PRESERVATION OF RIGHTS IN RESPECT OF ADDITIONAL PENSIONS

HC Deb 03 April 2000 vol 347 cc657-65

1. '.—(1) In the provisions of the Social Security Contributions and Benefits Act 1992 that are set out in subsection (2) (provisions relating to additional pensions for surviving spouses)—
   1. (a) the references to 5th April 2000 (wherever occurring) shall have effect, and be deemed always to have had effect, as references to 5th October 2002; and
   2. (b) the references to 6th April 2000 (whatever occurring) shall have effect, and be deemed always to have and effect, as references to 6th October 2002.
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2. (2) Those provisions are—
   1. (a) sections 39(3) and 39C(4)(widowed mother's allowance and widowed parent's allowance);
   2. (b) sections 48BB(7), 48C(3) and 51(3) (Category B retirement pensions); and
   3. (c) paragraphs 4(3), 5A(2) and (3) and 6(3) and (4) of Schedule 5 (deferred pensions).
3. (3) For section 52(3) of the Welfare Reform and Pensions Act 1999 (power to substitute a later year for references to year 2000 in prescribed provisions of the Social Security Contributions and Benefits Act 1992) there shall be substituted—
   1. "(3) The regulations may amend (or further amend) any prescribed provision set out in section (Preservation of rights in respect of additional pensions) (2) of the Child Support, Pensions and Social Security Act 2000 (which sets out provisions falling within subsection (2) of this section) so as to substitute a reference to a later date for—
      1. (a) any reference in that provision to 5th October 2002 or 6th October 2002; or
      2. (b) any reference to a date inserted in that provision by a substitution made by virtue of this subsection."
4. (4) After section 52(4) of that Act of 1999 there shall be inserted—
   1. "(4A) The regulations may provide, for the purposes of any provision made by virtue of subsection (4), for a case in which a person who, as a consequence of receiving incorrect or incomplete information, did not give any consideration to—
      1. (a) the taking of a step which is a step he might have taken had he considered the matter on the basis of correct and complete information, or
      2. (b) refraining from taking a step which is a step he did take but might have refrained from taking had he considered the matter on that basis,
   2. to be treated as a case in which his failure to take the step, or his taking of the step he did take, was in reliance on the incorrect or incomplete information and as a case in which that step is one which he would have taken, or (as the case may be) would not have taken, had the information been correct and complete."
5. (5) In section 52(6) of that Act of 1999 (supplemental provisions of regulations relating to the scheme), after paragraph (e) there shall be inserted—
   • "(ea) prescribing the matters that may be relied on, and the presumptions that may be made, in the determination of whether or not the prescribed conditions have been satisfied;".'.—[Mr. Rooker.]

Brought up, and read the First time.

Mr. Rooker

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to discuss new clause 7—Widows'/widowers' SERPS entitlements— 'In section 52 of the Welfare Reform and Pensions Act, subsections (1) and (2) shall be left out, and there shall be inserted— (1) The Secretary of State may by regulations make such provision as is authorised by subsection (2) and one or more of subsections (3) to (4), (2) The regulations may provide for any prescribed provision of Part II of the Contributions and Benefits Act (contributory benefits) which relates to additional pension for widows or widowers to have effect, in relation to persons of any prescribed description (which shall include at least all those who had reached pensionable age on or before 5th April 2000), with such modifications as may be prescribed for securing—

1. (a) that any such additional pension, or
2. (b) in the case of any provision of Schedule 5 to that Act (increase of pension where entitlement is deferred), that any constituent element of an increase provided for by that Schedule,

is increased by such percentage as may be prescribed (which may be 100 per cent, and which shall be 100 per cent for any person who had reached pensionable age on or before 5th April 2000).".'.

Mr. Rooker

During the final stages of the Welfare Reform and Pensions Bill last autumn, we introduced legislative cover that would allow us to address, through regulations, the inherited state earnings-related pension scheme problem. At that time, we had not reached a final decision on what to do. On 15 March this year, my right hon. Friend the Secretary of State announced to the House that we had decided to postpone the change that would halve the amount of SERPS that a widow or widower could inherit until 6 October 2002—a 30-month delay—and to set up the inherited SERPS scheme to provide redress for those who had been misinformed.

