Commons Sitting of 4 July 1995

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  DEFENCE

    Naval Refits
    Mr. Chidgey: To ask the Secretary of State for Defence if he will consider allowing all shipyards to compete for naval refits by ensuring that whole classes of vessels are not put within predetermined refit programmes. [30555]
    The Minister of State for Defence Procurement (Mr. Roger Freeman): All shipyards are able to compete for a wide range of naval refits within the unallocated programme. An increasing volume of work will be put to competition as the number of refits in the allocated programme reduces. Eventually, the whole of the surface ship refitting programme will be available for competition.
    Mr. Chidgey: The Minister has already informed the House that he is considering deferring the ending of nuclear work at Rosyth. Is he therefore also considering reviewing the allocation, and the consequences of his action on the allocation, of refit work for surface ships? If he is considering that review, will he give the House an undertaking that he will also consider the allocation of refit work for mine warfare ships—a particular concern to Vosper Thornycroft in my constituency?
    Mr. Freeman: We are discussing with both the managements at Rosyth and Devonport any amendments that need to be made to the allocation of work. The hon. Gentleman is right to say that the allocation to Rosyth assumed the end of refitting to strategic nuclear submarines in about two to three year's time. We need to run on strategic nuclear submarine refits at Rosyth and therefore we will reconsider the allocation programme, but I hold out no immediate hope to the hon. Gentleman that we shall reconsider assigning whole classes of ships to Devonport.
    Mr. Colvin: Without inviting tenders from others, how certain can my right hon. Friend be that the price that he receives for the refit work at Rosyth, which I acknowledge will have allocated work, is competitive? Is it not unfair that Vosper Thornycroft, which built most of the smaller warships that are being allocated to Rosyth, is not being allowed to bid for the tender for their refits? None the
    126
    less, will he also take this opportunity just to tell us what the Government's position is with regard to the bids for the new type 23 frigates?
    Mr. Freeman: I confirm to my hon. Friend that we expect Vosper to bid. My understanding is that it has bid for the type 23 frigates. I have a high regard for the company. I have confirmed that the yard is capable of a new build of a modern warship. On refitting, my hon. Friend is right, but to ensure that the price is competitive, we use estimates of what we believe the work of comparable ship refitting has been in the United Kingdom. We have refined our techniques for ensuring that the taxpayer gets value for money, but I look forward to the day when all ship refitting is available for competition—that should be from about 2005, and Vosper will be able to bid for all classes of refitting then.
    Mr. Denham: How can Vosper Thornycroft be excluded, as the Government are currently planning, from bidding for Hunt and Sandown minehunter work until 2005? Is the Minister not aware that a shipyard such as Vosper is constantly improving its productivity and lowering its cost structures? How can his Department really know what a competitive price for that work would be unless Vosper is able to bid for at least part of the work load that has been allocated elsewhere?
    Mr. Freeman: I understand the strength of that argument, but I should set against that the fact that we wish the Rosyth shipyard, in due course, to concentrate only on surface ship refitting. It is important that Rosyth should be viable. It is important that it should make a full transition from nuclear work to surface ship work. Therefore, the Ministry of Defence has an obligation to Rosyth as well as an obligation to ensure that there is as much competition as possible. I remind the House that we welcome competition for the unallocated programme of refitting work, especially for frigate work and that, by 2005, all new build yards and refitting yards will be able to compete for the work.
    Mr. Gallie: I commend my right hon. Friend for sticking to the commitments that he gave to Rosyth about two years ago—commitments that were sought from both sides of the House. Is it not disgraceful that Opposition Members seem now to be trying to persuade my right hon. Friend to turn against those commitments, which he gave so readily only a year or two ago?
    Mr. Freeman: I am grateful to my hon. Friend for that support. I can confirm our clear determination to ensure that there is a proper allocation of balanced work, not only for Rosyth but for Devonport. We shall not revisit our decision to allocate Trident submarine refitting work to Plymouth, Devonport, but we intend to ensure that Rosyth has enough viable work to ensure continued employment well into the next century.

    Bosnia (Arms Embargo)
    Mr. Home Robertson: To ask the Secretary of State for Defence what assessment he has made of the impact on international security of the lifting of the arms embargo on Bosnia. [30556]
    The Secretary of State for Defence (Mr. Malcolm Rifkind): We believe that that could lead to a serious escalation in fighting in Bosnia, which would jeopardise

    127
    the humanitarian effort and the international peace process, and would lead to the withdrawal of UNPROFOR.
    Mr. Home Robertson: Has the Secretary of State yet managed to convey to the United States Congress that lifting the arms embargo at this stage would certainly lead to pre-emptive strikes by those who have heavy weapons—not only the Bosnian Serbs, but the Croatian forces? As we are in a position now where the Bosnian Serb army has been blocking and attacking humanitarian aid convoys in Sarajevo and other enclaves for several months, how soon will it be before the new United Nations rapid reaction force is in a position to intervene to protect those convoys?
    Mr. Rifkind: There has been some progress in convoys getting through to Sarajevo and Gorazde, but I agree that the position remains serious. A significant part of the new rapid deployment force is already in Bosnia and is available to the theatre commander. We would expect further reinforcement of that force to be able to be sent out in the near future.
    Mr. Key: Has my right hon. and learned Friend discussed the effects of lifting the embargo with our French allies? Without divulging any details, can he assure the House that he has discussed, and is familiar with, the French rules of engagement and that they are the same as ours?
    Mr. Rifkind: I met my colleague the new French Minister of Defence last week, and I can assure my hon. Friend that both France and the United Kingdom believe that it is necessary to have robust rules of engagement to ensure the full protection of our forces in Bosnia, who will have the full freedom to use the force that they believe is necessary to defend their lives and to perform the duties that they are entrusted to carry out.
    Dr. David Clark: If the arms embargo were to be lifted, as the Secretary of State implies, we would have to evacuate the UNPROFOR forces. That would mean that 24 airmobile brigade would have to go in. Has the Secretary of State heard from the Bosnian and the Croatian Governments at this stage as to whether they are prepared to allow 24 airmobile to go in?
    Mr. Rifkind: We are at the moment discussing with the Croatian Government the use of the port of Ploce as an initial base for 24 airmobile brigade. I hope that that matter will be resolved in the very near future. Of course a substantial part of the British reinforcements is already in Bosnia—almost 1,000 extra men—and we would expect the advance party of about 400 of 24 airmobile to set out for Bosnia as soon as we can reach agreement with the Croatian Government on the lines that I set out a few moments ago.

    RAF Personnel (Overseas Peployment)
    Mrs. Gillan: To ask the Secretary of State for Defence how many RAF personnel are at present deployed overseas. [30557]
    The Minister of State for the Armed Forces (Mr. Nicholas Soames): In addition to over 9,000 personnel on permanent overseas deployments, over 1,300 Royal
    128
    Air Force personnel are deployed on out-of-area operational tasks in the former Yugoslavia, the middle east and elsewhere.
    Mrs. Gillan: My hon. Friend would no doubt agree that RAF personnel provide a first-class service in whichever arena they serve. Will he in particular praise the Jaguar wing from RAF Coltishall, which has been on almost permanent deployment for the past five years, first in the Gulf war, then in Turkey protecting the Kurds and latterly, since July 1993, providing close air support for UNPROFOR over Bosnia from Gioia del Colle? It is soon to be replaced by Harrier GR7s from RAF Laarbruch in Germany. Will my hon. Friend take this opportunity to acknowledge the special role that the Jag wing has played and to wish the GR7 team well?
    Mr. Soames: I am grateful to my hon. Friend. Before I address her question, I congratulate her on being the only Member of Parliament on the armed forces parliamentary scheme to have flown in the Tornado, the Jaguar and the Harrier. I understand that she acquitted herself on all three missions with great distinction and without being in any way untidy.
    I wholly endorse my hon. Friend's words about the Jaguar wing, which has achieved an exceptionally high strike rate over the past few years. It has done a very distinguished job in its recent deployment and will continue to do so until its end. I have no doubt that the Harriers will also acquit themselves well. I am also grateful for my hon. Friend's excellent support of the Royal Air Force.
    Mr. Martlew: That is all very well but, since 1990, there have been cuts in RAF personnel of 13,000. During that time, the RAF has become involved in defence projects in Iraq and Bosnia. In this year's defence estimates, it is stated that the RAF is going to lose another 11,000 jobs. There is severe overstretch in the RAF. When are the Government going to decide either to cut their defence commitments or to stop sacking RAF personnel?
    Mr. Soames: My right hon. Friends and I understand that it is the Labour party that wants to cut the Royal Air Force, not our party. I know that it will come as a terrible shock to the hon. Gentleman, but the Royal Air Force relishes the opportunity of flying operations and achieving exactly the exceptional results that it does. It is working hard. It is very busy. That is what it is there for, and it does it very well.
    Mr. Wilkinson: Is it not the case that most of the Royal Air Force's overseas operations in recent years have been outside the NATO area—Turkey, Iraq and now Bosnia? What is the sense of stationing so many Royal Air Force personnel in Germany, to the benefit of the local German economy? Should they not be brought back to this country to benefit our economy when so many proud bases, such as Scampton and Finningley, have closed?
    Mr. Soames: My hon. Friend, as a former Royal Air Force officer, is extremely knowledgeable in these matters. He knows well that our commitment to air defence in Germany at Laarbruch and Bruggen is extremely important. It is an essential part of our commitment to the defence of western Europe. That is why we are there and that is why we will stay there.

    Nuclear Test Ban Treaty
    Mr. Gerrard: To ask the Secretary of State for Defence what discussions he has held recently with his French and American counterparts regarding the nuclear test ban treaty. [30558]
    Mr. Rifkind: That is one of the wide range of defence matters which I discussed with and Dr. Perry in the past month.
    Mr. Gerrard: Has the Minister made clear to the French the outrage felt by many people in this country at the resumption of nuclear weapons tests? Will he impress upon France, the US and other nuclear weapons states the need for a comprehensive test ban treaty, as was agreed at the non-proliferation treaty conference, with no loopholes to allow any continuation of underground tests? Will he give a commitment that this country will in no circumstances resume nuclear weapons testing?
    Mr. Rifkind: The French Government have made it clear that their objective is to conclude a comprehensive test ban treaty. What they do at this moment is a matter for the French Government. I believe that they will work together with the United Kingdom and other countries towards such a test ban treaty. If the proper safeguards can be achieved, I look forward to the successful completion of the current negotiations.
    Mr. John Marshall: Is not the real trouble in the House with regard to nuclear test bans that the official Opposition are stuffed full of one-sided disarmers who want to throw away our nuclear deterrent and who have taken the lead from the Leader of the Opposition who was a supporter of one-sided disarmament in the 1980s?
    Mr. Rifkind: I have to say that the Opposition's policy is bizarre, to say the least. They were against Britain's possession of the nuclear deterrent at the height of the cold war and, once the cold war was over, they would have the British people believe that they have suddenly been converted to it. It is an incredible policy, to say the least.
    Dr. David Clark: Does the Secretary of State recall that, as recently as 16 May, the Foreign Secretary told the House that there was no longer any need for the Government to undertake nuclear tests? Is that still the Government's view? Will the Secretary of State assure the House that he will not follow the French example and resume nuclear testing?
    Mr. Rifkind: We have said that we have no intention of carrying out any further nuclear tests and, of course, the United States, which provides the testing ground, has a similar policy. The policy of the two Governments remains the same with regard to this matter.

    Partnership for Peace
    Mr. Patrick Thompson: To ask the Secretary of State for Defence when he next expects to visit NATO headquarters to discuss the development of partnership for peace. [30559]
    Mr. Rifkind: I expect that partnership for peace will be discussed when I visit NATO headquarters in November for the next meeting of the Defence Planning Committee.
    Mr. Thompson: My constituents who work at RAF Coltishall will certainly appreciate the tribute paid to their
    130
    work this afternoon. Bearing in mind the fact that NATO has ensured peace and stability in Europe since the second world war, is not partnership for peace the most effective route towards enlargement of NATO by the eastern European countries? Will my right hon. and learned Friend report on the progress that has been made with the documents setting out the criteria for joining NATO in the future?
    Mr. Rifkind: Partnership for peace provides not only the best basis for progress for those countries interested in joining but a framework for bilateral co-operation for countries such as Russia, Ukraine and others which are unlikely to be candidates for membership of the alliance. It enables us to develop security relationships with all those countries and that, I believe, is in the interests of our own national defence.
    Dr. Reid: The Secretary of State may know that we have long held the view that partnership for peace is one of the essential elements of the new European defence structures, along with an enlargement of NATO and with NATO-Russian bilateral arrangements. Will he therefore join us in welcoming the more co-operative approach that Russia has adopted towards partnership for peace and particularly its intention, as we understand it, to join in the joint co-ordination cells?
    Mr. Rifkind: Yes, we welcome the decision of the Russian Government to sign the two framework documents relating to their co-operation with NATO. I believe that it is crucial that, as the process of European security is taken forward, we develop a strategic relationship with Russia, because its co-operation would be a vital asset in ensuring peace throughout Europe, for the well-being of this country and western Europe as a whole.

    Defence Equipment Exports
    Mr. Nicholas Winterton: To ask the Secretary of State for Defence what steps he is taking to assist the overseas promotion of sales by United Kingdom defence equipment industries. [30561]
    Mr. Freeman: The Defence Export Services Organisation helped British industry in 1994 to achieve orders worth £5.4 billion.
    Mr. Winterton: Does my right hon. Friend agree that the Government should be proud of their commitment to promoting British defence exports which, from the figures that I have, could be worth as much as £7 billion annually, providing and guaranteeing some 500,000 jobs? Does he also agree that the longer and larger production runs are beneficial in saving money? In connection with the order that the Ministry of Defence is about to place for the attack helicopter, will my right hon. Friend bear in mind the Tiger, Tigrat, Euro-tiger team with which British Aerospace is involved, and which could add to the great assets that I have outlined?
    Mr. Freeman: I find myself in complete agreement with my hon. Friend. Conservative Members are all proud of Britain's defence export record, which is second to none in Europe. I agree with what he said about the value of defence exports to domestic procurement prices. Because of the volume of defence exports, we can reduce the cost of domestic procurement by about £300 million a year.

    131
    As for the attack helicopter, I know that my hon. Friend has a constituency interest. We hope to announce a decision as soon as possible. I must say that we have been very thorough in our analysis and we shall be purchasing an attack helicopter in the best interests of the British Army, based on cost and operational effectiveness.
    Mr. Fatchett: Is the right hon. Gentleman not scoring something of an own goal for the Government when he draws attention to the Government's record on defence exports? Is not the real issue the Government's covert and illegal support of arms sales to Iran and Iraq? Given the scandal that surrounds the Government's breach of their own regulations on Iran and Iraq, and the controversy surrounding BMARC and the role of the Chief Secretary to the Treasury, is it not true that, whatever happens in the vote on the leader of the Conservative party in Committee Room 12 today, the Government will always be remembered for sleaze, corruption and deceit of the House of Commons when it comes to exports to Iran and Iraq?
    Mr. Freeman: I think that we would all agree that that was utter claptrap, and I choose my words carefully. The policy of the United Kingdom Government in the 1980s was not to supply any lethal equipment to Iran or Iraq. The record of China, Russia and other major European countries is such that our modest contribution of non-lethal equipment to those two countries pales into insignificance.

    Front-line Infantry
    Mr. Pawsey: To ask the Secretary of State for Defence what is the United Kingdom's front-line infantry strength; and what it was in 1990. [30562]
    Mr. Soames: On 1 April 1995, the total trained strength of the infantry was about 27,000; on 1 April 1990 it was about 35,900. These figures exclude 2,000 Gurkhas, 2,000 Royal Marines and 1,250 soldiers from all other arms deployed in the infantry role.
    Mr. Pawsey: My hon. Friend has a distinguished service record in a distinguished regiment, and is therefore knowledgeable in these matters. Does he really believe that the infantry strength announced to the House today is enough to ensure the security of the United Kingdom and to enable us, at the same time, to discharge our international obligations?
    Mr. Soames: I am grateful to my hon. Friend for what he said. Over the past two years, he has rightly taken a close interest in these matters. We believe that the Army is large enough to meet its commitments. The numerical strength of the Army should not be regarded as the primary measure of front-line strength. Its operational capability is of prime importance. It has never been better equipped, motivated or trained. I am wholly confident that it can undertake all the tasks to which it is assigned. I am grateful to my hon. Friend for his support.
    Mr. Simpson: Does the Minister agree that it is in our national interests to equip our infantry with our own equipment? Is he aware that the royal ordnance factory in Nottingham is now the only small arms manufacturer and developer in the UK, increasingly dependent on how the Government decide to allocate their procurement policies? Does he accept that it is in our national interest to ensure
    132
    that our infantry is equipped on a strategic basis rather than by the equivalent of a pick 'n' mix counter at Woolworth's?
    Mr. Soames: The hon. Gentleman grossly over-exaggerates to make a point. I pay tribute to the Royal Ordnance company, a subsidiary of British Aerospace, which does a remarkable job in providing excellent equipment for our forces. I reiterate that our forces have never been better equipped. I am quite satisfied that they have everything that they need. Of course my right hon. and learned Friend will ensure that, whatever they can buy plainly from British suppliers which is cost-competitive and exactly meets their needs, will be bought.
    Sir Michael Neubert: What effect does my hon. Friend think it would have on the strength of our front-line infantry if, as reported, homosexuals were to be admitted to Her Majesty's armed forces? Is there any truth in the front-page story in yesterday's edition of The Daily Telegraph?
    Mr. Soames: I am grateful that my hon. Friend has raised that matter. I believe that the effect on our armed forces would be extremely serious. I want to take this opportunity to say that the reports in yesterday's press that Ministers had decided to review the ban on homosexuals in the armed forces were wholly inaccurate. There has been no such decision.

    China (Arms Embargo)
    Mr. Sutcliffe: To ask the Secretary of State for Defence what reports he has received of infringements in the arms embargo imposed on China; and if he will make a statement. [30563]
    Mr. Rifkind: I have not received any report confirming an infringement of the European Union arms embargo imposed on China.
    Mr. Sutcliffe: I thank the Minister for that answer and I am reassured by what he said. China has a continuing record of human rights violations. The markets within China are opening up and it is now selling arms around the world. Will the Minister and the Foreign Secretary use their offices to ensure that other countries considering arms sales to China, such as Israel and Russia, are aware of the arms embargo?
    Mr. Rifkind: China gets about 90 per cent. of its arms supplies from Russia, so it is clear that it is Russian Government policy that will determine whether China obtains access to the sort of equipment covered by the embargo.

    French Armed Forces (Co-operation)
    Mr. MacShane: To ask the Secretary of State for Defence what further co-operation or integration with the French armed forces is planned. [30564]
    Mr. Soames: The United Kingdom enjoys close bilateral defence relations with France and we are always willing to investigate potential areas for further co-operation.
    Mr. MacShane: I welcome that statement and hope that that military co-operation will be extended to political

    133
    and economic co-operation. Will the Minister say something about Britain's attitude to the gross provocation by France of resuming nuclear tests in the Pacific? Will he send a message of solidarity to the peoples and the Governments of Australia and New Zealand? Does he agree that, for the time being, we should be boycotting Renault and Peugeot cars? If, as Labour Members hope, the Prime Minister is soon confirmed in his post, we will toast that victory in Australian, not French champagne.
    Mr. Soames: That would be going a bit too far. The hon. Gentleman tempts us down a very unwise path. Indeed, I am surprised that he has asked such a question because he is a scholar and an aficionado of all things French. He knows that the decision on testing is a matter for the French. For us, the principal objective is an early conclusion to the comprehensive test ban treaty, and the French commitment to that has been reaffirmed. As for sending a message of solidarity to the countries that the hon. Gentleman mentioned, it is the French who should do that.
    Mr. Rathbone: Will my hon. Friend reaffirm the Government's support for the activities of the Western European Union and also the funding for its parliamentary assembly?
    Mr. Soames: I am happy to endorse the work of the WEU. As my hon. Friend knows from his distinguished work with that body—I had the honour to serve under him for a time—the WEU continues to be developed as the European pillar of NATO and a defence arm of the European Union in a way that is complementary to the alliance. It is important that we do not forget that the bedrock of the defence of Europe is NATO. That remains our first and prime charge.

    Faslane
    Mr. Kirkwood: To ask the Secretary of State for Defence if he now forecasts an overspend on the budget for the construction of the facilities at Faslane; and if he will make a statement. [30565]
    Mr. Freeman: The Trident works programme is expected to exceed the 1984 baseline estimate of £1.1 billion at current prices by some £800 million. The Trident programme overall is expected to cost £11.7 billion, representing a saving of £3.7 billion over the original estimate.
    Mr. Kirkwood: Is not a 72 per cent. overspend an absolute disgrace? Will the Minister confirm that there have been examples of some of the construction on some of the projects involved at Faslane starting before the design work had been completed? Will he confirm that £360 million has been paid to more than 1,000 consultants who variously have been employed on the project? Will he further confirm that 50 per cent. of that £800 million overspend has been siphoned off from budgets for other projects?
    Will the Minister assure the House that, after the Public Accounts Committee has properly investigated the overspend, any senior officials and Ministers responsible for that strategic gross failure will be asked to reconsider their positions?
    Mr. Freeman: The hon. Gentleman is not right about the consequences for the defence budget because the
    134
    Trident programme overall has come in substantially under budget. Some £3.7 billion was not required for the completion of submarines, missile systems and the works programmes, so there has been no adverse effect on the rest of the defence programme. I seek to make no apologies for the significant overrun, and I am pleased that the Trident programme was completed within 10 years. When the Public Accounts Committee has reported, we will consider its recommendations seriously and we will respond properly.
    Sir Michael Shersby: What were the principal reasons for the cost overrun on the Trident project? To what extent was the overrun caused by the earthquake in Scotland, which resulted in the need to redesign certain facilities at Faslane?
    Mr. Freeman: My hon. Friend will understand two of the principal reasons. The first is that the organisation of the contract resulted in PSA being in the lead for the construction of the Trident works programme, which was not completed either on budget or as expeditiously as we would have liked. We have learnt from that. Secondly, the nuclear standards that had to be met for the completion of the shiplift and the weapons facility at Coulport and other buildings were very onerous, and they changed during the 10 years of planning and construction. I undertake that when we have read the Public Accounts Committee report we will seek to give as much information that is not already contained in the report as possible.
    Dr. Godman: Is the budget overspend provoking management at Coulport and Faslane into introducing tough employment practices and procedures? A number of young men who are completing their apprenticeships are being told that they will be dismissed from employment when their apprenticeships are completed. Why at the very least cannot they be given short-term contracts of employment as journeymen?
    Mr. Freeman: I do not believe that current employment levels have anything to do with the Trident works overrun. The hon. Gentleman makes an important point, and I agree that the number of apprentices trained by the Army, Navy and Air Force makes a valuable contribution to society. I shall look into the point and write to him.

    Bett Report
    Mr. Brandreth: To ask the Secretary of State for Defence what representations he has received following the publication of the Bett report; and if he will make a statement. [30566]
    Mr. Soames: We have received a number of comments and questions from interested parties both inside and outside the armed forces. As we have said previously, we shall be giving the most careful and detailed consideration to all the report's recommendations before reaching any decisions.
    Mr. Brandreth: In the light of the report and the consideration that my hon. Friend said the Government will give, will he consider putting a halt to the development of Kentigern house in Glasgow as simply an Army pay and personnel centre, and consider the

    135
    establishment of a tri-service pay and personnel centre—possibly in a great historic city such as Chester, which has a proud services tradition?
    Mr. Soames: I am grateful to my hon. Friend—as his constituents will be—for his vigorous lobbying on behalf of his constituents, but the establishment of the APPC in Glasgow will proceed as planned. Any decision to set up a defence agency, as presaged in the Bett report, would not in any way be adversely affected by the decision to go ahead. It is not inconsistent with that decision, and we must proceed if the Army's requirements are to be met on time.
    Mr. Mackinlay: What representations has the Minister received about the privileged position enjoyed by the officers of our armed forces and their families—as distinct from the ordinary soldiers and service men and women—who enjoy the enormous benefit of having their children's boarding school fees paid to an extent in excess of £100 million a year? Is that not unfair to our other service men and women? Would it not be better for that money to be channelled into our state education system and to ensure that state schools in garrison towns had the benefit of that resource?
    Mr. Soames: No.

    Nuclear Weapons Testing
    Mr. Luff: To ask the Secretary of State for Defence what plans he has for developing procedures as alternatives to nuclear weapons testing; and if he will make a statement. [30567]
    Mr. Freeman: In the absence of underground nuclear weapon testing, we intend to develop further a range of experimental techniques and facilities for the stewardship of our nuclear weapon stockpile, including above-ground, non-nuclear experiments, lasers and computer simulation.
    Mr. Luff: Following that welcome confirmation that the Government do not intend to return to nuclear testing, will my right hon. Friend nevertheless assure me that it is our absolute priority to maintain the effectiveness of the Trident nuclear defence? Does he understand that this is a matter on which Conservatives are entirely united, in contrast to the Labour party, whose members have always accorded a shamefully low priority to the protection of this country?
    Mr. Freeman: I am grateful to my hon. Friend and can assure him that the safety of our nuclear weapons will be paramount in our programme. He is right: not only did 58 Labour Members sign the early-day motion to scrap Trident, but in May 1986 the shadow defence spokesman, the hon. Member for South Shields (Dr. Clark), and the leader of the Labour party were both members of parliamentary CND and both put their name to a statement supporting the removal of all nuclear weapons from British territory. That is the policy of the shadow defence spokesman.
    Mr. Dalyell: From previous answers this afternoon, is the House to take it that the Government approve of French nuclear testing?
    Mr. Freeman: The Government have not expressed an opinion; it is a matter for the French. My right hon. and learned Friend—[HON. MEMBERS: "Answer."] I am
    136
    answering the question. My right hon. and learned Friend the Secretary of State for Defence indicated our support, the United States' support and the French Government's support for full implementation of the comprehensive test ban treaty at the end of 1996.

    Bosnia
    Mr. Jon Owen Jones: To ask the Secretary of State for Defence what recent discussions he has had with his French counterpart concerning the deployment of additional troops to Bosnia. [30568]
    Mr. Rifkind: I met the French Defence Minister in London on 27 June. We discussed a wide range of issues, including the deployment of additional troops to Bosnia.
    Mr. Jones: Has the Minister had an opportunity to read today's The Times, in which a United Nations spokesman was quoted as describing UNPROFOR troops in Sarajevo as "sitting ducks"? Does he agree that if our troops, French troops and other United Nations troops are not to remain another winter in Bosnia as sitting ducks, the rapid reaction forces must arrange for their withdrawal this summer?
    Mr. Rifkind: No, I do not agree. For the time being, United Nations forces are carrying out a valuable role. That has been widely recognised and we hope that they will be able to continue to do so.
    Miss Emma Nicholson: Will my right hon. and learned Friend confirm that, in addition to the participation of French troops in Bosnia, we have 20 to 30 other training or co-operative missions with the French at present? Am I not right in thinking that that was the prime reason for the Prime Minister supporting the defence plank of the Maastricht treaty last year?
    Mr. Rifkind: There is good intergovernmental co-operation with France, as with the Netherlands and a number of other countries. We believe that it is in the interests of our defence capability to carry out joint exercises and to develop joint capabilities with a number of close allies.

    Land Mines
    Mr. Milburn: To ask the Secretary of State for Defence if he will ban the export of self-destruct anti-personnel land mines. [30569]
    Mr. Freeman: No. It would not be right to ban completely the export of a weapon which we may in future need to import for our own armed forces.
    Mr. Milburn: With more than 100 million mines already scattered across the world's battlefields, indiscriminately threatening not just soldiers but innocent civilians, has not the time come to call for a total ban on all types of land mines? Will not the Minister go one stage further by agreeing to press for a total ban, internationally, on all exports of land mines at the forthcoming UN inhumane weapons conference in September?
    Mr. Freeman: The sentiments of the whole House are probably with the hon. Gentlemen. However, the plain

    137
    fact is that a complete ban on the production, stockpiling and use of anti-personnel land mines would be ineffective. [Interruption.]
    Mr. Robathan: I am not used to such a cheer when I rise to my feet, but I am grateful for it.
    Does my right hon. Friend agree that, however appalling the consequences of anti-personnel mines may be for civilians, they are a viable weapon of war that we must keep in our armoury? Is it not unfortunate that the Labour party always uses the issue as a stick to beat the Government when we have an excellent record in the export of anti-personnel mines?
    Mr. Freeman: I am grateful to my hon. Friend, who is obviously correct. If we procure additional anti-personnel land mines, our policy will be to ensure that they are safe, tested and reliable, which will be a complement to the British armed forces.

  PRIME MINISTER

    Engagements
    Sir Michael Shersby: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30585]
    The Prime Minister (Mr. John Major): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.
    Sir Michael Shersby: Will my right hon. Friend join me in condemning the decision of the Associated Society of Locomotive Engineers and Firemen to strike? Does he agree that that decision will bring misery and frustration to millions of passengers? Is he, like me, astonished that the general secretary of ASLEF has not offered one word of apology to the travelling public?
    The Prime Minister: I am surprised at that and I regret it. [Interruption.]
    Madam Speaker: Order. I shall have a little order from the Front Benches below the Gangway—on both sides. There will be one exchange at a time.
    The Prime Minister: I totally condemn the decision to seek a strike, which is likely to cause chaos and confusion for hundreds of thousands of passengers. I do not believe that there is any justification whatsoever for the strike. I condemn it and I very much hope that the leader of the Labour party will condemn it as well and make it clear that he. like me, will put the interests of passengers before militancy.
    Mr. Blair: Does the Prime Minister share the anger and disgust of South West Water consumers—[Interruption.]Tory Members may find the subject boring, but while they continue to tear themselves apart we shall speak up for the people of this country on the issues that concern them. What is more, it is not 329 Conservative Members of Parliament who should decide the Prime Minister and Government of this country; it is the British people at the ballot box.
    138
    Does the Prime Minister share consumers' disgust that the managing director has received a 45 per cent. pay increase while water bills have risen by 70 per cent. since privatisation? Is it not high time that the regulator was given the power to curb such abuse?
    The Prime Minister: As the right hon. Gentleman knows, my view has been that many customers of water companies will be concerned about the reported pay increases of directors, and I share their concern. I think that, like me, many people would have no objection to pay rises that are linked to company performance, but if they cannot be linked to company performance I think that they will rightly be condemned by many people up and down the country. I propose to watch the pay increases carefully, and when we have received the Greenbury report on executive pay and remuneration we will be able to decide whether any action is necessary.
    Mr. Blair: Instead of watching it, why does the Prime Minister not act to put a stop to the abuses now?
    The Prime Minister: The right hon. Gentleman knows, for I have told him before—he is clearly a slow learner on this point—that we will wait and see what the committee examining the matter reports. When we have the facts in front of us, we will be in a position to take a decision: I prefer facts before decisions.
    Mr. Streeter: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30586]
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Streeter: Will my right hon. Friend join me in welcoming the decision of the House last night to extend the assisted places scheme for another year? What does he make of a party that voted yet again to deny the opportunities created by that scheme to hundreds and thousands of children throughout the country?
    The Prime Minister: I am unsurprised at the way in which the Labour party casts its votes. Labour Members may talk about opportunity but, time after time, they vote against extending opportunity, such as the assisted places scheme. I am in favour of that scheme because I want people to enjoy opportunities that earlier generations did not have. We act on issues—the Labour party talks about them but does nothing.
    Mr. Stevenson: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30587]
    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
    Mr. Stevenson: Does the Prime Minister agree that today 329 Tory Members of Parliament will probably be taking the most important political decision of their lives and that it will affect every man, woman and child in the country? Does the right hon. Gentleman recognise the sense of outrage felt throughout the length and breadth of the land that such a decision will be taken anonymously and in complete secrecy?
    The Prime Minister: I have to tell the hon. Gentleman—echoing the thoughts of the right hon. Member for Sedgefield (Mr. Blair) a few moments ago—that I recall Labour calling for a general election in 1985 and losing one in 1987. I recall Labour asking for a

    139
    general election in 1990, and it lost in 1992. Labour may call for a general election in 1995 but it will lose it in 1997.
    Mr. Brandreth: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30588]
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Brandreth: Is my right hon. Friend aware that in the City of Chester—[Interruption.]
    Madam Speaker: Order. We need order in the House.
    Mr. Brandreth: Is my right hon. Friend aware that my percipient constituents welcome low inflation and sustained growth, relish rising inward investment and falling unemployment and require a Government who represent Britain's interests at the heart of Europe—rejoicing in the literal decimation of new proposals from Brussels in the past five years? What does my right hon. Friend reckon has brought us in the direction of those happy phenomena?
    The Prime Minister: I welcome the advantages that have been brought to the people of Chester by this Government. I acknowledge that they will want to see such advantages in future, and I look forward to ensuring that they do.
    Ms Jowell: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30589]
    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
    Ms Jowell: Will the Prime Minister apologise to the thousands of blood donors whose gift of blood was wasted last week, and to the patients whose operations were cancelled because the Government's agent, the National Blood Authority, bought cheaper blood bags? Is not that another example of what the people of this country have come to expect from the Government, who know the price of everything but the value of nothing?
    The Prime Minister: One of the values of this Government's health reforms is that well over 1 million extra patients are being treated every year. One of the other values of this Government is capital expenditure worth more than £1 million every single week since 1979. One of the other advantages of this Government is more and better treatment in every aspect of the health service. One of the other values is the greatest improvement in primary health care since the health service was established in 1948. It is about time that the hon. Lady took her head out of the sand and saw what is really happening to improve the health service.
    Mr. Thurnham: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30590]
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Thurnham: Does my right hon. Friend agree that in negotiating our Maastricht opt-outs he proved that he is closer to the feelings of his people than any other leader in Europe? Is not the true test of leadership in Europe to
    140
    trust the people to think and act for themselves? Is that not how he led us to victory in 1992 and how he will lead us to victory again at the next election?
    The Prime Minister: I did then as I do now, and as I will do in the future, and that is to take the decisions that I believe are in our country's national interest and defend those decisions both abroad and here at home. It was for that reason that I set out and obtained the opt-outs. It was for that reason that I retained them. I believe that that is the right way for us to proceed.
    Dr. Hendron: The Prime Minister is probably aware that once again my constituency of Belfast, West was in flames yesterday evening. I am sure that he is aware that Mrs. Briege Gadd, the head of the life sentence review board, has resigned. In that regard, and in regard especially to the release of Lee Clegg yesterday, does the Prime Minister accept that the Northern Ireland Office has sacrificed the stability of the peace process for short-term political gains? Furthermore—[Interruption.]
    Madam Speaker: Order. The Member must be heard.
    Dr. Hendron: Furthermore, my constituents justifiably believe that there is one law for soldiers and another law for Irish prisoners.
    The Prime Minister: I must say to the hon. Gentleman, who has played a significant part in stilling the difficulties of Northern Ireland over recent years, that I believe that he is wrong to make that judgment. I hope that he will reflect again on what he said. The decision to release Private Clegg was a judicial matter, which was decided by my right hon. and learned Friend the Secretary of State for Northern Ireland on its merits—that is both the decision itself and the timing. The decision was made by my right hon. and learned Friend and subsequently I was informed of it. It was a judicial matter and it must remain a judicial matter.
    As for the difficulties faced by the hon. Gentleman's constituents yesterday, I think that he will know, as I know, and as the RUC is equally clear, that there was a high degree of orchestration in yesterday's violent events in Northern Ireland. Prominent members of Sinn Fein were present at a number of those events. They are far from the only violent demonstrations organised by Sinn Fein in recent months. I think that everyone in Northern Ireland is aware of that fact.
    If I may say one other thing about Private Clegg in the light of what has been said, I say to the House and the country as a whole that it is patently absurd to equate Private Clegg's case with deliberate acts of murder by paramilitaries—[Interruption.] The Lord Chief Justice, at Private Clegg's appeal, stressed that when he, Private Clegg, commenced the patrol
    "he had no intention of unlawfully killing or wounding anyone."
    One other further point may be of some comfort to many people in Northern Ireland. [Interruption.] I apologise for the length of my answer, but I think that this is a matter of importance for the peace of the streets in Northern Ireland. Of other cases recently considered by the life sentence review body alongside that of Private Clegg, five other prisoners were recommended for release on life licence. Four of those involved terrorist offences and they concerned both loyalists and republicans. All

    141
    those cases, including Private Clegg's, were reviewed on their merits. Private Clegg's case was only one of a number that were considered.
    Mr. Matthew Banks: My right hon. Friend is well aware of the healthy scepticism that exists, especially on the Government Benches, about a single European currency. He is also aware that many of us would like to see a referendum on the matter, if it is appropriate, in future. Does my right hon. Friend agree with me that to say no, never now to a single European currency would weaken Britain's negotiating position with our EU partners for very many years to come?
    The Prime Minister: I agree with my hon. Friend about that. I had observed over the past couple of years that there is the occasional case of scepticism about European policy—that has been evident. But I believe, as my hon. Friend said, that in the event that a British Cabinet decided to enter the single currency, it would be wise at that stage to consider whether or not to have a referendum. But to determine that matter at this stage would be premature.
    Mr. Simon Hughes: To ask the Prime Minister if he will list his official engagements for Tuesday 4 July. [30591]
    The Prime Minister: I refer the hon. Gentleman to the answer I gave some moments ago.
    Mr. Hughes: When the Prime Minister was previously elected, he set as one of his objectives the creation of a nation at ease with itself. If he is re-elected this afternoon, in a society and a country where the gap between the rich and the poor has become wider, not narrower, how will he show some commitment to that cause, so that under his premiership Britain is a country of social justice and greater equality, rather than one of greater social injustice and inequality?
    The Prime Minister: I do not agree with the premise upon which the hon. Gentleman frames his question. The greatest destroyer of ease of mind in Britain is inflation. Inflation is now at a lower level and under more secure lock and key than at any time for the past quarter of a century. That is not just a matter of concern to people with savings; it is a matter of concern, above all, to the people about whom the hon. Gentleman is concerned—the people who, at the end of the week, wonder whether they can pay their bills and are grateful that the prices have not gone up. To protect them, we must keep inflation down. I have, I am proud of that and I intend to keep it down.

Points of Order
3.30 pm
Mr. Ray Whitney: On a point of order, Madam Speaker. On a number of occasions in recent months you have expressed your view on the failure of hon. Members to advise other colleagues of visits to their constituencies. I have to report that, on Sunday 2 July, the hon. Member for Glasgow, Hillhead (Mr. Galloway) visited High Wycombe. I learned about the visit a few days before it took place, but the hon. Gentleman did not seek to advise me.
That gross breach of parliamentary convention and courtesy by the hon. Member for Hillhead was compounded by the fact that he sought to address members of the Pakistan and Kashmiri community in High Wycombe on the subject of Kashmir, playing on their understandable concern about the desire for self-determination of the people of Kashmir—a subject on which I have collaborated and worked with them for the 17 years that I have been a Member of Parliament.
In his speech, which descended to the lowest level of political muck-raking, the hon. Member for Hillhead seemed to display total ignorance of the record of policies of the Labour party on Kashmir. I seek your guidance, Madam Speaker.
Madam Speaker: The only matter that concerns me as a point of order is the fact that an hon. Member did not inform the hon. Gentleman that he was in his constituency. The House well knows my views on this matter. I have made them known many times. I have asked Members to comply, but as the hon. Gentleman and the House know, I have no authority to enforce these matters. It is simply a matter of courtesy that I would like to be observed.
Mr. D. N. Campbell-Savours: Further to that point of order, Madam Speaker. May I make it plain on behalf of myself and certain of my colleagues that we do not mind at all who comes to our constituencies? We do not require notice. I do not want anyone to write to me to tell me that they are coming to my constituency; any hon. Member of any political persuasion is welcome. We find it difficult to understand why Conservative Members are increasingly sensitive to the fact that people come to their constituencies, when it is a free country in free world, and they should simply grow up.
Mr. David Winnick rose—
Madam Speaker: I take it that it does not relate to the previous point of order.
Mr. Winnick indicated dissent.
Madam Speaker: No—in that case, I must hear it.
Mr. Winnick: As you know, Madam Speaker, the decision is being taken today as to who is to be the Prime Minister in this Parliament. My point of order is simply that, as the media will be notified immediately a decision
144
is reached, would it not be courteous for the House to be notified, too? Is it not another case where the media are notified, but we are not? We get our information from the press or television.
I put it to you, Madam Speaker, that the Leader of the House should make arrangements now, so that, when the result of the ballot is known, whether or not there is to be a second ballot—and that is inconclusive today—the House should be notified officially. I hope that arrangements will be made accordingly.
Madam Speaker: That is a matter not for me but for the usual channels. The job of the Speaker is to see that our work and our Order Paper continue to be dealt with in the Chamber. The matter that the hon. Gentleman has raised is a matter for the usual channels, if they wish a statement to be made. I prefer to see that our business goes on. Hon. Members who wish to know the result need only take a few strides out of the Chamber and they will soon be told.
Mr. Nick Hawkins: On a point of order, Madam Speaker. When I returned to the House across Westminster bridge this afternoon, I was disturbed to note that long telephoto lenses, presumably belonging to members of the paparazzi, have been installed and are trained on the whole of the Terrace, including your private section of the Terrace. Is it within your powers, or within those of the Officers of the House, to do as members of the Metropolitan police do when they protect access to the House on the public highway, and to take steps to prevent that unwarranted intrusion within the precincts of the House?
Madam Speaker: I cannot accept that it is an unwarranted intrusion if individuals, whether private persons or people from the press, wish to take photographs of the Terrace. There is nothing that we can do about it. I shall certainly not be doing anything of which I would be ashamed if photographs were taken of me. Now can we get on with our business?

STATUTORY INSTRUMENTS, &c
Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &c.),

INCOME-RELATED BENEFITS
That the Income-related Benefits Schemes (Miscellaneous Amendments) (No. 6) Regulations 1994 (S.I., 1994, No. 3061) be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Kirkhope.]
Question agreed to.
Dr. John Marek rose—
Madam Speaker: Does the hon. Gentleman have a point of order?
Dr. Marek: I wish to speak on the order of consideration motion for the Pensions Bill, Madam Speaker.
Madam Speaker: We have not yet reached that stage.

Orders of the Day

  Pensions Bill [Lords]
  As amended (in the Standing Committee), considered.
  Motion made, and Question proposed,
  That the Pensions Bill [Lords], as amended, be considered in the following order, namely, new Clause 22, new Clause 3, new Clause 23, new Clause 1, new Clause 2, new Clause 15, Amendments relating to Clause 164, Clause 7 and Clauses 16 to 21, new Clause 21, new Clauses 11 to 14, new Clause 7, new Clause 9, new Clause 10, new Clause 17, new Clause 19, new Clause 20, Amendments relating to Clauses 125 to 133 and Schedule 4, new Clause 6, new Clause 4, new Clause 5, new Clause 24, other new Clauses, other Amendments.—[Mr. Hague.]
  3.37 pm
  Dr. John Marek: I apologise for having stood up to speak too early, Madam Speaker, but it is always better to be early than to be late. Once one is too late, there is nothing that one can do about it.
  I want to draw the attention of the House to how curious the order of consideration is. Normally, as the House knows, Government new clauses come first, then Opposition new clauses and other new clauses. After that, we go through the amendments normally. However, this time, Madam Speaker, you will see that we are to start with Government new clause 22, then move to new clause 3, tabled by the Opposition, and then return to another Government new clause, new clause 23. Then we are to deal with new clause 1, another Opposition clause, and then new clauses 2 and 15, followed by amendments relating to clauses 164 and 7.
  We shall not come to new clauses tabled by hon. Members other than the occupants of the Government or the Opposition Front Bench until we reach new clause 21, Madam Speaker—the fifth debate, according to your selection. I find that curious, but there is a reason for it. The occupants of the Government and the Opposition Front Benches have got together to ensure that all the new clauses and amendments on war widows and their pensions, and on frozen pensioners, will not be considered until after 10 o'clock tonight.
  I could use various adjectives to describe that arrangement, and it does not help the House when Ministers and Opposition spokesmen get together in that way. Hundreds of hon. Members have signed early-day motions about frozen pensioners and war widows' pensions but now find that, because of collusion between the occupants of the two Front Benches, the amendments and new clauses dealing with them may not be reached until the early hours of the morning. [Interruption.]
  Will Ministers, instead of chatting across the Floor of the House to the Opposition Front-Bench spokesmen, consider that matter? The House would appreciate that, because some of the early-day motions have been signed by 200 or 300 Members. Could not the debate on those subjects have been taken, if not in prime time, at least in time when hon. Members will be here? That is the least we could do for war widows and reserve pensioners.
  I do not suppose that what I have said will make the slightest difference between hon. Members on the two Front Benches, but I register my objection to the way in which we are proceeding with—and the ordering of—the Bill.
  Mr. Phil Gallie: Surely hon. Members should be present when the business comes before the House. If the hon. Gentleman and the 200 or 300 Members thought the matter important enough to sign the early-day motion, they should be here tonight when the business is discussed.
  Question put and agreed to.

New clause 22

  HYBRID OCCUPATIONAL PENSION SCHEMES
  `.—(1) In spite of anything in sections 9 and 12 of the Pension Schemes Act 1993 (requirements for certification and determination of basis on which scheme is contracted-out), the Secretary of State may by regulations provide, where the pensions provided by an occupational pension scheme include both—

  (a) such pensions that, if the scheme provided only those pensions, it would satisfy section 9(2) of that Act, and

  (b) such other pensions that, if the scheme provided only those other pensions, it would satisfy section 9(3) of that Act, for Part III of that Act to have effect as if the scheme were two separate schemes providing, respectively, the pensions referred to in paragraphs (a) and (b)

  (2) Regulations made by the Secretary of State may, in connection with any provision made by virtue of subsection (1), make such modifications of the following Acts, and the instruments made or having effect as if made under them, as appear to the Secretary of State desirable: the Social Security Contributions and Benefits Act 1992, the Pension Schemes Act 1993 and Part I of this Ace'.—[Mr. Arbuthnot.]
  Brought up, and read the First time.
  The Parliamentary Under-Secretary of State for Social Security (Mr. James Arbuthnot): I beg to move, That the clause be read a Second time.
  Madam Speaker: With this, it will be convenient to discuss also Government amendments Nos. 82 and 83.
  Mr. Arbuthnot: New clause 22 will allow occupational pension schemes to contract out on the basis that they hold contracted-out benefits accrued on both a defined benefit and defined contribution basis. My hon. Friend the Member for Beaconsfield (Mr. Smith) tabled an amendment in Committee on this issue. I undertook to consider it with other representations, notably from the occupational pensions joint working group, which has raised related issues.
  The new clause and amendments that I have tabled will increase the flexibility for hybrid occupational pension schemes to contract out, and meet in full the concerns expressed by my hon. Friend and the occupational pensions joint working group. I commend them to the House.
  Mr. Adam Ingram: I wish to point out that it is a strangely worded new clause. It starts out with the phrase:
  "In spite of anything in sections 9 and 12".
  That seems to me to be unparliamentary language. I should have thought that something more appropriate could have been put in its place. But that is not the point that I wish to make.
  In Committee, when the issue was considered, the Minister said:
  "Were we to make a change to the current arrangements, we should need to be sure that we could safeguard the position of individuals. For example, we should almost certainly need to introduce new rules to ensure that the value of accrued GMP rights

  147
  could not be eroded under any of the proposed new arrangements. It would be necessary to consider, in the light of those new rules, whether the change still seemed desirable."—[Official Report, Standing Committee D, 15 June 1995; c. 666.]
  I simply ask the Minister to give an assurance that that matter has been taken into account and that the guarantee will apply—that there will be no loss to accrued guaranteed minimum pension rights.
  I also raise a point on the contracting out arrangements that will apply to differing schemes. Would it not be appropriate to give a guarantee that the better arrangements should apply in those circumstances, because, where two different schemes are in operation, the less favourable arrangement could apply, which would affect the individuals? It would be helpful if the Minister could explain further the underlying purposes behind the new clause, and deal with the concerns that he himself raised in Committee.
  Mr. Arbuthnot: We did consider those points, and we are confident that the protection that the hon. Gentleman has asked for is there.
  The point of the new clause is to provide a helpful flexibility, so that both defined contribution basis schemes and defined benefits schemes can be included within the same scheme. It is not always possible to say which of those would necessarily be better, because they have very different characteristics and benefits available at the end.
  So the answer to the first point is yes, but on the second point, it would not really be possible to do that.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New clause 3

  CENTRAL DISCONTINUANCE FUNDS
  `The Secretary of State may, after he has consulted organisations appearing to him to be representative of employers and of employees, by regulations make provision as to—

  (a) the establishment of one or more bodies corporate, to be known as central discontinuance funds,

  (b) the circumstances and the manner in which the trustees of an occupational pension scheme to which section 48 applies and which is being wound up may transfer the scheme's assets and liabilities to a central discontinuance fund established under this section,

  (c) the regulation of the administration of central discontinuance funds established under this section and the management of their assets.'.—[Mr. Dewar.]

  Brought up, and read the First time.
  3.45 pm
  Mr. Donald Dewar: I beg to move, That the clause be read a Second time.
  This is an innocent-looking new clause; it is also short, which is a virtue, and written in plain English. That marks it out from a large acreage of a Bill that, as a result of our efforts in Committee—or perhaps I should say the Government's efforts—has swollen by some 30 pages and a good handful of clauses.
  Although deceptively simple, however, the clause revisits one of the most complex and difficult parts of the new provision. It was discussed extensively in Committee, but I make no apology for returning to it now. I had hoped
  148
  that we would have a good deal of time in which to think about it, and particularly for the Government to think about it, but that did not happen; Report stage has arrived very quickly. Nevertheless, I think it important for us to canvass again what are very important and far-reaching arguments.
  As we have just been reminded, there is pressure of business, so I shall not rehearse the history and travel through the intricacies of the widely differing opinions that have been expressed; but I think that it would be helpful to summarise the progress that has been made since the original suggestions of the Goode committee.
  In shorthand, as it were, Goode recommended that, at all times, the assets of a pension scheme should be in a state to meet all liabilities, on the assumption that that scheme would be wound up. It was a matter of transfer values, and the transfer of cash equivalents. The aim, with which none of us would disagree although the practical problems of achieving it are manifest, was total security. Since then there has been considerable to-ing and fro-ing, along with many learned conferences and, I fear, many boring speeches; but I accept that the Government's position has moved considerably.
  We reached a compromise—if that is the right word—which stands in the name of the hon. Member for Bournemouth, West (Mr. Butterfill), in that he was the perhaps unwilling recipient of a long and complex letter which has given him an ersatz immortality, and the arrangement has been referred to as the "Butterfill compromise".
  The Government said, in effect, that, in the calculation of their pension liabilities, the larger pension funds would be able to take into account 25 per cent. of the calculation based on equities rather than gilts. That was intended to lighten the load to some extent, and to confer some flexibility. It was also agreed that the time within which pension funds must meet the various benchmarks set out by the Goode committee would be lengthened considerably.
  The compromise certainly helped, in that it was given a reasonably friendly reception, but many doubts remained—and, if anything, grew. The Confederation of British Industry, for instance, was unhappy with the arrangement, reflecting a wide range of concerns felt throughout industry. There was also a complex debate between actuaries and between the various pension funds, involving their representative body, the National Association of Pension Funds.
  We secured another important change—a presentational change, at least: the minimum solvency requirement became a minimum funding requirement. That, however, did no more than change the label on a product that has incurred consistent and increasing criticism.
  The trouble is that we are involved in a revolving door argument. We are trying to make compatible two basically incompatible aims: total security, and a wish not to inhibit unreasonably the management of funds in the scheme in the interest of maximising benefits for members. To be fair, I believe that that was recognised on both sides of the Standing Committee.
  The hon. Member for Beaconsfield (Mr. Smith), for example, rather uncharacteristically—I do not say that sarcastically; he does not often think that it is required—expressed considerable sympathy with my view, at least in the context to which I have referred.

  149
  The trouble is that, the more one compromises on security in the interests of growth, the more insecure the prospects become, and vice versa. We are left with an uneasy compromise and a Government—this may be unfair to them—who, at the end of the day, have said, "We have been pushed and jostled, we have agonised and worried, we have come to a conclusion, we have settled at a point in the scale, and we will not change it again. We have had enough, and we are going ahead on the basis of the argument at this stage."
  I shall briefly try to invite the Minister—I suspect that it will be a hard job, but I intend to put my best foot forward—to reconsider the issue. Of course, he knows—the title of the new clause tells us—the burden of my plea.
  There has been a strong feeling that we should be moving away from the winding-up principle, involving transfer values and cash equivalents, and towards valuing the system. We should be assuming that pension schemes will continue. We should value them on a continuing basis, and move towards a contributions basis with that in mind.
  The actuary to the scheme should be invited and asked to draw up a schedule of contributions, the aim of which is to ensure that, at all times, the assets in the scheme keep closely in touch with—and I hope, in the majority of cases, up to 100 per cent. up to—the safety level outlined in the Goode committee report.
  There is no doubt that, with the minimum funding requirement, there is a possibility that people may coast and allow the asset valuation to drop, and to sag, if I may use that metaphor, below the safety point, no doubt with the well-intentioned view that, at some point in a year or two, they can put in a major cash injection and save the position.
  The trouble, of course, is that, if disaster strikes, we get a point where winding-up comes just when the sag is at its deepest. As a result, people may find that what they thought were well-protected and safely guarded assets are, at least in part, missing, and that their pension promise has unfortunately gone with the wind. Obviously, we are anxious to avoid that.
  The minimum solvency requirement has problems in terms of expense. As at present drawn, it assumes a substantial shift from equities to gilts, even after the compromise to which I referred has been taken into account. There is an argument about the costs. I do not want to go into that, because we did so at some length in Committee. But briefly, if I remember correctly, the Minister takes the view, based on the cost compliance memorandum, that the shift will be between £5 billion and £12 billion over a period. He put that at a cost to funds of between £300 million and £400 million over a 12-year period.
  That is a substantial sum of money and shift, and should not be shrugged off, but it is challenged in any event. The CBI is unsure whether its sample was as big as the Minister would have liked, and whether it was conducted before the adjustment was made to the formula, but it talked in terms of a £1.9 billion cost over 10 years. Even allowing for the adjustment, clearly those are substantial costs.
  My real concern is that, even now, the minimum funding requirement flatters to deceive, and has the inherent dangers to which I have referred. I did not look up the actual reference, but I clearly have in my mind an
  150
  exchange between myself and the Under-Secretary of State for Social Security in Committee on independent custodianship. The burden of his argument was that such custodianship should not be introduced because it flattered to deceive, to use a phrase that I have just mentioned: it offered or appeared to offer guarantees, or it would be seen and understood to offer guarantees that it could not offer. That was one of the main reasons why the Under-Secretary of State, with the aid of his hon. Friends, successfully resisted in Committee the introduction of independent custodianship.
  If that is a decisive argument in that case—I understand it, although I do not accept it—and if that is the opinion of the Under-Secretary of State, it seems to me that that opinion should be transferred into the aspect that we are discussing under the new clause, and that he should consider carefully whether there is a danger of inviting the public to assume that there is a guarantee when no guarantee exists.
  I accept that it is difficult to offer a guarantee; on that we are united. However, I believe that the contributions approach—a contributions approach that would be joined to a central discontinuance fund—holds out promise of genuine progress and improvement. I argued that alternative approach in Committee, and the Under-Secretary of State remained unconvinced. I hope that, in the intervening time—that was one of our earlier debates in a lengthy consideration in Committee—he may have had some second thoughts.
  The clause is not revolutionary. Some of my hon. Friends would say that I am not noted for revolutions, but in any event it is not revolutionary. It has been drawn sensibly in terms of enabling legislation, asking the Minister to consult and, by regulations, make provision for
  "the establishment of one or more bodies corporate, to be known as central discontinuance funds".
  It does not try to pretend that it can draft the framework and regulations at this stage, from the Opposition Benches—that would be arrogant and counter-productive. It is better, on this level, if the Minister is prepared to entertain the argument.
  The shift to the contribution basis makes sense. It would make it easier for people to keep in line with the pension promise and the liabilities they shoulder. The central discontinuance fund is an important safeguard—although I accept that there are arguments on both sides—because it assumes that, rather than compulsory winding up or continuing in a closed scheme, there is the option of handing the assets over to the central discontinuance fund and continuing to operate the scheme under its auspices.
  We thereby get away from the present position, in which, if an unexpected disaster arises or if there is a shortfall, there may be no option but to wind up. As the Minister knows, there have been one or two outstanding examples of that happening, and substantial percentages of accrued rights have had to be written off. I emphasise that I would expect the central discontinuance fund to operate on the basis that it takes over the assets and then calculates what it can afford to undertake, given the yield of those assets and their likely history in its hands.

