HC Deb 05 July 1995 vol 263 cc455-66

Amendments made: No. 95, in page 170, leave out line 50.

No. 96, in page 171, leave out lines 10 to 14.

No. 97, in page 173, leave out lines 4 to 6.

No. 98, in page 174, line 32, column 3, leave out 'definition of "the Board"'and insert 'definitions of "accrued rights premium", "the Board", "contracted-out protected rights premium", "limited revaluation premium", "pensioner's rights premium", "personal pension protected rights premium", "state scheme premium" and "transfer premium"'.

No. 99, in page 174, line 54, column 3, after 'Board"' insert 'and'.

No. 100, in page 174, line 56, column 3, leave out 'and' and insert 'in sub-paragraph (2)'.

No. 101, in page 175, line 42, leave out from '1971' to end of line 43 and insert 'shall come into force on the day this Act is passed'.—[Mr. Hague.]

Order for Third Reading read.-[Queen's Consent, on behalf of the Crown, signified]

8.4 pm

Mr. Lilley

I beg to move, That the Bill be now read the Third time.

This huge Bill, with 177 clauses, is the biggest of half a dozen Bills which collectively constitute the largest overhaul of social security legislation in 50 years.

The Bill imposed an enormous task on the Committee and I am very grateful to the members of the Committee for the constructive way in which they approached it. I extend that gratitude to the Opposition, as I do to all the organisations which have contributed to the thought behind, and amendment of, the Bill as it has gone through the House. We are grateful to the joint working group on occupational pensions, the Institute and Faculty of Actuaries, the Confederation of British Industry, the Trades Union Congress, the Pensions Management Institute and a great many other organisations and individuals for their advice and representations.

Above all, I should like to express my gratitude to my ministerial team, whose members have so efficiently and effectively, good-humouredly and with such intellectual distinction, carried the Bill in Committee and on Report to Third Reading. This speech gives me an opportunity to offer my congratulations, which I think will be shared by all hon. Members, to my hon. Friend the Member for Richmond, Yorks (Mr. Hague), who is moving from the dales to the valleys.

I got into slight trouble when Neil Kinnock was claiming that he was going to displace my former right hon. Friend the Member for Finchley, now my noble Friend Lady Thatcher, from No. 10. I said that I was pretty sure that the people of Britain would not send a boyo to do a woman's work and I was criticised by someone in Wales who wrote to me saying that I should not use the word "boyo". So, I shall just say how I am certain that the people of Wales will be delightful-sorry, delighted to know—

Mr. Hague

They will be delightful.

Mr. Lilley

Oh, they will be delightful. The people of Wales will be delighted to know that a boy has been sent to do a Vulcan's job.

I should not refer to the age of my hon. Friend the Member for Richmond, Yorks. To me, he is reaching middle age. I was brought up in the village where William Pitt was born and every week I saw the statue commemorating the fact that he was Prime Minister at the age of 24, so I rather think that the new Secretary of State for Wales is a bit past it. He is, of course, admirably placed to launch a leadership bid at a future stage.

I also convey my congratulations to my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) who—I think that I am allowed to reveal it—has been made the Minister of State for Defence Procurement. He goes there with two enormous advantages: first, he has had experience of spending large sums of money in the DSS, which will come in handy in his new task and, secondly, as a former parliamentary private secretary of mine, he knows that his new post is but a stepping stone to the Cabinet, where all of my PPSs are destined to end up, as the Secretary of State for Education and Employment, with her enhanced authority, can confirm.

This is a big Bill and it is about big money. Pensions are the largest single element of social security spending. Indeed, the basic state pension alone is the biggest item of expenditure in Government. In the private sector, too, they account for an enormous amount of money: £500 billion is invested in occupational schemes and personal pension funds in this country, which, as we know, is more than that invested in all similar private pension schemes in the rest of the European Community put together.

We as Conservatives believe that it gives us a tremendous advantage to have so much private provision complementing state provision, especially as we move into a world in which there are an increasing number of retired people supported by a decreasing number of people of working age. We are therefore determined to build on our success in encouraging people to build up occupational and personal pension schemes; that is one of the key things that the Bill is about.

