Social Security (National Insurance Credits) Amendment Regulations 2007

My Lords, I do not accept that. Perhaps we may go into the detail of the point on another occasion because my time this afternoon is limited. We estimate that up to 30,000 people may have been underpaid contributory benefits, and the annual amount of underpayment is estimated to be around £65 million a year. However, in some cases no arrears will be due, or partial arrears will be due, because income-related benefits such as income support or pension credit have been paid in place of entitlement to a contributory benefit. The Government have given priority to correcting underpayments to ensure that people receive their correct entitlement, and compensation where there has been significant delay in making payment. Work to identify actual underpayments and to pay arrears is now under way and we expect to complete this work by early 2008. I should also advise the House that work to correct underpayments does not depend on the regulations before the House today. I turn now to the issue of overpaid awards of benefit. We estimated that up to 90,000 people may have received overpayments. Of these, around 75,000 are pensioners. There was a choice. We calculate each case and where appropriate offer the option to pay national insurance contributions to restore the original amount of benefit or to allow the existing payments to continue. The first option would have meant disrupting not only entitlement to contributory benefits like state pension, but also entitlement to pension credit, income support, housing benefit and council tax benefit where these are in payment. People may have been unable to find the money to pay the national insurance contributions, and pensioners in particular may not have been able to find the money, in effect reducing the state pension and requiring reassessment of the other benefits, with the net outcome that the pensioner is likely to be no worse or better off. These regulations provide the second option. They avoid creating anxiety and disrupting income flows for those people affected by the over-award of incapacity credits which would otherwise have followed if we took the first option. They also avoid unnecessary administrative work not only for DWP and HMRC, but also for local authorities. This approach recognises that such awards have been made and received in good faith, and it also recognises that some people may be placed in a difficult position if the awards were now to be revised. For example, people of pension age may be reliant on the level of income awarded to them, and financially it may not be as easy for them to make further contributions in retirement. They may also have taken this level of income into account in assessing how much money their spouse or civil partner will receive in the event of their death. Similarly, people receiving bereavement benefit or extra state pension because of bereavement may be placed in a difficult position if the contribution record of the deceased spouse or civil partner is corrected and their benefit is reduced or withdrawn. As making further contributions to the deceased contributor’s account is not possible, some form of special action would be required to address this. After careful consideration, the regulations were introduced to protect existing awards of state pension, incapacity benefit, jobseeker’s allowance, bereavement benefits and widows’ benefits which are based on incorrect records of certain credits. In the event of the death of a pensioner with a protected award, the regulations ensure that a surviving spouse or civil partner retains inherited entitlement to benefits. Our estimate of the cases affected—30,000 underpaid and 90,000 overpaid—is no more than that. The estimates were based on limited information from a pilot exercise run by HMRC and, on the basis of that limited exercise, the annual cost of making good the underpayments is around £65 million and the amount overpaid around £90 million, which will decrease over time. We cannot be precise about the costs because of the interaction with income-related benefits, as I have explained. The administrative cost of £8 million that would be incurred without the regulations is also a broad estimate. It could be higher or lower depending on how complex it would be to correct the overpaid cases and invite and assess claims for pension credit and income support.