  151
  There is no doubt that that continuity is advantageous. Winding up has the unpleasant side effects that I mentioned. With a closed fund, there are difficulties concerning trustees, administrative costs tend to be great, and there is little opportunity for growth.
  I emphasise that the central discontinuance fund would arise only where the employer has gone to the wall. Self-evidently, if the employer continued to trade, the employer would still have to shoulder the pension promise. If there were fraud, the central discontinuance fund would not arise, because the compensation scheme set out in the Bill would take charge. However, there are substantial arguments for a central discontinuance scheme in cases where the employer has gone to the wall.
  As I understand it, there was in the mind of the Minister of State one especially substantial argument against a central discontinuance scheme—the fact that the Opposition, who are proposing that scheme, were hopelessly over-sanguine about the possibility of a deficit emerging. I quoted Watsons, the well-known firm of actuaries, to suggest that it was a comparatively remote possibility, and one that would be eminently manageable and easy to cope with.
  We are told that the Government are less sanguine, although I think that it is fair to say that, when the Minister gave evidence to the Goode committee—the Pension Law Review Committee—he took the line that there was virtue in a central discontinuance fund system. However, the Minister certainly relied on his rather more pessimistic assumptions, and also talked about the American experience with the Pensions Benefit Guaranty Corporation.
  I do not want to plunge into such technicalities on Report, when we have already canvassed them very heavily. I draw the Minister's attention to the fact that there is a substantial body of opinion that backs the approach that I take.
  I do not for a moment deny that there will be critics on the other side of the argument. As always—this is perhaps a happy reference at this hour and place—there will be those who will stay with the devil they know even though they are unlikely to take much satisfaction from it. In any event, there is no doubt that there is a strong body of support for the approach that I am outlining.
  4 pm
  Mr. Tim Smith: Could the hon. Gentleman say whether we need regulations to make provision for the establishment of central discontinuance funds? Why should not the CBI set up its own central discontinuance fund pension scheme, to which the trustees of schemes that have gone bust could transfer assets and liabilities?
  Mr. Dewar: That may be a private enterprise solution that commends itself to the hon. Gentleman, and I do not sneer at his proposal. However, there is a general assumption on both sides of the House, and clearly in the mind of the Minister, that where we are offering safeguards for the pension promise and building an essential regulatory framework as the guarantee of security after public confidence has been heavily shaken in the aftermath of the Maxwell scandal and, less
  152
  dramatically, by the ravages of recession, which put many pension funds under pressure, such a fund should be on a statutory basis and supervised by the Government.
  That is why we are in the business of minimum solvency or funding levels, and I certainly would not want to depart from that. I am told that it would not be too difficult technically for the Government to move on that within the framework of the Bill. That is why new clause 3 has been drafted as it has.
  The hon. Member for Beaconsfield diverts me. I was going to point out to the Minister, as I come towards the end of my remarks, that the weight of opinion seems to be for my side of the argument, although not 100 per cent. behind me. The Minister recently paraded with great pride the Prudential insurance company and a memorandum from it. I am not sure that the arguments that it advanced were not equally valid against minimum funding levels. They were equally applicable in both cases. It was a reminder that perfection is hard to come by.
  There is support for a central discontinuance fund, through a contributions approach, from the Trades Union Congress, which has worked extremely hard on the issue and found, as it pushed the argument along, that it was not travelling alone. We had a great deal of support in the House of Lords. I pay tribute to my noble Friend Lord Eatwell, who particularly espoused the cause. When he first brought it to me, I was somewhat cynical, but my enthusiasm grew as the argument progressed. The Pensions Management Institute, the PMI, strongly favours it, and a number of firms and important funds have said at least that they want it to be further investigated.
  I would especially like to draw to the Minister's attention the position of the CBI. I do not say that it is the fount of all wisdom—it would regard me with considerable suspicion if I argued that case—but it has some experience, and has spent a good deal of time considering what is on offer and what seem to it to be the best options. The best and easiest thing is for me to remind the Minister of the briefing material—he probably knows it—that the CBI produced for this debate. I will read it only briefly into the record, as the Minister, ever-efficient, has the very text on his lap.
  The briefing states:
  "There is … concern among CBI members that the MFR"—
  the minimum funding requirement—
  "would become more restrictive—and thus costly—over time. There would seem merit, therefore, in giving further consideration to the idea of an on-going funding standard backed by a central discontinuance fund (CDF) or funds. This would allow the trustees, in cases where the employer becomes insolvent, to transfer the scheme's assets and liabilities to a CDF which would operate as a pension fund and could invest in equities as do on-going schemes. Members would be protected as the benefits produced by a CDF should prove higher in the long term than could be expected from the current alternatives",
  which are winding up or going on as a closed scheme.
  The briefing continues:
  "We would, therefore, support the addition of a clause which would enable, but not require, central discontinuance funds to be set up. This would facilitate the move to an on-going funding standard in the future if, after further study, it appeared the better proposal."
  I accept that that is cautious. The CBI is not supporting the notion 100 per cent., but it makes it clear that it believes there are potential advantages, that the scheme should be considered and that machinery should be included in the Bill to allow progress along that route if,

  153
  as the CBI clearly thinks, it is likely to turn out to be the best approach. It is very much in that spirit that the clause has been drafted and is being moved.
  The Minister should reconsider and leave the option open. He must recognise that, although he may be able to quote cynics on one side of the argument, many people believe that the new clause is the right way forward. A little flexibility in government would mean that the debate could reasonably be pursued without the feeling that the door had been slammed on the proposal because there was no room for it in the current legislation. We want to get away from that kind of full stop and make a constructive attempt to get the right answer to a difficult problem.
  Ms Judith Church: I shall add only a few words to what my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, in his usual superb way. This is an important but complex debate. There are several clear principles which highlight the need for the new clause.
  The case for a central discontinuance fund rests on three pillars: the inadequacy of having only a minimum funding requirement; the practical benefits of a central discontinuance fund; and the experience of how other countries with a CDF operate it.
  The essential problem with the Government's proposals is that, like Goode, they are trying to reconcile incompatible goals. With only an MFR, it is impossible to encourage long-term efficiency. It requires high-yield equity holdings while prioritising short-term security, which of course requires low-yield gilt. The MFR is too stringent for the first objective and too lax for the second. With just an MFR, the cost of full security—in terms of higher consumer premiums and effects on the equity market—is simply too great.
  The practical benefits of a CDF are clear. It would provide a low-cost complement to an MFR and make up for the deficit in security that exists if we remained with only an MFR. It would provide a cost reduction, because it would pool the risk of fund failure among all the schemes. The Government's approach will require all schemes to "insure", via the shift towards gilts, on the basis of an individual fund's probability of collapse.
  In contrast, a CDF would enable schemes to "insure", via a very small industry levy, on the basis of the aggregate probability of collapse. Because of the much lower aggregate probability of collapse, the cost of security under a CDF would be much smaller than under the Government MFR. Only through a central fund could one get such economies of scale and exploit them fully. The final result with a CDF would be a low-cost comprehensive insurance scheme for all pension funds.
  I shall refer finally to the experience of the operation of a CDF in other countries, which has been discussed in another place and in Committee. The practical evidence from other countries not only endorses all the arguments we have made today but expands the case for having a CDF in the UK pensions market.
  Finland, for example, has an exceptionally well-functioning CDF. Beyond the core advantages that I have already mentioned, it has further value-added benefits. As set out by the Government Actuary in his report to the Goode committee, the Finnish CDF acts as a clearing house for financial adjustments between schemes to permit the whole of an individual's pension to be paid by a single employer. That overcomes a major
  154
  weakness of occupational pensions, in that they discourage mobility between jobs and reduce labour market flexibility.
  The Japanese also have a very good CDF. In an economy such as theirs, with a heavy reliance on corporate social welfare and widespread occupational pensions, a CDF is regarded as an essential part of the market structure. Of course, America has an effective CDF too. Since 1974, when the Pensions Benefit Guaranty Corporation was established, the benefits of thousands of scheme members in the United States have been saved from a failure of their pension fund. Indeed, America is very similar to Japan, in that there is minimal state provision and significant corporate social welfare. Just as in the Japanese system, the CDF is viewed in America as a necessary part of an efficient market.
  The Government have held up the American CDF as a reason for not proceeding with a UK CDF, but their arguments simply do not stand up. The only caveat to success in the American instance has been a tendency towards deficit in the CDF, but that has been more related to the specific nature of the American experience than to the principle of a CDF itself. That could easily be avoided in the British CDF, by allowing only the entry of schemes from firms which have ceased trading.
  The lessons from those international examples are clear: provided that there is prudent implementation, a CDF would deliver in practice the advantages which make it so attractive in theory. Overall, a CDF would bring security to the benefit promise, and it would be efficient, equitable and just.
  In our evolving pensions market, with increased reliance on the private sector, the dangers of a fund collapse need to be taken more seriously. It is no accident that, in countries where there is widespread private provision, a CDF is an integral component of the market mechanism. We must take note of the theoretical reasoning, the practical evidence, and, above all, the real concerns of our constituents when we consider the new clause. If we truly take note of those aspects, there can be only one answer: this House must support this well-thought-out, widely supported and universally beneficial proposal.
  Mr. Hugh Bayley: My hon. Friend the Member for Dagenham (Ms Church) has spelled out the economic arguments for a central discontinuance fund very well, and I shall not detain the House further on those issues. The root of our argument is that it is better for people who pay into occupational pension funds to pool the unlikely risk of their employer winding up his business, and their pension therefore being put in jeopardy, than for each pension fund to pay a separate risk payment.
  We debated the matter at length in Committee, and the Minister and I agreed at the end of the day that there was no such thing as a free lunch for anybody in a pension fund. I am prompted to return to the issue, however, because since that debate I have received a letter from David Morgan, the group pensions manager of Nestlé, the largest manufacturer in my constituency. I have no financial interest whatever to declare, and I raise the matter simply because thousands of my constituents are Nestlé pensioners or members of the Nestlé pension scheme.

  155
  In the letter, Mr. Morgan says:
  "We do have severe worries about the level of cost volatility which could emerge from the current minimum funding proposals … It is with some interest that we saw the recent TUC paper revive the concept of a central discontinuance fund or pension protection fund as originally conceived by Watsons and espoused by the Government Actuary.
  If this could be made to work, it would be a preferable solution."
  Mr. Morgan also urges the Government to keep an open mind, study further the proposal for a CDF and express their willingness—I hope the Minister will respond to this point in particular—to keep the matter under review, and to change horses if a practical way of establishing such a fund is found.
  4.15 pm
  I draw the Minister's attention to the fact that the new clause does not require the Secretary of State to establish a CDF; it simply permits him, now or in the future, to do so if he thinks fit. It provides the Minister with the opportunity to continue to study the issue. If, at some stage, he then feels it appropriate to bring forward proposals for a CDF that the pension funds think might help to reduce the cost of individually insuring against the unlikely event of winding up, the Minister could do so without having to return to the House with primary legislation.
  In Committee, we debated whether the Government would have to be a backer of last resort if such a fund were established. Of course, that is a possibility; indeed, they took on that responsibility for the Maxwell pensioners. However, the backer-of-last-resort responsibility could be shared by those pension funds that decided to cover their liability, in the event of a wind-up, through a CDF.
  Mr. Morgan expressed concern that, under the Bill, the burden of the minimum funding requirement would put pressure on all employers to consider whether they could continue with final salary pension schemes. Indeed, he predicts that there will be a reduction in the number of such schemes—although he does not think that there will be any change in his company, he feels that there will be in others—and that there will be an increase in money purchase schemes.
  If that is the case, it will underline the need to try to reduce the burden of the minimum funding requirement. It would be wise and prudent of the House to establish, as the new clause proposes, provision for a CDF, should the need arise and should a practical scheme for doing so be developed.
  The Minister for Social Security and Disabled People (Mr. William Hague): As the hon. Member for Glasgow, Garscadden (Mr. Dewar) said, we debated this matter at great length in Committee. It is a complicated issue, and I have no objection to the hon. Gentleman and his colleagues raising it again in this non-revolutionary way.
  In a moment, I shall deal with the argument whether a central discontinuance fund is a viable alternative to the Government's proposals. However, given that much of this debate stems from concern about the possible impact of the minimum funding requirement, it might be appropriate to offer reassurance—adding to what I said in Committee—to people such as the manager of Nestlé, to
  156
  whom the hon. Member for York (Mr. Bayley) referred, and the CBI, whose briefing was referred to by the hon. Member for Garscadden.
  It is important to remember what the MFR is intended to achieve. It is about providing security for members so that, whatever happens to the sponsoring employer, they can expect pensions already in payment to continue and younger members to receive a fair actuarial value of their accrued rights. That is all we are asking for.
  We know from our survey that most schemes usually fund at a higher level, and it is right that they should continue to do so. In developing our proposals for the MFR, since the publication of the Goode report and last year's White Paper we have commissioned extensive analysis and consulted widely. We have made a number of changes—which I will not go over again, but which the hon. Member for Garscadden mentioned—which were laid out in the letter to my hon. Friend the Member for Bournemouth, West (Mr. Butterfill), who is now one of the country's most celebrated recipients of unsolicited mail of a highly technical nature. The changes have ensured that the likely costs of the MFR to British industry are those that are shown in the compliance cost assessment published with the Bill. They should also avoid any risk of a substantial shift in UK pension fund assets from equities into gilts.
  Our proposals for the MFR incorporate other flexibilities which I want to stress. In the extreme case of a scheme falling below the 90 per cent. level, we have fully accepted the case for secure alternatives—for example, funds held in a safe but separate account, or the provision of ring-fenced unencumbered assets. With the arrangements in place, members would be provided with security, and employers would have flexibility to spread cash contributions over a longer period than one year to restore the fund to the 90 per cent. level.
  The Bill also incorporates provision for the regulatory authority to extend the MFR time limits. That is intended to be an exceptional measure, but it does introduce an important safeguard into the arrangements. The exercise of the authority's discretion will be governed by regulations, and we will be consulting on what the regulatory framework should be.
  We envisage that an application to extend the MFR time limit could be made by either the trustees or the employer, but in the latter case, the regulatory authority would want to know the trustees' views on the application. As to the circumstances in which an extension might be granted, we envisage that an extension would be appropriate where an unforeseen external event outside the control of the employer or the trustees had resulted in a reduction in the scheme's funding level. We envisage that the Occupational Pensions Regulatory Authority would be more prepared to consider extending the time limit where there was objective evidence of an unusual divergence between gilt and equity yields.
  The regulatory authority would need to consider whether the scheme was properly administered with clean accounts, and the extent to which the drop in funding levels had been affected by internal factors such as benefit enhancement or substantial pay rises. It will be possible to ensure that we have good practice, guidance and sound regulation in those areas.
  The regulatory authority would need to take into account the probability of the scheme recovering—perhaps on the back of a longer-term funding commitment

  157
  from the employer, or, once time had been allowed for the employer to realise assets, to meet pension commitments. The important point that we will need to bear in mind in drawing the relevant regulations is the need to avoid any further deterioration in the security of scheme members. Subject to that, there should be considerable scope for a pragmatic application of this power. That should be reassuring to many companies.
  The power would be capable of being exercised in individual cases, but we would envisage it coming into play on a more general basis if there were, for example, extreme movements in equity yields relative to gilts, or a catastrophic stock market fall from which recovery was probable, but not likely to be immediate. In such circumstances, we envisage that the regulations would provide for the regulatory authority to authorise extensions to the time limit for all applicant schemes which met certain basic criteria.
  As a final safety valve, the Bill contains a power in clause 60 to modify the application of the MFR clauses in relation to particular schemes or classes of scheme. If evidence emerged that employers sponsoring a particular category scheme were being, or were likely to be, adversely and unnecessarily affected by their MFR, it would be possible to bring about a sensible resolution of the difficulty by using this power. I hope that that gives some reassurance about the MFR.
  That should deal with the reasons why people have put forward a central discontinuance fund as an alternative. In response to the new clause and the arguments that have been made for it, I shall state why I believe that the arguments in favour of a central discontinuance fund are highly questionable.
  I come first to the issue of administrative costs. Economies of scale will be realised only if a decision were taken to standardise the benefits provided by a central discontinuance fund. That would inevitably disadvantage some individuals, in so far as it would mean changing the nature of the benefits promised. More fundamental to the debate is the assumption that a central discontinuance fund could safely invest in equities. I seriously doubt whether that would be appropriate. A central discontinuance fund would tend to collect the liabilities of pensioner members and deferred members close to retirement. It would become a more and more mature scheme.
  The Trades Union Congress has said:
  "Schemes that have most of their liabilities in the future can justify a more risky investment strategy than those who are already paying substantial pensions each year."
  But the CDF would be in that position. If it is true of an individual pension fund, where the employer stands behind the scheme to make good any deficit, the need for a prudent investment strategy is all the more evident in the case of a central fund.
  In order to avoid any risk of members' benefits being reduced in a central fund, individual schemes would need to be funded at a level that would enable them to meet the central discontinuance fund's transfer premium. Those transfer terms would inevitably become a de facto funding standard based on a more prudent investment policy than that used by many on-going schemes.
  If that did not happen, and the central fund simply took over whatever assets the transferring scheme happened to hold, without having been funded to meet the transfer
  158
  terms, either members would take a cut in their benefits or the risk of the central fund running into deficit would be greater.
  It is difficult to see how the costs to sponsoring employers could be lower than those attributable to the proposed minimum funding requirement, which serves to underline the fundamental truth, which I set out in Committee, about there being no free lunch. Security has a price. It is not possible to improve security without some costs. Another misconception is that there would be little risk of a discontinuance fund falling into deficit.
  As the hon. Member for Garscadden said, there is a disagreement about that. He has quoted Watsons, a firm of actuaries. But other actuaries have come to a quite different conclusion. The Government Actuary took the view that, if a high equity investment strategy were adopted or optimistic rates of return were used in the valuation, the risk of a shortfall could be much greater. We have to consider how manageable even a small deficit would be, given the potential size of a central fund over time.
  Although a central fund would provide for risk to be pooled, as I think the hon. Member for Dagenham (Ms Church) said, it would not reduce the aggregate level of risk. It would merely increase the size of any potential deficit. If we set up a CDF, we might find large deficits, and we might find someone taking on an open-ended liability. We know that the CBI does not agree that employers should be liable to meet that deficit. The Government do not believe that it would be a suitable use of taxpayers' money to underwrite such a fund.
  The other option would be to reduce members' benefits, but I am sure that none of us would seriously want to advocate that as an option, as it would fail to provide members with the security they would expect from a central fund established under statute. That brings me to the crux of the various proposals for a CDF. The apparent agreement in support of a central fund does not rest on a common understanding of what is intended or any common objective in terms of the degree of protection that it is intended to provide for members, who would consequently shoulder the burden of risk in the event of a shortfall.
  The central discontinuance fund is a superficially attractive alternative to the MFR. Some people have been attracted to it because they have seen in it a way of providing security without the increase in costs which, we concede, the MFR is likely to entail for some people and some companies. But a CDF does not succeed in escaping from the basic issue—increased security can come only at some increased cost somewhere in the system.
  Therefore, the Government's strongly preferred approach is to ensure that the MFR works—to ensure that the flexibility is built into our arrangements for the MFR, so that it works in the future. I hope that what I have been able to say about the MFR has reassured people about that, and that what I have said about a central discontinuance fund has convinced hon. Members that it would not be the right course to pursue.
  Mr. Dewar: The man has a hard heart, and I can see that he has not been prepared to make any concessions since the Committee stage. I am perhaps a cynic, but I must confess that, when Ministers start dealing in fundamental truths, I start looking for the exit—and the Minister was strong on that today.
  I do not accept the Minister's argument. I think that there is merit in holding the door open for the possibility of a discontinuance fund system on a contributions basis.

  159
  I accept that there will be alterations if pension fund assets pass to discontinuance funds. Clearly, they will have to examine the assets and what they are likely to produce in deciding what kind of promises can be delivered. They may not be the same as the original fund, depending on the size of the deficit and the crash.
  4.30 pm
  Despite what the Minister said about equities and a cautious approach, I still think that this is a better option than simply winding up the scheme, with the immediate short-term losses that may emerge. It is not a matter of trying to produce a miracle cure of absolute security without anyone having to pay more to achieve it. That is not the line of argument that we have tried to deploy in this case. We believe that there will be costs involved with both schemes—there is no doubt about that. However, by moving to contributions and away from a winding-up to a continuing basis, we think that there is a better chance of ensuring increased security as against the present proposals.
  That is a matter for argument and debate. The primacy of purpose must be to try to produce a stable scheme that will offer, at affordable cost, the maximum security for those who invested in pension funds. On the advice that I have received, I regret what the Minister has said about not being prepared to entertain further change.
  I intend to put the matter to the vote, since I recognise that it will not be settled in the next few minutes by further argument across the Dispatch Box.
  Question put, That the clause be read a Second time:—
  The House divided: Ayes 230, Noes 271.

  Division No. 192]

  [4.30 pm

  AYES

  Abbott, Ms Diane

  Clark, Dr David (South Shields)

  Adams, Mrs Irene

  Clarke, Eric (Midlothian)

  Ainger, Nick

  Clarke, Tom (Monkands W)

  Alton, David

  Clelland, David

  Armstrong, Hilary

  Clwyd, Mrs Ann

  Ashdown, Rt Hon Paddy

  Coffey, Ann

  Banks, Tony (Newham NW)

  Cohen, Harry

  Barnes, Harry

  Connarty, Michael

  Barron, Kevin

  Corbett, Robin

  Bayley, Hugh

  Corbyn, Jeremy

  Beckett, Rt Hon Margaret

  Corston, Jean

  Beggs, Roy

  Cousins, Jim

  Bell, Stuart

  Cummings, John

  Benn, Rt Hon Tony

  Cunliffe, Lawrence

  Bennett, Andrew F

  Cunningham, Jim (Covy SE)

  Bermingham, Gerald

  Cunningham, Roseanna

  Blair, Rt Hon Tony

  Dafis, Cynog

  Blunkett, David

  Dalyell, Tam

  Bray, Dr Jeremy

  Darling, Alistair

  Brown, Gordon (Dunfermline E)

  Davidson, Ian

  Brown, N (N'c'tle upon Tyne E)

  Davies, Bryan (Oldham C'tral)

  Burden, Richard

  Davies, Rt Hon Denzil (Llanelli)

  Byers, Stephen

  Davies, Ron (Caerphilly)

  Callaghan, Jim

  Davis, Terry (B'ham, H'dge H'l)

  Campbell, Mrs Anne (C'bridge)

  Denham, John

  Campbell, Ronnie (Blyth V)

  Dewar, Donald

  Campbell, Savours, D N

  Dixon, Don

  Cann, Jamie

  Dobson, Frank

  Chidgey, David

  Donohoe, Brian H

  Chisholm, Malcolm

  Dowd, Jim

  Church, Judith

  Dunnachie, Jimmy

  Clapham, Michael

  Dunwoody, Mrs Gwyneth

  160

  Eagle, Ms Angela

  Lloyd, Tony (Stretford)

  Eastham, Ken

  Loyden, Eddie

  Etherington, Bill

  Lynne, Ms Liz

  Evans, John (St Helens N)

  McAllion, John

  Ewing, Mrs Margaret

  McAvoy, Thomas

  McCartney, Robert (N Devon)

  Fatchett, Derek

  McCrea, The Reverend William

  Field, Frank (Birkenhead)

  Macdonald, Calum

  Flynn, Paul

  McFall, John

  Forsythe, Clifford (S Antrim)

  McKelvey, William

  Foster, Rt Hon Derek

  McLeish, Henry

  Foster, Don (Bath)

  McMaster, Gordon

  Foulkes, George

  MacShane, Denis

  Fyfe, Maria

  Mc William, John

  Galloway, George

  Madden, Max

  Garrett, John

  Mendelson, Peter

  Gerrard, Neil

  Marek, Dr John

  Marshall, David (Shettleston)

  Godman, Dr Norman A

  Marshall, Jim (Leicester, S)

  Godsiff, Roger

  Martin, Michael J (Springburn)

  Golding, Mrs Llin

  Martlew, Eric

  Graham, Thomas

  Maxton, John

  Griffiths, Win (Bridgend)

  Meacher, Michael

  Grocott, Bruce

  Meale, Alan

  Gunnell, John

  Michie, Bill (Sheffield Heeley)

  Hain, Peter

  Michie, Mrs Ray (Argyll & Bute)

  Hall, Mike

  Milburn, Alan

  Harman, Ms Harriet

  Mitchell, Austin (Gt Grimsby)

  Harvey, Nick

  Morgan, Rhodri

  Hattersley, Rt Hon Roy

  Morris, Rt Hon Alfred (Wy'nshawe)

  Morris, Estelle (B'ham Yardley)

  Henderson, Doug

  Mudie, George

  Hendron, Dr Joe

  Mullin, Chris

  Hill, Keith (Streatham)

  Murphy, Paul

  Hinchliffe, David

  Oakes, Rt Hon Gordon

  Hodge, Margaret

  O'Brien, Mike (N W'kshire)

  Hoey, Kate

  O'Brien, William (Normanton)

  Hogg, Norman(Cumbernauld)

  Olner, Bill

  Home Robertson, John

  O'Neill, Martin

  Hood, Jimmy

  Orme, Rt Hon Stanley

  Hoon, Geoffrey

  Pearson, Ian

  Pickthall, Colin

  Howarth, George (Knowsley North)

  Pike, Peter L

  Howells, Dr. Kim (Pontypridd)

  Pope, Greg

  Hoyle, Doug

  Powell, Ray (Ogmore)

  Hughes, Kevin (Doncaster N)

  Prentice, Bridget (Lew'm E)

  Hughes, Robert (Aberdeen N)

  Prentice, Gordon (Pendle)

  Hughes, Roy (Newport E)

  Prescott, Rt Hon John

  Hughes, Simon (Southwark)

  Primarolo, Dawn

  Hutton, John

  Purchase, Ken

  Illsley, Eric

  Radice, Giles

  Ingram, Adam

  Raynsford, Nick

  Jackson, Glenda (H'stead)

  Reid, Dr John

  Rendel, David

  Jackson, Helen (Shef'ld, H)

  Robertson, George (Hamilton)

  Jamieson, David

  Rogers, Allan

  Janner, Greville

  Rocker, Jeff

  Johnston, Sir Russell

  Rooney, Terry

  Jones, Barry (Alyn and D'side)

  Ross, Ernie (Dundee W)

  Jones, Ieuan Wyn (Ynys Môn)

  Ross, William (E Londonderry)

  Jones, Jon Owen (Cardiff C)

  Ruddock, Joan

  Jones, Martyn (Clwyd, SW)

  Salmond, Alex

  Jones, Nigel (Cheltenham)

  Sedgemore, Brian

  Jowell, Tessa

  Sheerman, Barry

  Kennedy, Jane (Lpool Brdgn)

  Sheldon, Rt Hon Robert

  Khabra, Piara S

  Short, Clare

  Simpson, Alan

  Kilfoyle, Peter

  Skinner, Dennis

  Kirkwood, Archy

  Smith, Andrew (Oxford E)

  Lewis, Terry

  Smith, Llew (Blaenau Gwent)

  Liddell, Mrs Helen

  Smyth, The Reverend Martin

  Litherland, Robert

  Snape, Peter

  Livingstone, Ken

  Soley, Clive

  161

  Spearing, Nigel

  Wallace, James

  Speller, John

  Walley, Joan

  Squire, Rachel (Dunfermline W)

  Watson, Mike

  Steel, Rt Hon Sir David

  Welsh, Andrew

  Steinberg, Gerry

  Wigley, Dafydd

  Stevenson, George

  Williams, Rt Hon Alan (Sw'n W)

  Straw, Jack

  Williams, Alan W (Carmarthen)

  Sutcliffe, Gerry

  Winnick, David

  Taylor, Mrs Ann (Dewsbury)

  Wise, Audrey

  Timms, Stephen

  Worthington, Tony

  Tipping, Paddy

  Young, David (Bolton SE)

  Touhig, Don

  Turner, Dennis

  Tellers for the Ayes:

  Tyler, Paul

  Mr. Robert Ainsworth and Mrs. Barbara Roche.

  Walker, Rt Hon Sir Harold

  NOES

  Ainsworth, Peter (East Surrey)

  Couchman, James

  Aitken, Rt Hon Jonathan

  Cran, James

  Alexander, Richard

  Curry, David (Skipton & Ripon)

  Alison, Rt Hon Michael (Selby)

  Davies, Quentin (Stamford)

  Allason, Rupert (Torbay)

  Davis, David (Boothferry)

  Amess, David

  Day, Stephen

  Ancram, Michael

  Deva, Nirj Joseph

  Arbuthnot, James

  Dicks, Terry

  Arnold, Jacques (Gravesham)

  Dorrell, Rt Hon Stephen

  Arnold, Sir Thomas (Hazel Grv)

  Douglas-Hamilton, Lord James

  Ashby, David

  Duncan, Alan

  Atkins, Rt Hon Robert

  Duncan-Smith, Iain

  Atkinson, David (Bour'mouth E)

  Dunn, Bob

  Atkinson, Peter (Hexham)

  Durant, Sir Anthony

  Baker, Nicholas (North Dorset)

  Dykes, Hugh

  Baldry, Tony

  Eggar, Rt Hon Tim

  Banks, Matthew (Southport)

  Elletson, Harold

  Batiste, Spencer

  Evans, David (Welwyn Hatfield)

  Bellingham, Henry

  Evans, Jonathan (Brecon)

  Bendall, Vivian

  Evans, Nigel (Ribble Valley)

  Beresford, Sir Paul

  Evans, Roger (Monmouth)

  Biffen, Rt Hon John

  Evennett, David

  Body, Sir Richard

  Faber, David

  Bonsor, Sir Nicholas

  Fabricant, Michael

  Booth, Hartley

  Fenner, Dame Peggy

  Bottomley, Peter (Eltham)

  Field, Barry (Isle of Wight)

  Bowis, John

  Fishburn, Dudley

  Boyson, Rt Hon Sir Rhodes

  Forman, Nigel

  Brandreth, Gyles

  Forsyth, Rt Hon Michael (Stirling)

  Brazier, Julian

  Forth, Eric

  Bright, Sir Graham

  Fowler, Rt Hon Sir Norman

  Brown, M (Brigg & Cl'thorpes)

  Fox, Dr Liam (Woodspring)

  Browning, Mrs Angela

  Freeman, Rt Hon Roger

  Bruce, Ian (Dorset)

  French, Douglas

  Budgen, Nicholas

  Gale, Roger

  Burns, Simon

  Gallie, Phil

  Burt, Alistair

  Gardiner, Sir George

  Butcher, John

  Garel-Jones, Rt Hon Tristan

  Butler, Peter

  Garnier, Edward

  Butterfill, John

  Gill, Christopher

  Carlisle, John (Luton North)

  Gillen, Cheryl

  Carlisle, Sir Kenneth (Lincoln)

  Goodlad, Rt Hon Alastair

  Carttiss, Michael

  Goodson-Wickes, Dr Charles

  Cash, William

  Gorman, Mrs Teresa

  Channon, Rt Hon Paul

  Gorst, Sir John

  Chapman, Sydney

  Grant, Sir A (SW Cambs)

  Churchill, Mr

  Greenway, Harry (Ealing N)

  Clappison, James

  Greenway, John (Ryedale)

  Clarke, Rt Hon Kenneth (Ru'clif)

  Griffiths, Peter (Portsmouth, N)

  Clifton-Brown, Geoffrey

  Gummer, Rt Hon John Selwyn

  Coe, Sebastian

  Hague, William

  Colvin, Michael

  Hamilton, Rt Hon Sir Archibald

  Conway, Derek

  Hamilton, Neil (Tatton)

  Coombs, Anthony (Wyre For'st)

  Hampson, Dr Keith

  Cope, Rt Hon Sir John

  Hanley, Rt Hon Jeremy

  Cormack, Sir Patrick

  Hannam, Sir John

  162

  Hargreaves, Andrew

  Onslow, Rt Hon Sir Cranley

  Haselhurst, Sir Alan

  Oppenheim, Phillip

  Hawksley, Warren

  Ottaway, Richard

  Hayes, Jerry

  Page, Richard

  Heald, Oliver

  Paice, James

  Heath, Rt Hon Sir Edward

  Patnick, Sir Irvine

  Heathcoat-Amory, David

  Patten, Rt Hon John

  Hendry, Charles

  Pattie, Rt Hon Sir Geoffrey

  Hicks, Robert

  Pawsey, James

  Higgins, Rt Hon Sir Terence

  Pickles, Eric

  Hogg, Rt Hon Douglas (G'tham)

  Porter, Barry (Wirral S)

  Horam, John

  Porter, David (Waveney)

  Hordern, Rt Hon Sir Peter

  Portillo, Rt Hon Michael

  Howard, Rt Hon Michael

  Rathbone, Tim

  Howarth, Alan (Strart'rd-on-A)

  Redwood, Rt Hon John

  Howell, Sir Ralph (N Norfolk)

  Richards, Rod

  Hughes, Robert G (Harrow W)

  Riddick, Graham

  Hunt, Sir John (Ravensbourne)

  Rifkind, Rt Hon Malcolm

  Hunter, Andrew

  Robathan, Andrew

  Hurd, Rt Hon Douglas

  Roberts, Rt Hon Sir Wyn

  Jack, Michael

  Robertson, Raymond (Ab'd'n S)

  Jackson, Robert (Wantage)

  Robinson, Mark (Somerton)

  Jenkin, Bernard

  Roe, Mrs Marion (Broxbourne)

  Jessel, Toby

  Rowe, Andrew (Mid Kent)

  Johnson Smith, Sir Geoffrey

  Rumbold, Rt Hon Dame Angela

  Jones, Gwilym (Cardiff N)

  Ryder, Rt Hon Richard

  Kellett-Bowman, Dame Elaine

  Sackville, Tom

  Key, Robert

  Sainsbury, Rt Hon Sir Timothy

  Kirkhope, Timothy

  Shaw, David (Dover)

  Knapman, Roger

  Shaw, Sir Giles (Pudsey)

  Knight, Mrs Angela (Erewash)

  Shephard, Rt Hon Gillian

  Knight, Greg (Derby N)

  Shepherd, Colin (Hereford)

  Knight, Dame Jill (Bir'm E'st'n)

  Shepherd, Richard (Aldridge)

  Knox, Sir David

  Shersby, Sir Michael

  Kynoch, George (Kincardine)

  Sims, Roger

  Lait, Mrs Jacqui

  Smith, Tim (Beaconsfield)

  Lamont, Rt Hon Norman

  Soames, Nicholas

  Lang, Rt Hon Ian

  Spencer, Sir Derek

  Lawrence, Sir Ivan

  Spicer, Sir James (W Dorset)

  Legg, Barry

  Spicer, Michael (S Worcs)

  Leigh, Edward

  Spink, Dr Robert

  Lidington, David

  Spring, Richard

  Lightbown, David

  Squire, Robin (Hornchurch)

  Lloyd, Rt Hon Sir Peter (Fareham)

  Steen, Anthony

  Lord, Michael

  Stephen, Michael

  Luff, Peter

  Stern, Michael

  Lyell, Rt Hon Sir Nicholas

  Stewart, Allan

  MacGregor, Rt Hon John

  Streeter, Gary

  MacKay, Andrew

  Sumberg, David

  Maclean, Rt Hon David

  Sweeney, Walter

  McLoughlin, Patrick

  Sykes, John

  McNair-Wilson, Sir Patrick

  Tapsell, Sir Peter

  Madel, Sir David

  Taylor, Ian (Esher)

  Maitland, Lady Olga

  Taylor, John M (Solihull)

  Malone, Gerald

  Taylor, Sir Teddy (Southend, E)

  Mans, Keith

  Temple-Morris, Peter

  Marland, Paul

  Thomason, Roy

  Marlow, Tony

  Thompson, Sir Donald (C'er V)

  Marshall, John (Hendon S)

  Thompson, Patrick (Norwich N)

  Martin, David (Portsmouth S)

  Townend, John (Bridlington)

  Mates, Michael

  Townsend, Cyril D (Bexl'yh'th)

  Merchant, Piers

  Tredinnick, David

  Mills, Iain

  Trend, Michael

  Mitchell, Andrew (Gedling)

  Trotter, Neville

  Mitchell, Sir David (NW Hants)

  Twinn, Dr Ian

  Moate, Sir Roger

  Waldegrave, Rt Hon William

  Monro, Sir Hector

  Walker, Bill (N Tayside)

  Montgomery, Sir Fergus

  Waller, Gary

  Moss, Malcolm

  Wardle, Charles (Bexhill)

  Nelson, Anthony

  Waterson, Nigel

  Neubert, Sir Michael

  Watts, John

  Newton, Rt Hon Tony

  Wells, Bowen

  Nicholls, Patrick

  Whitney, Ray

  Nicholson, David (Taunton)

  Whittingdale, John

  Nicholson, Emma (Devon West)

  Widdecombe, Ann

  Norris, Steve

  Wiggin, Sir Jerry

  163

  Wilkinson, John

  Yeo, Tim

  Willetts, David

  Young, Rt Hon Sir George

  Wilshire, David

  Winterton, Mrs Ann (Congleton)

  Tellers for the Noes:

  Winterton, Nicholas (Macc'f'ld)

  Mr. Michael Bates and Mr. Timothy Wood.

  Wolfson, Mark

  Question accordingly negatived.

New clause 23

  PENSIONS ON DIVORCE, ETC.: SCOTLAND
  `.—(1) In section 8(1) (orders for financial provision) of the Family Law (Scotland) Act 1985 ("the 1985 Act"), after paragraph (b) there is inserted—
  "(ba) an order under section 12A(2) or (3) of this Act;".
  .(2) In section 10 of the 1985 Act (sharing of value of matrimonial property)—
  (a) in subsection (5)—

  (i) after "party" there is inserted "(a)"; and

  (ii) for "or occupational pension scheme or similar arrangement" there is substituted—" "or similar arrangement; and (b) in any benefits under a pension scheme which either party has or may have (including such benefits payable in respect of the death of either party), which is"; and

  (b) after subsection (7) there is inserted—
  "(8) The Secretary of State may by regulations make provision—

  (a) for the value of any benefits under a pension scheme to be calculated and verified, for the purposes of this Act, in a prescribed manner;

  (b) for the trustees or managers of any pension scheme to provide, for the purposes of this Act, information as to that value, and for the recovery of the administrative expenses of providing such information from either party, and regulations made by virtue of paragraph (a) above may provide for that value to be calculated and verified in accordance with guidance which is prepared and from time to time revised by a prescribed body and approved by the Secretary of State.

  (9) Regulations under subsection (8) above shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
  (10) In this section—
  "benefits under a pension scheme" includes any benefits by way of pension, whether under a pension scheme or not;
  "pension scheme" means—

  (a) an occupational pension scheme or a personal pension scheme (applying the definitions in section 1 of the Pension Schemes Act 1993, but as if the reference to employed earners in the definition of "personal pension scheme" were to any earners);

  (b) a retirement annuity contract; or

  (c) an annuity, or insurance policy, purchased or transferred for the purpose of giving effect to rights under a pension scheme falling within paragraph (a) above; and "prescribed" means prescribed by regulations.

  (11) In this section, references to the trustees or managers of a pension scheme—

  (a) in relation to a contract or annuity referred to in paragraph (b) or (c) of the definition of "pension scheme" in subsection (10) above, shall be read as references to the provider of the annuity;

  164

  (b) in relation to insurance policy referred to in paragraph (c) of that definition, shall be read as a reference to the insurer.".

  (3) After section 12 of the 1985 Act there is inserted—
  "Orders for payment of capital sum: pensions lump sums
  12A.—(1) This section applies where the court makes an order under section 8(2) of this Act for payment of a capital sum (a "capital sum order") by a party to the marriage ("the liable party") in circumstances where—

  (a) the matrimonial property within the meaning of section 10 of this Act includes any rights or interests in benefits under a pension scheme which the liable party has or may have (whether such benefits are payable to him or in respect of his death); and

  (b) those benefits include a lump sum payable to him or in respect of his death.

  (2) Where the benefits referred to in subsection (1) above include a lump sum payable to the liable party, the court, on making the capital sum order, may make an order requiring the trustees or managers of the pension scheme in question to pay the whole or part of that sum, when it becomes due, to the other party to the marriage ("the other party").
  (3) Where the benefits referred to in subsection (1) above include a lump sum payable in respect of the death of the liable party, the court, on making the capital sum order, may make an order—

  (a) if the trustees or managers of the pension scheme in question have power to determine the person to whom the sum, or any part of it, is to be paid, requiring them to pay the whole or part of that sum, when it becomes due, to the other party;

  (b) if the liable party has power to nominate the person to whom the sum, or any part of it, is to be paid, requiring the liable party to nominate the other party in respect of the whole or part of that sum;

  (c) in any other case, requiring the trustees or managers of the pension scheme in question to pay the whole or part of that sum, when it becomes due, to the other party instead of to the person to whom, apart from the order, it would be paid.

  (4) Any payment by the trustees or managers under an order under subsection (2) or (3) above—

  (a) shall discharge so much of the trustees' or managers' liability to or in respect of the liable party as corresponds to the amount of the payment; and

  (b) shall be treated for all purposes as a payment made by the liable party in or towards the discharge of his liability under the capital sum order.

  (5) Where the liability of the liable party under the capital sum order has been discharged in whole or in part, other than by a payment by the trustees or managers under an order under subsection (2) or (3) above, the court may, on an application by the any person having an interest, recall any order under either of those subsections or vary the amount specified in such an order, as appears to the court appropriate in the circumstances.
  (6) Where—

  (a) an order under subsection (2) or (3) above imposes any requirement on the trustees or managers of a pension scheme ("the first scheme") and the liable party acquires transfer credits under another scheme ("the new scheme") which are derived (directly or indirectly) from a transfer from the first scheme of all his accrued rights under that scheme; and

  (b) the trustees or managers of the new scheme have been given notice in accordance with regulations under subsection (8) below, the order shall have effect as if it had been made instead in respect of the trustees or managers of the new scheme; and in this subsection "transfer credits" has the same meaning as in the Pension Schemes Act 1993.

  165
  (7) Without prejudice to subsection (6) above, the court may, on an application by any person having an interest, vary an order under subsection (2) or (3) above by substituting for the trustees or managers specified in the order the trustees or managers of any other pension scheme under which any lump sum referred to in subsection (1) above is payable to the liable party or in respect of his death.
  (8) The Secretary of State may by regulations—

  (a) require notices to be given in respect of changes of circumstances relevant to orders under subsection (2) or (3) above;

  (b) make provision for the recovery of the administrative expenses of complying with such orders from the liable party or the other party.

  (9) Regulations under subsection (8) above shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
  (10) Subsection (10) (other than the definition of "benefits under a pension scheme") and subsection (11) of section 10 of this Act shall apply for the purposes of this section as those subsections apply for the purposes of that section.".
  (4) Nothing in the provisions mentioned in section 164(5) above applies to a court exercising its powers under section 8 (orders for financial provision on divorce, etc.) or 12A (orders for payment of capital sum: pensions lump sums) of the 1985 Act in respect of any benefits under a pension scheme which fall within subsection (5)(b) of section 10 of that Act ("pension scheme" having the meaning given in subsection (10) of that section).'.—[Mr. Arbuthnot.]
  Brought up, and read the First time.
  Mr. Arbuthnot: I beg to move, That the clause be read a Second time.
  Mr. Deputy Speaker (Mr. Michael Morris): With this, it will be convenient to discuss the following: New clause 1—Pensions on divorce, etc.—
  'In the Matrimonial Causes Act 1973, after section 24A there is inserted—

  Pensions
  24B—(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may make a pensions adjustment order (referred to in this section as "an order") for the benefit of a party to the marriage.
  (2) An order shall where the court so determines bind a person who is not a party to the marriage but who is liable to pay any benefit under a pension scheme to a party to the marriage or any successor to such a person.
  (3) An order is an order adjusting the rights and benefits to which either party to the marriage is or may become entitled to under any pension scheme and in particular the court may by such an order require—

  (a) either party to the marriage to pay to the other such lump sum or sums as may be specified in the order (without prejudice to any other order which may be made under section 23(1) or (3)); or

  (b) the administrator of a pension scheme to treat the party to the marriage in favour of whom the order is to be made as a member of the pension scheme in relation to such benefits as may be specified in the order which were acquired by the other party to the marriage before the decree of divorce or nullity was made absolute or before the decree of judicial separation, or

  (c) the administrator of a pension scheme to make such payment or payments as may be specified in the order into such other pension schemes as may be nominated by the party to the marriage in favour of whom the order is made, or

  166

  (d) the administrator of a pension scheme to pay such part of any pension as may be specified in the order to the party in favour of whom the order is made for such term as may be specified not extending beyond the death of either party to the marriage, or

  (e) the administrator of a pension scheme to pay such part of any dependant's pension as may be specified in the order to the party in favour of whom the order is made for such term as may be specified beginning with the death of the other party to the marriage and not extending beyond the death of the party in whose favour the order is made, or

  (f) either party to the marriage to pay such administrative costs incurred by the administrator of the pension scheme in responding to any application for an order or in implementing an order.

  (4) An order shall not be made—

  (a) under subsection (3)(b) above unless the administrator of the pension scheme consents to membership of the pension scheme for the party to the marriage who is not already a member of the pension scheme, or

  (b) under subsection (3)(c) above unless the court is satisfied that the administrator of the pension scheme nominated by the party in whose favour the order may be made has agreed to accept such payment or payments, and in the event of the administrator being unwilling to accept such payment or payments he may be required to notify the parties to the marriage and the court.

  (5) It shall be the duty of the court in deciding whether to exercise its powers under this section and, if so, in what manner to have regard in particular to—

  (a) the matters referred to in section 25 save for the words "in the foreseeable future" in section 25(2)(a), (b) and (f), and

  (b) the effect that child care or other domestic responsibilities have had or will have on the ability of each of the parties to the marriage to make provision for his retirement, and

  (c) any administrative complexity or cost to the administrator of the pension scheme.

  (6) The Secretary of State in agreement with the Lord Chancellor shall by regulations provide for the date and method of valuation to be applied by the court to rights under a pension scheme when making an order and to provide for notice of any application for an order to be given to the administrator of the pension scheme.
  (7) The Secretary of State may by regulations make such provision as may be appropriate to meet the special circumstances of unfunded public sector schemes by varying or excluding the powers of the court under this section.
  (8) Nothing in the provisions mentioned in subsection (9) below applies to a court exercising its powers under this section.
  (9) The provisions referred to in subsection (8) are—

  (a) section 203(1) and (2) of the Army Act 1955, section 203(1) and (2) of the Air Force Act 1955, section 128G(1) and (2) of the Naval Discipline Act 1957 or section 159(4) of the Pension Schemes Act 1993 (which prevent assignment or orders being made restraining a person from receiving anything which he is prevented from assigning);

  (b) section 84 of the Pensions Act 1995;

  (c) any provision for any enactment corresponding to any of the enactments mentioned in paragraphs (a) and (b); and

  (d) any provision of the pension scheme in question.

  (10) the making of an order shall in no circumstances form the basis of any decision made by the Commissioners of Inland Revenue to remove the exempt approved status or to alter the tax status of a pension scheme provided that—

  167

  (a) the party to the marriage in whose favour an order has been made shall be treated for the purpose of retention of benefits as the member; and

  (b) the maximum benefits payable to and in respect of the party to the marriage whose rights have been varied by the order shall be limited to the benefits that would have been payable if the order had not been made.

  (11) No order or orders shall be made which shall have the effect of increasing the liabilities of any pension scheme beyond those which might have been incurred had the parties to the marriage remained married until the death of the party against whom the order is to be made.
  (12) After paragraphs (2)(f) of section 31 there shall be inserted:
  "(g) any order made under section 24B(3)(d) or (e) above"
  (13) After subparagraph (ii) in section 35(2) there shall be inserted:
  "or (iii) by adjusting the rights and benefits to which either party to the marriage is or may become entitled under any pension scheme."
  (14) Nothing in this section shall affect any proceedings commenced before the commencement of this section.
  (15) In this section—
  "administrator" means the trustees of an occupational pension scheme or the administrators or managers of such a scheme in the absence of trustees or the administrators or managers of a personal pension plan;
  "member" means a member of an occupational pension scheme or a person having a personal pension plan or retirement benefit plan or other similar arrangement; and
  "pension scheme" means an occupational pension scheme or personal pension scheme or retirement benefit plan or other similar arrangement.'.
  New clause 2—Pensions on divorce, etc (Life Assurance)—
  'In the Matrimonial Causes Act 1973, after section 24B there is inserted:

  Life Assurance
  24C—(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may make an order requiring either party to the marriage—

  (a) to nominate the other party to the marriage or a child of the family for such benefits under a pension scheme as may be specified in the order,

  (b) to effect such policy or policies of life assurance for the benefit of the other party to the marriage or of a child of the family as may be specified in the order,

  (c) to nominate the other party to the marriage or a child of the family as a beneficiary under any existing policy or policies of life assurance as may be specified in the order, and

  (d) to make such contributions to a pension scheme and pay such premiums in respect of a policy of life assurance for such term as may be specified in the order.

  (2) Any order made under subsection (1) above may contain such directions for the compliance with any conditions for the implementation and maintenance of such life assurance (including medical examination) as the court thinks fit.
  (3) It shall be the duty of the court in deciding whether to exercise its powers under this section and, if so, in what manner to have regard in particular to the matters referred to in section 24B(5).
  (4) After paragraph (2)(g) of section 31, there shall be inserted:
  "(h) any order made under section 24C above."
  (5) Nothing in this section shall affect any proceedings commenced before the commencement of this section.
  (6) In this section "pension scheme" shall have the meaning referred to in section 24B(15) of this Act.".'.
  New clause 5—Pension provision on death of person not providing for spouse —
  `There shall be inserted in section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 (Power of court to make orders) a new paragraph—
  "(g) an order in respect of any pension rights of the deceased.".'.
  Amendment No. 2, in clause 164, page 121, leave out from beginning of line 25 to end of line 26 on page 124.
  Amendment No. 6, in clause 164, page 121, line 26, after '1973', insert
  `in section 25 there is inserted after subsection (1)—
  "(1 A) Where a court is satisfied that it has not had regard to any pension in deciding whether to exercise its powers under sections 23, 24 or 24A above, it shall have power to vary any order which it has made to take account of that pension".
  (1A) In that Act,'.
  Government amendments Nos. 69 to 72.
  Amendment No. 3, in clause 164, page 122, line 15, after 'question', insert
  `(a) to ensure that the other party is informed of the extent of those rights, and (b)'.
  Government amendments Nos. 73 to 81.
  Amendment No. 4, in clause 176, page 129, line 26, leave out '165' and insert '164'.
  Amendment No. 5, in clause 176, page 129, leave out lines 29 to 31.
  Mr. Arbuthnot: As the hon. Member for Glasgow, Garscadden (Mr. Dewar) predicted in Committee, we are once again discussing the difficult topic of pensions on divorce.
  I shall deal with the new clauses and amendments in some detail. New clause 1 is intended to provide a comprehensive pension splitting system. It would give the courts power to divide pension rights between divorcing spouses. Groups lobbying on behalf of ex-wives have suggested that divorce settlements could be made more equitable if courts could give them a share of their husband's pension. We must remember, however, that whatever provisions the courts are required to apply must be gender-neutral. As we know, the issue raises important and wide-ranging arguments, some of which we rehearsed in Committee. It was apparent from our thoughtful debate in Committee that there are no simple solutions in dealing with any of these issues. As I said in Committee, any solution must take into account more fundamental issues than merely producing a piece of legislation that gives some additional powers to the court. The three issues involved are cost, complexity and equity.
  I do not want to repeat on the Floor of the House all that I said in Committee. I shall summarise my remarks instead. The costs of the new clause would arise in two ways. First, there would be tax losses, which in the long term would amount to £200 million a year. Secondly, account must be taken of unfunded public sector schemes. On prudent assumptions, that extra cost would start at up to £500 million per annum. The complexity issue arises from the treatment of the state earnings-related pension

  169
  scheme, the guaranteed minimum pension and home responsibilities protection. The Opposition new clauses and amendments ignore that complexity. Finally, inequity results from giving to the divorced a tax advantage that is not available to the married.
  4.45 pm
  I am firmly of the view that pension splitting is not easy to effect and implement. I am supported in that view by Lord Nicholls of Birkenhead in last Thursday's ruling on Brooks v. Brooks. He observed:
  "The problem does not admit of one simple solution."
  In his final paragraph, he said:
  "This decision should not be seen as a solution to the overall pensions problem. Not every pension scheme constitutes a marriage settlement. And even when a scheme does fall within the court's jurisdiction to vary a marriage settlement, it would not be right for the court to vary one scheme member's rights to the prejudice of other scheme members. Directing a variation which does not meet with Inland Revenue approval would normally be prejudicial to the rights of the other scheme members. A feature of the instant case is that there is only one scheme member and, moreover, the wife has earnings of her own from the same employer which will sustain provision of an immediate pension for her. If the court is to be able to split pension rights on divorce in the more usual case of a multi-member scheme where the wife has no earnings of her own from the same employer, or to direct the taking out of life insurance, legislation will still be needed."
  Lord Nicholls has acknowledged the complexity that could arise from the diversity and complexity of pension provision and systems. From our discussion in Committee, it seems that the outcome of the case of Brooks v. Brooks does not go as far as Opposition Members might have wished.
  Any so-called solution to effecting pension splitting must clearly be one that neither imposes an unacceptable additional burden on schemes nor leads to additional state scheme expenditure. But it is recognised that to include the state scheme, especially SERPS and its private pension equivalent, the guaranteed minimum pension, will add a specific layer of complexity. Pensions experts have already acknowledged that.
  The amendments tabled by the Opposition appear to include the state scheme in their scope. Surprisingly, they also include the state basic pension scheme, which already has a precise and generous system for dealing with divorce. It allows a divorced wife to substitute her ex-husband's national insurance contribution record for her own.
  The state scheme is another type of unfunded scheme. There is no pool of assets available to split or to transfer out. Payments of pension are met by current national insurance contributors, who in most instances are also the taxpayers who would be asked to fund the cost effects that I mentioned. Those are the cost effects of unfunded pension schemes and tax losses.
  It would be difficult to put an accurate value on SERPS rights before they are due to come into payment. Enhancements to SERPS through home responsibilities protection and the family credit/disability working allowance measure contained in the Bill can properly be factored in only at the end of the working life. There is no concept of an early leaver from the state scheme, so there is no method of valuing on a cash-equivalent basis.
  In addition, however, despite the new contracting out measures in the Bill, SERPS entitlement will continue to be calculated net of any guaranteed minimum pension for
  170
  several decades to come. SERPS is calculated in the following way. It is rather complicated and at one stage I asked the Committee to hang on tight; I now ask the House to do the same.
  First, a person's gross state earnings-related pension scheme is considered, regardless of whether he is contracted in or out. Secondly, any guaranteed minimum pension that he has accrued is taken into account. The guaranteed minimum pension is subtracted from his gross state earnings-related pension scheme to achieve his net state earnings-related pension scheme entitlement. I am not surprised that the hon. Member for Garscadden finds it amusing.
  If a person's occupational pension scheme were split, a smaller guaranteed pension would be deducted from his gross state earnings-related pension scheme entitlement, so SERPS would pick up the tab. That is why we would need to ensure that any splitting of a scheme member's pension did not result in an artificial boost to his net SERPS entitlement. That would mean costs once again falling on the general taxpayer.
  I accept that excluding SERPS and guaranteed minimum pensions, as some have suggested, could have problems of its own. It would mean that, for many years to come, only ex-spouses whose former partners had built up substantial private pensions would stand to gain. Those whose former partners had only a SERPS entitlement or private pension equivalent would effectively be excluded from the change and we do not believe that that would be fair.
  I have touched on some questions of equity between married and divorced couples, between members of different schemes and their ex-spouses, and between divorcing couples and current taxpayers and national insurance contributors. Those matters of fairness have important implications that cannot be pushed aside, even by the courts, especially when increasing numbers of women are building up pension rights of their own.
  It has been claimed by the Family Law Committee that pension splitting is widely supported. There is considerable support for the idea, but it needs to be closely examined before the House can accept it. New clause 1, which I understand will be spoken to by the hon. Member for Garscadden, does not deal with the fundamental issues that I outlined. In view of the fact that I set out the problems in Committee, perhaps at greater length, I am surprised that Opposition Members are asking the House to accept the new clause. We are not even clear about the nature and extent of the problems that courts face when dealing with pensions in divorce settlements. That is why we commissioned the research to which we referred in the White Paper published last summer. As far as I am aware, that research is the largest ever survey of the facts behind the problem.
  I shall now repeat something that I said in Committee, which was more important than Opposition Members may have realised at the time, so I shall say it more slowly:
  "We recognise that some people would prefer a different, pension-splitting, approach to the treatment of pensions on divorce. However, our amendments will enable the courts to reinforce and build on their existing powers; they represent a much improved framework to enable the courts to take proper account of pension rights in divorce settlements.

