§ Question proposed, That the Clause stand part of the Bill.
§ Mr. Iain Macleod (Enfield, West)
We come to the most difficult decision which we have to take. A number of problems were outlined earlier by my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) arising out of the inevitable timetable—and I do not use the word in its technical sense —that the General Election, which we all desire, imposes on the Finance Bill.
The reality of Chapter II—that is, Clauses 21 to 28 and the Fifth Schedule —is that, even if we sat until dawn, it is virtually impossible effectively to move Amendments, nor would it be possible for the Government to accept them. Therefore, we must decide as a Committee whether we accept Chapter II, with its imperfections, as a basis or, because of its imperfections, reject it as a basis. The arguments for both courses are strong, and I will state them briefly before I give some advice to the Committee on the general question and on the special question of the F.S.S.U., about which no doubt hon. Members have had representations made to them.
The case for keeping these Clauses in the Bill is best put by quoting two short extracts from letters from the Chairman of the Life Offices' Association. Neither letter was written to me, but both were meant to be passed on to me. The first says:You will be aware that this Association and the Associated Scottish Life Offices have been consulted throughout on the provisions of these Clauses and that their negotiations with the Board of Inland Revenue have reached a stage where it would be unreasonable to postpone the legislation.The second quotation, from a different letter, reads:Needless to say any persuasion you can apply yourself in the direction of keeping the provisions on which we have spent so many weary months would be helpful!6.45 p.m.
The argument against is put in a number of Amendments, for example, by the C.B.I., but perhaps was most cogently put in a short leader yesterday in the 1870 Financial Times headed " Don't rush over pensions ". I read the last sentence of it:It would be very much better to drop Clauses 21–28 from the Bill and leave them to be dealt with more leisurely and in a more constructive atmosphere by the next Government.There are undoubtedly flaws in Clauses 21 to 28. First, the retrospective provisions will certainly hurt the F.S.S.U. scheme. There is the reduction in the death in service benefit, and there is the omission of any reference to self-employed schemes under the 1956 Act.
Those are most serious flaws, but I am fortified in my advice that, on the whole, we should, after discussion, approve these policies by reading a report of the Council of the Association of University Teachers on the question of superannuation. It says:In fairness, it must be said that for a lot of schemes these new tax regulations are a big improvement and offer considerable tax benefits to both employers and employees who operate terminal salary schemes, but it practically means the death knell of the F.S.S.U. scheme ".In my view, unsatisfactory though the situation is, it would be right, after discussion, to leave these Clauses in the Bill so that the life offices may have, as they most earnestly press on us, some basis on which they can plan in the weeks and months ahead. I have put this view to the C.B.I. and the A.B.C.C. I do not say that they both accept what they say, but they certainly understand the logic which lies behind it.
I come to my second point, which relates more directly to the matter about which hon. Members have been circulated during the last few hours—the problems of the F.S.S.U. The trouble arises from the fact that during the past year there have been negotiations to change the university superannuation scheme, which is insurance based, to a terminal salary scheme. As recently as January, the Government Actuary's Department had agreed a costing for the new scheme. But the February proposals of the Board of Inland Revenue would, unless the F.S.S.U. is either exempt or its points are met, destroy the scheme. The Inland Revenue has opposed the suggestion that such exemption should be given in the Bill.
1871 It does not necessarily follow that all members of the F.S.S.U. scheme would have the same attitude about the changes. I think that it depends very much on their age and at what point in their service they may be. The attitude of someone who has just come into university service may be very different from that of someone who has virtually completed his service and has planned his last few years on certain assumptions which may be vitiated if the Clauses go through un-amended. But there is no reason why such points should not be met in due course.
We shall face a General Election in a short time. I do not want to put this in any partisan way, but either there will be the present Government or there will be the alternative Government under my right hon. Friend the Leader of the Opposition. I consulted my right hon. Friend on this point this morning. It is known that our attitude towards occupational pension schemes is different from, and I think considerably more favourable than, that of the present Government. The Secretary of State for Social Services believes that many of the schemes can adjust to the proposals the Government have put forward. I think that he uses the word " adjust " in the procrustean sense of either mutilating the limbs or stretching the body to fit the bed he has designed for them.
