Lords Sitting of 14 July 1986

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln. European Air Fares

European Air Fares
Lord Kissin: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in their bilateral agreements on air fares already made or under negotiation with other European countries, account is taken of the regulation in regard to the proportion of club class passengers and economy class passengers on short flights within the EC.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): My Lords, the Government are seeking in their bilateral arrangements in Europe to reduce substantially the control of governments over the level of air fares and the conditions attached to them. It is for individual airlines to allocate seats between the different types of fare as they consider the market demands.
Lord Kissin: My Lords, I thank the Minister for that Answer. Am I right in understanding that the reduction as regard air fares is solely confined to air fares for the economy class and that the negotiations do not include the club class?
The Earl of Caithness: My Lords, I think that it depends on each individual airline. As a result of our recent efforts we have achieved more liberal arrange-ments with the Netherlands, and I know that if the noble Lord seeks to go there he will find that there is a much greater choice and variety of seat allocations than hitherto.
Lord Kissin: My Lords, is the Minister aware that an increasing number of airlines at present are allocating a greater number of seats to the club class than to the economy class? I have been a passenger on a short-haul flight from Brussels to this country, and there were about 185 club seats and 15 economy class seats. Is not that a way to avoid the basic agreement that is reached for the reduction of economy class seats?
The Earl of Caithness: My Lords, I agree with the noble Lord that on certain flights there will be a preponderance of business class seats. For example, if one travels from London to Brussels on an 8 o'clock flight on a Monday morning one will find that there is a very high proportion of business class passengers. However, it varies with the time of day and the type of flight.
Baroness Burton of Coventry: My Lords, if the noble Lord, Lord Kissin, feels that the proportion of seat allocations between club class and economy class passengers sometimes works to the disadvantage of
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passengers, would the noble Earl the Minister—although it is the responsibility of the airlines concerned—feel inclined to look into specific cases which the noble Lord, Lord Kissin, may be able to send him?
The Earl of Caithness: My Lords, I should certainly be glad to look at any case which any noble Lord wishes to bring to my attention.
Lord Auckland: My Lords, my noble friend has mentioned Holland as an example of a country in respect of which agreement has been reached over these charges. However, is he aware that flights to Denmark are marked by very high fares as regards both club and economy class? Is he able to say what negotiations are taking place in respect of flights to that country?
The Earl of Caithness: My Lords, we are pursuing bilateral negotiations with most of the European countries with which we do not have liberal arrangements at the moment. Moreover, as in particular the noble Baroness, Lady Burton of Coventry, will know, we are pursuing matters in the EC as well.
Lord Kennet: My Lords, will the noble Earl agree that there is also a public health point involved? Is he aware that on one flight from Brussels to London last week there were precisely 1½ rows of seats for economy class non-smokers?
The Earl of Caithness: My Lords, I am now aware of that fact, yes.

