and 48 will allow a maximum of 22 years of HRP acquired before 6 April 2010 to be converted. That is more generous for women than the present upper limit. We set the maximum at 22 years because that is the upper limit for men and will be the upper limit for women in 2020. If we did not set such a maximum upper limit, there might be some doubt about the number of HRP years that could be converted into credits. These technical amendments address that.

On amendment No. 27, I hope that the hon. Lady will be reassured by my comments. As I mentioned, HRP has been available for complete tax years in which a person is caring and unable to work—either because they are caring for severely disabled people or for children. The majority of people benefiting from HRP receive it for their parenting contributions. The hon. Lady is right to say that many people do not get full years of HRP when they first have a child. Part years of parenting or caring do not attract any HRP; they are therefore not recorded as part of someone’s contribution history. That is, of course, precisely why we are moving to a system of weekly credits.

We have already said that we intend to treat all years of HRP as qualifying years. The amendment would, however, make a further transitional change to the way in which HRP has operated by recognising part years through the new crediting arrangements. Committee members should remember that the changes we are making through clause 3 are being made alongside a raft of other beneficial measures, including the introduction of a single contribution condition through clause 1.

Those reaching state pension age on or after 6 April 2010 will need just 30 years for a full basic state pension. Combined with what we are doing through clause 3, that will mean that approximately three quarters of women will reach state pension age in 2010 with a full BSP. More than half of the remainder will get more than 60 per cent. of the full rate—more than the category B so-called married person’s pension.

My key point to the hon. Lady is that her amendment would have very little effect on top of that significant change; the reduction to 30 years achieves her goal. Awarding credits for part-years of HRP would have little or no extra effect. Under the current system, most people would normally have only two incomplete years in which they had not been covered by HRP—one when they started caring for their child and one at the end. The reduction in qualifying years to 30 more than makes up for that possible gap in their contribution history.

No doubt the hon. Lady will say that her amendment involves something marginal and ask why we do not agree to it. The problem is that the administrative burden would be extremely significant. What she argues for is not worth doing; her overall goal is already achieved through the reduction to 30 years. Accepting the amendment would create significant administrative work. A person’s work and caring history of the past 30 years would have to be looked into to uncover gaps in an individual’s contribution history.

David Laws (Liberal Democrat, Yeovil)

The Minister said—and it may be true—that the matter is not entirely simple. As a consequence, has it been difficult for his officials to estimate what the effect of the change would be? He said that it would be very small, but can he quantify that in any way?

James Purnell (Labour, Stalybridge and Hyde)

The effect would be very marginal. Given that we would not know the individuals, we would have to go through everyone’s contribution history to see whether there were any gaps. Most people would go up to a full basic state pension through the reduction to 30 years in any case. The effect would be marginal and any benefit would be significantly outweighed by the administrative burden of having to go through people’s individual contribution histories.

John Penrose (Weston-super-Mare) (Con) rose—

James Purnell (Labour, Stalybridge and Hyde)

I know that the hon. Gentleman wants to intervene, but I should like to finish this section of my response; he can come in if I have not answered his point by the end.

The hon. Lady’s amendment would put parents in a more advantageous position than people who get HRP because of other caring responsibilities, because we could use child benefit records to award credits for each week spent parenting. That is what we would have to do under the hon. Lady’s proposal. However, we have no similar mechanism allowing us to identify and credit past weekly caring activities, beyond those for which HRP had been awarded under the current rules. We have that information for only four years, so it would be unfair.

John Penrose (Conservative, Weston-Super-Mare)

I carry no brief for the hon. Lady’s amendment, but I am intrigued by one of the Minister’s comments. He said that people who have missing part-years tend to have just two—one at the start and one at the end. I think that he was basing that on the assumption that the majority of people qualifying will be parents and that the missing part-years would be at the start and end of parenting time.

Has he thought about how many might be affected because they were caring for people with remitting, relaxing or fluctuating conditions such as multiple sclerosis? Such carers might have multiple missing part-years; I was intrigued by the Minister’s statement that only a small number of people would be affected.