Our attitude is quite clear. We believe in occupational pension schemes. We recognise the advantages of the Clause, which is why I am offering this advice to the Committee, but we think that there are some flaws in it. Therefore, if we are returned as the Government we shall be anxious to consult urgently. We believe that amending legislation might well be necessary in the first Session of the new Parliament, and, if so, I give the undertaking from my right hon. Friend the Leader of the Opposition that that would be done, if, as I think is likely, those discussions show that Clauses 21 to 28 should not form a permanent basis for the future of occupational schemes.
If I understand the position rightly, the Board of the Inland Revenue has rejected the suggestion from the Chairman of the F.S.S.U. Council. I think that it would be wrong in advance of the discussions that will take place, in the eventuality I have 1872 indicated, to give a firm undertaking on the matter, but I view the case that the F.S.S.U. has put forward with sympathy and we would discuss its objections sympathetically in the light of what I have said.
I think that that is a clear statement of our position. I recognise the difficulties, but my advice, on balance, to my right hon. and hon. Friends is that with all the imperfections we should allow the Clauses to stand for the reasons the life offices put forward. I give the undertaking that we will carry out the discussions, and if necessary the amendments along the lines of my speech, as soon as we become the Government.
§ Mr. Lubbock
I listened very carefully to the right hon. Member for Enfield, West (Mr. lain Macleod) to ascertain whether he would give any firm undertaking that in the event of a Tory Government being returned to power the F.S.S.U. would be granted the exemption which the chairman sought. I think that university teachers will have noted that the right hon. Gentleman gave no such undertaking, but said only that he would do as the Government are already doing, which is to review the position with great sympathy.
§ Mr. lain Macleod
The hon. Gentleman is a very experienced Member. The Government, unless I am wrong, have rejected the application of the Chairman of the F.S.S.U. Council. I have not. The words " look at sympathetically are a well-known parliamentary phrase which the hon. Gentleman knows perfectly well. It does mean precisely what it says. I recognise the force of the requests, and am prepared to look at them sympathetically.
§ Mr. Lubbock
I am grateful to the hon. Gentleman for that clarification of his earlier remarks.
I have no doubt that the university teachers, who are not so well skilled in the phraseology we use here, will still have some difficulty in deciding exactly what he meant. But the important thing is that we should try to deal with this unfortunate situation in such a way that the university teachers whose scheme is to be affected by the Clauses are not left in a state of serious anxiety, particularly those who have nearly reached the 1873 end of their careers and depend upon the income they will receive from their existing pension scheme to finance their retirement.
We have all had letters about the matter from constituents who are university teachers. I should like to make one or two points drawn to my attention by a constituent which are additional to those referred to by the right hon. Gentleman. First, the F.S.S.U. would be a dying scheme if the exemption had been granted. I understand that the new entrants to university teaching would have had the alternative scheme which had been on the point of agreement when the new proposals were brought forward by the Board of Inland Revenue in February. One was concerned only with the 45,000 university teachers at present employed and covered by the F.S.S.U. scheme, and not teachers who entered universities after the date of any agreements that might have been made.
My constituent makes the very valid point that his contract of service will be overridden if the Clauses go through as they stand. We are entitled to assurances by the Government that if agreement could not be reached on the lines suggested by the chairman of the F.S.S.U. an alternative will be proposed. I hope that we shall hear about it this afternoon.
My constituent also tells me that if an alternative scheme is set up other than the one already negotiated the cost to the taxpayer would be extremely high. He points out that the 45,000 members of the existing F.S.S.U. scheme have over 500,000 policies. It is rather an odd sort of pension scheme. It means that on average any individual covered by it has over 10 policies. If I have understood the position correctly, as a university teacher moves up the salary scale he takes out a new policy every time instead of modifying the existing one.
