§ 6.50 p.m.
§ Lord WELLS-PESTELL
My Lords, I beg to move that this Bill be now read a second time. As your Lordships will have noticed, this is most aptly entitled a "Miscellaneous Provisions" Bill, for it touches on a wide range of disparate, and often highly technical, matters in the field of social security. There are three main purposes to the Bill, each of which is important. One is the vital need to secure public expenditure savings. A second reason is to make some small but, I venture to suggest, useful improvements in benefit provisions. And, finally, there is the need to correct omissions and mistakes in legislation, and to provide firm statutory backing where at present the law appears open to doubt.
My Lords, I will not weary your Lordships by going through each clause of the Bill in detail; that would take far too long, and I am sure it is not your Lordships' wish that I do so. I have already provided copies of Notes on Clauses to certain noble Lords, and I hope that they have found them helpful. I will, however, draw your Lordships' attention to some of the more significant features of the Bill. From the point of view of public 810 expenditure the most important clause of the Bill is Clause 4, which relates to the retirement pension earnings rule. This is the rule whereby retirement pensioners in the first five years over pensionable age whose weekly earnings exceed a specified limit—at present £35 a week—have their pension progressively reduced. The earnings rule limit also represents the level of earnings below which a person can be treated as retired, and is, therefore, entitled to draw full pension on top of his earnings from work. Clause 4, together with Clause 5, will provide a net saving of £45 million in the financial year 1977/78, by not raising the £35 limit to £50 in April next, but instead providing for the limit to be uprated each year, starting this autumn, in line with average earnings. The gross savings are £60 million to the National Insurance Fund, which is offset by £15 million loss in income tax.
The Government recognise that the retirement pension earnings rule is disliked by many people, and have confirmed their commitment to its eventual phasing out when resources permit. Nevertheless, even relaxing the rule—let alone phasing it out—involves very considerable additional expenditure. I hope noble Lords will agree that this is something which the Government cannot contemplate at the present time.
In view of the controversy and confusion which has in recent months surrounded the cost figures relating to the retirement pension earnings rule, I should like briefly to make two points about them. First, the costings are made not by Ministers, but by the Government Actuary's Department. They, of course, have no political axe to grind. They are the experts on whom successive Governments rely for an independent assessment of available trends and indicators to determine the future costs of a particular policy proposal in the pensions field. No Government, as I am sure your Lordships appreciate, could plan without such forecasts, and policy must inevitably be based on the best estimates to hand at any time. The detailed facts and assumptions on which the Government Actuary's estimate is based were made freely available in another place, and there was no seriously-based challenge to their accuracy there. Those whose case is that the earnings rule could be abolished at 811 minimal cost have not been able to reconcile, if I may put it this way, their optimistic conclusion with the known facts, and have had to fall back on vague, and I would venture to say illogical and completely unsubstantiated hypothesis.
Secondly, the most important variable in the Government Actuary's calculations, the factor on which most of the savings depend, is the number of people who would be able to draw their pensions if the earnings rule limit is raised, but who at present cannot do so. It seems too obvious to say—though some seem reluctant to believe it—that if the earnings rule limit is increased then more people are free to draw their pension while continuing in work. That, in itself, must increase public expenditure. This is the crux of the argument.
My Lords, on this vital question let us simply consider the facts. Over the last two years, in which the earnings rule limit has been raised considerably, from £13 to £35 a week, the number of people over pension age who are deferring retirement has fallen considerably: from about 218,000 in November 1974 (a level which had remained fairly static since 1971) to around 135,000 (I admit the figure is provisional) today. I recognise that other factors, including higher unemployment, may have played a part, although on the other hand we should remember that the rate of increments for deferred retirement was also raised substantially in April 1975. Nevertheless, these figures are hard evidence which confirms what we might, using common sense, expect: that at 60 or 65 people will, by and large, take their pension when they can, if they are not prevented from doing so by their earnings; and that a higher earnings rule limit does in fact lead to more people drawing their pension and thus to greater public expenditure. Clause 4 of the Bill will provide a large and necessary saving in public expenditure without taking away any existing rights to retirement pensions. People over pension age will be left as free as they now are to undertake either full-time or part-time employment, if they wish to do so.