The confidence that lies behind the growth of occupational and personal pensions was dented by the events affecting the Maxwell pension schemes and by the mis-selling of private pensions. The Bill is designed to restore confidence in the security of occupational pension schemes by giving greater rights to members, greater powers to trustees, greater duties to professionals such as actuaries and auditors and authority to a new strong regulator. It sets a minimum funding requirement and backs it up by a compensation scheme should all other measures fail to prevent a deficiency in the funds.

Secondly, we believe that the Bill will encourage choice in personal pensions by giving people greater choice in how they use the funds that they have built up in their personal pension schemes, when they convert them into annuities and draw funds from them before they do so, and by making it possible for people to remain opted out of the state pension scheme throughout their working life by introducing age-related rebates.

The third aspect of the Bill is its emphasis on equality. That is partly in response to the Barber ruling by the European Court of Justice and partly as a result of an autonomous decision, which we still have the power to take in the House, to equalise the state pension age between men and women. We have chosen to do that in a way that, we believe, is responsible and reflects the growing propensity of women to work, especially once their children have left home, and, therefore, to build up their own pension rights. We decided, therefore, to equalise at the age of 65, beginning the change in the second decade of the next century.

That decision is probably the most important spending decision taken this century—if we had decided to equalise at 60 rather than 65, the cost to the taxpayer would have been £12 billion a year once the change had come through—but we have not had a clear-cut response from the Opposition to it. The hon. Member for Glasgow, Garscadden (Mr. Dewar) has talked about introducing a flexible decade with a pivotal age of 63. I am not sure whether that is a firm commitment or one of those ideas that the hon. Gentleman is wont to float in his engaging way.

I point out to the hon. Member for Garscadden merely that the key thing about a flexible decade is the pension that one is entitled to draw at the beginning of the decade. The overwhelming experience everywhere is that people draw their pension at the first opportunity. If both men and women were allowed to draw their pension at the age of 60, we can assume that, just as they do now, the bulk of people would draw their pension at the age of 60 even if it were 20 per cent. lower than the present basic pension. That would be the result of having a pivotal age—that is, the age at which a person would reach the present value uprated for inflation, which is some three years into the flexible decade.

We will allow a much longer period of potential flexibility—an indefinite period of flexibility—from a starting age of 65. At the starting age, people will be able to draw the full basic pension, uprated for inflation. Should they defer for a year, they will get an extra 10 per cent. They will get an extra 20 per cent. for two years, an extra 30 per cent. for three years, and so on. The Opposition's proposal combines the worst of all possible worlds—high up-front costs, which would be higher than equalisation at 63, and the result of many people being much more dependent on income support because they have chosen to draw a low pension at an earlier age.

Other issues, to which I shall now refer, have arisen during the passage of the Bill. One important one is pension on divorce. I am grateful for the amendment introduced by my noble Friend Baroness Young in the other place, which provided the basis of the changes that we introduced. I know that there is a case, strongly argued in some quarters, for going further in the direction of full pension splitting. I believe that it would not have been appropriate to move in that direction in the Bill. The Government will, however, look at that issue in the context of the research that we are undertaking.

The issue of war widows came up and we made an important concession, which was right in this 50th anniversary year of the second world war, but we resisted other changes and I am grateful for the brave and lucid speech given by the hon. Member for Garscadden in that context.

The issue of residential care was raised and we have resolved an important difficulty and a sense of grievance, which were aired as a result of the Bill, by saying that we shall require, as a result of regulation changes, local authorities to ensure that when one spouse is in residential care—usually the husband—and the other remains outside, he or she will be able to retain at least half of the joint occupational pension. Local authorities will no longer be allowed discretion to leave less than half the pension for the spouse who remains outside residential care; that discretion was being used, in a minority of cases, in a way that was simply not acceptable.