James Purnell (Labour, Stalybridge and Hyde)

Such people would make up a very small proportion of the total. I think I am right in saying that 99 per cent. of HRP years relate to carefor children; the people whom the hon. Gentleman mentions would be a small percentage of a small percentage.

Lorely Burt (Liberal Democrat, Solihull)

I am substantially reassured by the Minister’s comments so far. If we are talking about only a small number of people, would it be possible for individuals not eligible for their basic state pension by a small margin to have their cases looked at?

James Purnell (Labour, Stalybridge and Hyde)

I do not want to be unduly unhelpful, but the problem is that in my experience opt-in systems for pensions end up being expensive because people ring up and lots of inquiries can be generated. A lot of people could ring up to find out whether they were involved. The cost of manually going through all those cases would be significant. It would be an unnecessary administrative burden. My core point is that the reduction to 30 years substantially achieves the goal; the administrative exercise that the hon. Lady’s amendment requires would thus not be justified. If I have reassured her, I ask her to withdraw her amendment.

Lorely Burt (Liberal Democrat, Solihull)

I am very grateful to the Minister for his helpful comments, the majority of which I take on board. I still have a fear and a concern for a small number of people, and it would have been helpful to be able to investigate whether an individual had a specific concern. However, in view of the Minister’s comments, I beg to ask leave to withdraw the amendment.

Andrew Selous (Conservative, South West Bedfordshire)

I promise not to revisit territory that we have already gone around in debating this clause. I know that you would not permit it, Mr. Taylor, but I must reassure you none the less. I would not want you to be worried on any account.

However, there is one quite interesting issue inclause 3 that we have not debated at all, and I would like to tease out from the Minister the departmental thinking behind the change. If members look at proposed new section 23A(3)(a) to the Social Security Contributions and Benefits Act 1992 in clause 3(1), they will see that it refers to the award of

“child benefit for any part of that week in respect of a child under the age of 12”.

That is a change of four years from the existing law, in which home responsibilities protection is awarded for parents who are receiving child benefits for a child under the age of 16.

I would like to understand some of the thinking in the Department behind that change. Is it purely financial? Do the Government have a view on the importance of caring for and parenting children up to the age of 12, as opposed to over that age? I see the Minister smile at me, as we are perhaps getting into deeper, more general philosophical waters than we have so far on the narrower technical issues. However, that raises interesting and important points.

Members of the Committee will also note that proposed new section 23A(3)(b) refers to someone being “a relevant carer” if they are,

“a foster parent for any part of that week”.

Having looked into that with the help of the excellent House of Commons Library, I would be grateful if the Minister could confirm my understanding that this will apply to children under the age of 18 as far as foster parents are concerned. So, within this proposed new subsection, we have children under 12 being eligible on one hand, and children under 18 being eligible on the other.

I know that the Government sometimes have to be careful. They have made statements in pre-Budget reports—and elsewhere, in the associated notes—talking of their view that adult dependency is an outdated concept. I think that is more or less a quote from a pre-Budget report document. A carer looking after either children or an ageing or sick family member may by nature be a dependent relative on some other family member who is in paid employment. So, that touches quite important, wider social issues. It may be purely the financial cost, which I would not say was wholly unreasonable, but the Committee need to probe slightly to find out Government thinking on this particular point.

John Penrose (Conservative, Weston-Super-Mare)

This clause is an essential step towards the righting of an essential wrong relating to the unfair treatment of women’s pensions over many yearsand, more broadly, the pensions of carers, who are predominantly women. It is one of the best aspects of the Bill.

In particular, I was delighted to see that the clause involves a degree of simplification. As the Minister said earlier, almost everywhere else, the language of pensions and the contributory principle is about adding years—building up a pot of rights and contributions—and creating a sense of saving for one’s retirement. Almost uniquely, the HRP talks of reducing years. Not only is that a complication of language, but of administration and systems as well. Clearly, it makes sense to put the new equivalent to that system—I appreciate it is a like-for-like comparison in terms of being fiscally neutral and so forth—and related language on all fours with the rest of the pensions world.

