(7 years, 8 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I beg to move,
That the draft Pensions Act 2014 (Consequential Amendments) Order 2016, which was laid before this House on 4 July, be approved.
This order implements a small number of further minor consequential amendments in connection with the introduction of the new state pension. It does two things. First, it ensures that existing administrative arrangements that are designed to facilitate the annual uprating exercise will continue to operate as they do now. Secondly, it gives appeal rights to decisions about national insurance credits that count for new state pension purposes.
Let me deal first with the amendments to do with uprating. Article 2 amends the Social Security Administration Act 1992, which deals with alterations in the payable amount of certain income-related benefits due to uprating: that is, income support, income-based jobseeker’s allowance, income-related employment and support allowance, universal credit, and pension credit. These provisions allow an existing award of these benefits to be altered automatically to take account of the uprating of another benefit in payment to the claimant or their partner, without the need for a further decision by a decision maker. They can also enable the decision maker to take account of the new rates from the uprating date when he or she is determining a new award that begins before the uprating order has come into force, rather than having to revisit the award to apply the new rates at a later date. Article 2 retains long-standing administrative easements that support the annual uprating exercise. It is simply a case of delivering business as usual in a case where a person or their partner’s benefit income is the new state pension. These amendments will therefore apply for the first time in April 2017, with the first uprating exercise for the new state pension.
I turn to the amendment to do with appeal rights for national insurance credits. Article 3 amends schedule 3 to the Social Security Act 1998, which lists decisions that carry the right of appeal. This schedule already includes decisions on credits awarded under the old 1975 credits regulations, and also needs to include those provided for under part 8 of the new State Pension Regulations 2015. The policy intention is that decisions made in relation to those credits should carry the right of appeal. That should have been enacted with effect from 6 April 2016, but I regret to say that it was overlooked and that, as the law stands, they do not have that right. The amendment makes good that omission and it will come into force on the day after the order is made.
Of course, that means that there will be a period in which decisions will be made that were intended to carry the right of appeal but that cannot in law be appealed. Those decisions are made by Her Majesty’s Revenue and Customs officials on behalf of the Secretary of State for Work and Pensions, so my officials have been working very closely with HMRC to find a solution.
That solution involves a workaround. Once the order comes into force, any decisions made under the provisions in part 8 of the State Pension Regulations 2015 will be appealable. HMRC will revisit any decisions made before the order comes into force, and when fresh decisions are made they will carry an appeal right. There will be no substantial difference in outcome between an original decision, had it been appealable and successfully appealed, and a fresh decision that is successfully appealed. A successful appellant will have credits awarded to them.
Importantly, I reassure the House that, to date, no one has in practice been affected. That may seem unlikely at first glance, but there are a number of reasons for it. First, the omission can affect only certain decisions made since 6 April 2016. Secondly, it affects only credits for which a person has to apply.
The practical impact of this gap in the law relates only to decisions about credit that a person has applied for since 6 April 2016. They include new credits that cover past periods in which a person was accompanying their armed forces spouse or civil partner on an overseas posting. Ordinarily, credits awarded for the tax year 2016-17 would be taken into account only in the assessment of new state pension awards that will be made after 6 April 2017. However, those new credits could affect state pension awards made since 6 April 2016.
A further mitigation is that, before a person can lodge an appeal, they have to ask for the decision to be reconsidered by a decision maker—a process known as mandatory reconsideration. Mandatory reconsideration enables a decision maker to reconsider the decision and the facts taken into account in making it. If, on reflection, it is considered that the decision should be changed, it can be revised without the claimant having to go through the whole appeal process. HMRC data from the last tax year, 2015-16, tell us that fewer than 10 cases where a credits decision under the 1975 regulations was disputed ended up progressing to appeal.
Finally, out of 324 applications for the new armed forces partner credits that have been refused up to 5 September, 201 of those refusals were because the tax year being applied for was already a qualifying year for other reasons, so the applicant would not need the credit in order to establish their new state pension entitlement.