I have paid a genuine tribute to the contributions from hon. Members on both sides. It would not be right, however, to let pass the fact that we are dealing here with an absolutely fundamental aspect of modern government and with a central aspect of social security provision—pension provision and provision for retirement. It is the most costly single item in the Government's Budget. It is important that any Government who are serious about controlling public expenditure and about ensuring that public expenditure does not outstrip the nation's ability to. pay spell out clearly what they intend to do about it. We as a Government have done so previously and we have done so in the Bill. We still wait to hear any clear response from the Opposition to the challenge so lucidly laid down by my hon. Friend the Member for Richmond, Yorks, now Secretary of State for Wales, in which he asked them to make clear

Mr. Miller

Right hon. Friend.

Mr. Lilley

No. My hon. Friend has yet to take the oath.

My hon. Friend laid a clear challenge to the Opposition, to which we have heard no response. He asked whether they reaffirmed the pledge to uprate pensions in line with earnings—a pledge on which they have fought the past three general elections—whether they were still pledged to reverse the changes to the state earnings-related pension scheme, which they have criticised in this Bill, whether they were still pledged to reverse the other changes to which they objected and whether they were firmly committed to a process of equalising the state pension age that would involve a cost several billion pounds higher than the cost in the Bill. In their ability or inability to answer that question lies one of the great tests of whether they are a serious Opposition and a potential Government or whether they are wedded to being in opposition and determined to remain there.

I commend to the House the Bill, with the changes that have been introduced in its passage through both Houses. They enhance it and mean that it will be a major contribution to the provision of pensions into the next decade.

8.19 pm
Mr. Miller

As was said last night, the genesis of the Bill came in the wake of the Maxwell affair. That was followed soon afterwards by Professor Goode's inquiry, which raised many important issues that I am sure that the House will revisit many times.

As the Secretary of State said, the Bill is large, and I congratulate my hon. Friends the Members for Glasgow, Garscadden (Mr. Dewar) and for East Kilbride (Mr. Ingram) on the amazing efforts that they have put in. I acknowledge that the Minister for Social Security and Disabled People—the future right hon. Secretary of State for Wales—was clearly in command of his whole team, but his team was enormous. I have never met so many civil servants as I did during the passage of the Bill. My hon. Friends had little or no such expert support, so their efforts should be commended—along with the efforts of my hon. Friend the Member for Leeds, East (Mr. Mudie), who occasionally let me out of the Committee to do other things.

It is clear from the energy and effort that went into the Opposition's activities that there are certainly people who will soon form a new Government. I take issue with the Secretary of State's closing comments, because it is obvious that the Opposition have taken the Bill extremely seriously, in a most responsible manner.

Many issues arise from the Bill. First there are the functions of the new regulatory authority, which we shall have to re-examine. The composition of that body, especially the absence of a pensioner representative, is a fundamental error. As we heard in our debates last night, the whole House and indeed the whole country are taking pensions matters increasingly seriously, and it would be improper to leave the gap unfilled in the longer term.

Trustees, too, have been debated in the past two days. Both the rights of pensioners as potential trustees and the numbers of member trustees will need revising. I feel strongly that a good pension scheme has nothing to fear from having at least as many member trustees as management appointed trustees. We considered those ideas in Committee and examined several potential permutations, all of which were rejected by the Government. For the sake of basic democracy in pension schemes, we shall have to revisit those issues in the near future.

The Secretary of State mentioned residential care, and we have heard some carefully thought-out contributions to that debate. I am worried about some of the anomalies that still exist. For example, I think of people in the same category as a constituent of mine who, having paid for 40 years into an occupational pension scheme, finds that at the age of 88 she gets no direct benefit from it. The woman in the next room has not paid into an occupational pension scheme—she has probably not had the opportunity—but under the clawback arrangements both women end up with the same personal allowance. That is an anomaly that needs thinking through more carefully.

Because of another personal constituency case, I was pleased that the effect of second marriages on war pensions was dealt with. That removed another anomaly that has deprived one of my constituents of a pension. She was one of the women who escaped during the fall of Singapore, and her pension was taken away in 1957. It will be welcome if her pension is restored after all those years.

