§ 4 p.m.
§ Report received.
§ Clause 7 [Calculation of contributions]:
Lord Banks moved Amendment No. 1:
Page 4, line 2, leave out ("so much or).
The noble Lord said: My Lords, with the leave of the House I shall speak also to Amendments Nos. 2, 3 and 4.
Amendment No. 2: Page 4, line 3, after ("week,") insert ("less the first £15.00,").
Amendment No. 3: Page 4, line 3, leave out from ("question") to end of line 6.
Amendment No. 4: Page 4, leave out lines 7 to 19.
There is an error in Amendment No. 3. It should read:
leave out from ('as') to end of line 6".
§ The word "question" should remain in the Bill.
§ The Government's restructuring of national insurance contributions contained in the Bill is designed to lessen the burden on the lower paid and to encourage employers to employ lower-paid workers. We on these Benches support those aims. However, the proposals are open to the criticism that they create a series of poverty traps where only one existed before. For a pay rise of 1p there are net income drops of £1.77, £1.09 and £1.79 at £34.99, £54.99 and £89.99 per week respectively.
§ With the object of eliminating these poverty traps I tabled at Committee stage amendments which eliminated the new graduated steps in national insurance contributions and substituted a disregard of the first £10 of earnings as far as employees were concerned. The amendments also abolished the uppper limit on employees' contributions. The Bill already abolishes the upper limit on employers' contributions.
§ The noble Lord, Lord Young, gave a very full reply, and after considering that reply most carefully I have come to the conclusion that the principle of my proposals was sound but that the disregard was insufficient and that the elimination of the graded steps from the employers' contributions unbalanced the whole. Accordingly, I have now tabled a series of amendments which I think meet the noble Lord's criticisms. These amendments substitute a disregard of the first £15 for employees instead of the graded steps in the Bill. As before, the top limit on employees' contributions is removed. However, on this occasion the amendments do not alter the graded scale in the Bill for employers' contributions.
§ As I understand it, a £5 disregard costs £400 million. One-third of the £15 disregard is replacement for the reduction on employees' contributions as set out in the Bill, which I believe also costs about £400 million. The remaining two-thirds of the disregard is paid for by the abolition of the upper limit for employees. The noble Lord, Lord Young, pointed out that under my original proposals it would cost an employer £7.49 to give an employee on £34.50 per week a net increase of £1. That is £7.49 as opposed to £8.58 under present arrangements and only £4.70 under the Government's 147 proposals. Under the proposals contained in these amendments it would cost £4.89, according to my calculations; virtually the same as under the Government's proposals.
§ Of course the cliff edges, as the noble Lord, Lord Young, called them, for employers at the higher levels would be less than under the Government's scheme and the poverty traps at these levels would be abolished. The burden on the lower paid and employers of the lower paid would be reduced. Everyone earning less than £280 per week would pay lower national insurance contributions than they do now. Those people earning over £280 per week would pay more.
§ In his reply at Committee stage the noble Lord, Lord Young, felt that for those earnings between £13,780 per annum, and £19,665 per annum to have a marginal rate of 39 per cent.—which under my proposals, as a result of raising the top limit of employees' contributions, they would have—was unacceptable. But 39 per cent. is the marginal rate for all those earning less than £13,780 and it is difficult to see why those above that figure should be treated more favourably. The noble Lord said that the people in the £13,780 to £19,665 band could not be compensated by a higher rate tax adjustment because they do not pay it. But presumably they, and others earning less, could be compensated by a standard rate income tax adjustment.
§ Of course the aim must be to integrate income tax and national insurance contributions into one rate of tax with a clear indication, I suggest, that a proportion of that tax is going to Government spending on resources, on the one hand, and to transfers of income, on the other. National insurance contributions are really a tax, which is why it makes sense to abolish the top limit on employers' and employees' contributions, particularly now that the earnings-related pension is to be phased out.
§ As a result of these amendments the employees' national insurance contributions would be on a simpler basis than currently proposed in the Bill. The cliff edges for employers would be reduced. The additional poverty traps introduced by the Government proposals would be avoided. All those earning under £280 per week would have their national insurance contributions reduced. A fairer system of employees' contributions would be established. The way would be open for the integration of income tax and national insurance contributions. I beg to move.
§ Baroness Jeger
My Lords, I rise only to say that we on these Benches strongly support the amendments tabled by the noble Lord, Lord Banks, who has spoken with great expertise and experience. We hope very much that the Government will give serious consideration to these amendments.
§ Lord Monson
My Lords, I was not here at Committee stage and I had no foreknowledge of these amendments, which I saw for the first time only a few moments ago; but I am delighted to know that the mind of the noble Lord, Lord Banks, and my own mind have evidently been running along the same lines ever since the Budget, approximately four months ago.
148 The scheme that the noble Lord proposes seems to be vastly superior to that proposed by the Government, in which, for example, anyone earning a gross wage of £89 a week who accepts a rise of £1.75 in his gross wages will actually be out of pocket. Therefore, I hope that these amendments will be supported.
§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington)
My Lords, the noble Lord, Lord Banks, has returned to the fray with a new version of the amendments he moved in Committee to assist the lower paid and their employers by changes in national insurance contributions. These proposals were announced by my right honourable friend the Chancellor of the Exchequer only after very careful thought. Despite the acknowledged expertise in these matters of the noble Lord, Lord Banks, I have to say that in our view neither his persistence nor his ingenuity have resulted in improvements. I shall explain why.