It is an unfortunate situation, but I hope that I have reassured the House that, even if a case did materialise, we have measures in place to ensure that, while justice may be delayed, it will not be denied. We are confident that no individual will be disadvantaged by the oversight.
I am sure you will be delighted, Madam Deputy Speaker, that I can confirm that I am satisfied that the instrument is compatible with the European convention on human rights, and I commend the order to the House.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I warmly thank the Minister for introducing the order. May I also take this opportunity to welcome him to his place? It is nice to see him there.
Although I recognise that the order principally tidies up existing legislation—as such, I will not oppose it—I want to make a few comments about articles 2 and 3, as well as about the decision not to conduct an impact assessment.
Article 2 enables the income-related benefits awarded to recipients to be adjusted to account for additional income being received through an uprating of the new state pension, without requiring Secretary of State oversight, as the Minister has explained. The arrangement applies to the old state pension and it is now being carried forward to the new one, so it is relatively uncontroversial. However, I want to push the Minister on the specific changes to entitlements for couples.
The explanatory memorandum states that, currently, where one member of a couple has reached a qualifying age for pension credit but the other has not, the couple can choose to claim either pension credit or the relevant working-age benefit. The explanatory memorandum points out that most choose to go for pension credit as, should they choose to access the working-age benefit, they will be subject to conditions that do not apply to pension credit. From 2018, it is planned to remove the option to claim pension credit, replacing it with universal credit for mixed-age couples making new claims.
What are the proposed transitional arrangements to cover those changes? Would someone covered by transitional protections who loses their entitlement to pension credit for a short period then be expected to enrol on universal credit? How do the Government plan to communicate those changes? Given the important differences in the amount awarded under pension credit compared with most other working-age entitlements, as well as the strict conditionality requirements of universal credit, I am sure that the Minister will agree that it is very important to ensure that all those affected are well informed.
Article 3 provides for a right of appeal against a decision as to whether a person is to be credited with earnings or contributions for the purposes of entitlement to the state pension. Under the old state pension, people who reached state pension age before 6 April 2016 already had a right to appeal decisions regarding whether they were eligible for credits. The order, as the Minister has explained, extends that right of appeal to the new state pension.
The explanatory memorandum states that that right should have been in place from 6 April 2016 but that it was “unfortunately overlooked”. That omission is disappointing, not least for those who might have been affected. Although the Minister has taken pains to explain that it has not affected anybody and that there are measures in place to ensure that no one will lose out, I would be grateful if he wrote to me to clarify how many people have been denied a claim since 6 April and who might have been affected. For example, were women and people on low incomes more likely to have been affected? I would also be grateful if he confirmed in writing how the situation for all those who have had applications for credits declined will be resolved?
I want briefly to touch on the related issue of take-up of national insurance credits. NI credits cover circumstances in which people are not working, and in some cases they require an application to be made. In 2013, the Government acknowledged that there was a low level of awareness and understanding of some NI credits, such as carer’s credit. They said that the low take-up rate suggested that the credits were
“not achieving their stated aim of protecting the state pension position of individuals who take time out of paid employment due to caring responsibilities”.
Of course, in many cases, those affected are women.
The Government undertook to review the system, develop a customer-focused communications strategy and work with outside agencies to encourage take-up. They said that state pension statements, which individuals have to request, would be the vehicle for providing individuals with personalised information about their entitlement. In last week’s debate on this order in the other place, the Minister for Welfare Reform said:
“There are around 400,000 eligible for carer’s credit and, in August, there were 10,900 recipients.”—[Official Report, House of Lords, 8 September 2016; Vol. 774, c. 1221.]
According to my maths, that is about one in 40, which means that a very low proportion of those who are eligible to apply have received entitlements. Do the Government have plans to review their approach and to look again at some of the recommendations made by the Work and Pensions Committee in its report, “Communication of the new state pension”?
