Pensions Act 2014 (Consequential Amendments) Order 2016

Baroness Drake Excerpts

Thursday 8th September 2016 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, you will recall a previous set of consequential amendments connected to the introduction of the new state pension, together with a set of affirmative regulations that were discussed in February this year. This order makes a small number of further such consequential amendments. They do two things.

First, they ensure that existing administrative arrangements which are designed to facilitate the annual uprating exercise will continue to operate as they do now. Secondly, they give appeal rights to decisions about national insurance credits that count for new state pension purposes.

Article 2 amends provisions of the Social Security Administration Act 1992 which deal with alterations in the payable amount of certain income-related benefits: income support, income-based jobseeker’s allowance, income-related employment and support allowance, universal credit and pension credit. These provisions allow the income-related benefit award to be adjusted without the need for a further decision if the adjustment is due to uprating—whether it is the benefit itself that is being uprated, another benefit is being taken into account, or both. They also enable the decision-maker to take account of the new rates from the uprating date in determining new awards that begin before the uprating order has come into force. These are long-standing administrative easements which help to ensure the effective operation of the annual uprating exercise.

As your Lordships know, where a person is a member of a couple, their entitlement to benefits can be affected by their status as a couple. Therefore, where a working-age income-related benefit is in payment for a couple but the non-claiming partner is a pensioner, the benefit income could include state pensions. The amendments made by Article 2 simply ensure that business as usual will continue where a person’s benefit income includes new state pension. The forthcoming uprating exercise which will determine the rates to be applied from next April is, of course, the first to apply to the new state pension.

National insurance credits which count for new state pension purposes are provided for under Part 8 of the State Pension Regulations 2015. These are new regulations, made under a new power inserted in the legislation by the Pensions Act 2014. The policy is that decisions made in relation to these credits should, as is the case with decisions made in respect of existing credits awarded under the old credits regulations, have the right of appeal. As the law stands, they do not. The amendment being made by Article 3 gives that appeal right. This amendment should have been in place from 6 April 2016 but, unfortunately, it was overlooked. Having identified the omission, we have acted as quickly as we could to put it right. This is why the order will come into force on the day after it is made.

My officials have been working closely with HMRC, which administers credits on DWP’s behalf, to devise a workaround. Once the order has come into force, HMRC will be revisiting the decisions made before it came into force. Where 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. I should stress that to date there have been no appeals. That there have been no appeals is understandable. First, this issue relates only to decisions made in the period between 6 April 2016 and the date the order takes effect, which is around five months. Secondly, it only affects credits which a person has to apply for.

The practical impact of the gap in the law is restricted to decisions about credits which a person has been able to apply for since 6 April 2016. These include new credits to cover past periods in which a person was accompanying their Armed Forces spouse or civil partner on service overseas. Ordinarily, credits awarded for the tax year 2016-17 would be taken into account only in the assessment of new state pension awards made on or after 6 April 2017. However, the new credits for Armed Forces spouses and civil partners could affect awards made this year. A further mitigation is that before a disputed decision can be appealed, it goes through a process of mandatory reconsideration. So the decision-maker has to look at it again and if, on reflection, they consider that the decision should be changed then it can be revised, without the claimant having to go through an appeal process.

We also know that in relation to the new credit for an Armed Forces spouse or civil partner made under Part 8 of the State Pension Regulations 2015, out of 1,647 applications which have been decided up to 5 September 2016, 324 were refused—and of those refusals, 201 were because the tax year in question is already a qualifying year for other reasons.

Finally, based on data from last year—2015-16—about credits decisions made under the 1975 regulations, we know that only a tiny number of disputed credits decisions actually proceeded to appeal.

So with the change in the law imminent, and if they are needed, we anticipate that the contingency arrangements we have put in place will be required for only a very small number of cases. I can also confirm that, in my view, this statutory instrument is compatible with the European Convention on Human Rights. I hope this gives noble Lords reassurance that while it is accepted that justice may be delayed, it will not be denied. I beg to move.

[Baroness Drake (Lab)]

My Lords, it is unfortunate that there has been an oversight in providing a right of appeal in respect of certain decisions on NI credits for the new state pension, but clearly it is recognised that this SI seeks to correct that.

However, I am a little confused because, as I understand it, the decisions potentially impacted by the oversight in relation to the appeal relate to credits for, in certain circumstances, people caring for children under 12, carers and spouses and civil partners of members of Her Majesty’s Armed Forces. It would be helpful if the Minister could clarify exactly which classes of credits were impacted by this appeal oversight, because it is difficult for the layperson to work it out. In particular, will he say whether that category or class of credits includes applications for credits from those caring for at least 20 hours a week, including grandparents?

The concern has to be over the extent to which the omission of a right of appeal may have affected individuals’ access to such credits and whether this SI addresses that sufficiently. Again, it was quite complex trying to follow what exactly was the answer to that question. Is it possible for the Minister to confirm or indicate the number of claimants who have been denied a right of appeal to date as a result of this omission—that is, the population denied that right rather than those who sought, in the absence of that right, to appeal?