§ Mr. Lubbock
I do not think that it is very sensible, because whenever the scheme is altered ten times as many policies need to be modified as there are employees. My constituent points out that when 5,000 Civil Service employees were given the opportunity to transfer to the Civil Service scheme in 1953 it took six 1874 years to evaluate the financial state of their previous policies. When we are concerned with a hundred times the number, it will obviously be an enormous undertaking.
I made some inquiries through the Financial Secretary's office the other day. It was good enough to draw my attention to the fact that the provisions of the Clauses come into effect only after the State scheme is introduced in 1972. Therefore, we are not at the last opportunity for considering the matter. I rather agree with the right hon. Member for Enfield, West that on that basis we can allow the Clauses to go through, knowing that we shall have another two Finance Bills in which to rectify the matter. But I do not think that it is at all a bad idea for it to be raised here this afternoon.
I hope that the Financial Secretary will be able to give some reassurance to those 45,000 people who have hitherto been in the F.S.S.U. scheme that their future pension rights will not be seriously jeopardised—quite unintentionally—by a wider scheme provided for in Chapter II and Schedule with which it is associated.
§ 7.0 p.m.
§ Mr. Taverne
It may assist the Committee if I intervene at this stage, although I do not wish to conclude the debate now, and, certainly, there may be points which hon. Members may raise to which I may have to reply later.
First, I should like to thank the right hon. Gentleman the Member for Enfield, West (Mr. lain Macleod) for the advice which he offered to the Committee and for the attitude which he has taken. I would like to echo the general trend of his remarks, though there are certain respects in which I might approach the matter slightly differently. We certainly agree that these proposals are of great importance and merit full discussion which, in the normal course of events, they would have had in Committee, but we decided that it was right to continue with the Clauses very much for the reasons which the right hon. Gentleman gave.
In the first place, there are a few points which it may be well to keep in mind. Generally, the new code will give more generous tax reliefs and greater flexibility to pension schemes, and for that reason 1875 they have been widely welcomed. There are many schemes, for example, in the process of reorganisation which want to take advantage of the new extended reliefs immediately, and by passing the Clauses into law now those schemes will be able to get ahead. I do not think that anyone wants a period of uncertainty in such matters if it can be avoided.
While any scheme which wants to do so will be able to take advantage of the new code, as the hon. Gentleman the Member for Orpington (Mr. Lubbock) pointed out, no one will be compelled to conform to it till the introduction of the National Superannuation Scheme—if this Government continue in power after the election; or at whatever date may be decided upon by the Opposition if they form the Government. We have put forward our proposals thus early in order to give the maximum amount of warning, and that means that we have a breathing space for further discussions and negotiations and any modifications which the Committee may, in due course, think appropriate.
By continuing with these Clauses now we hope to allow schemes to take advantage of the new reliefs, but without prejudice to further discussions on those individual aspects of the new code on which there may be mixed views.
I come to the very important question of the F.S.S.U. schemes. I hope that it will be realised from what I have said that we do not intend the passing of the Finance Bill in its present form in any way to prejudice the further discussion of their special difficulties—and there are special difficulties. We for our part intend to resume consideration of these special problems immediately on our return. It is not correct, I would say to the right hon. Gentleman, to say that we have finally rejected the F.S.S.U.'s particular request. The correct position is that so far the Board of Inland Revenue has not accepted it, but negotiations on this will continue.
Certain things should be made quite clear. Some of them have already been referred to by the hon. Member for Orpington. As the Bill stands, as I have said, no one can possibly be affected till the pension schemes come into operation. Suppose that the F.S.S.U. case is not met at the end of the negotiations, even then 1876 the existing rights to commute, earned up to the date of operation of the new pensions scheme, would not be affected; though the F.S.S.U. would presumably then wish to adapt its scheme, to ensure that there would be no tax penalty on employees after the operative date, but negotiations, as I have said, will continue, and there will be ample time—as the hon. Member for Orpington said, two further Finance Bills—to make whatever amendments the Committee might consider desirable after the negotiations have been completed.