Finally, I want to push the Minister on the decision not to undertake an impact assessment when preparing the order. The Government argue that the order has no impact on civil organisations or the private sector. Is this not a narrow interpretation of when an impact assessment should be carried out? Can the Minister reassure the Opposition that a dangerous precedent is not being set? As we know, impact assessments by this Government have tended to be rather inadequate.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
I welcome the Minister to his place. It is a pleasure to see him here. We on the Scottish National party Benches look forward to working with him to the benefit of pensioners when it is appropriate to do so.
We welcome the measure in so far as it enables the award of certain income-related benefits to be adjusted automatically when the new state pension is uprated, but when the measure was drawn up was consideration given to the results of the EU referendum and the uncertainty that arises for the 400,000 UK pensioners living in EU countries? The House will be aware that long-standing rules enable the co-ordination of social security entitlements for people moving within the EU. One result is that the UK state pensioners resident in EU countries receive annual increases to their UK state pension. Elsewhere, the UK state pension is uprated only if there is a reciprocal social security agreement requiring this.
The Government could have taken the opportunity today with these measures to address the concerns of the 400,000 UK pensioners living in the EU. Why has this not been done? Does the Minister agree that those UK citizens residing in EU countries who are entitled to a UK pension and all annual increments, as would be the case if they were living in the UK, should have those rights protected after the Brexit vote? Can he give an assurance today that this will happen?
In a parliamentary answer on the issue on 8 July the then Minister for Europe, now Leader of the House, said:
“It will be for the next Prime Minister to determine, along with their Cabinet, exactly the right approach to take in negotiating these provisions going forward but the Government’s guiding principle will be ensuring the best possible outcome for the British people.”
Given that the Prime Minister has had time to settle in, there has been ample opportunity to address this question. May we have an answer today and remove this uncertainty for UK pensioners? Prior to our entry into the EU, the UK had bilateral arrangements with a number of European countries. What will be the situation where this was previously the case? Do those arrangements remain in force and can the Minister reassure pensioners in those countries?
The measures before us also fail to address the issue of the 500,000 UK pensioners living in territories where there is no annual uprating. Why are not the Government bringing forward today plans to restore annual uprating to all British pensioners, based on entitlement and regardless of domicile? It is morally unjust and truly unfair for the Government to strip pensioners of their right to equal state pension payments. There are a host of reasons why a pensioner may choose to move abroad in later life, such as wanting to be closer to family or friends, or to enjoy a different lifestyle. It is simply wrong to punish them for making that choice.
Pensioners who have paid the required national insurance contributions during their working lives, in expectation of a decent basic pension in retirement, will find themselves living on incomes that fall in real terms year on year. Payment of national insurance contributions in order to qualify for a state pension is mandatory. All recipients of the British state pension have made these contributions, and although historically the level of pension received has varied according to the level of contributions made, it is clearly unfair to differentiate payment levels by any other criterion.
Pensioners will now face ending their days in poverty because they chose to live in the wrong country, in most cases without any knowledge of the implications of their choice for their pension. Others are forced back to the UK, away from the family they love, just to secure an income on which they can retire. All should receive their full and uprated pension according to their contribution, regardless of where they choose to reside. Reform would bring the UK into line with international norms, as most other developed countries now pay their state pension equivalents in this way. We are the only OECD member that does not do so.
Most pensioners had no idea that their pension would be frozen when they chose to emigrate. The frozen pension policy acts as a disincentive to pensioner emigration. As the International Consortium of British Pensioners put it, people currently living in the UK who would like to emigrate and who are aware of the frozen pension policy know they would not be able to afford to live on a state pension at its current level in their older years, by which time inflation will have decreased its value, and accordingly they decide not to move.
There is a real disparity in the treatment of UK pensioners and no consistency in how overseas British pensioners are treated. Those who live in the US Virgin Islands get a full UK state pension; those who live in the British Virgin Islands do not. Overseas pensioners are entitled to fairness. The state pension is, after all, a right, not a privilege. It is not a benefit; it is an entitlement to a pension based on paying national insurance contributions.