The amendments of the noble Lord, Lord Banks, have three main elements: the introduction by his first two amendments of a band of £15 of pay per week exempted from national insurance contributions; the abolition by his third amendment of the upper earnings limit for employee's contributions; and the removal by his fourth amendment of the graduated structure of rates for employees' (but not employers') contributions.
The £15 band of "free pay" which the noble Lord proposes should apply—once the lower earnings limit has been reached and liability for national insurance contributions then arises—is more generous than the £10 band he proposed in Committee. As we argued then, this proposal is not targeted as effectively on the lower paid and their employers as our own graduated rates: all would have some benefit, including those who do not need it.
However, one important objection to the amendments is cost. If we were to abolish the upper earnings limit for employees we would gain some £700 million. If, as the noble Lord suggested during the debate on Second Reading, this money were used to reduce the rate of contribution for employees, it would do so by only ½ per cent. Meanwhile, the system of £15 free pay would cost £1,150 million. Even if we used all the money from abolishing the employees' upper eanings limit instead of reducing the rate, there would still be a loss of contributions revenue of £450 million. I do not believe we could sustain this on top of other costs that we are prepared to accept in our existing proposals. There would therefore have to be an increase in the rates if the noble Lord's proposals were to break even.
I am sure that the noble Lord has no such increase in mind. Of course, the abolition of the upper earnings limit for employees will hit them much harder than employers, as my noble friend Lord Young explained in Committee. I am sure that your Lordships would not want me to repeat those points, save to say that it would be quite unacceptable to proceed in this way because of the high marginal tax rates that it would create just above the upper earnings limit.
Moreover, in conjunction with our proposal in the Green Paper on social security, the abolition of the 149 upper limit for employees will mean incurring greater benefit costs for those people who keep their title to the state earnings-related pension scheme but who, because they are in the upper earnings ranges, are less in need of those benefits. This is because the upper limit not only serves to contain the contribution liability for employees, but also serves as a link to limit the entitlement to the earnings-related pensions and the guaranteed minimum pension schemes.
It seems to me that the noble Lord has now come to accept our proposals for employers, because for their contributions he has retained the graduated rates. Apparently, though, he still feels that we should have a different system just for employees. It is a rather complicated way of proceeding. As my noble friend argued in Committee, we do not believe that there is such a problem concerning the steps for employees' contribution liability as the noble Lord seems to suppose. I would recommend that we leave our proposals undisturbed and see how they work out. I believe the encouragement that we have given both to employees and employers will be of great benefit to all concerned and we should see how the graduated rates work in practice before leaping to conclusions about the need for change and how to effect it. I therefore ask the noble Lord to withdraw his amendment.
§ Lord Banks
My Lords, I must say I am rather disappointed by that response from the noble Baroness. But I should like to thank the noble Baroness, Lady Jeger, and the noble Lord, Lord Monson, for their support of this series of proposals. The noble Baroness, Lady Trumpington, said that this was not targeted as effectively on the lower paid as were the Government's proposals. This was the argument put forward last time, which I felt was valid then, but I do not feel that it is valid in respect of these particular proposals. According to my calculations, the Government proposals mean that at £36 a week for those who are contracted in at the present time and paying the contracted-in rate there is a payment of £1.80; under my proposal it is £1.89. So there is a difference of 9p there. At £55 per week the Government proposal is £3.85; mine is £3.60. At £90 per week the Government proposal is £8.10 and mine is £6.75. So they are at lower end of the scale and the rates are not substantially different from those that are achieved by the Government procedure.
The noble Baroness next went on to the question of costs. I do not think that the figures that she gave in fact refute the figures of cost which I gave earlier. She was left with the sum of £450 million, but they have already allowed for that in their present calculations, and so the cost of that £1,150 million which she mentioned would be met out of the removal of the upper limit. I think she also objects to people above the present top limit having to pay more than they now pay, but it has always seemed to me quite ridiculous, when national insurance contribution is virtually a tax, that as one's income gets larger and above the top limit—£265 a week at the moment—so the percentage of one's income which national insurance contributions represent gets smaller. That does not seem to me to be right; it seems reasonable that it should run at a level rate, which I think is fairer.
150 The noble Baroness complained that I was suggesting a different system, and asked why was it necessary to have a different system for employees and for employers. As I explained, the object is to get rid of the poverty traps and reduce the cliff-edges, and that is achieved by my proposal. So it still seems to me that what I have proposed is better than what the Government are proposing. But I shall consider very carefully what the noble Baroness has said, and if we do not have the opportunity—as we shall not—to return to the matter under this Bill, nevertheless perhaps when the Fowler reforms are being introduced we shall have the opportunity to return to this again, and we will then have had some experience of the rates that are levied in the way the Government are anticipating. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 2 to 4 not moved.]
§ 4.15 p.m.
§ Clause 23 [Vaccine damage payments]:
Baroness Trumpington moved Amendment No. 5:
Page 21, line 18, after ("the") insert ("relevant").
§ The noble Baroness said: My Lords, this clause and the associated amendments amend the Vaccine Damage Payment Act 1979 by enabling my right honourable friend the Secretary of State to specify by order the amount of the payment under the Act. This gives effect to my right honourable friend's announcement on the 18th June of our intention to increase the payment to £20,000. The Government amendment to this clause makes clear the circumstances in which the £20,000 payments will be made. It will apply to new claims made on or after the date on which the order comes into operation. As noble Lords will be aware, having made the announcement on 18th June, we were anxious to amend the legislation quickly in order to enable an order to be made. In the event, this important matter was omitted from the original new clause put down in Committee.
