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This is an important amendment. Even with all the difficulties that we know are involved, we still have to find a way through in order to give the relevant benefit to the relevant people.
Lord McKenzie of Luton: I fear I am going to disappoint my noble friend yet again, but I hope I can convince her that in doing so we have a good basis for supporting grandparents. I am conscious of the heroic efforts of many grandparents in supporting their children and their grandchildren. I have had the opportunity twice in recent months, together with the noble Baroness, Lady Massey, to meet groups of grandparents and understand some of the tragic circumstances that they have encompassed in their lives and the struggles they have. We reasonably address their circumstances under the Bill.
Broadly speaking, the amendments seek to give national insurance credits to a relevant grandparent or other relative who is engaged in looking after a child to whom they are related. In the debate on the previous group of amendments we discussed how we intend to define “engaged in caring”. It would be interesting to hear from my noble friend how we define “engaged in looking after” and how that differs from “engaged in caring”. In the debate that has taken place we have to a certain extent conflated those two concepts, and it is important that we separate them. “Looking after” could be more occasional, and something less than “caring”.
We already have a tried and tested way of identifying those who are looking after children, through the award of child benefit—which also carries with it HRP, as my noble friend said, or, from 2010, the new credit. That credit can be switched to whichever parent needs it, provided that the child benefit is switched as well. The noble Lord, Lord Skelmersdale, will press that point in an amendment to which we will come shortly. In other words, the credit goes with the child benefit, as it is awarded in recognition that the parent is the primary carer of the child, usually the mother.
However, there is existing provision for parents to relinquish their child benefit award. I assure noble Lords that HMRC, which administers child benefit, takes great care to ensure that parents or other child benefit awardees are aware of their right to relinquish entitlement to it in favour of the person who gives up work to look after the child. Certainly, some of the grandparents I have met are in receipt of child benefit. They are entitled to it because their children, sometimes for very tragic reasons, have given up the care of their child. It follows logically that if grandparents or other relatives take on the role of primary carer, they would be entitled to child benefit and the credit in their own right. The credit would run for S2P as well as the basic state pension, something not covered by the amendment.
I neither underestimate nor undervalue the role that grandparents or other relatives can play in looking after a child. However, research suggests that the majority of those providing any childcare do so for just one or two days a week. I would distinguish the childcare that takes place in tragic circumstances following the death or effective loss of a child, perhaps through drug or alcohol dependency, from the casual support that people give their grandchildren.
That statistic about caring for grandchildren one or two days a week on average gives credence to the view that most grandparents—or, rather, family relatives—do not generally perform the role of primary carer and may not therefore be disadvantaged when looking for work. On that basis, it would be wrong to award class 3 credits to the generality of grandparents rather than, as the Bill does, supporting those grandparents and others who are involved in caring.
We have just discussed our plans for a new carer’s credit. There is no reason why a grandparent should not be eligible for the carer’s credit if they fall within the relevant criteria. For example, a grandparent might be providing care of 20 or more hours a week for a disabled grandchild to provide the mother with breathing space. Even if the mother is in receipt of carer’s allowance for that child, there will be no reason why the grandparent should not be eligible for the carer’s credit.
In another situation, a person may be providing 20 or more hours care a week for their son or daughter, who is suffering from drug or alcohol dependency, as well as taking care of their children. In those circumstances, the grandparent could be eligible for the carer’s credit for looking after their son or daughter if they were either receiving the appropriate benefit or the need for care was certified by a health or social care professional.
Furthermore, by definition, today’s grandparents were yesterday’s parents. If they retire after 6 April 2010, they will benefit from the conversion of years of home responsibilities protection from 1978 onwards, in respect of their own children, into years of credits, and of course from the reduction to 30 qualifying years to help them qualify for a full basic state pension. As a result of the Bill, a combination of credits for being in receipt of child benefit for their children and subsequently credits for caring for their children, or the award of child benefits for their grandchildren, could mean that only a few years of intervening work would enable them to achieve a full basic state pension. This is a major change resulting from the Bill.