  171
  We shall review the treatment of pension rights on divorce in the light of the outcome of the research project that my Department commissioned to gauge the nature and extent of the problem."—[Official Report, Standing Committee D, 22 June 1995; c. 813–14.]
  Mr. Archy Kirkwood: I had the misfortune not to serve on the Standing Committee. Is the Minister saying to those of us who were not on the Committee that the Government made a commitment to legislate further if they believed that the results of the research merited it? Is that the case?
  Mr. Arbuthnot: The misfortune was ours rather than the hon. Gentleman's. The commitment is in precisely the terms that I have just stated, and the hon. Gentleman would not expect to tempt me further.
  New clause 2 would give courts the power to require either party to the marriage to order a spouse to take out life assurance for the benefit of the other or for a child. It would also allow the courts to require one party to nominate the other or to nominate a child for any benefits due to him under a pension scheme.
  In my view, it would be unrealistic to require the court to require someone to take out life assurance. In some circumstances, such insurance would be prohibitively expensive, it might be refused or it might be terminated. In any case, nominations for scheme benefits would be subject to their availability under scheme rules.
  Mr. Dewar: Mortgage interest.
  Mr. Arbuthnot: The hon. Gentleman says, sotto voce, "Mortgage interest." The two varieties of insurance are not analogous, as he well knows. In some cases, it is already possible for scheme members to make nominations for scheme benefits.
  I cannot see any genuine merit in new clause 2. As I said in Committee, it is clear from anecdotal evidence that pension rights are not always put before the courts for consideration in divorce settlements. That is why we accepted the intentions of amendments tabled in another place by my noble Friend Baroness Young, to whom I paid tribute in Committee, and I repeat those tributes here. She persuaded us that pension rights were not always taken into account and her amendment, which was successful, will have a dramatic and important effect for women going through divorce from now on.
  We also accepted the intention of the amendment tabled by Baroness Hollis, to the effect that orders should have the power to bind the pension scheme as well as the ex-husband. That will have the benefit of not forcing ex-wives to drag their husbands through the courts in order to enforce the orders.
  We tabled our amendments in Committee to improve on the amendments that were accepted in another place. The fact that pensions on divorce have now been debated at some length should increase the awareness of all parties of the number of settlements in which pensions feature, but our amendments will highlight the duty on the courts to take those pensions into account.
  With regard to amendment No. 2, I am a little disappointed that Opposition Members are now asking the House to rescind the amendments to which I have just referred and which were agreed and improved in Committee. Opposition Members seem now to reject what
  172
  I thought amounted almost to a consensus that those amendments were desirable, generally acceptable and potentially useful. In the light of our wide-ranging debate in Committee, I undertook to consider concerns that were raised, and that is why we are introducing today further amendments to deal with those undertakings.
  I now refer to Government amendments Nos. 69 to 81. One concern is the limitation that the Matrimonial Causes Act 1973 puts on the time scale to which the courts have regard. In Committee I referred to the use of the term "foreseeable future". I understand that in some cases that can be, and has been, construed as referring to a period of up to 10 years. I agree that such a construction seems to put an undue restriction on the courts when they consider pensions, which are built up over a whole working lifetime—and I see that Opposition Members, too, have attempted to deal with that difficulty in their amendments. Our amendments Nos. 69 to 71 and 80 remove the restriction, and I hope that the House will welcome that.
  5 pm
  Another concern, which I well understand, is that an ex-wife could lose access to any payments from her ex-husband's scheme if he died. I explained in Committee that in some circumstances the court may be able to make some provision under the Inheritance (Provisions of Family and Dependants) Act 1975 for the ex-wife, but said that I was prepared to consider the argument further. I have done so. I therefore ask the House to agree to a further amendment that would give the ex-wife access, if the court deemed appropriate, to such share of any lump sum payments from the pension scheme as she may have had access to if the couple had not divorced.
  There was also some concern about the effectiveness of the amendments when pension rights were transferred from one scheme to another. Amendment No. 73 allows that where a court order is in force requiring scheme trustees or managers to make payments to an ex-spouse on a scheme member's behalf, that requirement transfers automatically to the new scheme if all pension rights are transferred. If, however, only a part of the rights is transferred, any of the parties will be able to seek further direction from the court.
  My right hon. Friend the Secretary of State for Scotland has suggested amendments to bring in analogous provisions for Scotland so far as is practicable, given the very different nature of the legislative regimes and procedures. The hon. Member for Garscadden said that he hesitated to dip his toe into English law. Well, I hesitate to dip mine into Scottish law, but it seems to be my duty to do that today.
  Since Committee stage, my right hon. Friend has taken the opportunity to consider what amendments to the law of Scotland might be required. Of course, Scotland is a separate jurisdiction, and it is not possible to lift wholesale provisions designed for one jurisdiction into the law of another. As divorce law in Scotland is different from that in England and Wales, it has not been possible for the Government amendments for Scotland to mirror in all aspects those for England and Wales.
  One purpose of new clause 23 was to clarify the law under section 10(5) of the Family Law (Scotland) Act 1985. That section sets out the principle to which the court is to have regard in determining a fair division of matrimonial property on divorce. In particular, it provides that the pension rights of a party to the marriage are to

  173
  form part of a matrimonial property. However, the definition of pension rights has left some room for interpretation by the courts. One of the thrusts of the Scottish amendments is therefore to clarify what pension rights the courts are to take into account.
  Secondly, the amendments provide for the Secretary of State for Scotland to make regulations for Scotland, as are made for England and Wales, covering how pension rights are to be valued. As the hon. Member for Garscadden pointed out in Committee, Scottish courts have reached inconsistent decisions on that matter, the majority favouring the continuing-service basis of valuation. Under the enabling power, the Secretary of State for Scotland will be able to make regulations to introduce consistency in the courts' practice.
  The Scottish amendments also make provision for empowering the courts to make orders of various sorts where a party's pension benefits include or may include a lump sum. In particular, where the court orders one party to pay an immediate or deferred capital sum to the other party, it will be able to provide the other party with some security, by making an order binding the trustees or managers of the pension scheme to pay that sum to the other party direct when the pension comes into payment.
  The court could order the party to nominate the other party for all or part of any benefit payable on death, and order the pension managers or trustees to exercise any discretion that they had in respect of a pension guarantee so as to benefit the other party. Finally, the court could order the pension scheme managers or trustees to pay any benefit accruing on the death of a member to the other party, overriding the normal rules regarding who is entitled to receive such a benefit.
  I believe that the measures that we are introducing for Scotland will pave the way for a significant improvement in the consistency with which the courts approach pension rights. They will also align the law of Scotland on pensions to a significant extent with that of England and Wales.
  Another serious concern was raised by Opposition Members in Committee. They seemed anxious to ensure that any amendments did not have retrospective effect. I shared that anxiety then, and I share it now. It has been our clear intention from the outset to avoid such retrospection. However, amendment Nos. 6 and 3, tabled by the hon. Member for Leyton (Mr. Cohen), suggest that he has no such qualms. Amendment No. 6, which would amend the Matrimonial Causes Act 1973, would enable courts to revisit all existing financial settlements to take account of any pension not previously considered. That would have the adverse retrospective effect that the Committee was anxious to avoid.
  The hon. Gentleman also appears to have no strong qualms about imposing costs on schemes, or about imposing on trustees and scheme managers extra unnecessary obligations that would give an ex-spouse the right to more information from a scheme than is available to a spouse. I suggest that that would be unfair.
  The hon. Gentleman also tabled amendment Nos. 4 and 5—far-reaching amendments which, for reasons that I explained, would be unworkable in practice. He would like pension splitting to operate from the date of Royal Assent. However, pension schemes would have no idea of what they were supposed to do, or of how to value the rights of pension scheme members. So I hope that the House will not accept those amendments.
  174
  I shall now talk about new clause 15. Hon. Members who have followed the Bill through all its stages will know how complex pensions issues are. Adding the hugely variable personal circumstances of divorcing couples must add to those complexities. The Opposition amendments do nothing to address that problem or the other key issues that I have outlined—cost to the taxpayer and fairness. It is not sensible to attempt to devise solutions, especially legislative solutions, when the nature and extent of the problems have not yet been identified.
  New clause 15 does not appear to be directly related to the previous amendments. It seeks primarily to ensure a fair allocation of death benefits that may be payable by occupational pension schemes. I do not think it necessary or appropriate to legislate in that way. Employers set up occupational schemes voluntarily, and they are free to decide what scheme benefits will be payable and what, if any, conditions should surround their payment. That includes benefits payable on the death of a member, subject to the relevant rules on tax approval and, if appropriate, on contracting out of the state earnings-related pension scheme.
  Perhaps I should clarify that. There are two main forms of death benefit—a survivor's pension and a lump sum payment. Under Inland Revenue rules, a survivor's pension can be paid only to a widow, a widower or someone else financially dependent on the member. Currently, the trustees of a scheme can decide, within their discretion, whether a person is financially dependent, but they must act in accordance with the scheme's trust deed and rules.
  The rules surrounding the payment of the lump sum death benefit are more flexible. It can be paid to a nominated beneficiary or to a member's legal or personal representative, or it can be distributed at the discretion of the scheme's trustees. Payment does not have to be limited to someone who was financially dependent on the member, and the trustees can decide to divide up the lump sum among several people.
  Finally, I repeat that it is a complicated matter. The Opposition amendments do not begin to deal with the complexities. Instead, they incur for the taxpayer significant costs while operating in a way that we consider unfair. I urge the House to accept instead the amendments which have been adopted by the other place, and which we have improved, as well as the analogous amendments for Scotland that we are now introducing.
  Mr. Dewar: I thank the Minister for what, by his standards, was quite a sharp trot over a time trial. I was quite impressed; it was all good dense stuff, which I am sure was the intention.
  I start by dealing briefly with the Scottish aspects of the new clause. The Minister is quite right that Scottish law has been in a state of some flux. In a sense, we started with a lead over our colleagues south of the border in terms of good intentions, but case law is confused. I do not object in principle to the idea that some attempt should be made to ensure shape and discipline.
  I am sure that the Minister accepts that this is a complicated area and that there has been only a short period between the end of Committee and Report. I telephoned the Law Society of Scotland to ask whether it had any comments. Its brief message was that it was not consulted and that it does not know much about it. I hope that the Scottish Office has got it right, because there does

  175
  not seem to have been any real contact—at least not according to the information that has been given to me, and, obviously, I am acting here as a go-between.
  I may say, as a taster of the debate to come in the next few minutes, that the person who spoke to my office added gratuitously, but pithily, that earmarking is a very poor second best. The problem is being swept under the carpet. In Drumsheuch gardens—that will puzzle the Hansard reporters—there is not a unanimity of purpose with the Minister on this matter.
  I now come to the main argument, and I make no apologies for revisiting an old friend in this debate: whether we go beyond earmarking into splitting. The Minister was dismissive of new clause 1, with which, I am not ashamed to admit, we got help. Indeed, it is largely—I hope that it will not mind being identified in this way—the work of the English Law Society. I was rather surprised that the Minister was quite so scathing, in his own gentle way, of its efforts. The new clause is an attempt to put into reasonable parliamentary form an important argument, with which I shall now deal.
  A great deal of work has been done. The House will remember that in May 1993 the Pensions Management Institute report was published with the Government's blessing. It produced one general proposition and a number of proposals on how that proposition could be implemented. It argued that pension rights that have accrued during a marriage should be treated as assets at the point of divorce when financial settlements were being considered. It considered a number of possibilities, one of which is that, having valued those rights, payment should be made out of other assets of the marriage—the option that most of us would certainly favour—if it is possible to do so. In many cases, however, pension rights may be the most valuable asset of the marriage, and it would not be possible to take that course.
  The Government seem to have settled for earmarking, a shorthand term that I shall not try to explain at length. Basically, it means that the court, at the time of divorce, should instruct that when the pension is in payment to the husband—for the sake of convenience, I shall assume that the husband holds the pension entitlement—a portion of it should go to the wife. It is a form of deferred maintenance that may not come into play for 10 or 20 years, depending on the point at which the divorce took place in the life cycle.
  There are then two variations of splitting, which is the assumption that the courts, having valued the pension rights that are to go to the ex-wife to be, should then split the pension fund. It should be retained by the wife, who becomes a member of the same scheme and in fact becomes a deferred member within it, or there should be a splitting of the fund and a transfer to another pension provider picked by the wife. I have expressed strong support for splitting as an option, and shall return later to the reasons for doing so.
  I do not want to spend a lot of time on history, but it is a little cruel of the Minister to talk about people trying to legislate for splitting when they do not even understand the problem. The Government have made up their minds about earmarking, and I would have thought that precisely the same problems and difficulties attend that.
  176
  5.15 pm
  I suppose, to be fair to the Minister, that the Government have been cautious. It might even be said that I have been driven to take action. At various points we were told—I shall not rehearse the references—that further research was required and that nothing could happen until that was to hand. In fact, on 20 February, when the Under-Secretary was explaining that to us in the Chamber, Lord Mackay of Clashfern was scrambling for cover down the Corridor, announcing that there was to be a major movement without waiting for any further research. I presume that the Government thought that that was defensible and workable.
  The result, of course, has been changes to the Matrimonial Causes Act 1973. There was a particularly dense—perhaps opaque is a better word—passage in Committee, when the Minister attempted to explain precisely the impact of this change in terms of whether the courts had to take it into account but could ignore having done so, or whether they had to do a split and recognise the value of the pension entitlement in the final decision. He said that he thought that there was general acceptance that the result of these changes will be to place greater emphasis on the duty of the courts. That will mean that the valuation of the pension fund will become much more important.
  I am slightly puzzled by this, as it is a little disingenuous, but when the Secretary of State wrote to me on 1 May, he said
  "we gave our full support to an amendment to the Matrimonial Causes Act 1973 to place greater emphasis on the duty of the courts to take account of pension rights in divorce settlements."
  He continued:
  "Lord Mackay did not, in fact, propose a system of 'earmarking'."
  I do not know whether this is playing with words, but the Government have acceded to a form of earmarking and have proceeded to defend it through thick and thin, despite the best efforts of those of us in Committee to introduce an element of flexibility.
  I ask the Government to reconsider their inflexibility and their refusal to listen to the arguments because I believe that this is an area where the strength of the argument is overwhelming. The objections advanced, even with the additions that have been paraded in the last half hour by the Under-Secretary, are totally unsatisfactory.
  My first objection to earmarking as the only possible way forward for the courts other than adjusting from other assets in the matrimonial property is that it is very hard to see it living happily and co-existing with the clean-break settlement. It is, as I said earlier, a form of deferred maintenance. The whole thrust of law over recent years, and Government policy, too, is to see divorce as a final severance.
  Children, of course, are different considerations. In terms of the relationship between the parting spouses, as far as is possible there should be a once-and-for-all settlement, and we should not be left in a situation where the valuation of the divorce gives rise to a claim on the pension in payment many years hence. Admittedly, that has been very much improved by the amendments that were moved by the noble Baroness Hollis of Heigham in another place, which placed on the pension provider the duty to extract an amount due to the former spouse and to pay it direct. I was relieved and pleased that the

  177
  Government accepted that. Nevertheless, this is an odd set of proposals, which surely does not represent the only way forward.
  I do not think that what the Minister said destroyed the force of the important social point that, if splitting is not an option, ex-wives will frequently find that their future is open to a degree of uncertainty. Although the ex-wife has been given a right to the pension in payment, a number of things may happen to that right, by chance or design, and she will have little or no control over those developments. The uncertainty strikes me as a fundamental difficulty.
  The most obvious problem is that if the husband—the pension holder—dies before drawing his pension, which is always a possibility, his ex-wife's right to the earmarked portion will die with him. She might, of course, wish him a long and happy life in any event; but she would undoubtedly have a financial incentive to do so, regardless of her view of his general conduct and desirability as a member of the human race.
  I do not think that the Minister dealt adequately with the much commoner circumstance in which the husband receives the pension in payment and the ex-wife receives her earmarked portion, but the husband then dies before her. For reasons that I have never quite understood, men tend to marry women a little younger than themselves. As we know from actuarial tables, women live longer than men, and it is likely that someone in the position that I have described would have a lengthy widowhood. She would draw the pension on the earmarking principle, but on her ex-husband's death she would be abruptly deprived of it. There might be survivor's benefits, but they would either die with the ex-husband or, in the event of a second marriage, go to the "actual" widow. No claim even on the survivor's benefit pro rata with the original earmarking would be open to the "notional", displaced widow.
  In his letter of 1 May, the Secretary of State wrote:
  "This is one of the issues which we are currently considering in the light of the amendments adopted in the House of Lords."
  It is possible—I say this with no mock modesty—that I have missed something in the substantial number of amendments that we are discussing that answers the question, but I do not think that I have. I am sure that the Minister will understand why I consider that point a practical difficulty that stands in the way of his determination to retain earmarking as the only option open to the courts.
  I could continue on this theme for some time, but those who have nothing else to do with their lives can read about it in the report of the Committee stage. I am not sure that I warmly recommend the experience, but many similar points were made then. For example, what will happen to the earmarked portion if the ex-husband surrenders part of his pension in favour of his second wife? If he is reasonably wealthy, he may wish to use the new powers in the Bill for reasons of personal management or, indeed, malice. He may defer the purchase of the annuity, and draw from the capital. Presumably, that would have the effect of reducing the pension when it is in payment—perhaps not dramatically, but to some extent. While he is going through that performance, his former wife will be denied the pension that she may consider to be due to her.
  178
  It would be possible to embroider the argument intellectually for a long time. I shall merely say that I view the proposal as a fundamental attack on the Government's determination to make earmarking the only possible option.
  Messengers surround me on all sides, speaking sotto voce. The Secretary of State looks remarkably cheerful; I do not know whether that is because what has just happened is a triumph for the hard right of which he is a distinguished ornament, or whether he has become, for the occasion, an establishment figure, but I have no doubt that all will be revealed shortly.
  I believe that the advantages of splitting are overwhelming, and should be considered seriously. Clearly, if a capital sum is put into the hands of a departing spouse, and that sum must be lodged with a pension provider, the woman concerned will be mistress of her own pension. She can define it; she can build on it; she knows what it will produce. There will be certainty at the end of the day. Surely there is a case for retaining splitting as an option, rather than ruling it out of court. I put my view in modest terms; I hope that the Minister will at least consider it. It conforms to the clean-break principle, and was originally favoured decisively by the PMI report.
  Let us examine some of the arguments that the Government have advanced against that option. In Committee, on 22 June, the Minister said:
  "I shall put my anxieties about pension splitting in a nutshell."
  One might consider that quite a good place in which to put them.
  "I am worried about three matters: cost, complexity and fairness of treatment between divorced and married couples."—[Official Report, Standing Committee D, 22 June 1995; c. 808.]
  I do not think that the Minister advanced a very powerful case in regard to any of those three matters, and I am not sure that he improved on it greatly today. It was clear in Committee, however, that cost was uppermost in the Government's mind.
  A pretty massive red herring was introduced in column 810, when the Minister told us that there was a possibility that the cost of splitting would be as high as £1.3 billion a year. He has courteously written to me saying that there was an error in the calculation, and that the £1.3 billion was in fact £600 million. I accept that these things happen, and there are no hard feelings; but, in my opinion, it does not matter whether the figure is £600 million or £1.3 billion.
  Mr. Arbuthnot: I apologise for making that mistake in Committee, but I explained in my letter that, although the figure would start at £600 million, it would rise to £1.3 billion in the fullness of time.
  Mr. Dewar: I understand that, but I do not think it relevant. The Minister is offering us the possibility that a substantial sum will be involved if we decide that married couples can allocate any pensionable income between them to minimise their tax bills, but, to the best of my knowledge, no one else has made the same suggestion. The Minister is on a little trip of his own. If he is saying that someone else might make the suggestion because they had read one of the Minister's speeches, and that he will then lie down like a puppy and allow himself to be swept away, I find that very unconvincing. I do not

  179
  imagine for a moment that what he has said represents a threat, and I consider it entirely irrelevant to the circumstances that we are discussing.
  Much more serious is, for example, the suggestion that the cost will be around £800 million. It is interesting that that £800 million is made up of two components: £500 million, which refers to the liability of unfunded public sector pension schemes, and the rest, which was to do with the impact on the tax take and the expense of funding additional voluntary contributions that may be paid in because a pension holder, who has seen his pension split, will want to build it up again to the same position as before.
  The £300 million was not mentioned in Committee. I think the £200 million figure has appeared, but the £300 million was taken from the Secretary of State's letter of 1 May and has been used on many other occasions. I do not make too much of that discrepancy, but I say strongly that the lower tax take from the split, if that is a concern, will still be a concern with earmarking. At least if the Under-Secretary introduces machinery to overcome the problem at that stage, it is possible to introduce machinery to overcome it in splitting.
  5.30 pm
  If we accept the idea that a substantial number of people will cost the state money by paying in more additional voluntary contributions to make up for the loss from their pension fund as a result of splitting, it is equally possible that they will do the same with earmarking. They will consider the end product—they are not silly—and say that, with earmarking, exactly the same result will come about. It is therefore sophistry to argue that the disadvantage of splitting does not apply to earmarking. I am not impressed by what the Under-Secretary has said.
  There is of course the £500 million for the liability for unfunded pension schemes in the public sector. Our point is a fair one: the Minister would not dispute it. In Committee, he said:
  "As we do not know precisely how people would behave, it would be prudent to examine the worst possible effect of the proposal.
  In calculating the figure it was assumed that pensions would be split in all divorces relating to public service scheme members and that 50 per cent. of the accrued cash equivalent transfer valuation would be transferred out of the scheme…If all ex-spouses were to transfer their pensions, the cost to the taxpayer would be up to £500 million a year".
  That is the worst case scenario: everyone does it; no one remains in the scheme. That is a remarkably unlikely concept.
  In Committee, I put it to the Minister, and I still hold to this view, that, if a spouse finds herself getting a split of a public sector scheme, she will be much more likely to want to stay in the scheme as a member than to leave. The Under-Secretary had some sympathy with that point. He accused me of saying that ex-wives should be banned from leaving and should stay in the unfunded scheme as a matter of law. That was not my argument, which was that best advice would be that ex-wives should stay and most of them would. When I explained that to the hon. Gentleman, he said:
  "I can only say yes, best advice might be to stay."—[Official Report, Standing Committee D, 22 June 1995; c. 810–12.]
  180
  If he agrees that best advice might be to stay—and almost everyone else I have spoken to says that it certainly would—to quote that the cost of the prospect of splitting is that no one will stay, despite the best advice that almost all would have to stay, is an almost worthless assumption. It is almost perverse to follow that line of argument in the extreme way in which the Under-Secretary has followed it.
  Perhaps I could quote from Mr. Richard Malone, president-elect of the Pensions Management Institute, who is a well-known and authoritative figure. He said:
  "The £500M a year figure was openly acknowledged by the Minister to be a worst-scenario cost … In practice, comparatively few ex-spouses would transfer their pensions from such schemes in my view, and in any case it is not a 'cost' but a cash-flow or incidence issue".
  He is agreeing with my point, and indeed with the Under-Secretary's point that almost all ex-spouses will be advised to stay. Most of them will take that advice and the Under-Secretary's £500 million explodes before our very eyes. He should at least concede that that is a real possibility.
  I recognise that there can be problems, but as we know from the work, for example, of Mr. Geoffrey Wilson of Binder Hamlyn, and all the advice that we have had from a range of sources, there are a number of different ways in which it is possible to overcome this problem if it is worrying the Under-Secretary. Perhaps I should mention that he will find that new clause 1(7) contains provision to make regulations to exclude public sector unfunded schemes. That was put in not by the Law Society but by me as a friendly gesture to the Under-Secretary. Lots of ways exist in which the problem can be overcome. That is at least a possible way of pursuing that problem.
  Mr. Arbuthnot rose—
  Mr. David Winnick: On the point of order, Mr. Deputy Speaker. May I seek your guidance? More than 100 Conservative Members of Parliament have refused to support the Prime Minister. In those circumstances and in view of the humiliation that the Prime Minister has undoubtedly suffered, is it possible for a statement to be made by the Prime Minister as quickly as possible? More than 100 Tory Members have said no to the right hon. Gentleman—more than are in the Government. We should have a statement quickly in the House.
  Mr. Deputy Speaker: The occupant of the Chair is here to serve and if the Government or any Minister wish to make a statement, the occupant of the Chair will respond.
  The Secretary of State for Social Security (Mr. Peter Lilley): Further to that point of order, Mr. Deputy Speaker. As the Prime Minister has received the handsome majority that he sought—a majority larger than that achieved in any leadership ballot bar one for this party, and substantially larger than that achieved by the right hon. Member for Sedgefield (Mr. Blair)—presumably we may expect the right hon. Member for Sedgefield to seek a reaffirmation of his leadership, resign, go to his party and try to succeed in receiving the support that my right hon. Friend the Prime Minister has achieved.
  Mr. Deputy Speaker: These seem to be points of political observation rather than points of order.
  Mr. Arbuthnot rose—
  Mr. Deputy Speaker: Is this a point of order?
  Mr. Arbuthnot: No. I was in the process of intervening on the hon. Member for Glasgow, Garscadden (Mr. Dewar) and got blown off track. In the light of new clause 1(7)—I apologise for drawing us back to pensions and divorce—does he now accept the point that he would be banning the transfer out of public sector schemes, about whia he was so indignant in Committee?
  Mr. Dewar: No, of course I would not be doing that. I am just trying to be helpful. The Under-Secretary knows how helpful I am on these occasions. If he considers the new clause, he will find that it is a permissive clause that makes such provisions as may be appropriate to meet special circumstances. It is simply that I was seized of the point that the Under-Secretary, who sometimes has a one-track mind, would appear before the House today saying that the unfunded pension scheme liability was so frightening to Ministers in the Department of Social Security that further consideration was not possible. I moved to meet that with a permissive clause, but I have made it clear where we stand. I have argued, I hope with some force, that the £500 million figure is nonsense and that the £300 million figure would largely arise in any event with earmarking as well as with splitting.
  I make a final point on financial matters. The Under-Secretary made a point and he incomprehensibly repeated it at some length—I shall read it; no doubt it will read better than it sounded—about GMP and the state earnings-related pension scheme. I shall read to him again from Mr. Malone, to give him an example of at least one person of some knowledge and weight in that respect who does not accept that argument. He says:
  "The arguments about splitting SERPS and GMPs are not well-developed."
  I am sorry that that is a criticism of the Minister by implication, but never mind.
  "To say that SERPS 'does not exist' is absurd. It may be unfunded, but the entitlements exist and it is those which are under discussion. GMPs are not an insurmountable problem as we have explained at length, face-to-face with DSS officials. A GMP is a deduction from the SERPS entitlement, and it could continue to be deducted in full despite a divorce settlement. This would not be 'an unacceptable burden on schemes' and I do not know that anyone has ever claimed that it was. It is earmarking that it is an unacceptable burden on schemes as everyone has repeatedly made clear to the government."
  Mr. Malone expressed that with some force, and perhaps a hint of exasperation.
  I say firmly to the Government that, having tried, to the best of my ability, to consider the financial arguments, I do not believe that they stand up in any substantial sense against the social arguments of certainty—to which I referred—and justice and fairness, which at least argue eloquently for the possibility of including splitting among the options.
  The argument is, on the whole, familiar to hon. Members who served on the Committee, and I promised that I would not rehearse it over-zealously. I must say, however, that there is a very powerful coalition in favour of at least going ahead with the option that I have discussed.
  Fairshares is unashamedly a pressure group, but it has worked hard and fairly to inform its members and itself and to put its case. I pay tribute to that. In addition, I have quoted the PMI extensively. The PMI did the major piece
  182
  of research that is the foundation of the proposals to which the Government have now agreed. Unfortunately, they would not take the further step down the road with the PMI.
  The Equal Opportunities Commission has been quoted. It has rightly expressed its opinions clearly. It does not want to find itself in a position where splitting is ruled out—I do not blame it for that.
  The Law Society of England and Wales, the Law Society of Scotland, the Institute of Actuaries, the Faculty of Actuaries in Scotland, the Solicitor's Family Law Association and the National Association of Pension Funds—and a lengthy and impressive list of other organisations—have all said that the Government have got that matter monumentally wrong, and should be considering splitting.
  If that is really so difficult to do—I understand that that is the Minister's position—let me quote what was said by the Pensions Board of Ireland. I do not pretend to be an expert about it, but I have been supplied with the annual report and accounts of the board, in which the board discusses the Family Law Bill, which was introduced in the Irish Parliament in February 1994 and I suspect will now be the law.
  The board deals with different approaches to the division of pension rights on marital breakdown available under the terms of the Family Law Bill. They fall into four principal categories. One is pension splitting within the scheme, which we suggest is the answer to the unfunded public sector pension problem. The next is pension splitting by transfer payment:
  "A variation of the approach immediately above, and it involves the transfer of an amount equal to the value of the pension rights allocated to a member's spouse out of the scheme to an approved insurance contract or to another pension scheme of which he or she"
  becomes
  "a member."
  That sounds like a very simple statement of what we propose.
  The myriad difficulties do not appear to have stopped the Irish. I have no doubt that there are differences in their system and their social security system, and I do not pretend that I have had time to consider that in detail, but I put that in as a corrective against the way in which the Minister is throwing his hands in the air and saying, "It is impossible."
  5.45 pm
  I expected that we might end up with Brooks v. Brooks, and I took the trouble, as the Minister did, to equip myself with a copy of the judgment in that contentious case, which ran on for a long time and ended up in the House of Lords.
  I do not believe that the Brooks v. Brooks case argues the case for splitting, as the Minister accused me of believing. I do not think that he has heard me speak on the subject of Brooks v. Brooks, and therefore he must suffer from the delusion that he is a thought transference expert. In any event, I do not hold that opinion.
  Brooks v. Brooks is a rather special case and it is narrow in its application. For a start, the decision does not provide for pension splitting on divorce in a normal case. Brooks v. Brooks, as the House will remember, depended to some extent on whether the specific pension scheme that was discussed was a marriage settlement. In addition,

  183
  the husband and wife were members of the same, very small, pension scheme, and therefore no problem of prejudice to other members of the scheme, or any other complications, arose.
  It has been suggested to me that there are some messages from the decision. In the normal case of a wife who has not worked for the same employer as her husband, the case will allow a wife, on divorce, not necessarily to split, but to receive a dependant's pension if, first, her husband's pension scheme is capable of being a marriage settlement—that is one great exclusion—and, secondly, the ex-wife remains a dependant. The latter is not something that we would want to encourage, and is not a case, in these days of women working in the labour market, that will arise very often. Finally, it must not prejudice other scheme members.
  I do not believe, therefore, that we can assume that the Brooks judgment is in any way a final word. However, I would urge on the Minister that it gives impetus to the need to clarify the position. If the Government leave the position as it is, in many cases the wife will have an earmarked portion of her husband's pension—assuming that the Bill becomes law—and the question whether her husband's pension arrangements might be the subject of a Brooks order would then arise, to secure a deferred pension as a replacement for the lost widow's pension. That will lead to enormous complication and difficulty, much of which would be removed if the amendments to which I spoke today—or at least their spirit—were accepted by the Government.
  One might also draw some perverse conclusions from Brooks. For example, if one is a middle-aged, middle-income executive, one is probably better off in a large company scheme than in a small scheme in which one is the prime figure; but that is another matter.
  I do not believe for a moment that Brooks settles the issue; indeed, it probably complicates the issue, but, by doing so, argues the case for completing the nap hand of options that should be available to the court in reaching the right decision in the circumstances of an individual case.
  I was interested that the Minister quoted the leading judgment, which is by Lord Nicholls of Birkenhead. The Minister triumphantly quoted the last paragraph, but before we reach the last paragraph I shall draw his attention to page 4 of the judgment.
  Lord Nicholls reviews the various possibilities with some care. He expresses—I want to make this clear—some reservations about splitting pension rights, but they are rather minor reservations. He suggests that there would be
  "significant administrative burdens and expense for scheme trustees; there may be problems over guaranteed minimum payments and protected rights; and there would be major financial implications for unfunded public service schemes."
  I concede that he is entitled to refer to all those matters, but that is nothing to the objections that he raises to earmarking. I am surprised that the Minister did not read the passage to us, as he is so keen a fan of Lord Nicholls' prose. It says:
  "A second method involves earmarking part of the pension benefit for payment direct to the spouse when the pension comes into payment. This earmarking method suffers from the disadvantages that it would not be a 'clean break': payment of benefit would depend on the happening of events some of which would be under the member's control; there would often be uncertainty for some
  184
  years for the former spouse, not knowing when benefits would start or what would be their duration; and in most cases this method would yield nothing for the wife after the husband's death, she no longer being entitled to a widow's pension under the scheme."
  That might be a summary of many of the arguments that I have made in the last half hour or so.
  If we are going to reflect on Lord Nicholls' opinions, we should take his strictures—not an unfair word—about earmarking, and certainly earmarking as the only way forward, very much into account.
  The Minister quoted the final paragraph of Lord Nicholls' speech:
  "If the court is to be able to split pension rights on divorce in the more usual case of a multi-member scheme where the wife has no earnings of her own from the same employer, or to direct the taking out of life insurance, legislation will still be needed."
  I accept that entirely: it is exactly what we are trying to do. Lord Nicholls said that that possibility requires legislation. We are trying to supply that legislation through new clauses 1 and 2, which the Minister especially disliked but which were referred to specifically by Lord Nicholls. They were drafted because the Law Society thought that they were right.
  I believe that we can by rational argument seriously shake the opposition to these proposals, certainly in respect of the financial arguments. When we come to the social arguments, to what is best for stability in the aftermath and trauma of a divorce and consider someone who may well find herself—it is likely to be the former wife—on her own, it is important to try to provide circumstances where she has certainty and knows that what she has been promised will be delivered, however modest it may be. That is not going to happen with earmarking and there will be many cases in which it will not be possible to accommodate a capital payment from other assets and in which earmarking may seem singularly inappropriate.
  I believe that the Minister even now should go a little further down the road than he did in his exchanges with the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and make it clear at least that the door is genuinely open to splitting and that the Government accept that there is a strong social case for making arrangements that would allow that.
  Mr. Kirkwood: For the past 45 minutes, I have listened with care to the hon. Member for Glasgow, Garscadden (Mr. Dewar), who has dissected the Government's position in a forensic way and demonstrated his well-known skills, especially in respect of the financial aspects. I concur with him. I am also grateful to him because I no longer have to repeat the arguments—he has deployed them with enough skill to satisfy anyone who has been listening that many questions about the Government's current position remain to be resolved.
  As one who did some divorce work as a solicitor before coming to the House, I can say that it was clear to everyone practising such work that the situation was unfair. Things have moved on at some speed during the past 12 or 13 years, and the courts are going to take the issue further than the Government are prepared to take it in a legislative sense if this measure is the Government's last word on the matter.

  185
  If the Government were willing to leave the door open to further reform, there would be a case for reconsidering the problem after the commissioned research had borne fruit and, after they had had a chance to consider it, more sensible provisions could be made.
  When the Bill was published, I was concerned that the amendments that were tabled in the other place started to tackle the issue as they did. I should have much preferred the issue to have been dealt with in a free-standing matrimonial family Act and separately from occupational pensions, the protection that schemes are now perceived to need and the rest of the burden of the Bill.
  Matrimonial disputes are complicated and deserve their own legislation. I came to that view when I was looking at how such matters work out in the courts. I have felt for some time that the courts should be given more discretion to deal with individual circumstances. I do not believe that the straitjacket of a legislative framework can deal with the panoply of ramifications of all the peculiar circumstances that can arise during the dissolution of a marriage.
  It is extremely difficult for legislators to cater for everything that can happen when a marriage is dissolved. If judges were given discretion, within a framework of law, to consider all the circumstances, including the cost to the public purse and to other members of the scheme, they could weigh those factors in the balance judicially. I have felt for some time that they should be given proper freedom and discretion and that we should have the confidence to allow the courts to make fair settlements. Case law could be established in that way.
  I was interested to hear what the hon. Member for Garscadden said about the Brooks v. Brooks case. I entirely agree that some of the press reporting of that case, certainly in the initial hearings, was misleading. The case involved a very peculiar set of circumstances and no great conclusions could be drawn. The courts should be trusted a bit more and charged with considering the effects on the public purse and on other scheme members. That could permit more sympathetic consideration of individual circumstances when settlements are made.
  I am nervous about how we have come to be in this situation. I fully understand the frustration felt by pressure groups such as Fairshares. I, too, commend them. They have played an excellent role. We have also been provided with briefing material during the passage of the Bill. I agree with the hon. Member for Garscadden about the role that has been played by the Pensions Management Institute report and Mr. Malone. They have exploded, certainly to my satisfaction, many of the positions that the Government have taken.
  I have not yet studied all the Committee proceedings in great detail. I am taking them on holiday to the beaches with me and, in the autumn, I shall be in a much better position to target questions, but the explanation of the financial reasons against splitting seems to me to be wholly bogus and unsubstantiated.
  I am grateful to the hon. Member for Garscadden because he effectively demolished the Government's argument that there would be a £500 million a year cost to unfunded public service schemes and tax losses estimated at some £300 million pounds a year by 2037. In passing, 2037 seems a gie long way away. It puzzles
  186
  me how such figures can be conjured up out of the air. If a bolt of enlightenment is to come from the Treasury Bench, I am more than willing to receive it.
  Mr. Arbuthnot: I do not know that I have ever described myself as a bolt of enlightenment. I want to correct the hon. Gentleman on the £300 million. The hon. Member for Glasgow, Garscadden (Mr. Dewar) properly and fairly drew attention to the fact that the tax cost had changed. We now consider that the tax cost of pension splitting would be up to £200 million, not £300 million; £100 million is quite an important difference.
  Mr. Kirkwood: I am tempted to ask the Minister to explain why the estimate has been revised, but that would perhaps only provoke him.
  Mr. Arbuthnot rose—
  Mr. Kirkwood: I see that it would, so I shall not ask him.
  There are many questions to be asked and there is a lot more work to be done before I shall be convinced that the financial difference between splitting and earmarking is as the Government allege.
  What consideration have the Government given to equity between sexes in this argument? If the Government scheme goes on to the statute book, what view will the European Union and the European courts take of the current earmarking proposals? Has that been considered? I should be interested to hear the view of the Equal Opportunities Commission and other interested bodies. I am not confident from a legal point of view that the Government could successfully take a case to the European Court and argue that the earmarking provisions are not inherently discriminatory. I believe that they might fall foul of the European Court. I am certainly persuaded that the provisions for splitting on divorce are far more equitable from a social point of view—and, indeed, from every other point of view.
  6 pm
  I understand that there are problems but I, too, have considered some ways to get around some of the difficulties that have been suggested by the Government. I should like to think that, if the Government had had longer to work on some of the objections, solutions to them could have been found. If the Government are saying that they will continue to examine the problem and that the current proposals are not the final word, I hope that the research that they have rightly commissioned will lead them to favour splitting and to introduce free-standing legislation that will, of itself, produce the fairness, justice and equity that we believe can be achieved only by a move towards splitting.
  Mrs. Jane Kennedy: I should like to ask the Under-Secretary of State to look carefully at Government amendments Nos. 69, 70 and 71, which amend clause 164 and refer to section 25B of the Matrimonial Causes Act 1973. I know that he dealt with these amendments in his opening remarks, but I have to confess that I did not fully understand the need for Government amendment No. 70, which would appear to be completely unnecessary if Government amendments Nos. 69 and 71 are carried.

  187
  Amendment No. 69 deletes "in the foreseeable future" in line 32 on page 121, and amendment No. 71 deletes the same phrase in a later proposed subsection of the 1973 Act. Amendment No. 70 adds the words:
  "and, accordingly, in relation to benefits under a pension scheme, section 25(2)(a) above shall have effect as if 'in the foreseeable future' were omitted".
  If that phrase is already omitted, where is the need for amendment No. 70? That is the main element of the Minister's remarks that I did not understand. Much of what he said concerned the complexity of the issues with which we have been dealing but, in Committee, we were able to distil that complexity into relatively simple terms and I managed to follow most of what was said. I have not, however, understood the reason for amendment No. 70.
  Mr. Arbuthnot: The reason for the proposed change is that we want to remove the words "in the foreseeable future" only in so far as they apply to pension schemes to which they are not appropriate. The amendment to section 25 of the Matrimonial Causes Act 1973 would therefore not remove those words in relation to any other types of asset.
  Mrs. Kennedy: I am sincerely grateful to the Minister. He has cleared up what, to me, was a puzzle.
  We can also distil into relatively simple arguments the complexity of what divides us. There is no difference between us on the principle that pensions are assets that can be split; the real difference relates to when we think that split should take place, which is why we have come to use jargon such as splitting and earmarking.
  The Minister referred to the case of Brooks v. Brooks. The importance of that case has already been explained by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). The House of Lords' ruling means that the courts have the power to order the payment of part of an individual's pension to a divorced spouse. There is no intention on either side of the House to diminish the importance of that ruling, although the Minister has tried to underplay its importance. This is the first time that it has been found that pension benefits can belong to someone other than the scheme member for whom they are intended.
  As I understand it, the courts in England have the power to compensate a divorced wife for the loss of expected pension benefits, but they are not allowed to vary pension schemes by splitting pension rights between the parties. The facts of the case of Brooks v. Brooks are recognised as unusual, but the Financial Times reported last Friday:
  "Solicitors for Mrs. Brooks said…that the judgment was likely to set a precedent for division, at divorce, of personal pensions, most of which also are single-member plans paying benefits based on contribution.
  Mr. Norman Russell"—
  the solicitor in question—
  "said: 'It is hard to see that there is one law for the wife whose husband bought an executive pension and"
  another for
  "the wife whose husband bought a personal pension'."
  There is no doubt that the argument will continue and that the courts will continue to make decisions. We should be failing if we did not help the courts to arrive at fair and equitable decisions.
  188
  One of the problems with the Bill is that it allows only the earmarking of pensions at divorce and dismisses the benefits of splitting. Under earmarking, divorcees are left entirely dependent on their ex-partners. It is only when a scheme member draws the pension that part of it is paid to a divorced partner. If that pension is drawn early, the divorced partner gets less than expected. If it is drawn later—if late retirement is taken—the ex-partner will have to wait for a share. If the scheme member dies before retiring, the ex-partner get nothing at all. The injustices of that will continue to be questioned by the courts. It is therefore right and proper that we now consider a solution which would assist the courts to arrive at fair and equitable decisions.
  The Bill supports earmarking despite the recommendations of the Pensions Management Institute which, in May 1993, published the report of an independent working group that investigated in depth the issue of pensions and divorce. Despite Government claims to the contrary when the Bill was considered in the House of Lords, the PMI argued—and continues to argue—that its report was supported by the Law Society, the Society of Pension Consultants, the Association of Consulting Actuaries, the Institute of Actuaries and the Faculty of Actuaries. In passing, I have to say how much members of the Committee owe to the actuaries for their assistance with some of the complexities.
  The PMI argues that its report came up with solutions that are practical, workable and effective. The report came out in favour of splitting pensions at divorce rather than waiting until the retirement of the partner who was a member of the scheme, thus allowing a full, clean break on divorce. It is worth quoting at length the PMI's memorandum which was submitted to the Select Committee on Social Security and appears on page 106 of the Select Committee's report. It states:
  "We believe there are political motivations behind the Government's reluctance to make more fundamental changes in this area and we find this profoundly disappointing. In recent years the pensions industry has been accused of failing to be innovative and failing to keep pension scheme provisions in line with changing social needs and attitudes. Here we have an example of the industry (and the legal and actuarial professions) taking the lead only to meet a refusal from the Government to implement the recommendations. We believe it is critical to sort out pensions on divorce urgently because of the social ramifications. Furthermore, it will not be long before questions to do with pension rights between partners in relationships other than marriages become a legal, not to mention a social issue."
  We have gone into the problems of earmarking at length but they bear further consideration. The ex-partner would receive benefit only when the member retired and receive nothing if the member of the scheme, their former partner, died before retirement. The divorcee would therefore be required to keep track of their partner over a number of years when all that they wanted was a clean break. Divorce practitioners believe that a break is desirable so that those concerned are free to go their separate ways without being financially dependent on each other.
  If the scheme does not require a direct payment of the earmarked sum, the ex-partner might have to use the courts to enforce the rights under the earmarking agreement. The costs of that—to both parties—are obvious. The only people who would benefit from that are lawyers, with all due respect to all hon. and learned Members present.