§ I am sure the House will welcome the information that, though the order will be made very soon, my right honourable friend will nevertheless make arrangements for any successful claims made on or after the 18th June to be paid the increased amount. I know that the whole House welcomes the Government's initiative to increase the vaccine damage payment to £20,000. My Lords, I beg to move.
§ Baroness Jeger
My Lords, I shall say only that of course we welcome this information and we are very glad to accept the amendment that the noble Baroness has moved.
§ On Question, amendment agreed to.
Baroness Trumpington moved Amendment No. 6:
Page 21, line 21, leave out ("the").
§ The noble Baroness said: My Lords, I have already spoken to this amendment. I beg to move.
§ On Question, amendment agreed to.151
Baroness Trumpington moved Amendment No. 7:
Page 21, line 25, after ("Treasury") insert ("and the relevant statutory sum for the purposes of that subsection is the statutory sum at the time when a claim for payment is first made").
§ The noble Baroness said: My Lords, I have already spoken to this amendment. I beg to move.
§ On Question, amendment agreed to.
§ Clause 32 [Commencement]:
Baroness Trumpington moved Amendment No. 8:
Page 28, line 27, after ("paragraphs") insert ("22,").
§ The noble Baroness said: My Lords, this is a technical amendment. Clause 32, which deals with commencement, states that the provisions not specifically listed there will be brought into force by commencement order. Paragraph 22 of Schedule 5 is not listed, even though it is retrospective in that it will be deemed to have come into effect on 1st January 1985. It is inconsistent that it is not included in the list of provisions taking effect on the day the Act is passed, and this amendment removes that inconsistency. My Lords, I beg to move.
§ On Question, amendment agreed to.
§ Schedule 1 [Transfer and revaluation]:
§ Baroness Trumpington moved Amendments Nos. 9 to 27:
Page 33, leave out lines 32 to 35 and insert—
("52C.—(1) The taking out or the transfer of the benefit of a policy of insurance or a number of such policies, or the entry into or the transfer of the benefit of an annuity contract or a number of such contracts, if it takes place after the commencement of this section, only discharges trustees or managers of an occupational pension scheme from their liability, or any part of their liability,").
Page 33, line 40, at beginning insert ("for or").
Page 33, line 40, leave out from ("person") to end of line 43 and insert ("in a case where and to the extent that subsection (2) below has effect.").
Page 33, line 44, at end insert ("at the time an earner's pensionable service terminates or at any later time").
Page 33, line 49, after ("provided") insert ("for or in respect of him").
Page 34, line 1, leave out (", after an earner's pensionable service terminates").
Page 34, line 4, leave out ("(a),").
Page 34, line 8, at end insert—
("(2A) Where before the commencement of this section—
the trustees or managers of the scheme shall be deemed to have been discharged from their liability, so far as what they were liable to provide was so secured, at the time when it was first so secured.").
Page 34, line 15, leave out from beginning to ("authorised") in line 16 and insert—
("(a) the insurance company with which it is, or was, taken out or entered into is, or was, at the relevant time,").
Page 34, line 18, after ("1982") insert ("or any similar previous enactment").
Page 34, leave out lines 20 to 31.
Page 34, line 33, leave out ("prescribed conditions") and insert ("conditions which satisfy such requirements as may be prescribed").
Page 34, line 36, leave out ("prescribed conditions") and insert ("conditions which satisfy such requirements as may be prescribed").
Page 34, line 36, at end insert—
(e) it satisfies such other requirements as may be prescribed.").
Page 34. leave out lines 39 to 41.
Page 35, line 8, at end insert—
("(4A) In subsection (3)(a) above, "the relevant time" means the time when the policy of insurance was taken out or the annuity contract was entered into or, as the case may be, when the benefit of the policy or contract was transferred.").
Page 35, line 44, leave out from ("where") to end of line 45 and insert ("section 52C(2A) above has effect.").
Page 35, line 47, at beginning insert—
("section 52C(2A) above does not have effect and").
Page 35, line 48, leave out ("(a)") and insert ("(b)").
§ The noble Baroness said: My Lords, I should like to explain that I propose to move Amendments Nos. 9 to 27 together. I am very sorry that it took so long to get them ready.
§ When we considered the Bill in Committee I promised to bring forward amendments on new Section 52C, which will be inserted into the Social Security Pensions Act 1975 by Schedule 1 of the Bill. This batch of technical amendments is the result.
§ Perhaps I should explain first of all what this new section is all about. It is intended to clarify a longstanding area of legal uncertainty. Occupational pension schemes can preserve pensions when a member leaves. An alternative is for them to secure the benefits by taking out an insurance policy or annuity contract in the member's name. It is when this happens that we have uncertainty, because it is not clear whether the scheme trustees or managers are thus discharged from their liability to provide benefits required by statute. I should emphasise here that the uncertainty exists only for benefits required by statute.
§ I am extremely grateful to the noble Lord, Lord Banks, and to my noble friend Lord Buckinghamshire for their contributions. We are also grateful to the experts in the pensions world who have been of great assistance.