It also makes sense to put across a notion of equivalence to paid employment. The hon. Member for Northampton, North picked up on what we were saying earlier in order to ensure that we were not talking about people who were working, but those in paid and unpaid work. Such unpaid work is tremendously important, and the clause not just symbolically, but actually ensures that it is valued and put on the same basis as paid work. For that reason alone, the clause is to be welcomed, as well as for its simplification of the systems and processes involved, particularly given the fact that we have one of the most complicated pensions systems in the entire developed world.

David Laws (Liberal Democrat, Yeovil)

I do not want to detain the Committeefor long, but the hon. Member for South-West Bedfordshire raised an important point. Rather than interrupt the Minister in mid-flow, I would like to reinforce our interest in hearing an explanation of how the proposal relating to the care of and responsibilities for children at particular ages ties into other parts of the Government’s thinking on the responsibilities of parents. Parents in the UK are allowed to remain on income support until their youngest child is 16, without work responsibilities or having to go on to jobseeker’s allowance. I wonder whether this change is a precursor to wider changes in the way that the Government interpret parents’ responsibilities towards their children and towards work.

James Purnell (Labour, Stalybridge and Hyde)

To answer the specific point about foster carers, registered foster carers are covered until the child that they are caring for is 18 because of payments being made to them. They may have to provide more significant care for older children than might be the case for other families and it is not untypical for their working patterns to be affected by their responsibilities as a foster carer. The principle is to examine how people’s ability to work is affected.

There is nothing particularly theological about the age specified. I sense the waters in which those on the Opposition Benches are tempting me to swim, but I shall stay firmly on the shore. The clause is simply intended to simplify the system: there were different conditions for the basic state pension and the state second pension. We have increased one and reduced the other. I hope that I will be able to explain how that makes the overall system much more generous for those who care for parents. It is not in any way a restriction on the support we give to parents.

Andrew Selous rose—

James Purnell (Labour, Stalybridge and Hyde)

The hon. Gentleman looks poised to intervene again, so I shall give way.

Andrew Selous (Conservative, South West Bedfordshire)

The Minister is generous, as always, in giving way. I said that I thought the change was purely financial, if I can put it like that. I think that is what the Minister is saying. Perhaps he could reassure me once more that the clause does not herald the wider thinking of the Government on the role of parents looking after children up to the age of 12 and beyond.

James Purnell (Labour, Stalybridge and Hyde)

I am not heralding, if that gives the hon. Gentleman the reassurance that he seeks.

We have covered the fact that the system will be much more transparent than it is now. HRP is complicated, and one of the further complications is that it was possible to get a basic state pension contribution for a child under the age of 16, but with a state second pension that was possible only for a child under the age of six. Under the proposals, a class 3 contribution will instead be credited for each week in which a person is either awarded child benefit for a child under 12, classed as an approved foster parent or engaged in other forms of caring, which I shall come to later.

As has been rightly pointed out, the age is currently 16. We have lowered that, but it is important to note that no one will lose out from those changes, for two reasons. First, the move to 30 qualifying years for a full basic state pension in clause 1 more than compensates for the move to age 12. Secondly, for the first time, through the provisions in clause 9, there be will a credit in respect of the state second pension for those awarded child benefit for a child aged between six and 12. Taken as a whole, the Bill therefore improves state pension outcomes for parents and carers. As before, foster parents will need to make a claim to ensure that they build up entitlement to the basic state pension, although under clause 9 they will also accrue entitlement to the state second pension.

As I promised, I shall say a couple of words about those engaged in caring. I assure hon. Members that the clause indeed makes provision for HRP years acquired before 2010. As we have discussed, there will be a maximum of 22 years, which we can convert. The clause includes a regulation-making power, in proposed new section 23A(3) of the Social Security Contributions and Benefits Act 1992, to prescribe those who may be said to be engaged in caring. The reason we have done that and resisted earlier amendments is to give ourselves flexibility, which this debate has again demonstrated will be necessary. The goal of helping carers to build up contributions when they cannot do so through national insurance contributions is widely shared, but the way of doing that might change over time. It is therefore important to give ourselves the right flexibility.