Given that the measures before us are provisions that support the annual exercise to uprate social security benefits in payment, will the Minister clarify the Government’s position on the triple lock? There have been suggestions that the triple lock may not survive. We on the SNP Benches fully support the continuation of the triple lock. It is the right thing to do to protect the interests of our pensioners. Will the Minister join me in championing the triple lock and commit the Government to continuing with it?
As we are talking about pensioners’ rights, equity and fairness, can the Minister tell us why, when we are discussing the state pension, there is no mention of the WASPI—Women against State Pension Inequality—women and no solution to the injustices that many face in this secondary legislation package? It is not right that women born after 1953 are having to wait so much longer than those born in previous years to collect their state pension. The Government will have to bring forward mitigation to deal with these injustices, and do so quickly. Why are there no measures in this package to deal with those issues?
Richard Harrington
I am grateful to the hon. Members for Oldham East and Saddleworth (Debbie Abrahams) and for Ross, Skye and Lochaber (Ian Blackford) for their contributions to the debate and for their kind words, which I appreciate. I am sure this will be the first of many occasions when we take part in such debates.
Let me deal briefly with the points that the hon. Gentleman made. I am aware that he has spoken many times on the frozen pensions issue, but the policy on that is unchanged. It has been in place for almost 70 years, under all sorts of Governments, and there are no plans to change it. The Government comply with their legal obligations where reciprocal agreements exist with other countries. There are no plans to change that and I would not like to mislead the hon. Gentleman by saying that there are.
On the triple lock, I will happily send the hon. Gentleman a copy of the Conservative party manifesto, if he is interested. I am sure it is still available from all good bookshops, and probably some bad bookshops as well. The Government are committed to retaining the triple lock throughout this Parliament. They have said so several times in the past and I am happy to repeat it for him.
The hon. Lady commented on the statutory instrument. On the transitional arrangements—for example, on ending the choice for mixed-age couples—the choice is ending because it is not right that a working-age customer should be exempt from any work-related conditionality just because they have a pension-age partner. Couples in receipt of pension credit at the date that the change is introduced will continue to be eligible for pension credit unless entitlement ends for some other reason—some change in their circumstances.
The hon. Lady asked me if I could indicate the number of claimants to date who had been denied a right of appeal as a result of the omission that we have mentioned. I will check and, if necessary, respond to her in writing. To my knowledge, we do not hold that information because administrative data are not routinely collected by HMRC on volumes of all clerically administered credit applications, but I am happy to get back to her on that point.
Very briefly—hon. and right hon. Members have had a lot of patience with this statutory instrument—the credits affected include applications predominantly for spouses and civil partners of members of the armed forces, as the hon. Lady said, but also for partners of recipients of child benefit where entitlement to the credit is transferred to the applicant, for people providing care for a child under the age of 12—that is called grandparent credit—for being a foster parent and for persons approaching pensionable age.
I have explained what the order covers and these consequential amendments, and we have been through them both in quite some detail. We have acknowledged the gap in the law. This is the first time we have dealt with that gap in the law, but we have put mechanisms in place to make sure that no one is disadvantaged. Fortunately, we have not yet needed to employ them because no one has sought to appeal.
I hope I have provided the clarification that the hon. Members required, but I am very happy to speak to them separately, should they require further clarification. I commend this order to the House.
Question put and agreed to.
Madam Deputy Speaker (Natascha Engel)
We now come to motion 4 on local government. I remind the House that as the Speaker has certified that this instrument relates exclusively to England and is within devolved legislative competence, this motion is subject to double majority. If a Division is called, all Members of the House are able to vote in the Division. Under Standing Order No. 83Q, the motion will be agreed only if, of those voting, both a majority of all Members and a majority of Members representing constituencies in England vote in support of the motion. At the end, the Tellers will report the results, first, for all Members and, secondly, for those representing constituencies in England.