We are particularly keen to ensure that all who were misinformed and who might have acted differently had they had the correct information need not lose out. During further consideration of our more detailed proposals and, indeed, with the benefit of the reports of the ombudsman and the National Audit Office, it now seems to us that the powers in the Welfare Reform and Pensions Act 1999 need amending slightly. This Bill, which is already in the parliamentary system, is the ideal place to do it. New clause 38, therefore, provides for the 50 per cent. reduction in inherited SERPS to come into effect in respect of deaths occurring on or after 6 October 2002.

We also want to clarify the eligibility criteria for the inherited SERPS scheme. Currently, section 52 of the 1999 Act provides that the scheme may deal with claims made by people who, having received incorrect or incomplete information about the SERPS reduction, either failed to take any steps they would have taken or took any steps they would not have taken had they received correct information. Yet the ombudsman has pointed out that, 15 years down the road, it will be difficult for many people to demonstrate that they would have taken a particular course of action, or not, had they been correctly advised.

The new clause will ensure that the scheme can provide redress for people who, because they relied on the wrong information, were denied the opportunity of considering taking relevant steps to protect their spouse's pension. I will roughly translate what I have just said as, by and large, replacing "would have" with "might have". In other words, we are loosening up the criteria—we are saying that people might have taken action, rather than that they would have taken action, which is what the Act provides for.

Another point that the ombudsman made was that people should not be unfairly excluded from the scheme because, after so long, they were unable to provide documentary evidence. We want to address that concern, and the new clause allows for the regulations to make further specific provision relating to the manner in which decisions under the scheme may be taken.

New clause 7, in the name of Liberal Democrat Members, would effectively put off the policy change indefinitely for all who are pensioners at 6 April 2000. It is not clear what is intended for people who are still contributors and who might in the future be bereaved. That is not a criticism, but I must put it on the record. If the intention is to provide a lesser amount for them, there will be some contributors, perhaps nearing pension age, and on a low income, who have been misled and would therefore benefit from the scheme proposed. Yet the cost of the proposal, although less than the cost of overturning the policy completely, would still be enormous—probably more than £10 billion over the next 50 years. So under that proposal, we would spend considerably more money without helping some of the people who should be helped.

Mr. Webb

I refer the Minister to his written answer to me of 21 March. Asked the cost of our proposal in lieu of what he has proposed, he replied: The estimated cost is £7,100 million.—[Official Report, 21 March 2000; Vol. 346, c. 479W.]

Mr. Rooker

I am sure that both figures are correct, but probably do not relate to exactly the same point. In pension discussions—this point arose in Committee—it must be remembered that a change to the national insurance system must be translated over people's working lives. I shall have the figures checked and shall write to the hon. Gentleman if there has been an error. However, I am sure that both figures are correct and deal with slightly different aspects.

Our first principle must be that if the Government gives people the wrong information, they must provide redress. That is what we are doing. All who have been misled are being provided with an opportunity to have their rights restored. The alternative—deferral of the change for 10 or 14 years to reflect the gap between the 1986 legislation and our proposed changes—would merely postpone the problem. The widow of a man who died after that time would still lose out.

Unlike new clause 7, our proposals on the future of inherited SERPS provide the fairest balance between the interests of pensioners and contributors. Full details—I said this at Question Time, but it is important to put it on the record again—of the inherited SERPS scheme will be put before the House. There will be a proper debate, and the details will not be slipped out in the way we have sometimes been accused of. The National Audit Office and the ombudsman will be fully involved in developing the information that we shall ask for and the procedures that will be followed in decision making. We must be certain that we have the powers necessary to cover those points in regulations, and that is why we propose the new clause.

Mr. Willetts

I want to say how grateful we are to the Minister for making it clear that there will be a proper debate. The Chairman of the Public Accounts Committee asked for that after the original statement, and it is right that something of this magnitude should be properly debated in the House.