For example, the regulations will allow the flexibility to ensure that carers can continue to be awarded the credit for up to four weeks during which such conditions are not satisfied, such as where the carer has fallen ill. There will also be a range of other technical details in the regulations, to allow us successfully to deliver class 3 contribution credits for those engaged in caring. Copies of the delegated powers memorandum, which sets out further how we intend to use the power in the clause, have been placed in the House. I therefore propose that the clause as amended stand part of the Bill. I also thank the hon. Member for Weston-super-Mare for his kind comments about the clause.

Clause 4

Nigel Waterson (Conservative, Eastbourne)

I am sorry for rising belatedly to speak, but I was under the impression that, as there are no amendments, the Minister would introduce the clause. However, let us proceed the other way round, just for fun.

On first blush, one might think that the clause is pretty uncontroversial. Indeed, that might yet prove to be the case. It certainly has no enemies, because nobody has tabled any amendments to it; but does that mean that it is a wholly innocent part of the Bill? There might yet be a torrent of written evidence stacking up somewhere—it has not reached me, but presumably someone would be looking at it—but, as far as I recall, no outside body has taken it upon itself to make representations about the clause to us either. It might therefore be quite easy to write off adult dependency increases as just an historical anomaly—an outdated matter that needs to be tidied up round the edges, as part of the wider reform.

However, there are a few issues that I should like the Minister to deal with in his summing-up. The first is the extent of the savings likely to be made by scrapping ADIs. Figures have been bandied around in supporting documents, but I shall deal with them in more detail in a moment. The second is the extent to which there will be net losers as a result of the proposals and how many there will be.

Again, it is perhaps an indication of the strange status of clause 4 that one must fall back on the excellent Library brief to find out the effect of the provision. I have to say that ADIs have not featured high on my list of interests within the DWP brief until fairly recently. According to the brief, however, a married man on the basic state pension can claim an increase for his wife provided that she does not have earnings or an occupational pension of more than £57.45 a week. That is paid at the same rate as the category B pension, about which we heard so much earlier. A married woman can claim a dependency increase for her husband only if she received an increase in incapacity benefit for him immediately before she qualified for her own pension. It is perhaps not surprising, therefore, that according to the brief, more than 99 per cent. of adult dependency increase recipients are men. That figure is based on DWP statistics.

The White Paper announced that ADIs will be abolished in April 2010. It might help if I quote the reason for that given in the White Paper:

“Our conclusion is that the concept of ‘dependency’ on which the ADI provisions are based has little relevance in today’s society in which partnerships of equals are the norm.”

If I may, I shall come back to that in a moment. Again, as I understand it, all existing entitlements to ADI will be protected up until 2020. On the question of possible losers, as I understand it, the average weekly pension for a person with a category A pension with no dependants was £94.77, but for those with adult dependants it rose to £144.51. In May 2006, 59,000 were in that category—pensions with an ADI—at a cost of £160 million. Some 59 per cent. of recipients are men aged 65 to 69. One begins to see the shape of any likely overall saving in that £160 million figure.

Child dependency is another issue. Any new claimants were effectively shut off as a result of the Tax Credits Act 2002, but existing ones continued to receive increases. Again, in May 2006, 5,300 pensioners received an increase for a dependent child. The average increase was £104.63. The clause would abolish such increases to pensioners caring for children. I have made the point already that new claimants are dealt with under the child tax credits legislation. According to comments in the debate on 6 January 2006, overall savings, as a result of the abolition, will be about£500 million by 2015, and about £1.2 billion by 2020. It will be interesting to hear from the Minister whether those figures have changed in the interim. The Department has estimated that 660,000 people would otherwise have received increases in 2020.