The Secretary of State mentioned the importance of occupational pensions. Whatever changes we introduce in this place, occupational pensions will continue to be an important part of personal savings—probably the most important part. In my previous occupation, it took me a long time to persuade many of the people whom I represented that their investment in their occupational pensions was equal to, and in many cases greater than, their investment in their houses. When that argument was won, it woke people up to the idea but they should have some control over the funds invested on their behalf. That is why issues concerning democracy in occupational pension funds are dear to me, and I hope that a future Government will revisit them.

My great regret is that I do not believe that the Bill will stop another potential Maxwell. It puts obstacles in the way of such a person, but I do not believe that it would stop someone determined to bypass fairness and equity and to manipulate people's pension funds improperly.

The Secretary of State mentioned the age of retirement. Many women resent the way in which the Government have dealt with that issue. There is no point in hiding the fact that the problems are complicated, but the Labour party's alternative approach provided a solution that would have been far more beneficial to a significant proportion of the population. I am especially disappointed that the Government failed to pick up those ideas.

Finally, I shall return to an issue at which I have nagged away in other debates, including those in Committee. I was disappointed that the Government did not pick up the spirit of the Occupational Pensions Bill that I presented in 1992.

Mr. Arbuthnot

I have not received it.

Mr. Miller

That is extraordinary. Here we have a Under-Secretary who is so keen on computing and information technology that we hear that he is now to be responsible for procuring weapons for our service personnel, yet he cannot find in his Department a piece of paper that I presume he will have to acknowledge must have been eaten by his predecessor. If the hon. Lady reads some of the Minister's remarks about her in Committee, she will perhaps eat him as well.

It is a great pity that the concept of my Bill—to deal more specifically with what happens to pension funds at the point of takeover of a company—was not addressed within the Bill. I acknowledge that the Government have dealt with some of the points that I raised in other debates, but I find it sad that they have continued to avoid the basic right of occupational pension fund members at the point of takeover. The Government have argued time and again that the assets of pension funds belong to everyone involved, including the employer, and that therefore the employer should have some of the benefits in certain circumstances. I have strongly argued that where an incoming employer has taken no risk whatsoever at the point of takeover, he should have none of the benefits accruing from assets in a fund.

We have gone through a lengthy Committee stage, and lengthy remaining stages, of the Bill, and we have sought to address many problems and other issues that I have described. I hope that the Government's confidence is well-founded, but the Bill is deficient in a number of ways. I hope that if, in their short remaining period in office, the Government recognise that we were right and they were wrong—as the Minister graciously did on the question of the rights of trustees during his swansong this evening—they will come back and make amendments to correct any deficiencies.

8.32 pm
Sir Andrew Bowden

I congratulate my right hon. Friend the Secretary of State and his colleagues on the gigantic task that they have now completed. This is an important Bill which has a great deal to commend it, but I fear that time will reveal some weaknesses—for example, in relation to the powers and effectiveness of OPRA. In the sector of trustee representation, I regret that an opportunity to define in law the purpose of pension funds and to establish the principle that pension fund money represents deferred earnings has been missed. I appreciate that the Bill is complex and technical, and that it has placed an enormous burden on Ministers in the Department who have undertaken an incredible amount of detailed work, but I suspect that, in the not too distant future, the House may well have to consider another amending pensions Bill.

8.33 pm
Mr. Clifford Forsythe

I know that Northern Ireland business is coming directly after Third Reading, but I would like to take a little time to say a word about the Bill. First, I congratulate the hon. Member for Richmond, Yorks (Mr. Hague) on his elevation, and also the hon. Member for Wanstead and Woodford (Mr. Arbuthnot) on his promotion. Both promotions are well deserved. It was a pleasure to work in the Committee considering the Bill. It was hard work and exhausting, but it was also pleasant.