  189
  Another problem with earmarking is that, although divorcees would obviously have an interest in the financial performance of the scheme, how the pension was reinvested, and so on, they would have no say in any decisions because they would not be members of the scheme. They would be linked to the scheme only through their former partner. Scheme members could face difficulty on leaving a job and transferring their pension rights if they were earmarked in a divorce settlement.
  There would be uncertainty about the level of retirement income, so it would be difficult for both parties to plan ahead. As I have already said, if the scheme member dies, former partners could have no income at all for their latter years. That would be a particular problem for women, as we tend to outlive men.
  There are several benefits of splitting: most important, it would allow a clean break. Divorcees could begin their lives again without continuing to be reliant on each other in any way. It would also allow the courts to reallocate other assets without complicating the value of the pension and ensure that both parties had their own entitlement to their own retirement benefits.
  I want the Minister to reconsider new clause 1, which is extremely constructive. It does not say that all pensions should be split at the point of divorce. At proposed new section 24B(3)(a), new clause 1 would allow for a lump sum to be paid to a partner if that was what the court determined and if it made an order to allow it. Paragraph (b) would allow the administrator of a pension scheme to treat the former party of a marriage as a member of the pension scheme in relation to such benefits as may be specified. The former partner would therefore become a full member of the scheme. Paragraph (c) would allow the administrator of the pension scheme to make such a payment into any other pension scheme that may be appropriate.
  There are throughout new clause 1 a range of options for the courts or the administrator of a pension scheme. In each case, it would be possible for the courts and the administrator to determine exactly the best outcome for the two partners.
  I know that there are difficulties with many of the solutions, just as there are with the earmarking solution that the Government have opted for. In new clause 1, proposed new subsection (4) allows for safeguards in that the administrator of the pension scheme would be able to present to the court a reason why any of the solutions being suggested should not be adopted. Paragraphs (b) and (c) in particular would allow the former partner to be brought into the scheme as a full member or allow payment from one pension scheme into another.
  Proposed new subsection (7) would allow a safeguard for unfunded schemes by enabling the Secretary of State to introduce regulations which may be appropriate when it was felt that an unfunded scheme could not or should not be part of the settlement.
  Will the Minister reconsider those points? I am not satisfied with the case that he has made against splitting on divorce. The new clause would allow the courts to choose the best solution for the two people before them when determining divorce settlements. That is the best solution for everybody and I commend new clause 1 to the House.
  6.15 pm
  Mr. Harry Cohen: I have tabled amendments Nos. 3, 4, 5, and 6 and new clause 15. I also rise to support the amendments in the name of the official Opposition—excellently explained by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar)—especially new clause 1, which puts the case for pension splitting within the scheme and, at the discretion of the courts, via transfer values to the ex-spouse of the pension fund member.
  I note that the Minister will review the matter in the light of research. Indeed, he was cautious in replying to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) about whether such a review would reveal a need for further legislation. I suspect that, when the Government receive the research, they will need to introduce further legislation and move toward a pension-splitting approach, as has been suggested not only by Opposition Members but by many expert organisations. I also suspect that, by relying on the research, the Government are kicking the whole matter into touch, and that further legislation will probably have to be introduced by a Labour Government after the next election.
  The mere fact that amendments and new clauses have been tabled on pensions relating to divorce is a triumph for fairness, and a victory for the campaign to recognise the issue in the Bill. To begin with, the Government did not envisage dealing with the matter of dividing pensions in the event of divorce. I am pleased to have played my part in the recognition of the problem and bringing about change. I introduced two ten-minute Bills on the subject: one at the end of last year and one earlier this year, which greatly raised the profile of the issue.
  An excellent campaign has been organised by Fairshares, a working party of the Pensions Management Institute has produced excellent reports, and I pay tribute to the work and achievements of Baronesses Young and Hollis in the other place in tabling an amendment on the subject.
  The Government accepted the principle of the amendment, although I do not know whether they were dragged kicking and screaming to that view. Perhaps that is a rather ungentlemanly thing to say, so instead I shall praise them for at least accepting the principle, realising that there was an issue to face, and accepting that changes needed to be made to ensure fairness for ex-wives, who are badly treated under the current law and often do not get a share of the ex-husband's pension.
  Nevertheless, my hon. Friends and I remain concerned, because the way that the provision is implemented could lead also to unfairness in the system. The earmarking method chosen by the Government, against all the advice from the experts, could result in unfairness. I have read the Hansard report of the Committee proceedings. My hon. Friend the Member for Garscadden asked whether I did not have better things to do with my life. He made an excellent speech in Committee on pension splitting on divorce, and he has done so again today.
  In Committee, the hon. Member for Antrim, South (Mr. Forsythe) asked whether the Government were not in danger of following the path of the Child Support Agency by making a mistake in their choice of how to implement the legislation. The principle is good, hut if the implementation is wrong, that could lead to unfairness and the Bill would have to return to the House for

  191
  clarification. That would have cost implications. It would have been better to follow the reports of the Pensions Management Institute and the Goode committee.
  On 30 June, The Independent described the Government's approach as "a strange mish-mash." It said that the Brooks v. Brooks case, which has been mentioned today, had made the Government alter their original intentions. Doubt has been cast on the overall effect of the Brooks case, and I agree with that. For example, The Independent said that a number of women would be
  "entitled to a share of their former spouses' pensions at retirement. They can claim this even if the partner dies before reaching retirement age."
  I am not at all sure that that is a consequence of the Brooks case. Indeed, my understanding is that Mr. Brooks is still very much alive, so I do not see how The Independent can make that judgment.
  As my hon. Friend the Member for Garscadden said, the Brooks case was narrow, and there were special circumstances, as Mr. and Mrs. Brooks were the only two members of the personal pension fund. Because of that, Mrs. Brooks had a right that would not necessarily apply to other spouses with a range of different circumstances. I certainly do not think that the right would apply if the partner were to die, which is why I have tabled my amendment.
  If a member of a pension fund dies, that should not negate the right of the ex-spouse to his pension, which should have been guaranteed at the time of the divorce. If, subsequently, the member of the pension fund inconveniently dies, the ex-wife should not lose her rights. I do not think that the Brooks case resolved that problem, as The Independent maintained, although I shall be interested to hear the Under-Secretary's view. If it does not resolve that problem, I hope that the hon. Gentleman will reconsider my amendment, which would.
  I want to press the case for pension splitting on divorce. Many of the expert organisations support that, rather than the Government's earmarking approach. I want to draw the attention of the House to two documents. May's edition of "Parliamentary Brief' carries an article by Stewart Ritchie, the director of pensions development for Scottish Equitable. In an article entitled "A Prescription For A Messy Divorce"—which in itself sheds some light on the Government's proposals—he states:
  "The government's proposed answer is for the court to make an order which will oblige the pension arrangement to pay a proportion of the relevant pension to his ex-wife when he retires."
  That is the key point. He continues:
  "However this is contrary to the conclusions reached by the Working Group appointed by the Pensions Management Institute in its widely acclaimed report of May 1993, and the government's approach has been greeted with dismay by many parts of the pensions industry."
  The article then gives a number of reasons for that dismay, such as the fact that the ex-spouse will have no control over her pension arrangements subsequent to the divorce.
  Mr. Ritchie asks what would happen if the member of the pension fund deliberately postponed his retirement out of spite, to delay the ex-wife access to her share of the pension. That point highlights the unfairness that will arise out of the Government's approach. If we must have earmarking, the ex-wife should be able to exercise her
  192
  right on her retirement, rather than her ex-husband's. He should not be able to postpone his retirement out of spite. Mr. Ritchie was referring to a key point in my amendments—that the pension fund member may leave pensionable service and die before retirement. His pension would then die with him, as would the ex-wife's entitlement to her share. That would be unfair.
  Mr. Ritchie stated:
  "The PMI Working Group approach is to allow the ex-husband and ex-wife to agree a clean break using other assets if feasible … If this is not feasible, a transfer value can be paid…The ex-wife is then in charge of her own pension destiny."
  That is the approach favoured by the Opposition.
  Mr. Ritchie concluded:
  "If there is a political will for a clean break, it can be done, and it would be less messy than the current proposals."
  That is an expert opinion.
  The other document comes from the PMI. It is a press release dated 13 June, headed "Pensions and Divorce: is Disaster Looming?" It quotes Mr. Richard Malone, the president-elect of the PMI, as saying:
  "The hopes and expectations of thousands of divorcees will be badly let down if the present provisions for pensions on divorce are not changed as the Pensions Bill goes through the House of Commons. The PMI has been pressing for divorcees to be allocated a pension of their own as part of the divorce settlement; a pension which they can control themselves and around which they can plan their own financial affairs and independence."
  The press release continued:
  "Only when the scheme member decides to draw pension will part of it be paid to the divorced spouse; if it is drawn early, the ex-spouse will get less than expected; if retirement is deferred, ex-spouses will just have to wait for their share; if the scheme member dies before retiring, they will often get nothing at all."
  Mr. Malone said that those are "fundamental flaws" in the current proposals, and concluded:
  "Further complications arise because between the divorce and the time of retirement the scheme member may transfer the pension … Divorcees will have no say in any of these decisions despite the fact that they have a substantial interest in the form that the final pension takes and in the financial security of the investments."
  That is a pretty scathing criticism of the Government's earmarking approach, and there are arguments in favour of going down the road that the Opposition propose, of pension splitting. If the Government are insisting on earmarking, they should address the flaws and tackle them, even at this late stage.
  6.30 pm
  In my amendments, I propose to give the Government an opportunity to ameliorate at least some of the worst effects of their proposals. My amendments relate to four main areas, which I shall now go through. Amendments Nos. 4 and 5 talk about the date when the legislation should be enacted. The fundamental point behind my amendments is that they should come into force on the day that the Bill receives Royal Assent.
  In Committee on 22 June, the Minister said:
  "We are talking about orders made after April 1996 for pension rights accruing after April 1997…If the divorce proceedings have started now, but have not concluded by the time that that time scale comes into effect, they will be affected in the ordinary way."
  Mr. Arbuthnot: I should correct a word that I used in Committee and which the hon. Gentleman referred to in his quotation. I said "accruing" when I should have said "paying". I am sorry to be pedantic.
  Mr. Cohen: That is a fair point. The effect on the ex-spouse of a pension fund member if the case is

  193
  on-going is that she will not have the rights which the Bill would pass to her for payment. It is understandable that, if the legislation is not passed, one will not get the rights. But why should an ex-spouse wait until April 1996 or 1997? Once the Bill is enacted and the ex-spouse goes to court, she should have those rights, as that is clearly what Parliament intends.
  In his opening speech, the Minister said that my amendments were retrospective, but I do not think that that is the case. I am saying that the measure should come into effect when the legislation is formally passed, as that is reasonable. Since taking up this matter, I have received letters from women who have been extremely badly treated in divorce settlements, and I have considerable sympathy with them. I understand the arguments about retrospective legislation, and I accept that we cannot reopen past divorce settlements. But I do think that we could start afresh from the date that the legislation is passed.
  The amendments would allow the provisions of the Bill to come into force on the day that the Lord Chancellor decides. It might not even be April 1996 or 1997, as the Minister said—although I presume that that is the Government's intention—as the Lord Chancellor could put off the introduction under the provisions of the Bill. We should be clear, and let divorced couples know where they stand, as that is the fairest way forward.
  There will be an anomalous situation if the Bill is enacted but its provisions are delayed until the rights start to come into effect, because couples will be bringing divorce cases to the courts and seeking settlements in the period between enactment and when the Lord Chancellor brings the measure into effect. It is unfair for the ex-spouse, and could create court chaos. Ex-spouses going to court for a settlement will—if properly advised by their lawyers—say, "Delay it until the Lord Chancellor brings the measure into effect," while the husband's solicitor will be telling him to get into court right away.
  That is not a proper way for the courts to be looking at divorce settlements, either. It is a recipe for chaos and unfairness, especially when the legislation is on the statute book. There is a strong case for bringing into effect the provisions related to pensions and divorce as soon as the Bill receives Royal Assent, and I hope that the Minister will consider that carefully when he comes to respond.
  My amendments would give an ex-spouse the right to be informed of any transfers of the pension fund money which occur when the ex-partner moves the money around different pension funds. In Committee, my hon. Friend the Member for Garscadden wondered whether the duty to inform should fall upon the provider, and asked how an ex-spouse would know where the pension fund money was and what her rights were. Someone should have the duty to keep the ex-spouse informed.
  The Under-Secretary replied:
  "Those are both fair points, which I shall consider further because they are important."
  The Under-Secretary might have considered those important points, but we have not heard the results of his consideration; he has not come up with anything. I have helped him out with my amendments that propose that the ex-spouse should have the right to be kept informed about where her pension money is.
  In his opening remarks, the Under-Secretary said that we would be giving more information to her than to her former spouse. I find that hard to believe. There is a basic
  194
  case for saying that, if it is her money, she has the right to know where it is. That is a fundamental point. I find it hard to believe that she has more rights to information than her former partner, as he is the one shifting the money around—he will know where he has put it. If he changes jobs and joins a new employer's pension fund, he will know where the money is. His partner will not know. I think that, on reflection, the Under-Secretary will realise that what he said is not right, and that the ex-spouse will not receive more information than her partner.
  The Under-Secretary also argued against the right for the ex-spouse to receive information, because the trustees would have to bear the cost. A cost probably would be involved, but I do not think that the cost is unreasonable. It is better for the trustees and the managers of the pension fund to have that duty than her ex-partner, who would have no incentive to tell her. It would be tricky to place a duty on him to do so in law. It would put the couple back into contact with each other, when their marriage was over and they wanted to break contact. It would not be wise to put the duty on the ex-partner. It would be far better to place it on the trustees and the managers of the fund. I acknowledge that, as the Under-Secretary said, my proposal would involve a cost, but it is a minimal cost—a letter, perhaps even a standard letter, and a stamp. That should not be too onerous a cost for the trustees to bear. At present, the ex-spouse is in the dark about where her money is, which is wrong.
  The third of my four amendments relates to reconsidering the divorce settlement if the pension was not initially considered under the Matrimonial Causes Act 1973—an important point. The matter was dealt with by the Under-Secretary on 22 June, when he drew attention to the 1973 Act:
  "The position now is that the courts are obliged to take into account the pension assets"—
  when there is a divorce settlement—
  "But the experience of many people is that, despite that, such assets have not been taken into account—that is important"— —[Official Report, Standing Committee D, 22 June 1995; c.803–8.]
  The Under-Secretary acknowledged that, although there is, nominally, a legal right, in many cases the pension right is not taken into account.
  6.45 pm
  My amendment gives the ex-spouse rights when that new pension money comes to light. It does so only in those circumstances where she may not have known that her partner had a pension fund, so it was never taken into account. The matter can be taken back to the court for consideration. But the case is reopened only in those specific circumstances—when the pension fund has not been taken into account in the original settlement hearing.
  The court would not reopen the whole divorce settlement, but only the pensions aspect of the settlement, which should have been taken into account at the original hearing, as the Under-Secretary acknowledged. That is not retrospection on any grand scale, but merely an adjustment to take into account existing law which is not being fully implemented. People are losing as a result of that omission.
  I have perhaps garbled my argument a bit, but I hope that I have made my point as best I can. I do not think that my amendment calls for too much retrospection—certainly not on a significant scale. It would allow for

  195
  pension rights, which are not always initially taken into account by the courts at the divorce settlement, to be considered as the law intended.
  I come now to the fourth of my amendments, and I see that the Whip, my hon. Friend the Member for Leeds, East (Mr. Mudie), is concerned that I have been talking for too long. I apologise to the House for that. I certainly do not intend to make a speech as long as the one I did the other night, but I am making relevant points.
  New clause 15 deals with what happens when the husband dies. I am strongly of the opinion that his ex-spouse should not lose her pension rights—they should not die with the husband, which would be extremely unfair. I shall not quote from the Committee Hansard again because of the shortage of time, but the Under-Secretary said that the matter was important. I give him credit for the fact that he was concerned about it. In response to points raised by Opposition members of the Committee, he said that he did not have the answers. He might not have the answers, but an answer is needed. My amendment gives the House the opportunity to have the answer.
  The basic principle behind the amendment is that the pension rights of the ex-spouse should not die when her partner dies if he dies before the pension comes into effect. That is the crucial point of the amendment. The ex-spouse should be entitled to what she would have received had her partner lived. My amendment amends the Inheritance (Provision for Family and Dependants) Act 1975 to allow that to happen.
  It is a clever amendment, and I pay tribute to the Clerks for its wording. It gives the ex-spouse the right under that Act for pension rights to be considered. The new clause is entitled
  "Pension provision on death of person not providing for a spouse".
  The new clause therefore goes a little wider than my original intention, but in a good cause. Regardless of divorce, if a person has not provided out of his pension for his ex-spouse, she can use the amendment to go to the courts to obtain her rights. I think that the Under-Secretary should accept the amendment.
  I think that the Under-Secretary said tonight that he was proposing to give the ex-spouse access to the lump sum. That goes part of the way to accepting my case that the ex-spouse should have rights, and that those rights should not die when her ex-partner dies.
  Mr. Arbuthnot indicated assent.
  Mr. Cohen: The Under-Secretary nods his head, and I am grateful that he has accepted the principle behind my amendments. I welcome that acceptance, but access to the lump sum is only half a loaf. If the Minister accepts that principle, a widow should have full pension rights and receive all she would have been entitled to if her spouse had not died. I hope that the Minister will take my points into account. Although I welcome his partial concession and his acceptance of the principle, I hope that I can persuade him to accept all my amendments.
  I believe that pension splitting is the best approach. A clean break would be best, and the courts should have the flexibility to arrange settlements and transfer values to the ex-spouse. The Government do not have time to address
  196
  all the points made by my hon. Friend the Member for Garscadden, but I believe that they have over-egged the pudding in terms of the cost of pension splitting. I do not think that the cost is as great as the Government maintain. Many wives who do not have pension rights are forced to claim benefit, which the Committee was told amounted to about £70 million. That sum must be offset against the Government's estimated cost.
  I noted the Minister's argument about barring people from leaving public sector pension schemes because that would cost the taxpayer money. I thought that the Government wanted people to leave the state earnings-related pension scheme—in fact, the Government have awarded tax relief and tax bonuses to people to encourage them to leave SERPS and secure private pensions. If the Government do that as a general rule, I do not see why they should not do the same for ex-spouses. It should not be taken into account in the Government's calculations, because that is their policy, anyway.
  I am in favour of pension splitting, but in this Bill it appears that the Government are stuck with the second-best earmarking approach. If the Government are stuck with that approach, my amendments at least clarify and improve the law. According to the Minister's own criteria, they are cost-neutral, less complex, and certainly a lot fairer than the Government's proposals. I recommend them to the House.
  Mr. Gerry Sutcliffe: Time moves on. The pensions issue has been well documented by many of my colleagues and I pay tribute to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) for the way in which he dealt comprehensively with that issue in putting the case for pension splitting. The Committee missed the contribution of my hon. Friend the Member for Leyton (Mr. Cohen) during its deliberations.
  Divorce is a traumatic event in the lives of the people involved. Many entanglements must be resolved, including emotional, financial and practical considerations. Sadly, in the United Kingdom the number of couples who opt for divorce has reached unwelcome proportions. Some two thirds of marriages now end in divorce, and that is the highest figure in western Europe. According to Mr. David Salter, vice-chairman of the Solicitor's Family Law Association, consecutive Governments have failed to take action on the issue of pensions and divorce. He went on to say that the current law creates inequitable settlements that often leave one partner of the marriage in poverty and that the courts need the power to redress the situation more fully.
  I have received a large amount of correspondence from individuals and organisations who point to high levels of suffering as a result of the inadequacies of the current settlement procedures. Social trends will make the issue increasingly more important. That view is shared by many, including Goode and the Pensions Management Institute.
  In marriage, careful provision is usually made by way of a pension and/or insurance to ensure that, if one partner dies, the other partner will be able to pay off a mortgage and to top up any existing pension entitlement. It is vital

  197
  that the dependent partner be provided for. At present, upon divorce, the dependent partner receives no such consideration. According to the organisation, Fairshares:
  "Divorce is as traumatic as widowhood. There is no partner, no breadwinner, no friend, instead there is an adversarial situation where each is trying to get as much as they can financially".
  That can be, and is, an horrific position in many cases—especially for the partner who has no on-going salary or pension provision for the future. As Fairshares says, the situation is particularly bad for older women, who may have had no opportunity to build their own pension rights through employment because of child care and family responsibilities. Those women—many of whose children have grown up and left home—face many other problems also, including social isolation, which is made worse by a lack of finance. The average total retirement income of divorced women is £65 per week. In 1993, 80 per cent. of the 1.5 million income support claimants over state pensionable age were women. The Government already face a considerable cost.
  Under existing trust law, a wife loses all her rights to her husband's pension upon divorce. We believe that our new clauses will assist the courts in quantifying the pension assets of partners through the pension-splitting process. It will not be the panacea that cures all ills, but it is a significant step in the right direction. Splitting pensions has the advantage of apportioning to a deposed or disposed-of partner a capital sum that may be passed to a pension provider if that is the required option.
  As has been said, that arrangement would fit in well with the clean-break settlement philosophy that the Government claim to believe in. The procedure and calculations for splitting would not be a disaster from the point of view of individual pension funds and they would not disadvantage the Treasury in the long term. The extravagant figures cited by the noble Lord Mackay of Ardbrecknish in the other place have been extensively dismantled by notable experts such as Mr. Geoffrey Wilson, an ex-Government Actuary and a partner in Binder Hamlyn.
  A Pensions Management Institute report of May 1993 opted decisively in favour of splitting, and a wide range of organisations have come to the same conclusion. The Equal Opportunities Commission said:
  "Any new legislation should be based on the now established clean break principle which underlies the current legislation on divorce settlement. It is important that a share in an ex-spouse's pension is not regarded as a form of deferred maintenance".
  The Law Society is also in favour of the Labour party's arguments. The Solicitor's Family Law Association, the Institute of Actuaries—despite some differences about the details—and the National Association of Pension Funds take the same line and have said so publicly. However, as usual, the Government have not gone far enough and, as in so many policy areas, have missed the opportunity to do what is right and fair. The Government have stalled for too long. Their proposal is too complex and it does not address the core needs of those involved.
  Earmarking makes no provision for the death of an ex-husband and would prove far more costly in administrative terms. It would not offer a clean break, with calculations having to be made for many years after divorce and all the agonising difficulties that bringing people together would bring. One cannot argue for parental responsibility with regard to child support provision and then not be consistent in ensuring that the
  198
  same responsibilities are applied to dependent partners who are divorcing. The law must reflect the changing face of our society and be adequate to meet people's needs. Pension splitting would allow people to get on with their lives, independent of their former partners. We believe that the Minister should reconsider the proposal.
  Organisations and professionals in the industry have said that pension splitting is the best option. As has been said, the Bill has reached Report stage very quickly after the conclusion of consideration in Committee. However, it is important that we do what is right. The Bill, which is very long and complex, must put the statute right because we are not sure when we shall return to the issue in future—albeit that the Minister has said that he is prepared to examine the survey results with a view to future legislation.
  We believe that our new clauses are appropriate and right and have the support of the majority of people. We urge the Minister to reconsider his decision.
  Mr. Clifford Forsythe: I am sure that my colleagues will agree that some of the saddest and most difficult cases with which we deal in our constituency offices involve divorce. There are a number of reasons why that is so. Partners often disagree about property, children and, recently, about the Child Support Agency. The current pension situation will now be added to those problems.
  Dreadful bitterness arises in many divorces, and sometimes children are used as pawns by one partner to get at the other. The situation that the House produced with the creation of the CSA has made matters worse. If it is now suggested that it is agreed by almost everyone that a former wife should be entitled to part of her former husband's pension, but only in the dim and distant future, we shall add to the burden of difficulty and anger. Divorce makes life hard enough for the children of a broken marriage without adding to it.
  7 pm
  It would seem fair, equitable and reasonable that when a divorce goes to court, the judge should review the circumstances and make a decision at that time. That way, the pension issue could be put to one side, which would at least do away with some of the anger and frustration that surround a divorce. I ask the Minister to reconsider even at this late stage. Hon. Members, for all the best reasons, missed certain opportunities with the child support legislation. Let us not make the same mistake again, but decide that new clause 1 represents the best thing to do.
  Mrs. Helen Liddell: I am conscious that a number of my hon. Friends wish to contribute to the debate, because the subject is of considerable interest. We have all been lobbied extensively on pensions and divorce. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) spoke at length and most ably, and I support his detailed, reasoned and sensible line.
  We are seeing the consequences of the Government being caught on the hop. For the past 10 years there has been pressure to rectify anomalies in the treatment of people after divorce. I accept the Minister's point that we must aim at gender neutrality, but the reality is that the vast majority of persons disadvantaged by the current situation are women, and women's organisations have been at the forefront in lobbying.

  199
  Opposing new clause 1—and one understands the Government not being interested, because that new clause took the argument further along the road than they want to go—the Minister referred to costs, complexity and fairness. The costs issue gives me cause for concern. There was lengthy consideration of the Bill, which spent 10 weeks in Committee. There was also the Bill's gestation period, the Goode report and that of the Social Security Select Committee, and the aftermath of various frauds and misappropriations affecting pension funds. There has been public demand for a review of pension funds. It is, therefore, regrettable that there is a sense that certain clauses have been cobbled together. The Government, having been caught on the hop in respect of pensions and divorce, have not thought through the matter properly and logically.
  In Committee on 22 June, the Minister explained that the estimated cost of allowing pensions to be split by all married couples was £1.3 billion in the first full year. I am grateful to the Minister for advising the Committee that the figure had been rechecked by the Inland Revenue, when the estimate fell dramatically to £600 million—a substantial change. In view of the Minister's comments this afternoon, it appears that the figure has now fallen to £500 million.
  Mr. Arbuthnot indicated dissent.
  Mrs. Liddell: The Minister shakes his head, but I understood him to say that £200 million would be lost in tax revenue and £300 million would be lost as a consequence of unfunded public sector schemes.
  Mr. Arbuthnot: The latter was £500 million.
  Mrs. Liddell: I stand corrected. That makes a total of £700 million. I would like much greater analysis of those figures. Having served an extended period before the legislative mast, as a member of the Committee on the Finance Bill prior to being a member of the Committee that considered the Pensions Bill, I cannot believe that it is beyond the wit of the Treasury to recoup some money.
  Mr. Arbuthnot: I hope that it will help the hon. Lady if I set out the figures. The figure of up to £200 million is the amount of tax revenue that could be lost as a result of direct pension splitting, but it would grow over time. The figure of up to £500 million is the potential immediate cost of splitting pensions in relation to unfunded public sector pension schemes. The figure of £600 million relates to the immediate cost—it would eventually grow to £1.3 billion—of giving the same sort of tax breaks to married couples as the pension-splitting effect would give divorced couples.
  Mrs. Liddell: I am grateful to the Minister. We are always grateful to the Government for fiscal prudence. In fact, our Whip is always careful to ensure that similar prudence is exerted by ourselves. The sum mentioned by the Minister is exactly the same that the Government spent on reorganising Scottish local government, which nobody wanted. The Government took that action in the hope that it would benefit them in some way, but instead they suffered the most humiliating result ever. If that is an example of the Government's fiscal prudence, I invite them to think again.
  200
  The Bill is unbelievably complex, and its very complexity deliberately confuses. The complex nature of pension law prior to the Bill was always a problem. Complexity was debated in detail in Committee, when my hon. Friend the Member for Garscadden greatly advanced the knowledge of Committee members, as he often does. He quoted from an article in New Law Journal by Maggie Rae, a matrimonial partner with Mishcon de Reya:
  "Pension splitting is not complicated. Since 1988 it has been possible to transfer a pension from one fund to another, say when a person changes jobs."—[Official Report, Standing Committee D, 22 June 1995; c. 789.]
  The mechanism is not complex, so I fail to comprehend why the Government favour earmarking over splitting, when people who have no party political axe to grind make it clear that there is no question of undue complexity.
  The Minister spoke also of fairness, which is at the heart of my hon. Friend's new clause. Until debate in another place—and I pay tribute to my noble Friend Lady Hollis—there existed the concept of women as chattels, even after divorce. Women lost control over their pensions because an ex-spouse, out of spite, could make sure that no pension or flexibility was available, which would allow the prudent person to plan ahead. It is important in the interest of fairness that those matters are considered. It is regrettable that the Government have not been more imaginative.
  New clause 2 draws our attention to insurance. It is intriguing that the Government speak with forked tongue. On many occasions, the Prime Minister has commended private insurance for what it can do to protect the mortgages of those who are unfortunate enough to become unemployed. Yet when we are seeking to enforce prudence on those who are walking away from a marriage, voluntarily or involuntarily, we find that such enforcement is not acceptable and, indeed, would be far too costly to implement.
  I was heartened to some extent by the Minister's rather evasive response to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) about the research that the Government are undertaking. I would be grateful if the Minister were to provide greater elucidation on the direction that the Government are planning to take.
  We must be conscious of the signal that we are giving to the outside world. The complexity of pensions is a major inhibiting factor when it comes to people planning prudently and wisely for their retirement. We have not managed to overcome that problem during our consideration of the Bill.
  The Government should have taken the opportunity to think again. Social trends suggest that by the year 2025, 13 per cent. of divorced women will be more than 60 years of age as against 3 per cent. in 1985. Those of us who are conscious that the sittings of the House relate more to English school holidays than to those holidays in Scotland might be concerned about joining that band by 2025, if longevity allows. The Government must take into account changing social trends.
  We have had 10 years in which to think about how pensions and divorce should be considered. The new clause moves us further on. It seems that the Government have been bounced and that they have not done justice to the extensive and widespread lobbying of those who are likely to be affected by the proposals that we are considering.
  Mr. Geoffrey Hoon: I congratulate my hon. Friend the Member for Monklands, East (Mrs. Liddell) on the quality of her speech. I have no doubt that she was encouraged to make it by the assiduous efforts of my hon. Friend the Member for Leeds, East (Mr. Mudie).
  Pension rights have become the most important matrimonial asset for a significant number of divorcing couples. They have become more valuable, perhaps, than the matrimonial home. Yet despite the financial significance of pensions, they have been insufficiently appreciated by those advising on financial arrangements after divorce. We can compare the growing appreciation of professional advisers of the importance of pension assets with the development of the law on the division of the matrimonial home.
  Traditionally, the matrimonial home was in the husband's name. That was because, traditionally, the husband went to work and made the mortgage payments each month. Given a growing recognition of the contribution in kind that was made by the wife, the courts eventually developed ways around the clear terms of the conveyance into the husband's sole name. That gave the divorced wife some interest in the former matrimonial home. Eventually the law, as made by Parliament, reflected that change and allowed courts a wide range of discretion in disposing appropriately of the asset of the matrimonial home.
  This debate should be about giving the courts similar comprehensive powers to deal with that other significant financial asset, the pension. Our debates in Committee, and again today, have focused on how to deal with the pension, and have been characterised by three different approaches. First, there is what might be described as the compensatory approach, which means balancing the value of pension rights against non-pension assets. Secondly, there is the earmarking approach, which means deferring pension rights until the ex-spouse reaches retirement age. Thirdly, there is pension splitting.
  The first option of balancing the various assets available to the spouses has, in effect, always been allowed under the Matrimonial Causes Act 1973. It has, however, significant disadvantages. It is difficult to calculate the exact amount of compensation that should be provided for the non-pension-paying spouse. One party may end up receiving a disproportionate share of the matrimonial home, but a poor pension. There may be insufficient assets to enable transfer from one spouse to the other. As a result, the debate has turned towards the Government's approach contained in clause 164, which would amend the Matrimonial Causes Act and allow for earmarking. Balanced against that is new clause 1, which sets out practical proposals for pension splitting.
  7.15 pm
  There is no doubt that earmarking is an improvement on the present position. It would not alter the total sum to be paid out by a pension scheme. It would at least allow the courts to award a pension to an ex-spouse on retirement as long as the scheme member is still receiving a pension. It would save the court making complex calculations in balancing the parties' various financial interests.
  There are still problems, especially in the failure to observe the clean-break principle. It is now well established that where possible it is attractive to the parties that they be allowed to continue to lead their lives
  202
  independently. That is what divorcing couples decide to do. As far as possible, the courts' approach should be to permit those couples to do so without continuing financial entanglements.
  Earmarking means that where one spouse fails to pay his or her share there may be a necessity to return to court to enforce any order of the court relating to the pension. That is a particularly unfortunate consequence of earmarking. It means that there will always be a continuing connection between the former parties to the marriage. It means also that the former partner depends on the member spouse surviving to retirement. We have already heard of the difficulties that that involves.
  In failing to observe the clean-break principle, there is considerable uncertainty about the level of retirement income. That means that individuals have difficulty in planning their future, including their retirement. That is why I hope that even at this stage the Government may still be considering the possibility of pension splitting. The Minister has already referred to surveys and investigations. We were much enlightened in Committee about the various surveys that the Government have conducted. As the reality is that there will not be further pension legislation in the near future, I hope that the Government will have some sympathy with the idea of pension splitting. It is a principle that supports the idea of a clean break. It would give former married partners the possibility of leaving their defunct marriage to go their own separate ways without being financially dependent on each other. With pension splitting, there would be no need for them, by and large, to depend on a continuing relationship with the former spouse.
  Pension splitting has regard to the modern world of work, in which people are likely to pursue a series of occupations with a series of different pensions. That was the underlying theme of all that we discussed in Committee. That theme recognises the modern world of relationships, in which people have a series of different relationships and may well, therefore, have a series of different pensions on which they depend. That is something to which pension splitting gives recognition.
  It follows that it would be sensible to take into account the contribution that is made by the non-member spouse in terms of the length of the marriage. It would appear to be possible to consider the contribution that has been made during the course of the marriage and to account for that financially in a split pension.
  The Government's objections were set out thoroughly in Committee and again by the Minister today. The Minister is concerned about the cost, the complexity of any arrangements and the fairness of treatment between married and divorced couples. Cost is based on losses to the Exchequer in the form of lost tax revenue and the potential cost of transfers from unfunded public sector schemes.
  I shall return to the tax implications in a moment, but it does not seem particularly complex for a pension fund to calculate a transfer value at the time of divorce. That transfer value can then be divided as appropriate, according to the length of the marriage, recognising that some people may have paid into a pension fund before the marriage. It seems perfectly straightforward to calculate the contribution in kind by the non-member spouse at the time of divorce. In those circumstances, I

  203
  cannot see that pension splitting is necessarily any more complicated or difficult than earmarking, which the Government appear to advocate.
  I accept, however, that there are more substantial problems in respect of cost and I would be interested to hear the Minister's observations as to whether the substantial argument from the Government is based on complexity, or whether it is a disguised way of saying that they are concerned about the cost.
  Obviously, there are potential costs of pension splitting. The substantial cost is likely to involve unfunded public service schemes, but that assumes a transfer at the time of divorce from the ex-spouse's share in the unfunded public sector scheme. Why not simply enrol the former spouse in the public sector scheme? That person would then receive a pension from the unfunded public sector scheme according to the length of time that they were eligible to receive such a pension, without involving the Exchequer in any substantial payout. I cannot see how it involves any greater cost to the public sector than would he the case if they had continued to be married and received a pension on retirement. Simply to put the former spouse into the pension scheme, with a guaranteed right to a pension on retirement, would not seem to involve any extra expenditure from the revenue.
  In respect of tax losses, I am grateful that the Minister appears to have revised down the original assessment of £300 million to £200 million. The first element of that cost appears to result from the splitting of personal allowances. If I understood the Minister's argument properly, the divorced couple would claim two personal allowances instead of the one that formerly would have been available to the person in receipt of the pension. I should be grateful if the Minister would comment on that calculation. It assumes that the non-earning spouse on retirement has no other income and, therefore, does not take up her—as it is likely to be the woman—personal allowance. That does not appear to be the most realistic approach. It is likely that that person will be entitled, for example, to a state pension which will take up all the personal allowance on retirement. If that assumption is correct, as more and more women are entitled to the state pension and, therefore, use up their personal allowance with the state pension, I assume that the costs of pension splitting would correspondingly diminish and might not increase in the way that the Minister has suggested.
  The second cost has been said to be the potential consequence of former spouses making extra tax-deductible contributions to top up their divided pension. Surely there are straightforward means of ensuring that a spouse does not claim more tax relief than that to which he or she is entitled. If that is likely to be a serious cost to the revenue, I assume that it is possible to produce regulations to limit the effect of that potential topping up. On the assumption that the topping up would be only within the existing revenue rules, it is unlikely to be a significant cost.
  The third cost was in respect of fairness. The Minister felt that it might be necessary to give benefits to married couples on retirement to put them in the same position as divorced couples. The cost has been estimated at £600 million, but I cannot see any reason why it should be necessary. The law on taxation already treats married couples significantly differently from single couples.
  204
  There are arguments for many married couples to divorce and take advantage of the various allowances that then would be available to them, so I am not clear why we should take a different view of couples in retirement receiving a pension. That fairness argument is not nearly so substantial as the Minister suggests.
  The real benefits of splitting as against earmarking seem to be in terms of simplicity and fairness. It provides a clean break, it allows both former partners to take benefits when they need them, and it assures ex-spouses a pension when they need it. That is an attractive argument in favour of splitting.
  Ms Church: We have heard several excellent speeches from Opposition Members, and I shall add just a few words. Opposition Members recognise that thousands of women—and some men—up and down the country are watching the outcome of the debate, but it is mainly women because, at the end of the day, it is mainly women who will benefit from our amendment.
  The normal pattern of life for many women will involve divorce, as my hon. Friend the Member for Bradford, South (Mr. Sutcliffe) said earlier. We should not pretend that it is an undesirable social change. We cannot hide our heads in the sand and pretend that it has not happened. It has happened and the Government have recognised it in their proposals for earmarking.
  Tonight's debate is clearly between a clean break and earmarking. It is a debate about what thousands of women want and what the Government choose to deny them. Women earn pensions in their own right, but those pensions are often very small or virtually non-existent, and we all know the reasons for that. Many women do not earn at all because they care for children and have other caring responsibilities. Even when they work, there is still gross inequality in earnings. Women have broken periods of employment because they devote time to bringing up their children and, increasingly, to the care of elderly and dependent relatives. All those issues are interrelated. In practice, few women have adequate pensions in their own right. Following a divorce, women often do not have pensions appropriate to the standard of living to which they became accustomed during married life.
  As many Opposition Members have already said, divorce is a painful emotional experience. The circumstances giving rise to it can be long drawn out, as can the process of the divorce itself and its aftermath. The Government must recognise that social change; they cannot turn back the clock. Not only do many marriages end in divorce, but many second and subsequent marriages also end in divorce.
  The Government's earmarking option will leave thousands of women once or twice divorced without a clean break. They will be unable to put marriage behind them and plan a new life in full and complete independence. In their later years, they will have to track down their benefits, as my hon. Friend the Member for Leyton (Mr. Cohen) said. They may have to find various pension schemes in which small sums of money are buried because their former partners had many different employments. It is totally unrealistic to expect elderly women, often burdened by many other problems, to undertake time-consuming tasks which are often a bureaucratic nightmare simply to claim what is rightly theirs. Why should they have to do that when they may be

  205
  suffering from ill health or other detriment or incapacity? Women do not want the Government's inadequate option; increasingly they recognise that it is a mealy-mouthed measure—another example of the Government's failure to understand what modern women want and deserve.
  The women concerned know that pensions are deferred pay and that they are entitled to the money. When they divorce they want to be sure that, as part of the divorce settlement, they will know exactly what their pension rights are. They also want to know that the money is theirs, and is in their name, so that they can do with it what they want.
  Surely the Government—I understand that at the moment they are a reshuffled, or rather, a reshuffling Government—can bring their great mind to bear on trying to overcome the difficulties of bringing about a clean break. As my hon. Friend the Member for Monklands, East (Mrs. Liddell) said, many people in the financial and pensions world realise that that is achievable, so that women who want a fair and equitable settlement can pick up the strands of their lives after divorce.
  The Minister's explanation of the Government's failure to rise to the challenge was unusually foggy—if that is not too unparliamentary an expression, Mr. Deputy Speaker. We do not accept that explanation, and neither will our constituents. They want a modern pensions law—something clear on the statute book that will ensure that when they go through the painful process of divorce the law does not add to the pain and uncertainty of their future lives.
  7.30 pm
  When will the Government recognise that we are now becoming a nation of multi-marriages—or at least two marriages in many cases? When will they admit that marriage for a lifetime is not what is actually happening to everybody and therefore provide clarity in pensions law? To protest that they cannot do that does not wash, and thousands of women know that it is wrong. It is an appalling failure to recognise what women want and to provide it.
  We shall return to the matter another time, but it will not be while the Minister and his friends occupy the Government Benches. We can be clear about that tonight: the moment will come, and I believe that it will come soon.
  Mr. Arbuthnot: From the mood of the House I sense that we feel that we have heard the arguments on both sides. They have been developed in another place, further developed in Committee and developed even further by the amendments that we have now tabled.
  It is important to remind the House what we are doing. We are giving the courts important extra powers which we believe that they will value, and which will be especially valuable to women going through divorce. The position of such women will be significantly strengthened. I commend the Government's proposals to the House.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New clause 1
  PENSIONS ON DIVORCE, ETC.
  'In the Matrimonial Causes Act 1973, after section 24A there is inserted—

  Pensions
  24B—(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may make a pensions adjustment order (referred to in this section as "an order") for the benefit of a party to the marriage.
  (2) An order shall where the court so determines bind a person who is not a party to the marriage but who is liable to pay any benefit under a pension scheme to a party to the marriage or any successor to such a person.
  (3) An order is an order adjusting the rights and benefits to which either party to the marriage is or may become entitled to under any pension scheme and in particular the court may by such an order require—

  (a) either party to the marriage to pay to the other such lump sum or sums as may be specified in the order (without prejudice to any other order which may be made under section 23(1) or (3)); or

  (b) the administrator of a pension scheme to treat the party to the marriage in favour of whom the order is to be made as a member of the pension scheme in relation to such benefits as may be specified in the order which were acquired by the other party to the marriage before the decree of divorce or nullity was made absolute or before the decree of judicial separation, or

  (c) the administrator of a pension scheme to make such payment or payments as may be specified in the order into such other pension schemes as may be nominated by the party to the marriage in favour of whom the order is made, or

  (d) the administrator of a pension scheme to pay such part of any pension as may be specified in the order to the party in favour of whom the order is made for such term as may be specified not extending beyond the death of either party to the marriage, or

  (e) the administrator of a pension scheme to pay such part of any dependant's pension as may be specified in the order to the party in favour of whom the order is made for such term as may be specified beginning with the death of the other party to the marriage and not extending beyond the death of the party in whose favour the order is made, or

  (f) either party to the marriage to pay such administrative costs incurred by the administrator of the pension scheme in responding to any application for an order or in implementing an order.

  (4) An order shall not be made—

  (a) under subsection (3)(b) above unless the administrator of the pension scheme consents to membership of the pension scheme for the party to the marriage who is not already a member of the pension scheme, or

  (b) under subsection (3)(c) above unless the court is satisfied that the administrator of the pension scheme nominated by the party in whose favour the order may be made has agreed to accept such payment or payments, and in the event of the administrator being unwilling to accept such payment or payments he may be required to notify the parties to the marriage and the court.

  (5) It shall be the duty of the court in deciding whether to exercise its powers under this section and, if so, in what manner to have regard in particular to—

  (a) the matters referred to in section 25 save for the words "in the foreseeable future" in section 25(2)(a), (b) and (f), and

  (b) the effect that child care or other domestic responsibilities have had or will have on the ability of each of the parties to the marriage to make provision for his retirement, and

  207

  (c) any administrative complexity or cost to the administrator of the pension scheme.

  (6) The Secretary of State in agreement with the Lord Chancellor shall by regulations provide for the date and method of valuation to be applied by the court to rights under a pension scheme when making an order and to provide for notice of any application for an order to be given to the administrator of the pension scheme.
  (7) The Secretary of State may by regulations make such provision as may be appropriate to meet the special circumstances of unfunded public sector schemes by varying or excluding the powers of the court under this section.
  (8) Nothing in the provisions mentioned in subsection (9) below applies to a court exercising its powers under this section.
  (9) The provisions referred to in subsection (8) are—

  (a) section 203(1) and (2) of the Army Act 1955, section 203(1) and (2) of the Air Force Act 1955, section 128G(1) and (2) of the Naval Discipline Act 1957 or section 159(4) of the Pension Schemes Act 1993 (which prevent assignment or orders being made restraining a person from receiving anything which he is prevented from assigning);

  (b) section 84 of the Pensions Act 1995;

  (c) any provision for any enactment corresponding to any of the enactments mentioned in paragraphs (a) and (b); and

  (d) any provision of the pension scheme in question.

  (10) the making of an order shall in no circumstances form the basis of any decision made by the Commissioners of Inland Revenue to remove the exempt approved status or to alter the tax status of a pension scheme provided that—

  (a) the party to the marriage in whose favour an order has been made shall be treated for the purpose of retention of benefits as the member; and

  (b) the maximum benefits payable to and in respect of the party to the marriage whose rights have been varied by the order shall be limited to the benefits that would have been payable if the order had not been made.

  (11) No order or orders shall be made which shall have the effect of increasing the liabilities of any pension scheme beyond those which might have been incurred had the parties to the marriage remained married until the death of the party against whom the order is to be made.
  (12) After paragraphs (2)(f) of section 31 there shall be inserted:
  "(g) any order made under section 24B(3)(d) or (e) above"
  (13) After subparagraph (ii) in section 35(2) there shall be inserted:
  "or (iii) by adjusting the rights and benefits to which either party to the marriage is or may become entitled under any pension scheme."
  (14) Nothing in this section shall affect any proceedings commenced before the commencement of this section.
  (15) In this section—
  "administrator" means the trustees of an occupational pension scheme or the administrators or managers of such a scheme in the absence of trustees or the administrators or managers of a personal pension plan;
  "member" means a member of an occupational pension scheme or a person having a personal pension plan or retirement benefit plan or other similar arrangement; and
  "pension scheme" means an occupational pension scheme or personal pension scheme or retirement benefit plan or other similar arrangement.'.—[Mr. Dewar.]
  Brought up, and read the First time.
  Motion made, and Question put, That the clause be read a Second time:—
  The House divided: Ayes 247, Noes 292.

  Division No. 193]

  [7.30 pm

  AYES

  Abbott, Ms Diane

  Fatchett, Derek

  Adams, Mrs Irene

  Faulds, Andrew

  Ainger, Nick

  Field, Frank (Birkenhead)

  Ainsworth, Robert (Cov'try NE)

  Flynn, Paul

  Alton, David

  Forsythe, Clifford (S Antrim)

  Armstrong, Hilary

  Foster, Rt Hon Derek

  Ashton, Joe

  Foster, Don (Bath)

  Banks, Tony (Newham NW)

  Foulkes, George

  Barnes, Harry

  Fraser, John

  Barron, Kevin

  Fyfe, Maria

  Battle, John

  Galloway, George

  Bayley, Hugh

  Garrett, John

  Beckett, Rt Hon Margaret

  Gerrard, Neil

  Beggs, Roy

  Godman, Dr Norman A

  Bell, Stuart

  Godsiff, Roger

  Benn, Rt Hon Tony

  Golding, Mrs Llin

  Bennett, Andrew F

  Gordon, Mildred

  Bermingham, Gerald

  Graham, Thomas

  Berry, Roger

  Grant, Bernie (Tottenham)

  Betts, Clive

  Griffiths, Win (Bridgend)

  Blunkett, David

  Grocott, Bruce

  Boateng, Paul

  Gunnell, John

  Bray, Dr Jeremy

  Hain, Peter

  Brown, N (N'c'tle upon Tyne E)

  Hall, Mike

  Bruce, Malcolm (Gordon)

  Harman, Ms Harriet

  Burden, Richard

  Hattersley, Rt Hon Roy

  Byers, Stephen

  Henderson, Doug

  Caborn, Richard

  Hill, Keith (Streatham)

  Callaghan, Jim

  Hinchliffe, David

  Campbell, Mrs Anne (C'bridge)

  Hodge, Margaret

  Campbell, Ronnie (Blyth V)

  Hoey, Kate

  Campbell-Savours, D N

  Hogg, Norman (Cumbernauld)

  Cann, Jamie

  Home Robertson, John

  Carlile, Alexander (Montgomery)

  Hood, Jimmy

  Chidgey, David

  Hoon, Geoffrey

  Chisholm, Malcolm

  Howarth, George (Knowsley North)

  Church, Judith

  Howells, Dr. Kim (Pontypridd)

  Clapham, Michael

  Hoyle, Doug

  Clark, Dr David (South Shields)

  Hughes, Kevin (Doncaster N)

  Clarke, Tom (Monkands W)

  Hughes, Robert (Aberdeen N)

  Clelland, David

  Hughes, Roy (Newport E)

  Clwyd, Mrs Ann

  Hutton, John

  Coffey, Ann

  Illsley, Eric

  Cohen, Harry

  Ingram, Adam

  Connarty, Michael

  Jackson, Glenda (H'stead)

  Corbett, Robin

  Jackson, Helen (Shef'ld, H)

  Corbyn, Jeremy

  Jamieson, David

  Corston, Jean

  Janner, Greville

  Cousins, Jim

  Johnston, Sir Russell

  Cummings, John

  Jones, Barry (Alyn and D'side)

  Cunliffe, Lawrence

  Jones, leuan Wyn (Ynys Môn)

  Cunningham, Jim(Covy SE)

  Jones, Lynne (B'ham S O)

  Cunningham, Roseanna

  Jones, Martyn (Clwyd, SW)

  Dalyell, Tam

  Jones, Nigel (Cheltenham)

  Darling, Alistair

  Jowell, Tessa

  Davidson, Ian

  Keen, Alan

  Davies, Bryan (Oldham C'tral)

  Kennedy, Jane (L'pool Br'dg'n)

  Davies, Rt Hon Denzil (Llanelli)

  Khabra, Piara S

  Davies, Ron (Caerphilly)

  Kilfoyle, Peter

  Davis, Terry (B'ham, H'dge H'l)

  Kirkwood, Archy

  Denham, John

  Lestor, Joan (Eccles)

  Dewar, Donald

  Lewis, Terry

  Dixon, Don

  Liddell, Mrs Helen

  Dobson, Frank

  Litherland, Robert

  Donohoe, Brian H

  Livingstone, Ken

  Dowd, Jim

  Lloyd, Tony (Stretford)

  Dunnachie, Jimmy

  Llwyd, Elfyn

  Dunwoody, Mrs Gwyneth

  Loyden, Eddie

  Eagle, Ms Angela

  Lynne, Ms Liz

  Eastham, Ken

  McAllion, John

  Etherington, Bill

  McAvoy, Thomas

  Evans, John (St Helens N)

  McCartney, Robert

  Ewing, Mrs Margaret

  Macdonald, Calum

  209

  McFall, John

  Robertson, George (Hamilton)

  McKelvey, William

  Robinson, Geoffrey (Co'try NW)

  Mackinlay, Andrew

  Roche, Mrs Barbara

  McLeish, Henry

  Rogers, Allan

  Maclennan, Robert

  Rooker, Jeff

  McMaster, Gordon

  Rooney, Terry

  McNamara, Kevin

  Ross, Ernie (Dundee W)

  MacShane, Denis

  Ross, William (E Londonderry)

  McWilliam, John

  Ruddock, Joan

  Madden, Max

  Salmond, Alex

  Mandelson, Peter

  Sedgemore, Brian

  Marek, Dr John

  Sheerman, Barry

  Marshall, David (Shettleston)

  Sheldon, Rt Hon Robert

  Marshall, Jim (Leicester, S)

  Short, Clare

  Martin, Michael J (Springburn)

  Simpson, Alan

  Martlew, Eric

  Skinner, Dennis

  Maxton, John

  Smith, Andrew (Oxford E)

  Meale, Alan

  Smith, Llew (Blaenau Gwent)

  Michie, Bill (Sheffield Heeley)

  Smyth, The Reverend Martin

  Michie, Mrs Ray (Argyll & Bute)

  Snape, Peter

  Milburn, Alan

  Spearing, Nigel

  Miller, Andrew

  Spellar, John

  Molyneaux, Rt Hon James

  Squire, Rachel (Dunfermline W)

  Morgan, Rhodri

  Steel, Rt Hon Sir David

  Morris, Rt Hon Alfred (Wy'nshawe)

  Steinberg, Gerry

  Morris, Estelle (B'ham Yardley)

  Stevenson, George

  Mowlam, Marjorie

  Taylor, Mrs Ann (Dewsbury)

  Mudie, George

  Taylor, Matthew (Truro)

  Mullin, Chris

  Timmis, Stephen

  Murphy, Paul

  Tipping, Paddy

  O'Brien, Mike (N W'kshire)

  Touhig, Don

  O'Brien, William (Normanton)

  Turner, Dennis

  Olner, Bill

  Tyler, Paul

  O'Neill, Martin

  Walker, Rt Hon Sir Harold

  Orme, Rt Hon Stanley

  Wallace, James

  Parry, Robert

  Walley, Joan

  Pearson, Ian

  Wardell, Gareth (Gower)

  Pickthall, Colin

  Watson, Mike

  Pike, Peter L

  Welsh, Andrew

  Pope, Greg

  Williams, Rt Hon Alan (Sw'n W)

  Powell, Ray (Ogmore)

  Williams, Alan W (Carmarthen)

  Prentice, Bridget (Lew'm E)

  Wilson, Brian

  Prentice, Gordon (Pendle)

  Winnick, David

  Prescott, Rt Hon John

  Wise, Audrey

  Primarolo, Dawn

  Worthington, Tony

  Purchase, Ken

  Wray, Jimmy

  Quin, Ms Joyce

  Wright, Dr Tony

  Radice, Giles

  Young, David (Bolton SE)

  Randall, Stuart

  Raynsford, Nick

  Tellers for the Ayes:

  Reid, Dr John

  Mr. Jon Owen Jones and Mr. Eric Clarke.

  Rendel, David

  NOES

  Ainsworth, Peter (East Surrey)

  Beresford, Sir Paul

  Aitken, Rt Hon Jonathan

  Biffen, Rt Hon John

  Alexander, Richard

  Bonsor, Sir Nicholas

  Alison, Rt Hon Michael (Selby)

  Booth, Hartley

  Allason, Rupert (Torbay)

  Bottomley, Peter (Eltham)

  Amess, David

  Bottomley, Rt Hon Virginia

  Ancram, Michael

  Bowden, Sir Andrew

  Arbuthnot, James

  Bowis, John

  Arnold, Jacques (Gravesham)

  Boyson, Rt Hon Sir Rhodes

  Arnold, Sir Thomas (Hazel Grv)

  Brandreth, Gyles

  Ashby, David

  Brazier, Julian

  Atkins, Rt Hon Robert

  Bright, Sir Graham

  Atkinson, David (Bour'mouth E)

  Brown, M (Brigg & Cl'thorpes)

  Atkinson, Peter (Hexham)

  Browning, Mrs Angela

  Baker, Nicholas (North Dorset)

  Bruce, Ian (Dorset)

  Baldry, Tony

  Budgen, Nicholas

  Banks, Matthew (Southport)

  Burns, Simon

  Bates, Michael

  Burt, Alistair

  Batiste, Spencer

  Butcher, John

  Bellingham, Henry

  Butler, Peter

  Bendall, Vivian

  Butterfill, John

  210

  Carlisle, John (Luton North)

  Hawksley, Warren

  Carlisle, Sir Kenneth (Lincoln)

  Hayes, Jerry

  Carrington, Matthew

  Heald, Oliver

  Carttiss, Michael

  Heath, Rt Hon Sir Edward

  Cash, William

  Heathcoat-Amory, David

  Channon, Rt Hon Paul

  Hendry, Charles

  Churchill, Mr

  Heseltine, Rt Hon Michael

  Clappison, James

  Hicks, Robert

  Clark, Dr Michael (Rochford)

  Higgins, Rt Hon Sir Terence

  Clarke, Rt Hon Kenneth (Ru'clif)

  Hogg, Rt Hon Douglas (G'tham)

  Clifton-Brown, Geoffrey

  Horam, John

  Coe, Sebastian

  Hordern, Rt Hon Sir Peter

  Colvin Michael

  Howard, Rt Hon Michael

  Conway, Derek

  Howarth, Alan (Strat'rd-on-A)

  Coombs, Anthony (Wyre For'st)

  Howell, Sir Ralph (N Norfolk)

  Cope, Rt Hon Sir John

  Hughes, Robert G (Harrow W)

  Cormack, Sir Patrick

  Hunt, Sir John (Ravensbourne)

  Couchman, James

  Hunter, Andrew

  Cran, James

  Jack, Michael

  Currie, Mrs Edwina (S D'by'ire)

  Jackson, Robert (Wantage)

  Curry, David (Skipton & Ripon)

  Jenkin, Bernard

  Davies, Quentin (Stamford)

  Jessel, Toby

  Davis, David (Boothferry)

  Johnson Smith, Sir Geoffrey

  Day, Stephen

  Jones, Gwilym (Cardiff N)

  Deva, Nirj Joseph

  Jones, Robert B (W Hertfdshr)

  Devlin, Tim

  Kellett-Bowman, Dame Elaine

  Dicks, Terry

  Key, Robert

  Dorrell, Rt Hon Stephen

  King, Rt Hon Tom

  Douglas-Hamilton, Lord James

  Kirkhope, Timothy

  Dover, Den

  Knapman, Roger

  Duncan, Alan

  Knight, Mrs Angela (Erewash)

  Duncan-Smith, Iain

  Knight, Greg (Derby N)

  Dunn, Bob

  Knight, Dame Jill (Bir'm E'st'n)

  Durant, Sir Anthony

  Knox, Sir David

  Dykes, Hugh

  Kynoch, George (Kincardine)

  Eggar, Rt Hon Tim

  Lait, Mrs Jacqui

  Elletson, Harold

  Lang, Rt Hon Ian

  Evans, David (Welwyn Hatfield)

  Lawrence, Sir Ivan

  Evans, Jonathan (Brecon)

  Legg, Barry

  Evans, Nigel (Ribbte Valley)

  Leigh, Edward

  Evans, Roger (Monmouth)

  Lennox-Boyd, Sir Mark

  Evennett, David

  Lidington, David

  Faber, David

  Lightbown, David

  Fabricant, Michael

  Lilley, Rt Hon Peter

  Fenner, Dame Peggy

  Lloyd, Rt Hon Sir Peter (Fareham)

  Field, Barry (Isle of Wight)

  Lord, Michael

  Fishburn, Dudley

  Luff, Peter

  Forman, Nigel

  Lyell, Rt Hon Sir Nicholas

  Forsyth, Rt Hon Michael (Stirling)

  MacGregor, Rt Hon John

  Forth, Eric

  MacKay, Andrew

  Fowler, Rt Hon Sir Norman

  Maclean, Rt Hon David

  Fox, Sir Marcus (Shipley)

  McLoughlin, Patrick

  Freeman, Rt Hon Roger

  McNair-Wilson, Sir Patrick

  French, Douglas

  Madel, Sir David

  Gale, Roger

  Maitland, Lady Olga

  Gallie, Phil

  Major, Rt Hon John

  Gardiner, Sir George

  Malone, Gerald

  Garel-Jones, Rt Hon Tristan

  Mans, Keith

  Garnier, Edward

  Marland, Paul

  Gillan, Cheryl

  Marlow, Tony

  Goodson-Wickes, Dr Charles

  Marshall, John (Hendon S)

  Gorst, Sir John

  Martin, David (Portsmouth S)

  Grant, Sir A (SW Cambs)

  Mayhew, Rt Hon Sir Patrick

  Greenway, Harry (Ealing N)

  Merchant, Piers

  Greenway, John (Ryedale)

  Mills, Iain

  Griffiths, Peter (Portsmouth, N)

  Mitchell, Andrew (Gedling)

  Gummer, Rt Hon John Selwyn

  Mitchell, Sir David (NW Hants)

  Hague, William

  Moate, Sir Roger

  Hamilton, Rt Hon Sir Archibald

  Monro, Sir Hector

  Hamilton, Neil (Tatton)

  Montgomery, Sir Fergus

  Hampson, Dr Keith

  Moss, Malcolm

  Hanley, Rt Hon Jeremy

  Nelson, Anthony

  Hannam, Sir John

  Neubert, Sir Michael

  Hargreaves, Andrew

  Newton, Rt Hon Tony

  Haselhurst, Sir Alan

  Nicholls, Patrick

  Hawkins, Nick

  Nicholson, David (Taunton)

  211

  Nicholson, Emma (Devon West)

  Stephen, Michael

  Norris, Steve

  Stern, Michael

  Onslow, Rt Hon Sir Cranley

  Stewart, Allan

  Oppenheim, Phillip

  Streeter, Gary

  Ottaway, Richard

  Sumberg, David

  Page, Richard

  Sweeney, Walter

  Paice, James

  Sykes, John

  Patnick, Sir Irvine

  Tapsell, Sir Peter

  Patten, Rt Hon John

  Taylor, Ian (Esher)

  Pattie, Rt Hon Sir Geoffrey

  Taylor, John M (Solihull)

  Pawsey, James

  Taylor, Sir Teddy (Southend, E)

  Peacock, Mrs Elizabeth

  Thomason, Roy

  Pickles, Eric

  Thompson, Sir Donald (C'er V)

  Porter, Barry (Wirral S)

  Thompson, Patrick (Norwich N)

  Porter, David (Waveney)

  Thornton, Sir Malcolm

  Portillo, Rt Hon Michael

  Thurnham, Peter

  Powell, William (Corby)

  Townend, John (Bridlington)

  Rathbone, Tim

  Townsend, Cyril D (Bexl'yh'th)

  Redwood, Rt Hon John

  Tracey, Richard

  Renton, Rt Hon Tim

  Tredinnick, David

  Richards, Rod

  Trend, Michael

  Riddick, Graham

  Trotter, Neville

  Rifkind, Rt Hon Malcolm

  Twinn, Dr Ian

  Robathan, Andrew

  Vaughan, Sir Gerard

  Roberts, Rt Hon Sir Wyn

  Viggers, Peter

  Robertson, Raymond (Ab'd'n S)

  Waldegrave, Rt Hon William

  Robinson, Mark (Somerton)

  Walker, Bill (N Tayside)

  Roe, Mrs Marion (Broxbourne)

  Waller, Gary

  Rowe, Andrew (Mid Kent)

  Ward, John

  Rumbold, Rt Hon Dame Angela

  Wardle, Charles (Bexhill)

  Ryder, Rt Hon Richard

  Waterson, Nigel

  Sackville, Tom

  Watts, John

  Sainsbury, Rt Hon Sir Timothy

  Wells, Bowen

  Scott, Rt Hon Sir Nicholas

  Wheeler, Rt Hon Sir John

  Shaw, David (Dover)

  Whitney, Ray

  Shaw, Sir Giles (Pudsey)

  Whittingdale, John

  Shephard, Rt Hon Gillian

  Widdecombe, Ann

  Shepherd, Colin (Hereford)

  Wiggin, Sir Jerry

  Shepherd, Richard (Aldridge)

  Wilkinson, John

  Shersby, Sir Michael

  Willetts, David

  Sims, Roger

  Wilshire, David

  Smith, Tim (Beaconsfield)

  Winterton, Mrs Ann (Congleton)

  Soames, Nicholas

  Winterton, Nicholas (Macclesfield)

  Spencer, Sir Derek

  Wolfson, Mark

  Spicer, Sir James (W Dorset)

  Wood, Timothy

  Spicer, Michael (S Worcs)

  Yeo, Tim

  Spink, Dr Robert

  Young, Rt Hon Sir George

  Spring, Richard

  Sproat, Iain

  Tellers for the Noes:

  Squire, Robin (Hornchurch)

  Mr. Sydney Chapman and Dr. Liam Fox.

