HL Deb 25 June 1985 vol 465 cc676-715

4.57 p.m.

House again in Committee.

Clause 8 agreed to.

Clause 9 [Abatement of invalidity allowance etc., where beneficiary entitled to additional component in pension or to guaranteed minimum pension]:

The Earl of Caithness moved Amendment No. 6: Page 11, line 36, leave out ("below") and insert ("of the Social Security Act 1975").

The noble Earl said: With the leave of the Committee, I should like to speak also to Amendment No. 7. Amendment No. 7: Page 12, line 9, leave out ("below") and insert ("of the Social Security Act 1975").

These are purely drafting amendments to correct mistakes in the present wording of the Bill. It is necessary to relate the references to Sections 124 and 126A in Clause 14 specifically to the Social Security Act 1975. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 7:

[Printed above.]

On Question, amendment agreed to.

On Question, Whether Clause 9, as amended, shall stand part of the Bill?

Lord Kilmarnock

I have given notice of my intention to oppose the Question whether Clause 9 shall stand part of the Bill? Clause 9 covers several pages of the Bill. It concerns the abatement of invalidity allowance and so on, where the beneficiary is entitled to an additional component in the pension or to a guaranteed minimum pension. The Government's proposal in this Bill is that in future invalidity pensioners will not be able to receive both the age addition and the earnings-related component on top of their basic pension. In April 1983, 37 per cent. of all invalidity pensioners were receiving both additions. That implied then that about 300,000 claimants would be affected by the change; and I understand that in fact the number now stands at 375,000. Therefore these claimants will lose the smaller of the two additions that they receive.

From November 1984 the three rates of age addition are: £7.50, £4.80 and £2.40. The maximum current payment for the earinings-related addition is £16.21 and the average payment to those receiving this addition is about £3. Thus, someone who is now receiving £3 earnings-related and a £2.40 age addition will lose the whole of the age addition. On the other hand, someone who is receiving £3 earnings-related and £7.50 age addition will lose £3. In fact, owing to the way in which these deductions are to be administered, the earnings-related component will not disappear in this case and instead the claimant will continue to receive the £3 earnings-related and the age addition will be paid net of the £3 at a rate of £4.50: in other words, £7.50 less £3. In this way, the Government can claim that the earnings-related part of the pension is being protected, as promised in the Green Paper, but this is really just semantics.

I wanted to draw the attention of the noble Baroness to the view of Mr. Stewart Lyon the independent adviser on their review, in opposing the abolition of SERPS. One of the reasons that he gave for this was: Nothing is said about how invalidity benefits will fit into a regime of compulsory private pensions. Given the small margin for personal invalidity benefits in the private sector does this silence mean that the difficulties are too great and the disabled are to be sacrificed on the altar of expediency? Some of your Lordships might wonder why it is right, or how it can be justified, that both these payments should be received together. The reason I think is simple. The Government's argument is that offsetting the age allowance against the earnings-related additional component is based on the notion that the two overlap. But given that the additional component relates to what the individual earned when able to work, which is one thing, and the age allowance relates to compensation for loss of earning power, which is another thing, then in my submission there can be no overlap, since the two were designed in recognition of two totally different circumstances.

I think it emerges that what is really happening is that the Government are using Clause 9 to pay for Clause 14 to which my noble friend Lord Banks will be speaking in due course. In effect, it is giving with one hand and taking away with the other, and this is confirmed in a letter which the noble Baroness, Lady Trumpington—who, I am glad to see, is back in her seat—was kind enough to write to me on 13th June. She says: The savings from offsetting additional component against invalidity allowance build up more slowly than we had anticipated. Our current estimates break down as follows. The table she then gives clearly shows that the net cost of the concessions under Clause 14 is more than offset by the net savings under Clause 9, to the tune of £25 million over the period between now and 1987–88. The noble Baroness then goes on to say—because this was a matter I raised at Second Reading—that: You are therefore quite right to think that overall these three measures will reduce benefit expenditure below what it would otherwise have been, though the effect is not borne only by the benefits for the long-term sick. We have not pretended otherwise, and I believe that both Clause 9 and Clause 12 will save money and are sensible measures fully justified on their own merits". Of course in that quotation she is referring also to Clause 12, which is not at issue in my amendment. Her argument is that these are sensible measures—I repeat her words—"fully justified on their own merits".

There may be two opinions on this. It seems to me quite extraordinary, as the noble Lord, Lord Stallard, has already suggested, that these measures should be brought forward in this Bill with the Government's Green Paper coming shortly after it, and in fact overtaking it. In Chapter 1.42 of the Government's Green Paper on page 6 they seem to recognise that there are some considerable difficulties in this area, and they say: The Government will be giving further consideration to the implications of the new arrangements for invalidity benefits. On those grounds, I would seriously suggest to the noble Earl who will reply to this debate that the clause should be withdrawn from the Bill at this stage. It is quite inappropriate, particularly during the process of consultation on this document which is supposed to be taking place. In effect, I suppose we are actually performing some of this consultative process this afternoon. In view of that, I would strongly suggest to the Government that they withdraw the clause, that they consult with all the interested bodies concerned, that they have regard to the very serious effect that this will have on invalidity pensioners, and that they come forward with their final proposals; whatever they may be, in the final legislation which follows the consultation on this Green Paper.

Lord Stallard

I want to support the noble Lord, Lord Kilmarnock, in this amendment, and I hope I remain within the Standing Orders in this instance. May I start by saying that we gave a cautious welcome to the announcement about the restoration of the cuts to the invalidity benefit, among others, that had taken place in the Social Security Act 1980. I suggested then that this clause was unnecessary. In fact I suggested that this part of the Bill was unnecessary, because this restoration could have been done in the normal process, in the same way that had been applied years ago to the unemployment benefit and to the invalidity allowance. So there was another reason behind the necessity to introduce such a clause and such a part of a Bill.

Having said that we gave a cautious welcome to that abatement, we certainly did not welcome Clause 9 and the provisions of Clause 9, because that claws hack most of it from many thousands of people—in fact I think the Secretary of State has admitted that half of the people who claim, that is half of 750,000, would lose most of the abatement in clawback. There was therefore no welcome for a clause that would claw back the abatement that was being offered in another two clauses. It is true of course that in order to cover this up Clause 9 is extremely complicated. As the noble Lord, Lord Kilmarnock, has already said, it covers five pages—one clause covering five pages of a Bill that was introduced in a panic. Very few people had the time to consider this Bill in the detail required because of the immediate announcement of the social security reviews and the Green Papers. It was all crowded into that time scale and gave no one a real chance of going into this proposal in depth.

However, we have been able to look at it since. We think it is still complicated, but in essence it offsets the invalidity allowance and the additional component to invalidity pension, retirement pension and widows' pension. It offsets one against the other. The noble Lord has already said that. I do not accept—I do not think anyone I have spoken to accepts, and I have spoken to a number of professional people who understand these things—that the Government have made a case out for the overlap. They claim an overlap, but in fact there is no overlap.

I think I should go back a little to talk about when the invalidity allowance was first introduced by Sir Keith Joseph in 1971, in recognition of the fact that people who became incapable of work early in life have not had the opportunity to build up as many assets as those who fall permanently sick at a later age. The invalidity allowance was £7.50 for people who were permanently incapacitated since before the age of 40, £4.80 for those incapacitated before the age of 50 and £2.40 for those incapacitated before the age of 60–55 for women. The additional components were introduced by the Social Security Pensions Act 1975 as part of the eventual all-party agreement, the consensus on the question of SERPS, the earnings related pension scheme. If it had then been considered—and I recall the tremendous amount of consideration and discussion surrounding that measure in 1975 both inside and outside the Palace of Westminster—that the two benefits were paid for the same reasons, then the Government in my view would have taken steps to ensure that the overlapping benefit regulations applied.

Everybody knows about the overlapping benefit regulations and they should have been applied there and then, as soon as it was recognised. I hope that I shall not be told that it took another 10 years for the Government to recognise that there was a possibility of an overlap in these two benefits, because I do not accept that. I hope that the noble Earl will reply to that point. I do not think that the two benefits are the same, and the noble Lord, Lord Kilmarnock, has said the same thing. The rationale for each benefit is totally different, and therefore it cannot be argued now, nor could it be argued in 1975, that there is this overlap. The Government have used this question of overlap as the sole reason for reducing the amounts of these benefits.

I submit that there is another reason and for that other reason we have to look at the Explanatory and Financial Memorandum. There we see that in the first full year, 1986–87, the net cost of restoring the cut in invalidity pension will be £65 million, but that the savings that the Government will get from this clause and from Clause 12 are £70 million through Clause 9 and £20 million through Clause 12. So there is an overall profit of £25 million to the Government as a result of the introduction of these clauses. That is the real reason. The overlap is a convenient excuse which the Government thought would hold up, but it does not hold up. The fact is that not only is Clause 9 a nil-cost clause, it is a saving clause and the Government aim to save £25 million as a result of the introduction of these two clauses.

So in two short contributions we have proved that the clause is necessary and that it has to be reconsidered on the basis of the 1971 and 1975 Acts. I hope that the Government will take this away and review it. Then I hope they will come back later and say that they have taken this clause out of the Bill as it is totally unnecessary and that they have made a mistake in claiming that there was an overlap in these benefits.

Baroness Jeger

Very briefly, if the Government are saving £25 million under Clause 9 in 1985–1986 and £85 million in 1986–87, where are they getting it from? They are saving it only because they are taking it away from people who need it. They are taking this money out of the resources which many of these people need.

I wanted to ask why maternity benefit was not included among the items which would be regarded or disregarded, but as I read the Green Paper I see that it is because the maternity benefit is to be abolished altogether. This is another illustration of how this Bill is a total waste of time, since everything in it will be overtaken if the Fowler review goes through.

I want to refer to something that was said in Committee in another place, but I must first say, in passing, that Parliament must be tired of this Bill. It dragged through the Committee stage in another place from 11th December 1984 until 29th January 1985, yet here we are getting it now in what should be midsummer. It has been the most botched-up piece of legislation that I have had to put up with in my long experience.

But to return to what I was saying, the Minister said in Standing Committee E on 15th January 1985 (which is a long time ago), at col. 195 of the Official Report: However, the Government's intention remains to bring invalidity benefit into tax as soon as that is operationally possible. The fact that we have restored the abatement without bringing invalidity benefit into tax does not imply that that intention has been abandoned". So we get these restrictions, these savings on capital expenditure, and a threat that there is to be taxation on these inadequate benefits. I hope that the noble Earl can answer those two questions: what is the relevance of maternity benefit to this clause, and what point have the Government reached in their decision about the taxation of benefits?

5.15 p.m.

The Earl of Caithness

I have listened very carefully to what the noble Lords, Lord Kilmarnock and Lord Stallard, and the noble Baroness, Lady Jeger, have said on what we consider to be a very important clause. As everybody has said, Clause 9 is technically a very complicated clause; but, as my noble friend explained on Second Reading, it is intended to provide that two elements which serve broadly the same purpose are not both paid in full.

Noble Lords opposite have argued that these two elements were introduced for completely different purposes; but that is clearly not so and that is where we have a complete difference of opinion. When invalidity allowance was introduced in 1971, it was not envisaged that those falling long-term sick before pension age would receive an additional component which offers the equivalent of an occupational pension, the absence of which was what invalidity allowance was intended to compensate. Duplication of provision can and does occur, and in our view the fairest solution to deal with this is to ensure that pensioners receive the equivalent of the higher of the two additions and that is what the clause does.