I also congratulate the hon. Members for Glasgow, Garscadden (Mr. Dewar) and for East Kilbride (Mr. Ingram) on their tremendous work during the debates on the Bill. It is not often that we mention Whips, but I should like to refer to the hon. Members for Leeds, East (Mr. Mudie) and for Gedling (Mr. Mitchell). I have been fortunate to have two Whips on this Committee, and I feel greatly honoured. I would like to thank both of them, but particularly the hon. Member for Leeds, East for the great help that he has given me.

The House should know that, as a member of the Ulster Unionist party and therefore not subject to the Whips who know what is going on, I had to listen carefully to the points put forward both by Government and by those leading for the Opposition. It has been fascinating, and it is quite obvious that those who took part are well versed in the subject.

I feel this evening that I have come to the end of a very long journey. My experience of this subject began when I heard the news that a certain gentleman had gone overboard and drowned. That prompted my first experience of looking into occupational pensions. Since then, we have come a long way. When I spoke on Second Reading, I made out a list of items that I felt we should try to change. I have to tell the House that, up until a very short time ago, every item on that list had not been changed. I was almost dancing with joy this evening when two amendments that I very much support were accepted by the Government.

I am delighted that the Bill is reaching the end of its passage through the House. I know that most of us are, but for the best reasons. The difficulties for the Committee in looking at the subject were enormous, and I congratulate everyone concerned with the Bill and all of my Committee colleagues on the hard work that they did.

I should like to mention one other item. I am sorry that the Secretary of State for Northern Ireland left the Chamber just before I began my speech. I mentioned earlier that I am very concerned because the Bill does not extend to Northern Ireland. I was shown great courtesy by Ministers and by civil servants—for whom I have the highest regard—when I raised the matter. I must also congratulate the civil servants on their hard work. When such matters are being looked at, the fact that they should extend to Northern Ireland should be taken into account at the beginning. Perhaps if they had, we would not need 167 amendments applying to Northern Ireland. I fully support the Bill and I am delighted that it has managed to complete its passage through the House.

8.38 pm
Mr. Denham

I will not detain the House for long, because I have already tested the credulity and patience of my Front-Bench team by saying that I found the Bill interesting and the Committee enjoyable. I also know that the Minister of State will want to go off to look for a house in the Principality or in a nearby commuter suburb, such as Wokingham. The Under-Secretary will soon find a number of letters on his desk regarding major procurement contracts, so I would not like to alienate him at this stage in our proceedings.

We have been on a long journey, and we have all aged a lot. Cabinet Ministers seem a lot younger to me now than they did when we started our consideration of the Bill. Just like one feels when one gets to the top of a hill while fell walking, when one wants to enjoy the view before one goes down, it is worth taking a quick overview of the Bill. I must say that I am disappointed by it. It was born out of a desire to provide more security for people's pensions and people's retirement.

It is a remarkable achievement of the Bill that the great majority of people will now receive a lower pension as a result than they would have done before its introduction. Every single woman will now have less entitlement to pension rights than she did before the Bill was introduced. Every single member of the state earnings-related pension scheme will now have a lower SERPS entitlement than he or she did when the Bill was introduced.

People with appropriate personal pensions, APPs, which are, as we have said, linked to SERPS, will, through the rebate, be liable to a lower entitlement and will receive lower pensions should the Government

Actuary gets his calculations right. The links between SERPS and occupational pension schemes have been broken. Perhaps the jury is still out on the requisite benefits test, but I suspect that people's pension rights will be worth less than they were before the Bill was introduced.

It would be churlish not to accept that one or two measures such as limited price indexation will provide better pensions for those who do not enjoy that protection in their current occupational schemes. It is a remarkable and rather cynical achievement on the part of the Government to introduce a measure on the back of widespread concern about pension security that diminishes people's pension rights.

The Secretary of State chided the Opposition for failing to provide all the details of their pension strategy. The Government's Bill does not constitute a pension strategy. It is a mistake to believe that simply redrawing the boundaries between what the state scheme does and what non-state schemes do constitutes a new pensions strategy. It may constitute a public expenditure strategy for the future and a strategy for reducing the future tax burden, but it does not constitute a pension strategy.