There is one other point of criticism which the right hon. Member did not refer to, but which has led to some misconception and which I should perhaps also mention. One other criticism which has been made of the Bill is that it is more restrictive than the statement of practice issued by the Revenue on 26th February. But this is a misconception.
We have not tried to write out the full range of benefits which might be approved under the discretion conferred by Clause 22. It would not be practicable to do so. Clause 21 and Part I of the Schedule set out a simple minimum scheme which could be approved without any inquiry by the Revenue. It is not intended as a model scheme, but, I understand, there are employers who might be deterred from setting up pension schemes by the prospect of inquiries and negotiations, and they may be glad to have the opportunity to take a scheme which can be approved and operated automatically, and the Schedule attempts to meet their needs. Most employers will certainly want to have more elaborate schemes which will be approved under the discretion which is given in Clause 22.
There is a great deal left to discretion. This has been another point of criticism, but ever since 1921 the system has been to give a wide discretion to the Revenue. I think that it has been felt on all sides that it has worked extremely well, because it has given unique opportunity for flexibility. The present proposals are, in fact, broadly in line with the recommendations of the Tucker Committee. What that committee said was that while there should be perhaps a widening of the area where automatic approval should be given, discretion should certainly continue in the hands of the Board of Inland Revenue.
1877 So, in summary, what I would like to say at this stage is that all we are doing in these Clauses is to enable those who want to to go ahead to take advantage of the scheme, and for those reasons I think that, for the benefit of those concerned, the Clauses should become law.
§ Mr. John H. Osborn (Sheffield, Hallam)
I intervene only briefly because my right hon. Friend the Member for Enfield, West (Mr. lain Macleod) has argued very persuasively why we should accept the Clauses dealing with occupational pension schemes. There is only one major point which I would make, and that is to ask why the Bill should go ahead when the other Bill which contained such proposals has been dropped. Why should not these Clauses be dropped as well? Why should we not consider the position more soberly and calmly? These are very important Clauses indeed, affecting the whole of occupational pension schemes. I have been at committee meetings with those a great deal more expert than I am in the operation of such schemes, and those people are very disturbed that Parliament should push through these Clauses, particularly when they are riddled with errors.
My right hon. Friend has informed the Committee that there will be amending legislation, if necessary, after discussion, and the Government have put forward the point that there is discretion and that the Revenue will continue to exercise discretion. I would feel very much easier if I could have an assurance that, after discussion, the present Government, if they are re-elected, or the present Opposition, as is more likely when they have won it, will bring forward amending legislation soon after the election; and many other people would feel a great deal easier too.
§ Mrs. Lena Jeger (Holborn and St. Pancras, South)
I am sure that the whole Committee will have welcomed the statement made by the Minister on this difficult subject of university pensions. As I understood him, it means that the passing of this Finance Bill does not affect the N.F.S.S.U. negotiations, and that these will continue without prejudice. I am sure he will tell me if I have mis- 1878 represented the position, but that is my understanding of it. I think that it would have relieved the anxieties of many of our university constituents if they had understood that that was the position.
Pensions, especially contributory pensions, are a very personal and sensitive matter, and it is very important that nobody should have any sense of grievance or misunderstanding about his or her pension prospects under a contributory scheme. People feel that, to a large extent, the money is their own, and they do not want to lose the right to have some say about how it is disposed of, about the right to a lump sum, the right to choose investments for annuities, and so on.
I hope very much that there will be the least possible delay in taking up these negotiations immediately after the election, because there has been a great deal of anxiety, which I can quite understand; and I am sure, from the sympathetic remarks which have been made on both sides of the Committee, that other hon. Members appreciate this concern, too. It does not matter how actuarially perfect these schemes are; they somehow fail if people feel that they are not fair and are out of their own personal control.