My Lords, I have spoken in some detail on Clause 4, which is the money-saving part of this Bill, and I do not want to take up too much of your Lordships' time. 812 I will, therefore, with your Lordships' permission, be brief on the other major clauses. Clause 11 deals with a subject in which I know a number of noble Lords have a special interest: the extension of eligibility for the mobility allowance consequent on the unavoidable decision to phase out production of the invalid tricycle. The clause will enable the Secretary of State to issue certificates to holders of tricycles issued under the old vehicle scheme, and to certain groups with similar reserved rights under that scheme, deeming them to satisfy the inability to walk test for award of the allowance. Because the vehicle scheme had no upper age limit, those transferring from the vehicle scheme will be able to receive mobility allowance even when over pension age.
I should emphasise, however, that, as the Secretary of State made clear in his letter to vehicle holders last December, the Government are ordering sufficient spares and stocks to keep the fleet going and to replace tricycles until at least 1981. There is therefore no question of existing holders of tricycles provided under the old vehicle scheme being suddenly deprived of their vehicles if they want to keep them. Moreover, they have been assured that the Government recognise that some of them will continue to need a specialised vehicle when eventually the tricycle can no longer be replaced, and will look at what is available on home and world markets. But some will wish to take the option of mobility allowance provided by this clause.
Clause 12(1) contains provisions to give statutory backing to the Supplementary Benefits Commission's long-standing practices with regard to student claims. It will enable the Commission to take into account any contribution to the student's grant which the parents are assessed as being able to make whether it is, in fact, paid—in cash or in kind—or not paid. It will also ensure that no part of the student's award is disregarded.
If the Commission were compelled—and I want to make this clear—to investigate every case where a student claimed that his parents were not paying their proportion of the grant, this would have the most serious practical implications. It would mean that the Commission's officers would have to mount detailed investigations into the exact family situation 813 in order to ascertain precisely what was or was not being provided for the student, not just in cash but also in kind. The word of the parent would not be sufficient, as this would open the door to collusion between parents and students in an attempt, in effect, to get the Commission to meet at least some of the parental contribution. It must be doubted whether the Commission could effectively carry out such a requirement, and it would certainly open the door to collusion, abuse of the social security system, and considerable ill-feeling all round. It would also have severe manpower implications. I am told that if the Commission had to investigate in detail each case where a student complained or claimed that his parents were not giving him his due support, it might need altogether about 125 extra civil servants at first, and that number would probably increase.
Your Lordships may know that since the Bill left another place the Court of Appeal has given its judgment in the case of Atkinson v. Barnsley Supplementary Benefits Appeal Tribunal. The judgment is relevant to this clause since it said, in effect, that the Commission were in error in using their discretionary powers to deal with whole classes of claimants, such as students. So far as students are concerned, we think that this clause will remedy that situation.
I must stress to your Lordships that the clause does not prevent students from receiving supplementary benefit if their grant and any other resources fall short of their assessed vacation requirements—if, for example, they are householders or have special expenses. Students who are severely disabled or who are lone parents will continue to receive supplementary benefit as before.
I should also mention that the Atkinson judgment casts considerable doubt on the wider use of the Commisison's discretionary power. This has serious operational consequences for the Supplementary Benefit Scheme, including the possibility of past claims to benefit being received. To deal with the wider problems raised by the judgment the Government will be introducing Amendments at the Committee stage.
Clause 18 is also one which I know will particularly interest a number of 814 noble Lords, relating, as at least some of it does, to the important but complicated questions facing occupational pension schemes in the final run-up to the introduction of the new pensions scheme next year. Subsections (6), (7) and (8) provide alternative arrangements whereby the solvency requirements of the Pensions Act may be satisfied by occupational schemes. Subsection (9) amends, by way of clarification, the provisions relating to the calculation of the various premiums when a scheme ceases to be contracted-out, and subsection (10) provides a regulation-making power to cover a particular situation in the same context.