It is interesting that, as the Library briefing points out, this part of the Bill has received so little comment outside this place—in fact, I feel sort of guilty to be the first to add a comment. Perhaps people do not appreciate what is happening, do not understand the way in which it works, or have not done the calculations. I am not in a position to comment. However, there has been intervention by Saga Magazine, which, as we all know, is a powerful voice for the over-50s and offers a very decent rate of insurance for those of us who have passed that magic milestone. Paul Lewis, in the magazine’s guide to pensions reform in August 2006—I am sure that it has been required reading for all members of the Committee—made the point that the scrapping of new claims for the dependency increase will result in some pensioners being worse off than others because of reaching pension age the wrong side of 5 April 2010. That has the potential to be another cliff-edge or steep-incline problem, and it needs to be addressed. One sentence of Mr. Lewis’s piece reads:

“There will be a lot of people who will fall just the wrong side of this line and who will get a much smaller pension than someone in the same circumstances just a few days younger.”

He says “a lot of people”. What is the Minister’s current estimate of that number?

The Government’s position, of which we will hear more in a moment, appears to be that the transitional arrangements will protect people already receiving ADIs up to 10 years from now and that the money saved—it would be interesting to have the net figure—will provide better state pensions, particularly for women. Like the savings made on contracted-out rebates, that is an example of money being ploughed back into the pensions system.

The gender impact document published with the Bill contains some rather delphic comments on the matter. It points out that ADIs will be abolished under the reform proposals and states:

“These increases are less necessary where both members of the couple are likely to be economically active and can also act as a disincentive for women to work up until the State Pension age.”

I have to say that it sounds to me as though the amounts involved are not likely to be sufficient to stop a woman working until pension age if that is what she wants to do.

The regulatory impact assessment states at page 29 that the rationale is

“the principle that the reforms would enable a person to accrue pension entitlement in their own right.”

That is fair enough.

“The abolition of adult dependency increases removes a disincentive for women to continue in work up to at least State Pension age and the Government’s position is that the principle of dependency in the benefit system is outdated.”

That seems a sweeping statement. Yes, as we constantly hear, and no doubt will in the Committee, we have moved on from the days of Beveridge when the man went out to work and the woman stayed at home, brought up the children, looked after elderly relatives and usually never went back into the jobs market. That has changed out of all recognition, but even in the most modern societies there will be some dependency in the system. My hon. Friend the Member for South-West Bedfordshire touched on that point in our previous debate. If the Government hope, by diktat, to scrap the concept of dependency altogether, they are making a mistake.

To summarise, I have raised three broad issues that I wish the Minister to deal with: first, the likely savings arising from the change, which he is apparently relying on to help finance the rest of the pensions reform package; secondly, whether there will be any losers in real terms; and thirdly, whether he accepts that there will be situations in which, through no fault of the individuals involved, dependency still exists and where some people may be part of the group of potential losers that I have mentioned.

David Laws (Liberal Democrat, Yeovil)

The hon. Gentleman has given the clause a good airing and I do not intend to go back over the wider issues that he has raised. I do wish to make a couple of specific points. The hon. Gentleman is right that relatively little attention has been paid to the elements of clause 4 that he mentioned. Indeed, the Work and Pensions Committee did not cover the issue during the course of its inquiry, saying so specifically at paragraph 223 of its report, which simply picks up and quotes from its earlier report, “Incapacity Benefit and Pathways to Work”, where some concern about the impact of the changes on people with disabilities is expressed. I should be grateful if the Minister would tell me whether the potential concerns have been addressed in any other way, or whether there are any particular implications for vulnerable groups, such as for people with disabilities.

The hon. Member for Eastbourne said that he had had no representations on the clause. We can declare one. The group to be commended is the National Pensioners Convention, which raised a specific point about the proposal. I will quote the group in order to give it full credit:

“Most of the increases in payment in 2010 will have come to an end before 2020, as the dependants, of either sex, reach pension age and become entitled to a pension in their own right. The cost of continuing those still in payment would therefore be very small. If the increases are to be abolished, it should be done gradually, over a much longer period, so that the rights already accrued are preserved.”