Mr. Rooker

I am grateful for those remarks. We have gone beyond blame and must think about the future. Obviously, we inherited the current position, but I shall not labour the point. We need consensus across the House on the way forward on an issue that will affect constituents of all Members over a long period. We want the widest possible support, and that is why we shall ask the NAO and the Parliamentary Commissioner for Administration—the ombudsman—to comment on our proposals and the way in which we intend to operate the scheme. I hope that the House will reject new clause 7, but approve new clause 38.

Mr. Webb

New clause 7 was tabled by the Liberal Democrats, and we see it as consistent with Government new clause 38, but as a measure that goes further. We welcome and support new clause 38, but believe that our additional new clause deserves further consideration.

We welcome the broadening of scope proposed by new clause 38, and the change of phraseology from "could" have to "might" have. However, I find new clause 38 rather bewildering. Can the Minister explain proposed new section 4A of the 1999 Act? It refers to a person who…did not give any consideration to… (b) refraining from taking a step which is a step he did take but might have refrained from taking had he considered the matter on that basis to be treated as a case in which his failure to take the step, or his taking of the step he did take, was in reliance on the incorrect or incomplete information. And so it goes on, completely impenetrably.

It is hard to see how the Government will convert those words into language that people will understand. There is evidence that the scheme brought forward so far by the Government is already defective. For example, after the Secretary of State's announcement on the matter, newspaper advertisements in the national press said that people would be entitled to claim compensation on inherited SERPS if they "can" show that they were misled.

We have heard a lot of promises from the Secretary of State that it will all be different and better this time, but the first thing he did—almost on the day of his announcement—was to send out 3,000 letters including the wrong telephone number, which did not fill us with confidence. Then he placed newspaper advertisements about the compensation scheme in new clause 38, which said that it would be available for those who can show that they were misled. I think that the Minister will agree that that is not an accurate description of the way the scheme will work. There is no need to be able to show that one was misled; it is necessary only to be able to claim that one was misled in a manner that the Government cannot disprove. The two are very different.

5.30 pm

My hon. Friends tell me that their constituents have telephoned them and said, "It looks as though I won't be covered by the scheme." The people whom the scheme is aimed at have read the advertisements and been misled. They have been confused because the advertisement was wrongly worded. I wonder whether the Minister, when he responds to the debate, will comment on its wording. I do not know whether his officials have briefed him on that.

Mr. Rooker

No, I shall not comment on the advertisement. When the House has approved a scheme, having held debates on the regulations, there will be a full and fairly massive propaganda campaign, using television, a helpline and advertisements—written and otherwise—and we shall then reflect the scheme that the House has approved. The initial notification of such a scheme, in the recent advertisements, was made, following the statement to the House, because we thought it right and proper to give an initial view that there would be a scheme; I shall not be pedantic about the words. Once we have a scheme to market, it will be thoroughly and properly marketed.

Mr. Webb

The Minister cannot have it both ways. He is spending public money on placing advertisements that are designed to illuminate but which confuse. They were not accurate about the scheme as described by the Secretary of State a few days earlier. I find that very worrying, and I hope that the Minister will ask some questions in his Department about why that form of words was used and whether he should issue some clarification.

We are dealing with people who have already been misled by the Department. Years have gone by, and they have now found out that they were misled. They have now read an advertisement that is also misleading, and they are starting to give up. That is not what we want.

In new clause 7 we propose simply that those who have already reached state pension age by the time the original cut was due to come in should be protected from the cut, for two principal reasons. First, it is unreasonable to expect those who have only just found out about what happened, and who have already reached pension age, to save for their pension. It is too late for that.

A charity dealing with older people says that every year new people come to it for help, having only just heard for the first time about the change as a result of the advertisements and the discussion of the subject in the press. Many people still do not even know about the change, although there has been a great deal of coverage, particularly in the specialist press. It is unreasonable to expect them to make alternative arrangements now. That is why we want to protect them.