My Lords, these proposals on occupational pensions are highly technical and, if I may speak for myself, very confusing to the uninitiated. At this stage I shall not pretend to your Lordships that I know them from beginning to end, so I hope that I shall not be pressed on some of these matters tonight. I should, however, make the general point that the Government firmly stand by the broad consensus of all sides of the House and the partnership between the occupational pensions industry and the Government which was achieved in 1975 and embodied in the Pensions Act of that year. Now that we are close to the start of the new scheme we want to avoid any changes which are not, let me say clearly essential, since unnecessary last minute changes in the rules can have only a disruptive and harmful effect, as I think noble Lords will appreciate. But that does not mean that we shall not continue to look closely and sympathetically at all proposals and representations from the industry.
My Lords, I have mentioned only the more notable parts of what is rather a pot-pourri of a Bill. The other provisions are also important, but will not, I hope, prove excessively controversial. They will provide significant improvements in a number of areas of social security where, for example, the law at present does not achieve original intentions or where for some other reason it is defective. The Bill also provides for some useful improvement and simplification of administrative arrangements, particularly in the field of industrial injuries, disease and war pensions. Last, but not least, the provision inserted in another place into 815 Clause 2 for a higher rate of increment on deferred retirement pensions and postponed guaranteed minimum pensions will improve benefit rights, as will other provisions included in Clauses 7, 9 and 14.
I hope noble Lords think that I have said enough at this stage. Perhaps I may—I hope successfully—commend the Bill to your Lordships. My Lords, I beg to move that the Bill be read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Wells-Pestell.)
§ 7.9 p.m.
§ Baroness YOUNG
My Lords, I should like to begin by thanking the noble Lord, Lord Wells-Pestell, for introducing this Bill and for explaining its content so clearly. This is not a Bill that at this stage will arouse any great Party political controversy, though inevitably there will be matters of difference between us. As the noble Lord said, in parts it is an extremely technical Bill, and I am therefore grateful to him for letting me have the Notes on Clauses in good time. Like him, I should like to begin by commenting on two major matters that are included in the Bill and to which we shall wish to return at a later stage.
The first one concerns the provisions in Clause 4 on the earnings rule. As I understand the position, the effect of this Bill was originally to prevent the earnings for retirement pensioners rising from the limit of £35 a week, as exists at present, to £50 a week, as was agreed. This was to come into force in April 1977 and is the case under existing legislation. Now the Government are proposing under Clause 5 to index-link the earnings of retirement pensions to average industrial earnings.
We on this side of the House have no quarrel with this point. Indeed the dynamising of earnings—if that is the correct expression to use these days—is much to be welcomed, and we, as indeed do the Government, would, for a variety of reasons, like to see the end of the earnings rule, but we accept the enormous public expenditure cost. However, I was glad that the noble Lord, Lord Wells-Pestell, went into some detail on the figures on the abolition of the earnings rule and those that were given 816 on Report stage in another place. At Committee stage we shall be pressing the noble Lord to undertake to review the operations of the earnings rule for retirement pensioners, and of course for the wives of retirement pensioners and invalidity pensioners.
I do not intend this evening to repeat the figures that were given by my right honourable friend in another place and which are fully recorded, but they give cause for some disquiet because the Government calculations on the cost of abolishing the earnings rule have varied so much. It is certainly not my intention to question the Government actuaries in the costs that they have put out and the calculations they have made. I too appreciate that they have a job to do, and I am sure they are doing it with the intention of arriving at the best projections that they can. Nevertheless, the projections have altered so much that I think it is necessary that, before too long, we should have some kind of statement on the costs, and how all this Clause 4 and Clause 5 variation in the earnings rule is going to work out.
The second point to which I should like to draw attention is of course the point about the students, in Clause 12. What is required now, it seems to me, is that the Government should make a clear and unequivocal statement about the position. Apart from anything else, there is the practical fact that the Easter vacation is almost upon us; indeed, it will be upon us before this Bill becomes law. In order to make the position quite clear I wrote down what I called the "Seven Ages of Students", to indicate the complexity of the situation into which we have got ourselves and which lies behind Clause 12 of the Bill.
As I understand the position, originally students were eligible for supplementary benefits in the Christmas and Easter vacations of 1976, but in the Christmas vacation of 1976 the Supplementary Benefits Commission changed the rules so that student grants were taken into account in considering cases. Part of the grant was assumed to cover their expenses during the Christmas and Easter vacations, and the consequence was that some of the offices of the Supplementary Benefits Commission stopped paying the supplementary benefit.