In my view, there is a significant difference between providing care and looking after somebody. We have sought to protect the pension rights of someone providing significant levels of care, either as the primary carer of a child or a disabled person. That is not the same as looking after a child on an occasional or ad hoc basis. Of course there can be hard cases but I hope the examples I have given show that what we are putting in place will provide effective coverage. I have not dwelt on the practicalities of pursuing the route that my noble friend suggests, but there are clearly practical implications for establishing the credit, should the amendment be adopted.
As I said, I do not underestimate the importance of the role of grandparents or indeed other relatives in modern families. However, I believe that the amendment would be a step too far in supporting grandparents generally for doing what they have always done—providing help and support for their families. In the light of this, I ask my noble friend to withdraw her amendment.
Baroness Hollis of Heigham: I thank the Minister. He is known colloquially—I think that one of his friends has said it—as the Minister for Grandparents, so I know how much he has taken to heart the plight particularly of those grandparents who are at the extreme end of pressured, dysfunctional families, where the parents are unable to take care of their children. If anybody can fight to help to improve their situation, I am sure that it will be my noble friend.
I accept his points about the technical difficulties of the amendment. I accept that transferring across is not straightforward, which is why—I am sorry if I sound like a gramophone record—we really need Amendment No. 4, which would address the problem. If we cannot agree to Amendment No. 4, we shall have to find some other way and keep going after pockets of individuals with tailored solutions. I disagree with the Minister’s suggestion that we might appreciate that we have in place “effective coverage for grandparents”. No, we do not. What we have—I welcome my noble friend’s remarks on it—is greater protection and support where either the grandchild or their parent is disabled. My noble friend’s comments in that regard were very helpful.
However, where a grandparent is engaged in steadfast caring for a child—I am talking about 20 hours a week or more on a regular basis—in, let us say, a rural community, where one is unlikely to be able to find alternative commercial care for a two year-old, I do not understand the distinction between caring and looking after. When I looked after my two year-old, I was caring and looking after at the same time. It is not a valid distinction. We are talking about somebody whose hours of committed, reliable caring are such that they take that grandparent out of the labour force to enable the daughter to be in it. At that point, the grandparent loses their income, because they are not receiving child care tax credit—that is perhaps a battle to be fought on another day—and their pension rights as well. I am afraid that nothing that my noble friend has said today gives me comfort on that front.
He asked for some way of checking. We currently have a child care tax credit, which is a high-value payment, being worth £150 or more, and there is a fairly flaky audit trail on to whom it is being paid. Whatever system we have for that can certainly apply perfectly well for someone who is seeking merely to acquire a pension credit as opposed to an income payment. A district health visitor could make an occasional check while on a call that they would probably make at any rate on a two year-old at home. A GP could authorise it in a similar way. There are plenty of people who interface with the lives of those children, their parents and their grandparents if an audit trail is needed.
If a parent, particularly a lone parent, is in work full time and has a child under 12, especially a child under five, we know that someone has to look after it. If the parent is not claiming child care tax credit, it almost certainly means that the primary carer is the grandparent or a family relative. If it was anybody else, they would be able to claim child care tax credit. Ergo, there is a grandparent involved; ergo, somebody is failing to achieve the protection that they would get through entitlement to a basic state pension if they were in the labour market. The problem that the Minister identified does not exist.
Lord McKenzie of Luton: Does my noble friend not accept that, under the 30-year rule, if somebody is a grandparent, even with the 12-year credit rule for their children, 12 of those 30 years are already covered? However extensively they are caring for or looking after—we could debate what those concepts may mean—children grow up. They will not necessarily absorb the whole of the rest of the working life of the grandparent. The 30-year contribution rule, together with the other changes—the de minimis provisions and the mixtures of credit and payments-in—makes a significant difference to the position of grandparents that my noble friend describes.