We know that the existing clause 4 proposes to protect rights up until 5 April 2020, as the hon. Member for Eastbourne indicated. In addition to his wider points about costings and effects, it would be particularly helpful to know from the Minister who would still have some of the payments owed to them beyond 2020 and who would suffer the loss after the protected period ends. I should be grateful if the Minister would let us know how many people he expects to fall into that category and what the savings will be from bringing the guillotine down in 2020, rather than allowing the costs to taper away. Also, why have the Government chosen 2020? Was the issue one of costings, to correspond with a date when some of the costs of the other pensions reforms really click in? Was a judgment made that most of the accrued rights would have been paid off by 2020 and continuing the payments beyond then would be administratively complex? What were the reasons for choosing that particular date?

James Purnell (Labour, Stalybridge and Hyde)

Scrutinising such a proposal as this is exactly what the Committee is for. As the Opposition Front Benchers said, the issue has not been hugely looked at. We had one response in the consultation, from Carers UK, which agreed that ADIs were outdated. Other than that, they have not been the top subject of conversation down in “The Dog and Duck” or, indeed, in pensions circles.

The clause abolishes increases in state pension entitlement in respect of a spouse or an adult who has the care of the pensioner’s children. The clause would have effect for new claims from April 2010, but would not apply to certain existing claims until April 2020. Our big-picture argument is that the whole concept is outdated. The idea of one person being dependent upon another purely because of their age is outdated. When the hon. Member for Eastbourne quoted the remark about adult dependency being an outdated concept, we do not mean that adults can never be dependent, just that the particular principle—there should be a payment to someone who is over state pension age because their spouse is under state pension age—is, I think, pretty much agreed by everybody not to be something that anyone would come up with today. The core reason why abolishing this is important is not so much because the cost is huge now. However, because of state pension age equalisation, every couple—unless both were born on the same day—would in effect have one person who was thought dependent on the other under the provisions. The costs would increase significantly over time.

That is why the clause intends to remove the provisions in the Social Security Contributions and Benefits Act 1992 that enable a person claiming a category A or a category C state pension to receive an increase in their pension in respect of a spouse or alternatively an adult who cares for a child on their behalf. I should explain that none of the increases in respect of category C pensions are in payment, nor will any arise in the future. That is one of the parts of the legislation that shows for how long today’s debate will have an effect, because category C pensions are payable only to people who were over state pension age in July 1948 and their widows but they are still in the system and those pensions are still being paid. Only widows remain and they will not be affected by the changes.

Our intention is that from April 2010 increases of pension in respect of adult dependants will no longer be available. Any such increases in payment immediately before the proposed change will cease, if they have not already done so, in 2020. The clause is part of our policy to simplify the rules for state pensions. The current dependency increase provisions are a hangover from the immediate post-war period when single-breadwinner households were the norm. There is little justification for that in the 21st century. As I have said, only a small number of people benefit: only around 65,000 men and a handful of women receive an increase of pension for an adult dependant. Over the past decade the proportion of men receiving an increase for an adult dependant has fallen from about 2.5 per cent. to about 1.5 per cent.

However, between 2010 and 2020 those numbers are forecast to increase roughly tenfold for two reasons. The first is the increase in women’s state pension age, because the dependency increase provisions benefit only those couples in which the wife has not reached pension age when the husband claims his pension—in effect they are applicable only to the minority of couples where the wife is more than five years younger than the husband. As women’s pension age increases, the provisions are set to have far wider application. The second reason is that from 2010 the dependency increase provisions were set to extend to women—that is to enable a woman to claim an increase of pension for her husband—and to people in civil partnerships. As a result the net costs of paying increases foradult dependants were estimated to rise to around£1.4 billion by 2020.

The hon. Member for Eastbourne will be glad to know that we are reinvesting the money that will not be spent on our reforms to the state pension scheme. By taking money out of paying people as dependants, we will be paying people in their own right. That is why the analogy about a cliff edge does not quite run. For any couple who retire after 2010, although they would not get an adult dependency increase, the spouse would get the benefit of a far more generous pension provision. There is no strict analogy, as the hon. Member for Yeovil will see, with the issue that we debated earlier because of the compensating benefits for anyone who retires after 2010. He is furrowing his brow, so I do not know whether he wants to intervene.