  Steen, Anthony

  Question accordingly negatived.

Clause 164

  PENSIONS ON DIVORCE, ETC.
  Amendments made: No. 69, in page 121, line 32, leave out 'in the foreseeable future'.
  No. 70, in page 121, line 38, at end insert—
  'and, accordingly, in relation to benefits under a pension scheme, section 25(2)(a) above shall have effect as if "in the foreseeable future" were omitted'.
  No. 71, in page 121, line 41, leave out 'in the foreseeable future'.
  No. 72, in page 122, line 6, leave out from 'above' to end of line 11.
  No. 73, in page 122, leave out lines 33 to 39 and insert—
  '(7) Where the party with pension rights may require any benefits which he has or is likely to have under the scheme to be commuted, the order may require him to commute the whole
  212
  or part of those benefits; and this section applies to the payment of any amount commuted in pursuance of the order as it applies to other payments in respect of benefits under the scheme.

  Pensions: lump sums
  25C.—(1) The power of the court under section 23 above to order a party to a marriage to pay a lump sum to the other party includes, where the benefits which the party with pension rights has or is likely to have under a pension scheme include any lump sum payable in respect of his death, power to make any of the following provision by the order.
  (2) The court may —

  (a) if the trustees or managers of the pension scheme in question have power to determine th e person to whom the sum, or any part of it, is to be paid, require them to pay the whole or part of that sum, when it becomes due, to the other party,

  (b) if the party with pension rights has power to nominate the person to whom the sum, or any part of it, is to be paid, require the party with pension rights to nominate the other party in respect of the whole or part of that sum,

  (c) in any other case, require the trustees or managers of the pension scheme in question to pay the whole or part of that sum, when it becomes due, for the benefit of the other party instead of to the person to whom, apart from the order, it would be paid.

  (3) Any payment by the trustees or managers under an order made under section 23 above by virtue of this section shall discharge so much of the trustees or managers liability in respect of the party with pension rights as corresponds to the amount of the payment.

  Pensions: supplementary
  25D.—(1) Where —

  (a) an order made under section 23 above by virtue of section 25B or 25C above imposes any requirement on the trustees or managers of a pension scheme ("the first scheme") and the party with pension rights acquires transfer credits under another pension scheme ("the new scheme") which are derived (directly or indirectly) from a transfer from the first scheme of all his accrued rights under that scheme (including transfer credits allowed by that scheme), and

  (b) the trustees or managers of the new scheme have been given notice in accordance with regulations, the order shall have effect as if it has been made instead in respect of the trustees or managers of the new scheme; and in this subsection "transfer credits" has the same meaning as in the Pension Schemes Act 1993.

  (2) Regulations may—

  (a) in relation to any provision of sections 25B or 25C above which authorises the court making an order under section 23 above to require the trustees or managers of a pension scheme to make a payment for the benefit of the other party, make provision as to the person to whom, and the terms on which, the payment is to be made'.

  No. 74, in page 122, line 42, leave out 'subsection (4)' and insert 'sections 25B and 25C'.
  No. 75, in page 123, line 3, leave out 'subsection (4)' and insert 'sections 25B and 25C'.
  No. 76, in page 123, line 16, at end insert
  'and sections 25B and 25C above'.
  No. 77, in page 123, line 28, leave out 'subsections (1) and (2)' and insert 'section 25B(1) and (2)'.
  No. 78, in page 123, line 31, at end insert
  'and sections 25B and 25C above—

  213
  '"the party with pension rights" means the party to the marriage who has or is likely to have benefits under a pension scheme and "the other party" means the other party to the marriage'.
  No. 79, in page 123, line 47, leave out from 'section' to end of line 4 on page 124 and insert—
  '31 of that Act (variation, discharge, etc. of orders) —
  (a) in subsection (2), after paragraph (d) there is inserted—
  "(dd) any deferred order made by virtue of section 23(1)(c) (lump sums) which includes provision made by virtue of —

  (i) section 25B(4), or

  (ii) section 25C, (provision in respect of pension rights)", and

  (b) after subsection (2A) there is inserted—
  "(2B) Where the court has made an order referred to in subsection (2)(dd)(ii) above, this section shall cease to apply to the order on the death of either of the parties to the marriage'''.
  No. 80, in page 124, line 10, leave out 'in the foreseeable future'.
  No. 81, in page 124, line 23, leave out `(8) of section 25B' and insert
  `(7) of section 25B, and section 25C'.—[Mr. Arbuthnot.]

Clause 7

  APPOINTMENT OF TRUSTEES
  Mr. Ingram: I beg to move amendment No. 16, in page 5, line 7, at end insert—
  '(1 A) Where an application is received from the member nominated trustees of a scheme and where those member nominated trustees including any pensioner trustees selected by the members of the scheme comprise less than 50 per cent. of the total number of trustees the Authority may direct the trustees of the scheme to appoint an independent trustee to be drawn from a register of approved trustees to be compiled by the Authority.
  (1B) The Authority shall establish and maintain a register of approved independent trustees.
  ( IC) Where a direction under Clause 7(1)(a) is not complied with, sections 3 and 10 apply to any trustee who has failed to take all such steps as are reasonable to secure compliance.'.
  Mr. Deputy Speaker (Sir Geoffrey Lofthouse): With this, it will be convenient to discuss the following amendments: No. 1, in clause 16, page 9, line 39, at end insert—
  '(6A) The arrangements must provide that when a scheme has more than 850 members, and pensioner members comprise a majority, one additional trustee shall be nominated, who shall be a pensioner member of that scheme.'.
  No. 10, in clause 16, page 9, line 39, at end insert—
  '(6A) The arrangements must provide that when a scheme has more than 500 members, one trustee shall be nominated who shall be a beneficiary of that scheme or a person approved by the beneficiaries of that scheme.'.
  No. 11, in clause 17, page 10, leave out lines 4 to 30.
  No. 12, in clause 17, page 10, line 9, after `procedure', insert
  `and are not rejected by at least 10 per cent. of active and pensioner members or by 5, 000 such members, whichever is the lesser number.'
  Mr. Ingram: In dealing with this group of amendments, I shall speak to amendments Nos. 16 and 1.
  Amendments Nos. 16 and 1 set out to achieve very different objectives. Simply put, the purpose of amendment No. 16 is to provide a mechanism for member-nominated trustees in schemes with less than 50
  214
  per cent. of member-nominated trustees to ask the regulatory authority to appoint an independent trustee. If the grounds for that application satisfy the authority, the authority may direct the trustees of the scheme to appoint an independent trustee from a register of approved independent trustees.
  Those of us who have spent weeks and months achieving a smattering of knowledge about the Bill will know that it already gives the regulatory authority considerable power to remove or suspend trustees in given circumstances: clauses 3, 4, 5 and 6 refer to those powers. Provisions also permit the appointment of independent trustees in given circumstances: clauses 23, 24 and 25 relate to those powers. Amendment No. 16 proposes that member trustees be given a role in that process in circumstances where they consider it to be in the best interests of scheme members that an independent trustee be appointed to assist in the on-going running of a scheme.
  Although the issue was dealt with briefly in Committee, it was discussed in broad terms. Amendment No. 16 adopts a specific approach. Amendment No. 68, which was debated in Committee on 9 May, drew particular attention to clause 7(4), which vests wide-ranging powers in the regulatory authority, including the power to
  "appoint a trustee of a trust scheme in prescribed circumstances."
  It could well be argued that amendment No. 16, which aims to give powers to member-nominated trustees to adopt such an approach, is already covered by clause 7.
  Although I do not wish to go into all that was said in Committee on 9 May, I think it is worth examining what the Minister said:
  "Clause 7 deals with the power to appoint trustees. In view of the expense that an additional trustee might impose on a scheme, the Government felt that it was important not to give the authority unfettered power to appoint trustees in any circumstances. That would have been one of the alternatives to a regulation-making power. Indeed, we have sought to set out on the face of the Bill the situations in which we believe that the power is most likely to be exercised."
  The Minister continued:
  "It would be nice to think that we had been able to anticipate all such situations, but we need to be able to add to the list in case, in the light of experience, there proved to be other situations where it would be desirable for the authority to be able to make appointments."—[Official Report, Standing Committee D, 9 May 1995; c. 107–8.]
  We could drift into an argument about the unfettered powers of the regulator, as we are dealing with the powers vested in the authority and in the Government, through regulation; but I think it useful to examine precisely what the Minister said on 9 May. The amendment gives him the chance to be "nice". We had some pleasant debates in Committee, and I am sure that this would not be the first or, indeed, the last opportunity for him to be nice.
  Others have speculated about the future that lies before the Minister, given the events that have taken place elsewhere this afternoon. Someone may well be nice to him if he is nice to those who tabled amendment No. 16. What could be nicer than to accede to the request of member-nominated trustees that an independent trustee be appointed? If such a request were made, it would not be made lightly or frivolously, but in the context of specific circumstances pertaining to specific schemes.
  The argument in support of the amendment is linked to the wider debate on the number and percentage of member-nominated trustees appointed to schemes. That

  215
  issue, too, was debated extensively in Committee: we discussed the balance between member and employer-based trustees, which was also dealt with at length in the other place. Strong arguments were advanced in favour of the principle of a 50:50 split between member and employer-nominated trustees, notwithstanding the view adopted by the Goode committee—and expressed in the Bill—that the statutory requirement should be a minimum of one third member-nominated trustees in schemes above a certain size. It is worth repeating that some of the best and biggest final-salary schemes in the country operate above that minimum: Rothmans, Jaguar, Leyland DAF, Thomas Cook, Shell, Allied Lyons, Albright and Wilson, Courtaulds, Lucas, Sainsbury and Boots all have 50 per cent. member-nominated trustees.
  ICI has six employer trustees, six member trustees and one independent trustee; its scheme has been in operation since 1926. Unilever—one of the top companies internationally, not just in the United Kingdom—has 12 employer trustees, 12 employee trustees and one pensioner trustee. That, without doubt, is a roll-call of some of the best companies in British industry, and it could be expanded further. For instance, the Rolls-Royce pension scheme has 80, 000 members and a market valuation of £1.63 billion. It goes further than most: it has 13 trustees, five appointed by the company and eight elected by the members.
  Mr. Michael Stern: The hon. Gentleman and I share the distinction of being Rolls-Royce Members. Does he agree—I hope to say more about this later if I catch your eye, Mr. Deputy Speaker—that, at least until recently, not a single pensioner was represented among those eight employee trustees?
  Mr. Ingram: That is true, but it could be changed tonight if the hon. Gentleman votes with us. Rolls-Royce falls into a category with which I shall deal when I speak about amendment No. 1; at present, however, I am speaking to amendment No. 16, and referring to the balance between member and employer-appointed trustees.
  The Government rejected our argument originally. An earlier amendment was not selected, and this is not an attempt to return to it, but the underlying argument in amendment No. 16 relates to the rights, role and functions of member-appointed trustees, and what they can and cannot do. It aims to give them additional power, strictly regulated by the authority. I think that the point made by the hon. Member for Bristol, North-West (Mr. Stern) is more relevant to amendment No. 1.
  In Committee, in another place and on the Floor of the House, Ministers have strongly opposed the extension of the one third-two thirds member-employer relationship laid down in the Bill, but that argument is not solid. It is based on the list of companies during the two Committee stages. There is nothing to show that a 50:50 split is impracticable, cumbersome or costly; if it were, none of those blue-chip schemes would have adopted such an approach. Experience and best practice tell us that the 50:50 balance is a respectable and tried-and-tested approach.
  216
  On 16 May, the Under-Secretary of State said—this relates directly to the underlying principle of amendment No. 16—
  "However, it would not be right for us to go further than setting a floor. We have set a floor of at least a third of the trustee board being member nominated and many people may wish to build on that floor."—[Official Report, Standing Committee D, 16 May 1995; c. 173.]
  If the Government are serious in their intention that schemes should be allowed to build on the one third-two thirds floor set down in the Bill, they can have no argument against amendment No. 16, which provides for precisely that. It identifies the concept of the floor and allows member trustees to argue something at variance with that floor—again, only with the approval of the regulatory authority. Clearly, granting the power proposed in amendment No. 16 would give much encouragement to member trustees who may be operating in a one third-two thirds environment and finding that all their reasonable requests are simply being rejected or overturned by the majority view of the trustees.
  We accept and understand that the purpose of trustees is not to represent sectional interests, but another argument is involved here that does not stand up to examination. To be realistic, it must be recognised that, in many instances, employer-based trustees will represent the interests of their company where they believe the better interest of the company must be served and, likewise, employee-based trustees will seek to operate in a similar fashion. That is the reality.
  8 pm
  Sir Andrew Bowden: The hon. Gentleman makes the point about specific interests being represented by trustees. Surely each group has a specific interest. Employers have an interest and contributors to the scheme who are still employees have an interest. Why do we not have a pensioner interest as well? They all have particular interests to further and to work for.
  Mr. Ingram: I agree entirely. I do not have time to return to the Second Reading debate but, in reply to it, I welcomed the hon. Gentleman's speech and suggested that it might be worth his serving on the Committee as he was clearly a man of independent spirit and mind. His views could have added considerably to our debates in Committee. I do not know whether it was his or someone else's choice that he did not serve. He makes a strong, valid and telling point, but it deals with amendment No. 1, to which I shall come shortly. I agree, however, with his point.
  The Government say that there must be a floor of one third member-nominated, employee-based trustees, which can be exceeded and amended with the approval of the trustees, the company that is funding the scheme and the other contributors. In those circumstances, however, member trustees who consistently argue what they believe to be a reasonable case and find themselves frustrated—it will and does happen—have no way of amending the scheme to achieve a 50:50 split.
  Amendment No. 16 therefore proposes the simple mechanism of putting a case to the authority. If there is a logjam and something in a scheme is not in the interests of the scheme members, who may be losing out because of the intransigence of the employer trustees, those

  217
  members could say to the regulator, "Please consider the appointment of an independent trustee to assist us in determining a way out of this impasse."
  It is important to consider in detail what amendment No. 16 proposes. It does not propose that power be given to member trustees to insist that an independent trustee be automatically granted. That must happen by leave of the regulatory authority, so that important power resides elsewhere. Clearly, trustees would need to submit a strong case to satisfy the conditions that are likely to be laid down by the regulator.
  That is the underlying principle of amendment No. 16. It touches on some of the arguments relating to the balance of trustees on schemes. If passed, it would give some comfort to member trustees who may be battling away, doing their best in difficult circumstances and acting honestly to achieve changes to the operation of the scheme, but making no progress. In the normal course of events, they would have no recourse other than to the authority. Amendment No. 16 says that one helpful recourse would be for member trustees to be able to put the case to the authority that they need to break the logjam or to overcome the difficulties that they face. If the authority agrees, an independent trustee could be appointed and would undoubtedly be of great benefit not just to trustees, but to the scheme members involved in a scheme.
  I commend amendment No. 16 to the House on that basis. Others may wish to speak in relation to this point, but I suspect that the real debate will take place in relation to amendment No. 1, which relates to the appointment of pensioner trustees.
  All those who have been involved in the consideration of the Bill—and, I suspect, all other hon. Members—have received considerable correspondence from a wide variety of interests making the case for a pensioner trustee. The issue was debated at length in another place, and of course during our deliberations in Committee. When the matter was considered in the other place, a wide-ranging amendment was proposed. It says simply:
  "At least one trustee to be nominated by pensioner members of the scheme".
  That wide-ranging demand was modified when we debated the matter in Committee.
  Despite the fact that in this country there are 4, 500 schemes with 1.83 million members that have a pensioner trustee, the Government have rejected the arguments in favour of the principle proposed in the amendment. Lord Mackay of Ardbrecknish said:
  "If pensioner members were singled out to have the right to nominate their own trustee, there could be a danger that that trustee might not enjoy the confidence of active members."—[Official Report, House of Lords, 13 February 1995; Vol. 561, c. 460.]
  That is a strong statement by a Minister, but he did not back it up with any facts. He simply ignored the fact that 4, 500 schemes already have such an approach. I am aware of no evidence—perhaps the Minister has evidence that Lord Mackay received but did not give to his Committee—that the pensioner trustee members in those schemes do not enjoy the confidence of active members. If the Government are basing their rejection of the principle of pensioner trustees on such an assertion, they must prove their case. That case has not been proven.
  Mr. Frank Field: Is my hon. Friend not being typically generous to Treasury Ministers? If their
  218
  argument is correct, surely they must move even further. If the pensioner interests on pension trusts are behaving in the way that was described in the other place, surely they should be removed from the trust.
  Mr. Ingram: I thought that my hon. Friend was going to say that those Ministers should be removed from the Treasury, but that may come as well. That is a strong point. If pensioner trustees did not enjoy the trust of active members, that action could be taken. The case advanced by Lord Mackay of Ardbrecknish was not supported by any fact, but he based his rejection of the arguments advanced in another place on that case.
  In Committee on 11 May, the hon. Member for Antrim, South (Mr. Forsythe) moved an amendment with the support of Labour Members, which appeared in column 143 of the Official Report.He was more specific about the way in which this matter should be dealt with. Rather than adopting the general approach of the amendment in the Lords, his amendment provided:
  "Once a scheme of more than 1, 000 members comprises a majority of pensioner members, for at least one trustee to be nominated by pensioner members on that scheme".
  Clearly that narrows it down to particular schemes—large, mature schemes. It says that, where there was a majority of pensioner members, one of the trustees should be nominated by pensioner members on that scheme. That was an advance on what was being proposed in the other place simply because it dealt with schemes that operate in a particular way. It was supported by the arguments advanced in the Goode report. That document was used extensively in Committee.
  On page 261, Goode reported that
  "The case for pensioner trustees is not without merit. There is some anxiety that the interests of pensioners may be very much in the background if there is no pensioner trustee, particularly since they are not involved in the negotiating process between employer and employees. In addition, they are thought to be less susceptible to some of the pressures that face active members. The case for pensioner trustees is particularly strong where they represent the majority of the scheme beneficiaries".
  Goode went on to reject the idea of pensioner trustees. However, the analysis that I have quoted is met by the amendment that was moved in Committee by the hon. Member for Antrim, South, and met, in its entirety, by amendment No. 1.
  Simply put, the case for pensioner trustees is that a pensioner trustee will bring a wealth of experience to a trustee board. The experience of the many schemes that have pensioner trustees shows that such trustees tend to be people with considerable experience in the company. Many are retired senior managers who know the company inside out, who are committed to advancing the company's interests, who have served for many years, ensuring that the company was successful, and therefore who want it to continue to be successful. There is incredible loyalty among the pensioner trustees whom I meet and many pensioner members of schemes who wish to serve in that capacity. They have a loyalty to the company that they have served—in many cases, for 20, 30 or 40 years. They often bring expertise of senior management.
  Perhaps more important—this argument was picked up by Goode in the passage that I quoted—pensioner trustees would not be susceptible to pressure from elsewhere. That is very important, given the new concepts that have been developed in the Bill about whistleblowing.

  219
  We must live in the real world. Many member trustees would have second thoughts about blowing the whistle if they considered, notwithstanding the protection that may or may not be in the Bill, that they had only, say, a 40 per cent. question mark in their mind about wrongdoing. Most member trustees would have to be very satisfied about what was going on before they ever blew the whistle on the scheme.
  Such pressure and uncertainty would never exist in the mind of a pensioner trustee. A pensioner trustee has no need to fear, however strong his commitment and loyalty to the company. The minute that there was any hint of mismanagement or perceived irregularities in the operation of a scheme, he would not hesitate in blowing the whistle.
  Mr. Stern: I am not sure that I follow the hon. Gentleman's logic. Employer-nominated trustees or member-nominated trustees have a vested interest in the well-being of the scheme, which may in itself encourage them to blow the whistle over malpractice, but surely the same considerations apply to a pensioner trustee whose pension is not necessarily purchased outside the scheme but depends on the future funding of that scheme by the employer and by existing employees.
  Mr. Ingram: I am not adopting an absolute position that pensioner trustees will always operate on that basis—they will undoubtedly have other factors in their mind. I hope that I have not lost the support of the hon. Gentleman for that concept because he believes that there is illogicality in what I have said.
  Mr. Frank Field: If the hon. Member for Bristol, North-West (Mr. Stern) recalls the genesis of the Bill, it resulted from what happened in the Maxwell pension schemes. An employer removed people at his will if they did not do as he wished. That would not occur if they were retired, because they would not have jobs to lose, which would lose them the place on the pension scheme.
  The case of Imperial Tobacco appeared before the courts. Trustees had been removed from pension schemes, and the judge said that to lose one set of trustees was carelessness, but to move two was a much more serious charge against the employer. Surely, given the origins of the Bill, we are trying to build some safeguard into it.
  Mr. Ingram: My hon. Friend makes his own argument extremely well, based on his knowledge and experience of investigating that specific scheme. My memory tells me that one of the trustees was not simply moved but was sacked by Maxwell, because he was the one who was identifying much of the wrongdoing. That trustee was dismissed from the company, not from the trust, but obviously, the minute that he was out of the company he was no longer eligible to serve as a trustee. That could not happen to a pensioner trustee, who is free to tackle such matters.
  8.15 pm
  I do not believe that such things will be happening daily. We have come to expect and accept that most pension schemes in this country are well run. However, it has been clearly proven—in the Maxwell case and in many other cases documented in the Goode report and elsewhere—that irregularities do creep in and major
  220
  wrongdoing does take place. A pensioner trustee would simply be another bulwark against that eventuality occurring in schemes covered by amendment No. 1.
  Some people may want to argue differently, but I emphasise that amendment No. 1 does not argue that pensioner trustees should be appointed as of right. A pensioner trustee should be appointed only to mature schemes, the majority of whose beneficiaries are pensioners.
  We must respond to another development that has taken place in the economy in which we all now have to exist. Many large companies have been divesting themselves of employees rapidly in the past 10 or so years, creating a shift, which many people could not have predicted, in the balance in pension schemes between active members and pensioner members.
  The National Federation of Post Office and British Telecom Pensioners says, in its briefing material, which has been sent to all hon. Members, that 66.3 per cent. of members of the Post Office scheme are pensioners and 69.4 per cent. of members of the British Telecom scheme are pensioners. In absolute terms, there are 192, 000 pensioner members in the Post Office scheme and 211, 000 members in the BT scheme. Those are very large numbers of people who have no right of direct representation.
  Ten or 15 years ago, people could not have predicted that shift, which has been mirrored in large scheme after large scheme, and the percentages to which the National Federation of Post Office and British Telecom Pensioners draws attention are borne out by arguments advanced by other groups acting on behalf of pensioners' interests.
  It is therefore right that that reasonably new and developing make-up of pension schemes—of pensioners being in the majority—is recognised.
  I accept that the Government may argue that there is nothing to prevent pensioner members from becoming trustees. We discussed that at length in Committee, and it is correct. Pensioners can become trustees if they are so elected.
  However, we should return to the real world. The real world proves that it is very difficult for pensioners to organise. They lack the financial resources; they do not necessarily have all the relevant information to hand. It is quite a task to organise 192, 000 pensioners, as in the case of the Post Office scheme, or more than 200, 000 in the BT scheme.
  I accept that 850 members is an arbitrary figure. Other figures could be set; I think another amendment sets the figure at 750. In Committee, the hon. Member for Antrim, South set the figure at 1, 000. It is the principle that is being argued for.
  I hope that the Minister will accept the arguments about the need to recognise the changed circumstances that now apply in many large pension schemes and the important role that pensioner trustees can play in a free and unfettered way. They would not need to look over their shoulders or worry about employer pressure if they reported perceived wrongdoing in a scheme.
  The expertise that those pensioners can bring to the operation and management of individual schemes is important. There is a wealth of talent screaming out to he included in many sue) schemes. We can address that argument by accepting amendment No. 1. I am sure that it will be warmly welcomed by hundreds of thousands of pensioners in schemes throughout the country.
  Sir Andrew Bowden: I should like to concentrate my comments on amendment No. 10, which stands in my name and that of the hon. Member for Birkenhead (Mr. Field). I support a large part of the comments made by the hon. Member for East Kilbride (Mr. Ingram) in moving his amendment.
  I ask the Government to understand that there is strong feeling among pensioner organisations about their lack of representation. Many hundreds of thousands of people are involved. They are frustrated because they feel that they have no effective say and no direct influence on the handling of schemes or on the boards of trustees.
  I know that there was considerable debate on this issue in Committee, where my hon. Friend the Minister for Social Security and Disabled People said:
  "The Government agree that there should not be a requirement to appoint pensioner trustees, but we are trying to facilitate pensioners having a voice on an equal basis with active members, which would go further than the Goode report suggested."—[Official Report, Standing Committee D, 16 May 1995; c. 156.]
  I am glad that they are trying to do that. What we are asking my hon. Friend the Minister to do tonight is to put those words into operation. It is a great opportunity for him to do so.
  I believe that the Goode committee side-stepped the matter. It took the soft option when it used words to the effect that pensioner trustees should be encouraged. It should have gone much further. I do not know why it did not. I suspect that there was some disagreement in the committee about how far it should go and it compromised on encouragement instead of being more positive.
  The 1993–94 report of the pensions ombudsman makes an interesting statement:
  "Trustees' conflicts of interests…Trustees are often appointed from the management sponsoring company, or company itself … Conflicts of interest can arise in which consciously or unconsciously the individual concerned may not distinguish between their differing responsibilities adequately."
  That refers to the point that we were discussing earlier.
  Frankly, it is a fig leaf argument to claim that trustees should not represent sectional interests. In the real world, in practice, they do. Quite correctly, employers and member trustees have sectional interests. Why on earth should not the pensioners have a sectional interest and a sectional voice, too?
  Mr. Peter Griffiths: I hesitate to interrupt my hon. Friend, but he and the hon. Member for East Kilbride (Mr. Ingram) used the phrase "pensioner trustee". My interest was not aroused when the hon. Member for East Kilbride used it because amendment No. I refers to a trustee
  "who shall be a pensioner member",
  but amendment No. 10 refers to a trustee
  "who shall be a beneficiary of that scheme or a person approved by the beneficiaries of that scheme."
  Is my hon. Friend using those two phrases interchangeably or does he see a distinction between a pensioner trustee who is a pensioner and a trustee appointed to look after the interests of pensioners?
  Sir Andrew Bowden: There is a distinct difference on this point between amendment No. 1 and amendment No. 10, which extends a view that I have expressed in the House before. Where appropriate, we should encourage people to join boards of trustees who are not necessarily
  222
  beneficiaries and who do not necessarily contribute to the scheme but who would be there with the approval and support of the pensioner beneficiaries. That would enable a much wider range of people to join trusts and use their expertise and knowledge.
  In groups of beneficiaries, there will be individuals who could do a very useful job, but there may well be occasions when the beneficiaries will want to bring in from outside somebody who might have had a great deal of experience and knowledge of pension matters. Such a person might be a retired solicitor who specialised in that subject or a Member of Parliament who had retired or whose services had been disposed of by the electorate but who had some expertise that could be used. There is a range of possibilities. We should not be rigid and say that trustees must come from one category or another.
  Mr. Andrew Miller: As a Back Bencher, I appreciate the difficulty of drafting amendments. For clarity in this debate, would the hon. Gentleman confirm that he uses the word "beneficiary" to mean somebody in receipt of a pension? I ask because there has been confusing use of that word. For example, consider the judgment against Lord Hanson in the Hanson-Imperial Tobacco case. The word "beneficiary" is used to cover active scheme members, deferred pensioners, pensioners and, indeed, the company. I take it that the hon. Gentleman means specifically those people in receipt of a pension.
  Sir Andrew Bowden: Yes, I mean people who actually get the benefit of the pension. It is always difficult, as the hon. Gentleman said, for Back-Bench Members to get the wording of amendments exactly right. I am sure that my hon. Friend the Minister knows what I mean and I am certain that the House does.
  I should be delighted if my hon. Friend the Minister were to say, "I have to tell my hon. Friend that his amendment is not quite correctly worded, but I agree with the spirit of what he intends and wishes. I shall take it back to my Department, get the wording right and submit it through further stages of the Bill so that it will become law." I very much hope that that will happen. I am clear that I am talking about those actually in receipt of a pension.
  There are large groups of people who meet regularly to discuss their schemes and their problems as pensioners. There is one other thing that slightly worries me. I have no specific, hard evidence to establish it, but I get the feeling that there is some prejudice against allowing pensioner beneficiaries to become trustees because there is a feeling that they might be a bit old and past their best. People wonder whether they can really make a useful contribution. I hope that that is not the case because a large number of people in their 60s, 70s and, indeed, 80s are very able. There are some hon. Members in that age group who are excellent Members of Parliament. I therefore trust that I am mistaken, but I have a feeling that I am not.
  There is also a feeling that beneficiaries who are on the board of trustees will lack impartiality. I should not mind if they lacked impartiality in the sense that they were battling to ensure that the beneficiaries got a full and fair deal. If we put the right people on boards—people who can also consider the overall position of the trust and the decisions that it has to make—they could make a valuable contribution.

  223
  I hope that my hon. Friend the Minister will be more positive tonight than he was in Committee. I look forward to hearing what he has to say.
  8.30 pm
  Mr. Frank Field: I support amendments Nos. 1 and 10 for various reasons. My hon. Friend the Member for East Kilbride (Mr. Ingram), who spoke with typical force, outlined one of the most important arguments that we ought to consider. No one but a knave or a fool would claim to have the panacea with which to safeguard pension funds. We are trying to knit together a series of mechanisms that will minimise the chance of any group of pensioners going through what the Maxwell pensioners had to go through.
  When my hon. Friend the Member for East Kilbride spoke about the need for pensioner trustees, he meant that they might be less easy to nobble than other trustees, given the frailty of human nature. He was not saying that, if only we had a pensioner trustee on every trust, we could guarantee the safety of the funds. We could not do that, but the chances are that we would improve the safety of funds if there was such a trustee whose job was not dependent on his carrying out his employer's wishes.
  In response to my intervention, my hon. Friend made my point more forcibly than I did and in the manner that I should have employed. People are often on boards because they hold a particular job. If they prove difficult as trustees—if they do not do what the employer wants—they risk losing their job because dismissal can be the only way to take them off the trust board. It is crucial to have on the board a number of people who speak the truth as they see it, without fear or favour of their employer.
  Mr. Mark Wolfson: I agree with what the hon. Gentleman says about people who are trustees of a pension fund and in related employment. Often, the pressure may not be as direct or overt as the risk of losing a job. If someone is making a nuisance of himself, as it were, his prospects in the company can be diminished—it might be no more than that, but it can nevertheless be very damaging.
  Mr. Field: Most people would be helped by there being an independent/pensioner trustee behind whom other trustees could group their arguments. I should hope that that case alone would persuade the Government even at this late hour to improve the Bill by accepting the amendments.
  There is another reason for supporting the amendments. The more the Government claim that people do not speak for specific sectional interests but are bound by trust law, the weaker is their case against having on trust boards people who represent particular special interests. In this context, I disagree slightly with the way in which my hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden)—I call him my hon. Friend tonight—presented his case. It is important to have on trusts people who represent specific ideas while abiding by the framework of trust law, or who have a general duty to promote the trust, as specified in law.
  Let us consider our roles as Members of Parliament. We all enter the House with a party label. Indeed, we should be foolish to think that we would be elected without our party
  224
  labels. We therefore bring a particular interest, whether it be Labour, Tory or Liberal. However, once elected, we represent all of our constituents. Bringing a particular point of view to our work here does not make us any the less Conservative, Labour or Liberal, but we regard our constituents' interests with particular eyes.
  The same applies to a member of a trust. He joins the trust with employer or employee interests, trade union interests or, as we are discussing now, special independent interests or pensioner interests. That trustee brings different qualities. If I compare the qualities that I try to bring to the House with those of my colleagues or Conservative Members, it is clear that we all bring something different to the debates although each of us tries to represent properly the views of all our constituents. That argument applies equally to members of pension trusts.
  There is a final reason why the Government should concede the amendments. I believe that they would do so had they been present when the hon. Member for Antrim, South (Mr. Forsythe) and I took evidence in Northern Ireland about the Harland and Wolff pension scheme. The evidence that we heard was disgraceful, as was the attitude of those in charge of the pension fund. In fact, it was doubly disgraceful because they did not know how disgraceful their views appeared to all those present.
  The prevailing attitude was not merely condescending but a dismissal of people who had given all their working life to Harland and Wolff. People were publicly humiliated for trying to represent their interests effectively as pensioners. I believe that I am right to say that they were denied information about other pensioners. Their efforts to represent pensioner interests were thwarted at every turn. Instead of seeing a mature group of individuals in charge of the Harland and Wolff scheme and rejoicing in the fact that people were actively trying to represent their own interests—that, after all, is the very lifeblood of democracy—those in charge tried to humiliate those people. Those in charge have now made some minor concessions. They will appoint someone from the group, but they did not trust the vast majority of those interested in the scheme to make that decision themselves.
  If one believes the Government's rhetoric, as I do, that ownership of pension assets is probably more important than the value of one's house—even before the age of negative equity—one must surely move with alacrity to accept the amendments.
  The genesis of the Bill was the theft of pension funds from Maxwell pensioners and future pensioners. No one pretends to be able to guarantee the absolute safety of pension funds. The amendments seek to make pension funds more representative and to make it a little more difficult for the awful Maxwell scenario to happen again. Given the purpose of the Bill, I think that the Minister will have to have some pretty good arguments if he is, with a clear conscience, to persuade his colleagues to vote against the amendments.
  Mr. Stern: I am happy to continue in the spirit with which the hon. Member for Birkenhead (Mr. Field) concluded. When considering this group of amendments, I find myself in a not unusual position for any Back Bencher of any party. I am pretty convinced that the Government have got it wrong. I am also pretty convinced that the amendments do not represent much of an improvement. By using a couple of arguments, I shall explain why, from experience, I believe that.

  225
  I came to the House in 1983 as the representative of an area in which Rolls-Royce Aero Engines was—and still is—the second largest employer. My first involvement in this argument occurred when a small group—first two people, then half a dozen—of Rolls-Royce pensioners came to see me to complain with some fairly abstruse figures that the pension scheme into which they were locked had been disadvantaged by a subsequent action by the company in favour of another pension scheme into which a larger number of employees was locked, but in which there was also a larger number of non-pensioner members.
  The group of half a dozen people tried to enlist my help and I contacted Ministers and the company. In the end, I suggested to them that it would be a good idea, given the local involvement of Rolls-Royce, to arrange a meeting and invite a representative of the company to explain its point of view. I was a little surprised when more than 500 people turned up—it was just one branch of the company.
  The nub of the argument was very simple. Although it was not as extreme an example as Harland and Wolff, which the hon. Member for Birkenhead described, Rolls-Royce had taken a decision which appeared to be in , the interests of the company and the on-going contributors to the pension scheme, but which meant that a group of pensioners had no say, and no opportunity of a say, in the argument. They had no representative on either the pension trust or the company funding committee, which examined the levels of contributions made to the pension trusts. They were the ultimate disfranchised minority whose financial future was being affected by decisions that were outside their control.
  I suppose that, from that date, I became convinced that some greater pensioner involvement was necessary to look after—or at least speak for—the interests of pensioners. A second example, again in my constituency, confirmed that feeling. It concerned another former major employer in the Bristol area, Imperial Tobacco, which was much more to do with southern Bristol than northern Bristol, but nevertheless involved a considerable number of people.
  After the war, Imperial Tobacco set up the dream pension scheme especially for its managers—the famous Ross-Goobey scheme, which was the benchmark for many years. When I was elected, a large number of my constituents—as is the case even now—enjoyed very generous pensions because of the way in which that pension scheme was set up.
  A few years ago, efforts were made by the then owners of Imperial Tobacco, Hanson plc, to alter the rules of the scheme. Those efforts ended up in a highly expensive legal action which the company happened to lose. There may well be a division of opinion across the Floor of the House on the rights and wrongs of that action but, as was explained to me by the company, it was not a raid on the pension fund as some people thought. It was a straightforward lack of anybody at decision-making level able to put forward the very deeply held views of the majority of pensioner members.
  That is another example of the interests of pensioners being deliberately or inadvertently damaged—at least from the pensioners' point of view—because of the pensioners' lack of even one representative on the scheme whom they could regard as acting in their interests.
  226
  So far, I have advanced arguments that back those, especially those put by the hon. Member for East Kilbride, for the need for further prescription, but this is where I start to have some doubts. I have spent a large part of my working life as a practising chartered accountant. Inevitably, as such, I have advised companies on setting up schemes and advised companies with schemes in place on how to change them. The one conclusion that I have come to, which makes me very doubtful about any setting up of rules for pension schemes generally, is that every pension scheme is different. The ebb and flow of individual interests in a pension scheme not only varies from month to month, but from company to company and from industry to industry.
  8.45 pm
  The hon. Member for Birkenhead talks—rightly— about mature schemes in which there are a large number of pensioners. I have to ask him how it would be possible, for example, to set up rules for the following two schemes with an identical number of pensioner members. With Rolls-Royce, pensioners are concentrated in two or three places, so a large number of them can get together. In another company, such as a tour operator, in which the employers are worldwide, every individual receives his or her pension in a different way and the interest of each individual varies according to the movement of currencies, and it is virtually impossible to get a common opinion, let alone a common voting system, among pensioners. I therefore come to a slightly different solution from that suggested by the hon. Member for Birkenhead.
  In the 1980s, I was proud of being in this House and of serving on the Committee on the Bill that abolished compulsory membership of pension schemes, which I regard as one of the great advances in pensions. The Government have given employers and active employee members of pension schemes a way out. Just as employers always had the right to cease to fund a pension scheme subject to existing contracts, employees were given the right, by a Conservative Government under the Social Security Act 1985, to opt out of pension schemes that they found inimical to their interests. That right does not apply, except to some extent, to deferred pension scheme members and it does not apply to any extent to pensioner members.
  Mr. Frank Field: Before the hon. Gentleman congratulates himself too much on supporting that particular measure, does not he see some inconsistency with the general stance of those on the Treasury Bench, which I also accept, that wherever possible people should provide for themselves and not draw means-tested welfare? Will not that very measure, which he is so proud to support, increase the number of people on means-tested pensions and therefore the burden on taxpayers?
  Mr. Stern: I fear that the hon. Gentleman's comments, however apposite they may appear, have nothing to do with the subject that we are discussing. I prefer to stick to the subject that we are discussing.
  Compulsory membership of pension schemes still exists in all its full force for people who are currently drawing a pension. The Government need to go a little further to address that and see whether additional rights can be given to those pensioner members. I reject the prescription approach set out in the Opposition

  227
  amendments simply because it is too prescriptive and would create as many anomalies as it would destroy. I also reject the hands-off approach, which the Government appear to be proposing, that we cannot do anything right and, therefore, should do nothing.
  There is scope for the Government and, in particular, OPRA—which is being set up under the Bill—to go further than the Government have so far. It should be open to the Government positively to encourage all schemes regulated by OPRA to introduce as soon as possible, within the circumstances of each particular scheme, some form of pensioner membership. My hon. Friend the Minister has previously argued, and may well do so again tonight, that that would create representative vested interests on a scheme. However, I join the Opposition in saying that those vested interests already exist and it would do no harm to recognise them.
  Mr. John Denham: During discussions in Committee and on earlier stages of the Bill, I have found rather curious the Government's resistance to the idea of pensioner-nominated or pensioner-member trustees. It appears quite straightforward to me that such trustees would add strength to the trustees of pension funds, would add a welcome element of independence and would reassure millions of pensioner members of funds. Those are all good reasons for having pensioner trustees. The Government have not produced any strong or overwhelming arguments for resisting the extension of those trustees to a much larger number of schemes.
  The amendment focuses on larger, mature schemes where the majority of members are pensioners. However, I do not see any absolute reason why we should restrict our support for pensioner trustees to schemes that have a majority of pensioners. The advantage in debating the amendment is that it focuses clearly on the interests of pensioner members of schemes, which are not properly represented at the moment.
  In Committee, the hon. Member for Antrim, South (Mr. Forsythe) moved a similar amendment, but with a slightly higher threshold—1, 000 scheme members rather than 800. Both amendments have the same principle. The hon. Gentleman estimated that his amendment would cover 720 of the 128, 000 schemes in this country. A relatively small number of schemes would need to adjust to fall within the terms of that amendment, but it would cover more than 4 million people, many of whom feel that they are not adequately represented. The slightly lower threshold in the Labour amendment would draw in a larger number of schemes. However, both amendments, with the condition of schemes being of a certain size and with a majority of pensioner members, are aimed at a particular group.
  Three or four key questions must be asked about the principles behind our amendment. First, would pensioner members of schemes feel more confident about their pensions if those principles were adopted? I cannot believe that any hon. Member—certainly none who served in Committee—could be in any doubt that pensioner members would feel more confident if someone whom they had directly chosen represented them on the board of trustees.
  I am sure that we have all received letters from the British Telecom and Post Office schemes and had meetings with and representations from the Confederation
  228
  of Occupational Pensioners Associations. That has left us in little doubt that people speaking for the majority of pensioners have a strong case. For as long as they are excluded from representation in a scheme, they and those whom they represent will continue to feel that their interests are not being adequately safeguarded.
  It is true that, as has already been said, no one measure could absolutely safeguard the pensions either of people who are already receiving them or of those who will do so in future. However, the very act of exclusion—and that is the way in which the Government's proposals are being interpreted—leaves many pensioners feeling disfranchised. If the amendment was adopted, people would feel more secure and would be reassured that their pensions were being better looked after.
  Secondly, would it cause any substantial problems to adopt the amendment? Are there any overriding difficulties or overwhelming problems standing in the way of doing so? In Committee, the Minister produced a series of rather curious arguments. He raised a complete red herring about making regulations that cover a wide variety of schemes. However, under the Bill, schemes will have to make arrangements, and rules will have to be drawn up for consulting on the selection of member trustees', so there seems to be no reason why the modest amount of additional work and thought needed to find a way to consult pensioner members, and so choose a representative whom they find satisfactory, cannot be part and parcel of drawing up those rules.
  Thirdly, what would the role of the trustees be? Would they act irresponsibly or pursue narrow, sectional interests to a point that damaged the operation of the fund and the trustees as a whole? I felt in Committee—and nothing has been said today to change my mind—that the clinching argument is that there are already a significant number of schemes with pensioner representatives in one form or another, yet no one has shown us any evidence that pensioner-nominated trustees are more inclined to breach trust law, or that they are more likely to act more irresponsibly than any other type of trustee. There is no evidence that pensioner-nominated trustees would create problems for the operation of existing funds.
  I agree with the points made by a number of hon. Members on both sides of the House. The Government are in a stat of complete confusion about whether trustees from different constituencies represent certain interests. Throughout our debates on the Bill, the Government have failed to produce a single logical argument. When it has suited them, Ministers have argued that trustees are responsible only to the trust deed and to the operation of the fund, so that where they come from is irrelevant. The Government have used that argument to resist the idea of pensioner-nominated trustees. They have said that that would be a terrible step in the wrong direction as it would create a set of special interests, and they have added that they do not wish to encourage the recognition of special interests within pension funds. But the Government have not used that argument when it comes to the overall make-up of the trust.
  When we advocated a 50:50 split of employee and employer representatives on the trust, the Government said that that was not a good idea and was going too far. They readily conceded that employers would take the view that such a scheme would involve too many people

  229
  who did not represent the employers' interests on a trust. For the sake of logic, the Government should have been consistent on the principle throughout the Bill.
  When the Government rejected the idea of a 50:50 split of employer and employee representatives in the membership, they recognised de facto that the members would represent different interests within the pension funds. The members will all be bound by trust law—as a pensioner's representative would be bound—but they will bring to the operation of the pension fund a special knowledge of and a special interest in their own area.
  We expect that the people who are nominated by employers will bring to the operation of a pension fund a special interest in the employer's viewpoint of the management of the fund, and we also expect that employee representatives will bring a special insight of the view of the active members of the fund of the way in which the fund is administered. There is nothing wrong with recognising that.
  We think that the Government have got it wrong, and that there could well have been a 50:50 balance that would not have harmed the operation of the funds. My hon. Friend the Member for East Kilbride (Mr. Ingram) gave a long list of examples where such schemes work perfectly satisfactorily. During the consideration of the Bill, the Government should have reflected on the underlying principle that there is nothing wrong with people bringing a special insight to a pension fund.
  9 pm
  It is possible to identify fairly readily the sort of situations where it would be useful to have a member of a scheme who had an interest and insight into the concerns of the retired members who are the beneficiaries of the fund. The most obvious example is when the immediate interests of both the active members—the current employees—and the employer coincide, but in a way that is to the detriment of the pensioner members of the scheme. A company running into financial difficulties will clearly be under pressure to accept a lower funding level for the scheme titan might otherwise apply.
  A base line is now in place as a result of the introduction of the minimum funding requirement. None the less—as we rehearsed many times in Committee—that level may well be significantly below that which a company would normally wish. It would be useful in those circumstances for pensioners to have a voice within the fund to say, "We understand and appreciate the difficulties, but other interests are involved."
  Self-investment is tightly prescribed within the Bill, but—as I recall—it is not ruled out. That is another example of where the immediate interests of the active members and the employer may coincide, when it might be healthy to have a third point of view, to question whether that is in the best interests of the scheme as a whole.
  When a company is restructured, there is a temptation—all hon. Members will have seen this in their constituencies—for various employers to use the surpluses in the fund to enhance the early retirement benefit for the active members. Again, that is an instance where it would be useful to have retired members questioning whether such an operation was really in the interests of all the beneficiaries of the scheme. In all circumstances, the management of a fund would benefit from having a pensioner-nominated member.
  230
  In opposing the amendment tabled by the hon. Member for Antrim, South in Committee, the Minister deployed three arguments, one of which I have touched on. The Minister's red herring was that the amendment would create enormous difficulties for schemes, but I do not accept that argument. The schemes will be drawing up rules and procedures for consulting members and finding out how best to consult them on member-nominated trustees. The Minister also quoted the Goode committee report—which came out against the representation of sectional interests—but my views on that matter are very much in line with those of the other hon. Members who have spoken in the debate.
  The Minister's third argument was a curious and democratic one. He seemed to argue that, in the type of schemes that the amendment addresses, where there is a majority of pensioner members, that majority would in principle be able to organise themselves in such a way as to make sure that their interests were adequately represented among the trustees. I am not sure that that approach is realistic, wise or healthy for the management of schemes that have a majority of pensioner members.
  At one end of the spectrum there is a difficulty in organising a dispersed group of pensioner members who may, by now, be living at different ends of the country, a long distance from the workplaces where they originally worked. In many companies, those workplaces may not now exist. Their ability to organise themselves to reflect their interests will be much weaker than that of active members who may well, in some big companies, still be in large workplaces, well organised by trade unions and able to have a clear, collective voice.
  From time to time I receive various ballot papers from building societies asking me to vote in building society elections. One reads the information and generally does not have a clue whom to vote for. I feel very much the same in some of the obscure regional elections of my trade union, when I receive CVs from apparently identical candidates. A dispersed electorate has difficulty in organising itself to get its views across.
  There is a danger that, although in principle, pensioner members could use the new procedures in the Bill to ensure that their interests are represented, that will not happen in many cases. When the rules are initially drawn up under which active members and pensioners are to be consulted on the selection of the member trustees, it will, in many cases, be difficult for the retired members to have a clear voice on whether those rules and procedures will enable them effectively to express their apparent majority. I do not think that they will be able to do so very often. The rules and procedures will presumably govern whether statements and manifestos can be circulated to all members. It would be essential for such items to reach retired members, so that they could be asked to vote for a specific person because he or she would be willing to act in the members' best interests.
  The current rules and procedures could easily result in some funds in which pensioners were not organised. Although there might be a majority of pensioner members, they could ultimately end up with very little representation on tile trust bodies. However, it is at least theoretically possible, perhaps in some of the large schemes where pensioners are extremely well organised and where there is a considerable majority—of two to one or three to one of pensioner members to active members—for pensioner members, as I understand it, to

  231
  use the rules and procedures to ensure that every member trustee of the scheme is a pensioner member or a pensioner-nominated member. I am not sure that that would be healthy for the management of pension funds.
  I doubt whether there would be many employers who would be happy for their active members of the scheme to be excluded from the scheme's management and for it to be dominated by pensioner interests. I am not sure whether many employees and active members would welcome that outcome. By advancing the democratic argument that if there is a majority of pensioners, they will be able to ensure that th y are adequately represented, the Minister is encouraging a dangerous and unstable position.
  It would be more prudent to define a clear role for pensioner-nominated members of the scheme. If that were done and made best practice and enforced as best practice in the way suggested by the amendment, pensioners would, by and large, accept it. They would see it as a means by which their interests would be clearly represented in future. Such a policy would also add to the stability of the management of the schemes.
  I believe that the Government have resisted the proposal more from their general desire not to prescribe regulations if they think that they can get away with it. In this case, they are doing so in a way that will leave many pensioner members feeling that they are poorly represented and unable to contribute to the security of their own pensions.
  Mr. Wolfson: I have, all along, been uneasy at the difficulty that the Government appear to have in accepting compelling arguments for pensioner representation on the trustee bodies. It seems that we are inevitably in a working world of much greater insecurity than existed in the past. New technology means that this is a continuous process; short-term contracts and rapid changes in the skills required for the job mean that, during their working lives, people feel less secure than they used to, whatever their employment. For pensioners, that sense of insecurity has become much stronger since the Maxwell fiasco.
  As the Bill was instigated as a result of the problems arising from the defrauding of the Maxwell funds, I find it odd that we are not focusing very strongly on giving future and existing pensioners a feeling of security that their funds will be properly guarded and secured through thick and thin. Pensioner fund members have an independent voice, which I believe could make a valuable contribution to the discussions of a trustee body.
  The chairman of any pension trustee body must weld its members into a coherent team that looks at all the problems rather than just arguing for the vested interest. As the hon. Member for Southampton, Itchen (Mr. Denham) made clear, employers and employees will inevitably have vested interests in the scheme, but the beneficiaries of the scheme do not have an opportunity for any input. I believe strongly that we should move towards taking account of their views.
  Finally, it would be wise for the Conservative party to demonstrate a voter-friendly policy on the issue and perhaps this, of all days, is the day to do it. A great many natural Conservative voters who are members of pension
  232
  schemes look to us to safeguard their interests and they are rather surprised and bewildered that we appear not to be doing so. I hope that it is not too late to think again.
  Ms Church: I am very happy to follow the hon. Member for Sevenoaks (Mr. Wolfson) in the debate. He is absolutely right: thousands of pensioners up and down the country are watching the outcome of the debate tonight. They may not be natural Conservatives, but the hon. Gentleman is correct that the Government need to woo every voter they can at present.
  Pensioners have invested their livelihoods in retirement pension schemes and they are directly and immediately affected by the management of those schemes and by the action of the trustees. They have no right to participate directly in the running of a scheme, so they should have the right, in statute, to nominate a pensioner member.
  The arguments in favour of Opposition amendment No. 16 are absolutely clear and they have been put very well by a number of my hon. Friends, particularly my hon. Friend the Member for Southampton, Itchen (Mr. Denham). There is a clear democratic argument: those who affected directly should have the right to participate in the running of a scheme. There is also a security argument. Pensioner beneficiaries of a scheme need to know that their interests are being safeguarded—as far as that is possible—so that, as my hon. Friend the Member for Birkenhead (Mr. Field) said, they will be less easy to nobble. We know that the operation of pension schemes cannot be safeguarded absolutely, but that would make it more secure for members.
  We could also argue for the amendment on the grounds of equity. As existing employees—those who have a deferred benefit from the scheme—participate in the running of the scheme, should not those who are benefiting currently have even more right to participate in the management of that scheme? Pensioner participation would also directly benefit schemes. It is likely that a former employee member of the scheme would, upon becoming a pensioner, be nominated as a pensioner member of that scheme. That person operated as a trustee of the scheme while in employment and would be likely to continue to contribute to the scheme's operation. Such people would bring to the scheme invaluable experience, knowledge of the scheme's history—which is often important to its operation—and a particular perspective as pensioners. My hon. Friend the Member for Birkenhead emphasised the independence of pensioner members, who would not be so susceptible to employer pressure or fear of being sacked for speaking out—as was the case with members of the Maxwell scheme.
  9.15 pm
  The existence of pensioner members would increase trust and confidence among existing employees, who would know that if a whistle needed to be blown, it would be blown by someone who did not fear a direct financial penalty, which might be incurred by an employee trustee. Opposition Members and people throughout the country acknowledge those as straightforward arguments, so what are the Government's objections? My hon. Friend the Member for Itchen fully described them, so I shall not go over that ground again.
  The Government seem to believe that it is not right for someone who is a direct beneficiary to be represented on a scheme It is not a question of representation.