Baroness Hollis of Heigham: My noble friend is absolutely right that the 30-year rule would help, but he is assuming that only one grandchild is concerned, that that grandchild grows up and the grandparent can then go back to work. We are talking about perhaps two grandchildren growing up or two families, with two or three daughters needing help, particularly in rural communities. We could very easily be talking about a situation where the people concerned may bring up their own child and receive HRP, manage two, three, four or five years in the labour market and then, from age 50 to age 65, provide almost continuous child care for grandchild after grandchild. My noble friend can do nothing to help them except to ensure that they go into old age without a pension of their own.
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Lord McKenzie of Luton: That really is not correct. If we examine the circumstances that my noble friend describes, presumably the grandparent is likely to be in work for a period before having children. That is not necessarily the case but it is possible—so there are opportunities there to build for the state pension. If the grandparent has only one child, 12 years’ worth of credits will be earned, so if nothing else happened there would certainly be an entitlement to a proportion of the basic state pension. At that level it would not be the complete state pension. If you assume that after that period there was no engagement with the labour market and no other entitlement to credits, what my noble friend says is right—except that at least on that basis a proportion of the basic state pension would be available to that person.
Baroness Hollis of Heigham: I entirely agree. My noble friend is right that if that person has had a job there will be 12 years under the new regime under which they will acquire HRP protection as of right. They may at that point, for three, five or eight years—who knows—be in the labour market. However, the average age to become a grandparent is 49, which means half of those people become grandparents before that age and half after it. Obviously, some will be caring after the age of 60 or 65, but none the less a substantial number of women will find that the whole decade of their lives between the ages of 50 and 60 is taken up in childcare.
I do not doubt that some women will be able to cobble together a 30-year record in bits and bobs, and I am delighted if they can. But they will not know that necessarily until the day before they retire, and they will not be able to buy additional years, which would allow us to help them to overcome the problem.
Lord McKenzie of Luton: They would be able to buy six years under the current arrangement, so that is another six years of entitlement to basic state pension.
Baroness Hollis of Heigham: Yes, but the point is that they may start caring at 50; they would hope to finish at 55, but their daughter may have another child and they may find themselves in a further caring situation. At 58 they cannot buy back the years that they have missed at 50 or 51, as my noble friend explained so clearly earlier.
I do not doubt that some grandparents will be able to cobble together some coverage, but I am concerned about the ones who cannot or will not. This amendment is not the best way in which to deal with the issue, but it may be the only way in which to raise it, given the Government’s reluctance to address other ways in which to deal with grandparents’ problems. Grandparents who take on the bulk of childcare, possibly for a decade or more, for their children, lose out on their pension rights and, because they are not allowed to register as childminders, lose out on childcare tax credit, too.
I am not comfortable that the amendment is the right form for this proposal because it would introduce technical difficulties about transferring across, but I am very grateful for the support that I have received. It has been a very wide-ranging debate. There is a problem to be addressed here. I am not saying that this amendment is the right way in which to resolve that problem—I am not persuaded that it is myself—but there is a problem here that women, particularly women in rural communities, low-paid women, parents of lone parents and so on, take on a responsibility for which they pay a very high cost. Some of them will find themselves without a full basic state pension when they enter official retirement. I hope that my noble friend will find ways in which to address this problem.
Baroness Howe of Idlicote: I should like to probe a tiny bit further. Clearly the Minister has addressed a lot of ways in which the group that we are discussing is being helped, especially with individuals with serious problems. We are dealing with a generation in which grandparents, particularly the older ones, are seeing a transition from a group who, like them, did not go to work, to a group who are automatically going to work. It is part of the routine; from day one they are beginning to earn their pension. Those grandparents are making an extra-special effort to help their children to ensure that they are in that position.
I support what the noble Baroness, Lady Hollis, has said. We agree that the amendment may not be the perfect way in which to do this, but can the Minister think a bit longer about the issue and see whether there is any way in which he could address this particular point? This is a hugely important period of time for equal opportunities, in which grandparents are willingly playing a particularly heavy price.
Baroness Greengross: Will the Minister consider one other thing? Somewhere in the Bill could there not be a line that stresses that grandparents who care for 20 hours or more a week should not be discriminated against in terms of pension rights compared with non-family carers? I do not know whether that is the right way in which to do this—but if there were some line to that effect it would help enormously, because at the moment they are gravely discriminated against.