§ I shall try to explain very briefly the main changes. With these amendments we are making it clear that the trustees or managers of schemes will be discharged from their liability to provide the benefits required by statute only when these benefits are bought out in accordance with the new section. For past buy-outs liability will be deemed to be discharged if the requirements of the new section are met. If they are not met, the liability position will be exactly the same as now; in other words, uncertain.
§ We are also heeding the comments we have had about subsection (3)(b). We have been told that it will not work properly, and we are therefore removing it completely. Instead we shall set out requirements in regulations which is, I believe, the right place for this kind of detail. We shall, of course, be consulting fully on these regulations.
§ Obviously, I do not wish to pre-empt this consultation, but your Lordships will, I am sure, wish 153 to know just what we have in mind. We intend that the regulations should require any policy or contract to be in the name of the member or some other person who was a potential beneficiary under the scheme, or, of course, trustees for a potential beneficiary. The benefit payable under the policy or contract must at least equal any guaranteed minimum pension due to the earner or his widow. Any guaranteed minimum pension must be payable to the earner or his widow, and not used for any other purpose. We intend to leave the question of enforceability to contract laws. And it should now be clear that the insurance policy will not need to provide the same benefits to the same beneficiaries as the scheme would have provided.
§ This is quite a package to put to your Lordships, and I apologise for that. We have had to recast the new section, which has given rise to many consequential amendments. But in essence our purpose remains the same as it has always been: to clarify the law in this extremely difficult and obscure area. My Lords, I beg to move.
§ Lord Banks
My Lords, I should like to thank the noble Baroness for her explanation of this series of amendments. I should like to thank her in particular for dealing with the problems associated with Section 52C to which the noble Earl, Lord Buckinghamshire, and I drew attention at the Committee stage. The two big problems have been removed. The first was in lines 40 to 43 on page 33, which would have removed a discharge under existing scheme rules. The second was in subsection (3)(b), lines 20 to 31 on page 34, which would have rendered it impossible for virtually any insurance policy to comply. I am glad that these difficulties have been removed.
It would have been helpful to have had a statutory discharge for all benefits, as in paragraph 16(2) of the new Schedule 1A which will apply to future policies taken out at the member's request. Section 52C deals with the position where the decision to buy out by means of an insurance policy or annuity is taken by the trustees. Since buy-outs were introduced in 1981 there has been concern as to whether trustees could properly build in a discharge. This section does not, for example, cover death benefits.
There are two questions I should like to ask. The first is this. Does the section offer a discharge where existing policies have replaced all benefits and not just the statutory benefits in the way that Schedule 1A paragraph 16(2) does in respect of future policies that the member requests under his new entitlement?
I now come to my other question. On page 34 Section 52C(3)(c) says:it may not be assigned or surrendered except on prescribed conditions".The question I want to ask is this. In view of the prohibition of restrictions on assignment, are the Government satisfied that this statement would in fact prevent assignment or the seizure by trustees in the case of the bankruptcy of the member? Is this matter not better dealt with, more satisfactorily dealt with, in Section 48 of the Social Security Pensions Act 1975?
§ Baroness Trumpington
My Lords, the noble Lord, Lord Banks, asked why new Section 52C is restricted 154 to requisite benefits, short service benefits and alternatives to short service benefits. The answer is simply that these benefits are all required by statute. Schemes have always been able to discharge their liability for other benefits by their own rules. However, there has always been legal uncertainty about whether they can discharge their liability for benefits required by statute.
New Section 52C is intended to remove that uncertainty, but it does not go beyond that and in our view does not need to. One of the other questions that the noble Lord, Lord Banks, asked was to do with the uncertainty which exists for outside benefits—I think that was his description. The answer to his question is that it applies only to statutory benefits, as I think I said earlier. The answer to his other question is that we will consult on assignment. We think it is all right, but we shall certainly consider what he has said.
§ On Question, amendments agreed to.
Baroness Trumpington moved Amendment No. 28:
Page 37, line 31, leave out ("and").
§ The noble Baroness said: My Lords, this is a minor, technical amendment. It is so minor that I hesitated before bringing it before your Lordships. However, it seemed worthwhile, since we are already amending Schedule 1, to get the drafting of sub-paragraph (2) right. The removal of the word "and" is purely a drafting amendment. My Lords, I beg to move.
§ On Question, amendment agreed to.
§ Schedule 2 [Information about and registration of occupational pension schemes]:
Lord Kilmarnock moved Amendment No. 29:
Page 48, line 16, leave out ("may") and insert ("shall").
§ The noble Lord said: My Lords, this amendment was not designed to lead to a skirmish with the noble Lord, Lord Mottistone, who is totally opposed both to the clause and to the schedule. Since I see that the noble Lord is not in his place, that danger seems to be averted. The object is to press the Government's intentions a little further regarding information about and registration of occupational pension schemes. Noble Lords will see that I have simply changed "may" to "shall", so that the Secretary of State must specify the requirements to be complied with in the case of an occupational pension scheme. It does not tie his hands by committing him to any particular form of register. Accordingly, I have left the proposed Section 56B permissive. The Secretary of State may appoint a registrar or he may not; it is still up to him.
§ 4.30 p.m.
In the previous debate on this subject, I noted particularly the worries of the noble Lord, Lord Swann, on the question of cost and his plea that the Government should consider cheaper and simpler solutions. He was followed by my noble friend Lord Banks who suggested either a tracing registry or, if there were to be a registry of documents, that this should be held at the joint office of the Inland Revenue Superannuation Fund and the Occupational Pensions Board which already has copies of all the approved pension scheme documents. The noble Lord, Lord Mottistone, wanted to throw out the clause and the
schedule altogether. I was, however, glad to hear the noble Baroness say on that occasion that this would be to throw the baby out with the bath water. The noble Baroness said:
For some time there has existed broad agreement that members of pension schemes should have the right to basic information about the schemes to which they belong".—(Official Report, 25/6/85; col. 656.)