When these negotiations are taken up again, will my hon. and learned Friend sympathetically consider the restrictions in the Schedule on the right to take a lump sum? This is an element of free choice for the people who are getting towards the end of their earning life which should be extended as far as possible.
The Minister suggested that those who had been in the scheme for a long time should have more rights than those who came in later, and I hope that such a provision will be built into any revision of the scheme.
§ Mr. Lubbock
The Financial Secretary gave us an assurance that all benefits which had been acquired up until the date of the Finance Bill—
§ Mr. Lubbock
—all benefits which had been acquired up until the operative date, which is 1972, could be continued in their present form, and it is only thereafter that any disadvantage could accrue to the university teachers. This is a very 1879 important point which perhaps our constituents would like to know about.
§ Mrs. Jeger
I thank the hon. Gentleman for spelling this out in more detail. If we cannot get agreement on the lump sum problem and the scheme thereby ceases to fail within the mantle of what can be approved, university staff will be exposed to the serious problem of having to pay income tax on the contributions to the fund of their employers. This is an unfair and difficult choice to put before the university staff.
The employers contribute about 10 per cent. of the fund, and to pay tax on that will, I am told—and I am the last person in the Committee to know anything about income tax—cost a university teacher earning £1,500 an extra £48, in the £2,500 range an extra £80, and in the £3,500 range an extra £112.
I know that the whole policy of the Government is directed towards a reduction of income tax and taking the maximum number of people altogether out of liability for income tax. It is no part of our policy to increase income tax, and I should be sorry if, in an accidental way, because of failure to agree on commuting rights, university staffs found themselves outside the approval of the scheme and, therefore, subject to a most unfair and unfortunate reduction in their real incomes. I am confident that the next Government, like the present Government, will take every care to see that this does not happen.
The Treasury and the Board of Inland Revenue would save themselves a tremendous amount of trouble if these policies did not have to be rewritten. This is a complicated and lengthy business and it will occupy the time of civil servants which could be better devoted to much more important matters.
This has been a useful debate which should allay a great deal of anxiety felt by the universities. Our universities have enough problems to face without the added problem of anxious staff who are worried about their old age and their pension rights. I thank the Minister for what he has said this afternoon to allay those anxieties.
§ Mr. Frank Hooley (Sheffield, Healey)
Before coming to the House of Commons I was on the staff of a university for 16 1880 years, and several of my former colleagues have written to me in very pressing terms outlining their anxieties about these Clauses.
I welcome what has been said by my hon. Friend the Financial Secretary, which perhaps I may summarise in the following way. First, discussions on the question of the F.S.S.U. are still proceeding and will proceed. Secondly, even if the outcome of these discussions were not all that the members of the F.S.S.U. wished, nothing would take effect until 1972, at the earliest, when the national superannuation scheme would become effective. Thirdly, all existing rights up to that time, or whenever the operative date may be, would continue to be valid. Fourthly, he said that there would he at least two more Finance Bills—I am not quite sure how he makes two—during which amendments, discussions or further legislation on this matter could take place. We are not up, therefore, against the deadline of this week, and the situation is a great deal more fluid in many respects than some university teachers have been led to believe.
§ Mr. Lubbock
The hon. Gentleman said that he could not quite see why there would be two Finance Bills. The State superannuation scheme is not now to come into operation until late 1972, so that we are not only considering the Finance Bill of next year but also the one in the spring of 1972.
§ Mr. Hooley
I am obliged to the hon. Gentleman, but my impression was that the State superannuation scheme would come into effect on 1st April, 1972, and would, presumably, be effective before the 1972 Finance Bill, but this is a small matter—
§ Mr. John Smith
It may well be that the Minister was referring to the Finance Bill of this autumn which either Parliament will have to introduce to cope with the mess the Government have got us into.
§ Mr. Hooley
With respect, I was trying hard to avoid that sort of stupid and irrelevant debating point. This is a matter of great personal concern to my constituents and the constituents of many hon. Members. This is a matter which is causing great anxiety to individuals, and I am sorry that the hon. Gentleman has made that comment.