  233
  Employees have a direct if deferred interest. It is because a pensioner member would have a certain perspective that he or she should participate in the scheme's management. Not for the first time, the Government are standing logic on its head. A pensioner member could not outvote the others, and individuals prepared to be nominated and to stand—from my experience of working as a trade union official before I entered the House—are of high integrity, have sound principles and are deeply concerned for pensioners who will follow them, not just for existing pensioner members.
  I say to pensioners who are listening to or watching this debate—and they number thousands, as the hon. Member for Sevenoaks said—that they should listen carefully to Government Members. Listen to their vacuous excuses for refusing to accept the amendment. Listen to their denial of pensioners' interests in the operation of pension schemes. I have been a Member of Parliament for little more than a year, but time after time I have heard the Government talk about choice and protecting the interests of the individual. We hear that mantra time and again, but the truth is that the Government are denying choice to pensioners and failing to protect the interests of individual pension scheme members—be they existing employees, deferred pensioners or existing recipients.
  I hope that those thousands of people throughout the country are listening carefully to yet another example of the Government's failure to understand the needs of ordinary people who want extra protection, experience and knowledge brought to the operation of their pension schemes. As a result of scandals and mismanagement, the public have lost confidence in pension schemes. Tonight, the Government have a chance to restore in part that lost confidence, but they refuse to do so. If they persist, they should not be surprised if it leads to the loss of even more of what little confidence the public have in the Government, given their continued failure to protect people who need protection—most of all, our pensioners.
  Mr. Clifford Forsythe: The Select Committee on Social Security—the hon. Member for Birkenhead (Mr. Field) is its Chairman and I am a member of it—has taken many hours of evidence on pension schemes, starting with the Maxwell scheme. We received evidence from everyone who is significant in the pension scheme world, including actuaries.
  We arrived at the conclusion that a pensioner trustee or an independent trustee should be an essential member of a board of trustees of a pension fund. We did not pluck that conclusion out of the air. We arrived at it, having listened to everyone in pension schemes throughout the United Kingdom. I still have not been given a satisfactory explanation of the Government's view that employer-representative trustees and employee-representative trustees are acceptable and not regarded as biased—I accept that—while pensioner-representative trustees are not acceptable
  It has been said that pensioners are resentful about various things. A good example of their resentment is the Harland and Wolff pension fund. Harland and Wolff pensioners were in dispute about a pension fund surplus when the company was privatised. They felt that the surplus would not he used properly. The House will be glad to hear that I do not intend to go into detail.
  The pensioners formed a group and wished to enlarge it. They asked the trustees if they could have the names of other pensioners. That request was refused. They then
  234
  asked the trustees if they could have the addresses of other pensioners on the basis that the trustees would write to those pensioners. That request was refused. They tried everything to enlarge their membership. Each request was refused by the trustees and by the firm. The pensioners were disregarded. They had been members of the Harland and Wolff work force for many years but when they became pensioners they were ignored.
  After pressure was brought to bear by the Select Committee on Social Security, the Harland and Wolff trustees decided that they would appoint or have a pensioner trustee. They did not ask the pensioners who they would like as a trustee. As in all quango-type operations, the trustees decided to appoint a pensioner trustee themselves.
  I have no objection to the person who was appointed. My objection lies in the way in which he was appointed. The interests of the pensioners were disregarded. As I have said, I have no objection to the representative as a person. My complaint is that a dictatorial decision was made and the pensioners were ignored. Can the House really say that in those circumstances pensioners would not be resentful and would not find a pensioner trustee more acceptable? A pensioner trustee would be loyal to the fund for all the obvious reasons. I am not yet a pensioner, but on their behalf I resent the implication that because someone is a pensioner of a fund, they are not to be trusted to be a trustee.
  The Minister and others have said that perhaps pensioners would not have sufficient expertise, but the former chairman of the trustees is now a pensioner. I submit that nobody would be more fitted to be a pensioner trustee than the former chairman of the trustees. I make my few remarks in support of the amendments and I hope that the Minister will accept them.
  Mr. Miller: I shall be brief in dealing with the important amendmants under discussion.
  First, in respect of amendment No. 16, I was considering the number of companies that already have independent trustees. I would bring to the House's attention a list of companies for which Law Debenture acts as an independent trustee. They are an amazing cross-section of British industry and include the Agricultural Mortgage Corporation, Amersham International, BAA, Bull Information Systems, Chloride, Cory Towage, Freemans, Guardian Royal Exchange Assurance, ICI, John Holt, Logica, Mercantile and General Reinsurance, the Ocean Group, 3i and George Wimpey. There could hardly be a better cross-section of British industry.
  It is interesting that the pension trustees of those companies have deliberately chosen to introduce the principle of independence into their schemes. I am sure that none of those companies would be in the circumstances envisaged in amendmant No. 16, but the powers that it gives the authorities to appoint such a person as the list of companies I have read out already use are important and we should he prepared to accept them as a matter of principle.
  The hon. Member for Bristol, North-West (Mr. Stern) touched on the Hanson litigation. He was right to say that it was extremely expensive. The only winners were the Chancery Division of lawyers. I cast no aspersions on the Under-Secretary of State for Social Security, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot), who is a member of that profession and who looks

  235
  surprised, but I am sure that he would agree that that is the truth. It is a great pity that many issues of principle had to be dealt with in that way and not by a more rational means.
  Mr. Frank Field: My hon. Friend told me privately that I should have been referring to Imperial Tobacco and not British American Tobacco in my earlier intervention. He also said that if I were a smoker I would not have made that error. I am grateful to him for both points.
  Mr. Miller: Amendment No. 1 is about the basic issue of democracy. We have heard an awful lot in this place today about issues of democracy, but it is something that we cannot forget. The hon. Member for Sevenoaks (Mr. Wolfson) made the wise suggestion that his party should examine carefully the interests of pensioners. If he says that with a majority of 19, 000, the hon. Member for Bristol North-West, with a majority of 45, needs seriously to consider those wise observations.
  The Confederation of Occupational Pensioners Associations—COPAS—sets the matter out in stark terms in a leaflet distributed to members of the Committee yesterday. Under the heading,
  "Discrimination of the very worst kind",
  the leaflet points out that
  "NO existing Act of Parliament permits the discrimination which the Pensions Bill contains. Discrimination on the grounds of race, religion, gender or sexual orientation is unlawful.
  But discrimination against pensioners will be enshrined in law if the Pensions Bill goes unamended".
  9.30 pm
  COPAS has a sound point. Its leaflet sets out the case for pensioners in detail, but I shall not repeat it all because time is pressing and several hon. Members have made that case clear already. The association represents a significant number of pensioners, and its arguments are based on the simple principles which, as my hon. Friend the Member for East Kilbride (Mr. Ingram) said, were touched on by the Goode inquiry but were not developed to their logical conclusion.
  The leaflet continues
  "Many good pension schemes include a pensioner Trustee. No evidence has ever been produced that pensioner Trustees do not act in the best interests of their schemes overall. But where there are pensioner Trustees, they are there by agreement, which can be withdrawn, not by right."
  Hon. Members on both sides of the House have said that putting a pensioner trustee in by statute would give such trustees the independence that would mark them out as different from people who can be leaned on by employers.
  COPAS goes on to say:
  "The truth is that unscrupulous employers can ensure that management Trustees do their bidding or face the consequences. They can also influence employee Trustees or remove them by sacking them from the company.
  The one Trustee who is totally independent of the employer is the pensioner Trustee. The one Trustee who has the most time for his or her duties is the pensioner Trustee. The one Trustee with the longest—and, perhaps, the greatest—experience is the pensioner Trustee. The one Trustee with the biggest investment in the scheme—his or her life savings—is the pensioner Trustee.
  Why, then, is the Bill denying all schemes the advantage of one truly independent pensioner/trustee watchdog?"
  236
  The amendment is specific and deals with people in mature schemes—those with more than 850 members. It raises some organisational issues; the hon. Member for Bristol, North-West pointed out some of them and my hon. Friend the Member for Southampton, Itchen (Mr. Denham) mentioned some others. But those can be addressed by good organisation and by ensuring that such schemes, with the enormous resources at their disposal, properly facilitate the trustees' carrying out of their functions, as has to be done for every other trustee. The exceptional circumstances mentioned by the hon. Member for Bristol, North-West need dealing with, but that could all be encompassed within the spirit of the amendment. The amendment would do a service to democracy in this country by encouraging the development of pensioner organisations that could participate in such schemes, as many of the COPAS members already do.
  The points made during the debate are valid, and although there can be arguments about technical details, however one regards the specific amendments, the House should accept the principle and spirit underlying them. If the Government are serious about doing a service for the 7 million pensioners in this country, they should adopt the spirit of the amendments, which I urge the House to accept.
  Mr. Bayley: I mentioned earlier that I had received a letter from a group pensions manager of Nestle, in which he said:
  "The key to preventing any future Maxwell—is good governance in trustee boardrooms."
  I firmly believe that the key to good governance is to ensure that there is a strong voice for the beneficiaries of pension funds. There are, of course, three types of beneficiary for pension schemes: contributing members, deferred members, and pensioner members. I would have liked a situation in which the beneficiaries of the scheme, the people for whom the scheme was established in the first place, were a majority among the trustees, but sadly that is not to be the case, because the Government have stood in the way of that. Amendment No. 16 proposes that, in those circumstances, some redress could be achieved by allowing for the appointment of an independent trustee or trustees.
  Many pension schemes are well managed. The Nestle scheme has four managers, two pensioner members and six other members. It is an example of good governance. It is not just an academic or technical argument when I suggest that there are many cases of bad governance of pension schemes. Just recently, the pensions ombudsman published his latest report, which records 59 cases in which members' pension rights were violated by pension fund trustees. In the limited time that I have, I shall give two examples.
  First, an employer agreed to augment a pension but withdrew that agreement at the time of the pensioner's retirement. The trustees in that case backed the employer. The pensions ombudsman said that they backed the employer because the
  "alleged augmentation was made in ignorance of the true cost."
  I am pleased to say that the pensions ombudsman upheld the pensioner's complaint and increased the pension by £2, 890 and awarded compensation.
  Secondly, a member of a pension fund was refused a transfer payment when he moved to different employment. The trustees stated that the scheme

  237
  "did not have liquid funds available to make a payment."
  Again, the ombudsman, I am pleased to say, upheld the member's complaint and said that a transfer value of £108, 000 should be paid of behalf of the member, plus a sum of compensation.
  Many of the 59 cases are of trustees refusing to award the enhanced benefits that are stipulated under the schemes and promised to employees on redundancy. In many cases, the ombudsman upheld the complaint. In one case, he increased the member's pension by £8, 300.
  I firmly believe that if members of pension funds were better represented among the trustees of pension funds, such gross abuses would not take place, or certainly not so frequently. I really am concerned that the Government will not allow the House to give pension fund members the protection that they need with more adequate representation.
  Amendment No. 1 specifically looks at the failure of the Bill as it currently stands to guarantee representation for pensioner trustees. I have had dozens of letters from my constituents about various aspects of the Bill, but on that issue in particular I have had a full postbag. John Taylor from the York and district campaign for equal state pension ages says:
  "It should be mandatory that Pensioners Associations be allowed at least 2 nominated Trustees in their Pension Fund Scheme."
  Mr. Greaves from the Transport and General Workers Union, retired members association, makes a similar point, as does Mr. Webb from the York branch of the British Transport pensioners federation.
  The courts have said that pensions belong to pension fund members. They are deferred pay. The Government say that it is good practice to have pensioner trustees, so I hope that the Minister, if he insists on maintaining the Government's argument against the amendments, will explain why they are not backing amendments that will support what they say would be good practice.
  Mr. Hague: The amendments all deal with the issue of member-nominated trustees. The key provision is contained in clause 16, which gives effect to the Goode committee's recommendation that members of pension schemes should have the right to nominate a proportion of the trustees of those schemes. The main effect of that recommendation—which the Government fully endorse, and which is reflected in clause 16—is to give ordinary scheme members the power to require that trust boards include at least some people whose perspective differs from that of the scheme sponsor, who typically appoints the majority of, if not all, of the trustees.
  The underlying purpose of the provision is to reinforce the crucial feature of trust law: that trustees should be independent of the settlor or scheme sponsor, and should consider the interests of all the beneficiaries within the framework of the scheme trust deed and rules. Giving scheme members the power to nominate and select a proportion of trustees should significantly reduce any risk of trust boards' acting primarily in the interests of the scheme sponsor and compromising their responsibilities to scheme members.
  There is a range of positive reasons for encouraging the appointment as trustees of people nominated by scheme members. I need not go into them in detail; I think that they have the support of the House. As for the arrangements that would be made to select member-nominated trustees, we were anxious to do as the
  238
  Goode committee recommended—to avoid prescription, and to allow the wide variety of satisfactory arrangements currently in place to continue without unnecessary disturbance. That is why we have settled on a proposal that we consider flexible, which strikes an equitable balance between the interests of all parties.
  Clause 16 leaves schemes free to introduce or maintain arrangements for selecting member-nominated trustees that suit their particular circumstances and are acceptable to members; but—this is an important point—both pensioners and active members will be given the opportunity to influence nomination and selection arrangements through their participation in the statutory consultation procedure.
  I do not think that that point has been appreciated widely enough in the House or in the country as a whole. Much of our debate has been based on a misunderstanding. The Government do not oppose the appointment of pensioner trustees, but share the Goode committee's view that it should not be mandatory. We agree with all the positive points that have been made about the qualities of pensioner trustees. Our proposals for member-nominated trustees go further than those of the Goode committee in giving all scheme members—active and pensioner members, and deferred pensioners if trustees decide that it is desirable and practicable to include them—a say in the composition of the trust board through the statutory consultation procedure.
  My hon. Friend the Member for Sevenoaks (Mr. Wolfson) rightly reminded me that pensioners look to the Government to ensure that their interests are looked after. As a result of the Government's proposal, millions of pensioners will be consulted about the arrangements for selecting member-nominated trustees—arrangements that will be subject to the pensioners' right to object to them and vote on them if enough people object. We are doing a great deal to ensure the involvement of pensioners.
  Mr. Wolfson: It is clear that at this stage the Minister's arguments are not hitting home across the country. Many pensioners and their representatives feel that all is not as they would wish. We must change either the perception or the policy.
  Mr. Hague: My hon. Friend has put his finger on it and he can guess which of those options I shall choose to take. It is important to change the perception. Perhaps in the new spirit of party unity we can set about that, and do so extremely effectively. I will expand on that point and on my argument.
  Mr. Frank Field: Is the Minister saying that pensioners will be consulted if they are unhappy that they are not directly represented, that they will have the vote and that through that vote they will be able to get representation on the board? That is what I took him to say before his hon. Friend the Member for Sevenoaks (Mr. Wolfson) intervened.
  9.45 pm
  Mr. Hague: I am saying that the proposals for the selection of member-nominated trustees will be subject to an approval process in which, by law, active and pensioner members must be involved. If a certain proportion of them object—the hon. Gentleman has signed an amendment

  239
  which argues for a proportion or a minimum number, which I shall come to—there must be a ballot or alternative arrangements must be put forward. Pensioners will therefore always have a voice. They will have an influence over these matters. I am not sure that that has been sufficiently widely appreciated.
  Mr. Miller: Will the Minister give way?
  Mr. Hague: I will give way to the hon. Gentleman and then I should like to develop my argument.
  Mr. Miller: Does the Minister agree that, in the context of the amendment proposed by my hon. Friends, we are dealing with mature schemes in many—indeed most—of which there are more pensioners than active members? Does he not believe that in those circumstances the annoyance of pensioners is understandably about the basic issue of fairness and democracy? Does he not understand that that issue needs to be addressed?
  Mr. Hague: In those schemes, pensioners will have a huge influence over the selection arrangements. It will be a brave board of trustees that puts out proposals for consultation and for the approval of its members, if a majority of them are pensioners, which do not provide for pensioner involvement in the selection process. If it did so, many of the board members would regret it. That point is fully taken on board by the Government and reflected in our proposals.
  The requirement in the Bill is that members should have a right to nominate at least one third of their scheme's trustees; a proportion of one third would be a statutory minimum. The hon. Member for East Kilbride (Mr. Ingram) touched on that point and compared it with the arguments for a 50 per cent. split. I should respond to that and I shall return to the point about pensioner representatives.
  Employers set up schemes voluntarily. In the Government's view, they should be able, if they want to, to retain the right to appoint a majority of the trustees. An occupational pension scheme and its associated fund is established by an employer to achieve a business objective and the employer retains a considerable business and financial interest in the fund's performance and the scheme's effectiveness. The fund is, of course, held in trust by the trustees to be distributed on the basis set out in the trust deed and rules, but in a defined benefit scheme the employer is bound to meet the pension promise and to make good any deficit in the fund.
  From a member's perspective, the fund offers a degree of security against the employer going insolvent, and it provides a vehicle for delivering their pension, but the pension that they receive is not dependent on the existence or performance of the fund. By contrast, the existence and performance of the fund is crucial to the sponsoring employer. It offers a tax-efficient way of providing an important part of the remuneration package, it smooths out
  240
  the cash flow problems that a pay-as-you-go pension scheme incurs, and its performance and any consequent need to increase pension contributions can have a dramatic effect on company cash flow.
  The employer is the one giving the guarantee. He must top up or make good the fund in the event of deficiency. He therefore has a major interest in the successful operation of the fund and it is only right that he should be in a position to ensure that the scheme will be administered sensibly.
  Mr. Frank Field rose—
  Mr. Hague: I shall give way one more time.
  Mr. Field: Does the Minister now accept that he has made the case for pensioner trustees? He is saying that employers will not abide by those schemes unless they can have a majority of their people on the scheme to represent their views, despite all his talk that trust law will govern those trustees. If it is good enough for the employer to want a majority of members to represent his interests, surely there is a case for ensuring that there is a pensioner representative of pensioners' views.
  Mr. Hague: There is a strong case for ensuring that there are member-nominated trustees—by which I mean, in that context, trustees nominated, not necessarily only by the active members, but by active and pensioner members. However, let me discuss in more detail the arguments of the hon. Member for Birkenhead (Mr. Field).
  We recognise that there are many excellent schemes, more than one third of whose trustees are member-nominated trustees. We recognise that there are many schemes that have pensioner-nominated trustees, and that they can do a good job. The hon. Member for East Kilbride said that the Government had said that pensioners were not trusted or accepted by other members. That is a caricature of the argument made by my noble Friend Lord Mackay of Ardbrecknish in another place. The Government are not arguing that pensioners make bad trustees—quite the reverse. We agree with all the positive arguments made by the Goode committee and by the hon. Gentleman in his opening remarks. Our worry is about the mandatory nature of the proposal.
  If pensioners are given a separate facility by statute to appoint a pensioner trustee, other members may well have reservations about the implications of that privileged position compared with the position of other members, and might fear that the pensioner trustee would be inclined to act in the interests of pensioners rather than of scheme members as a whole.
  Mr. Stern: Will my hon. Friend give way?
  Mr. Hague: I have to get on, but I give way to my hon. Friend.
  Mr. Stern: Now that my hon. Friend has mentioned that matter, I hope that he will answer the argument that I made earlier—that while employers and members have the opportunity of an out from the scheme, pensioners are the one group which is irretrievably locked in, and that is the very group to which he is denying representation.
  Mr. Hague: My hon. Friend makes a fair argument, but we must set it in the balance against the other arguments that I am about to make. As he clearly said in his speech, there may be no perfect solution and there are very different ways of considering those matters. We must balance some factors against others.

  241
  I believe, and the Government believe, that creating artificial distinctions between the members to whom, collectively, we are giving rights in the Bill may encourage members to believe that trustees are somehow representatives of the category of member to which they personally belong. Active members may come to regard a statutory pensioner trustee provided by the amendment as somehow called to represent the interests of pensioners.
  Arguments can be made, once one has accepted that there should be a mandatory provision for a pensioner trustee, for provision for deferred pensioner trustees or for specific rules to be laid down to say that there must be active member trustees. One can extend that argument to considerable lengths, and argue that widows should be represented in some way. Many different interests are involved, and venturing into the mandatory representation of specific interests creates many more anomalies and difficulties than it is likely to solve.
  That amendment would also not do justice—this is the argument of my hon. Friend the Member for Bristol, North-West (Mr. Stern)—to the wide variety of schemes which currently operate. The provisions in the Bill will allow schemes to develop their own arrangements for the selection of trustees, subject to the approval of the active and the pensioner members. Trustees will make those proposals to each active and pensioner member. Members' interests will be protected by a rigorous statutory consultation procedure, which includes consultation on all aspects of the selection process and the conditions necessary to become a member-nominated trustee.
  For example, a scheme might decide that its circumstances required a pensioner trustee, or perhaps an independent trustee; whatever the trustees' proposals, however, pensioner members as well as active members will have the opportunity to approve or reject them. It seems clear that, where scheme membership consists of a reasonable proportion of pensioners, those members will be in a strong position to influence the nomination and selection process.
  There is a third reason for rejecting amendment No. 1. It would upset the crucial balance between the interests of members and employers on the trust board. It would do that because it provides for a pensioner trustee in addition to whatever proportion of member-nominated trustees a scheme had determined. That would raise the minimum requirement for member-nominated trustees from at least one third to at least one half and, in many cases more than half, for all but the very largest trustee boards. Only if the board had exactly nine or more than 10 trustees could an employer be confident of being able to nominate a majority of them under that proposal. That would conflict with the point that I made earlier about the balance that we have struck.
  The amendment would create artificial distinctions between members and constrain the freedom of pension schemes to develop selection rules best suited to their circumstances. It would upset the balance of interests contained in the statutory minimum of at least one third member-nominated trustees.
  I emphasise that we have no objection whatever to pensioner trustees if that is what scheme members want. In the Bill we are giving millions of pensioners the right,
  242
  which they do not have and have never had in the past, to be consulted along with the active membership. It is all very well for Labour Members to shake their heads, but the fact that pensioners will be consulted is set out on the face of the Bill. It is clear that they will be consulted when we have passed the Bill into law.
  Amendment No. 16 seems to be designed to provide a back-door way of putting pressure on sponsoring employers to agree to have at least 50 per cent. member-nominated trustees. If they do not, the amendment would impose on them the cost, which could be substantial, of an independent trustee. There is no reason to believe that a scheme with under 50 per cent. of member-nominated trustees would necessarily benefit from the imposition of an independent trustee. It would be wrong to require the regulatory authority to consider applications made on that basis. Of course, if there are genuine concerns about the running of a scheme, however many member-nominated trustees it may have, the regulatory authority has the necessary powers under clause 7 to appoint an independent trustee.
  It is a pity that amendment No. 12 has not been referred to very much in the course of our discussions as it is one with which I have some sympathy. It was tabled by my hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden) and the hon. Member for Birkenhead. I appreciate that in larger schemes 10 per cent. of members will be a considerable number.
  The practical details of the statutory consultation procedure are to be prescribed in regulations. That is still subject to consultation with those who have experience of the day-to-day operation of schemes. It is therefore not clear at this point that the amendment hits on the right number. The figure of 5, 000 might be too low or, as I suspect, it may be too high. I am therefore unable to accept the amendment. I can assure my hon. Friend the Member for Kemptown and the hon. Member for Birkenhead that I will give the spirit of that amendment very careful consideration with a view to incorporating a provision on the same principle in secondary legislation.
  For the reasons that I have given, I think that it would be wrong to sympathise in the same way with the other amendments. The Bill will represent a major extension of the rights of members of pension funds whether they be active or pensioner members. It is important for us to make that clear and for it to be clearly communicated in the way that my hon. Friend the Member for Sevenoaks has asked for. However, it would be wrong to elevate one group of members above the other groups of members, which is what these amendments would do.
  Mr. Ingram: We have had a useful and interesting debate. It is interesting that the Minister is the only hon. Member who has argued against amendment No. 1. Every other contribution has argued for the principle of pensioner trustees and refuted all the arguments that were advanced by the Minister in his response. He has justified employer-based trustees on a sectional basis but denies that right to other groups that have the right, in the case of large schemes, to seek equal representation.
  The case has been strongly argued. I do not intend to press amendment No. 16 to a Division. Given the weight of the arguments advanced in support of amendment No. 1, however, it is right that we should vote on that amendment in due course.
  Amendment negatived.

Clause 16

  REQUIREMENT FOR MEMBER-NOMINATED TRUSTEES
  Amendment proposed: No. 1, in page 9, line 39, at end insert—
  '6(A) The arrangements must provide that when a scheme has more than 850 members, and pensioner members comprise a majority, one additional trustee shall be nominated, who shall be a pensioner member of that scheme.'.—[Mr. Ingram.]
  Question put, That the amendment be made:—
  The House divided: Ayes 252, Noes 282.

  Division No. 194]

  [10.00 pm

  AYES

  Abbott, Ms Diane

  Davies, Ron (Caerphilly)

  Adams, Mrs Irene

  Davis, Terry (B'ham, H'dge H'l)

  Ainger, Nick

  Denham, John

  Armstrong, Hilary

  Dewar, Donald

  Ashdown, Rt Hon Paddy

  Dixon, Don

  Ashton, Joe

  Dobson, Frank

  Banks, Tony (Newham NW)

  Donohoe, Brian H

  Barnes, Harry

  Dowd, Jim

  Barron, Kevin

  Dunnachie, Jimmy

  Battle, John

  Dunwoody, Mrs Gwyneth

  Bayley, Hugh

  Eagle, Ms Angela

  Beckett, Rt Hon Margaret

  Eastham, Ken

  Beggs, Roy

  Etherington, Bill

  Bell, Stuart

  Evans, John (St Helens N)

  Benn, Rt Hon Tony

  Ewing, Mrs Margaret

  Bennett, Andrew F

  Fatchett, Derek

  Bermingham, Gerald

  Faulds, Andrew

  Berry, Roger

  Field, Frank (Birkenhead)

  Betts, Clive

  Flynn, Paul

  Blunkett, David

  Forsythe, Clifford (S Antrim)

  Boateng, Paul

  Foster, Rt Hon Derek

  Bowden, Sir Andrew

  Foster, Don (Bath)

  Bray, Dr Jeremy

  Foulkes, George

  Brown, Gordon (Dunfermline E)

  Fraser, John

  Brown, N (N'c'tle upon Tyne E)

  Fyfe, Maria

  Bruce, Malcolm (Gordon)

  Galloway, George

  Burden, Richard

  Garrett, John

  Byers, Stephen

  Gerrard, Neil

  Caborn, Richard

  Godman, Dr Norman A

  Callaghan, Jirn

  Godsiff, Roger

  Campbell, Mrs Anne (C'bridge)

  Golding, Mrs Llin

  Campbell, Ronnie (Blyth V)

  Gordon, Mildred

  Campbell-Savours, D N

  Graham, Thomas

  Cann, Jamie

  Grant, Bemie (Tottenham)

  Carlile, Alexander (Montgomery)

  Griffiths, Win (Bridgend)

  Chidgey, David

  Grocott, Bruce

  Chisholm, Malcolm

  Gunnell, John

  Church, Judith

  Hain, Peter

  Clapham, Michael

  Hall, Mike

  Clark, Dr David (South Shields)

  Harman, Ms Harriet

  Clarke, Eric (Midlothian)

  Harvey, Nick

  Clarke, Tom (Monklands W)

  Hattersley, Rt Hon Roy

  Clelland, David

  Henderson, Doug

  Clwyd, Mrs Ann

  Hill, Keith (Streatham)

  Coffey, Ann

  Hinchliffe, David

  Cohen, Harry

  Hodge, Margaret

  Connarty, Michael

  Hoey, Kate

  Corbett, Robin

  Hogg, Norman (Cumbernauld)

  Corbyn, Jeremy

  Home Robertson, John

  Corston, Jean

  Hood, Jimmy

  Cousins, Jim

  Hoon, Geoffrey

  Cunliffe, Lawrence

  Howarth, George (Knowsley North)

  Cunningham, Jim (Covy SE)

  Howells, Dr. Kim (Pontypridd)

  Cunningham, Roseanna

  Hoyle, Doug

  Dalyell, Tarn

  Hughes, Kevin (DoncasterN)

  Darling, Alistair

  Hughes, Robert (Aberdeen N)

  Davidson, Ian

  Hughes, Roy (Newport E)

  Davies, Bryan (Oldham C'tral)

  Hughes, Simon (Southwark)

  Davies, Rt Hon Denzil (Llanelli)

  Hutton, John

  244

  Illsley, Eric

  Pickthall, Colin

  Ingram, Adam

  Pike, Peter L

  Jackson, Glenda (H'stead)

  Pope, Greg

  Jackson, Helen (Shef'ld, H)

  Powell, Ray (Ogmore)

  Jamieson, David

  Prentice, Bridget (Lew'm E)

  Janner, Greville

  Prentice, Gordon (Pendle)

  Johnston, Sir Russell

  Prescott, Rt Hon John

  Jones, Barry (Alyn and D'side)

  Primarolo, Dawn

  Jones, Ieuan Wyn (Ynys Môn)

  Purchase, Ken

  Jones, Jon Owen (Cardiff C)

  Quin, Ms Joyce

  Jones, Lynne (B'ham S O)

  Radice, Giles

  Jones, Martyn (Clwyd, SW)

  Randall, Stuart

  Jones, Nigel (Cheltenham)

  Raynsford, Nick

  Jowell, Tessa

  Reid, Dr John

  Keen, Alan

  Rendel, David

  Kennedy, Jane (L'pool Br'dg'n)

  Robertson, George (Hamilton)

  Khabra, Piara S

  Robinson, Geoffrey (Co'try NW)

  Kilfovle, Peter

  Roche, Mrs Barbara

  Kirkwood, Archy

  Rogers, Allan

  Lestor, Joan (Eccles)

  Rooker, Jeff

  Lewis, Terry

  Rooney, Terry

  Liddell, Mrs Helen

  Ross, Ernie (Dundee W)

  Litherland, Robert

  Ross, William (E Londonderry)

  Livingstone, Ken

  Ruddock, Joan

  Lloyd, Tony (Stretford)

  Salmond, Alex

  Llwyd, Elfyn

  Sedgemore, Brlan

  Lynne, Ms Liz

  Sheerman, Barry

  McAllion, John

  Sheldon, Rt Hon Robert

  McAvoy, Thomas

  Short, Clare

  Macdonald, Calum

  Simpson, Alan

  McFall, John

  Skinner, Dennis

  McKelvey, William

  Smith, Andrew (Oxford E)

  Mackinlay, Andrew

  Smith, Llew (Blaenau Gwent)

  McLeish, Henry

  Smyth, The Reverend Martin

  Maclennan, Robert

  Spearing, Nigel

  McMaster, Gordon

  Spellar, John

  McNamara, Kevin

  Squire, Rachel (Dunfermline W)

  MacShane, Denis

  Steel, Rt Hon Sir David

  McWilliam, John

  Steinberg, Gerry

  Madden, Max

  Stevenson, George

  Mandelson, Peter

  Straw, Jack

  Marek, Dr John

  Sutcliffe, Gerry

  Marshall, David (Shettleston)

  Taylor, Mrs Ann (Dewsbury)

  Marshall, Jim (Leicester, S)

  Taylor, Matthew (Truro)

  Martin, Michael J (Springburn)

  Timms, Stephen

  Martlew, Eric

  Tipping, Paddy

  Maxton, John

  Touhig, Don

  Meacher, Michael

  Turner, Dennis

  Meale, Alan

  Tyler, Paul

  Michie, Bill (Sheffield Heeley)

  Walker, Rt Hon Sir Harold

  Michie, Mrs Ray (Argyll & Bute)

  Wallace, James

  Milburn, Alan

  Walley, Joan

  Miller, Andrew

  Wardell, Gareth (Gower)

  Morgan, Rhodri

  Watson, Mike

  Morris, Rt Hon Alfred (Wy'nshawe)

  Welsh, Andrew

  Morris, Estelle (B'ham Yardley)

  Williams, Rt Hon Alan (Sw'n W)

  Mowlam, Marjorie

  Williams, Alan W (Carmarthen)

  Mudie, George

  Wilson, Brian

  Mullin, Chris

  Winnick, David

  Murphy, Paul

  Wise, Audrey

  Oakes, Rt Hon Gordon

  Worthington, Tony

  O'Brien, Mike (N W'kshire)

  Wray, Jimmy

  O'Brien, William (Normanton)

  Wright, Dr Tony

  Olner, Bill

  Young, David (Bolton SE)

  O'Neill, Martin

  Orme, Rt Hon Stanley

  Tellers for the Ayes:

  Parry, Robert

  Mr. John Cummings and Mr. Robert Ainsworth.

  Pearson, Ian

  NOES

  Ainsworth, Peter (East Surrey)

  Ancram, Michael

  Aitken, Rt Hon Jonathan

  Arbuthnot, James

  Alexander, Richard

  Arnold, Jacques (Gravesham)

  Alison, Rt Hon Michael (Selby)

  Arnold, Sir Thomas (Hazel Grv)

  Allason, Rupert (Torbay)

  Ashby, David

  Amess, David

  Atkins, Rt Hon Robert

  245

  Atkinson, David (Bour'mouth E)

  Forman, Nigel

  Atkinson, Peter (Hexham)

  Forsyth, Rt Hon Michael (Stirling)

  Baker, Nicholas (North Dorset)

  Forth, Eric

  Baldry, Tony

  Fowler, Rt Hon Sir Norman

  Banks, Matthew (Southport)

  Fox, Dr Liam (Woodspring)

  Bates, Michael

  Fox, Sir Marcus (Shipley)

  Batiste, Spencer

  Freeman, Rt Hon Roger

  Bellingham, Henry

  French, Douglas

  Bendall, Vivian

  Gale, Roger

  Beresford, Sir Paul

  Gallie, Phil

  Biffen, Rt Hon John

  Gardiner, Sir George

  Bonsor, Sir Nicholas

  Garel-Jones, Rt Hon Tristan

  Booth, Hartley

  Garnier, Edward

  Bottomley, Peter (Eltham)

  Gillan, Cheryl

  Bottomley, Rt Hon Virginia

  Goodson-Wickes, Dr Charles

  Bowis, John

  Gorman, Mrs Teresa

  Boyson, Rt Hon Sir Rhodes

  Gorst, Sir John

  Brandreth, Gyles

  Grant, Sir A (SW Cambs)

  Brazier, Julian

  Greenway, Harry (Ealing N)

  Bright, Sir Graham

  Greenway, John (Ryedale)

  Brown, M (Brigg & Cl'thorpes)

  Griffiths, Peter (Portsmouth, N)

  Browning, Mrs Angela

  Hague, William

  Bruce, Ian (Dorset)

  Hamilton, Neil (Tatton)

  Budgen, Nicholas

  Hampson, Dr Keith

  Burns, Simon

  Hanley, Rt Hon Jeremy

  Burt, Alistair

  Hannam, Sir John

  Butcher, John

  Hargreaves, Andrew

  Butler, Peter

  Haselhurst, Sir Alan

  Butterfill, John

  Hawkins, Nick

  Carlisle, John (Luton North)

  Hawksley, Warren

  Carlisle, Sir Kenneth (Lincoln)

  Hayes, Jerry

  Carrington, Matthew

  Heald, Oliver

  Carttiss, Michael

  Heathcoat-Amory, David

  Cash, William

  Hendry, Charles

  Channon, Rt Hon Paul

  Hicks, Robert

  Churchill, Mr

  Higgins, Rt Hon Sir Terence

  Clappison, James

  Hogg, Rt Hon Douglas (G'tham)

  Clark, Dr Michael (Rochford)

  Horam, John

  Clarke, Rt Hon Kenneth (Ru'clif)

  Hordern, Rt Hon Sir Peter

  Clifton-Brown, Geoffrey

  Howarth, Alan (Strat'rd-on-A)

  Coe, Sebastian

  Howell, Sir Ralph (N Norfolk)

  Colvin, Michael

  Hughes, Robert G (Harrow W)

  Conway, Derek

  Hunt, Sir John (Ravensbourne)

  Coombs, Anthony (Wyre For'st)

  Hunter, Andrew

  Cope, Rt Hon Sir John

  Hurd, Rt Hon Douglas

  Cormack, Sir Patrick

  Jack, Michael

  Couchman, James

  Jackson, Robert (Wantage)

  Cran, James

  Jenkin, Bernard

  Currie, Mrs Edwina (S D'by'ire)

  Jessel, Toby

  Curry, David (Skipton & Ripon)

  Johnson Smith, Sir Geoffrey

  Davies, Quentin (Stamford)

  Jones, Gwilym (Cardiff N)

  Davis, David (Boothferry)

  Jones, Robert B (W Hertfdshr)

  Day, Stephen

  Kellett-Bowman, Dame Elaine

  Deva, Nirj Joseph

  King, Rt Hon Tom

  Devlin, Tim

  Kirkhope, Timothy

  Dicks, Terry

  Knapman, Roger

  Dorrell, Rt Hon Stephen

  Knight, Mrs Angela (Erewash)

  Douglas-Hamilton, Lord James

  Knight, Greg (Derby N)

  Dover, Den

  Knight, Dame Jill (Bir'm E'stn)

  Duncan, Alan

  Knox, Sir David

  Duncan-Smith, Iain

  Kynoch, George (Kincardine)

  Dunn, Bob

  Lait, Mrs Jacqui

  Durant, Sir Anthony

  Lamont, Rt Hon Norman

  Dykes, Hugh

  Lang, Rt Hon Ian

  Eggar, Rt Hon Tim

  Lawrence, Sir Ivan

  Elletson, Harold

  Legg, Barry

  Evans, David (Welwyn Hatfield)

  Leigh, Edward

  Evans, Jonathan (Brecon)

  Lennox-Boyd, Sir Mark

  Evans, Nigel (Ribble Valley)

  Lidington, David

  Evans, Roger (Monmouth)

  Lightbown, David

  Evennett, David

  Lilley, Rt Hon Peter

  Faber, David

  Lloyd, Rt Hon Sir Peter (Fareham)

  Fabricant, Michael

  Lord, Michael

  Fenner, Dame Peggy

  Luff, Peter

  Held, Barry (Isle of Wight)

  Lyell, Rt Hon Sir Nicholas

  Fishburn, Dudley

  MacGregor, Rt Hon John

  246

  MacKay, Andrew

  Shepherd, Colin (Hereford)

  Maclean, Rt Hon David

  Shepherd, Richard

  McLoughlin, Patrick

  Shersby, Sir Michael

  McNair-Wilson, Sir Patrick

  Sims, Roger

  Madel, Sir David

  Smith, Tim (Beaconsfield)

  Maitland, Lady Olga

  Soames, Nicholas

  Malone, Gerald

  Spencer, Sir Derek

  Mans, Keith

  Spicer, Sir James (W Dorset)

  Marland, Paul

  Spicer, Michael (S Worcs)

  Marlow, Tony

  Spink, Dr Robert

  Marshall, John (Hendon S)

  Spring, Richard

  Martin, David (Portsmouth S)

  Sproat, Iain

  Mates, Michael

  Squire, Robin (Hornchurch)

  Mayhew, Rt Hon Sir Patrick

  Stephen, Michael

  Merchant, Piers

  Stewart, Alan

  Mills, Iain

  Streeter, Gary

  Mitchell, Andrew (Gedling)

  Sumberg, David

  Mitchell, Sir David (NW Hants)

  Sweeney, Walter

  Moate, Sir Roger

  Sykes, John

  Monro, Sir Hector

  Tapsell, Sir Peter

  Montgomery, Sir Fergus

  Taylor, Ian (Esher)

  Moss, Malcolm

  Taylor, John M (Solihull)

  Nelson, Anthony

  Taylor, Sir Teddy (Southend, E)

  Neubert, Sir Michael

  Temple-Morris, Peter

  Newton, Rt Hon Tony

  Thomason, Roy

  Nicholson, David (Taunton)

  Thompson, Sir Donald (Ce'r V)

  Nicholson, Emma (Devon West)

  Thompson, Patrick (Norwich N)

  Norris, Steve

  Thornton, Sir Malcolm

  Onslow, Rt Hon Sir Cranley

  Thurnham, Peter

  Oppenheim, Phillip

  Townend, John (Bridlington)

  Ottaway, Richard

  Townsend, Cyril D (Bexl'yh'th)

  Page, Richard

  Tracey, Richard

  Paice, James

  Tredinnick, David

  Patnick, Sir Irvine

  Trend, Michael

  Patten, Rt Hon John

  Trotter, Neville

  Pattie, Rt Hon Sir Geoffrey

  Twinn, Dr Ian

  Pawsey, James

  Vaughan, Sir Gerard

  Peacock, Mrs Elizabeth

  Viggers, Peter

  Pickles, Eric

  Waldegrave, Rt Hon William

  Porter, Barry (Wirral S)

  Walker, Bill (N Tayside)

  Porter, David (Waveney)

  Waller, Gary

  Portilto, Rt Hon Michael

  Wardle, Charles (Bexhill)

  Powell, William (Corby)

  Waterson, Nigel

  Rathbone, Tim

  Watts, John

  Redwood, Rt Hon John

  Wells, Bowen

  Renton, Rt Hon Tim

  Wheeler, Rt Hon Sir John

  Richards, Rod

  Whitney, Ray

  Riddick, Graham

  Whittingdale, John

  Rifkind, Rt Hon Malcolm

  Widdecombe, Ann

  Robathan, Andrew

  Wiggin, Sir Jerry

  Roberts, Rt Hon Sir Wyn

  Wilkinson, John

  Robertson, Raymond (Ab'd'n S)

  Willetts, David

  Robinson, Mark (Somerton)

  Wilshire, David

  Roe, Mrs Marion (Broxbourne)

  Winterton, Mrs Ann (Congleton)

  Rowe, Andrew (Mid Kent)

  Winterton, Nicholas (Macc'f'ld)

  Rumbold, Fit Hon Dame Angela

  Yeo, Tim

  Sackville, Tom

  Young, Rt Hon Sir George

  Sainsbury, Rt Hon Sir Timothy

  Shaw, David (Dover)

  Tellers for the Noes:

  Shaw, Sir Giles (Pudsey)

  Mr. Sydney Chapman and Mr. Timothy Wood.

  Shephard, Rt Hon Gillian

  Question accordingly negatived.
  It being after The o' clock, further cosideration of the bill stood adjoured.
  Motion made, and Question put forthwith, pursuant to Standing Order No.14 (Exempted business).
  That, at this day's sitting, the Pensions Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Kirkhope.]
  Question agreed to.
  Mr. Brian Wilson: On a point of order, Madam Deputy Speaker. I am sure that you are aware, as is the House, of the rather sorry background to the case of BMARC and arms to Iran. In particular, I refer to the fact that, in both written and oral parliamentary statements during that time, Ministers, as they have acknowledged, misled the House—inadvertently, no doubt—because of the non-availability of papers that were held by Government Departments.
  We are also aware that those papers have now surfaced, and there is no longer any doubt about their importance. We understand that some examination, several years belatedly, is being made of them. I am sure that you would agree, Madam Deputy Speaker, that, if information were to come out of those papers that had further implications for oral and written statements made to the House by Ministers, the House must be the first to know the contents of those papers.
  In particular, if any information which comes out of the BMARC papers has any implications for the position of the Chief Secretary to the Treasury or any other Minister, the House must be the first to know about it. I ask you, Madam Deputy Speaker, to safeguard the House's interests in that respect.
  Madam Deputy Speaker (Dame Janet Fookes): The hon. Gentleman and the House will understand that that is not a matter over which the Chair has any jurisdiction. The hon. Gentleman must find other ways of pursuing the issue.

New clause 21

  EXTENSION OF PENSIONS APPEAL TRIBUNALS ACT 1943
  `(1) The Pensions Appeal Tribunals Act 1943 is amended as follows.
  (2) In section 1 (appeals against rejection of war pension claims made in respect of members of armed forces)

  (a) in subsection (1), after "administered by the Minister" there is inserted "or under a scheme made under section 1 of the Polish Resettlement Act 1947", and

  (b) in subsections (3) and (3A), for "or Order of His Majesty" there is substituted ", Order of Her Majesty or scheme".

  (3) In section 7 (application of Act to past decisions and assessments)£

  (a) in subsection (2), at the beginning there is inserted "Subject to subsection (2A) of this section, ", and

  (b) after that subsection, there is inserted£

  "(2A) Subsection (2) of this section shall not apply in relation to any decision given by the Minister before the passing of this Act which corresponds, apart from any difference of the kind referred to in that subsection, with such a decision as is referred to in section 1 of this Act in respect of claims made under the scheme referred to in that section."
  (4) In section 10 (power to modify sections 1 to 4 by Order in Council), in subsections (1) and (2), for "or Order of His Majesty" there is substituted ", Order of Her Majesty or scheme".
  (5) In section 12 (interpretation), in the definition of "relevant service"—

  (a) for "or Order of His Majesty" there is substituted ", Order of Her Majesty or scheme", and

  (b) for "or Order" there is substituted ", Order or scheme".

  (6) In the Schedule (constitution, jurisdiction and procedure of Pensions Appeal Tribunals), in paragraph 3(2), after paragraph (b) there is inserted—
  "(ba) if the claim was made under the scheme referred to in section 1 of this Act in respect of a person who is treated under the scheme as an officer, shall be a retired or demobilised officer of Her Majesty's naval, military or air forces;
  248
  (bb) if the claim was made under the aforesaid scheme in respect of a person who is treated under the scheme as a soldier, shall be a discharged or demobilised member of any of the said forces who was not at the time of his discharge or demobilisation an officer;…[Sir Jim Spicer.]
  Brought up, and read the First time.
  10.15 pm
  Sir Jim Spicer: I beg to move, That the clause be read a Second time.
  I count it as a privilege to move this new clause. I remember so well going across to Belgium in November 1944 with members of the 1st Polish armoured division just after four members of the provisional Polish Government, who were based in London, had flown to Lublin to have discussions with the new Government set up by the Soviet Union. Those four members disappeared and were never seen again. Those people, who served so gallantly in the Polish armed forces alongside us in the battle of Britain, in Italy and north-west Europe, deserve our gratitude for all they did to support us.
  This is a simple matter, which the House should pass on sidethe nod. The new clause introduces an extension of the war pension appeal provisions, and gives Polish service men who served under British command in world war two a statutory right of appeal to a war pensions appeal tribunal against a decision on a claim to a war pension or a war widow's pension. I need say no more. This is a simple issue, and something should have been done about it years ago.
  I am grateful that, in the year of the 50th anniversary of VE day, we are able to say to those who fought alongside us in the war that this is the very least we can do to recognise all they did for us so many years ago.
  Mr. Hague: I congratulate my hon. Friend the Member for Dorset, West (Sir. J. Spicer) on proposing the new clause in such an eloquent manner. Polish service men dissatisfied with a decision on a war pension claim are able to seek a review of that decision from the War Pensions Committee. But I understand their view that, as a matter of principle, they should have a statutory right of appeal on the same basis as British service men. I entirely agree that it is most fitting that this change should be introduced during this year of world war two anniversaries. The Government are happy to accept the new clause.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New clause 11

  ONE THIRD RATE SERVICE WIDOWS' PENSION
  `Widows of members of Her Majesty's Armed Forces who retired or who died in service before 31st March 1973 shall, in all cases where a pension is payable under the terms of the Armed Forces Pension Scheme, be entitled to receive a pension based on one half of their late husband's retired pay or pension.'.—[Mrs. Ewing.]
  Brought up, and read the First time.
  Mrs. Margaret Ewing: I beg to move, That the clause be read a Second time.
  Madam Deputy Speaker: With this, it will be convenient to discuss also the following: New clause 12—Post 1973 war widows—

  249
  `Notwithstanding any other enactment, a widow awarded a Forces Family Pension (Attributable) shall receive that pension for life.'.
  New clause 13—Post 1973 war widows (No. 2)—
  `Notwithstanding any other enactment, a widow in receipt of a Forces Family Pension (Attributable) shall receive that pension for life.'.
  New clause 14—Post-retirement marriage: service widow's pension—
  `Without prejudice to benefits already available under the terms of the Armed Forces Pension Scheme for widows of members of Her Majesty's Armed Forces with service beyond 6th April 1978, no widow of a member of Her Majesty's Armed Forces shall be disqualified from receiving a full pension under that scheme in relation to her late husbands's membership of Her Majesty's Armed Forces by virtue of the fact that the marriage occurred after he had retired from Her Majesty's Armed Forces, provided that that marriage was before his 65th birthday and had lasted for at least three years.'.
  Government amendment No. 84.
  Mrs. Ewing: I feel greatly honoured to move the new clause, which is supported by hon. Members of all political persuasions. This year, we have seen the celebrations of the 50th anniversary of the setting up of the UN. Those of us who are sharing a similar anniversary are only too well aware that our generation has grown up in a time of peace, and we owe a great debt to those who went before us. It is important that we pay tribute to the men and women who gave so much in previous wars to enable my generation and subsequent generations to have the feeling of peace within Europe.
  I wish to pay tribute to the Officers Pensions Society, which has done so much to ensure that hon. Members are aware of the difficulties faced by war widows—or victory widows as we prefer to call them. It has done so much to ensure that people are made well aware of the implications of new clauses 11, 12, 13 and 14. New clause 11 focuses on those widows, all of whom are now over 75 years of age, whose husbands retired or died in service before 31 March 1973 and who, as a result, receive only one third of their late husbands' service retired pay or pension.
  Hon. Members will have seen, either in the press or by reading their own mail, the case of Mrs. Wormack. They will have been as horrified as I was to find that the occupational pension earned for her by her husband after 23 years of service, including the whole of the second world war—service which saw him promoted to the rank of captain, involved him in risking his life in the service of the Crown and left him suffering until the day he died—is today worth, after tax, £140 a month. That lady is typical of hundreds of war widows who, in the evening of their own lives, look to us in this House today to take this opportunity to improve their position before it is too late.
  Several of those widows have said to me, and, I suspect, to other hon. Members, "I suppose that they are just waiting for us to die." Those widows are dying at the rate of 1, 300 a year. If we agree to help them, as the nation clearly wants us to, it will hardly be an open-ended commitment. I feel that a principle of social justice is at stake—the debt we owe those widows and their families.
  The Government contend that there are three main obstacles to improving the pensions. First, they say that it will cost £27 million each year. There are several points that we need to make. First, that is almost certainly an exaggerated figure. The Government said that 16, 500 widows would benefit from the amendment already
  250
  secured by Lord Freyberg in the other place. Some four months on, only 6, 500 have applied, thus reducing the estimate by almost two thirds.
  Secondly, many of the ladies are on some form of income support, which is vastly more expensive to apply than giving them the pensions to which their husbands contributed. The Government also say that it would not be right to pay older widows half-rate pensions, because their husbands did not buy into half-rate pensions as the younger service men did.
  The truth is that, despite the fact that the Government received constant warnings in 1973, when the half rate was introduced, that there would be problems of hardship in future, the Government refused to give older service men the opportunity to buy in—most would have taken that opportunity. If there is an inequity, it is that the Government denied older service men the opportunity to provide for their widows. That was the inequity in which the Government persisted.
  The subject of retrospection is often raised. That, in itself, is not worth considering; we all know of situations in which retrospection is ignored when it suits the Government. A detailed examination of 14 other comparable allied schemes reveals that the United Kingdom is the only state that persists in paying any service widows less than 50 per cent. Some states pay as much as 71 per cent. Meanwhile, we in the United Kingdom continue to pay our older widows 33 per cent.
  Thirdly, the most plausible obstacle raised by the Government is that, if the elderly service widows were to be given 50 per cent. of their late husbands' service retired pay or pension, it would have to be paid to all the public services. How many obligations have the Government ducked on the basis of precedent? We must answer the question today, and decide whether or not the armed forces are a special case. I speak not only as a Member of Parliament with clear defence interests—with two key RAF bases in my area—but as one who has grown up in a generation of peace. I believe that we have a responsibility to all such widows.
  Most people who write to me and to other hon. Members think that they are a special case. We tended to think so until the Whitehall ethic tried to subdue us all. I draw particular attention to the comments of the Prime Minister when he first entered Parliament—perhaps it is not a key thought in his mind this evening. In his first year as a Back Bencher, he made a memorable speech in a debate about service pensions, in which he said:
  "service men, by virtue of their profession, are in a special position and should be treated accordingly…I ask him to promise that the door is not closed on justice for these pensioners and their widows".—[Official Report, 2 May 1980; Vol. 983, c. 1846.]
  That plea is echoed by all those hon. Members who have remained in the Chamber this evening to ensure that justice is done. That view is echoed also by the 251 Members of Parliament who put their signatures to early-day motion 186, tabled by the right hon. Member for Manchester, Wythenshawe (Mr. Morris), and by the 59 Front Benchers who have written to the Victory Widows Campaign assuring it of their support.
  In the first of the new clauses, we must decide to do what our constituents have asked us to do and what we feel is the right thing to do: bring the pensions of elderly service widows—our victory widows—up to the half-rate pensions which their younger colleagues receive, and

  251
  closer to the pensions paid to service widows by all the European and western nations that fought with and against us in the war.
  On the 50th anniversary of victory in Europe and victory in Japan, we would do well to remember that, from 1939 to 1945, those who were called upon to guarantee our continued freedom from fascism risked everything in so doing. We are talking about their widows this evening. I trust that the new clauses will be accepted as part of the Bill.
  Sir Jim Spicer: I shall address my remarks to new clause 12, the second clause with which we are dealing tonight, which refers to war widows who have been awarded attributable forces family pensions. It states that they should keep that pension for life, regardless of any subsequent change in their marital status.
  The hon. Member for Moray (Mrs. Ewing) spoke about elderly war widows; I am talking about the younger generation of war widows, who I believe have been treated quite disgracefully over many years. I shall expand on that point. War widows are not treated as well as many other widows. Should they remarry, war widows lose all pension rights, whereas most widows keep their pensions for life. Now is not the occasion to talk about private pension schemes, but 84 per cent. of widows involved in private pension schemes keep their pensions for life, and 21 per cent. of all public pension schemes in the United Kingdom are retained for life.
  The lump sums on death awarded to widows of firemen or policemen are significantly more generous than those given to war widows. The widow of a policeman receives five times the annual salary. In the case of firemen and Royal Ulster Constabulary officers—whose situations are closest to those of soldiers and whose lives have been at risk over the years—their widows receive seven times the annual salary, whereas armed forces widows receive two times the basic salary.
  Whatever else the Government can or cannot do, I would like my hon. Friend the Minister for Social Security and Disabled People to give me an absolute commitment that the Government will re-examine the figure for war widows, and increase it sevenfold to match the sum received by widows of RUC officers and firemen. How can we possibly equate the situation of service men with that of firemen? How many times are firemen tragically killed on duty, compared with the number of service men killed on duty? I hope that my hon. Friend will confirm that the Government intend to examine that situation.
  Rev. Martin Smyth: I appreciate the hon. Gentleman giving way on that point, and particularly the contrast that he makes with RUC members. One sympathises with and understands his point. Twice a squaddie's salary is a pittance compared with five times the salary of an RUC constable. That is not in any sense treating in a generous spirit the widows of those who have served in the nation's defence.
  10.30 pm
  Sir Jim Spicer: I am grateful to the hon. Gentleman, who reinforces my point. On the streets of Belfast or anywhere else in Northern Ireland, members of the RUC
  252
  and of the armed forces have served side by side. They have shared the same risks and stood the same chance of being killed, so it seems intolerable that we should allow them to be treated differently.
  The independent review team recommended that all service widows should receive a pension for life, regardless of any change in marital status. I should like an undertaking from the Government that that recommendation will be considered positively, and that action will be taken in the short term, not the long term.
  The argument against is for doing nothing at all. Civil servants—with my apology to all civil servants—come out of the woodwork and say, "But Minister, if you do this, you might open the door to other people." There are no other people in the same category. Members of our armed forces are a special category, and deserve special treatment.
  If I were a Minister and anyone said to me, "How can you say that these people are a special case? If you give a pension to them, you must give a pension to everyone else, " I would answer, "Go away. You don't understand what we have done and why we have done it." I beg Ministers not to be deluded by that totally wrong view, which would not be supported by the vast majority of the public. There would be no knock-on effect unless one allowed it.
  The widows of men who die in the service of their country are a special case. In my view, public opinion demands that they be treated as such. There is no question of an overspill or a concession to other groups, so please let us not have that offered as an excuse.
  There is no better year than this to deal with that problem. The husbands of a number of war widows—some of them are in the Public Gallery tonight—were killed on active service in the Gulf war. Those widows know that, if they remarry, they will put at risk their existing pension. It would be iniquitous to say to them, "You should not think about remarrying, or you should think three times about doing so, because if you remarry we shall take this pension away from you."
  We are looking at a pittance in cash terms. I ask my hon. Friend the Minister to take a sensible view, and I beg the Government—if they cannot accept new clause 11—seriously to consider a times seven award and the other aspect that I emphasised.
  Mr. Alfred Morris: If I were asked to suggest a poetic text to preface the debate on this group of amendments—all of which have my support—I would be tempted to choose Rudyard Kipling's poem "Tommy":
  "it's 'Thank you, Mister Atkins, ' when the band begins to play"
  and
  "it's 'Saviour of 'is country' when the guns begin to shoot."
  But when the war is over, then
  "it's Tommy this, an' Tommy that, an' Tommy go away."
  The hurt that poem expresses about double standards well reflects the feelings of many war and service widows as they strive—happily now with the support of hon. Members in all parts of the House—to remove the heartless and mindless restrictions that demean both them and the memory of husbands who fought that we might live in freedom. All of them are the widows of husbands who fought in war, to whom we owe an undoubted debt of honour. But, to the shame of Whitehall and