§ I agree with that. I applaud it. But some of us would like to go a little further in the interests of consumer protection. Many schemes, encouraged by the Company Pensions Information Centre under the distinguished chairmanship of the noble Lord, Lord Swann, adopt good practices. However, there is a minority which does not. I have not had any answer yet to the question that I put to the noble Baroness on Second Reading when I suggested that it should be a requirement upon schemes to declare the element that is funded on behalf of individual beneficiaries separately from that part of the fund held by trustees but not allocated to individuals which it might not be unreasonable to tax. This, it was suggested by an honourable Member in another place Sir Brandon Rhys Williams, would influence managers and trustees to allocate the maximum to individuals with a corresponding improvement in entitlements. I do not think that the noble Baroness reacted to that suggestion. I would be interested to hear her view.
§ What is there to prevent occupational schemes indexing pensions after account through the purchase of indexed gilts or through indexed annuities, as is now the practice, I understand, of some companies like Legal and General? Finally, I am concerned with consumer protection under the Government's new proposals for obligatory contributions by employers and employees to personal portable schemes. The mandatory switch of funds in this direction will be bound to pump money into the private pension market. This may have the result that funds have to become more attractive and more accountable. But it will also make them more fiercely competitive. This raises serious questions of consumer protection.
§ I am aware that the Inland Revenue has powers here, but its main concern is fraud and the interests of the Revenue and not with the consumer. I should therefore like to hear what proposals the Government have to take care of the consumer in the battle for his or her custom. I know that the noble Baroness will say that this is a matter, because it relates to the Secretary of State's reviews, for the consultation process on his reviews. But this may be the last occasion that we have for discussing such things here before a Bill is announced in the Queens' Speech for the next Session of Parliament. I seek from the Government a firm commitment to a register of occupation schemes in some accessible form and an assurance that the further matters that I have raised will receive serious consideration. I beg to move.
§ Baroness Trumpington
My Lords, the noble Lord, Lord Kilmarnock, has been a Member of this House much longer than I have. However, it seems to me that even in the short time that I have been here I have heard more arguments on "may" and "shall" than on any other subject. I hope that I can answer the whole question that the noble Lord has put before me very 156 simply. He has anticipated in some ways part of my answer. The amendment seeks to make the power to make regulations for the disclosure of information about pension schemes mandatory rather than permissive. A consultation document, which has been placed in the Library, covering the detail for proposed regulations on disclosure of information, has recently been issued. It is the firm intention of my right honourable friend the Secretary of State to make regulations when the consultation process is complete. The contents of disclosure will be in regulations. We shall certainly consider what the noble Lord has said when we are drawing up the regulations. I hope that in the circumstances the noble Lord will agree to withdraw the amendment.
§ Lord Kilmarnock
My Lords, I am grateful to the noble Baroness for that brief but not unsatisfactory reply. I have had longer replies which have been less satisfactory. I was glad to hear that it is the firm intention—I think that those were the noble Baroness's words—of the Secretary of State to make regulations and that before he does so, he will consider what has been said on the matter in this House. I look forward very much to the appearance of the regulations in due course. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Schedule 5 [Minor and consequential amendments]:
§ Baroness Trumpington moved Amendments Nos. 30 and 31:
Page 70, line 15, at end insert—
("32A. The words "under section 38 of this Act" shall be omitted from subsection (5)(b) of section 59 of that Act (increase of official pensions).").
Schedule 6, page 71, line 42, column 3, at end insert—
("In section 59(5)(b), the words "under section 38 of this Act.").
§ The noble Baroness said: Both these amendments are technical and put right an oversight in last year's Health and Social Security Act. I beg to move.
§ On Question, amendments agreed to.
§ Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution):
§ Lord Denham
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Social Security Bill, has consented to place her prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
§ Moved, That the Bill be now read a third time—(Baroness Trumpington.)
§ Baroness Jeger
My Lords, I may have appeared to take a rather Trappist part in the debates this afternoon. I can assure your Lordships that this is not from any lack of interest but because I think that silence may be golden especially when we are dealing 157 with such an unsatisfactory piece of legislation. The Bill had its First Reading in the other place on 15th November 1984. It struggled and wandered through its Committee stage from 11th December until 29th January 1985. After this elephantine gestation, we get a Bill that we know is going to be overtaken in the autumn by the White Paper and the social security reviews. If there is anything to condemn this Bill, it is the fact that in the other place there had to be at Report stage—after all those months in Committee—41 amendments. With my experience of the other place, I find it difficult to recall a precedent.