1881 Would it be feasible for the Treasury, either through the Department for Education and Science or the University Grants Committee, to set out formally what has been said this afternoon? I know that members of the F.S.S.U. and university teachers can read HANSARD, but if a brief statement showing broadly what my hon. Friend the Financial Secretary has said were sent to members of the A.U.T. and to universities this might allay some quite unnecessary anxieties. That is merely an administrative suggestion, which may be useful.
I am in no way an expert on superannuation matters, and it would be inappropriate for me to go into details, but a point has been made to me in correspondence which it may be worth mentioning in addition to the points which have been made by my hon. Friend the Member for Holborn and St. Pancras, South (Mrs. Lena Jeger). As the hon. Member for Orpington (Mr. Lubbock) said, the F.S.S.U. scheme is peculiar in that there is no pension fund. The pension rights depend on policies which are taken out on the life of the individual person. Part of the premium is paid by that person and part by the employer, but the pension accrues through the maturity of the individual policies. A great many university teachers will also take out life policies for other purposes; for example, as collateral on a mortgage, or as an ordinary life insurance.
The fear has been expressed to me by one correspondent that if the F.S.S.U. policies are aggregated the policies which he has taken out for other purposes may exceed certain tax liabilities and he may innocently find that because of the changes in the superannuation system the policies which he has taken out for the mortgage on his house are exposed to heavy tax liabilities. This is a highly technical matter which I do not fully understand, but this point should be ventilated because of the special and peculiar nature of this superannuation scheme.
The hon. Member for Orpington mentioned the number of policies, and he is absolutely right. When I left the universities, after a quite moderate spell of 16 years, I had 22 policies in my own name. He understated the situation when he spoke of an average of 10. It will 1882 be a difficult business to convert this scheme. I welcome the assurance by the Financial Secretary that further negotiations will take place and that the matter will be carefully considered.
§ Sir Eric Fletcher (Islington, East)
I, too, have had a number of letters from university teachers living in my constituency, and there is no doubt that there is wide concern on this matter. Some of the fears may be misconceived, but the concern is deeply felt.
I am grateful for the assurances which have been given that none of the existing rights to which members of the F.S.S.U. are entitled will be prejudiced. They are particularly sore about the fact that as they understand it they would be liable to pay tax on their employers' contribution and would lose the existing rights to the lump sum payable on death or retirement. The matter is highly complicated. I very much hope that the anxieties felt by my constituents and university teachers generally will be alleviated and that there will be the fullest possible negotiations.
§ Mr. Dean
I hope that the Financial Secretary will be able to clarify a few points which are not yet clear. He said that these Clauses represent changes which are both more generous and more flexible for occupational pension schemes. In so far as they do that we welcome them, but there are still a number of uncertainties which I hope he will be able to clarify.
All hon. Members who have spoken have mentioned the F.S.S.U. scheme, about which there is considerable concern in the universities. The financial Secretary said, and I took down his words, " So far we have not accepted their case." I do not think he was prepared to go further than that. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) made it clear that we want to meet the case, but I hope that the Financial Secretary will go further than he has gone since it would be intolerable if no solution were found to this problem. It would put the university staff in a situation in which their contracts would be broken and this is a very serious matter. I hope that the hon. and learned Gentleman will he able to say that a solution to this difficulty will be found. He has mentioned that there is time for this to be done and that 1883 it is not the intention that these Clauses should come fully into operation until a new pensions scheme is introduced. That gives a certain amount of time. Indeed it takes us beyond April 1972 since it is highly unlikely that a new pension scheme could be introduced before April 1973 at the earliest.
The Financial Secretary also said that the Inland Revenue over many years has had discretion in regard to approval of the scheme for tax purposes and that this will be retained. We welcome this statement and I hope that he will be able to clarify the matter a little more. It appears from the Bill that it is a good deal less favourable than the original White Paper of February, 1970 issued by the Inland Revenue on the authority of the Treasury.