One question is still unanswered. Will there be sufficient funds available in 2010, 2020, or 2030, whether through a state scheme or through funded non-state schemes, to provide people with the level of pensions that they would expect to accrue during their working lives? There is nothing in the Bill to ensure that those funds are available to pay people's pensions in the future. The past six months have changed nothing.

I believe, perhaps for slightly different reasons from the hon. Member for Brighton, Kemptown (Sir. A Bowden), that, in a short time, under a Labour government, the House will have to reconsider the pensions strategy. That must happen if we are to ensure that people in the 21st century have a pension to retire on that is not only secure—a central aim of the Bill—but of an adequate level to provide them with a decent retirement income.

8.42 pm
Mr. Dewar

Many things happened in the course of the Committee, some of which I sadly missed. One that I particularly regret missing was the sight of the hon. Member for Antrim, South (Mr. Forsythe) dancing with joy. That would have been a rare spectacle. As I said at the end of the Committee, I thought that the staying power of the hon. Member for Antrim, South was admirable. He took punishment with uncomplaining zeal, and lasted the pace. He was an extremely useful colleague in Committee.

My feelings are mixed. The Bill is in many ways a disappointing end product, but I cannot pretend that I am not sorry to see the end of it. I am, to put it bluntly, very pleased to see the end of it. The Secretary of State said that the Bill has 177 clauses. It started out with 162 clauses, so I suppose that that represents productivity in a way. I doubt whether we will get a bonus for our efforts—certainly not from the Secretary of State.

The Bill has been a difficult one to consider because of its complexity, but the business has been conducted with great courtesy, I hope on both sides. I certainly pay tribute to the Ministers who were in charge of the Bill. I wonder whether the Minister of State is aware that there is a rather unfortunate rumour that he was born aged 54½ I am prepared now to put it around that at least the evidence is worth re-examining. I will not put it more enthusiastically than that, but he was genuinely extremely helpful within the limits of propriety. I do not know what that means, but it sounds very pleasant.

The new Minister of State for Defence Procurement must have got some sort of remission, because he was among us at the Department of Social Security for a short time. He passed wraith-like among us and is now disappearing. I must bring him the bad news, as did my hon. Friend the Member for Southampton, Itchen (Mr. Denham): that I, too, have a defence procurement constituency. I look forward to the next round of type 23 orders—

Mr. Denham

I do, too.

Mr. Dewar

Oh dear. Damn. I would be straying just marginally out of order if I prayed the case of Yarrow Shipbuilders, although I feel strongly about it in the context of frigate orders.

Everyone has tried hard on the Bill at least to make sense of it. I agree with other hon. Members that we have been on a long road—at times a stony one. I do not pretend that there were not moments when I began to wonder where we were going. I suppose that that is inevitable.

I am grateful to my colleagues who have stuck to the task remarkably well. The Whips are, of course, a race apart, we all know that. My hon. Friend the Member for Leeds, East (Mr. Mudie) has been a constant aid, and the co-operation from his opposite number would have warmed the heart of those who enthuse over the Jopling Committee report—a small and select band in the House. I believe that such co-operation is important in making the business of the House manageable.

I will not advise my hon. Friends to vote against the Bill—it would be extraordinary if I did so—because it has some good things in it, particularly in the earlier sections, which built upon the Goode committee report. There has been widespread concern about security and the adequacy of the regulatory framework for occupational pensions. Although there are some disappointments, I believe that much of the Bill, taken from the Goode committee and translated into legislation, is helpful and right.

I am sorry that the shift in control represented by the arrival of a legal minimum for a number of active member-selected trustees stuck at one third. As the Minister knows, we tried hard to persuade him that many British companies operate successfully on at least a 50:50 basis. That, too, fell upon stony ground.

The Opposition also had doubts about the regulatory authority, not in terms of the need for such a body, but whether it has all the powers it needs to carry out its enforcement and monitoring jobs, which are essential to it. We also argued hard and lost on pensioner trustees.