To put the financial consequences into perspective, as at April 1983 there were 737,000 invalidity pensioners, of whom 275,000, or 37 per cent., were getting both invalidity allowance and additional component. It is estimated that by November 1985 there will be 850,000 invalidity pensioners, of whom 375,000, or 44 per cent., will be getting both increases. Thus, 56 per cent. of invalidity pensioners will be completely unaffected by the proposals.

The noble Baroness, Lady Jeger, said that this was the most botched-up piece of legislation that she had come across. It is great fun. She is thinking of wonderful new words. I remember that last year she became equally excited about the Health and Social Security Bill. I think she called that the worst rag-bag. She is doing frightfully well. I hope that Roget's Thesaurus comes to her aid for the next social security Bill because with her vast experience she knows far better than I that social security Bills are complicated and cover a wide range of subjects. We look forward to her next instalment in due course.

The noble Lord, Lord Kilmarnock, rushed to the aid of the Green Paper. He answered his own question right at the end when he said that the Green Paper explains that these matters are being further considered. One of the purposes of a Green Paper is to consider a whole lot of matters, and to say that we should wait until we determine the results of the Green Paper after further consultation seems to be the most ludicrous way of legislating because in his opinion—and this is perhaps the Alliance's way of trying to get votes—we should not do anything as we are always looking to the future, to the next consultation, and dare not do it now.

The noble Lords, Lord Kilmarnock and Lord Stallard, asked for further justification of this clause. Invalidity allowance and the additional component, which were introduced at different times, are broadly intended to cover the same purpose and this has led to duplication of cover. Invalidity allowance was introduced as an addition to invalidity pension in 1971 and it provides additional financial help for those people who became chronic sick early in their working lives and who do not have the opportunity therefore to build up additional pension rights.

But since 1979, it has been possible for invalidity pensioners also to get an earnings-related additional component added to their invalidity pension if they have been working and have paid earnings-related contributions. This was clearly not envisaged when invalidity allowance was introduced and that is why we are now acting to remove the duplication. In our view, the fairest solution is to ensure that the pensioners will receive the higher of the two additions and that is what, in effect, the proposed legislation will achieve.

The noble Lord, Lord Stallard, asked how much people will lose. I can tell him that more than half of all invalidity pensioners will not be affected as they do not receive both invalidity allowance and the additional component. For the remainder, the loss will vary between a few pence and £8.05; but for the majority it will result in a relatively small loss. The average amount of additional component in payment at April 1983 was £2.63. Does the noble Baroness wish to say something?

Baroness Jeger

I was just having a word with my noble friend.

The Earl of Caithness

The noble Baroness, Lady Jeger, referred to Clause 14. I have a good deal of information for her on Clause 14 but perhaps the noble Baroness can wait, as perhaps can the noble Lord, Lord Stallard, who started off on Clause 14. I have something to say on tax in due course.

The noble Baroness also asked about the maternity allowance and whether we should restore the abatement. I can tell her that we have no plans to do so at present but we shall look at this again when the benefits are taxed in the light of the economic and other circumstances prevailing at the time. The noble Lord, Lord Stallard, pointed out that according to the financial memorandum the savings here are about £25 million. That of course is not denied. It is in the financial memorandum and we stand by that.

However, I hope that he is not discounting the immense amount of good that the Government have done towards the long-term sick and disabled. I can mention such things as the ending of the invalidity trap and the reduction from two years to one year for the waiting period for long-term supplementary benefit. Last year—this is more in my mind than the previous two—there was the introduction of the severe-disabled allowance, which alone represented an increase of £20 million. I do not think that the noble Lord is entirely justified when he criticises us solely on making a saving on this clause, but perhaps we can discuss this again. Does the noble Lord wish to intervene?

Lord Stallard

Anybody can quote statistics to prove a case. I can prove that millions of people have lost as a result of the social security measures introduced since 1979–80. We know that pensioners and invalidity pensioners lost as a result of the two weeks that were added to the year in 1980–81. One week is added this year, which means three weeks' lost payments. It is estimated that the cumulative cost to a single person by November 1985 of the invalidity pension changes alone will be £354; and it will be £569 for a married couple. The Secretary of State has already said, and the Minister who is replying has said, that half the people will not be affected. He said it as though half means nothing. I put it another way round. I say that half of them will lose. The half is a half of 750,000 people. That is 375,000. He passed over that as though it was nothing. But 375,000 people will lose. Many of them will lose the whole benefit. If you have been getting £7.50 on one benefit and £7.51 on the other and you deduct £7.50 from £7.51, you are left with one penny. So it is possible to lose the lot on this transaction as a result of Clause 9. The losses have not been fairly estimated or enunciated by the Minister who has answered this debate.

The Earl of Caithness

I am sorry if the noble Lord does not think I have been fair. I have spent quite a long time on the people who would lose and on the amounts some people would lose. But the number of people who will lose the full amount is very small. I must make it absolutely clear that nobody is going to lose money. There is no cash reduction here. They might not gain as much if the upratings had gone on both; but as is clearly set out in the memorandum to which the noble Lord has referred, there is a saving on this clause. Although this clause and Clause 14 stand clearly on their own two feet, there is in our view considerable merit in looking at them to some extent together for the benefits that we can give under Clause 14.

I think I have covered all the points that were raised and I hope that the noble Lord will not press for the deletion of this clause.

Lord Kilmarnock

I am grateful to the noble Earl for answering the debate, though I am disappointed that the Government are not going to withdraw the clause when such very good reasons for doing so have been given from various quarters of the Committee.

I really cannot agree with the noble Earl when he says that these two elements are broadly for the same purpose. I thought that the noble Lord, Lord Stallard, had demolished that argument. The invalidity allowance, or age allowance as it is also called, is given in such a way that it is bigger the earlier you become incapable of work to compensate for loss of earning power and thus the capacity to accumulate pension rights. The additional component is calculated on a SERPS basis in respect of past earnings. These are two entirely different things. It will not wash when the noble Earl tells us that they have broadly the same purpose. When he tells us that 56 per cent. of the category concerned will be unaffected, that does of course mean that 44 per cent. will be affected.

As regards Roget's Thesaurus, I really do not think that the noble Baroness, Lady Jeger, will have any need for it in searching for more words such as "ragbag" or "hotch-potch", because she already has an extremely fertile mind. I am sure that it comes quite naturally from her.

The noble Earl said that my claim was ludicrous, but what seems to me and to many of us to be ludicrous is to legislate in this Bill, which will presumably be passed within the next month or two, and then follow it with another Bill which will be partly covering similar ground and which we understand the Government intend to introduce in the Queen's Speech in November. If anything is a ludicrous way of legislating, I submit that that is it.

The noble Earl has been quite frank. He has said that this is a cost-cutting or off-setting exercise. That was also the burden of the letter to me from the noble Baroness. They have been quite open about that. It will certainly have been noted by the 300,000 or more people who will be affected. If that is the way the Government want it, so be it, but it does not allow them to congratulate themselves on restoring the abatement in Clause 14 out of the money which they will have accumulated from the operation under Clause 9. That needs to be clear. If that is the road the Government are going to go down, we want to be quite clear about how it is working, and that is the way it is clearly going to work.

I shall read carefully, as I always do, what the noble Earl has said. I am not proposing to divide the Committee on this Motion this evening, but I can promise the noble Earl that we shall certainly come back to this question at Report stage.

Clause 9, as amended, agreed to.

The Earl of Caithness moved Amendment No. 8: After Clause 9, insert the following new clause

("Voluntary redundancy entitlement to unemployment benefit.

In section 20 of the Social Security Act 1975 (disqualifications for receipt of benefit), the following subsection shall be inserted after subsection (3)—

"(3A) For the purposes of this section, a person who has been dismissed by his employer by reason of a redundancy within the meaning of section 81(2) of the Employment Protection (Consolidation) Act 1978 after the volunteering or agreeing so to be dismissed shall not be deemed to have left his employment voluntarily ".").

The noble Earl said: With the leave of the Committee, I should like to speak to Amendments Nos. 8 and 19 at the same time.

Amendment No. 19: Clause 29, page 27, line 10, at end insert— ("section (Voluntary redundancy—entitlement to unemployment benefit);").

The amendment to Section 20(1)(a) of the Social Security Act 1975 is put forward to maintain our policy that those who are made redundant should not be regarded as having left employment voluntarily and thereby subject to up to six weeks' disqualification for receiving unemployment benefit even though they may have volunteered or agreed to be dismissed by reason of redundancy. This has been the situation until recently when the chief adjudication officer issued new guidance indicating that those who had volunteered for redundancy should normally be regarded as having left employment voluntarily and were therefore subject to a disqualification under Section 20(1)(a). The proposed amendment will restore the previous interpretation and put the matter beyond doubt. I beg to move.

On Question, amendment agreed to.

Clause 10 [Entitlement of married women to Category A retirement persons]:

On Question, Whether Clause 10 shall stand part of the Bill?

5.30 p.m.

Lord Tranmire

As an ex-Parliamentary Secretary of the ministry, perhaps I may congratulate the Government on their decision to remove the very obscure and unpopular married women's half test. However, I should like the Government to explain in some detail exactly what is involved in this provision. It appears that it is retroactive from only 22nd December 1984. There are very many married women who were serving overseas after the war, who were quite ignorant of the married women's half test and who have been fighting to get a retirement pension for many years. How will they be affected by the decision?

It seems that older retired married women will be at a disadvantage when compared with younger retired married women who retired after December 1984. I am sorry not to have given my noble friend notice of this question, but this battle is one that we have been fighting for many years, and that is why I was delighted to see Clause 10 in this Bill.

Baroness Trumpington

I greatly welcome my noble friend's remarks and am grateful for them. I have pleasure in explaining Clause 10, which will extend pension rights to some 25,000 women by removing the residual effects of the married women's half test from 22nd December 1984.

The half test was abolished in 1979 for women reaching the age of 60 after 6th April 1979, but it continued to apply to women who reached the age of 60 before then. Following careful consideration within the department in the light of the European Community equal treatment directive, this clause proposes abolition for the women still subject to the discriminatory test. I hope that the Committee will regard this as a welcome measure and a further step forward in the direction of equal treatment.. The cost of the change will be under £25 million in 1985–86, gradually reducing to almost nothing by 1990.

Clause 10 agreed to.

Clause 11 agreed to.

Clause 12 [Pension increases in respect of adult dependantsequal treatment for males and females etc.]:

Lord Kilmarnock moved Amendment No. 9: Page 12, line 42, at end insert ("of at least £10 in excess of the lower earnings limit specified in section 4(1)(a) above").

The noble Lord said: This amendment affects Clause 12, which applies to Category A or C retirement pensioners or invalidity pensioners. It equalises the treatment of additions to invalidity benefit for spouses. The amendment is designed to ensure that earnings of less than £10 above the lower earnings limit will be ignored.

The present earnings limit for wives of invalidity pensioners is £45, and the present lower earnings limit is £35.50. The amendment would merely make the same arrangements for men as for women, which, after all, is one of the perfectly laudable objects of the clause.