David Laws (Liberal Democrat, Yeovil)

I am grateful to the Minister for making those points. So that I can, perhaps, get my mind around all the issues in my own time, can he still answer my question about the number of people affected beyond 2020? If he does not have that information now, perhaps he could write to the Committee about it so that I can give some thought to the matter of whether there will be any losers as a consequence of the changes in the cohort beyond 2020.

James Purnell (Labour, Stalybridge and Hyde)

I am struggling to think whether those people would be affected beyond 2020. I am happy to write to the hon. Gentleman, but I will come to that later in my speech.

The savings are not the only reason for abolishing the increases for dependants. That will be particularly interesting to those members of the Committee who favour pension simplification. The rules governing entitlement to those increases are mind-bogglingly complicated as a result of tinkering by successive Administrations in order to restrict entitlement. Under the current rules there are three different earnings limits depending on whether the dependant is the pensioner’s spouse, living with the pensioner or employed by the pensioner as a child carer. In addition, “earnings” does not mean only earnings. The legislative definition also includes some, but not all, occupational or personal pensions paid to the dependant. Entitlement to the dependency increase is determined on a weekly basis, depending on the dependant’s earnings, either in that week if she is his wife and lives with him or the previous week if she does not.

The “earnings” limits operate on an all-or-nothing basis; if the dependant earns over the limit, no increase is payable. For example, if a woman’s husband is claiming an increase for her, even a modest wage increase can result in withdrawal of the dependency increase, which can create the disincentive to which the hon. Member for Eastbourne referred.

Nigel Waterson (Conservative, Eastbourne)

I am massively impressed that a system that cannot change its programming in less than two years can track the ups and downs of married life week by week.

I ask the Minister to answer two questions. First, leaving aside the potential losers after 2020, I can see that a tremendous surge of people would then be entitled. A ballpark figure would be helpful of people who, up to that date, might well be losers in some shape or form. He is expressing quite eloquently the complications of ADIs; can he say what estimate has been made of the take-up level? Presumably people have to fill in forms, and given the relative anonymity of ADIs until this moment I assume that the take-up is rather small.

James Purnell (Labour, Stalybridge and Hyde)

I shall deal with the point about losers later. If the hon. Gentleman will trust me on that it would be great. However, I am happy to tell him that the computer indeed says no to those cases, as they are not done by the computer; they have to be done clerically because they are so complicated.

I am sure that the Committee will agree that these complicated arrangements are difficult for the customer to understand and for Pension Service staff to administer. But for all the complexities, increases for adult dependants are of little or no help to the poorest pensioners, as the increase is simply offset against the pension credit guarantee credit and other income-related benefits. Indeed, to pick up on one of the points raised by the hon. Member for Yeovil, ADIs are not paid if the dependant is getting a disability benefit such as incapacity benefit in his or her own right.

For those reasons we propose to remove these outdated provisions in two stages—first, by abolishing increases for adult dependants for new claims from April 2010; and secondly, by ceasing to pay them in transitionally protected cases from April 2020. The transitionally protected cases will be those where entitlement was established before 6 April 2010.

We anticipate that payment of the increase will have ceased before 2020 in the majority of transitionally protected cases, because the wife will have reached pension age and become entitled to her own state pension. In the minority of cases in which a couple is still in receipt of an increase at the point of change, we will ensure that they are made aware of other benefits for which they may be eligible, particularly pension credit. By and large, any people losing their ADI at that stage would be looking forward to receiving a state pension.

The transitional arrangements are appropriate, given that everyone recognises that the principle of the existing arrangements is many decades out of date. Preserving it for another 15 years would involve a fair amount of transitional protection. We estimate that the case load in 2010 will be 60,000 people, and that about three-quarters of them would have ceased getting ADIs before protection ends in 2020, so between 15,000 and 20,000 ADIs would be switched off at that stage. That is the answer that the hon. Member for Eastbourne was seeking. Given that they would be later, and that there will potentially be an increase in pension credit, we think that that is the right balance. We do not want to keep the system going for decades to come, for a small handful of cases.

These are complicated and arcane provisions. They do not benefit many people at the moment, but they would create a significant spending increase for those who had not reached state pension age. We therefore think it right in principle to remove them.