Today, we have had here at Report stage 31 amendments, four of them from the noble Lord, Lord Banks, and one from the noble Lord, Lord Kilmarnock. Many of the amendments we welcome, and they are consequential one upon another. I do not blame the noble Baroness, the Minister. I hope, however, that she will indicate to her dilapidated department that this is not the way to bring legislation before the House. We do not expect to have a Bill that started in November dragging on until the middle of July and at this late stage still needing amendment. One particular point to which I should like to draw the attention of your Lordships is Clause 18 relating to statutory sick pay. I quoted in a previous debate from the Explanatory and Financial Memorandum. I quote again what I said at col. 695 of 25th June namely, that the memorandum states there will be,an increase in revenue to the Consolidated Fund from the income tax on statutory sick pay. The overall effect of these changes will be to save about £200 million in public expenditure".I thank the noble Baroness because when I raised this matter in the House she questioned whether or not I had it right. I am always prepared to admit that I am wrong. She kindly wrote me a letter to explain it. But I must say that the letter, for which I thank her, has made it equally difficult for me. Of course I am privileged to have a letter from the noble Baroness, but when figures are printed in the financial memorandum to a Bill anyone who gets that Bill should be able to believe those figures. It is totally irresponsible and absolutely disgraceful—and I say this as an old civil servant—for a department to allow figures to be printed in a financial memorandum to a Bill and afterwards the Minister is put in the position of having to write a long letter to explain it.
The noble Baroness says:Whereas most of the savings from extending SSP count as public expenditure savings, none of the costs count as public expenditure costs".If someone could explain that to me, I should appreciate it. There must be many people who are puzzled by that statement.
I could find other difficulties in the Bill, in the wording of it, in the whole philosophy underlying the Bill. We welcome some of it such as the increase in vaccine damage payments, but on the whole it is a shoddy piece of legislation. In view of the fact that we are to have major changes coming before us very soon I think that we have wasted a great deal of time, and that is why I do not propose to add to that waste of time.
§ Lord Kilmarnock
My Lords, it seems to me that the noble Baroness has made her "this Bill do now pass 158 "speech. Therefore, perhaps it is appropriate that I should do the same. I promise that I shall not make a further speech on the subsequent Motion.
As I said at Second Reading, there are some things that we can welcome in this Bill. I personally feel, as certain noble Lords opposite did not, that the Government have got their transfer and revaluation proposals about right. I think my noble friend Lord Banks also had some cause for satisfaction on the concessions he achieved from the Government in Schedule 1.
On the matter of a register and the desirability of greater transparency of occupational schemes, I have said my say this afternoon and have had from the noble Baroness an answer which at least gives me some hope, so I shall not pursue that line any further. On the social security side of the Bill I remain—and I think we on these Benches remain—fundamentally unhappy. We had a long argument at Committee on Clause 9. I believe that that argument was won by the noble Lord, Lord Stallard, and I, although it was resisted by the Government. At least we proved that Clause 9 is basically a cost-cutting exercise designed to pay for the restoration of the abatement in Clause 15, so the Government have no grounds for covering themselves in glory on that.
Personally I very much regret the Government's refusal to withdraw the clause in the light of their commitment in volume 2 of their Reform of Social Security, page 6, chapter 1.42, where they say:The Government will be giving further consideration to the implications of the new arrangements for invalidity benefits".It seemed to me that there were very good reasons in fact for not pressing on with this clause.
Incidentally, it is worth bringing to the Government's attention that the equivalent invalidity benefits in other countries in the EC are higher than those here. In particular, we compare badly with the Netherlands. I have here figures for that country but I shall not burden the House with them at the moment. I hope that the Government will study them before they come forward with further proposals on invalidity in their legislation in the autumn.
On Clause 20, similarly with new arrangements shortly to come on stream for housing benefit, it seems to me that the clause might well have been dispensed with. I know that abuses by certain local authorities are alleged, but it remains the opinion of the Association of District Councils that the Secretary of State has assumed unnecessarily draconian powers to curb these abuses.
On statutory sick pay we were, and I think remain, fundamentally unhappy. It seems to us that something should have been done to reduce the burden on the small employers. None of the noble Baroness's display of conjuring tricks with figures has done anything to convince me that the Government are not taking some £200 million away from the sick. There really seems to be no reason why there should be three differential rates, to which we object on grounds of equity and fairness.
I think that that is all I need say. I do not know whether we look forward to it, but we understand that 159 we are going to get in the autumn in the Queen's Speech the announcement of a substantial social security Bill which will be brought forward, we assume, after consultation on the four documents which the Secretary of State has produced. We very much hope that there will be genuine consultation, and that some of the views which have already been expressed in your Lordships' House will be taken into account before we come to that Bill. In the meantime, I think we should reserve all our fire and energy for that occasion, which I think will be something—to use a current term—of a Big Bang in the social security community. We look forward to that when it comes before us later in the year.
§ Lord Stallard
My Lords, my noble friend Lady Jeger and the noble Lord, Lord Kilmarnock, have said much of what I wanted to say. Therefore, like them I can be brief, and I promise too that I shall not be repeating another speech on the Motion that the Bill do now pass.
There are one or two things that I ought to say before the Bill leaves your Lordships' House. I said—and I think there was widespread agreement both inside and outside the Houses of Parliament—that the Bill was unnecessary. It seemed to be totally unnecessary in view of the reviews which were taking place and the legislation that was expected, and is now promised, to come forward from those reviews. All of what is in this Bill should have been in whatever Bill is forthcoming. We should not have wasted the time—valuable time, in my view—of this House in discussing this measure.
It was a panicky measure, and we said so at the time. It is ill-thought-out legislation. My noble friend Lady Jeger has underlined that again and emphasised it by referring to the fact that there were over 40 Government amendments at Report stage in the other place, and 25 or so Government amendments at Report stage in this House. It does not seem as though the Bill was properly and reasonably thought out before it came to this House.