  253
  Westminster alike, most of them now have to apply for some degree of income support even barely to make ends meet.
  New clause 14 would affect, by definition, widows most of whom are now over 75 years of age. They could thus hardly be more deserving. There are no widows as disadvantaged as they are in any of the European or allied nations' military pension schemes that were examined by the Officers Pensions Society. Their husbands served through most of the second world war and retired before April 1973. They contributed to an eventual widow's pension both by their service to the Crown and by effective financial contributions throughout their service, a point to which I shall return as I proceed. They made only one mistake: they married after retirement, and, for that reason, all their contributions were cancelled.
  One case which comes to mind is that of Lady Earle. Her first and second husbands gave between them 80 years of service in the Royal Air Force, yet she receives no pension from either of them. Officials call such widows post-retirement marriage widows, or PRM. In having no provision of a pension made for them, they are almost unique in the world. Our own pensions scheme provides pensions for all our widows whenever they marry. So, too, do the schemes of every other nation's armed forces. Even the UK scheme does so for the younger service widow, as do almost all commercial schemes and most public schemes as well. So why are the PRM widows so isolated?
  The main argument for so astonishingly neglecting those widows is precedent—that, if they were granted pensions, civil servants would have to be given the same. The Victory Widows Campaign does not seek to evade that argument by claiming, as it might, that the armed forces are a special case, although we all know that they are. Indeed, as the hon. Member for Moray (Mrs. Ewing) said, the Prime Minister explicitly and strongly made that point in a speech in this place.
  No, the campaigners have faced the issue of precedent head on, by devising a scheme which provides a PRM pension only if the widows' husbands had been civil servants. They have imposed upon themselves the limitation that the marriage must have been entered into before the ex-service man reached the age of 65, the age up to which, in the 1950s, 1960s and 1970s, almost all civil servants worked. By contrast, the average age of retirement for the armed forces was nearer 45, and post-retirement marriage was a most unwelcome problem. One important factor in choosing the age of 65 is that service men had, and in fact still have, a liability to recall up to that age.
  Nor is it essentially a matter of cost. The Ministry of Defence insists that it cannot provide an accurate estimate of the cost, and this makes it uncertain ground upon which to argue. Experience shows, moreover, that most Government estimates in such matters are over-estimates. The Department of Social Security predicted that 16, 500 widows would apply for the enhancement secured by Lord Freyberg, to whom I again pay warm tribute today for his extremely important help in another place, when he amended the Bill.
  Hon. Members will be familiar with the case of Mrs. Charney, featured in the Victory Widows Campaign's advertisement. Her husband was a Spitfire pilot. His early days included defending Malta from air attack. He and his few brave colleagues displayed unparalleled courage, and it was no surprise when he was awarded his first
  254
  Distinguished Flying Cross. He flew with total disregard for his own safety in the battle of the Falaise Gap, for which he was awarded a second DFC. He married Mrs. Charney shortly after retiring from the RAF, on completion of 30 years as a fighter pilot. Simply because he married after retirement, his contributions were pocketed by the Treasury, and his widow gets not a penny. She has had a struggle to survive; she has sold his medals and his flying log book in order to raise cash.
  In this 50th anniversary year of victory in the second world war, is that not a total disgrace? Does anyone in any part of the House dare to defend the grossly shabby treatment meted out to this unmerited victim of the present system?
  I ask the House to see this as a matter of honour, a debt that must now be settled. I ask that elderly service widows like Mrs. Charney, on whose behalf I speak, be granted a pension comparable to that which they would have received had they married their husbands before they retired from HM armed forces. I so move, and, in moving, I must again make it clear that, if the battle still has to go on after tonight to achieve fairness for these widows, then go on it will.
  Sir Peter Lloyd: The hour is late and I want to touch on one brief, specific point on new clause 14. It is very similar to the point ably made by the right hon. Member for Manchester, Wythenshawe (Mr. Morris). It is an important point because it would right a particular unfairness well illustrated by a retired service couple living in my constituency.
  The husband paid his contributions throughout his service. He retired before 1978. His wife, who of course qualified for a widow's pension, alas, died. The husband then remarried the widow of another former service man. On remarriage, as the rules stand, his wife naturally lost her service widow's pension. If her present husband dies before her, as the rules stand she will not regain the pension earned by her first husband's contributions which she forfeited on remarriage. She will also be denied any pension earned on her second husband's contributions. That is clearly not right.
  I hope that my hon. Friend the Minister will be able to assure me in his response that he will find a way of automatically restoring service widows' pensions to those who were once entitled to them but lost them on remarriage if they are widowed a second time, and especially if they are left without any equivalent occupational pension on their second husband's contributions.
  If he can so assure me, I shall admire my hon. Friend's humanity, I shall rely on his ingenuity, and I shall refrain from going into the Lobby in support of the new clause.
  10.45 pm
  Mr. Simon Hughes: It is clear from the speeches already made, and from the new clauses of the hon. Members for Moray (Mrs. Ewing) and for Dorset, West (Sir J. Spicer), and of the right hon. Member for Manchester, Wythenshawe (Mr. Morris), that what we are trying to do has huge support in the House. My right hon. and hon. Friends and I add our voices to those of not just the six political parties represented in the new clauses, but all our colleagues who have expressly

  255
  requested the changes and the huge number of people who have written—I can certainly vouch for it from my postbag—in support of them.
  I do not want to repeat what has been said by colleagues, but I shall add a word or two about new clauses 12 and 13—they are alternatives, one better than the other—and then say something about new clause 14. As has been alluded to, if not expressly set out, the present position is that war widows of service men who died on active service after 1973 are entitled to both the Ministry of Defence and the war widow's pension. I understand that there are 2, 200 such widows. Both those entitlements cease on remarriage.
  Many people will testify to the fact that the consequence has been that many women do not remarry, in spite of their personal circumstances and wishes, because they know how that would prejudice their position. They are deprived of the opportunity of remarriage because it is not financially viable, and therefore have two alternatives—to carry on a relationship illicitly and risk running the gauntlet of the investigation services of the Department of Social Security and so on, or to be deprived of any stable second relationship. The War Widows Association of Great Britain claims that only one in every 100 war widows has remarried—far fewer than in any comparable group. Clearly, that statistic is a result of the present financial position.
  The cost to the Treasury would reportedly be extremely small. The MOD in-house pension review team report concluded that retaining such pensions for life would cost less than £1 million a year. Moreover, the War Widows Association of Great Britain and others argue that actually the net cost could be negative, because of the benefits being claimed otherwise. We would give out with one hand but recoup with another. A young widow who does not remarry costs the DSS a considerable sum—perhaps as much as £1 million over her whole lifetime.
  I ask the Minister to confirm that the change would not affect a huge number of people—indeed, that the number is small—and that it would not necessarily mean a net cost to the Treasury. But as the right hon. Member for Wythenshawe made absolutely clear, even if it did mean a net cost, it is something that in all justice we should do.
  The right hon. Member for Bridgwater (Mr. King) is not in his place now, but in 1989, when he was Secretary of State for Defence, he said in the House that the husbands had fully paid for the pensions for life. There is no argument about that; the contributions have been fully made.
  By way of comparison, 84 per cent. of all public and private pension schemes in this country now pay a pension which, once obtained on widowhood, is retained for the rest of one's life, irrespective of changes in one's status. We have heard that that is true of most other military pension schemes, too. We are the only country with a hard, immovable rule, which is not only unjust but has been unjust for far too long. It seems incompatible with everything that we said on the 50th anniversary of VE day, to continue that penny-pinching anomaly.
  Any widow of someone killed in an industrial or mining accident receives compensation that is not affected by subsequent remarriage. Policemen's and firemen's
  256
  attributable pensions, largely in the form of gratuities, and the occupational element, are in the same category, in the sense that they are restored on subsequent bereavement.
  I hope that the Minister will agree to the new clauses, or at least, as the hon. Member for Dorset, West requested, that he will say that before the end of this year the Government will agree to the changes for which we ask. Clearly, new clause 12 is more generous than new clause 13, because it would apply to all widows.
  New clause 14 deals with a small anomaly that it is mean for the Government not to correct in the way that it suggests. Post-retirement marriage pensions have been in existence for 17 years, but only service after that time counts towards a pension. Therefore, two categories suffer. Older widows receive nothing, as do widows of husbands who retire between 1978 and 2000, or, as I understand it, 2012 for officers' widows. Those categories receive only a variable fraction of the full war widow's pension.
  The point of principle has been made that the new clause would give fair treatment to service widows who married their husbands after they had left the service. There is a qualification in the new clause that the marriage must be before a 65th birthday and has to have lasted for three years. Those are perfectly reasonable preconditions for entitlement. An amendment was moved and the case well argued in another place, but unfortunately it is not something that the Government have conceded. The real unfairness of not doing so is that the majority of comparable schemes in other countries would give the entitlement.
  We as Members of Parliament—Ministers and Members alike—have voted that we have this entitlement, so marriage to a Member of Parliament subsequent to service, provided that it meets the preconditions, entitles somebody to the Member's pension. It is not acceptable that we vote for the entitlement for ourselves, while those who have served, and their dependants after their death, are not entitled to it. It is unacceptable that widows who are in the category before 1978 receive no pension.
  I hope that the Minister understands the strength of feeling. The issue will not go away, and it does not deserve to do so. Given that the Government may be feeling a little more relaxed and enthusiastic this evening, I hope that the Minister will start doing things that are not only right but vote-winning. I offer him this, as do my colleagues, as the first way in which to restore the Government's credibility. A victory in Committee Room 12 is one thing, but a victory on the Floor of the House is much more valuable and might do much more for the Prime Minister's image than the votes of his colleagues earlier this evening. It is a chance for the Minister to make another mark in his career. Who knows? He might be rewarded as early as tomorrow morning.
  Sir Andrew Bowden: I support the new clauses. I shall concentrate my comments on pre-1973 war widows. After 50 years, it is too easy to forget that when they were young women, they watched their husbands go to war and never return. It is a matter of deep shame that the pensions that they receive are the worst in western Europe. Immediate steps should be taken to increase their pension from 33; per cent. to 50 per cent. of their husband's pension. Some 80 per cent. are over 70; the majority are between 75 and 85. Nearly all of them have financial problems, and it is appalling that so many have to apply for and receive income support. But for the sacrifices of their husbands, this debate would not be taking place.

  257
  The words that so many of us will have heard at meetings of Royal British Legion branches are appropriate in this debate:
  "When you go home, tell them of us and say For your tomorrow we gave our to-day."
  The present position is appalling. Those war widows deserve and must have a better deal now.
  Mr. Hague: I begin by assuring the hon. Member for Southwark and Bermondsey (Mr. Hughes) that we on the Conservative Benches are as relaxed and enthusiastic as ever this evening, and in the spirit of agreement across the House that we had in dealing with new clause 21, which was proposed by my hon. Friend the Member for Dorset, West (Sir J. Spicer), I deal first with Government amendment No. 84, to which no one has yet referred in the debate, but which is grouped with the new clauses.
  Government amendment No. 84 extends clause 165 to Northern Ireland. It deals with the effect of remarriage on war pensions for widows. As the armed forces of the Crown, including war pensions, are an accepted matter under the Northern Ireland Constitution Act 1973, it is appropriate for clause 165 to extend to Northern Ireland.
  The background to the other new clauses is the substantial change in war widows' pensions that is already part of the Bill. The DSS war widow's pension is awarded to the widow of a man whose death is due to any service in the armed forces; to most that is worth about £143 a week, and is tax free. As a pension for the maintenance of the widow, it is withdrawn on remarriage and currently there is no provision for it to be restored later. As a result of debates here and in the other place, however, it became clear that the current position was unacceptable, and we therefore decided to restore the pension in certain circumstances.
  That amendment is now part of the Bill. The Government amendment that I moved in Committee, which tidied up that provision, goes further than the Lords amendment: it includes, for instance, the widows of certain merchant seamen, civilians and Poles who served under British command during the last world war, and ensures that the war widow's pension is restored in the event of a second bereavement or failure of a second marriage—and, moreover, that it is restored in the event of any subsequent widowhood or divorce. That change is estimated to benefit about 16, 500 former war widows at an estimated cost of some £45 million a year.
  The hon. Member for Moray (Mrs. Ewing) gave certain figures, but according to the latest estimate, some 8, 000 former war widows have now lodged claims, and the number is rising steadily week by week. The estimate of 16, 500 still stands, so the estimate of £45 million of additional expenditure per year also still stands.
  The new clauses seek further changes, not this time to the DSS war widow's pension but to the separate Ministry of Defence armed forces pension scheme—a public service pension scheme. They seek improved pensions or pension rights for the widows of ex-service men. We have serious problems with the new clauses on grounds of principle.
  The introduction of half-rate widows' pensions was one of a number of major improvements made to public service pension schemes in the 1970s. Each of those improvements was introduced from a fixed and current date, and none could have been afforded if they had been extended retrospectively to recognise all previous service.
  258
  New clause 11 seeks to make an exception for one group of public service pensioners—the widows of ex-service personnel—by backdating an improvement to the armed forces pension scheme that was made in 1973.
  We should be clear that the majority of widows who would benefit under new clause 11 are not "war widows" in the sense used in our debate about the DSS war widows scheme, or in the sense covered by new clause 12. In over 80 per cent. of cases, widows receiving pensions from the armed forces occupational scheme will have been married to service men who have died after retirement from causes unrelated to service. Those who are war widows in the proper sense will be receiving a tax-free war widow's pension from the DSS in addition to their pension from the armed forces pension scheme.
  We have estimated that there are some 53, 000 pre-1973 service widows whose pensions would have to be reviewed if the new clause were implemented. It is not possible, in advance of the review, to arrive at a clear estimate of the cost of full retrospection, but it is estimated that the cost to the armed forces pension scheme would be some £27 million per year. The final cost would be substantially higher if the same principle were extended to other public service pension groups to which the same rules apply.
  The widows of members of the forces who retired or died in service before 31 March 1973 and who are in receipt of an armed forces pension are therefore not a uniquely disadvantaged group. We recognise the debt that we owe to those who served their country in those difficult times, but we could never have afforded to introduce the improvements that we have made to public service schemes since then if we had extended them retrospectively to recognise all past service.
  It is for that reason that we must maintain the principle that improvements in public service occupational pension schemes are made on the basis that they benefit only those giving service on or after the qualifying date. I say to my hon. Friends that, if we are remotely serious about controlling public expenditure in coming years, we cannot enter into the sort of open-ended commitment that we are asked to enter into with proposals such as new clause 11.
  Mr. Simon Hughes: I want to pick up one point that reflects a point made by the hon. Member for Dorset, West (Sir J. Spicer). The group that the Minister described is not uniquely disadvantaged, but is a unique group for the reasons given: it is part of the family that gave military service to the country. Does the Minister accept that the issue should be considered, not on the basis that everyone who is in the same boat should have a change, but on the basis that that group should be considered on its own?
  11 pm
  Mr. Hague: The hon. Gentleman might find that a difficult argument to sustain with members of other public service occupational pension schemes. As I said, certain arguments have been advanced about war widows and attributable pensions. We are talking about a public service occupational pension scheme, the majority of the beneficiaries of which are not war widows in the sense that death was a result of service in the armed forces. Of course one can argue that military service is different from other things, but one can also argue that the fire service,

  259
  the police service and parts of the civil service are different from other things, so I am not sure that I can accept the hon. Gentleman's point.
  Sir Jim Spicer: My hon. Friend has just made the point that one could argue that military service is different from other services such as the fire service. Does not that emphasise my point that the very least that one could do is to reconsider the amount that is paid in a gratuity when a debt occurs and to upgrade it substantially?
  Mr. Hague: I shall come to my hon. Friend's point in due course. He raised it earlier and I shall of course refer to it in my remarks.
  Mr. Alfred Morris: In the brief from which the Minister is reading, there is no mention at all of the point I made—that people who married after their service terminated had contributed year by year to an entitlement to widow's pension if they died and were survived by their wives. That is a very important point and supports the views of the Royal British Legion, the Officers Pensions Society and the War Widows Association in support of the amendment. In terms simply of equity, something that was paid for, in their view, ought to be delivered; but there is no mention of that in the reply that the Minister has been reading, which was prepared for him before the debate.
  Mr. Hague: I am just coming to the right hon. Gentleman's new clause. New clause 14 seeks to make an exception for one group of public service pensioners, the widows of ex-service personnel, by backdating an improvement to the armed forces pension scheme that was introduced with effect from 6 April 1978. Pensions for the widows of those who married after their husbands had left the scheme occupation was one of a number of major improvements to public service pension schemes in the 1970s, but, again, each of those improvements was introduced from a fixed and current date. None of them would have been afforded if they had been extended, retrospectively, to recognise all previous service. They were not made retrospective in the 1970s by the Government of which the right hon. Gentleman was a member. That was an important factor for that Government then, and it is an important factor for this Government now and for all Governments in the future.
  Before the Social Security Pensions Act 1975, it was a normal and well-established principle of occupational schemes, including those in the public service, that to qualify for a pension, the widow of a pensioner had to be married to him at the time when he was engaged in the occupation covered by the scheme. In that aspect of its provision, the armed forces pension scheme, a public service scheme, was similar to others—for example, the civil service, education, health, police, fire and local government schemes.
  The new clause seeks to entitle any service widow of a post-retirement marriage to a widow's pension regardless of the introductory date applicable to other public service schemes. The Government of the day, when introducing that improvement, were well aware that, as usual, there would be people who fell just the wrong side of the implementation date and would therefore not benefit from
  260
  it. The improvement was given a phased introduction in so far as only service in the relevant occupation from April 1978 could count.
  We have no record of the number of post-retirement marriages contracted before 1978, so the full extent of the cost of giving full retrospective recognition to all past cases is difficult to determine, but we estimate that the total cost of the new clause might well be in the region of £60 million for the armed forces pension scheme. That figure would increase substantially if the same principle were extended to other public service pension groups to which the same rules apply.
  Mr. Dewar: Purely for clarification, the Minister said in Committee, at column 594 on 13 June 1995, that that £60 million was an estimated cost for the Ministry of Defence alone and did not take in anything else. It has been suggested to me that that £60 million is a cumulative cost over a run of years, and I wish to establish whether that is so.
  Mr. Hague: Yes; the hon. Gentleman is quite right. That is a total cost over the years of £60 million. The figure that I gave earlier for the previous new clause was a per year cost of £27 million, and the figure for the change in the DSS scheme is a per year cost of £45 million, but this one, as the hon. Gentleman rightly identifies, with his usual perspicacity, is a total cost.
  It is a fundamental principle that improvements to occupational pension schemes can benefit only those serving on or after a qualifying date. The rules in force at the time when an employee leaves the scheme occupation determine pension entitlement. It would be impossible on cost grounds alone to introduce major improvements to occupational schemes without imposing a fixed and current date for the award of additional benefits. The knock-on effects for other public service pension schemes if an amendment were to be introduced would be substantial.
  Mr. Simon Hughes: Will the Minister give way?
  Mr. Hague: I shall give way once more to the hon. Gentleman before discussing the other new clause.
  Mr. Hughes: First, it is important that we obtain the figures. Does the Minister have before him—and if not, will he undertake to give it on another early occasion—the cost if one were seeking to provide only for those who were at retirement pre-1978, not those who have reduced entitlement because they fall in after 1978?
  Secondly, surely it would be possible, even if one did not backdate to 1978, to introduce the scheme from now, at considerably reduced cost.
  Mr. Hague: I do not have the more detailed numbers and I am not sure that it is easily possible to calculate what the hon. Gentleman asked for, but I shall consider that and write to him with those details.
  There may be alternative proposals that would cost differing amounts, but they are not the proposals that are before the House, and of course those that cost less would be of much less benefit to the people whom hon. Members have spoken about.
  I shall now discuss new clause 12. The rule that a widow's pension ceases on remarriage is common to all public service occupational pension schemes. That is on the basis that widows' pensions are intended to give financial support for as long as the state of widowhood

  261
  continues. The effect of new clause 12 would be to apply different rules to a minority of service widows, and to apply a rule change retrospectively.
  It is claimed that it would not cost very much to make an exception for that group. Although the cost to the armed forces scheme would be relatively small—although we believe that it would be a net cost of about £1 million per year—there are other groups to consider.
  I am aware that provision of a widow's pension for life is a feature of most private sector schemes, but against that background it would be difficult to argue, if those new clauses were accepted, that other service widows and the widows of other public service scheme members should not also have the right to retain on remarriage the pension to which, they will claim, their husband contributed.
  As in other public service occupational pension schemes—
  Mrs. Ewing: How many are we talking about?
  Mr. Hague: I wish to make another point before dealing with that.
  The tragic circumstances of the Chinook accident last year, in which police officers and civil servants died alongside service personnel, show how difficult it would be in practice to make a clear-cut distinction between members of the armed forces and other public servants in this respect. As in other public service occupational pension schemes, a forces family pension or attributable forces family pension ceases on remarriage. There is, however, discretion—this relates to the point raised by my right hon. Friend the Member for Fareham (Sir P. Lloyd)—to restore the original pension on the subsequent marriage coming to an end. More than 80 per cent. of such applications are successful.
  I am conscious, however, that the uncertainty as to the outcome of any restoration application, should the need arise, can be a source of great concern to a service widow contemplating remarriage. The current arrangements are discretionary, but the Government are prepared to undertake to make amendments to the rules of the armed forces scheme to provide for the automatic restoration of an attributable forces family pension, if the subsequent marriage should come to an end, on a similar basis to the arrangements now agreed for DSS war widows. Those amendments can be made without the need for primary legislation.
  I can tell my hon. Friend the Member for Dorset, West that the Government will be considering the report of Sir Michael Bett's independent review of the armed forces manpower career and remuneration structures. The report has recommended that all service widows should retain their pension on remarriage. It has also made recommendations about lump sum benefits payable on death in service—the issue to which my hon. Friend referred—and the need for a study of the rules for assessing whether incapacity is attributable. The Government will be giving all those recommendations very careful consideration.
  The principle of paying widows' pensions for life is an issue that affects all public service schemes.
  Mr. Bayley rose—
  Mr. Hague: We believe that it would be wrong to make changes to the rules at this time for one very small group in isolation. I therefore cannot recommend to the House that the new clauses be accepted.
  Mr. Dewar: I shall be brief. This is clearly an extremely important and sensitive aspect of policy. The arguments have been expressed tonight with a great deal of feeling by many right hon. and hon. Members. My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), for example, has an especially long and distinguished record in this sphere. He is a persistent man, and I have no doubt that he will continue to be persistent and put his case forcibly to a Labour Government after the next election. [Interruption.] Many others—including the hon. Member for Dorset, West (Sir J. Spicer) who, with his "Ho, ho, ho", has just drawn attention to himself—have also presented strong arguments.
  I must in all honesty make it clear that I shall not be supporting the new clauses, and I want to explain why. A number of important questions of principle arise, which we can and no doubt should discuss in the future. I understand the strength of feeling, but there are difficulties with, for example, the principle of a widow's pension being paid for life, irrespective of status.
  Indeed, when that matter was debated in another place, my Front-Bench colleagues there did not support that particular amendment—
  Mr. Simon Hughes: If they had, it would have got through.
  Mr. Dewar: I am not hiding. Politics is not always about doing the popular thing; it is occasionally about considering the arguments and trying to do the right thing. That is a lesson that I accept.
  I shall try to say this as calmly as I can. There are problems with the principle of having a pension for life, irrespective of status. It clearly has implications for other schemes and other parts of the public sector. It was on that basis that, in another place, we carefully backed the amendment that got through—it is worth recording that it did so against the Government's advice—which allowed the reinstatement of a pension for someone who had seen a second marriage end for some reason.
  We have to be selective, although I understand the pressures. I understand that there are post-1973 widows who feel that the possible loss of a pension if they remarry is an inhibition and a barrier to marriage. I am not sure how strong that feeling is in all cases, but I recognise that it does exist. The principle has to be looked at rationally and sensibly in the wider context, and I am not satisfied that the Government or the House have done that so far.
  Similarly with the argument of the hon. Member for Moray (Mrs. Ewing): I see that it is very attractive to say that there is a group of pre-1973 widows who did not buy in on a half-pay basis. That they did not and were not given an opportunity to do so, I accept. But there is the difficulty which should not be ducked. There were also people who served beyond 1973 who bought half-pay basis for their previous service. Frankly, we must consider the imposition and equity of that as well, because they have paid and obtained.
  If we are to extend retrospectively without additional contribution—to raise from a third to a half—those people might well feel that they are due, for example, reimbursement. That is the kind of rather prosaic detail that we have to weigh in the balance before we go down that particular road.

  263
  I also find—of course—new clause 14 attractive. We are not talking about war widows in an emotive sense, but about service pensions, which is an important distinction. The Minister might think that I asked rather an unhelpful question about the £60 million cost. My understanding is that it is—and he confirmed—cumulative to 2035. In a sense, that undermines the financial argument against agreeing to the new clause, although it does, of course, have to be weighed in the balance.
  It is not right simply to dismiss totally the retrospective argument, or the fact that it is difficult to isolate and ring-fence service pensions as a general category in the way that has been suggested as against other public service pensions, often in areas of activity where there is danger and stress and where, too, there are casualties. One has to be a little careful about approaching the matter from a simple isolation argument, without considering it in a broader context.
  11.15 pm
  Mr. Simon Hughes: I hear the hon. Gentleman's argument, and I understand it, but I do not agree with it. Can he justify treating ourselves and our dependent successors differently and better than the people of whom he is talking?
  Mr. Dewar: I can, although, again, it is not necessarily a popular argument. The parliamentary pension fund, which I think was introduced in 1965, is an occupational pension scheme giving rights ab initio. Therefore, the funding and the contributions were based on that principle. In other words, the fact that the pensions had to be paid was taken into the calculation, and the contribution was set on that basis. That is very different from changing the rules retrospectively when no accommodation has been made for such benefits. There is therefore a distinction to be made, although I understand why people throw that point at us, and why they feel so strongly about it.
  Although I have taken a decision which I have not enjoyed because of my situation and that of my hon. Friends on the Front Bench, I recognise the temptation to say yes, I recognise the strength of feeling over the matter and I was glad to hear—one of the more significant comments made—the Minister refer to the Bett review and its recommendations. Those recommendations are on the table, and it would be of some consolation to the House and the hon. Member for Dorset, West, if it was a clear understanding that they would be under active consideration in the wider context about which I have been talking.
  I do not think that we should proceed on a piecemeal basis, nibbling away, providing a little goodie here and a little goodie there, without putting them in some sort of rational context and ensuring that we have a defensible position against other claims which may be forthcoming and which we may want to distinguish or feel that we have to distinguish.
  It is not—I am afraid—an easy decision, and I understand why many hon. Members will disagree, going
  264
  into the Lobby. But after—genuinely—a good deal of agonising in the past day or two, my recommendation to my hon. Friends, on the Front Bench at least, is that we should not support the amendments.
  Mr. Bayley: I am sorry that the Minister did not give way when he was announcing his intention to extend the service widow's pension concession by restoring a pension to those who remarry, lose their pension because they have done so and subsequently are widowed again, because he will recall that, in Committee, I pressed him about the Government's concession in relation to the Department of Social Security war widow's pension.
  On behalf of some constituents who had raised the matter with me, I asked whether the Government would ensure that there was an automatic and simple procedure, with the minimum of difficulty, for those entitled to restart their war widows' pensions. I said that they should be able simply to notify the Department of Social Security and then have their pensions restarted.
  Now that the Minister has made the welcome concession that the same principle of restarting the widow's pension will apply not only to the social security war widow's pension but to the service widow's pension, will he consider having a single application process, so that a service widow who received both a service widow's pension and a war widow's pension, subsequently remarried and lost her right to both those pensions, and then was widowed again, could make one simple application and automatically have both pensions restarted?
  People in that position have told me of their concern that it could be a complicated process unless the Government take steps to make it as simple as possible. I hope that the Minister will respond briefly to that point.
  Mrs. Ewing: Like other hon. Members, I have listened carefully to the arguments propounded from both sides of the House. I am sure that everyone will agree that members of all the political parties showed a great deal of feeling and passion.
  I was interested to note that the Minister called in his defence the fact that Government amendment No. 84 met some of the arguments. It is worth reminding the House that the Government fought that amendment tooth and nail in another place. They have granted only a very grudging concession, but it is of great credit to those who worked so hard in the other place that we have even reached this stage.
  I had hoped that, having given that grudging concession, the Government would take a more realistic approach to some of the points made in the debate. The Minister seemed to have great difficulty in defining a war widow. I am sure that everyone would agree that a war widow is a war widow is a war widow. It is a simple definition.
  I referred earlier to the case of Mrs. Margaret Wormack. For the sake of those who have not received briefings or who follow our debates through the media, I shall read into the record exactly the sort of case that we believe merits a very small concession for a very small number of people.
  Private Wormack joined the Army in 1933. He served in the infantry in Burma throughout the war, and at one stage he was captured by the Japanese. While escaping, he received severe bayonet wounds to the face, stomach

  265
  and legs, and was left for dead. He and two companions struggled into the jungle, where they managed to stay together until one committed suicide.
  When they were eventually picked up by a British patrol, Sergeant Wormack, as he had become, weighed six stone. He was temporarily blind and his face had been disfigured by maggots feeding on his bayonet wounds. He seldom spoke of the war. Mrs. Wormack learned about his experiences only from having to listen to his repeated nightmares. He was commissioned in 1944, and, although still suffering from recurring malaria, dysentery, a perforated stomach and facial wounds necessitating extensive skin grafts, he served until 1956, retiring as a captain.
  Mr. and Mrs. Wormack were married for 49 years. Despite her husband's peerless service, Mrs. Wormack receives a one-third rate widow's pension, of just £140 a month after tax, or £1, 860 a year. Any of us who know of people in our families or, through our associates, of people who went through the horrors of what happened in Japanese prisoner-of-war camps, will know exactly how difficult it has been for them to express their feelings, because they do not want to horrify members of their families with the reality of their stories. Yet this woman, who had to cope with a husband who had suffered that indignity during the war, is given £140 a month by the state.
  We are asking for help for a small number of people. The Minister said that the figures have gone up from 6, 500 to 8, 000, but that is still less than 50 per cent. of those who are entitled to receive a half-rate pension, rather than the third-rate pension they receive at present.
  I have said that these people are dying at a rate of 1, 300 per annum, so it is hardly a substantial sum that is being asked for from the Treasury to support these people, who certainly deserve our support tonight. It is all very well to talk about the technicalities of a 1965 pension fund for Members of Parliament. Is it because we did not have such technicalities drawn up in 1939 that our war widows and our victory widows are now to be denied their basic fundamental rights? It seems that we are rejecting compassion and social justice in favour of technicalities, and, in the circumstances, I have no alternative but to press the matter to a vote.
  Dr. Marek: I am sorry to intervene, but my hon. Friend the Member for York (Mr. Bayley) made a useful suggestion, and it would be nice if the Minister were to reply. The Minister, who is an honourable man, has a duty to reply, and I hope that he will be able to accept my hon. Friend's suggestion. I support the hon. Member for Moray (Mrs. Ewing), and I shall be joining her in the Lobby if the matter is pressed to a vote.
  Mr. Hague: The hon. Member for Wrexham (Dr. Marek) may not have been able to see my sign of communication with the hon. Member for York, in which I indicated—I think to the hon. Gentleman's satisfaction—that I would write to him about the specific matter he raised after my main response to the debate. It is a difficult matter, because the hon. Gentleman was talking about both the DSS scheme and the Ministry of Defence scheme. I shall look at the points raised and will write to the hon. Member for York. I hope that that makes the hon. Member for Wrexham very happy.
  Question put, That the clause be read a Second time:—
  The House divided:Ayes 41, Noes 199.

  Division No. 195]

  [11.26 pm

  AYES

  Ashdown, Rt Hon Paddy

  McAvoy, Thomas

  Barnes, Harry

  Mackinlay, Andrew

  Bayley, Hugh

  Marek, Dr John

  Beggs, Roy

  Marshall, Jim (Leicester, S)

  Bowden, Sir Andrew

  Michie, Mrs Ray (Argyll & Bute)

  Bruce, Malcolm (Gordon)

  Morris, Rt Hon Alfred (Wy'nshawe)

  Carlile, Alexander (Montgomery)

  O'Brien, Mike (N W'kshire)

  Chidgey, David

  Rendel, David

  Cohen, Harry

  Ross, William (E Londonderry)

  Corbyn, Jeremy

  Salmond, Alex

  Cunningham, Roseanna

  Simpson, Alan

  Davis, Terry (B'ham, H'dge H'l)

  Skinner, Dennis

  Ewing, Mrs Margaret

  Steel, Rt Hon Sir David

  Forsythe, Clifford (S Antrim)

  Taylor, Matthew (Truro)

  Foster, Don (Bath)

  Tipping, Paddy

  Harvey, Nick

  Tyler, Paul

  Hughes, Simon (Southwark)

  Wallace, James

  Johnston, Sir Russell

  Winnick, David

  Jones, Nigel (Cheltenham)

  Kirkwood, Archy

  Tellers for the Ayes:

  Llwyd, Elfyn

  Mr. Andrew Welsh and Mr. Ieuan Wyn Jones.

  Lynne, Ms Liz

  NOES

  Ainsworth, Peter (East Surrey)

  Dorrell, Rt Hon Stephen

  Aitken, Rt Hon Jonathan

  Douglas-Hamilton, Lord James

  Alexander, Richard

  Dover, Den

  Alison, Rt Hon Michael (Selby)

  Duncan, Alan

  Amess, David

  Duncan-Smith, Iain

  Ancram, Michael

  Dunn, Bob

  Arbuthnot, James

  Durant, Sir Anthony

  Arnold, Jacques (Gravesham)

  Eggar, Rt Hon Tim

  Arnold, Sir Thomas (Hazel Grv)

  Elletson, Harold

  Atkins, Rt Hon Robert

  Evans, Jonathan (Brecon)

  Atkinson, Peter (Hexham)

  Evans, Nigel (Ribble Valley)

  Baker, Nicholas (North Dorset)

  Evans, Roger (Monmouth)

  Bates, Michael

  Faber, David

  Batiste, Spencer

  Fabricant, Michael

  Bellingham, Henry

  Field, Barry (Isle of Wight)

  Bendall, Vivian

  Fishburn, Dudley

  Beresford, Sir Paul

  Forman, Nigel

  Biffen, Rt Hon John

  Forsyth, Rt Hon Michael (Stirling)

  Bonsor, Sir Nicholas

  Fowler, Rt Hon Sir Norman

  Booth, Hartley

  Fox, Dr Liam (Woodspring)

  Boswell, Tim

  Freeman, Rt Hon Roger

  Bottomley, Peter (Eltham)

  French, Douglas

  Bowis, John

  Gale, Roger

  Brandreth, Gyles

  Gallie, Phil

  Brazier, Julian

  Garnier, Edward

  Bright, Sir Graham

  Gillan, Cheryl

  Browning, Mrs Angela

  Goodson-Wickes, Dr Charles

  Bruce, Ian (Dorset)

  Gorst, Sir John

  Burns, Simon

  Greenway, Harry (Ealing N)

  Burt, Alistair

  Greenway, John (Ryedale)

  Butler, Peter

  Griffiths, Peter (Portsmouth, N)

  Carrington, Matthew

  Gummer, Rt Hon John Selwyn

  Cash, William

  Hague, William

  Channon, Rt Hon Paul

  Hamilton, Rt Hon Sir Archibald

  Clappison, James

  Hamilton, Neil (Tatton)

  Clarke, Rt Hon Kenneth (Ru'clif)

  Hampson, Dr Keith

  Clifton-Brown, Geoffrey

  Hanley, Rt Hon Jeremy

  Colvin, Michael

  Hawkins, Nick

  Conway, Derek

  Hawksley, Warren

  Coombs, Anthony (Wyre For'st)

  Heald, Oliver

  Cope, Rt Hon Sir John

  Hendry, Charles

  Couchman, James

  Hicks, Robert

  Currie, Mrs Edwina (S D'by'ire)

  Higgins, Rt Hon Sir Terence

  Davies, Quentin (Stamford)

  Hogg, Rt Hon Douglas (G'tham)

  Davis, David (Boothferry)

  Horam, John

  Day, Stephen

  Howarth, Alan (Strat'rd-on-A)

  Deva, Nirj Joseph

  Hughes, Robert G (Harrow W)

  Devlin, Tim

  Hurd, Rt Hon Douglas

  267

  Jack, Michael

  Porter, David (Waveney)

  Jackson, Robert (Wantage)

  Portillo, Rt Hon Michael

  Jenkin, Bernard

  Powell, William (Corby)

  Jessel, Toby

  Rathbone, Tim

  Johnson Smith, Sir Geoffrey

  Redwood, Rt Hon John

  Jones, Gwilym (Cardiff N)

  Renton, Rt Hon Tim

  Jones, Robert B (W Hertfdshr)

  Richards, Rod

  King, Rt Hon Tom

  Rifkind, Rt Hon Malcolm

  Kirkhope, Timothy

  Robathan, Andrew

  Knapman, Roger

  Roberts, Rt Hon Sir Wyn

  Knight, Mrs Angela (Erewash)

  Robertson, Raymond (Ab'd'n S)

  Knight, Greg (Derby N)

  Robinson, Mark (Somerton)

  Knight, Dame Jill (Bir'm E'st'n)

  Rowe, Andrew (Mid Kent)

  Knox, Sir David

  Ryder, Rt Hon Richard

  Kynoch, George (Kincardine)

  Sackville, Tom

  Lait, Mrs Jacqui

  Shaw, Sir Giles (Pudsey)

  Lamont, Rt Hon Norman

  Shepherd, Colin (Hereford)

  Lang, Rt Hon Ian

  Spencer, Sir Derek

  Legg, Barry

  Spicer, Michael (S Worcs)

  Lennox-Boyd, Sir Mark

  Spink, Dr Robert

  Lidington, David

  Spring, Richard

  Lightbown, David

  Sproat, Iain

  Lilley, Rt Hon Peter

  Squire, Robin (Hornchurch)

  Lloyd, Rt Hon Sir Peter (Fareham)

  Stephen, Michael

  Lord, Michael

  Streeter, Gary

  Luff, Peter

  Sumberg, David

  Lyell, Rt Hon Sir Nicholas

  Sweeney, Walter

  MacGregor, Rt Hon John

  Sykes, John

  MacKay, Andrew

  Taylor, Ian (Esher)

  Maclean, Rt Hon David

  Thomason, Roy

  Maitland, Lady Olga

  Thompson, Patrick (Norwich N)

  Mans, Keith

  Thurnham, Peter

  Martin, David (Portsmouth S)

  Townsend, Cyril D (Bexl'yh'th)

  Mates, Michael

  Trend, Michael

  Mayhew, Rt Hon Sir Patrick

  Twinn, Dr Ian

  Merchant Piers

  Viggers, Peter

  Mills, Iain

  Waller, Gary

  Mitchell, Andrew (Gedling)

  Wardle, Charles (Bexhill)

  Moate, Sir Roger

  Waterson, Nigel

  Montgomery, Sir Fergus

  Watts, John

  Moss, Malcolm

  Wells, Bowen

  Nelson, Anthony

  Wheeler, Rt Hon Sir John

  Neubert, Sir Michael

  Whittingdale, John

  Newton, Rt Hon Tony

  Widdecombe, Ann

  Nicholls, Patrick

  Wilkinson, John

  Nicholson, David (Taunton)

  Willetts, David

  Norris, Steve

  Wilshire, David

  Onslow, Rt Hon Sir Cranley

  Winterton, Nicholas (Macc'f'ld)

  Oppenheim, Phillip

  Wolfson, Mark

  Page, Richard

  Paice, James

  Tellers for the Noes:

  Patnick, Sir Irvine

  Mr. Sydney Chapman and Mr. Timothy Wood.

  Pattie, Rt Hon Sir Geoffrey

  Question accordingly negatived.

New clause 7

  CONSULTATION ON PENSIONS UPRATING (RESIDENCE OUTSIDE GREAT BRITAIN)
  `(1) The Secretary of State shall consult with representatives of other countries where persons are resident who are entitled to retirement pensions under Part II or Part III of the Social Security Contributions and Benefits Act 1992 but whose pensions have not been uprated as they would have been had they been resident in Great Britain ("affected pensioners").
  (2) Consultation under subsection (1) shall be for the purpose of ascertaining what problems are encountered by affected pensioners, and by what means such problems may be ameliorated.
  (3) The Secretary of State shall lay before both Houses of Parliament a report on the outcome of his consultations within one year of the passing of this Act.'.—[Mr. Alfred Morris.]
  Brought up, and read the First time.
  Mr. Alfred Morris: I beg to move, That the clause be read a Second time.
  Mr. Deputy Speaker (Mr. Michael Morris): With this, it will be convenient to discuss the following: New clause 9—Entitlement to pension uprating (residence outside Great Britain)—
  `—(1)The Social Security Contributions and Benefits Act 1992 shall be amended as follows.
  (2) In section 119 (Persons outside Great Britain), at the beginning there shall be inserted "Subject to section 119A".
  (3) After section 119, there shall be inserted —
  "Entitlement to pension uprating (residence outside Great Britain)
  9A. Notwithstanding the provisions of any other enactment, no person who is entitled to a retirement pension under Part II or III of this Act shall be disqualified by reason of residence outside Great Britain from any benefit under this Act, or any uprating of any such benefit, if he would have been entitled to such benefit or such uprating if he had instead been resident in Great Britain.".'.
  New clause 10—Entitlement to pension uprating (residence outside Great Britain) (phased introduction) (No. 2)—
  —(1) The Social Security Contributions and Benefits Act 1992 shall be amended as follows.
  (2) In section 119 (Persons outside Great Britain), at the beginning there shall be inserted "Subject to section 119A".
  (3) After section 119, there shall be inserted —
  "Entitlement to pension uprating (residence outside Great Britain) (phased introduction)
  119A—(1) This section applies to any person who is entitled to a retirement pension under Part II or III of this Act and who is disqualified by reason of residence outside Great Britain from a retirement pension under this Act, or any uprating of any such pension (an 'affected pensioner').
  (2) There shall be paid to any affected pensioner any uprating of a retirement pension which is payable to any other pensioner under this Act at any date after the passing of the Pensions Act 1995.
  (3) The Secretary of State shall by regulations made by statutory instrument make provision for a scheme which shall ensure that, within the period of five years after the passing of the Pensions Act 1995, no affected pensioner shall receive a retirement pension of any lesser amount than he would have received if he had been resident in Great Britain throughout the period from which he first became eligible for a retirement pension.
  (4) So far as practicable, a scheme under subsection (3) above shall ensure that an affected pensioner's retirement pension is increased by an equal amount in each year of the five year period referred to in that subsection.".'.
  New clause 17—Pension uprating (Australia and Canada)—
  `—(1) So far as it applies to retirement pensions, Regulation 5 of the Social Security Benefits (Persons Abroad) Regulations 1975 (or any regulation replacing that regulation) shall cease to apply to persons resident in Canada or Australia.
  (2) This section shall come into force two years after the passing of this Act.'.
  Mr. Morris: Whatever differences of view there may be about this group of new clauses, we must surely all agree that it does nothing for the reputation of this country that state pensions paid to our compatriots who today live in Australia, Canada and other Commonwealth countries are so low that they put those who receive them below the poverty line in the countries where they have gone to live.

  269
  The problem of frozen British pensions is a long-standing issue that ought now urgently to be settled and it is in the interests of all the countries involved—including the United Kingdom—to reach a solution very soon.
  The preferred solution of those of us who have taken part in drafting and proposing the amendments to the Bill—not least the hon. Member for Davyhulme (Mr. Churchill)—is for the UK to bring all pensions that it currently pays up to the level that would have been reached if those pensions had been indexed year on year, in line with past annual increases granted to British pensioners in the UK. That solution—sometimes referred to as full unfreezing and which certainly has my support—would be the most equitable possible. It would ensure that British pensioners in Australia, Canada and elsewhere receive the level of benefits to which they or their spouses contributed during their working years in the United Kingdom. What could be fairer?
  I realise that the cost of full unfreezing, estimated at £168 million in the first year for British pensioners in Australia and Canada alone, would be substantial. However, the Australian and Canadian Governments are wholly prepared to consider other options, the costs of which to the UK would be significantly less. With good will and co-operation, an option can be found that is acceptable to pensioners living abroad and patently affordable by the UK.
  One such option receiving serious consideration by the Australian and Canadian Governments is to forgo any cost of living increases granted prior to the entry into force of any unfreezing arrangement, but to pay all increases granted after such an arrangement comes into force. That approach, sometimes referred to as partial unfreezing, was the basis for the UK's unfreezing arrangement with the United States of America and other countries. Its first-year cost would be £26 million for British pensioners in Australia and Canada.
  There may be other options. The identification and analysis of viable options for unfreezing are complex tasks that will require co-operation between UK social security officials and their counterparts in the other Commonwealth countries. They could be sought within the framework of bilateral social security arrangements already in place.
  The core of what the Australian and Canadian Governments are proposing to end the current impasse is that the UK should agree to hold meaningful bilateral talks, at the official level, with each of the countries in which frozen pensions are paid to identify and analyse options for unfreezing, with the overall goal of finding an option that is acceptable to all the countries concerned. I believe there should be an agreed time frame for these talks, long enough to allow officials to do the work required of them and to seek guidance from Ministers, but not so long as to delay a reasonably early conclusion.
  I repeat, and with emphasis, that the preferred solution is full unfreezing, or one as near as possible to that aim. At the very least, we should agree in this debate to what new clause 7 proposes. That would demonstrate a commitment by the British Government, equal to that of other Governments, to finding a solution to the unfreezing problem. It would position any possible solution within the framework of the existing bilateral social security arrangements between the UK and other countries. It
  270
  would provide an opportunity for Australian Ministers to show the British Government that, among other wrong assumptions, indexation would not be
  "swallowed up by the Treasuries"
  because 92 per cent. of pensioners from Britain have been in Australia for over 10 years and deduction of UK pension from the rate of Australian pension ceases after 10 years. The new clause would also avert a total breakdown in intergovernmental talks while there is still time to find a mutually acceptable solution to a problem that stains this country's reputation and that will not go away if we fail to reach agreement tonight. Time is short if we are to resolve an issue that in the view of many of us is one that involves principle and honour. I implore the Minister not to miss the opportunity that the new clauses present to reach a just settlement.
  11.45 pm
  Mr. Winston Churchill: The hour is late and I shall be brief.
  As we stand between the 50th anniversaries of VE and VJ days, the nation's thoughts are inevitably with the heroic generation who saved the world from Hitler. There would be no more fitting moment to rectify a clear injustice that affects 375,000 British expatriate pensioners who, unlike those who retired to an EU country or the United States, find that they receive no uprating to the pension to which they have contributed. These frozen pensioners live overwhelmingly in the old dominions of Canada, Australia, South Africa and New Zealand. Many are facing severe hardship, especially those in South Africa where there is no social security net.
  Time permits me to cite but one example of a wartime Royal Navy commander, who two years ago wrote to me from Nordhoek in South Africa. I shall quote only a paragraph of his letter. It reads:
  "My wife and I have lived here since 1951. I am now 85 and she is 77. We receive £6.75 for self and £4.15 per week, frozen. In 1951, having received Admiralty permission to emigrate, I wrote to ask if I would get the pension. You will see the reply."
  The reply from the Ministry of Pensions and National Insurance dated 12 July 1963 I quote in part:
  "The Class Three contributions which you are paying maintain the title to retirement pension, death grant, widow's benefit and maternity benefit, all of which are payable abroad subject to territorial currency restrictions."
  Those were the only restrictions suggested.
  That gallant gentleman has indisputably been misled by a Government Department. In consequence, he finds himself deprived of more than £50 a week of the pension to which he contributed throughout his working life. The Government have never sought to dispute the injustice that is caused to expatriate British pensioners, but plead that the cost of £235 million cannot be afforded.
  We are talking of pensioners who contributed throughout their working lives to their national insurance pension. They find it hard to understand how a Government who have found it possible to increase social security expenditure in real terms since 1979 by a staggering £39, 800 million, providing billions of pounds of benefit to unmarried teenage mothers and others who have never contributed a penny to the national insurance scheme, cannot afford £235 million, barely one quarter of 1 per cent. of the social security budget, to rectify a fundamental injustice.

