§ 8.40 p.m.
§ Baroness Hollis of Heigham
rose to move, That the draft regulations laid before the House on 26th June be approved [34th Report from the Joint Committee].
The noble Baroness said: My Lords, I have a fairly full description of what the regulations do. However, I am mindful that, given that the first order of the day went well past its time, I do not want to trespass too largely on your Lordships' patience. I shall make two points. Perhaps I should then respond to questions rather than describe each of the regulations. Your Lordships, and certainly the noble Lord, Lord Higgins, will have recently taken part in the Bill. I am sure that every item is engraved on the noble Lord's memory.
The draft regulations cover the five main issues associated with pension credit: first, people not in Great Britain—the habitual residence questions; secondly, the calculation of the guarantee credit; thirdly, the assessment of income and capital; fourthly, the savings credit; and, finally, the assessed income period. They are full regulations, primarily because they incorporate rather than merely cross-refer to the core income support regulations of 1987. It seemed more sensible to reincorporate those old regulations into this so that there is, as it were, a clean read. We thought that that would be more helpful and transparent. For example, Regulation 22 on the diminishing notional capital rule is unchanged from the Income Support Rules of 1987.
657 That is what the regulations cover. I have a fairly full description of them because we had originally allowed ourselves 20 minutes for the discussion. It may be that it would be more helpful if I simply sat down at this point and sought to respond to questions. If your Lordships wish, I should be happy to try to describe in greater detail what the regulations do, but your Lordships may feel that having recently passed the Bill and having had, I hope, a helpful explanatory memorandum, that is not necessary. I commend the order to the House. I beg to move.
Moved, That the draft regulations laid before the House on 26th June be approved [34th Report from the Joint Committee].—(Baroness Hollis of Heigham.)
§ Lord Higgins
My Lords, this is an absolutely marvellous opportunity to make another Second Reading speech on the State Pension Credit Act 2002. However, I think that it is true to say that while a number of noble Lords have arrived for a subsequent debate, those involved in this debate are probably those who might usually be described as "the usual suspects". We are not unfamiliar with this matter, which, as the noble Baroness has rightly pointed out, we have only recently discussed.
It is also right that the Minister's virtue should be rewarded, in the sense that during the passage of the Bill she—I think unusually—provided draft regulations in Committee, on Report and at Third Reading and so on, which cover much of what we have in the order. Therefore, it is not unfamiliar to us. So far as one can see, it does not contain any shocks.
Perhaps I may, therefore, just ask one or two questions. The first is a question to which I ought to know the answer and do not. In the order it says, as is normal, that the advice of the Social Security Advisory Committee has not been taken because the Bill has been passed only a short time before. I am not absolutely clear whether the Social Security Advisory Committee expresses a view ahead of a Bill. Does it have an opportunity to make any comment after the Bill is passed and after it has seen these regulations, which it has not previously seen? It seems rather unfortunate that when it may have some comments on the regulations it is precluded from so doing. Probably the normal case is that the initial regulations come out within the six-month period.
Secondly, the orders cover a number of points with regard to absence overseas and whether individuals should or should not be allowed to continue to receive state pension credit when they are overseas. The order sets out the period over which they continue to receive the benefit, although that is a fairly tight limit—in some cases four weeks and in other cases eight weeks. It is particularly relevant in the context of the orders, which are concerned with what are described as "patients", that is to say, people who go overseas to receive medical treatment.
My impression is that the individuals concerned only continue to receive the state pension credit if they go overseas for medical treatment paid for by the 658 NHS. If that is true it seems to me quite wrong because the individual who pays has not only paid all the normal contributions for National Health Service treatment but has in addition paid for his own treatment, thereby relieving the state of that cost. Consequently, it does not seem to me that there should be a differentiation between people who go overseas for medical treatment under the NHS and those who go overseas for medical treatment privately. No doubt the Minister can respond to that and we can then consider whether we need to go further.
The only other point which one might consider is the question of the definition of income. In particular, the orders are concerned with the rate of return which is deemed to be received on capital. The Minister anticipates what I am going to say. The rate which is specified in the order would seem to imply a rate, once the initial tranche of capital has been taken into account, of something over 10 per cent. If the noble Baroness can tell me where I can invest money at 10 per cent at the moment I should be happy to hear from her. So will many other people suffering from the situation on the Stock Market.
The usual Treasury argument is, "Well, you must take the average rate of return, allowing for the fact that the first tranche of capital is not taken into account". It is the marginal rate which is relevant. Even if one were to take the average rate, it is still significantly higher than the rate one is likely to receive on risk-free investments at the present time. What I am really saying is that it does not seem to me that the rate which is set is as favourable or as sensible as it ought to be. The question then is whether there are sufficient powers to alter that rate in future.
Those are my main points. I shall not go over the fascinating aspects that we discussed on the recent passage of the Bill through your Lordships' House, particularly with regard to polygamy and other favourite subjects of the noble Baroness. I look forward to hearing her specific answers to those points.
§ Earl Russell
My Lords, there are a number of items in the regulations that I welcome. I welcome the fact that refugees and those given exceptional leave to remain are exempt from the habitual residence regulations. I also welcome several items which my noble friend Lady Barker asked for during the passage of the Bill. In the process, I thank my noble friend for burning the midnight oil preparing a brief for me on the subject.
I welcome the disregard for royalties and income from public lending rights and the 13 weeks' extension for hospital downrating. I mention one technical problem about that aspect. Re-admission within 28 days is counted as a continuous stay in hospital. That raises the question, what if the re-admission is because of an inappropriate discharge? That, I know, is more a matter for the Department of Health than for the noble Baroness. I hope that they might possibly consult each other about the matter.