I was disappointed, and I am still, at the apparent lack of interest (although I can understand it) from Members of this House. I understand it because of the reasons I gave at the beginning. I do not think the Bill is necessary. Most Members also accepted that, and therefore stayed away.
I do not complain that television has not been interested in social security at any stage on any Bill. I do not know whether that is a criticism of television or a criticism of a lack of interest in the country generally on social security, but I hardly think that it is the latter. However, the attendance in the House is better today than it has been throughout most of the Bill. Of course I exempt those people who have been present at all stages.
was also disappointed in what I heard and read of the debates in the other place and the debates here in that the Government do not seem to be listening at all. The Government have decided what shall take place, and they say, "That is right, and that is where we stand". There is intransigence, and a great deal of frustration on the part of those of us who are in constant contact with the professional bodies, the 160 statutory bodies, and the voluntary organisations who are responsible for operating all of this social security legislation, and who know the effects of social security legislation on claimants.
Those of us who are in constant contact with those sources feel frustrated that all that expertise seems to have been brushed aside in the face of what the department, whom none of us know, are saying: "This is right. This is how it should be, and under no circumstances will we change one dot or one comma".
That is an unfortunate and disappointing aspect not just of this Bill but of much Government legislation going through, but I am particularly concerned about the fact that they do not seem to be listening on the question of this Bill. The noble Lord, Lord Banks, is an accepted reference, if you like, on occupational pensions. He is certainly an expert on pensions. He made some good points and moved many excellent amendments, but they have just gone and might as well not have been mentioned at all.
Likewise the management people who wrote to me, the Managerial and Professional and Staff Liaison Group, made some excellent suggestions. With their expertise and knowledge on occupational pensions one would have thought that that would have been listened to or remarked on, or at least would have caused some kind of reaction, but it did not. We are exceedingly disappointed. It was summed up for me by a friend in another place, Sir Brandon Rhys-Williams, although of a different persuasion. Having explained that he had abstained on a vote on Second Reading, and if the matter went to a vote again on Third Reading, he would again abstain, he said:This measure does not meet the needs of the early leaver"—that is, a leaver from an occuptional pension scheme—and does not do what is required for the reform of national insurance. It does not make the changes in the law that have been called for for so long in relation to occupational pensions.I believe that tonight we have marked another stage in the decline of Parliament, because we have abdicated from our responsiblility to deal with matters that concern the entire population in terms of cash".—[Official Report, Commons, 18/4/85; col. 514].Had that been spoken by somebody from my side of the political divide, no doubt the Government would have brushed that aside as well; but I do not think that they should be as cavalier when such comments come from another accepted expert on pensions matters. I have listened to him speak on pensions on many occasions both inside and outside Parliament. When Sir Brandon Rhys-Williams speaks we all should listen. The Government were not listening to those comments, and that is sad.
On sick pay, I said on two or three previous occasions that there had been a deal of criticism and that too had been pushed to one side. I am still not satisfied that the criticisms of the small employers have been listened to, accepted or acted upon by the Government. The noble Lord, Lord Kilmarnock, made similar points at other stages as well. I re-read the 10th report of the Public Accounts Committee. It is available in the Printed Paper Office. On reading that it is clear that there is a great deal of criticism, ambiguity and doubt as to how the statutory sick pay scheme will work. There is also much doubt about 161 how much it will cost. I need repeat only one sentence. In a reply to a question, Sir Geoffrey Otton, who is the Second Permanent Secretary, said:We do not precisely know what the additional costs falling on employers are, and we are not able to estimate them in advance".I should have thought that employers would be entitled to better treatment than that in relation to the costs that they will be expected to meet by the extension of this scheme. I was disappointed in that and by many other comments in the Public Accounts Committee report.
On invalidity allowance and the additional component, the noble Lord, Lord Kilmarnock, has mentioned the discussion and debates we had on the amendments. We were able to prove that the rationale for each of those two benefits is totally different. There is no question of an overlap, yet the overlap was the sole reason that has so far been given by the Government for the change in payment of those benefits. I asked then why they did not impose the regulations that exist for dealing with overlaps. Why did they have to go in for a whole new procedure, except that it was to save money? No response has been forthcoming from my criticism.
I should have thought too that in a Bill of this size and at this stage, as the Government have thought it necessary to have 33 clauses and six schedules that somewhere would have been found—I have raised this on every occasion when I have spoken on social security—to have introduced the invalid care allowance for married women and women cohabiting. I quote from col. 705 of Hansard for 25th June, when the noble Earl, Lord Caithness, replying to a debate regarding invalid care allowance, said:Notwithstanding that we have covered this ground before, I am very well aware of the strength of feeling that invalid care allowance arouses. The words which the new clause is designed to omit from the Social Security Act clearly discriminate against married women and cohabiting women and I would not attempt to pretend otherwise".That is reasonable and honest comment. But if that is so why the delay? Why not introduce it? It is an open and shut case that the Social Security Act discriminates against married women and cohabiting women; but in my view the opportunity should have been taken—again I am disappointed that it was not taken in this Bill—to rectify that discrimination.
I shall not delay the House any longer, though I could have gone on a little more. The Government are concerned about their image and much discussion has taken place in the media and a load of whimpering is coming from Government ministers because they feel that their policies are not being put across properly; they are not being understood; but that when they are, things will change.