The second issue, which has not been addressed much in the debate, is the validity of the original policy. Was it right of the House, in 1986, to decide to halve widows' pension entitlements? New clause 7 gives us an opportunity to reverse that decision for those who have already reached state pension age for whom there is no other alternative. We know that widows make up one of the poorest groups of pensioners. Later we shall discuss the position of older pensioners, most of whom are women, many of whom are widows, who already have relatively dire pension positions.

This afternoon at Social Security questions, the Government—I believe that it was the Minister—attacked what the Conservatives did to the state earnings-related pension scheme; one of their biggest cuts, if he does not accept new clause 7, he is about to implement. How can he have it both ways? He wants to attack the Conservatives for the cuts that they made in SERPS but to implement those cuts, and not reverse any of them, even when he has the chance to do so.

The Minister raised the question of the cost of what we are proposing. The Government have introduced a bizarre new doctrine: they add up all the costs of the compensation over 50 years. They have got into enough trouble by adding up the figures for national health service spending and education spending over three years and double and triple counting, but trying to make out that the compensation package is generous by working out what it would cost over 50 years is incredible. If the Government make an increase in the winter fuel payment which is to be paid for each of the next 50 years, they do not claim 50 years' worth of expenditure. If they put 75p on the basic state pension, they do not multiply the figure by 50 to say how much it has cost.

I asked for a breakdown of the extraordinarily large figures being claimed for the cost of the scheme. The cost of deferral—which relates to new clause 38—never rises above £270 million a year, yet it has been costed at £2.5 billion: nearly 10 times as much. The compensation scheme has been costed at £5.7 billion if there is a take-up of 30 per cent., yet its cost never rises above £600 million in any of the next 20 years. Although the Minister says that our scheme is extraordinarily expensive, it is only by adding together the figures for 50 years that he can come up with his figure.

As I said in an intervention, our estimate of the cost of our scheme in lieu of the Government's scheme is £7.1 billion. The Government's central costing is £2.5 billion for deferral and just over £5 billion for people who claim compensation, so the total is about £8 billion. We are not inventing enormous items of Government spending. We have come up with a scheme which, on the Government's figures, does not cost as much as the one they have themselves proposed. The Minister said that there would probably need to be some form of tapered provision for those aged 63 or 64, so I suspect that our scheme would cost something similar to the Government's proposal.

The big advantage of our proposal is that it is clear and simple. Under the Government's proposal, pensioners will try to claim that they were misled and the Government will have to investigate those claims and attempt to disprove them. We have no idea how they will disprove the claims because they have no records with which to do so. That scheme will, as ever, miss out the inarticulate and the ill-informed, but will reward the corrupt because, if anyone says that he was misled, that claim cannot be disproved. Their system is costly, bureaucratic and complex and it creates a further worry for all the people who have been affected by the reduction in SERPS. They will not know until next year whether they will be protected.

Mr. David Heath (Somerton and Frome)

My hon. Friend will recall that I asked the Secretary of State about receiving information at second hand and not directly from the Department. However, I did not receive a satisfactory answer. New clause 38 refers to receiving incorrect or incomplete information, but does not qualify that statement by mentioning the source of the information. Does that not suggest to my hon. Friend that someone who was misled by a professional adviser or another person, but who acted under the belief that he was taking the right steps, would be covered?

Mr. Webb

My hon. Friend raises an important point, and I hope that the Minister will clarify the position. Clearly an adviser will act on the basis of the leaflets and the guidance given him by the Department. If that information is misleading and is passed on to a member of the public, that member of the public will have been misled in just the same way as if he had received the information at first hand. People misled in that way should be covered and that is how I read the new clause. I hope the Minister will confirm that my reading of it is correct.

Our constituents have been asking us for months and years what will happen. They want to know so that they have can have peace of mind in their old age about the provisions for widows or widowers. We still do not know what will happen and the scheme is so vague that it will be another year before we find out. We want certainty; older people deserve that if nothing else. That is why exempting those who have already reached state pension age is a neat, clean way of approaching the issue. People who did not follow the small print of the Social Security Act 1986—can we blame them?—and who have reached pension age have probably found out only now about the cut in their entitlements. They deserve to be looked after with a clean and simple solution.