§ Mr. Taverneindicated dissent.
§ Mr. Dean
The Financial Secretary shakes his head, but that appears to be the case. This is the impression gained by many pension experts outside who ought to know.
To give one example, in the case of death or retirement the White Paper stated that the widow's pension could be two-thirds of the maximum of the husband's whereas the Bill appears to state clearly that it can be only half. I am advised that if Schedule 5 of the Bill were to be strictly applied most good schemes would have to cut back the arrangements which now exist. May we have a clear assurance that the Inland Revenue will have discretion as in the past to allow it to approve schemes at least up to the terms and conditions laid down in the White Paper in February, 1970.
I should like to mention two other brief points which come within the terms of the discretion. The first relates to early retirement. The Bill and the Schedule appear to prevent early retirement other than through incapacity and long term illness, whereas the present practice is that early retirement is normally approved within ten years of the specified retirement age. It is important that this provision should be continued, particularly in these days when redundancy occurs at a comparatively 1884 early age but when it is difficult for people to get other employment. Therefore, the provision for earlier retirement is valuable and should be retained.
Another point relates to death in service, where it appears that the maximum lump sum will be equal to twice the annual salary. Again, I hope that there will be discretion with the Inland Revenue. This would not only appear to be restrictive but even more so than obtains at present. I have in mind the case of a widow who may want to repay a house mortgage. She may have estate duty to pay and may want a lump sum for the education of children. Surely sympathetic treatment should be given in such cases and the restrictions in regard to twice the annual salary would create unnecessary difficulties for widows.
One can also foresee a situation in a company in which existing employees are offered more than twice annual salary whereas new employees who come along can be offered only twice annual salary. There are obvious difficulties and anomalies which would arise between the two types of employee depending upon when he joined the firm. Furthermore, this could work against mobility. Here, too, I hope that the Financial Secretary will be able to say a little more.
The final point mentioned by my right hon. Friend is one which we regard as extremely important. One of the great omissions in bringing these Inland Revenue rules up to date is that the opportunity has not been taken at the same time to revise the rules for the self-employed which are very much out of date. I refer to the limit of £750 which was laid down a good many years ago, and the fact that there is no provision for commutation. It is much to be regretted that an opportunity has not been taken to make the same sort of up-dated arrangements for the self-employed as has been done for employees.
To sum up, for the sake of clarity and for the sake of the minimum amount of uncertainty, I hope that the Financial Secretary will be able to go a little further than he did in his first speech, especially on the F.S.S.U. problem and also on the other points which have been raised in the debate.
§ [Mr. HARRY GOURLAY in the Chair]
§ 7.30 p.m.
§ Mr. Taverne
Perhaps I might deal, first, with some of the points raised by the hon. Member for Somerset, North (Mr. Dean).
I ought to make it clear that the discretion which would be given to the Revenue would go wider than the provisions of the Bill. The discretion will be up to what is provided in the White Paper. The limits in Part I are for an automatic approval only, and the discretionary approval will be exercised on the lines set out in the White Paper. This includes both death benefits and the age of retirement. Early retirement with immediate pension will be allowed under the discretion within 10 years of normal retirement age.
On the other point which the hon. Gentleman mentioned, about the death in service restrictions and the lump sum, the White Paper states clearly that the lump sum which will be possible under an approved scheme will be restricted to twice the yearly salary, and the balance must be pension. That was also set out in the White Paper, and the White Paper guidance is intended to be the code under which the discretion will be exercised.
If I might now mention the self-employed, it was intended that the question of self-employed pensions should be dealt with at the same time as employee-employer pensions. In fact, the proposals by the body concerned with self-employment came in so late that it was not possible to finalise them in time for the Finance Bill. It is unfortunate that these proposals could not be dealt with at the same time, but they came in at a late stage.