The most usual cases are those of invalid husbands whose wives go out to part-time work. It would surely be wrong to force such wives to keep their earnings below the lower earnings limit, which would thus deprive them of National Insurance rights. We on these Benches see that as entirely wrong. We believe it may be due to an oversight on the part of the Government and hope very much to hear from either the noble Earl or the noble Baroness that they agree with us on this amendment. I beg to move.

Baroness Trumpington

I regret that I must disappoint the noble Lord, Lord Kilmarnock. Amendment No. 9 seeks to fix the amount which the wife of a retired pensioner or invalidity pensioner may earn and still keep the dependancy increase at an amount even higher than it is now—this at a time when one of the reasons for changing the provision is that it does not provide a realistic measure of dependancy.

The earnings limit is at present £45, as the noble Lord said, and tapered for higher earnings. The amendment would make this a minimum of £45.50. This really will not do. A pensioner's wife may earn however much she can without in any way affecting her husband's pension, but she ought not to qualify him for further benefit unless she is truly his dependant. If she earns more than he himself is getting by way of personal pension, surely she is not his dependant. In strict social security terms he becomes her dependant.

There is another reason why I take this view. We are trying to introduce a measure of equality in the terms and conditions for dependancy increases. The amendment specifies an earnings limit for the wife of a retirement or invalidity pensioner. Another amendment would give the same limit to the husband of a retirement pensioner but does nothing for the husband of an invalidity pensioner. We want a common earnings rule running across the long-term benefits.

Another consideration is the cost of this proposal. Not only would we forgo £10 million of savings to the National Insurance Fund in 1986–87, but we would have to shoulder the cost of giving equality of treatment to the husbands of pensioners. This would mean an additional cost of £1 million. With expenditure on social security running at £42 billion, we must look for ways of containing a burden which, after all, falls upon contributors to the scheme, many of whom have no dependants at all. Against this background, I hope that the noble Lord, Lord Kilmarnock, will see fit to withdraw his amendment.

Lord Kilmarnock

I thank the noble Baroness for her rather tortuous argument, which I shall of course read with the attention I always pay to her remarks. Just listening to what the noble Baroness was reading out has not immediately convinced me. She spoke about a measure of equality, but it seems to me that the amendment is introducing a greater measure of equality than that which is in the Bill as drafted.

Also, the noble Baroness has not answered the very real objection that if the proposals in the Bill stand, wives in this situation will be virtually forced to work below the lower earnings limit and will not therefore enjoy any national insurance rights. That is a very cogent criticism. I will read carefully what the noble Baroness said and will probably return to this point at a later stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 10 not moved.]

Clause 12 agreed to.

Clause 13 agreed to.

Clause 14 [Invalidity pension]:

Lord Banks moved Amendment No. 11:

Page 16, line 18, at end insert— ("(2) All invalidity pensioners shall be able to claim the total additional benefit which they would have received between 1980 and 1985 but for section 1 of the Social Security (No. 2) Act 1980.").

The noble Lord said: In 1980 the invalidity pension was abated by 5 per cent. In other words, everyone in receipt of invalidity pension received 5 per cent. less than they would otherwise have done. This was regarded by the Government as an interim measure pending the application of income tax to invalidity pension. It meant, however, that the 5 per cent. abatement was suffered by those who would not have been subject to income tax as well by those who would. Attention was drawn at the time to the unfairness of that situation.

Now it appears that invalidity pension is not, after all, to be made subject to income tax, and so it would appear that people who suffered the abatement, and those who would not have been subject to income tax, in particular, did so to no purpose. The Bill restores the abatement. The pension is restored to the level it would have reached had there been no abatement.

However, nothing is done to restore the losses sustained by invalidity pensioners over the years as a result of the abatement. The restoration of abatement will cost £65 million a year, but the Government are saving £70 million a year as a result of the abatement of invalidity allowance where a beneficiary is entitled also to an additional component or guaranteed minimum pension, as referred to by my noble friend Lord Kilmarnock and as introduced in Clause 9. Between November 1980 and November 1985 a single person will have lost a cumulative total of £354 as a result of the 5 per cent. abatement. For a married couple the figure is £569. The amendment would ensure that invalidity pensioners would receive a payment of the sum which they had lost in earlier years. I beg to move.

The Earl of Caithness

I have listened to the noble Lord, Lord Banks, with great care, but I am sure he will not be surprised to learn that I cannot recommend acceptance of the amendment. As the noble Lord pointed out, the Social Security (No. 2) Act 1980 provided for invalidity benefit and the short-term benefits to be uprated by 5 per cent. less than would otherwise have been due. This was part of the Government programme for reducing public expenditure. The fact that the Government have been able to restore the abatement in advance of bringing the benefit into tax does not mean that it would be right to restore the abatement retrospectively and so negative the provisions of the 1980 Act. The fact that the Government are restoring the abatement before taxation does not imply that the reasons for introducing it in 1980 have been discredited.

It is common ground with noble Lords opposite that tax on invalidity benefit and similar benefits should be brought in, and this was not denied in another place. This takes me to the point raised by the noble Baroness when we were discussing Clause 9. It is true that because of the way in which the Government have been able to raise tax thresholds over recent years the number of invalidity pensioners who would have been liable for tax would have fallen compared with a few years ago. Indeed, this was one of the factors which the Government took into account in deciding to restore the abatement now. But that does not alter the broad justification for the abatement in the first place.

The Government are pleased to be able to restore the abatement ahead of taxation. We are still considering possible methods of taxation but, as the noble Baroness will be aware, that is a matter for my right honourable friend the Chancellor of the Exchequer. I conclude by saying that there is no justification for going further at this stage.

Lord Banks

It appears from what the noble Earl has said that invalidity benefit is going to be made subject to taxation even though the Government have not yet made it so. That is an important admission on the part of the Government this evening, that that is what they intend to do. If the Government are able to restore the abatement and yet intend to proceed to taxation it destroys the argument that the abatement was introduced in the first place as an interim measure pending the introduction of taxation. It leaves the saving of money as the only argument in favour of it.

I do not intend to press this further this evening, but I am quite certain that we shall come back to this point at Report. I beg leave to withdraw—

The Earl of Caithness

Before the noble Lord withdraws his amendment, he referred to what he said was a major admission by the Government this evening that they still propose to tax invalidity benefit. In fact, it was not a major admission because it has been well known for some time. I reiterate that it is because we have been able to raise the tax thresholds over the years that we have been in office that we have been able speedily to bring in this piece of legislation.

Lord Banks

The impression had certainly got about that as the Government had done nothing as yet to apply taxation they were not now intending to do so. That impression has been dispelled by the noble Earl this evening. There is nothing else that I can add to what I have already said except to repeat that we shall undoubtedly return to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14 agreed to.

5.45 p.m.

Baroness Trumpington moved Amendment No. 12: After Clause 14, insert the following new clause:

("Up-rating benefits.

.—(1) The words "in the month of June" shall be omitted from subsection (1) of sections 125 and 126A of the Social Security Act 1975 (annual reviews of benefits for purposes of up-rating).

(2) The following subsection shall be substituted for subsection (4A) of section 125—

(4A) A review under this section or section 126A below shall cover a period of not more than twelve months beginning immediately after the end of the period covered by the last review under the relevant section.".").

The noble Baroness said: As my right honourable friend the Secretary of State has already announced in another place (and which was printed in the Official Report of this House) the Government propose that the 1986 uprating of benefits should take place in July and thereafter, starting in 1987, it should take place in April. This new clause is to enable this change to take place by removing the present requirement to review benefits each June.

The change will mean that pensions and other benefits will be uprated three times between November 1985 and April 1987, and uprating will thereafter take place at the same time as other changes in personal incomes, notably tax and national insurance contributions. It will also coincide with rent and rates changes and thus have an added advantage for local authorities administering housing benefit. I should emphasise that this clause permits the period between reviews to be less than 12 months but it does not allow it to be more.

There will be a consequential amendment to Schedule 6, which appears as Amendment No. 43 on the Marshalled List. I beg to move.

On Question, amendment agreed to.

Clause 15 agreed to.

Clause 16 [Period of entitlement]:

Lord Banks moved Amendment No. 13:

Page 17, line 11, at beginning insert— ("( ) The two lower rates of Statutory Sick Pay are abolished and the highest rate will apply from the coming into effect of this Act to all levels of earnings.").

The noble Lord said: Under the Bill statutory sick pay is to be extended from eight weeks to 28 weeks, replacing the national insurance sickness benefit entirely for most people. Only the self-employed, the unemployed and a small proportion of employees are excluded from statutory sick pay. At the end of 28 weeks, as is the case now for those on sickness benefit, all those still on statutory sick pay will go on to invalidity pension if they qualify. Sickness benefit is a contributory national insurance benefit. Employees have paid into the national insurance scheme with the expectation that they would receive adequate financial support from the state when unable to work through sickness.

Statutory sick pay is paid in three rates, whereas there is only one rate for sickness benefit. The result is that lower-paid married couples suffer under statutory sick pay whereas single people gain. A single man on £60 per week would receive £27.25 sickness benefit but £35.45 statutory sick pay. A married man on £60 per week, on the other hand would receive £35.45 gross (it would net to £32.26) under statutory sick pay as against £44.05 on sickness benefit. That is nearly £12 less. The amendment seeks to rectify the position as far as the lower-paid married man is concerned by abolishing the two lower rates and making the top rate apply to all.

It is not satisfactory—and I freely admit this—that a single contributor and a contributor with an adult dependant should be paid the same amount, but that is a defect which is inherent in the statutory sick pay scheme. We cannot, if the scheme maintains its present structure, help the married man who needs help without also helping the single man who is not so much in need of help. I beg to move.

Lord Kilmarnock

It has always seemed incomprehensible to me that people on lower wages should be assumed to have fewer expenses when sick than people on higher wages. Sickness is sickness. I should have thought that the demands on the family are exactly the same. There is another severe defect in statutory sick pay. As it is often lower than sickness benefit, it means that more people are forced to rely on supplementary benefit. That money will still have to be paid but it is coming from the supplementary benefit rather than from the sickness benefit source.

A further consideration which I think that the Government should have in mind is that in extending the period for statutory sick pay from eight to 28 weeks there may well be a danger of employers sacking employees to avoid payment over that prolonged period. I wonder whether the Government have given consideration to that.

Baroness Trumpington

Perhaps I may answer both noble Lords together. As has been explained, the amendment would abolish the middle and lower rates of statutory sick pay with the result that all employees would receive the top rate when sick, no matter what their normal earnings. The middle and lower rates of SSP, which this amendment seeks to abolish, were introduced in order to preserve an incentive to return to work. This is important. It is still open to employers to pay more to their employees if they choose, and many of course do so under their own occupational sick pay schemes. But it would be wrong to compel employers to pay SSP at rates closely approaching or exceeding normal earnings.

The majority of people who qualify for SSP at the lower rates will be young people and married women working part-time who would rarely be able to claim for an adult dependant if receiving sickness benefit; and even the lowest rate of SSP is higher than sickness benefit for a single person. While I am not saying that no one will ever be worse off on SSP than they would have been on sickness benefit, such a situation will not happen often. It is of course open to any claimants to claim supplementary benefit under the normal rules for receipt of that benefit if their situation warrants it.