817 Then of course the Bill was published, and its first intention was that students would not be eligible for supplementary benefits in the Christmas and Easter vacations. Students then were shown to be eligible, on further amendment to the Bill, but the parental contribution was to be taken into account. The difficulty here is that all the statistics that one can obtain show that 73 per cent. of parents do not make the parental contribution. Why they do not make the parental contribution, we do not know.
It might well be, as the noble Lord suggested, that this is collusion between the students and the parents to get the Supplementary Benefits Commission to pay. We have no evidence at all of this. All we know is that it might well be the case that quite a number of parents now cannot pay, because of course it can be a major cost to have one or more children at a university to which a contribution must be made in order to complete the grant. At any rate, as the noble Lord said, in the meantime there has been a court case, the Atkinson case, which has clarified the position on this point, and we now find that the Government will need to bring further Amendments to this Bill in order to put the position back as they originally wanted it; namely, that students would be eligible for supplementary benefits, and only the parental contributions must be taken into account.
What really concerns students is that not only do 73 per cent, of parents not pay the contribution, but the alternatives are no longer available to them. For a great many students vacation employment is no longer available. Secondly, even if the grant is increased it is unlikely to keep up with inflation. The proportion of the grant which is designed to cover expenditure during the Christmas and Easter vacations has certainly not kept up with inflation, and there could indeed be cases of considerable hardship. This is a matter to which we shall need to return at a later stage. In the meantime, so complicated is the position that I think a clear statement from the Government is called for.
I was glad to hear from the noble Lord, Lord Wells-Pestell, that the Government stand by their proposals for handicapped students. It would be helpful to have it 818 printed in the Bill that handicapped students are eligible for supplementary benefit. I believe that to be the case, although the Bill does not explicitly say so. We shall again return to this point.
As the noble Lord said, this is a Miscellaneous Provisions Bill, and one of the difficulties with it is that one finds oneself hopping, as it were, from one issue to another. There are two other matters which I think will be of great interest to your Lordships' House. As the noble Lord said, Clause 11 is one of them because it concerns the mobility allowance and the anomalies arising from that allowance. I should like to study again what the noble Lord has said, because I understand that he will be bringing forward an Amendment at a later stage to cover some of the anomalies. We shall look forward to seeing that Amendment.
The other matter which I think will be of interest to your Lordships' House is an Amendment moved by my honourable friend in another place concerning pensions for the over 80s. This has been a matter of considerable concern to Members not only of your Lordships' House but outside, and arises, of course, only in cases of people who were not eligible to subscribe to the National Insurance Scheme in 1948. The number of such people still alive diminishes every year, but there is a small category of people who come back to this country but who have been out of the country for ten years and cannot count the years after the age of 80 towards the present ten-year qualification for the pension for the over 80s.
They are a very aged and diminishing number of people, who may suffer great hardships. I believe it would need only a small amount of public expenditure cost to give these people a pension. The cost is estimated to be between £250,000 and £500,000 a year. The important factor is that the sum would diminish each year, as of course the group of people who are not eligible diminishes each year.
However, as this is a Miscellaneous Provisions Bill, I should also like to draw to the noble Lord's attention another point which I believe has arisen recently and which I think the Government ought to consider. On 2nd February in another place my honourable friend Mr. Hannam introduced a Private Member's Bill to 819 remove what I am sure your Lordships' House will agree is an anomaly in the payments to those who care for disabled children. I understand that at present the natural parents of disabled children are entitled to attendance allowances which are tax free. Under Section 35(6) of the Social Security Act 1975 the Secretary of State for Social Services may by regulation withdraw these allowances in certain circumstances, and usually this is done when the child in question is in hospital for some long time. Regulations also cover children boarded out by local authorities. However, foster parents do not get the attendance allowance; they can be given the special care allowance by local authorities in lieu of the tax-free attendance allowance.
Recently a couple in Wiltshire agreed to foster a severely handicapped child and they have been taxed on the special allowance given to them by Wiltshire County Council. This seems to be an anomaly and one which goes against the spirit of the Government's Consultation Document on the Future of the Health and Personal Social Services, in which it would appear to be the intention of the Government that children should be fostered rather than left in institutions. In my view that is the right policy and, I should have thought, one by which we should give encouragement to foster parents to take on severely handicapped children. This particular anomaly that has arisen from a Treasury ruling should be looked at again and I hope to introduce Amendments on this point at a later stage.