The compensation scheme, time off for trustees, training for trustees, indexation, limited price indexing and so on will stand the test of time. I hope that those parts of the Bill will have provided an enduring framework for occupational pension schemes. Whatever may happen in the future, at least that shape will remain. It will be of importance in reassuring the public, and perhaps encouraging an even broader coverage of occupational pension schemes in the future.

I also approve of other parts of the Bill. Perhaps it is inevitable, but I thought that the Government were a little over-proud of the important concession to war widows and to that band who unfortunately have seen a second marriage end. I take some satisfaction from the fact that the Labour party in another place voted for that concession, but the Government did not. I will leave that point at that.

It was important that we got the concession on the protection of the rights to a portion of occupational pensions when the holder of that pension has, unfortunately, gone into residential care. That was again the result of fairly sustained pressure in another place. We were preparing to return to that point when, to their credit, the Government capitulated.

There is much unfinished business. I cannot agree that the argument about the future treatment of pension assets upon divorce and the break-up of a marriage has concluded. To be fair, the Minister said that the Government would examine the matter again in the context of further research. However, I feel very strongly about it, as do my hon. Friends and the majority of people in the wider community.

It is not some sort of Opposition delusion on this occasion; I think that it is the unanimous view of those who are involved in the technicalities of the matter that there should at least be an option of dividing funds at the time of divorce and providing security for an ex-spouse. That cannot occur with the form of deferred maintenance that the Minister appears to prefer.

I think that we have said all that we need to say, but I must conclude with one important area of dissent. I refer to part II of the Bill, which deals with the state pension system. We were disappointed that the Government insisted on what we believe is the rather unrealistic concept of a retirement age of 65 when people are expected to shuffle off into retirement. I recognise that the term "flexible decade of retirement" is anathema to the Secretary of State.

It is not such a silly idea when we remember that it was—and still would be if the door had not been slammed—the preferred option of the National Association of Pension Funds and of the Confederation of British Industry. I do not suggest for a moment that that means that it is, by definition, the right solution. However, it is perhaps an antidote to the idea that it is some sort of eccentricity on the part of the Labour party to believe that flexibility should be part of the scheme.

I look forward to seeing the costings and the definition of the Prime Minister's pledge—I referred to it in Committee—which appeared in the Evening Standard as one of his trump cards in the leadership election. He promised that there would be a new flexible pension scheme which would allow people to receive their state pension before the normal retirement age in circumstances such as illness or unemployment. I do not know quite what that means, but Prime Ministers do not give those pledges lightly, and we look forward to seeing exactly how it will work and how it will be costed. Perhaps it will give a rather different definition to the whole argument.

Our major concern is that part II of the Bill represents an attack on the state earnings-related pension scheme, which is fundamental in its impact and very serious in social terms. It is a very complex matter, and we spent hours talking about the annualisation of SERPS, for example—an interest that will not be widely shared. However, people may be interested in the end product.

As we all know, the way in which we treat the proportion of earnings below the lower earnings level of the national insurance contributions band and the alterations to how it is treated that have been introduced are "technical"—that is the word used by Ministers—but, to be fair, important in financial terms.

Many people will not have woken up to the fact that the changes will save the Treasury £400 million in 2010 and £2.3 billion by 2050. If one puts that into more practical terms, it means that those people drawing SERPS in 2000 will find that their weekly pension is worth about £2.70 per week less, on average, in current terms. By 2020, it will be £4.90 per week less.

When we examine the basis of entitlement to SERPS and the loading of the contracting-out calculations, it is fair to say that SERPS has again been mugged by the Government. That argument is encapsulated by the Government's calculation that, as a result of the changes, in 2050 the cost of SERPS to the national insurance fund—which would have been £19.3 billion—will be £9.9 billion. That has been done by stealth, and it is a mugging in the small print of the Bill.

I think that it is a serious matter, and one about which we protested in vain. It means that that section of the legislation will have a very uneasy and, I suspect, rather short life. I look forward to returning to the matter, and I recommend that the Secretary of State keep the Committee stage reports by him, as they will prove a useful reference work when he is on this side of the House.

Question put and agreed to.

Bill read the Third time, and passed, with amendments.