With regard to the comparison of SSP rates with sickness benefit, the middle and lower SSP rates of £37.20 and £30 compare with a weekly rate of sickness benefit of £27.25. That is the rate payable to a person without an adult dependant. I want to emphasise here that 80 per cent. of people who get sickness benefit are paid at the £27.25 a week rate. Therefore we can say that most people getting the middle and lower rates of SSP are entitled to more now than they would have been from sickness benefit.

The noble Lord rightly pointed out that unlike sickness benefit SSP is subject to tax and national insurance contributions, but even so the changes in contribution rates for the lower paid from October will ensure that the net SSP received will still be more than the standard sickness benefit rate. That leaves us with those employees who would have been entitled to sickness benefit for a dependent adult and thus would have received in current benefit terms £44.5 sickness benefit compared with gross payments of £37.20 or £30 SSP. I accept that those are the people who concern the noble Lord.

As I said earlier, only about 20 per cent. of people who get sickness benefit are paid that higher rate. We do not have information as to how many employees receive the middle and lower rates of SSP. Employers are not required to keep those statistics. But, as I have explained, common sense points to there being very few people who would be disadvantaged in that way. Most of those people on the lower rates of SSP would not have entitlement to an increase of sickness benefit for an adult dependant.

The noble Lord, Lord Kilmarnock, asked about SSP adversely affecting the job prospects of the chronically sick and disabled; but we have no evidence that that is so and there is no reason to suppose that the scheme should have that effect.

Lord Banks

I am grateful to the noble Baroness for her reply to this amendment. One of the things that she said was that the three rates were introduced in order to give an incentive to people to go back to work; but that does not apply in the case of sickness benefit. It seems to me that it is wrong to have different principles applying to benefits which are used for the same purpose. Certain categories of people get sickness benefit; others get statutory sick pay. It does not seem to me right that we should have a different set of principles for the one than for the other.

I think that the main point to which we wanted to draw attention—and the noble Baroness had accepted that we have a point—is the position of the lower paid person with an adult dependant. As we have shown, those people are worse off on statutory sick pay. It was their plight to which we wanted to draw attention. However, I do not wish to press the amendment and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

On Question, Whether Clause 16 shall stand part of the Bill?

Lord Stallard

I am in just a little bit of difficulty here. I had originally intended to move that Part III and Schedule 4 of the Bill be left out. I have since been given to understand that that means that I oppose the Question that Clauses 16, 17, 18 and 19 shall stand part of the Bill. I seek guidance on whether it is in order for me to speak to the clauses on the Question whether Clause 16 shall stand part of the Bill or whether I have to deal with each one separately.

The Deputy Chairman of Committees (Lord Murton of Lindisfarne)

I am advised that the noble Lord can speak to all the Motions together but presumably they will be put separately at the end.

Lord Stallard

I am grateful to the noble Lord. I should have been quite happy to move them separately if it was necessary.

I wish to oppose the Question that Clause 16 shall stand part of the Bill because I do not think that the case for extending the period of statutory sick pay from eight to 28 weeks has been made at all. I do not think that this part of this Bill is necessary. On the contrary, I think that it has aroused a great deal of hostility and anger in all sections of the community, both among those who may receive it and those who will have to administer it. We all recognise that behind all these measures is the cost cutting/nil cost aspect.

I am certainly not arguing that the existing national insurance sickness benefit is adequate or that the scheme is perfect. We have on a number of occasions argued that there is room for improvement. The statutory sick pay arrangements that came into force in April 1983 fell even further short of the inadequate national insurance sickness cover. Right from the beginning the arrangement which placed the responsibility for the payment of the first eight weeks of statutory pay on employers was heavily criticised. I gave a number of examples during the Second Reading of the Bill of the administrative difficulties that small employers in particualr experience. Those difficulties will inevitably be magnified if we increase the commitment from eight to 28 weeks.

I have had a number of letters—I shall not read any of them out at this stage; there will be time later on—to say that small employers are even more concerned than I thought they were. I could not be privy to all their considerations as I had been able to talk to just two or three of them. But it seems that there is widespread opposition among them to extending that statutory sick pay scheme. I can understand why. I should have hoped that noble Lords opposite particularly would have understood why small employers, or indeed any employers, would not welcome the huge administrative burden that is about to be loaded on them by the extension of the scheme to 28 weeks.

Because of their overheads and because no single company can possibly bear the overhead costs in the way that a central organisation can, it must be more efficient and cheaper to operate the sick pay scheme from the centre, as it was with the DHSS operating it through its network of offices, than it is for each separate employer to operate his own. That seems common sense to me, as it does to many small employers. Yet, the Government say that they are simplifying it. I would dispute that and so would the small employers.

Another matter that I mentioned on Second Reading and which I think is worth repeating is that most ordinary illnesses, such as severe colds, 'flu and other viruses, are fairly short lived. It is likely to be the most serious illnesses which last for up to or more than 28 weeks. In consequence, employers more than ever are likely to discriminate against people with records of frequent sickness. That is an inevitable consequence. People who understand industry and commerce and employers, must know that that will happen.

Disability is another one of my particular interests. It is quite often mistakenly equated with poor health because of the possibility of absences. The possibility of frequent absences will place those people in an even more invidious position than many of them are in now, given the present circumstances and the present employment situation.

6 p.m.

It has already been noted by employees, small employers and the trade unions that there has been an increase in employers monitoring sickness records. At a recent meeting which I attended in a school, for the first time sickness records of teachers appeared as an item on the agenda. There was already a monitoring of the sickness records of the people in that school. It is happening not only there, but also in industry. It will happen everywhere. It is inevitable that this monitoring process will now take place because of the responsibility, the administrative costs, and everything else that is being loaded on to employers because of this new increased time factor.

I have mentioned the disabled and their difficulties because we know that the rate of unemployment among the disabled is already much higher compared with that among the able-bodied job seekers. An extension to 28 weeks will do nothing to improve their situation. On the contrary; it must worsen their situation. All those who understand their position, and certainly the small businessmen, must accept that.

I repeat the quote that I used on Second Reading. The chairman of the small businessmen's association has said that employers and especially smaller businesses will be viewing disabled applicants with a very unfavourable eye. It must worry all of us that people are even thinking along those lines. Therefore we must begin to query whether this extension is necessary.

I understand, again from recent reports, that some small employers do not even yet realise that they have this kind of responsibility. They have simply said, "Oh, don't bother about it, we will carry on paying", and they have carried on paying a man his full wages while he was absent. That has saved them the necessity of going through all the administrative procedures. They do not realise the implications of continuing with that process into a 28-week period. They have simply glossed over it because it was in relation to a short period of illness and they have not been operating the Act as it ought to have been operated. Thus they now realise that they are going to have a fairly big shock and they are now very strongly objecting to this increase to 28 weeks.

The Minister has said that there was little, if any, difference in the two schemes, the national insurance benefit and the statutory sickness pay. We have proved that for a number of reasons statutory sickness pay is lower, that people when they are sick lose on statutory sickness pay as opposed to national insurance sickness benefit. One of the main reasons for this exercise is to save costs. We understand that. If the Government were as open on this clause as they were on a previous one, they would openly admit that they did this to save money, and therefore they know that people will lose.

We have figures to prove it. For instance, in relation to a married couple, the current rate of national insurance sickness benefit is £44.5, whereas the maximum statutory sickness pay would be £42.25. Thus they lose. Single people lose almost the same amount. We know that there are children's allowances, children's benefits and dependents' allowances under the old NISB, which are not given under SSP. We know that SSP is taxed and the other one was not. Thus, there are inevitably bound to be losses to people when they are sick. That is at a time when, in my view, they may be entitled to extra money because of the extra necessity for diets, medicines, special clothing and other costs which they incur as a result of long illnesses. In my view, the attempt to save money is a pretty squalid exercise.

I do not think that the case to extend the SSP scheme has been made out. I never thought that the case had been made to introduce it. Having said that, I recall that when it was introduced in Committee, a Member on the Government side proposed this course of action. He said that it should be extended to 28 weeks. The Government Minister, replying to the debate in Committee, demolished his arguments and pushed the issue to a vote. The Government were opposing any introduction. The Minister said: If we were to extend that period"— that is, eight weeks to 28— there would be problems with employees with families. There has already been much criticism of the sick pay scheme on the basis that it provides for flat rate payment, irrespective of family circumstances … That argument would be much reinforced if we were to carry that period beyond 28 weeks". That did not come from this side of the House at all. It came from the Government Minister replying to a Back-Bencher on the Government side who was trying to do what the Government are now doing in this Bill. I do not know how they will justify these matters, but they will. They have much cleverer research assistants and backers than I have. They can do all kinds of things and no doubt they will. But I suggest that they have not done it correctly.

However, as well as that, the Select Committee favoured a 28-week extension. Those who favoured a 28-week extension favoured it on two conditions. First of all, there would have to be substantial increases in child benefit sufficient to make up for the loss that such families would endure under statutory sickness pay. Now the opposite is true. Child benefit is not being increased. I think it is being cut. It is certainly not being increased to the levels that were envisaged by those who at that time were suggesting that it should be increased to 28 weeks. Secondly, the Select Committee recommended that the low paid should receive normal earnings rather than a substantially reduced figure merely because they were low paid. Both of those conditions would have been acceptable at that time, or would have been partially acceptable, to the people who were suggesting 28 weeks. I therefore submit that the case has not been made out for extension to 28 weeks. It never was made out for the eight weeks and it certainly has not been made out for the 28 weeks. Therefore I oppose Clauses 16, 17, 18 and 19 standing part of the Bill.

Lord Tranmire

In reply to the noble Lord, Lord Stallard, who has just spoken, will the Minister give an explanation of the difference on the taxation side? It is perfectly true that the man who is on sick pay and goes on to 28 weeks will have to pay his income tax, his pay-as-you-earn, on it. He will also have to pay his national insurance contributions as an extra on that. It amounts to a great deal.

I think the time is coming when we must have an investigation into the effect of national insurance contributions and pay-as-you-earn on sickness benefit and statutory sick pay. We cannot have one taxed and the other not taxed, and one included in the wage for national insurance contributions. I should have thought the time has come to remit that to a committee to look at and to advise on, so as to get one form of treatment for both.

Baroness Jeger

This may not be the time to have a fundamental debate about the statutory sick pay scheme, though I think that one is very badly needed. We have very little evidence of how it is working out. We have had assurances that matters are going quite smoothly, but I do not know on what evidence that is based. All that I know is that the Explanatory and Financial Memorandum states that as a result of Clause 16 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". If we are saving £200 million, that means that people on statutory sick pay are getting £200 million less. We are constantly told that any increases have to come out of the taxpayers' pocket. But these increases are going to come out of the pockets of the sick and the disabled, and especially the pockets of those most frequently ill who will be at a financial disadvantage and who will also be at a disadvantage in the employment market because their sickness record causes a nuisance if not an expense to employers. I hope therefore that the Government can say that there is to be some fundamental review of what was a very bad scheme which will be made worse by the extension of time to 28 weeks.

Baroness Trumpington

I shall ask your Lordships to resist all the words of the noble Lord, Lord Stallard. As your Lordships know, Clause 16 extends the duration of statutory sick pay from eight to 28 weeks. As some doubt has been expressed about the advantages of the SSP scheme and the wisdom of extending it, I should perhaps say a few words about this. The move to 28 weeks, liability is not as considerable as it may at first appear. Employers are already dealing with nearly 90 per cent. of short-term sickness spells. The average length of a spell of sickness is about 10 days. Only about 10 per cent. of sickness lasts longer than eight weeks. Of those spells, around half last no longer than 13 weeks. We do not therefore expect the ongoing administration costs of extension to be large. I would, however, stress that we are very conscious of the need to keep procedures as simple and flexible as possible. This is certainly our aim.