As Lord Wells-Pestell said, a number of highly technical points arise under Clause 18. Like him and at this hour, I do not intend to pursue them. Nevertheless, I would like the noble Lord to consider before the next stage of the Bill the points raised in Committee in another place under the then numbered Clause 19. Those of us who are not expert in these matters understand that some experts are not satisfied with the technical replies that were given on the Amendments that were raised at that stage. A sensible way out of the dilemma would seem to be for there to be a meeting between those who advise the Government on actuarial matters and those in the private industries 820 who are concerned about these actuarial calculations because, what is being discussed is a matter of fact and, rather than pursue a great deal of technical detail across the Floor of the House, I should have thought that these were matters which could be resolved by a private meeting. Between now and the next stage, would the noble Lord consider whether this is the best way of proceeding? As I have indicated, this is not a Bill which we are against in principle. We wish to discuss in detail some of the interrelated but rather technical points and we wish the measure as speedy a passage through the House as possible.
§ 7.23 p.m.
§ Lord BANKS
My Lords, I join the noble Baroness, Lady Young, in thanking the noble Lord, Lord Wells-Pestell, for the thorough explanation he gave of the various provisions of the Bill. I also thank him for letting me have in advance the notes on the clauses. Like the curate's egg, the Bill is good in parts; for example, I imagine that most noble Lords welcome the provision which enables disabled persons, if they wish, to exchange tricycles issued under the old scheme for the mobility allowance and to continue to receive that allowance after retirement age. We welcome that provision, whatever we may think of the withdrawal of tricycles and the general rules governing the mobility allowance scheme, both of which fall outside the scope of the Bill.
The miscellaneous tidying-up provisions, of which the Bill mainly consists, are broadly acceptable, if not exciting, subject to certain reservations which my noble friend Lord Byers will make. However, these provisions do not touch the main purpose of the Bill. In the debates in another place it was made clear by the Secretary of State for Social Services and the Minister for Social Security that the main object of the Bill was to secure savings in public expenditure, and as originally presented for Second Reading in another place there were three sources of such saving. The first was the reduction of unemployment benefit for those receiving an occupational pension of over £25 a week. The second was the provision, to which Lady Young referred, that students should no longer be eligible for 821 supplementary benefit during the Christmas and Easter vacations. The third was the proposal that the earnings limit for retirement pensioners should not go up to £50 from £35 in April as provided for in the Social Security Act 1975.
The first two of those provisions have not survived the scrutiny of another place. However, although the main provision in regard to students has been deleted, as Lady Young pointed out, the Bill introduces an unsatisfactory feature into the supplementary benefit arrangements for students, a provision to which Lord Wells-Pestell referred at some length. Under Clause 12, any prescribed contribution must be taken into account, notwithstanding the fact that the contribution is not actually made; parental contributions must be taken into account as if they had been paid, even though they had not been paid.
The survey to which Lady Young referred, conducted by the Department of Education and Science, revealed that 73 per cent, of students do not get the full parental contribution. Surely supplementary benefit should take into account the actual situation—even if that involves certain difficulties of administration such as those to which the noble Lord referred—because the whole purpose of supplementary benefit is to provide aid for actual situations and not for notional ones. In any case, the system of parental contributions for adults is nonsensical and humiliating, and to say that contributions must be assumed to have been paid when they have not is to make the system more nonsensical still.
The main saving is contained in the provision about the earnings rule; that remains in the Bill and keeps the limit at £35 instead of allowing it to rise. This is going against a previous decision of Parliament. It is not a new benefit which is being refused on grounds of economy; something which has already been provided for is being withdrawn because it is felt that that is essential to make a saving.
We on these Benches have been pledged to the abolition of the earnings rule for a great many years and I understand that all Parties now agree that it should be phased out. It is kept, then, not because of any principle but because it is alleged that the economic situation makes it 822 necessary to do so in order to make a net saving, as the noble Lord told us, of £45 million, this at a time when there is a surplus of £932 million in the National Insurance Fund this year and another surplus of £888 million anticipated for next year. And those figures, as the Government Actuary made clear in the report presented at the time of the last uprating, do not take into account this saving of £60 million gross which is now added to the surplus. The only reason why this is done is that it is a convenient way—building up this reserve—of reducing the public sector borrowing requirement.