  271
  Both new clauses 9 and 10 would end the discrimination that I have outlined and remove any geographical limitation on the payment of the annual uprating to state retirement pensioners. New clause 9 would do so outright; new clause 10 would phase in the uprating over five years. I intend to press new clause 10, bearing in mind that it would reduce the first-year cost to £62 million. It would not increase the cost to the full £235 million until the next millennium.
  I am most grateful to my 250 colleagues from all parties who have signed my early-day motion 279 in support of the campaign. I look forward to them registering their support in the Lobby. I hope that my right hon. and hon. Friends will signify their acceptance of a reasonable proposal.
  Mr. Kirkwood: I concur entirely with the sentiments expressed by hon. Members on this group of new clauses and I shall refrain from rehearsing the long-established arguments about the social justice and equity of the case. I want to put a proposition to the Government that is drawn from the speech of the right hon. Member for Manchester, Wythenshawe (Mr. Morris).
  In recent conversations with representatives of the Canadian and Australian Governments, I was struck by the extent to which they are exasperated by the Government's refusal even to discuss the issues surrounding the problem. They believe that if officials were given a bona fide mandate to get round the table and discuss the principles involved, ways could be found, in the best diplomatic fashion, to accommodate the differences.
  As the right hon. Member for Wythenshawe rightly said, those representatives are looking for a full unfreezing, but they are prepared to settle for less and to try to establish a bona fide compromise, which they believe is achievable. It is causing great concern to them and to me. It should also concern the House because those two countries are faithful allies and stout friends of the United Kingdom in all other international forums and discussions and if they perceive the issue as an outstanding irritant, we should give it careful attention.
  If the Minister is looking for evidence, I am advised that, when the Canadian Prime Minister was in London to participate in the recent victory celebrations, he took the opportunity, in a short interview with the Prime Minister, to raise the issue. If the Prime Minister of Canada considers it important and if it is the only outstanding matter between Britain and Canada, the House of Commons is bound to pay attention to that fact alone, leaving aside the merits of the case.
  I have put my name to a new clause on the amendment paper this evening. If the Minister is prepared to tell the House in good faith that discussions will be entered into and that officials will be instructed to talk through this subject with the Australian and Canadian Governments to deal with the principle, I will accept that. However, it will not be enough for the Government to produce the same old tired and inadequate justifications about money.
  Full unfreezing would cost a significant amount. I am not arguing for that, but if the Government stick to the brief that we have heard on previous occasions and in previous debates, I fear that there will be a mood to divide the House and put the question to hon. Members in the
  272
  Division Lobby. This evening, the Minister need say only that talks will commence. That is all that would be necessary to satisfy me that some progress had been made on a very important issue.
  Dr. Marek: I rise briefly to support the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who moved new clause 7.
  New clause 7 does not involve the expenditure of any money whatsoever; it simply asks that the Government undertake investigations to identify the problems and find out whether anything can be done.
  My name also appears on new clauses 9 and 10, and I too believe that something should be done. I realise that the Government do not want to spend any money because they want to cut taxes in the Chancellor's November Budget. But even if they do not want to spend money on frozen pensions at this stage, I hope that, as all hon. Members who have spoken have urged, we can at least persuade them to investigate the problems and then to lay a report before Parliament.
  I do not want to rehearse all the well-known arguments, but I must emphasise the fact that pensioners have contributed to their pensions. They may have contributed not for 40 years of their working life but for only 20 years, but that would still mean that they had contributed enough for half the pension. It will be robbery by the Government and theft by Parliament if pensions continue to be frozen, because they lose their value with inflation.
  I know that the Minister is an honest person with integrity, and I appeal to him to read new clause 7. It does not commit the Government to spending a single penny, but simply tells them to investigate, to find out whether there is a problem and to come back with some answers, because the economy may be better in a year's time. I also hope that the official Opposition will support the new clause, because it does not entail the use of a single penny, and I look forward to receiving a bit of support from my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar).
  Mr. Dewar: I hear that invitation, Mr. Deputy Speaker.
  I recognise that there are strong feelings concerning this group of amendments, and widespread concern extending to hon. Members in all parties. I do not under-estimate that for a moment, although I sometimes think that signatures can be appended to early-day motions somewhat carelessly, so the level of commitment may not be as great as the hon. Member for Davyhulme (Mr. Churchill) would like it to be. But there we are; we live in a real world, and we shall see.
  The facts have been set out, and I congratulate the Select Committee on Social Security, whose Chairman, my hon. Friend the Member for Birkenhead (Mr. Field), is here, on the useful memorandum that it produced. It came to no conclusions, but set out extremely usefully all the facts and figures, and the history of this long-standing affair.
  Mr. Jeremy Corbyn: I too am a member of the Select Committee. We have come to no conclusions because we have not yet discussed the matter. We wanted to publish the memorandum so that the whole House, and everybody else, could understand the basis on which the curious calculation, whereby some pensioners get an uprating and many do not, is made. It seems grossly

  273
  unfair, and I hope that, when the Select Committee considers the matter, we shall recommend universal uprating of all the pensions, wherever the people happen to live, in line with the amendments tabled.
  Mr. Dewar: I would expect nothing else of my hon. Friend. There was no hint of criticism in what I said—indeed, there was the opposite. However, I did not realise that the Select Committee's work was the preliminary to a full investigation; I thought that it was an attempt to inform debate. That is not an ignoble objective of Select Committees—
  Mr. Corbyn: We do it all the time.
  Mr. Dewar: As a former Select Committee member, I am a great defender of the system. Among other things, Select Committees provide information that is not otherwise easily available to Members of Parliament, and certainly not to the public. A current Select Committee investigation is one of the most useful quarries for arguments and information, and I would never under-estimate or undervalue that aspect of their role.
  Like many other hon. Members, I have been lobbied with great courtesy by letter from almost every country that I can think of, including several that I had not thought of before. Like the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), I have seen the high commissioners for Australia and Canada, who, good diplomats that they are, put their case with great skill.
  I have some sympathy with the point that was made by my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris). I can see that there is something to be said for talking to friends, even if it is not, in the view of the Minister, likely to be productive in the short term. Who knows, the Minister might get a surprise. It could reduce some of the irritation that might be building up, although I have to record that the high commissioners were far too diplomatic to indicate any irritation to me, although Liberal antennae may have discovered it.
  Mr. Kirkwood: There is nothing wrong with my political antennae.
  Mr. Dewar: That should not necessarily be taken as any sort of comment on the insect-like propensities of the Liberal party.
  There is a case for talking—this is where I come to the point made by my hon. Friend the Member for Wrexham (Dr. Marek), and his request—but it would be rather odd to put it in the form of a new clause in the Bill. I do not think that future generations reading the Bill would find it a likely interpolation into statute, but it would be useful to try to get a positive response from Ministers on the need to talk.
  12 midnight
  Mr. David Nicholson: Does the hon. Gentleman agree—I am one who declined to sign the early-day motion last year because I appreciated the public expenditure consequences—that there is an anomaly here? I understand from written questions that my hon. Friend the Minister has answered that the previous Labour Government made agreements with Spain and Portugal, countries with which this country does not have any particular historic tradition, to uprate pensions, whereas pensioners in the old Commonwealth
  274
  countries—the British countries, as my hon. Friend the Member for Davyhulme (Mr. Churchill) puts it—do not have that benefit. Is there not an anomaly between what happens in foreign countries, where British pensioners have the uprating, and in British countries—Commonwealth countries—where they do not?
  Mr. Dewar: Spain is now in the European Union and so operates in a rather different context, and different considerations apply.
  There is a case for looking sympathetically at the uprating problem in the best of all possible worlds. The problem—I have explained it as honestly as I can in probably hundreds of letters—is that it is a matter of competing claims and priorities. The Government have to take decisions on that. Another Government would have to take those decisions when the time came. I have had to say to people, who have written to me with great courtesy, that I cannot give an undertaking that the matter would be a top priority when, as would happen with every other Government, there would almost certainly be only limited room for manoeuvre.
  People would have to compete for the £235 million, which is, I understand, full uprating but no payment of arrears. They would have to compete against pensioners who live in this country and their special needs, poor pensioners, pensioners with special difficulties, carers and the disabled—a range of others.
  The Labour party—and, no doubt, other parties—keeps its priorities under review and does not regard them as set in stone. I have not been able to promise that uprating would be a top priority for a Labour Government in an initial period in power. Given that inhibition, it would be inconsistent of me to vote for it on this occasion. I do not say that to belittle in any way the genuineness of feeling or the fact that there is a case to answer, but I am afraid that I have had to take a prudent line—the hon. Member for Taunton (Mr. Nicholson) has virtually accepted that it is a prudent line—and it must be followed through consistently on this occasion. I intend to do that tonight.
  Mr. Arbuthnot: I acknowledge that many overseas pensioners feel a sense of injustice that their United Kingdom pensions have not been uprated, but I do not accept that, in the present circumstances, the Government are under an obligation to respond in the ways that have been suggested tonight. Our argument, which is well known, is that the full cost of unfreezing the pensions would be £235 million a year. There are options that cost less to start with but which nevertheless build up to that figure, or to lesser but still substantial sums. The right hon. Member for Manchester, Wythenshawe (Mr. Morris) mentioned one such option.
  The point for the House to decide is simply this. If we could find nearly a quarter of a billion pounds extra for social security, is this what the House would want to spend it on? We are talking about people who have left this country knowing that their pensions would not be uprated. The policy is not new; it has been in place since 1955.
  Mr. Churchill: My hon. Friend cannot have been listening when I mentioned the case of the Royal Navy commander in South Africa. He was advised by the Ministry of Pensions and National Insurance that his pension rights would be unaffected—and that is by no

  275
  means the only such instance that I have encountered. Many other people have been given the same advice, and they were clearly lied to.
  Mr. Arbuthnot: I have read the advice that was given. If I remember correctly—I think that I read it some six months ago—the advice was given in an entirely different context from that which is suggested.
  Mr. Corbyn: The Minister's argument is unsustainable. As the hon. Member for Davyhulme (Mr. Churchill) said, advice has been given to a number of people who believed that their pensions would be uprated wherever they happened to live. The Minister also seems to be skating over the fact that the state pension is a contributory pension. Surely it is just for it to be paid regardless of where the recipient happens to live, irrespective of any other factor.
  Mr. Arbuthnot: The United Kingdom national insurance scheme is financed on a pay-as-you-go basis. Pensions that are being paid today are financed by national insurance contributions today. It should be remembered that paying contributions gives no automatic entitlement to any particular benefits. The agreement between an individual and the state is that payment of contributions will give entitlement to benefits under certain conditions: for example, pensions are payable, but only when the recipient reaches the age of 65, in the case of men, or 60, in the case of women. Moreover, pensions are not generally uprated outside the United Kingdom. Although I understand the hon. Gentleman's point, the conditions that apply to the benefits do not give rise to the rights that he suggests.
  Rev. Martin Smyth: Will the Minister give way?
  Mr. Arbuthnot: I will, but I had better get on with my speech after that.
  Rev. Martin Smyth: We are all aware that we shall not receive pensions until we are 65—or 60, in the case of women. As far as I know, however, no one has ever been told that they will not receive a pension if they leave the country. Earlier, in answer to some of our questions, the Government blamed the Canadians for not moving forward, but at the time they were discussing relations with the various provinces of Canada. I have raised the issue before, but I have a personal interest now: my sister migrated, and was not aware of the rule until she reached Australia.
  Mr. Arbuthnot: I am a little surprised that the hon. Gentleman's sister was not aware of it. Advice is available from my Department, and has been given since 1955. A clear warning is given in a leaflet called "NI 38: Social Security Abroad". If there are individual cases in which the wrong advice has been given, I shall of course look into them.
  Mr. Churchill: I mentioned one.
  Mr. Arbuthnot: My hon. Friend suggests that he is acquainted with one such case, and I should like to look into it, although I may have done so already.
  At home, we are having to take steps to contain the cost of social security expenditure, as with all public expenditure. There is no extra, or spare, £250 million to
  276
  meet the bill, so we would have to find the money from within the existing social security budget. Hon. Members who suggest that it would be easy to find it should suggest where we should cut at home to pay extra money to people abroad.
  New clause 7 requires the Secretary of State to consult representatives of countries where United Kingdom pensioners who do not receive annual upratings live to find out what their problems are and how they might be ameliorated. It also requires him to report to Parliament within no more than a year. More than 400,000 pensioners do not receive pension increases. They live in 150 countries worldwide. No doubt their problems are many and diverse, and amelioration of those problems would lie in many different directions outside the power of any Government.
  The circumstances of pensioners who do not receive upratings are extremely varied. They may have occupational pensions or other income. Many receive pensions from their country of residence, and not all would be better off if their UK pensions were uprated, because an increase in the UK pension could simply reduce their pension entitlement from the country in which they live.
  We have no reason to think that representatives of other countries would wish to enter consultations with the Secretary of State on the basis that the new clause envisages. I believe that the Australian Government have been canvassing an approach similar to that in the new clause, but it is not clear that the other 149 Governments involved would take the same view. After all, they may not know what problems, financial or otherwise, are experienced by the pensioners concerned, and they would need to carry out detailed personal inquiries.
  Mr. Frank Field: Will not the Minister tell the House that, in fact, most of these pensioners live in only a few countries? I am puzzled. Do the Government not want to undertake the inquiry because they think that they will learn nothing, or because they are fearful of what they might learn?
  Mr. Arbuthnot: Neither. The point about undertaking talks is that there would be a commonality of objective and there is no such commonality of objective between the countries in which pensions are not uprated and the objectives of the British Government that relate particularly to the restraint of our social security expenditure.
  New clause 9 takes a different approach to the same issue. Its intention, which must be gleaned from it, is to require the Government to pay retirement pension increases that arise after the Bill comes into force. It does not seek to restore the effects of upratings that have already been forgone, but it could have a far wider effect. It requires that no person entitled to a retirement pension should be disqualified by reason of residence outside Great Britain from any benefit under the Social Security Contributions and Benefits Act 1992. It would overturn the law that prevents payment of benefits such as income support and attendance allowance outside Great Britain. It could therefore make available to UK pensioners anywhere in the world any benefit that they could receive if they were living in Great Britain. That would entail vast cost.
  Mr. Churchill: New clause 9 clearly refers specifically to retirement pensions. It refers to anyone

  277
  "entitled to a retirement pension under part II or III of the Act".
  Mr. Arbuthnot: That is right, but retirement pensioners would then be entitled to attendance allowance and to income support wherever they lived in the world, and that could entail vast cost. Let us assume, however, that the effect of the new clause were to require the payment only of retirement pension, as my hon. Friend suggests. The cost would still be great. It would be about £16 million in the first year, but that would increase steadily as people who retired or went to live outside Britain had their pensions fully uprated from the outset. The full unfreezing cost, which would be £235 million a year at 1994 rates of benefit, would be reached as people whose pensions were partially unfrozen were replaced by those whose pensions had never been frozen.
  My hon. Friend may say that that is spending in the future, but spending in the future is no less spending; it is simply spending that we would impose on our grandchildren rather than ourselves.
  12.15 am
  Dr. Marek: The Minister speaks of spending. It is not actually spending; we are talking of contributions that people have paid for part of their working lives. If the Government have the money, the Government can invest it and can pay the increased contributions out of the investment. It is not actually spending by Government.
  Mr. Arbuthnot: That is a delightful but, I suggest, misguided view of economics. National insurance contributions generate a right to pensions under certain conditions, which are set down in the rules that we have at the moment.
  New clause 10 would require the Government to pay future increases of retirement pension abroad and to make good, by instalments, upratings forgone in the past. The £235 million cost of fully unfreezing pensions would thus be reached over five years.
  New clause 17 is also technically defective. The Secretary of State already has the power to amend regulations in the way proposed, so primary legislation is not needed. However, the intention of new clause 17 is clear and rather eccentric. It would give United Kingdom pensioners in Australia and Canada the upratings that take effect from two years after the Bill becomes law. About 80 per cent. of pensioners who do not receive annual upratings live in Australia or Canada. Even if upratings arising only in the future were paid in those two countries, they would cost about £11 million in the first year, but that cost would increase steadily to £200 million.
  That is not the only factor. Many UK pensioners in Australia and Canada also qualify for pensions from those countries, so the UK pension is deducted, in whole or in part, from that pension. That means that, if the UK pensions were to be uprated in Australia, not all the additional expenditure would go to the pensioners. A proportion would go straight to the Australian exchequer.
  Mr. Kirkwood: That is not true if they have been there for more than 10 years.
  Mr. Arbuthnot: It is not true for everyone. I do not know the precise percentage, but it is not true for
  278
  everyone. However, a proportion would go straight to the Australian exchequer.
  The point of principle on new clause 17 brings me to the reason that I suggested that it was rather eccentric. It is blatantly discriminatory. It seeks to extend the payment of increases to pensioners in Australia and Canada but not to pensioners in the other 148 countries involved. Quite what the pensioners of New Zealand and the eastern Caribbean states have done to irritate the Liberal Democrats is beyond me, but I do not believe that it would be right to pursue that change to the law.
  Mr. Nicholas Winterton: My hon. Friend obviously seeks to argue a difficult case with a House that, overwhelmingly, is sympathetic to the propositions made in the new clauses. I believe that he is doing quite a good job, but I do not believe that the proposal made by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is unreasonable.
  I ask my hon. Friend the Minister, would it not help the House if there were an inquiry? Even if it takes two years, it would be very helpful in advising the House of the precise way in which pensioners overseas are affected. Then, when the matter is debated again, the House might undertake the debate from a position of knowledge of the way in which our pensioners overseas are faring and whether they deserve the sympathy that I believe that the House seeks to give them tonight.
  Mr. Arbuthnot: The problem is that the inquiry and the sort of meetings and negotiations that my hon. Friend is suggesting would be based on a false promise, because we do not feel that it would be right at this stage to reverse Government policy. Now is not the time to spend £235 million on this matter. We pay out more than £900 million a year to more than 700, 000 pensioners overseas. To increase that would be to fly in the face of the Government's commitment to contain the cost of social security now and in the future. I therefore urge the House to reject the new clause.
  Mr. Alfred Morris: If I may, I shall reply briefly. I listened very carefully to what the Minister said, but I still find it difficult to determine where he stands. He was critical of what new clause 7 says about the requirement to report within a year. Is he asking for a period of two years, or three years? He did not appear to argue in principle against the need for bilateral discussions and a report to the House, but said over and over again that the cost of the new clauses would be a quarter of a billion pounds.
  That is not fair to the high commissioners of Australia and Canada. They have made it very clear, as I did in my opening speech, that they are seriously prepared to consider other, less costly, options. Thus, simply to repeat over and over again the figure of a quarter of a billion pounds is less than fair to high commissioners whose reputations are most highly respected in all parts of the House.
  New clause 7 would not cost a penny and I see it as sheer obscurantism to say that we should not try to find out more. If countries do not want to consult, we would obviously not try to force them to consult, but there are countries that do want to consult. Therefore, I shall press the new clause.
  Mr. Corbyn: I want briefly to put on record the fact that, like many hon. Members, I have had many letters

  279
  from all over the world, often from desperate people. I think that the Minister's reply to the reasonable proposal is wholly inadequate.
  It cannot be right that the Government understand that there is a problem, having been forced to publish a document about it, but then say that they do not want to undertake an inquiry because they do not want to know the results of that inquiry or exactly what the problem was in the first place. Inadequately uprated as the current state pension is, surely the principle that has to be borne in mind is that it is a contributory scheme. It may be pay-as-you-go, but the principle is that one pays into the national insurance fund during one's working life in the reasonable expectation of getting a pension at the end of it.
  If one happens to go and live in another country for any number of reasons—family commitments, for example—one should not be penalised. The basic principle, which has been strongly supported by more than 280 Members of Parliament, should bend the Government a little further than was suggested by the Minister's obscure, waffling reply.
  Question put, That the clause be read a Second time:—
  The House divided: Ayes 39, Noes 179.

  Division No. 196]

  [12.22 am

  AYES

  Ashdown, Rt Hon Paddy

  Lynne, Ms Liz

  Barnes, Harry

  Mackinlay, Andrew

  Beggs, Roy

  Marek, DrJohn

  Bruce, Malcolm (Gordon)

  Marshall, Jim (Leicester, S)

  Carlile, Alexander (Montgomery)

  Michie, Mrs Ray (Argyll & Bute)

  Chidgey, David

  Morris, Rt Hon Alfred (Wy'nshawe)

  Cohen, Harry

  Parry, Robert

  Corbyn, Jeremy

  Pike, Peter L

  Cunningham, Roseanna

  Rendel, David

  Davis, Terry (B'ham, H'dge H'l)

  Ross, William (E Londonderry)

  Denham, John

  Salmond, Alex

  Ewing, Mrs Margaret

  Skinner, Dennis

  Field, Frank (Birkenhead)

  Smyth, The Reverend Martin

  Foster, Don (Bath)

  Taylor, Matthew (Truro)

  Wallace, James

  Graham, Thomas

  Welsh, Andrew

  Harvey, Nick

  Wise, Audrey

  Hill, Keith (Streatham)

  Wray, Jimmy

  Hughes, Simon (Southwark)

  Johnston, Sir Russell

  Tellers for the Ayes:

  Jones, Nigel (Cheltenham)

  Mr. Archy Kirkwood and Mr. Paul Tyler.

  Llwyd, Elfyn

  NOES

  Ainsworth, Peter (East Surrey)

  Bottomley, Peter (Eltham)

  Alexander, Richard

  Bowis, John

  Alison, Rt Hon Michael (Selby)

  Brandreth, Gyles

  Amess, David

  Brazier, Julian

  Ancram, Michael

  Bright, Sir Graham

  Arbuthnot, James

  Browning, Mrs Angela

  Arnold, Jacques (Gravesham)

  Bruce, Ian (Dorset)

  Arnold, Sir Thomas (Hazel Grv)

  Burns, Simon

  Atkins, Rt Hon Robert

  Burt, Alistair

  Atkinson, Peter (Hexham)

  Carrington, Matthew

  Baker, Nicholas (North Dorset)

  Cash, William

  Bates, Michael

  Channon, Rt Hon Paul

  Batiste, Spencer

  Chapman, Sydney

  Bellingham, Henry

  Clappison, James

  Beresford, Sir Paul

  Clarke, Rt Hon Kenneth (Ru'clif)

  Biffen, Rt Hon John

  Clifton-Brown, Geoffrey

  Bonsor, Sir Nicholas

  Colvin, Michael

  Booth, Hartley

  Conway, Derek

  Boswell, Tim

  Coombs, Anthony (Wyre For'st)

  280

  Cope, Rt Hon Sir John

  MacGregor, Rt Hon John

  Couchman, James

  MacKay, Andrew

  Currie, Mrs Edwina (S D'by'ire)

  Maclean, Rt Hon David

  Davies, Quentin (Stamford)

  Maitland, Lady Olga

  Davis, David (Boothferry)

  Malone, Gerald

  Day, Stephen

  Mans, Keith

  Deva, Nirj Joseph

  Martin, David (Portsmouth S)

  Devlin, Tim

  Mates, Michael

  Dorrell, Rt Hon Stephen

  Mayhew, Rt Hon Sir Patrick

  Douglas-Hamilton, Lord James

  Merchant, Piers

  Dover, Den

  Mills, Iain

  Duncan, Alan

  Moate, Sir Roger

  Duncan-Smith, Iain

  Montgomery, Sir Fergus

  Dunn, Bob

  Nelson, Anthony

  Durant, Sir Anthony

  Neubert, Sir Michael

  Eggar, Rt Hon Tim

  Newton, Rt Hon Tony

  Elletson, Harold

  Nicholls, Patrick

  Evans, Jonathan (Brecon)

  Nicholson, David (Taunton)

  Evans, Nigel (Ribble Valley)

  Onslow, Rt Hon Sir Cranley

  Evans, Roger (Monmouth)

  Oppenheim, Phillip

  Fabricant, Michael

  Page, Richard

  Field, Barry (Isle of Wight)

  Paice, James

  Fishburn, Dudley

  Patnick, Sir Irvine

  Forman, Nigel

  Pattie, Rt Hon Sir Geoffrey

  Forsyth, Rt Hon Michael (Stirling)

  Porter, David (Waveney)

  Fox, Dr Liam (Woodspring)

  Portillo, Rt Hon Michael

  Freeman, Rt Hon Roger

  Powell, William (Corby)

  French, Douglas

  Rathbone, Tim

  Gale, Roger

  Redwood, Rt Hon John

  Gallie, Phil

  Richards, Rod

  Garnier, Edward

  Robathan, Andrew

  Gillan, Cheryl

  Roberts, Rt Hon Sir Wyn

  Goodson-Wickes, Dr Charles

  Robertson, Raymond (Ab'd'n S)

  Gorst, Sir John

  Robinson, Mark (Somerton)

  Greenway, John (Ryedale)

  Rowe, Andrew (Mid Kent)

  Gummer, Rt Hon John Selwyn

  Ryder, Rt Hon Richard

  Hague, William

  Shaw, Sir Giles (Pudsey)

  Hamilton, Rt Hon Sir Archibald

  Shepherd, Colin (Hereford)

  Hamilton, Neil (Tatton)

  Spencer, Sir Derek

  Hanley, Rt Hon Jeremy

  Spicer, Sir James (W Dorset)

  Hannam, Sir John

  Spicer, Michael (S Worcs)

  Hawkins, Nick

  Spink, Dr Robert

  Hayes, Jerry

  Spring, Richard

  Heald, Oliver

  Sproat, Iain

  Hendry, Charles

  Squire, Robin (Hornchurch)

  Higgins Rt Hnn Sir Terence

  Stephen, Michael

  Higgins Rt, Hon Sir Terence

  Streeter, Gary

  Hogg, Rt Hon Douglas (G'tham)

  Sweeney, Walter

  Horam, John

  Sykes, John

  Howarth, Alan (Strat'rd-on-A)

  Taylor, Ian (Esher)

  Hughes, Robert G (Harrow W)

  Taylor, Sir Teddy (Southend, E)

  Jack, Michael

  Thomason, Roy

  Jackson, Robert (Wantage)

  Thompson, Patrick (Norwich N)

  Jenkin, Bernard

  Thurnham, Peter

  Jones, Gwilym (Cardiff N)

  Townsend, Cyril D (Bexl'yh'th)

  Jones, Robert B (W Hertfdshr)

  Trend, Michael

  King, Rt Hon Tom

  Twinn, Dr Ian

  Kirkhope, Timothy

  Viggers, Peter

  Knapman, Roger

  Waller, Gary

  Knight, Mrs Angela (Erewash)

  Wardle, Charles (Bexhill)

  Knight, Greg (Derby N)

  Waterson, Nigel

  Kynoch, George (Kincardine)

  Watts, John

  Lait, Mrs Jacqui

  Wells, Bowen

  Lamont, Rt Hon Norman

  Wheeler, Rt Hon Sir John

  Legg, Barry

  Whittingdale, John

  Lennox-Boyd, Sir Mark

  Widdecombe, Ann

  Lidington, David

  Willetts, David

  Lightbown, David

  Wilshire, David

  Lilley, Rt Hon Peter

  Wolfson, Mark

  Lioyd, Rt Hon Sir Peter (Fareham)

  Lord, Michael

  Tellers for the Noes:

  Luff, Peter

  Mr. Andrew Mitchell and Mr. Timothy Wood.

  Lyell, Rt Hon Sir Nicholas

  Question accordingly negatived.

New clause 10

  ENTITLEMENT TO PENSION UPRATING (RESIDENCE OUTSIDE GREAT BRITAIN) (PHASED INTRODUCTION) (No. 2)
  `.—(1) The Social Security Contributions and Benefits Act 1992 shall be amended as follows.
  (2) In section 119 (Persons outside Great Britain), at the beginning there shall be inserted "Subject to section 119A".
  (3) After section 119, there shall be inserted—
  "Entitlement to pension uprating (residence outside Great Britain) (phased introduction)
  119A—(1) This section applies to any person who is entitled to a retirement pension under Part II or III of this Act and who is disqualified by reason of residence outside Great Britain from a retirement pension under this Act, or any uprating of any such pension (an 'affected pensioner').
  (2) There shall be paid to any affected pensioner any uprating of a retirement pension which is payable to any other pensioner under this Act at any date after the passing of the Pensions Act 1995.
  (3) The Secretary of State shall by regulations made by statutory instrument make provision for a scheme which shall ensure that, within the period of five years after the passing of the Pensions Act 1995, no affected pensioner shall receive a retirement pension of any lesser amount than he would have received if he had been resident in Great Britain throughout the period from which he first became eligible for a retirement pension.
  (4) So far as practicable, a scheme under subsection (3) above shall ensure that an affected pensioner's retirement pension is increased by an equal amount in each year of the five year period referred to in that subsection.":.—[Mr. Churchill.]
  Brought up, and read the First time.
  Motion made, and Question put, That the clause be read a Second time—
  The House divided:Ayes 35, Noes 167.

  Division No. 197]

  [12.33 am

  AYES

  Barnes, Harry

  Lynne, Ms Liz

  Beggs, Roy

  Michie, Mrs Ray (Argyll & Bute)

  Bowden, Sir Andrew

  Mills, Iain

  Bruce, Malcolm (Gordon)

  Morris, Rt Hon Alfred (Wy'nshawe)

  Carlile, Alexander (Montgomery)

  Parry, Robert

  Chidgey, David

  Rendel, David

  Churchill, Mr

  Ross, William (E Londonderry)

  Cohen, Harry

  Salmond, Alex

  Corbyn, Jeremy

  Skinner, Dennis

  Smyth, The Reverend Martin

  Cunningham, Roseanna

  Taylor, Sir Teddy (Southend, E)

  Davis, Terry (B'ham, H'dge H'l)

  Tyler, Paul

  Foster, Don (Bath)

  Welsh, Andrew

  Graham, Thomas

  Wise, Audrey

  Hannam, Sir John

  Wolfson, Mark

  Hughes, Simon (Southwark)

  Wray, Jimmy

  Jessel, Toby

  Johnston, Sir Russell

  Tellers for the Ayes:

  Jones, Nigel (Cheltenham)

  Mr. Andrew Mackinlay and Dr. John Marek.

  kirkwood, Archy

  NOES

  Ainsworth, Peter (East Suney)

  Atkinson, Peter (Hexham)

  Alexander, Richard

  Baker, Nicholas (North Dorset)

  Alison, Rt Hon Michael (Selby)

  Bates, Michael

  Amess, David

  Batiste, Spencer

  Ancram, Michael

  Bellingham, Henry

  Arbuthnot, James

  Beresford, Sir Paul

  Arnold, Jacques (Gravesham)

  Biffen, Rt Hon John

  Arnold, Sir Thomas (Hazel Grv)

  Bonsor, Sir Nicholas

  Atkins, Rt Hon Robert

  Booth, Hartley

  282

  Boswell, Tim

  Jackson, Robert (Wantage)

  Bottomley, Peter (Eltham)

  Jenkin, Bernard

  Bowis, John

  Jones, Gwilym (Cardiff N)

  Brandreth, Gyles

  Jones, Robert B (W Hertfdshr)

  Brazier, Julian

  King, Rt Hon Tom

  Bright, Sir Graham

  Kirkhope, Timothy

  Browning, Mrs Angela

  Knight, Mrs Angela (Erewash)

  Bruce, Ian (Dorset)

  Knight, Greg (Derby N)

  Burns, Simon

  Kynoch, George (Kincardine)

  Burt, Alistair

  Lait, Mrs Jacqui

  Carrington, Matthew

  Lamont, Rt Hon Norman

  Cash, William

  Legg, Barry

  Channon, Rt Hon Paul

  Lennox-Boyd, Sir Mark

  Chapman, Sydney

  Lidington, David

  Clappison, James

  Lightbown, David

  Clarke, Rt Hon Kenneth (Ru'clif)

  Lilley, Rt Hon Peter

  Clifton-Brown, Geoffrey

  Lloyd, Rt Hon Sir Peter (Fareham)

  Colvin, Michael

  Lord, Michael

  Conway, Derek

  Luff, Peter

  Coombs, Anthony (Wyre For'st)

  Lyell, Rt Hon Sir Nicholas

  Cope, Rt Hon Sir John

  MacGregor, Rt Hon John

  Couchman, James

  MacKay, Andrew

  Currie, Mrs Edwina (S D'by'ire)

  Maclean, Rt Hon David

  Davies, Quentin (Stamford)

  Maitland, Lady Olga

  Davis, David (Boothferry)

  Malone, Gerald

  Day, Stephen

  Mans, Keith

  Deva, Nirj Joseph

  Martin, David (Portsmouth S)

  Devlin, Tim

  Mates, Michael

  Dorrell, Rt Hon Stephen

  Merchant, Piers

  Douglas-Hamilton, Lord James

  Moate, Sir Roger

  Dover, Den

  Montgomery, Sir Fergus

  Duncan, Alan

  Nelson, Anthony

  Duncan-Smith, Iain

  Neubert, Sir Michael

  Dunn, Bob

  Newton, Rt Hon Tony

  Durant, Sir Anthony

  Nicholls, Patrick

  Eggar, Rt Hon Tim

  Nicholson, David (Taunton)

  Elletson, Harold

  Onslow, Rt Hon Sir Cranley

  Evans, Jonathan (Brecon)

  Oppenheim, Phillip

  Evans, Nigel (Ribble Valley)

  Page, Richard

  Evans, Roger (Monmouth)

  Patnick, Sir Irvine

  Fabricant, Michael

  Pattie, Rt Hon Sir Geoffrey

  Field, Barry (Isle of Wight)

  Porter, David (Waveney)

  Fishburn, Dudley

  Portillo, Rt Hon Michael

  Forman, Nigel

  Rathbone, Tim

  Forsyth, Rt Hon Michael (Stirling)

  Redwood, Rt Hon John

  Fox, Dr Liam (Woodspring)

  Richards, Rod

  Freeman, Rt Hon Roger

  Robathan, Andrew

  French, Douglas

  Roberts, Rt Hon Sir Wyn

  Gale, Roger

  Robertson, Raymond (Ab'd'n S)

  Gallie, Phil

  Robinson, Mark (Somerton)

  Garnier, Edward

  Rowe, Andrew (Mid Kent)

  Gillan, Cheryl

  Shaw, Sir Giles (Pudsey)

  Goodson-Wickes, Dr Charles

  Shepherd, Colin (Hereford)

  Gorst, Sir John

  Spencer, Sir Derek

  Greenway, John (Ryedale)

  Spicer, Michael (S Worcs)

  Gummer, Rt Hon John Selwyn

  Spink, Dr Robert

  Hague, William

  Spring, Richard

  Hamilton, Rt Hon Sir Archibald

  Sproat, Iain

  Hanley, Rt Hon Jeremy

  Squire, Robin (Hornchurch)

  Hawkins, Nick

  Stephen, Michael

  Hayes, Jerry

  Streeter, Gary

  Heald, Oliver

  Sweeney, Walter

  Hendry, Charles

  Sykes, John

  Higgins, Rt Hon Sir Terence

  Taylor, Ian (Esher)

  Hogg, Rt Hon Douglas (G'tham)

  Thomason, Roy

  Horam, John

  Thompson, Patrick (Norwich N)

  Howarth, Alan (Strat'rd-on-A)

  Thurnham, Peter

  Hughes, Robert G (Harrow W)

  Townsend, Cyril D (Bexl'yh'th)

  Jack, Michael

  Trend, Michael

  283

  Twinn, Dr Ian

  Whittingdale, John

  Waller, Gary

  Widdecombe, Ann

  Wardle, Charles (Bexhill)

  Willetts, David

  Wilshire, David

  Waterson, Nigel

  Watts, John

  Tellers for the Noes:

  Wells, Bowen

  Mr. Timothy Wood and Mr. Andrew Mitchell.

  Wheeler, Rt Hon Sir John

  Question accordingly negatived.

New clause 19

  HOME RESPONSIBILITY PROTECTION
  'For any person attaining pensionable age on or after 6th April 1999, for the purposes of Schedule 3 of the Social Security Contributions and Benefits Act 1992 (contribution conditions for entitlement to benefit) and for the purpose only of calculation of retirement pensions, a person prevented from regular employment by responsibilities at home shall be treated as having paid primary Class I contributions during any period during which they were so prevented.'.—[Mr. Kirkwood.]
  Brought up, and read the First time.
  12.45 am
  Mr. Kirkwood: I beg to move, That the clause be read a Second time.
  Mr. Deputy Speaker (Sir Geoffrey Lofthouse):With this, it will be convenient to discuss also the following: New clause 20—SERPS disregard—
  'Subsection (4)(b) of section 45 of the Social Security Contributions and Benefits Act 1992 shall be amended to insert after the words "5th April 1978" the words "after disregarding any tax year from 2011 onwards where —

  (i) there is no surplus in the pensioner's earnings factor and

  (ii) the person was aged 60 or over".'.

  Amendment No. 21, in clause 133, page 90, line 40, at end insert—
  '( ) In paragraph 5(5) of Schedule 3 to that Act, for the table there is substituted—

  "Duration of Working Life

  Requisite Number of Years

  10 years or less

  The number of years of the working life, minus 2,

  20 years or less (but more than 10)

  The number of years of the working life, minus 4,

  30 years or less (but more than 20)

  The number of years of the working life, minus 6,

  40 years or less (but more than 30)

  The number of years of the working life, minus 8,

  More than 40 years

  The number of years of the working life, minus 10".'.

  Amendment No. 23, in schedule 4, page 147, line 33, leave out '2000' and insert '2010'.
  Amendment No. 24, in schedule 4, page 147, line 34, at end insert —
  `( ) In the case of a pensioner whose spouse died on or after 5th April 2000, and on or before 5th April 2010, sections 48A(4)(b) and 48B(2)(b) shall have effect with the omission of the words "half of and after the words "additional pension" the insertion of the words "reducing by 5 per cent. for each complete year after 5th April 2000 and before death".'.
  Amendment No. 25, in schedule 4, page 148, line 19, at end insert —
  '( ) In section 44(3)(b) of that Act (as amended by this paragraph) following the words "for the relevant years" there is inserted "or, if there are more than 39 such surpluses, of those 39 which are the largest".'.
  Mr. Kirkwood: I shall deal with the amendments relatively quickly and I certainly have no intention of
  284
  pushing them to a Division—if that helps any hon. Members who may wish to make dispositions in advance of the end of the debate.
  There has been very interesting and useful debate on the Report stage of the Bill so far this evening in addressing the situation of war widows and the position of divorcees. They are very important subjects and it is correct that we should examine the effect of the legislation on those groups. However, the changes will affect a relatively small number of women as a proportion of the general population.
  The Equal Opportunities Commission report estimates that, by 2023, two thirds of all retired women will have an income on the margins of poverty. This small clutch of amendments and new clauses seeks to reinforce in the Government's mind the importance of trying to deal with the situation that some women will face when they retire. Women are still disadvantaged in the workplace. They are disadvantaged in the expectations placed upon them for child care, in having to care for elderly and dependent relatives, and in the availability of non-state pensions for part-time, low-paid work—in which many are engaged—and of pensions for those whose working lives have been interrupted.
  I do not think that the Bill as it stands addresses adequately the fundamental disadvantages that women will face upon retirement. Before the Bill was drafted, the Government consulted about the equalisation of state pension age. We supported that consultation process and we concluded that we favoured a decade of retirement with a common retirement age of 65 years. The Social Security Advisory Committee and the Equal Opportunities Commission recommended that any money clawed back by the Exchequer from the equalisation of state pension age at 65 should be targeted at vulnerable groups.
  We have placed the amendments before the House in order to draw attention to the fact that women who are engaged in part-time, low-paid work have poor prospects for a decent income in retirement. Some 88 per cent. of those who earn less than the lower earnings limit—which is currently £59 per week—are women; 73 per cent. of all those who claim income support in retirement are single women; and, on average, women are employed for 57 per cent. of their working lives compared with 97 per cent. for men. Therefore, we can state unequivocally that the vulnerable group comprises primarily women.
  I recently tabled a number of questions which the Minister was kind enough to answer. Although that was a very useful exchange and I understand that it would take a lot of money to address the ideas in the amendments adequately and fully, the purpose of the amendments is not to ask that that money be paid forthwith; their purpose is simply to probe the Government's intentions. If the Government do not intend to address the matter in the Bill, how will they make adequate provision in the near future for women such as those who work intermittently throughout their careers in part-time, relatively low-paid jobs in the textile industry in my constituency? Many women will retire and fall into inadequate financial circumstances which will affect them and their families in an unconscionable manner. The matter must be addressed urgently.
  Mr. Arbuthnot: All the amendments seek to reduce the effects of our state pension reforms, which have been designed to achieve equality of treatment between men and women and to ensure the continued affordability of SERPS. We have taken care to ensure that women's ability to secure a basic state pension will not be affected by those changes and that the position of people in vulnerable groups is protected by our proposals. We have protected the position of older women and ensured that those who are affected have been given plenty of time to change their pension plans. The amendments would make inroads into the steps that we have taken to put long-term state pension provision on to a more sustainable basis. They would increase expenditure in a poorly targeted way that cannot be supported. I urge hon. Members to reject them.
  Question, That the clause be read a Second time, put and negatived.
  Further consideration of the Bill adjourned.—[Mr. Burns.]
  Bill, as amended (in the Standing Committee), to be further considered tomorrow.

  LOCAL GOVERNMENT FINANCE
  Ordered,
  That the provisions of paragraph (2) of Standing Order No. 84 (Constitution of standing committees), paragraph (1) of Standing Order No. 86 (Nomination of standing committees) and Standing Order No. 101 (Standing Committees on Statutory Instruments, &c.) shall apply to the Updated Code of Audit Practice for Local Authorities and the National Health Service in England and Wales as if it were a draft statutory instrument; and that the said Updated Code be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Burns.]

  Black People (Deaths in Custody)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Burns.]
  12.50 am
  Mr. Harry Cohen: There have been nearly 70 deaths of black people in custody since 1987, which the Institute of Race Relations and the organisation Inquest describe as giving some cause for concern. I will read the names into the record: Akhtar Moghul, Clinton McCurbin, Ahmed Katangole, Rai Jasbir Singh, Nenneh Jalloh, Mohammed Parkit, Anachu Anozie Osita, Tunay Hassan, Terence Brown, Anthony Mahony, Mark Ventour, Joseph Palombella, Samuel Carew, Femi Adelaja, Armando Belonia, Bahader Singh, Oakley Ramsey, Kelroy Briscoe, Joseph Watts, Sajjan Singh Atwal, Derek Stephen Buchanan, Martin Richmond, Wayne Tobison, David 'Duke' Daley, Nicholas Bramble, Vincent Graham, Jamie Stewart, Edwin Carr, Mr. Romany, Siho Iyugiven, Germain Alexander, Kimpua Nsimba, Oliver Pryce, Aslam Khan, Edwin Robinson, Delroy McKnight, Vandana Patel, Ian Gordon, Arthur Allison, Leon Patterson, Sohan Sanghera, Joy Gardner, Kwanele Eldah Siziba, Mark Harris, Joseph Nnalue, Oluwashiji Shiji Lapite, Tyrone Wilson, David Ewin, John Ryan, Kwaku Andrew Ohene, Omasase Lumumba, Melita Crawford, Errol Commock, James Segawa, Ian Francis, Donna Awadat, Nadeem Younus, Warren Jones, Adejare Paul Akinbiyi, Turan Pekoz, Carl Owens, Oluwafeyisola Akinbobola, Norman Washington Manning, Anthony Lloyd Powell, Orville Blackwood, Mark Fletcher, Munir Usef Mojothi, Jerome Scott and Rupert Marshall.
  Those names are given in the Institute of Race Relations publication "Deadly silence—black deaths in custody" and in a letter from the institute dated 19 April. That is a roll call of shame for the British state and for Home Office Ministers, who have shown no concern about those deaths. The Minister should do the decent thing after this debate and write to me, put a paper in the Library or write to the families of every one of those individuals with an explanation for their deaths.
  Fifteen years ago, the Home Affairs Select Committee published a report on the deaths of people in police custody because, in the 10 years up to 1987, 274 people died while in the custody of the police. There were allegations that 26 of those deaths were the result of police action, but no one was prosecuted. Compare that figure with the deaths of all the individuals that I have named.
  The Police Complaints Authority has said that police custody deaths are running at about one a week. A disturbingly high number of them involve people from the black and ethnic minority communities. Although there have been several verdicts of unlawful killing, only one has resulted in an official admission of responsibility and payment of compensation. There have been deaths in police cells, prisons and psychiatric hospitals of immigrants and asylum seekers. The brutality that has brought about those deaths includes tape over the mouth, neck-holds, the new police baton, forced medication and beatings up.
  There has been a wall of silence and secrecy in response to those deaths. Peter Moorhouse, the deputy chairman of the Police Complaints Authority, is quoted in The Guardian as saying:
  288
  "Officers facing disciplinary hearings are ambushing cases by holding back information and intimidating witnesses with considerable success."
  Inquest, in its newsletter this summer, states:
  "We have absolutely no confidence in current mechanisms for investigating deaths in police custody where the police are called in to investigate themselves. These investigations remain biased, inherently secret and are never made public and yet they form the basis on which the Crown Prosecution Service and the Police Complaints Authority decide where charges are to be brought and strongly influence the shape of the inquest. Prosecutions rarely happen. This means the police remain unaccountable to the public for their actions and are seen by many as being above the law."
  In its annual report last year, Inquest referred to deaths in prison. It stated:
  "The issue of accountability of the Prison Service remains an area of great concern. Despite numerous recommendations from Coroners, Prison Service internal inquiries and vast amounts of evidence presented at inquests it appears nothing is learnt from the lessons of the past. Without scrutiny of these institutions in the public domain the Prison Service can choose to ignore or implement recommended changes at will."
  The report deals with psychiatric deaths as follows:
  "Specific cases during the year have highlighted, yet again, the dangers of anti-psychotic medication, the most famous (or notorious) of which is largactil, sometimes known as the liquid cosh … An increasing number of cases referred to INQUEST involve death after administration of these drugs and strongly point to a causative link."
  The report refers to deaths in police custody, which it describes as "The Invisible Deaths". It continues:
  "Many of these deaths could have been prevented by proper medical attention instead of incarceration in a police cell."
  As for unlawful killing, the report states:
  "Unlawful killing verdicts reached at inquests are ignored despite the fact that the jury is sure that a criminal act has been committed. They are not dealt with at a criminal trial or public enquiry. This is particularly important where it is agents of the state who are suspected either of carrying out the killing or of seeking to conceal the truth."
  The killing of Shiji Lapite, the 32-year-old Nigerian is a case in point. I went to his funeral on 24 June. He was killed on 16 December 1994. His voice box was crushed and he was asphyxiated due to pressure on his neck. The priest, a white man, called the killers thugs. Everyone in the church knew that he was referring to the police officers responsible. The priest said that the blood of Shiji Lapite cried out for justice.
  Six months after Shiji's death his family know as little about it officially as they did last Christmas. The family's lawyer talks of exceptional delays and lack of co-operation. The family's pathologist has been denied access to information, including photographs of the body which showed much bruising to the head and face, and the toxicology, histology and fixed brain reports. Shiji's family, like all the others, have no right to information about the Police Complaints Authority process, the Crown Prosecution Service process or the coroner's process. There is no legal aid for the families at inquests and no disclosure of information in advance. Legal aid should be available for the families in proceedings before a coroner. That was recommended in the report of the Select Committee on Home Affairs in 1980. It is disgraceful that successive Lord Chancellors have ignored the recommendation.
  The cost of that legal aid provision would not be that much. It would be between £2 million and £3 million, just 0.3 per cent. of the legal aid budget. The taxpayer pays

  289
  the state's bill—in this instance the killers' bill. Surely the taxpayer should pay the legal aid bill to enable the victim's family to be properly represented.
  Omasese Lumumba was killed in Pentonville prison on 8 October 1991. His inquest said that he had been unlawfully killed by prison officers using excessive force and improper methods during the course of control and restraint. Ever since then, there has been a huge cover-up. No information has been supplied to the House or to Members of Parliament.
  I have had protracted correspondence with Home Office Ministers, the Lord Chancellor and the Prison Service. To get Ministers off the hook, I have been told to contact the coroner, because he can release information to a properly interested party. I now have a letter from the coroner saying that I am not a properly interested party, even though I am trying to get to the truth of the matter. The letter concludes:
  "I have no power to disclose documents which were provided by other agencies purely to assist the coroner in inquiry and for his eyes only, as these documents would be subject to public interest immunity."
  We have come across that before in the Matrix Churchill cover-up. It seems to be used to allow injustices to occur.
  The coroner did not mention that, apparently, there was a private Prison Service inquiry, or whether he was aware of it. It is a disgrace that suspected killers can talk to a private inquiry in order to avoid justice. The findings of a private inquiry do not go to a coroner, an inquest or the family. Any killer would talk to such an inquiry as he would have carte blanche to lie while resting assured that he would never appear before any system of public justice. That is unacceptable and I call on the Minister to publish a report of the Prison Service inquiry into the unlawful killing by excessive force of Omasese Lumumba.
  Other cases deserve full and open information. Norman Washington Manning was killed in a racial murder by other prisoners without the Prison Service fulfilling its duty of care to protect him. Derek Lewis of the Prison Service wrote to me saying:
  "I am unable to say whether or not further inquiries may be necessary, nor in these circumstances can I comment on the motive for the killing."
  What answer is that to such a murder?
  Brian Douglas died of a fractured skull in May after being beaten by police with a new police baton. That warrants a full public inquiry before more people die in the same way. Leon Patterson was detained on remand at Stockport police station in November 1992. After six days he was transferred to Denton police station, where he died a few hours later. Covered in bruises, he received no proper medical treatment despite suffering diarrhoea and vomiting for several days. He was heavily dosed with Mogadon. The inquest said that he was unlawfully killed and that a failure of duty contributed to or caused his death; yet no one was prosecuted.
  Mr. Jeremy Corbyn: I am grateful to my hon. Friend for giving way and for obtaining the debate. I am sure that my hon. Friend will agree that the case of Leon Patterson is disgraceful. Despite all the inquiries pressed for by the family, myself and others, nobody from the appropriate police authority admitted responsibility. Eventually, a successful application was made to the High Court to set that inquest verdict aside
  290
  and we are now back in limbo without even an inquest date so that we can discover who the true killers of Leon Patterson are.
  Mr. Cohen: That is a good point. It is one of the cases that the Minister should answer, as is that of Orville Blackwood, who was killed in Broadmoor in August 1991 after being injected with more than three times the recommended dose of tranquilisers.
  Oliver Pryce was killed by a police special operations team. Again, the inquest recorded a verdict of unlawful killing. In 1992, the Director of Public Prosecutions announced that there was insufficient evidence to bring further prosecutions and the Police Complaints Authority announced that no officer was to face disciplinary charges. In April 1995, Cleveland constabulary admitted liability for that death and the family were awarded considerable damages; yet no apology was ever given to the family and no officer ever faced charges or disciplinary action.
  Those deaths are a disgrace, and many of them were caused by neck-holds and strangleholds which are still prevalent now.
  The Independent newspaper on Monday mentioned several deaths, including those of Oliver Pryce, Clinton McCurbin and James Davey. Winston Rose and Nicholas Ofusu—both mentally ill black men—John Lamaletie and others, probably including Shiji Lapite, died of neck-holds and strangleholds which should be banned.
  Justice is needed for the families of the deceased. There must be an end to the prevailing secrecy and cover-up procedures that I have described. There should be a ban on neck-holds and strangleholds, and an inquiry into medical care arrangements in prisons, police stations and psychiatric institutions. As was recognised by the 1980 Select Committee report, legal aid should be available to the families of the dead so that they can be represented at inquests. There should be a full, open and independent public inquiry into those shameful deaths, to which the families would all have full access. We want some answers from the Minister about the state's role in those deaths.
  1.5 am
  The Minister of State, Home Office (Mr. David Maclean): I have listened to the hon. Member for Leyton (Mr. Cohen) with care, and there is one point—although probably only the one—on which I can agree wholeheartedly with him. When a member of the public dies while in the hands of an agent of the state who is charged with his care, that must be treated as a most serious matter.
  Indeed, deaths in custody are treated as a very serious matter. It is a requirement for all police forces to report any death in custody to the coroner without delay, and to the Home Office within 48 hours, giving details of the circumstances leading to the death.
  For such purposes, the term "custody" is extremely broadly defined, and includes any death in a police station, whether or not the person had been arrested, and also the deaths of witnesses who had been attending a police station voluntarily. The definition includes deaths that occur in hospital if the deceased had been taken there from a police station. It also includes any death that takes place in the street after a person has been arrested by a police officer,

  291
  and any other case in which the person was in the hands of the police at the time of death—for example, in a police vehicle—or in police custody at a court. Finally, it includes any death that results from an injury caused by a police officer in the execution of his duty.
  The full definition is set out in the Home Office consolidated circular of 1986. It is deliberately couched in wide terms to avoid any suspicion that a death of which the police were culpable could somehow fall outside its terms of reference. In my view, it probably errs on the side of being too wide, and I have been re-examining it to see whether it should focus more clearly on circumstances in which there is some possibility, however small, of police culpability.
  Far from our hushing up such matters, the full details of all deaths in police custody are published each year in a Home Office bulletin of police complaints and discipline statistics. The bulletin gives details of the date when and the place in which each death took place, the age and the gender of the victim, and the verdict of the coroner. It also gives a brief account of the circumstances of each death.
  We provide that information because we recognise that it is crucial to preserving trust between the police and the public that there should be as much openness as possible about deaths that occur in police custody. For the same reason, it has now become standard practice for police forces to call in the Police Complaints Authority whenever a death occurs in custody, so that the authority can decide whether to look further into the matter.
  Deaths of prisoners in Prison Service custody also have to be reported immediately to the coroner and to Prison Service headquarters. Where there are suspicious circumstances, the police will also be brought in. Rule 19 of the prison rules requires the spouse or next of kin to be informed at once, as well as any other close associates of the deceased. They may also visit the establishment in which the death occurred.
  Like the police and the Prison Service, the immigration service has clear rules on the procedures for reporting deaths in immigration custody, in which the coroner would be informed at once and the police asked to investigate any suspicious circumstances. There has been only one death in immigration custody in recent years, and that was a tragic case in which two men set fire to their own cell, killing one and seriously injuring the other.
  It is important to put into context the number of deaths in police custody. In the past five years, it has ranged between 36 and 61 per year, and more than 1.5 million people are arrested by the police each year. Given the number of people who pass through police hands each year, it is an actuarial inevitability that some will die while they are in police custody. Indeed, a number of deaths occur each year as a result of heart attacks suffered by people who have been arrested.
  A large proportion of deaths are associated with drug or alcohol abuse. The Police and Criminal Evidence Act 1984 codes have strict requirements about the treatment of drunks. They must be roused and spoken to every half hour, to ensure that they do not lapse into a coma. If the condition of any detainee gives grounds for concern, a doctor must be called. But people who abuse drugs or alcohol put their lives at risk and, despite the best efforts of the police, some of them die while in police custody.
  292
  The hon. Gentleman asked about neck-holds. The Police Complaints Authority, in its annual report for 1993, stated that, following a number of high-profile cases, it had compiled a substantial body of expert opinion on the effect of neck-holds and certain arm locks, which it had passed to the relevant committee of the Association of Chief Police Officers. The expert opinion was that a neck-hold that exerts any pressure on the carotid artery—the artery in the neck that carries oxygenated blood and nutrients to the head—or any hold that compresses the airway, involves, except in extreme circumstances, an unacceptably high element of risk. The authority expressed the view that that advice must be emphasised in police training to avoid the risk of deaths resulting from that type of restraint.
  The use of training and self-defence techniques is an operational matter for the chief officer of each force. Guidance on those matters is issued by ACPO through its standing sub-committee on self-defence, arrest and restraint. I understand that the sub-committee is in the process of reviewing its guidance and is looking at, among other things, the use of neck-holds in restraining assailants.
  I shall now say a few words about lay visiting in police stations. Lay visiting plays a valuable role in police-community relations and in providing independent oversight of police treatment of detainees in police stations, and the conditions in which people are held. Following the success of pilot schemes set up in 1983, the Home Office recommended the setting up of lay visiting schemes in all force areas. Updating guidance was issued in 1991 in respect of the Metropolitan police district, and in 1992 for the rest of the country. All areas now have lay visiting schemes in operation. The responsibility for the setting up of lay visiting arrangements lies with the police authority. In London, it lies with the Home Office, now the Metropolitan Police Committee, in consultation with the chief constable.
  From the earliest days, it was recognised that schemes needed to evolve to suit local circumstances. There is accordingly a wide variation in schemes and panel membership, ranging from those comprising visitors recruited from the public at large to those that consist of police authority members who make visits as part of their normal duties. The purpose of lay visiting is to enable members of the local community to observe, comment and report on the conditions under which persons are detained at police stations, and the operation and practice of the statutory and other rules governing their welfare, with a view to securing greater public understanding and confidence in those matters. Those arrangements also provide an independent check on the way in which police officers carry out their duties with regard to detained persons.
  The police are required to give direct and immediate access to lay visitors, who arrive unannounced at police stations at any time of the day or night. Lay visitors may inspect empty cells, talk to all detainees if the detainees consent and examine custody records—again, if the detainees consent. Any areas of concern, or complaints, are immediately drawn to the attention of the custody officer. Reports on each visit are made to the police authority.
  The police service accords the highest priority to good relations with all members of the community that it serves, irrespective of racial background or other factors.

  293
  Since 1993, the service has been collecting information for Her Majesty's inspectorate of constabulary on the ethnic origin of those stopped and searched under the relevant powers in the Police and Criminal Evidence Act 1984. The 1993–94 figures were made available nationally, and chief officers are beginning to make available locally their forces' figures for the most recent financial year. Additional ethnic monitoring of police activity will begin from 1 April next year.
  All that will help chief officers to assess whether their officers are delivering an equitable service to all sectors of the public. It also shows that our police service is prepared to look at how it operates, and to make changes to its policies and practices if necessary.
  The recruitment and retention of members of ethnic minorities to the police service is a high priority. The Government are keen for the service to represent the communities it serves.
  Mr. Cohen: What the Minister has been saying does not really address the seriousness of the concern expressed in my speech, and the feelings of the families of those who have died. What lessons have the Minister and the police learnt from those 70 deaths, and what changes will be made to prevent another 70 in the future?
  Mr. Maclean: As I tried to make clear at the beginning of my speech, the vast majority of those people died while suffering from the results of alcohol or drug abuse, or from heart attacks, or in other circumstances in which no blame can be attributed to the police. It is unfair of the hon. Gentleman to suggest that there are 70 deaths a year, and that the police are somehow guilty because people happen to die while they have been visiting a police station, giving evidence at a police station or sitting in a police cell. Moreover, while the police service is happy to look into neck-holds, I am concerned that the service should have sufficient restraint methods to deal with some of the raving maniacs whom it must hold at times.
  294
  Let me also tell the hon. Gentleman that, when there is any evidence whatever of police culpability in the use of excessive violence, or any other action that results in the death of someone in police custody, a proper investigation takes place. If there are lessons to be learned, they will be learned and put into practice. As I intimated in connection with neck-holds, the police are investigating what additional training may be necessary so that they can safely grab some violent raving maniac by whatever part of his body is available, but hold him in a way that will not result in his untimely death.
  It is all very well for us to sit in the plush comfort of the House of Commons and talk about police officers who should show tremendous care for some of the people they must arrest. It is quite another matter to be patrolling the streets on Friday and Saturday nights and to have to deal with the people out there who are assaulting the police time and again, knifing and murdering them. Of course the police must behave within the rule of law; when they do not do so, they are held to account and dealt with very severely.
  I was also trying to demonstrate to the hon. Gentleman that, in order to prove to the communities they guard that the police can be trusted to behave properly and favourably to all sections of those communities, the police are engaged in ethnic monitoring of the people whom they arrest and with whom they deal, and of those whom they recruit for the police service. They are keen to ensure that, throughout England and Wales, serving police officers properly represent those in the community with whose policing they are charged.
  For the past few years, we have actively encouraged police forces in their attempts to secure more black and Asian recruits, but we recognise that there is more work to be done in increasing the representation of ethnic minority groups in the police force.
  The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned accordingly at twenty minutes past One o'clock.