We are confident that the extension will be taken successfully on board by employers and will be to the benefit of employers and employees alike. In addition, the employer will be compensated in full for all the SSP that he pays out and for the national insurance contribution payments on that SSP. Although some organisations representing small employers objected to the SSP scheme in principle, the majority of comments that we have received on our proposals following the consultation document that we issued have not been against the extension.

With regard to the success of the SSP scheme for both employers and employees, mentioned by the noble Lord, Lord Stallard, SSP was introduced in April 1983 after a long period of consultation with both employers' and employees' representatives, and there can be no doubt about its success. Would the noble Lord, Lord Graham, like me to pause? On the employers' side, the SSP scheme has been successfully incorporated within employers' bankroll systems with little trouble or upheaval, while, for employees, fears expressed about the effect that SSP would have, for example, on job prospects where an employee had periods of sickness, have proved groundless. Indeed, there is evidence—I substantiated this in my speech at Second Reading—that many employees positively prefer the SSP scheme to state sickness benefit. Of course, some mistakes and errors are occurring. It would be very strange if this was not the case. The Government have never sought to deny it. But these are mainly of a very minor nature, and the position will improve with experience.

Also, as I again explained on Second Reading, because we are concentrating our checks on those employers most at risk, the level of mistakes discovered is misleading if applied to all employers. In general, the SSP scheme is working well. With regard to the disabled and SSP adversely affecting the job prospects of the chronically sick and disabled, we have no evidence, as I have said, that this is so. There is no reason to suppose that the scheme would have this effect. It is important not to confuse the terms "disabled" and "chronically sick". Disabled people do not, in general, have bad attendance records. It has been the constant endeavour of Governments of both complexions to increase awareness that a disabled employee is a good employee. His attendance record is likely to be as good as average, if not better.

Before the SSP scheme, employers may have sought to avoid employing people likely to have poor attendance records. I do not believe that SSP has aggravated this. There is no reason to expect this to occur when SSP is extended to 28 weeks. It is interesting to note that in its comments on the proposed extension the TUC confirmed that fears that the introduction of SSP could lead to more dismissals on account of sickness absence did not materialise.

6.15 p.m.

The noble Lord, Lord Stallard, also asked why the extension should be made now when this was opposed by the Government at the start of SSP. As I said during Second Reading, because SSP was a completely new concept for employers, it was thought best to restrict their involvement to the shorter spells of sickness and to look at this again once employers had become used to the scheme. This is sensible. On the question of family benefits, I should emphasise that there is no increase of sickness benefit for children; so there is no difference between SSP and sickness benefit.

My noble friend asked about SSP and tax. The rates of SSP were deliberately set so that, as a whole, employees would receive the same net income as they would have done if sickness benefit had been liable for tax and national insurance contributions. As your Lordships know, it remains the Government's intention to bring sickness benefit into tax when it is practical to do so. As for the costings of SSP about which I have been asked, I must make clear at once that there is no question of saving £200 million at the expense of people at the lower end of the scale. I really must ask your Lordships to oppose the amendments of the noble Lord, Lord Stallard.

Baroness Jeger

Before the Minister sits down, can she help me? I quoted the figure of £200 million from page vii of the Bill. I cannot be responsible for any mistake that has been made, although I am not surprised to hear that there are a few more mistakes in the drafting of this legislation.

Lord Stallard

I have listened carefully to the noble Baroness trying to explain this turn-about. I want to read her remarks in detail before making any further comment. I would never agree with some of her figures and statistics. Nor do I accept that small businesses have welcomed this and that there is no problem for them. I shall produce my own statistics, figures and evidence at a later stage. I have reservations about this matter and I shall raise it again at Report stage.

Clause 16 agreed to.

Clauses 17 to 19 agreed to.

Clause 20 [Housing benefits—subsidy]:

Lord Kilmarnock moved Amendment No. 14: Page 20, leave out lines 19 to 25.

The noble Lord said: We come now to Part IV of the Bill dealing with housing benefit subsidy. I have raised previously—I was joined on that occasion by the noble Baroness, Lady Faithfull—the worries of the Association of District Councils, of which I have the honour to be a vice-president, concerning the effects of this clause on the undertaking which was given by the Government that there would be no additional costs to local authorities arising from their new responsibilities for the housing benefit scheme.

The association told me that it feared that Clause 20(1)(b) could undermine the 90 per cent. subsidy principle. It saw the power contained there as too wide-ranging, allowing the Secretary of State to make deductions—deductions under almost any heading—at his discretion. The association also pointed out that the exercise of this discretion would not be subject either to affirmative or to negative resolution in either House of Parliament.

The noble Baroness, in reply to me at col. 562 of the Official Report for 3rd June, said that "the amendment"—I think that she meant to say "the clause"— will also give the Secretary of State a new power to exclude items which it is clearly not reasonable to meet out of money voted by Parliament for the housing benefit scheme. This power will not be used lightly". That may be so, but it gives the Secretary of State an unbridled right to exclude any item that he chooses and, of course, that right will continue to his successors.

I have since heard from the Association of District Councils that its fears about this subsection have been, if anything, strengthened since the publication of the Government's Green Paper Reform on Social Security, which has been mentioned several times this evening. In that review, in Chapter 3, paragraph 70, we learn that the Government consider that the best way in which to subsidise local authorities for their administration expenses under the new housing benefit scheme will be by: including administration costs in Rate Support Grant like most other local authority administrative spending. Administration costs will therefore be dealt with in this way from the start of the new housing benefit scheme. The proposal will be discussed with local authority interests". Frankly, that is rather alarming. When the housing benefit system was introduced the local authority associations were assured that their administrative costs would not be increased.

The consultation document Assistance with Housing Costs of March 1981 stated that the Government accepted the need to reimburse local authorities for any increase in their net administrative costs resulting from the change. However, it rather looks from Chapter 3, paragraph 70, of the review as though the Government may be planning to go back on that and to introduce another system. Of course, the paragraph does conclude with the undertaking that: The proposal will be discussed with local authority interests".

Therefore, in view of the (I think) justified alarm of the association and of the fact that there will shortly, presumably, be discussions with local authority interests about how their administrative costs under the housing benefit scheme will be handled in the future, it seems to be quite superfluous to write this power into the Bill—a power which it looks as though will possibly be extremely short-lived. I should like to suggest to the Government that, in view of the fact that the Bill has once again been overtaken by their review, perhaps they will consider withdrawing this subsection pending discussions with the interested parties. I beg to move.

Baroness Jeger

We support the amendment. In view of the housing benefits review which is being undertaken—and we all agree that if anything needs a review it is the housing benefits muddle—it is unfortunate to enshrine in statute and in this particular piece of legislation more confusion about housing benefit. This is not a party issue. I have put forward a view which is widely held among those in the local authorities who have to administer housing benefits and who are experiencing increasing difficulties.

The noble Lord, Lord Kilmarnock, has very clearly set out the arguments. I would only emphasise one aspect which concerns me particularly. The Bill gives so much power to the Secretary of State to decide what is unreasonable when local authorities are working out their housing benefit schemes. If we were to have a Secretary of State with such enormous power that he could go around investigating the housing benefit proposals of every single local authority in the country, then I would suggest, first, that he ought to have something else to do; and, secondly, that it is a deprivation of local democracy which I thought the party opposite were supposed to support.

There is nothing in the Bill as it stands which could prevent the Secretary of State from deciding that the reduction in subsidy was reasonable or unreasonable. There are no guidelines here; local authorities will not know when the Secretary of State is going to tell them that something which they have decided in good faith to do is reasonable or unreasonable. The noble Baroness the Minister has not been able to help us much today, but surely this is a proposal which the Government, on the basis of good common sense, could take back again. I do not say that there should be no changes in the housing benefit arrangements. However, the Government take this matter on board as part of the total review which is taking place of the housing benefit arrangements.

The Earl of Caithness

I understand the points which the noble Lord and the noble Baroness have made. However, with due respect, I believe that they are based on a misunderstanding of the purpose of this new clause.

The vast majority of local authorities need have nothing to fear from it. Only those authorities which deliberately attempt to abuse the housing benefits subsidy system will be affected. The arrangements for reimbursing local authorities for their benefit expenditure and administration costs will continue to be set out in an annual subsidy order following consultation with the local authority interests. This new clause does nothing to alter that. At Second Reading my noble friend assured the House that the power for the Secretary of State to make deductions from an authority's benefit subsidy will not be used lightly—and it will certainly not be used to make changes in the subsidy arrangements that apply to authorities in general. I can confirm that assurance. The power is there to prevent abuse, and I assure the noble Lord and the noble Baroness that it is needed.

The Secretary of State's existing powers are not adequate to prevent the exploitation of the subsidy arrangements by any authority determined to find a way of doing so. Of course the annual housing benefits subsidy orders can be amended if potential abuses come to light, but it is clearly unsatisfactory for the Government to have to keep reacting in this way and there is always the danger that the more tightly definitions are drawn the more risk there is of unwittingly excluding perfectly proper arrangements made by local authorities.

I must say to the noble Lord, Lord Kilmarnock, that I do not want to go into too much detail because, as the noble Lord knows, there is a case before the courts at the moment. However, to insist to the Committee that we leave out this clause would only facilitate what one local authority is doing to abuse the housing benefits system. I think that that would be a retrograde step and I am sure that the noble Baroness would not want it. We want the housing benefit system to work well; we do not want it to be abused. This clause is included purely to stop the abuse that has happened recently and as regards which there is a court case.

The noble Lord, Lord Kilmarnock, mentioned the Green Paper. I am glad that it has proved to be such fascinating reading to him. The proposals for subsidising local authority benefit and administration costs in the revised housing benefits scheme will be fully discussed with the local authority interests. The power in the current Bill is not concerned with these proposals. I repeat, it is there to prevent abuse of the subsidy arrangements in the present scheme. I queried in great detail with the officials whether there should be a narrower power; but, as I have explained, the more tightly it is drawn the more loopholes there are. I knew that this would be raised and I have gone into it in great detail. I am convinced that this power is necessary and I urge your Lordships to accept the Bill as it is.

6.30 p.m.

Baroness Jeger

Is the noble Earl telling the Committee that there is only one case of proposed or expected abuse and it is on the basis of that one single case that we have the clause in this Bill, or is there other evidence?

The Earl of Caithness

No, there is more than one case which, as I said, I do not want to go into in too much detail. Other local authorities are viewing that case with a great deal of interest. If that case succeeds, they are ready to jump on the bandwagon of abuse.

Lord Davies of Leek

I do not want to create a lot of fuss about this. It is mostly phrased anyway; nevertheless I see an ulterior motive. I do not want to make a party point of this; but bit by bit power is going from the people and being centralised under this new system of government—I will invent a word—Thatcherism. It is taking away from the people. Everything is being moved to the centre as though they are gods almighty. Can we not trust the people in local areas? Local councillors are not fools, they are men of all political colours with years of service to the community. When local authorities act daft—if I can use a vulgar phrase—the public come to the rescue of a sane Government. I do not know why the noble Earl is afraid of points of view put from this side of the Committee. I do not want to develop it any further than that because we are all busy and have been speaking long enough about this point.