When the 2 per cent, surcharge on employers' contributions was introduced, I maintained that it was an abuse of the National Insurance system; that is, to use it to raise taxes, which was in effect what was being done. Similarly, the noble Lord may recall that, when we discussed the uprating, I said that with a surplus of the size I have just mentioned, either benefits should be increased or contributions reduced, and that if that was not done it seemed an improper use of National Insurance contributions.
Similarly now, I feel that to insist on a saving of £45 million by withdrawing something that Parliament has already approved in order to assist with the problems relating to the public sector borrowing requirement is again an improper use of the National Insurance system. In my view, that is not the way these problems should be tackled. Incidentally, one hears a great deal at the present time about the possibility of tax cuts, and I notice that the Trades Union Congress is urging a package upon the Chancellor that would cost £2,500 million, of which £1,500 million would be in tax cuts. One can regard this as a case of taxation. After all, it is being used for what are virtually tax purposes and, at it speak, it is a rate of tax of 100 per cent. Surely, something that has already been provided for should have priority over other cuts in what is, in effect, taxation.
To sum up, I would say that, in so far as this is a tidying up measure, the Bill is certainly welcome to us on these Benches, though there are one or two points of criticism here and there. However, in so far as it uses the National Insurance system as a weapon in the management of the economy, which, in our view 823 it is doing with regard to the earnings provision, it is not something that we can welcome.
§ 7.32 p.m.
§ Lord BYERS
My Lords, I do not intend to deal with the Bill as a whole. That has already been done by my noble friend Lord Banks. I have to declare an interest as the chairman of the Company Pensions Information Centre, I have been fairly close to the pensions scene over the last three and a half years and I should like to draw attention to one or two problems which have arisen in operating the Social Security Pensions Act 1975 and to suggest that the Bill now before us may have to be used as an appropriate vehicle for amending that Act in minor detail or for obtaining clarification from the Government at different stages of our proceedings.
One of the problems which I believe should be tackled is the delay which occurs by a strict interpretation of the 1975 Act by the Occupational Pensions Board in connection with the interpretation of the various stipulations concerning what are called the "requisite benefits". I want to make it clear that I am not criticising the Occupational Pensions Board. I believe that it is acting very properly and, indeed, I would not seek to criticise the Board when I see on the Cross-Benches the chairman of the Board, the noble Lord, Lord Allen of Abbeydale, who is unfortunately, in political and Parliamentary baulk because of the Addison Rules. I sympathise with him very much.
Some of these stipulations are mandatory and some are permissive. The appropriate place for complying in detail with these provisions is in the formal rules of the schemes themselves, and the Act appears to envisage this by using the word "rules", for instance, in Clause 33(l)(a ) and 36(2). But, in practice, very few schemes will be able to produce full and final rules or amendments to rules by April 1978 and, even if they could, I do not believe that it is reasonable to suppose that the Occupational Pensions Board would have time to examine them in detail before then. Therefore, I believe that there is a need for interim methods of documentation if the work is to be completed before April 1978. I am told that many insurance companies have 824 been negotiating with the OPB to establish standard methods for this purpose.
Unfortunately, the OPB officials concerned in these discussions take the view that they have no discretion to waive any of the detailed requirements in defining what are called "requisite benefits". I do not know whether they are right or wrong: they may well be right and I think that they could be. But at present the only place where this kind of detail can be recorded appears to be in the announcement usually issued to employees. This is a highly unsatisfactory situation because the kind of detail and formal expression needed tends to defeat the simple communication objectives which everybody insists are the right sort of approach for such document. Secondly, the variety of such documents and of alternative forms of requisite benefits make any kind of standardisation very difficult.
It is also likely that pensions practitioners will have great difficulty in persuading employers to accept standardised provisions in these documents and the OPB is likely to have to examine most of them individually and in detail at some time. Again, I say that the likelihood of their achieving this by April 1978 seems almost as remote as for the fall rules themselves.