We accept new clause 38, because deferral is welcome. However, additional measures, as reflected in new clause 7, would also be welcome. Given the opportunity, we shall seek to test the opinion of the House on the additional measures.

Mrs. Jacqui Lait (Beckenham)

I shall be brief, because most points have already been made. However, it is important to clarify even further the degree of evidence and proof that the Government will seek to build into the regulations and their compensation scheme. Although we have accepted responsibility for the part that we have played in the problem, we stick by the policy—as do the Government—of the reduction in the rebates. We shall not, therefore, support the new clause tabled by the Liberal Democrats.

The key to the matter is what degree of evidence of whether people have been misled the Government can accept. For example, one could argue that people who have done nothing to find out about the cut have been misled. Will that be acceptable to the DSS, and will it be covered in regulations? Any sensible person planning for their retirement would, if they had known about the cut, have taken action, and the mere fact that they have not done so indicates that they have been misled.

I welcome the change in the wording of new clause 38 from "would have" to "might have". However, even if the Government are prepared, in regulations, to alter the burden of proof, we need more clarification about what exactly they will do. It is clear that since the first announcements, the debate about recompense has moved on, and I suspect that that is why confusion is developing and the Government's statements are getting softer and softer and are increasingly trying to be helpful to people who feel that they are affected.

The Minister indicated that there will be a proper debate on regulations, and my hon. Friend the Member for Havant (Mr. Willetts) picked him up on that point. This may be nit-picking, but I wonder whether the debate will be in the Chamber or upstairs in Committee. What defines proper debate? This subject is of great interest to everybody, and it might be sensible of the Government to have the debate on the Floor of the House.

I was also slightly concerned to hear that the National Audit Office and Public Accounts Committee will consider the regulations. When does the Minister expect the regulations to be laid before the House? What delay will there be? Is this to be another example of the DSS's use of the word "shortly"? The right hon. Gentleman has castigated others for their use of grammar, but over the past few months "shortly" has stretched into infinity. It would be nice to have an indication of when the Department expects to introduce the regulations.

Mr. Rooker

I must make it absolutely clear that I cannot answer most of the questions that I have been asked. We do not have the scheme yet. It is in the first stages of being designed. We have only just chosen one of the options that we considered. It is not possible to answer the detailed questions that I have been asked.

I shall certainly not use the term "shortly" about any regulations, because I can tell the House that they are not expected shortly. As I said at Question Time, I am not even certain whether they will be introduced before the summer recess or in the autumn—the time scale is as wide as that. They might not be the ideal legislation for the House to consider in, for example, the third week of July, so we might hold them over.

Mrs. Lait

Can I tempt the right hon. Gentleman to say that they will be introduced before October 2002?

Mr. Rooker

Yes, I can definitely say that. If the hon. Lady reads new clause 38 in great detail, she will see that every conceivable contingency—or at least every one that we can think of—has been built into that new clause. However, I cannot answer all the questions.

The hon. Member for Northavon (Mr. Webb) asked me about the figure of £7 billion referred to at Question Time. That is the cost of paying the surviving spouses of all current pensioners 100 per cent. with no policy deferral. The new clause includes the scope to defer for those currently under pension age. All the figures that I am using are global—they have to be—and the only figures that I am prepared to rely on are those on page 39 of the National Audit Office report, because the NAO used our figures to make assumptions. I shall not go into detail about those assumptions now.

The figure of about £10 billion that I quoted earlier assumes that the hon. Gentleman would intend to use those measures and reflects the cost of a 10-year policy deferral. Both figures are right, but the question differs depending on whether one takes account of the policy deferral that we have already announced. The cost of that policy deferral is £2.5 billion—that cost is there before we even start, and we have no idea what the take-up rate will be.

5.45 pm

I have honestly admitted that I cannot answer the questions asked, for reasons that I have explained. None the less, I hope that the House will accept new clause 38.

Question put and agreed to.

Clause read a Second time, and added to the Bill.