659 Among the various allowances dealt with there are various ones reserved for the care of children. There is no mention of adoption allowances. That may need attention after the Adoption and Children Bill has finished its passage. The allowance for aids and adaptations is welcome. But it is not clear whether it extends beyond those registered disabled to those who are victims of stroke or heart disease and are not registered disabled.
I declare an interest. My mother-in-law, although not on benefits, is aged 92 and suffering from angina. She has had to have a stairlift installed, which was quite remarkably expensive. People could really be in need of help for such an item. Perhaps the department might at some future date look at that matter.
My only other question of concern—and this has been a question throughout the Bill—is the complexity of the pension credit system. The DSS says that it will attempt to do the calculation for everyone, which is generous and warm-hearted of it. But it prevents people from being in a position to work out their own entitlement. If we are being told that we should make provision for our own retirement, and do so responsibly, it is a little easier if one knows what one is entitled to. That point might be worth some thought.
§ Baroness Hollis of Heigham
My Lords, I am grateful for the brevity with which your Lordships have responded. It is pleasing that we have all resisted the temptation to make speeches suitable for Second Reading, Third Reading or any other Reading. I shall try to deal with the specific points that have been made.
The noble Lord, Lord Higgins, asked about the Social Security Advisory Committee. It can indeed comment; its advice was sought; and we have had the benefit of that advice. The noble Lord will know that the assumption concerning the sixth-month rule—although the Social Security Advisory Committee is not officially required to be consulted within six months of a Bill's passage—is that Parliament has clearly expressed its view when discussing the Bill. The job of the Social Security Advisory Committee is normally to advise the Secretary of State after that six-month period, when Parliament's intention may be more remote from what has since happened. But in this case, as I said, the Social Security Advisory Committee engaged in policy discussions on the matter, so that point is met.
On the question about overseas provisions, our views may be irreconcilable. The noble Lord's description of the situation was correct: medical treatment paid for by the NHS falls under the regulation. For anyone else, it is a matter of volition or choice to decide to seek medical treatment abroad and to pay for it. We have sought legal advice, and I understand there to be no legal difficulties with the provision. I suspect that whether the noble Lord 660 considers that approach to be desirable depends on his views about private medical treatment, which we may not share.
§ Lord Higgins
My Lords, that seems very unfair. Given the income provisions of the tax credit, there will be few cases. People who have contributed towards the National Health Service and who are now relieving the NHS and the United Kingdom of that responsibility will be penalised. Someone treated on the NHS, to which everyone has contributed, will gain relief, whereas someone being treated privately will not. That is unfair.
§ Baroness Hollis of Heigham
My Lords, I understand that that is what the noble Lord believes, but that is no different in principle from the fact that people do not receive tax relief on contributions to medical insurance policies, for example, or anything of that sort. People make that choice.
§ Baroness Hollis of Heigham
Yes, my Lords, but my point is that if people pay for private medicine they make that choice. Whether or not they relieve the NHS of part of its responsibility has not been—certainly under this administration—a consideration affecting tax and fiscal policies. I know that the noble Lord disagrees with me on that, but that is entirely consistent with our tax treatment of the costs of medical treatment incurred on a private basis.
Finally, the noble Lord asked me about the definition of income shown on capital. He knows as well as I that if someone had capital of £12,000, the effective rate attributed to his capital would be 5.2 per cent average. That is because, when we consulted with Age Concern and other organisations, they preferred us to set a band of capital—£6,000—that was exempt. As a result, 85 per cent of all pensioners, who have savings of less than £6,000—will have no notional rate of return attributed to their capital. The notional rate kicks in above £6,000.
It is entirely reasonable that we should decide that the average should be, as it were, loaded on those with higher capital to benefit those with more modest capital. That was the advice offered to us by Age Concern, and that is exactly the policy that the Government have followed. Again, I know that we disagree on that, but that is what it is.
§ Lord Higgins
My Lords, when discussions took place, did Age Concern know what rate would be fixed?
§ Baroness Hollis of Heigham
My Lords, I doubt that it knew what would be the specific rate. It would have known that, given the structure of pension credit, any abatement on the first £6,000 would have to be recovered by increasing the rate that applied above £6,000. That was always part of the discussions, and 661 that is what Age Concern signed up to, I understand. Of course, if I have misled the noble Lord in any respect, I shall write to him.
I should add that that is effectively half the rate of the existing minimum guarantee—which in turn follows previous income support rates for capital treatment. So we have got rid of the capital ceiling. As a result, it is reasonable to have a fresh look at how we appraise the notional return on capital. As I said, pensioners did not want each individual item to be assessed; they wanted a notional rate, which is what we have provided.
The noble Earl, Lord Russell, asked about adoption allowances. It may be good news for him that nothing related to children is relevant to pension credit; it is disregarded for those purposes. Any income from adoption allowances would not cut into entitlement to pension credit. He asked what provision is made when readmission to hospital is deemed to be the result of inappropriate discharge. The reasons for admission or discharge are not relevant to social security legislation. If there is a perceived problem in that regard, it is a matter for the Department of Health. Whether discharge was inappropriate would not determine the outcome of pension credit.
The noble Earl also asked about housing costs and respite care. That is dealt with in Schedule II at paragraph 4(9), which allows housing costs of people who are temporarily in care homes to be met, subject to a limit of 52 weeks, which I think covers the examples that he gave. Finally, he asked for a definition of a disabled person at Schedule 2(12)(2)(k). It is simply taken over from definitions under income support. That is an incorporation; there is no change; existing policy will continue.
I hope that that has met the concerns of the noble Earl, Lord Russell. If your Lordships will agree, given the lateness of the hour, I commend the regulations to the House.
On Question, Motion agreed to.