I turn now to the questions relating to the F.S.S.U. and to one or two other points raised by hon. Members. My hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) was correct in his very clear summary of the four main points which he understood me to be making. Certainly, I will take note of his suggestion that we might set out formally what has been said today, though I do not feel at first sight that it will be necessary. I hope that what has been said will receive proper publicity, and cer- 1886 tainly those concerned with the negotiations are well aware of the position.
The hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) asked for a clear assurance that there would be amending legislation as a result of the discussions. I cannot give him that assurance, of course. I have made it clear that there is an opportunity for amending legislation. Discussions are going on, but I cannot see what the end will be.
As for the code as a whole, we feel that what is set out in the White Paper is right. It has been welcomed, and it would undo the good work now to say that everything is at large and that we intend to change the main proposals at a later stage. We intend to abide by the main proposals set out in the White Paper.
My hon. Friend the Member for Holborn and St. Pancras, South (Mrs. Lena Jeger) asked whether we could not consider relaxing the restrictions on the lump sums payable in approved schemes. The restrictions on the lump sums under paragraph 3 of the Fifth Schedule are an essential part of the scheme. It is a generous provision. The Royal Commission recommended that there should be a severe ceiling on the amount of lump sums which could be payable. The Tucker Commission recommended a higher ceiling. After discussion with the C.B.I. representatives, I came to the conclusion that it was right that a more generous provision should be made, and that is what is provided in paragraph 3.
One cannot say that there should be no limit, because what is happening is that a concession is being made now which did not exist before. Not only is there tax relief on the contributions. There is tax relief on the build-up of the funds which did not exist before, and then there will be a tax-free lump sum. There must be a limit, and this is contained in paragraph 3.
§ Mrs. Lena Jeger
What is the present limit, if any, on the lump sum rights of F.S.S.U. contributors?
§ Mr. Taverne
I am not discussing the F.S.S.U. at the moment. I am dealing with the general question. I do not want to mislead the Committee. The point on lump sums which is under discussion at present is the special position of the 1887 F.S.S.U. and similar schemes. I cannot give any undertaking about the outcome of the negotiations. The discussions are in process, and I do not know what the outcome will be.
However, certain matters are clear. There will not be any retrospective removal of rights. Whatever lump sum rights or commutation rights have been earned by the operative date, they will be observed regardless of the outcome of the negotiations.
A number of fears have been expressed, but again I cannot comment on what the F.S.S.U. would do if the negotiations did not come out as it wished. However, I find it inconceivable that the employees would be under a tax penalty. What might happen is that the F.S.S.U. would have to adapt its scheme so that they avoided the penalty. Anyway, these are matters for negotiations.
I hope that I have clarified the points which were worrying hon. Members and that, in general, the decision to go ahead will commend itself not only to the Front Bench opposite but to the Committee at large.
§ Mr. Gilbert Longden (Hertfordshire, South-West)
May I ask three questions about the F.S.S.U.? If the F.S.S.U. is not exempted, is it true that the 10 per cent. employer's contributions will be taxed as additional salary? Secondly, will the death in service benefit be cut by less than half of the present possible rate? Thirdly, will the lump sum payable on retirement be cut to a maximum of 1½ year's final remuneration? I am not quite clear about those three points.
§ Mr. Taverne
First, he retains his present rights. Secondly, he will not have to pay any penalty after the operative date if the scheme is adapted. On the question of death in service benefits, if there was no adaptation, again existing rights would not be affected. If there was an adaptation, it would be in line with the White Paper proposals which, generally speaking, improve the position of widows. Again, I must emphasise that existing rights will not be affected in any event. What happens apart from that is a matter for negotiation.
§ Question put and agreed to.
§ Clause 21 ordered to stand part of the Bill.1888
§ The Deputy Chairman
If it suits the convenience of the Committee, I suggest that I put the Question on Clauses 22 to 28 together.
§ Question, That Clauses 22 to 28 stand part of the Bill, put and agreed to.
§ Clauses 22 to 28 ordered to stand part of the Bill.