Lord McKenzie of Luton: With the force of argument that has been made, one will continue to reflect on this matter. However, unless I am missing the point, it is not right to say that grandparents are discriminated against in these provisions in comparison with non-grandparents. They are in exactly the same position.
To recap on the journey that grandparents could take—even under the scenario that the noble Baroness, Lady Howe, outlined, which I do understand—a grandparent would presumably have the opportunity to start off in work at the start of their lives. They may possibly give up work when they have children, but then be entitled to the credit for 12 years—so there are two tranches of contribution towards the basic state pension. Even if for the rest of their life they were involved in caring for children in a way that did not produce any credits for them, under the provisions, they could buy the final six years—or any of those six years over that period. If you top that up—and those would probably be fairly unusual circumstances—quite a significant tranche of basic state pension would be available because of that. We need to keep this in context.
I shall continue to reflect on the matter.
Baroness Hollis of Heigham: With that assurance, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Skelmersdale moved Amendment No. 11:
(1) The Secretary of State may from time to time, and shall when required by subsection (2), lay before each House of Parliament a report on—
The noble Lord said: I briefly mentioned pension credit at Second Reading and I should like to return to the issue again now. When debating this topic, the Government are always quick to remind us about the benefits of the pension credit scheme. The system has the potential to do a lot of good for quite a lot of people, which is why we on these Benches have no intention of abolishing means-testing or the pension credit scheme, although improvements are badly needed.
These benefits are often trumpeted by the Government to hide the unfortunate effects of pension credit on many other people—people who do not claim the credit to which they are entitled and see their small personal savings result in swingeing cuts of their benefit levels, and the huge number of people who will become subject to intrusive means-testing. Your Lordships will note that this is a problem that will persuade some people not to invest in the new national pensions saving scheme, but that thought will get further discussion later.
There is no doubt that pensions credit is formidably—not to say intimidatingly—complicated. Every report and research study shows that the problem is getting worse. Nearly £2.5 billion goes uncollected, which means that more than 1.5 million pensioners do not receive what they are owed. Indeed, the problem is so bad that the Government calculate the cost of pension credit on the assumption that huge amounts of benefit will not be claimed and so do not need to be funded outside public expenditure. How magic!
Means-testing is also failing those who do take up the benefit at that end. The current levels of means-testing, even after reforms in this Bill, will still leave 30 per cent of pensioners eligible for pension credit, and that is the best possible outcome. That is still 30 per cent of pensioners who have no incentive to save, because what money they can put aside will immediately be clawed back by the system and the Government.
This amendment is not hugely radical. The Department for Work and Pensions already produces lots of information, and covers that information in an annual report. However, that is clearly not enough. We must be clear that the reforms in the Bill will reduce pension credit entitlement as promised and that take-up must be improved. I beg to move.
Lord Oakeshott of Seagrove Bay: The noble Lord, Lord Skelmersdale, made a brief but powerful attack on the evils of means-testing and I do not propose to duplicate his figures. However, given the scandal of 1.7 million or 1.8 million people—whatever the figure is—not receiving the pension credit to which they are entitled, the disincentive effect of means-testing and the problem for people under the national pensions savings scheme, I was a little surprised that he did not seem to feel that we should take stronger and bolder action to reduce means-testing. Be that as it may, we all agree that there is a problem.
We on these Benches still have an open mind on the amendment. As the noble Lord said, the department already provides most of this information. I am not against the Secretary of State’s making a regular report but I am not sure whether it is more appropriate to ask the Secretary of State to do another report or to ask a more independent body to do it. Perhaps we can return to that when we come to the provisions on the Personal Accounts Delivery Authority and our Amendment No. 111. We are thinking of having the authority do it so that it can specifically look at and link in the effect of means-testing, estimates of the amount of means-testing, and the effect that that has on whether people should be saving through auto-enrolment and so forth.
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