The Earl of Caithness

I agree with the noble Lord that the great majority of councillors behave sensibly. This is purely a reserve power to be used as a last resort to stop abuse. I am sure the noble Lord, who knows about these matters far better than I do, does not want to see the type of abuse that is being perpetrated in some areas extended and continued. It is for that reason that I discussed this carefully with the officials, and I am now convinced that this power is necessary to stop the limited number of councillors who are abusing the present system.

Lord Kilmarnock

The noble Earl said that he thought that there was a misunderstanding on this point. I doubt that because local authorities are well versed in these matters. He referred to abuse and we agree with him for we do not want abuses. I said at Second Reading: While appreciating the Government's wish to prevent exploitation of the scheme by a few authorities (which was mentioned by Lady Faithfull) the association [of district councils] considers that the existing powers of the Secretary of State are adequate for this purpose and that the proposed powers in subsection (1)(b) are unnecessary and undesirable".—[Official Report, 3/6/85; col. 551.] That remains their and my position.

When the noble Earl refers to a reserve power it seems to me that he is taking a sledgehammer to crack a nut. He has also referred to a case which is pending and that seems to me to be an additional reason for not rushing into legislation, if it turns out that the powers are already there to prevent the alleged abuse in question.

The noble Earl has said that there will be full discussions with local authority interests which I imagine will take place shortly. That is another reason for not putting this on to the statute book simply for a short or transitional period of time. I was not insisting on leaving out this subsection. I was simply inviting the Government to take the initiative themselves. I was trying to give the noble Earl a chance to make a concession—he has not made any concessions this afternoon—which I am sure his nature inclines him to make from time to time to those of us who speak from these Benches. As he has not offered to do so, I shall not press the matter further. Both I and the association I speak for will want to study carefully what has been said and we are likely to return to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 20 agreed to.

The Earl of Caithness moved Amendment No. 15: After Clause 20, insert the following new clause:

("Vaccine damage payments.

In section 1 of the Vaccine Damage Payments Act 1979

(a) in subsection (1), for "£10,000" there shall be substituted "the statutory sum";

(b) the following subsection shall be inserted after that subsection—

"(1A) In subsection (1) above "the statutory sum" means £10,000 or such other sum as is specified by the Secretary of State for the purposes of this Act by order made by statutory instrument with the consent of the Treasury."; and

c) the following subsection shall be inserted after subsection


"(4A) No order shall be made by virtue of subsection (1A) above unless a draft of the order has been laid before Parliament and been approved by a resolution of each House.".").

The noble Earl said: I have great pleasure in moving this amendment and the associated amendments which are Amendments Nos. 17, 18, 20 and naturally the consequential Amendment No. 44 in the Title. Amendment No. 17: Clause 28, page 26, line 37, at end insert— ("(3A) Section [Vaccine damage payments] extends to Northern Ireland and the Isle of Man."). Amendment No. 18: Page 26, line 38, leave out ("(3)") and insert ("(3A)"). Amendment No. 20: Clause 29, page 27, line 15 at end insert— ("section [Vaccine damage payments"];"). Amendment No. 44: In the Title, line 3, after ("to") insert ("amend section 1 of the Vaccine Damage Payments Act 1979 and").

These amendments amend the Vaccine Damage Payments Act of 1979 by enabling my right honourable friend the Secretary of State to specify, by order, the amount of the payment under the Act. As noble Lords will be aware, my right honourable friend announced our intention to increase the payment to £20,000 when he made his statement about the annual up-rating of social security benefits on 18th June. My noble friend Lady Trumpington also wished to give the good news to your Lordships' House; but, alas, the Statement was refused by the noble Baroness.

The Vaccine Damage Payments Act 1979 does not contain any power to vary the payments and thus it is unnecessary to bring forward the amendment in primary legislation. We believe that it is also right to take this opportunity to include the power to make alterations if necessary by order in the future. I am sure that the Committee welcomes the Government's initiative more than to restore the value of the payment which has stood at £10,000 since the Act was first introduced. I beg to move.

Baroness Jeger

We are very happy to associate ourselves with this amendment. It is the first hit of good news we have had from the Government today and we welcome it.

On Question, amendment agreed to.

Clause 21 agreed to.

Clause 22 [Pensions and gratuities for members of certain Boards]:

On Question, Whether Clause 22 shall stand part of the Bill?

Baroness Jeger

I rise to ask a few questions about this strange clause. The effect of Clause 22 would enable the Horserace Totalisator Board and the Horserace Betting Levy Board to pay pensions to board members with the cost falling to the hoards concerned and not to the Consolidated Fund. I find this a strange creature in the middle of this very strange Bill. I have to ask, first, why we have to have legislation so that the Horserace Totalisator Board and the Horserace Betting Levy Board can make arrangements for pension schemes. Surely it is the Government's policy that all employers should be making their own occupational pension schemes. It is extraordinary to find in this complex Bill that there has to be statutory consent for this. Why cannot the boards make their own arrangemens? How much are members of these boards paid? Why do there have to be special pension arrangements for them?

I do not want to to be too personal; but I understand that among the members of the board there is Lord Allen, who was former Permanent Secretary at the Home Office, I am sure he is enjoying an index-linked pension, quite rightly; Sir Ian Trethowan may not be totally bereft of earlier pension arrangements; my onetime friend, Sir Woodrow Wyatt, who I hope is receiving a modest pension from the other place. I have to ask this question. Are all the employees, including the most modest employees, of these boards going to get pension rights; or is it only these well-paid gentlemen at the top?

Are we not in danger of setting a very dangerous precedent of members of all boards and all quangos now going to have their pension schemes enshrined in legislation? What would be the consequences of that? I have always thought that when people with a record of public service and of distinction and ability are asked to serve on boards of this kind, it is in some ways an honour; it is an interesting job for them and they are not badly paid. I am in some confusion as to why we have to have their statutory rights for further pensions enshrined in legislation. I ask these questions really because I want to know the answers, and not in any envious spirit. That may come later, but not at the moment.

Lord Swann

I must take issue with the noble Baroness. It has been my modest experience that the public sector, on occasions such as this, is extremely cavalier about giving pensions to hard-working members of the public. It took me seven years, despite many promises, to achieve a pension as chairman of the BBC. I am glad to see that my director-general is being brought into the fold. I think it is entirely right and proper.

The Earl of Caithness

The noble Baroness has given us a pretty good canter over this clause. I admire her. I think she is a great stayer in heavy going. My noble friend, who is a true thoroughbred if ever there was one, when faced with heavy going, sent for her whip. Successive Governments have recognised the unfairness of asking people to chair these boards without any provision for pensions and there is a clear commitment to rectify the position—even by the party of the noble Baroness. Over the years, the chairmanship of each of these boards has become close to a full-time occupation. The chairmanship of the Tote requires a full-time commitment and each chairmanship of the other two boards calls for three days a week.

Under the clause, pensions will be determined and paid for in the same way that the salary of the chairman concerned is determined and paid for at present. So, in the case of the Tote and levy boards, the boards themselves will determine the pension for their board chairmen, subject to the approval of the Secretary of State. The boards will pay for the pension from their own resources and not from public funds. In the case of the Gaming Board, the Secretary of State will determine the chairman's pension subject to the consent of the Treasury; and the pension, like the chairman's pay, will be a charge on the Consolidated Fund.

Legislation is necessary in order for the boards to be able to pay these expenses as the enabling legislation, which goes back to the Gaming and Lotteries Act 1963 in the case of the Tote, does not provide for pensions for the chairmen. On the current salaries, I think I shall have to write to the noble Baroness, if she would like the figures.

I hope that the Committee will agree that it is only reasonable to provide pensions for people filling such responsible positions and that this Bill does provide for legislative opportunity to do this—something that both sides have wanted. The noble Baroness's party did not find an opportunity; we have done so. I hope that the Committee will support us.

Baroness Jeger

I thank the noble Earl for his usual courtesy. There was only one question which he did not answer: that is, whether pension arrangements would be made for all employees of these boards and not just the top board members.

The Earl of Caithness

I think that, as they are career employees, they have been treated separately from the other employees of the board.

Clause 22 agreed to.

6.45 p.m.

Lord Stallard moved Amendment No. 15A: After Clause 22, insert the following new clause:

("Invalid Care Allowance for Married Women.

The following words shall be deleted from subsection (3) of section 37 of the Social Security Act 1975and a woman shall not be entitled to any such allowance if—

  1. (a) she is married and either—
    1. (i) she is residing with her husband, or
    2. (ii) he is contributing to her maintenance at a weekly rate not less than the weekly rate of such an allowance; or
  2. (b) she and a man to whom she is not married are living together as husband and wife.".").

The noble Lord said: I beg to move Amendment No. 15A. I think that this is something that should be included in the Bill. Even at the risk of incurring further wrath from the noble Baroness, I should still like to spend some more money because I am not one of those who at this moment is advocating massive tax reductions in order to effect savings at the expense of people on social security. Neither can I compare the people who are going to be affected by this amendment with the people who were affected by my noble friend's previous amendment to Clause 22—I think it is a different argument—except that now that the Front Bench have put themselves into a generous mood, following the opposition to the Question that Clause 22 stand part of the Bill, I hope that they can carry that generosity into this amendment.

What I am really saying—and I have said it so many times—is that the invalid care allowance should be extended to married and cohabiting women. That is what my new clause really says. If we are seized, as most of us are, about care in the community, then this is something to which we must turn our minds: the situation that affects married women in respect of this care allowance. It is the only benefit that is available for carers. The vast majority of carers are married women but they are the only group who cannot at this moment receive the allowance. I have spelt out the words and they are written on the Marshalled List.

The wording of the previous Act, the 1975 Act, was based on the assumption that all married women are financially dependent upon their husbands. I do not think that anybody on either side of the Committee would agree that that is the situation now. For whatever reason, it is certainly not the situation now. In fact, statistics prove that 70 per cent. of married women between the ages of 30 and 54 are in the workforce and that a common reason for having to give up work is the ill health of a relative; so that 70 per cent. of them have to give up work, we know, because of the ill health of a relative of one description or another. And one in three women over 35 are restricted because they have to care for a sick or invalid relative.

The invalid care allowance, in my view, would simply give married women the financial protection to which they are entitled. I think that the amount paid to carers at the moment is £21.50 a week. That is not a great deal in itself but it would be a help to the family budget in those circumstances and it would enable the woman's national insurance contribution to be credited—which it is not at the moment—thereby giving her some financial security in her old age.

I daresay that everyone in the Chamber at this moment could think of examples of people who could benefit, and ought to have benefited, because they have given up half their lives (and some have given up more than that) to the care of an elderly or not-so-elderly or sick or dependent relative. They have forfeited their own earning potential, their own rights, their own pension rights, their own careers. All sorts of things have been forfeited and there is no case in justice for continuing on the basis of the assumptions behind the earlier wording in the 1975 Act and previous Acts.

I say that it would be an acknowledgement of the importance that we place on this caring in the community if we were to say that we will recognise the importance of the people who do the caring and that we will now extend this benefit to married women. I do not think that I need say any more at this stage because I know the Government are in this generous mood following the previous amendment. I hope that that will continue and that they will say that they will look at this and come back at Report stage with a scheme that would help at least to ameliorate some of the problems faced by married women in this situation.

