State Pension Credit Pilot Scheme Regulations 2010

My Lords, I am grateful to my noble friend for introducing the regulations. It comes as no surprise to those of us who served on the Committee for the proceedings of the Welfare Reform Act 2009. Section 27 presaged the Motion tabled by my noble friend Lord Freud this evening. To that extent, it is business as usual. These are interesting regulations, for a number of reasons. I would like to use the context of this evening’s debate to raise one or two issues. It is a tactical provision and an important piece of legislation for a number of reasons that I will come to the moment in terms of how it widens the extent of well understood and well honed social security tenets of legislation. It is tactical because it seeks to underpin the concept of means-testing. In so far as that gets more money into pensioner households which are eligible and which are not claiming, that is welcome. But at the outset of this Government, if we are looking in the long term and thinking strategically, is more efficient means-testing what we are really trying to be about? That is an important strategic question. It is early days for the new coalition Government to come to a final conclusion about that, but we are beginning to run out of time on a wider horizon. If you look at the proposals that were contained in the Turner commission some years back, the understanding that the noble Lord, Lord Turner, had when he made his recommendations was that there would have been more discernible movement by now in the direction of a universal basic state pension, which produced a threshold of earnings, such as 30 per cent of average earnings. It would be a base; a first-tier provision on which other things could be built. We are not getting there fast enough. This is a limited project both in terms of time because it will run for a 12-month period, and in terms of scope, because we are devoting only £1 million of the DWP departmental expenditure limit—although that is £1 million not available for other things in very trying circumstances over the next comprehensive spending review. We have got to think carefully about the signal that this is sending. We have to ask whether it is credible, even if this pilot is swimmingly successful, that the 70 per cent of pensioner households which do not currently get the entitlement which they are due suddenly become, as if by magic, able to get this automatic payment after a deemed application. Where does that take us? All it does is encourage people to think more about means-testing. If that is the long-term goal, I would be much happier if we were to think more carefully and strategically about developing the basic state pension in a sustainable way. The State of the Nation report, which was helpfully produced by the department just after the election talks at page 38 about the disincentives to save that can be created by means-testing. It refers specifically to pensioner credit in that regard. Although this is a very limited project—it pays benefit automatically for 12 weeks to families and the Pensions Policy Institute certainly suggests that as things stand 30 per cent to 40 per cent of pensioners will be eligible for pension credit and means-testing in the future—we have to bear in mind that this may be a project that ends up being of little value if the strategic decision is to go in the other direction and to head down a unified first-tier pension provision which gives a sustainable income for pensioner households. It is an important signal in that you could raise expectations in the minds of pensioner households that this would be the way forward and that they would be sent money through the post. I do not think that we can do that. Looking at the financial framework that we are facing for the next three years, I do not think it is realistic that the department could find the money out of the annual managed expenditure of the departmental settlement—whatever it is—on 20 October. If this pilot is successful and a way to automatically send pension credit to pensioner households is found, it could cost £5 billion. I will put it no higher than this, but I doubt that there is £5 billion in the annual managed expenditure of the budget over the next comprehensive spending round to pay for that. We need to be very careful about how we evaluate this, how we sell it and how it fits into the long-term strategy of the coalition Government. As I said earlier, deeming applications to have been made is a substantial revision of social security law, as is the automatic payment. The idea that people can be sent money in the post without having made an application in the first place is a radical departure from everything that we know and it needs to be treated with very great care. I hope that my noble friend will look very carefully at the use of pilots. Perfectly understandably, he is still finding his way around the department. I do not say this critically because most of the pilots had a merit in their own right when looked at individually, but over the distance they became completely incoherent. It was impossible for observers to track the evaluation and what happened to them. I suspect that many of them bit the dust quietly. The whole notion of "pilotitis" was getting out of hand in the previous Administration. I am just warning my noble friend that the department might encourage him to do that. He has to be very stern and very sure that if he introduces pilots he really means them. He must take the value out of them and make sure that they are not just a waste of time for everyone involved. Staff resources will be involved because it is complex. I am absolutely sure that my noble friend is right. Trying to stitch together the bits and pieces of data that are available legitimately and lawfully to the department in order to establish who will get these automatic payments will not be easy. If anyone is unsure about that, they should look at parts 4 and 5 of these regulations which have completely separate definitions for income and earnings that have to be laid on top of an already complicated situation. People will have to do staff training to carry out these pilots, which will be random across the whole of the United Kingdom. Only 2,000 people will be involved, but that does not mean that a whole lot more people in the staff complement will not need to know about these things. There may well be a single helpline telephone number, which I would welcome. People will need to know how to deal with folk who ring up and say, "I have just been sent a lot of money by the department in the post. What is all this about?". I know that a lot of care is being taken over getting the letters of explanation correct and I welcome that, but there are staff resources involved in this and it will involve complexity of some kind. On the operational questions, a lot of the problems have been ironed out in the extensive consultations that have been conducted. I welcome that. I recognise too that the stakeholders who have been asked are a lot more welcoming to the order than I am sounding today. However, there are still some questions in my mind. For example: why is this money being paid for only 12 weeks, monthly in arrears? Did someone guess that, or is there a reason for having 12 weeks of payments and then they stop? A second question that is obvious but to which I think I know the answer is that if an underlying entitlement is detected from this automatic payment, presumably people are entitled to pursue that genuine entitlement. Once week 13 comes along and the money stops coming, they can go to the Jobcentre or phone the Pension Service and get a proper claim. I assume that that is axiomatic and will not be a bar to long-term entitlement, if entitlement is indeed found. I have a slight objection to the pilot excluding people who do not have access to direct credit. The people with bank accounts are the people who are organised; the people who we are trying to help most are the folk who do not have bank accounts and are still using alternative means. Now, there are not many of them, and statisticians may say, "If you take too many of them into the pilot, that may skew the pilot", but some of them should be in the pilot to draw statistical conclusions from, because there are still significant numbers of people in that category across the United Kingdom. Why we are excluding religious orders is an interesting question. "What have we got against monks and nuns?" I ask myself. I have no way of understanding that, except maybe that they live in a residential setting. May I have an assurance, just for Daily Mail purposes, that this money will not be sent to people in Spain? I think that regulation 10 means that people in Spain will not be sent cheques automatically, having been deemed eligible for pension credit, because that would be in nobody’s interests. I hear myself sounding quite niggardly about this, but there are some important issues here that I hope the Government are thinking through. My question to my noble friend is this: "Is it really credible to say that this pilot is determined to achieve an algorithm that will produce automatic payments of pension credit in future to the 30 per cent of pensioner households that are not currently collecting it because they do not know that they are entitled to it and that we have the money to pay for this in the short to middle term?". That is an important question that the Government need to think about carefully before they implement these pilots.