Social Security (National Insurance Credits) Amendment Regulations 2007

My Lords, the administrative costs will have to come from the routine DWP DEL budget. For example, a pensioner who received a state pension and pension credit might be no worse off if we were to calculate and reduce his state pension because that would lead to an increase in his pension credit. In other cases, the reduction in state pension would give rise to pension credit. Similarly, people below pension age who have been overpaid could have their benefit increased by claiming income support. Generally, when assessing the effect of the cost, we would expect that income support was in payment in up to 45 per cent of incapacity benefit cases and pension credit was in payment in about 65 per cent of state pension cases. The interaction with other benefits would therefore have a huge impact on the actual cost of correcting these cases. We will only know the true cost of correcting the underpaid cases once we have completed the exercise. As I have said, the regulations deem the over-award of benefits to be legally correct, thereby avoiding the need to re-examine these cases. Although we are honouring existing awards of benefit, we recognise that the Government have a duty to ensure that errors in credits data are not perpetuated. For this reason, HMRC will correct national insurance records for those under state pension age so that future claims to contributory benefits can be correctly assessed. Where correcting the individual contribution record results in particular years being no longer qualifying years for state pension and other contributory benefits, HMRC will write to the individuals concerned advising of them their options and asking if they wish to pay any missing contributions. They will have six years to take up that offer, and payment of contributions will be at the rates that applied during the tax year concerned. The Government do not believe that it would be right to seek a saving in relation to future costs given the background to the issue. Just as the Government have a responsibility to people who have been underpaid, they have a responsibility to those who have been awarded too many credits and who, as a consequence, have been overpaid benefit but were denied the opportunity to make up shortfalls in their national insurance records at the relevant time. That has been the result of system and related procedural errors and is not the fault of the contributors. People depend on the Government to advise them about their national insurance record so that they can make properly informed choices about how they may protect or increase their entitlement to benefits. Decisions about whether to apply for credits or pay voluntary contributions are influenced by the information provided by the relevant government departments, and it is likely that much of the amount referred to as a potential overpayment would have been properly payable now, had the system and procedures worked properly, as a contribution to contributory and income-related benefits. Specific questions were asked, and I will try to deal with as many of them as I can. The noble Lord, Lord Skelmersdale, asked whether the Treasury had approved the orders. Of course; we sought and received the Treasury’s agreement to allow the orders to be made. The noble Lord, Lord Kirkwood, asked about recent announcements about 4,000 cases of double payment. That relates to a small number of cases—4,000, as he identified—out of 1.6 million cases where DLA or AA is combined with state pension and pension credit. In this instance, there appears to have been a breakdown in communication between the Disability and Carers Service and the Pension Service over the benefits paid to a small group of customers. Steps have been taken to prevent such duplicate payments occurring in the future. That is a separate issue. Both noble Lords asked who the NIRS2 supplier was. Andersen Consulting, later Accenture, implemented the upgrade of NIRS1 to NIRS2. The current system is operated under the ASPIRE contract since January 2005. The noble Lord, Lord Skelmersdale, referred to the phrase, "““believed to have been operating correctly since … 2005””," and asked why there should be any extension beyond that. Testing has confirmed that the interface between the two computer systems has worked correctly since November 2005, but we have decided to look at all cases from 1993-94, the start of the strategy computer system, and go up to 2006-07 because it is just possible that some cases actioned after November 2005 could have had handling errors, although staff training has been improved. Reference has been made to HMRC staff costs of £1.3 million. Those costs reflect the fact that those affected will contact HMRC about their national insurance record and the question of collecting and allocating class 3 contributions. I have dealt with the issue of the 4,000 duplicate payments. The noble Lord, Lord Kirkwood, asked about the SSAC. The issue was explained to the committee, which saw the draft regulations. The committee did not write to DWP Ministers. That is the bulk of the issues that were raised. I will review the record and write further to noble Lords if necessary. The concerns raised by the Merits Committee and by noble Lords during the debate are recognised. We have resolved the issue that led to the errors and have acted in a balanced and proportionate way to put right the affected cases. We are firmly of the view that we have done the right thing by introducing the regulations, thereby avoiding unnecessary anxiety and distress for some 75,000 pensioners in particular. I hope that noble Lords will agree that in all the circumstances the only credible option now is to introduce the regulations.