Lord Banks

I should like briefly to support the case that has been put by the noble Lord, Lord Stallard. He has put the case extremely well. As he pointed out, the majority of carers are married women and it has always seemed very unfair that they should not get an allowance which, as the noble Lord has said, is not a very large one. I strongly support the aim of this particular amendment.

The Earl of Caithness

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.

At this stage I should like slightly to widen the debate from the very good arguments put forward by the noble Lord, Lord Stallard, and refer to the European Commission directive on equal treatment. The directive came into force last December. In early January a test case was put to the independent adjudicating authorities with the ultimate aim of securing a judgment from the European Court on the application or otherwise of the directive to invalid care allowance.

Our legal advice was, and remains, that the directive does not cover invalid care allowance—a view which the commission shares but which ultimately is a matter for the European Court. I understand that the Social Security Commissioner has referred the case to the court and that judgment will be made in due course. If that final judgment is that the directive applies to the invalid care allowance, the directive would override domestic legislation—but only if the European Court decides that the directive applies to invalid care allowance. We would then need to take stock of our own position in the light of the availability of resources and see how the expenditure could be contained.

Before leaving that issue I should make it clear that any claims we are receiving from married women are being put on ice. They are being acknowledged, but adjudication will await the judgment of the European Court and the subsequent decision of the Social Security Commissioner. Although our advice has been, and is, that the directive does not apply to ICA, we have never used that as a reason for not extending the allowance to married women. Our record on the implementation of the directive is an honourable one. I have made it clear that our principal reason for not extending the allowance is the cost—an estimated extra £85 million a year at current rates. I think it is fair to say that it was undoubtedly cost which prevented the Labour Government in 1975, when they introduced this, including married women at that time. I think it is quite fair for us to take that into account when considering this matter today.

We have to face the fact that resources are finite. I do not wish to detain your Lordships, but even if £85 million a year were available, within the broader context of care within the community it is by no means clear cut that an extension of ICA to married women would be the best use of resources. In other contexts pressure is brought to bear on behalf of other sectors of the disabled community. In this field, therefore, it is by no means certain that ICA would top the list even if the money were available, despite the persuasiveness with which the case has been argued. It is clear that I cannot advise your Lordships to accept this new clause and, given that the whole issue is now before the European Court, I hope the noble Lord will feel able to withdraw his amendment.

Baroness Jeger

Again I thank the Minister and I assure him that this amendment was not moved in any party sense. Many of us were very disappointed when a previous Government did not put into legislation what we have in mind. In fact, my noble friend Lord Stallard, then in another place, moved an amendment to this effect, and tonight he is really repeating a speech he made on that earlier occasion. At least he cannot be accused of inconsistency.

I read very carefully what was said on Second Reading in the other place in November, 1984—a long time ago it seems—and it is very unclear from what the Minister then said whether we would pay this benefit only if the European Court found that we should. The Minister said—and I quote from col. 712 of Hansard of 26th November 1984: We think it right to move against that discrimination, although we are not compelled to do so by the EEC directive". What I am now asking is: if the EEC directive comes out in support of the payment for married women carers, will the Government then have to find the money? I think that is what the noble Earl said—that the money would have to be found if the court made a judgment to that effect. If the court does not do so, are the Government going to give no further consideration to this problem? I do not think it was within the terms of what the Minister said in the other place that the whole thing would be finished on the result of the European Court's findings and that if we find we do not have to pay, we simply will not pay; in other words, we will pay only as the result of a court directive. The Minister said in another place that he was considering the whole problem, apart from the European Court.

The Earl of Caithness

It is too early to anticipate the judgment, and much of what the noble Baroness has said depends on how the judgment, when it comes, is phrased. The reference to the court has only just been made by the commissioner and therefore an early response is not expected. When we receive the decision of the Social Security Commissioner in the particular case of Mrs. Drake, we will consider the implications and what the correct course of action should be at that stage.

Lord Stallard

I am grateful to the Minister for his reply and for the mention of the European Court. I deliberately omitted it because I was not sure whether or not I would be in order. I am grateful for his reassurance, or what seems to be a reassurance, that if the court's judgment goes in favour of Mrs. Drake, the Government will be bound to consider the matter favourably. Certainly that puts a respectable light on the amendment and on the reply the Government have given. I beg leave to withdraw my amendment, on that basis.

Amendment, by leave, withdrawn.

Clauses 23 to 27 agreed to.

Clause 28 [Extent]:

Baroness Trumpington moved Amendment No. 16: Page 26, line 37, leave out ("extends to Northern Ireland only.") and insert—

The noble Baroness said: Clause 28 provides for the extent to which the Bill applies to England, Wales, Scotland and Northern Ireland. This technical amendment provides that Clause 28 (Extent), Clause 29 (Commencement) and Clause 30 (Citation) extend to Northern Ireland. I beg to move.

On Question, Amendment agreed to.

The Earl of Caithness moved Amendment No. 17:

[Printed 25/6/85; col. 701.]

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 18:

[Printed 25/6/85; col. 701.]

On Question, amendment agreed to.

Clause 28, as amended, agreed to.

Clause 29 [Commencement]:

The Earl of Caithness moved Amendment No. 19:

[Printed 25/6/85; col. 701.]

On Question, amendment agreed to.

The Deputy Chairman of Committees (Lord Alport)

I have to point out, in calling Amendment No. 20, that "line 14" as it is printed should read "line 15".

The Earl of Caithness moved Amendment No. 20:

[Printed 25/6/85; col. 701.]

On Question, amendment agreed to.

Clause 29, as amended, agreed to.

Remaining clause agreed to.

Schedule 1 [Transfer and revaluation]:

7 p.m.

Lord Mottistone moved Amendment No. 21: Page 31, line 20, leave out ("5") and insert ("3").

The noble Lord said: On Second Reading I raised this point about the proposed 5 per cent. revaluation and suggested that 3 per cent. would be a better figure. The noble Lord, Lord Banks, said that he thought that 5 per cent was about right. So far as I can tell, my noble friend the Minister did not comment upon that particular point when she wound up. It is really quite simple. The point is that there is no really good reason for acquiring a higher escalation of deferred pensions than of pensions in payment, since both are a call upon the same pool of money. There seems to be no reason why deferred pensioners should receive preferential treatment over actual pensioners, or indeed over current employees. I beg to move.

Baroness Trumpington

My noble friend will remember that we looked at this at Second Reading, and I have to tell him that I am not persuaded by his arguments. This whole subject was looked at in depth by the Occupational Pensions Board, and they came up with a 5 per cent. ceiling. We think that is about right. We have been criticised for being too generous to the early leaver and criticised also for not being generous enough. So we find ourselves in the middle. That, as much as anything, leads me to believe that 5 per cent. is a fair and reasonable ceiling.

Lord Mottistone

My noble friend has not taken up my point about comparison between deferred pensions and pensions in payment, nor indeed those of current employees. I honestly think that I have not had an answer to this point, either at Second Reading or now. It is not an adequate explanation to say that the Occupational Pensions Board thinks that this is a good figure, because there is a very valid point here which companies need to have answered. I should have said, when I moved this amendment, but did not because we were rattling along, that in moving Amendment No. 21 I was also speaking to Amendment No. 22. Amendment No. 22: Schedule 1, page 31, line 26, leave out ("5") and insert ("3").

Lord Banks

Taking up the point made by the noble Lord, Lord Mottistone, I do not know whether he is really comparing like with like. He is saying that because, as he understands it, 3 per cent. is the average of the increases that are made in pensions in payment, we ought therefore to increase preserved pensions by the same amount. But if we are dealing with final salary schemes, then up to retirement those people who now may be receiving only 3 per cent. in retirement have certainly received an increase in their pension which has taken account of inflation, have they not? If inflation has been running at higher than 3 per cent., then they have had a higher increase than 3 per cent. It seems to me that that is the comparison with the preserved pension: what is happening with the preserved pension compared with what is happening with the man who is still in his final salary scheme.

Baroness Turner of Camden

As a member of the Occupational Pensions Board I hope that we do not have a different figure from the 5 per cent here. We spent a lot of time talking about it. There were different views on the Occupational Pensions Board at that time, and we came out with 5 per cent. as a majority view. It has to be remembered that this was in the context in which early leavers were regarded as especially disadvantaged. This is trying at least to take away the inequity which early leavers suffer and to make it easier for people to change jobs and not to be tied to their employment. I think this was an issue about which there was agreement on all sides, and there is a lot of public support for this, so I hope that this amendment is not carried.

Baroness Trumpington

May I say that the noble Lord, Lord Banks, is quite right in what he said. I am grateful to the noble Baroness, Lady Turner, who leads me into answering my noble friend when I say that we believe that early leavers are in a different position from stayers. Once somebody has left early there is no one to fight for his interests. That is why we believe that early leavers have been given such a poor deal in the past. They have in effect been subsidising the benefits of stayers, and that is unfair.

Lord Mottistone

I am deeply grateful to both the noble Lord, Lord Banks, and the noble Baroness, Lady Turner, and, at last, to my noble friend the Minister, because I really did not have a satisfactory explanation either at Second Reading or on our first encounter on these amendments, but I now see that there is a very good point to this. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 22 not moved.]

Lord Banks moved Amendment No. 23: Page 31, line 40, leave out from ("person") to end of line 43.

The noble Lord said: The noble Baroness, Lady Trumpington, will be aware that there is much concern in professional circles about the effect of the new Section 52C as it now stands in the Bill. The object of the section is to secure that trustees and managers of occupational schemes may obtain a discharge by taking out insurance policies or annuity contracts for the benefit of members. Such a procedure is one permitted way of dealing with early leavers. There is, however, a fear that in securing one discharge the Bill will take away another.

Lines 40 to 43 state that trustees or managers are not discharged from their liability unless they comply with Section 52C. But in line 37 the new section refers to the provision of "requisite benefits", and requisite benefits are not relevant to contracted-in schemes. So it would appear that trustees and managers of such schemes who seek to discharge their liabilities by taking out insurance policies or annuity contracts in fact would not have discharged them. Accordingly, the amendment seeks to remove lines 40 to 43, which give rise to this situation. I beg to move.

The Earl of Buckinghamshire

This is a technical amendment. The noble Lord, Lord Banks, has outlined the position very clearly and accurately. The discharge as it is currently drafted is inadequate. Legal advice has been taken on this subject and I feel sure that my noble friend on the Front Bench will take note of this amendment.

Baroness Trumpington

In speaking to this amendment I hope I can make some remarks that apply equally to other amendments that have been put down by noble Lords to the new Section 52C. I refer to Amendments Nos. 24, 25 and 26. Amendment No. 24: Page 32, leave out lines 22 to 31 and insert ("that, except in such cases as may be prescribed, any sums which fall to be paid under the policy or contract can only be paid to the person or persons for whom the policy or contract provided for payment of the amount secured by the policy or contra( t or to trustees for any such person; and"). Amendment No. 25: Page 32, line 23, after ("obligation") insert ("(being enforceable by the earner or a person for whom the policy provides or the trustees or managers of the scheme)"). Amendment No. 26: Page 32, line 25 leave out ("occupational pension scheme") and insert ("the policy or contract"). This new section has given us considerable trouble. It was amended in another place, and it is clear, both from the amendments that we have today and from discussions that my department has had with pensions experts, that we have still not got it right. I had hoped to be able to put down Government amendments to meet those points today, but we are still having problems in drafting them.