I take exactly the opposite point of view. I think what is happening is that their policies are being well understood and that is why people are reacting as they are. They are faced with a nil cost, non-expenditure, non-caring Government, and that is coming through whether Government spokesmen believe it or not. When I speak to people they are well aware of what is happening and that the Government are leaving no stone unturned to find savings at the expense of the poor, from sickness benefit, from invalidity benefit, 162 from funeral grants and all sorts of benefits that affect people at the lowest end of the spectrum. That is the end where one has to be in dire circumstances before any of those benefits can be claimed.
People have to be in real trouble before they qualify and that is where the Government are looking for all these hundreds of millions of pounds of savings so that they can amass sufficient money for the Chancellor to give in the form of tax handouts to people who do not require them at the other end of the spectrum. That is clearly understood by everyone I speak to at whatever level. I do not think that any amount of PR or explanation on the part of the Government will overcome that.
I express my disappointment both at the Bill and the lack of movement—I shall not say caring, because I should not want to include the noble Baroness in that category—on the part of the Government towards all the excellent amendments that could have made this an acceptable Bill had some of them been agreed to.
§ Lord Mottistone
My Lords, it seems that while we are making "this Bill do now pass" speeches at this stage, I may briefly contribute. I was amused by the crocodile tears of the noble Lord, Lord Stallard. They reminded me of being on the Back-Benches in Opposition—luckily several years ago now. One used to make that kind of speech with tears practically pouring down the gangways. It makes it all sound so dreadful; but his closing remarks were so much the reverse of the truth that no doubt my noble friend will be picking it up.
My brief remarks relate to industry. As your Lordships will know, it was on specific points raised by industry on which I had amendments, and on the whole industry were satisfied that the Government had enough flexibility to give effect to the various points that I made, as and when they found them to be necessary. I might invite my noble friend to listen carefully at this point. Am I sure that my noble friend is listening carefully?
§ Lord Mottistone
My Lords. I hope that the Government pay very special regard to the points that I raised both at Second Reading and at Committee stage and will keep a sharp eye open to make quite certain that the various policies they seek to give effect to in this Bill go the way they think they should, and that they will make the necessary changes if they do not. The most important thing that they must do is to ensure that industry—and that includes the employees in industry—receive the maximum benefit that they can from this Bill so that they can help the country as a whole. If I can be reassured on that point I shall be happy to see this Bill go on to Royal Assent.
§ 5 p.m.
§ Baroness Trumpington
My Lords, I was going to say that this has been a most courteous, civilised, good-tempered passage of a Bill through your Lordships' House until I heard the purple prose of the noble Baroness, Lady Jeger; but I shall not rise to that bait because I still believe that we have had some extremely useful and interesting discussions on this Bill. We have made amendments which I believe have improved it.
163 Of course we listen. The noble Lord, Lord Stallard, said that we do not listen. Some of the amendments to this Bill resulted from representations made to us by Members both of your Lordships' House and of another place as well as from outside bodies. I believe also that, on a number of other amendments, while I have not always agreed with their purpose, I have ensured that we have considered thoroughly the alternatives to the line that the Government have taken. I think that this has been a productive exercise, and I am grateful for the constructive way in which, on the whole, we have been able to debate these very complicated subjects.
I do not agree with the noble Baroness, Lady Jeger. This Bill will not be overtaken by the Green Paper. It does a great deal of good and we think it well worth while. I agree that there have been many amendments and we wish we could have got it right first time; but these are complicated issues and getting it right in the end is what matters.
With regard to the question of statutory sick pay, which both the noble Lord, Lord Kilmarnock, and the noble Baroness, Lady Jeger, raised, statutory sick pay is paid from—that is, deducted from—national insurance contributions collected by employers, so that it never comes into the Exchequer. It is therefore not public expenditure but it is not a saving from the sick. It reduces revenue received by the Government and also reduces the expenditure.
The noble Baroness, Lady Jeger, also asked me about SSP. I know that the public expenditure implications of statutory sick pay are puzzling. I tried to explain this in my letter to the noble Baroness and, if I have still not made it clear, I will of course write again. We cannot know the exact cost to employers of administering SSP, as they operate in different ways, but we are compensating them in a general way by the remission of their national insurance contributions on SSP payments.
With regard to my noble friend Lord Mottistone, may I assure him that my sharp eye will be open and, more importantly, the beady eye of the Government will be open. I hope that that will reassure him. On Second Reading, I said that this Bill, while involving tremendously technical and complex issues, would do a great deal of good for a great many people. I think that most of us are agreed on that. This Bill contains a lot of changes, some of them relatively small, but together they add up to a significant package of help to many people. For example—and I would emphasise this to the noble Lord, Lord Stallard—we are taking steps to end the unfair treatment of early leavers from occupational pension schemes and we are giving members the right to information about their schemes. We are making important changes to the structure of national insurance contributions, changes which will promote employment particularly for young people and focus additional help at lower income levels. We are extending statutory sick pay which, we believe, will make life simpler for the majority of people who are sick for longer than eight weeks. All the indications are that this is what most people prefer.
We are abolishing the residual effects of the married women's half test. We are restoring the 5 per cent.
164 abatement for invalidity pension and we are making small but nevertheless important changes in special hardship allowance and in the pneumoconiosis legislation and providing for increases in the payment for vaccine damage. I totally reject the argument of the noble Lord, Lord Stallard. This is by any standards an impressive list. This is a Bill for the benefit of everybody; and the electorate will understand that.
§ On Question, Bill read a third time, and passed, and returned to the Commons with amendments.