The Minister will already be aware from discussions with representatives of the Life Offices that they regard the situation as reaching crisis point and feel that if there is no change of course it will be impossible in more than a minority of cases for the necessary documentation to be completed in time for the OPB to carry out the necessary work by April 1978. In fairness, I should say that the Occupational Pensions Board has today written me a letter that indicates that it does not think the matter all that serious. However, my technical advisers tell me that I am right and I shall be replying to that effect.
I want to propose a possible solution to what I believe to be a real problem. What I think is needed is the facility to meet the requirements of the Act by a short, generalised commitment in interim formal documentation. There are precedents for this—for example, a long-standing Inland Revenue practice, and the arrangements 825 under the 1973 Act for the preservation requirements. I believe that the OPB is under the impression that there is no provision in the 1975 Act for it to issue interim certificates for contracting out. I do not believe that that is correct, because the drafters of the 1975 Act envisaged this situation and included a regulation-making power in Section 63(2)(g) which would make it possible to overcome the difficulty by adopting more streamlined systems of interim documentation.
I hope that the Government will feel able to give an assurance at some stage that they recognise the urgency of the situation and will issue the necessary regulations under this section. Alternatively, this House could take action to include the necessary discretion for the OPB in Section 33 of the 1975 Act. What I think is required is an amendment to the 1975 Act which could be made at a later stage of the Bill to give the OPB the discretion to issue a contracting-out certificate even where the scheme does not at that stage contain rules complying in detail with the requirements of the Act, but where the OPB is genuinely satisfied that it is intended to do so and that a formal commitment has been entered into. The OPB could lay down the date by which the detailed requirements must be satisfied. Subject to what the Government may feel, I should be prepared to put forward an Amendment to that effect at Committee stage.
I turn to one other point. Again, it is a practical point and has arisen, I am informed, between the OPB and the Life Offices. It arises from the interpretation of the legal requirements which must be followed in examining the solvency of guaranteed minimum pensions. Putting it at its simplest, it appears that the OPB view is that it cannot rely upon the security of an insurance policy unless it is issued to and vested in an individual member or, at the least, is outside the trusts of the relevant pension scheme. I do not understand why this should be the case, because the contracting-out provisions of the Boyd-Carpenter scheme worked happily for many years without anyone insisting on this requirement and without any suggestion that the precautions were inadequate.
826 What I understand is that the requirement now will cause considerable proliferation of paperwork which will have to be paid for, and this will mean a reduction in the amounts of pension which can be provided for given contributions of the employer and the employee. In other words, the requirement is against the interest of providing better pensions, and if the OPB are correct in their interpretation of the law—as they may well be—then there is a need for the law to be put into more practical shape.
My Lords, I should like to make one final suggestion arising out of what I have been saying. In seeking to operate the provisions of the 1975 Act—and we are working under a very tight schedule now to try to get the Act into operation by April 1978; every day and every week counts—there will inevitably be a number of matters which will require clarification either by the Occupational Pensions Board or by the DHSS. If these matters can be disposed of quickly, then there is no problem at all; but with this tight timetable we cannot afford to allow unsolved problems to drag on, even for a few weeks. This is particularly true of matters which will affect the granting of contracting out certificates by the OPB.
Often these matters drag on—and I do not want to be misunderstood, and I am not being critical—because they are being dealt with in the very nature of things, as is quite right, at a relatively low level to begin with. My experience is that many of these problems can be solved if they are put to the highest level in good time. I should like to see meetings taking place from time to time between the OPB at top level, the DHSS at top level, possibly with the Minister, Mr. Stanley Orme, in the chair, and the outside parties involved, to examine any problems which have arisen which may cause delay in dealing with the granting of contracting out certificates.
I wonder whether I might draw an analogy. In the war we had in 21 Army Group a very similar problem in the Normandy campaign not long after D day. We realised that the availability of replacement tanks from the United Kingdom was not keeping pace with the tank casualties and that our calculations showed that the supply of tanks arriving 827 in Normandy could well dry up; and we were working against a very tight schedule for the breakout. We convened a conference in the beach-head comprising the top-brass from the factories dealing with the tanks, the transport system, the Navy and the senior officers of the tank regiments, not to mention from the War Office, and one or two others. It was not long before we identified the real bottleneck; I say not long, it was only a few hours. It appeared that whereas the Americans went into battle with the identical tanks after about 30 modifications had been made to them, our own people had insisted on modifications counted in hundreds. It took about a day to iron this out and to decide with the help of the experts on which modifications were essential and which could be dropped, and we decided how to cut through the red-tape and to get things moving. The tanks began to roll into Normandy very soon after that.