I can give an undertaking, though, that I hope will satisfy noble Lords. We shall bring forward at Report amendments to this new section which I think will meet all the misgivings that have given rise to these amendments. I shall not apologise further on behalf of my friends, but we have tried very hard, and I am sure your Lordships will agree that it is best to get this right. I hope that this undertaking will be sufficient to enable both the noble Lords who have put their names to this particular amendment and others not to pursue this amendment now but to await our amendments on Report.

Lord Banks

In view of what the noble Baroness has said, I beg leave to withdraw this amendment, and I shall look forward to seeing the Government amendment dealing with this matter in due course.

Amendment, by leave, withdrawn.

Lord Banks moved Amendment No. 24:

[Printed earlier: col. 710.]

The noble Lord said: Although my remarks are covered by what the noble Baroness has said, I think it would be useful to make the points so that perhaps they can be taken into account in the preparation of the Government amendments. This amendment deals with the new Section 52C(3)(b), which also relates to cases where trustees or managers of occupational schemes discharge their liability by taking out insurance policies or annuity contracts. Where this is done, the transfer value accuring to the member is used to purchase a single premium policy and this policy may be on a with-profits basis. If it is on a with-profits basis, there will be a comparatively small guaranteed amount to which bonuses are added until retirement. The resulting cash value on retirement is used to purchase a pension. The resulting pension will not be the same as the pension which would have been provided had the member remained in the scheme until retirement.

The wording of the lines which this amendment would leave out seem to imply that the benefit provided by the policy must be the same as the benefit which would have been provided by the scheme. The amendment seeks to rectify this. In addition, it is not clear from the current wording whether a policy effected in this way would be enforceable by a member and his executor or by the recipient, who might be the widow or another dependant. The amendment clarifies the position by allowing either. Amendments Nos. 25 and 26, in the name of the noble Earl, Lord Buckinghamshire, are an alternative method of dealing with the same problem, and the noble Earl and I should be happy for either of the two alternatives to be adopted. I beg to move.

The Deputy Chairman of Committees

I have to inform your Lordships that if this amendment is agreed to, I cannot call Amendments Nos. 25 or 26.

Baroness Trumpington

I have nothing further to add. I have already given my reasons for asking the noble Lord whether he would kindly not press these amendments.

Lord Banks

In view of those reasons, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 25 and 26 not moved.]

Baroness Trumpington moved Amendment No. 27: Page 37, line 8, leave ("his widow") and insert ("to any other person in respect of him").

The noble Baroness said: This is a technical amendment which will put right a defect in the revaluation requirements for flat-rate benefits. The requirements apply, for other benefits, to all dependants' benefits provided by the scheme. That for flat-rate benefits covers only widows' benefits. This is quite simply an error and we now wish to correct it. I beg to move.

On Question, amendment agreed to.

Lord Banks had given notice of his intention to move Amendment No. 28: Page 37, line 20. after ("to") insert ("payment or").

The noble Lord said: In view of the Government's Amendment No. 29, Amendment No. 28 is not moved.

[Amendment No. 28 not moved.]

Baroness Trumpington moved Amendment No. 29: Page 37, line 20, leave out ("payments made from time to time") and insert ("a payment or payments made").

The noble Baroness said: This is a technical amendment and I am grateful to the noble Lord, Lord Banks, for not moving his amendment. As he and everybody else will have realised, we are single-minded about this. The definition of a money purchase benefit is defective, because it does not cover the situation where the benefit results from a single payment. This is important, because a transfer value into a scheme could well be money purchase based. If the scheme otherwise provides final salary benefits, the money purchase benefit would be the result of a single payment. This amendment will remedy the defect. I beg to move.

On Question, amendment agreed to.

Lord Swann moved Amendment No. 30:

Page 39, line 9, at end insert— (". Notwithstanding any other provision of this Part, if the scheme is contracted-out then for the purpose of calculating—

  1. (i) the amount of pension which is to be revalued in accordance with this Part; and
  2. (ii) the amount of the revaluation percentage for the period as defined in paragraph 1(2)(a),
the periods to be taken into account shall be the same as the periods taken into account for calculating guaranteed minimum pension and the revaluation of guaranteed minimum pension under that scheme;

except that—

  1. (a) revaluation shall not apply to the pension of any scheme member whose pensionable service ends before 6th April 1986;
  2. (b) pensionable service before 6th April 1985 shall not be taken into account;
  3. (c) the references to the date of the commencement of Part 1 of Schedule 1A shall be construed as references to the 6th April which is or next follows such date of commencement; and
  4. (d) references in the 1975 Act to state pension age shall be construed as references to the normal pension age of the scheme.").

The noble Lord said: I fear that the amendment must look as baffling to your Lordships as some of the schedule itself. In fact, as I shall try to explain, it is intended to "debaffle" your Lordships and a good many other people who deal with pensions, or who are members of schemes, and I think I can explain quite simply how and why that is.

Before the days of inflation it was quite easy to ensure that pension schemes provided reasonable levels of benefit by stipulating the amounts that they should provide from time to time. But with the coming of higher inflation it became necessary to make sure that the pension earned in any one year should maintain its real value right up to the time when it started to be paid. To achieve this, some very complicated requirements for revaluing pensions were built into the Social Security Act 1975. These requirements, however, applied only to occupational pensions used for contracting out. The Bill that we are currently considering introduces equally complicated revaluation requirements into these occupational pension schemes, which are not covered by the 1975 Act because they are not pensions used for contracting out. So far, so good.

7.15 p.m.

But I am surprised to find that the revaluation requirements in the current Bill are significantly different in a number of details from the revaluation requirements of earlier legislation. This means that a scheme member who has contracted out will find complicated differences between the revaluation which applies to the part of his pension used for contracting-out, and the revaluation which applies to the rest of his pension. I believe that we have to try to avoid bringing in yet further complications which are not only unnecessary but which will make it finally impossible for a scheme member, unless he be a genius, to understand how the amount of his pension is worked out.

As I said earlier, the 1975 Act introduced a number of complicated requirements and the pensions world has learned to live with them over the last 10 years. The sole purpose of my amendment is to ensure that we do not bring in further unnecessary complexity. I have to admit that the wording of the schedule that I am seeking to amend is itself terribly complicated. I also have to admit that the wording of my amendment, despite the fact that I have taken expert advice, may be defective. But what it is trying to achieve is that the method of revaluation in the current Bill will follow, wherever possible, the method of revaluation already in use for contracted-out pensions.

I appreciate that some differences may have to survive, such as the link to prices rather than earnings. But I want to make sure that the only differences between the revaluation introduced by the 1975 Act and the further revaluation introduced by this Bill are necessary differences. Why, for example, does the present Bill provide for revaluation to be calculated in calendar years, when contracted out pensions are revalued in fiscal years? That is surely a fertile ground for confusion.

I believe that simplifying these revaluation calculations will not only help all those professionally involved with pensions, but, most important, it will help the ordinary man or woman who belongs to a scheme and wants simply to understand how the pension works. I know that your Lordships value clarity and simplicty and I need say no more. I beg to move.

Baroness Trumpington

I listened with enormous interest to what the noble Lord, Lord Swann, said. He is, I know, chairman of the Company Pensions Information Centre, and therefore brings all their expertise to bear as well as his own. Perhaps I may begin by saying that there is nothing in the Bill to prevent revaluation applying to people who leave on or after 6th April 1986. The starting date for these provisions will depend upon a commencement order. But the Government have said that they intend to bring these provisions into effect on 1st January 1986, and that is still our intention. I agree that there is some attraction in linking increases to tax years, because that is how increases in guaranteed minimum pensions are calculated. But, equally, there is no compelling reason why increases to benefits in excess of GMP should be treated in the same way and using tax years has a positive disadvantage.

It might be helpful if I illustrate this point with an example. Let us assume that our early leaver leaves his scheme on 7th April 1986 and reaches pension age on 8th April 1988. If we use tax years, his increase will be based on one year. But if we use complete years, he will have an increase based on two years. In other words, using tax years would often mean that the leaver would lose out. It is therefore in the best financial interests of the leaver to go for complete years rather than tax years.

I sympathise with anything that will help people to understand occupational pensions. I speak here with some feeling because I, too, find the whole subject extremely complicated; but I really question whether one method rather than another will be much easier for the average member to understand. Given the choice I think most of them would rather have more money and that is what in the end this amendment is about. We have considered this whole matter very carefully and sympathetically, but we believe that, on balance, the advantage rests with the provisions in the Bill as drafted and I am therefore unable to support the amendment.

Lord Swann

I am grateful to the noble Baroness. I am aware of the point she raises about the amendment's effect in terms of money. In fact, as the years go by it becomes a trivial difference, but I agree that initially there is a difference. However, I do not wish to pursue the matter, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Banks moved Amendment No. 31: Page 39, line 35, after ("to") insert ("or in respect or).

The noble Lord said: I wish also to speak to Amendment No. 32. Amendment No. 32: Page 39, line 37, after ("to") insert I or in respect of"). The Bill gives to members of an occupational scheme the right when their pensionable service terminates at least one year before normal pension age to take a transfer value which may be transferred to another scheme or used to purchase a Section 32 single premium policy. The transfer value is defined as the cash equivalent of the benefits "which have accrued" to the individual. That is the phrase used in line 35 and in line 37 of page 39. On page 43 it is stated that where this process is carried out, the trustees or managers shall be discharged from any obligation to provide benefits to which the cash equivalent related".

However, in lines 35 and 37 benefits for widows and dependants are not included. It would therefore appear possible that, even though all the cash accumulated in relation to a particular individual had been transferred, the trustees and managers might still be under an obligation to provide widows' or dependants' benefits. To rectify this the amendment inserts—the next amendment does the same a little further along—the words "or in respect of thus including widows' and dependants' benefits. I beg to move.

Baroness Trumpington

I am so grateful to the noble Lord, Lord Banks, for bringing forward these amendments. We think that the Bill as drafted may well have the desired effect, but I agree that it makes sense to put this beyond doubt. The Government are therefore pleased to be able to accept the amendments.

Lord Banks

Just before we approve the amendments, perhaps I may thank the noble Baroness very much indeed for accepting them and for her cooperative attitude.

On Question, amendment agreed to.

Lord Banks moved amendment No. 32:

[Printed earlier: col. 714]

On Question, amendment agreed to.

Baroness Trumpington moved Amendment No. 33: Page 40, line 46, leave out ("or friendly societies") and insert ("such as are mentioned in section 52C(3)(a) above").

The noble Baroness said: This is a technical amendment. When someone takes a transfer value and uses it to purchase an annuity the annuity will have to satisfy prescribed conditions. It has always been our intention that those conditions should include restrictions on those with whom the policy or contract can be taken out. It was also our intention that the prescribed conditions should not conflict with new Section 52C, which deals with discharging liability on buy out. We now have doubts whether the power in paragraph 13(2)(b) is sufficient to enable us to put conditions on the company providing the annuity, and we have therefore put this provision on all fours with new Section 52C.

On Question, amendment agreed to.

Schedule 1, as amended, agreed to.

The Earl of Caithness

I think this is an opportune moment for the House to resume, and in begging so to move I think it would be wise to confirm that we shall not return to this Bill before twenty-five past eight.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.