The oversight concerning an appeal embraces all decisions on the relevant credits made between 6 April 2016 and the date when these regulations restore a right of appeal. The Explanatory Memorandum refers to minimising,

“the period when there is no right of appeal”,

for these certain classes of credits, but I am not sure how that impacts the individuals who may have sought to exercise a right of appeal during the period. Does this mean, for example, that all those who made applications for such credits which failed will automatically be written to and told that they now have a right of appeal? I am not quite sure how they will be addressed under this SI. It would be helpful to have that clarified.

As the Explanatory Memorandum observes, some credits are posted automatically while other credits must be applied for: for example, the credit for caring for at least 20 hours a week. The omission of an appeal sits alongside what appears to be government reluctance to report on the success of measures to improve the take-up of claimable benefits. The noble Baroness, Lady Altmann, as Pensions Minister, commented that it was regrettable that the number of carers claiming for NI credits was still so low—so I will take this opportunity to ask the Minister whether it is possible to be advised on how many carers claim such credits and the number the DWP estimates could be eligible for such credits, so that we have some idea of what the noble Baroness, Lady Altmann, was referring to when she referred to the regrettably low number of claimants.

My final point is on the uprating of the new state pension and the consequential adjustment to income-related benefits. Sections 150, 150A and 151A of the Social Security Administration Act refer to uprating by no less than earnings or prices. There is no reference to the triple lock in the new state pension. I cannot miss this opportunity, given that there has been much speculation and comment about the longevity of the triple lock, not least from the Government’s previous Pensions Minister. Can the Minister confirm the exact extent of the Government’s commitment to retaining the triple lock?

Given the introduction of universal credit, over time the adjusting of income-related benefits to take account of the uprating of the new state pension will largely be in respect of awards of universal credit and pension credit. The experience of the poorest pensioners will continue to be influenced by the extent to which the uprating of the pension guarantee credit is comparable to, or less generous than, that applied to the new state pension. Can the Minister confirm the Government’s policy for the uprating of pension credit, not least over the course of this Parliament?

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I will make a short contribution to this debate. I think the House is grateful to the Minister for coming forward with these two corrections to omissions. It is reassuring to hear, if I understand the Minister accurately, that these things have been caught in time, so that there has been no real loss to individuals. Like the noble Baroness, Lady Drake, I would like more reassurance, because it was quite a complicated explanation. I think the Minister said that no results in terms of loss of appeals to national insurance credit were discernible.

It would be valuable if the Minister could take careful note that some of us might like to come back to monitoring this in the uprating debate next spring, so that we will have a better chance to look at all the downstream consequences of the changes. In addition, I would like to hear a little more reassurance about paragraph 12 of the Explanatory Memorandum, Monitoring and Review, which says:

“We will not monitor these changes specifically, but will do so through established customer feedback processes”.

I wonder what that means and how meaningful it is when these changes might be affecting tiny numbers, but the tiny numbers might be significantly affected. I am a bit nervous about leaving this to customer feedback. Will the Minister take that point on board?

On another process point, I have always been amazed at the extent of the expertise available to the professionals in the department, the Pensions Directorate and the Pensions Agency, its predecessor. They were expert at coping with this immense detail. The regulations contain two omissions, and that is two omissions too many. They may be relatively minor in their extent, but, as I keep saying to the Minister, the ministerial team has to make sure that there is enough resource in the department to ensure that parliamentary draftsmen get all the details they need, so that omissions are not made in future. The department continues to suffer staff cuts in a way that puts unreasonable pressure on the experts who are good enough to provide us with the regulations that we consider here in Parliament. Will the Minister reflect on that?

It may be that these are two completely one-off exceptions. I hope that it is not the beginning of a trend. Those of us in Parliament who look at these things will be watching very carefully. I do not blame the professionals in the department: if they are underhanded in terms of dealing with the immense volume of ineffably complicated minutiae of legislative proceedings and provisions, they need all the help that they can get.

Again, I welcome the fact that this seems to have been picked up in time, but if the Minister could give us some more reassurance about winners and losers, even if it takes him over the coming months until the next uprating in the spring, I am perfectly content to support these regulations. I support the points raised by the noble Baroness, Lady Drake, but I am perfectly happy to support these regulations and allow them to go forward.

--- Later in debate ---

[Lord Freud]

I will confirm this in writing, but my impression is that there is a right of appeal in these circumstances. It may be that there was no gap in the legislation. I will confirm that, but that is my starting position for 10.

[Baroness Drake]

Before the noble Lord sits down, I just want to take advantage, if I may, to ask about the issue of pension credit. It has been confirmed that it will follow the earnings link, which we know is in the legislation. But in recent times we have seen increases in pension credit greater than what is required by legislation in order to ensure that the poorest pensioners do not receive a smaller increase than those receiving state pension. Given the kind of statements made in the Budget in 2015, is the disposition of the Government still to say that there will be a focus on the poorest pensioners through pension credit and that they will not feel constrained to stay only within what the legislation says but may go above it in order to protect those poorest pensioners? I am interested so I am pushing the Minister on this point.

[Lord Freud]

I always love to answer the noble Baroness in a positive way, but I am not in a position to speculate on the precise levels in any particular year. We do not have long to wait until we see some of the figures. I am feeling incredibly confident about my last answer, almost to the extent that a letter is not required on this particular point. With that response, I beg to move.

Motion agreed.