This is not just a military reminiscence. The point is that these kind of decisions have to be made quickly, and they have to be made at the top. If we are to avoid a chaotic log-jam at the OPB some organisational structure must be brought into being, in my view, to cut out avoidable delay. I hope that the Government will recognise the problem. I am quite sure that the noble Lord, Lord Wells-Pestell, who has been so extremely helpful in all pension matters, will see it quite quickly, and I am sure that something has to be created, even if it is only ad hoc, to solve the problem. I am not looking for a reply from the Government tonight. I merely want to put forward these suggestions in the hope that they will be considered.
§ 7.44 p.m.
§ Lord WELLS-PESTELL
My Lords, I am grateful to the three noble Lords who have taken part in the debate. I think that I can say without being misunderstood that perhaps in the whole of your Lordships' House it would be difficult to find three people more competent to contribute in this particular field. I know that the noble Baroness would say that her involvement derives from her concern. Both she and I have a very deep concern in the field of social services, social welfare and social benefits, and the noble 828 Lords, Lord Byers and Lord Banks, bring to discussions of this kind an expertise which we would not ever presume to possess; indeed, perhaps no one else in the House possesses quite that expertise. The Government will read Hansard very carefully because a number of quite definite suggestions have been made. I am under the impression that there has been an "on-going discussion"—I hate that expression, although it is used by professional social workers these days. I cannot bear it. But there has been an on-going discussion between experts; but it may well be, as the noble Lord, Lord Byers, suggested, that we ought to be looking at the matter afresh.
The noble Baroness raised the question of the Easter situation with regard to students. I can say at this stage that we shall deal with any claims that are made in accordance with the law as it is at the moment, until the law is changed, as we hope, by this Bill; but that is the position. I do not want to enter into a discussion at this time with the noble Lord, Lord Banks, about the responsibility of parents regarding the contributions that they are expected to make in relation to their sons and daughters who have been given student awards. Some of us feel quite strongly about this, but we realise that there are difficulties. It is very difficult to find a satisfactory way of dealing with this question, and sometimes one has to adopt a position which is going to meet the situation generally, even though it may be unfair to some. The noble Lord, Lord Byers, was good enough to say that he did not expect replies to what he——
§ Baroness SEEAR
My Lords, I hope that the noble Lord will forgive me for intervening, but I wish to refer to a matter with which I know he has great sympathy. With regard to the parental contribution, will he recognise that if nothing is done about this the people who will suffer most acutely will be the daughters where there is a question of choosing whether it is a son or a daughter who gets a university education? In cases where a parental contribution is required, many daughters simply will not go to university.
§ Lord WELLS-PESTELL
My Lords, the noble Baroness will know that my 829 Department is not responsible for that particular system. This system has been adopted by Governments over many years, and one recognises that there are problems where there are one, two, and perhaps three children in a family going to university one after another. I am prepared to accept, because it is within my own personal knowledge, that the discrimination to which the noble Baroness has referred does in fact sometimes take place. But I think that the Government always have to look at the situation as it should be and consider whether it is right to have a system which provides a possibility of money being paid out twice from different sources. The noble Baroness will say that in 73 per cent. of cases it is not being paid out at all. We recognise this problem and it is a matter which causes us some concern.
The noble Lord, Lord Byers, referred to the solvency test. He mentioned certain difficulties in connection with contracting out. I think that he will understand when I say that this is a very technical and complex subject. It is one which we are very carefully examining in the Department, and it is also being carefully examined by the Occupational Pensions Board. Discussions are still continuing on the details of implementing the test and perhaps the noble Lord will allow me to leave the matter there. But as I said at the beginning of my reply, we will look very carefully at what has been said. I am grateful to the three noble Lords who have taken part for their balanced observations and comments. Although the situation may be a little different in Committee, nevertheless we are grateful for what they have said.
§ On Question, Bill read 2a and committed to a Committee of the Whole House.