Graduates: Employment Prospects
2.38 p.m.
Lord Gainford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what are the current employment prospects for graduates who have recently concluded their studies.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, I am pleased to say that according to information published recently employment prospects for new graduates in 1986 are better than they have been for many years. Vacancies are 5 per cent. above the 1985 level, and this increase affects graduates across all disciplines. Thus, young people leaving higher education for the labour market this summer have good job prospects, especially if they are prepared to be flexible and mobile.
Lord Gainford: My Lords, I thank my noble friend the Minister for that Answer. As regards flexibility, is there any danger that some young people will not take possible employment because they fear that jobs may be too menial? Did my noble friend the Minister read an article in the Daily Telegraph a short while ago suggesting that it was easier for women graduates to obtain jobs because they were more open-minded?
Lord Trefgarne: My Lords, I do not know about being open-minded, but I am certain that employers pay close attention to personal skills—such as, numeracy, ability to work in groups and communications skills—when recruiting graduates, and that is often more important than the precise subject that has been studied.
Lord Cledwyn of Penrhos: My Lords, does not the encouraging Answer given by the noble Lord point to the need to assist the universities in recruiting new students? Does not the Government's policy towards the universities, as enunciated recently through the UGC, discourage the universities in making this important attempt? Will the Minister also tell the House the percentage of graduates now unemployed?
Lord Trefgarne: My Lords, I am not sure that I have the figure for which the noble Lord asked. However, I can say that the percentage of graduates from United Kingdom universities believed to be unemployed—and of course the precise number is not always possible to arrive at—was only 8 per cent. last year—that is, 1985. Also, the universities, the polytechnics and other institutions taken together produced 137,132 graduates last year. I hope that that information will assist the noble Lord. The important point is to ensure that the teachers remain in good supply; and the Government are concerned to ensure that that is achieved. Your Lordships will recall the Question recently answered by my noble friend Lord Swinton who explained what we were doing in that regard.
The Earl of Halsbury: My Lords, will the noble Lord agree that the employment prospects for graduates on sandwich courses, particularly thin sandwich courses, are very much better than for those on non-sandwich courses? Will he represent to his right honourable friend that some influence should be brought to bear on the University Grants Committee to treat sandwich course universities rather better than the average instead of rather worse?
Lord Trefgarne: My Lords, I shall certainly convey the noble Earl's views to my right honourable friend. I agree that the sandwich course system is extremely valuable, not least because it gives young people a taste not only for the academic disciplines that they are seeking to acquire but of the real world as well.
Lord Annan: My Lords, would the Minister agree that it would be more appropriate if universities were informed that they would give a better chance to their graduates if they went over to sandwich courses?
Lord Trefgarne: My Lords, I think that just underlines the point made by the noble Earl, Lord Halsbury.

China: UK Export Trade
2.44 p.m.
Lord Rodney: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
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The Question was as follows:
To ask Her Majesty's Government whether they have revised their attitude towards encouraging efforts to increase exports to China and, if so, why.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, government help for exports to China has recently been increased with the introduction of the £300 million development loan arrangement. In addition, substantial help continues to be available through the British Overseas Trade Board, the Export Credits Guarantee Department and our posts in China and Hong Kong. Prospects will also be enhanced by the state visit by Her Majesty the Queen later this year.
Lord Rodney: My Lords, I should like to thank my noble friend for that Answer. May I ask him whether he is aware that, due to the successful promotion of the Chinese market by Her Majesty's Government, the demand for support from the BOTB has increased considerably? Would my noble friend see whether it is possible to increase this support still further to help British companies who are anxious to keep abreast of the Germans and Japanese, who are making considerable inroads into this market?
Lord Lucas of Chilworth: My Lords, there is indeed a greater degree of activity in the Chinese market. The British Overseas Trade Board have responded to this by sponsoring 13 joint ventures, 12 missions, and six seminars in China for the year 1986–87. One has to recall that British Overseas Trade Board funds are, to an extent, limited, and we have to respond to all the world markets in giving support.
Lord Mellish: My Lords, is the Minister aware that the Chinese have decided to take an option on an important site in Docklands, and that they are being encouraged at a local level because the potential is there for the world to see? May I have an assurance that the Government are supporting such a scheme, because its potential is enormous?
Lord Lucas of Chilworth: My Lords, the Government of course will support, where they can, any scheme for the furtherance of trade with overseas countries. My understanding is that the Trade and Cultural Centre is a private enterprise operation in conjunction with one of the municipal states of China. I am sure that whatever help can be given through the normal channels would be given to a private enterprise effort of that nature.
Lord MacLehose of Beoch: My Lords, I thank the Minister for that encouraging answer. Would he agree that better knowledge of the country, its law and its language, would be of great assistance to our exporters? Would the Government therefore support those places of higher education, without which that knowledge would fade?
Lord Lucas of Chilworth: My Lords, I think that the noble Lord's question could be directed to a number of countries. Certainly the Sino-British Trade Council offer assistance and advice to potential exporters to

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China, and I think it would be to them that a potential exporter should make his first advance to find out what he ought to know and ought to be learning before he actually goes.
Lord Tordoff: My Lords, is the noble Lord aware that there is in October of this year in Peking a chemical trade exhibition, and that at the moment only one British chemical company is exhibiting there, and that approaches to the British Overseas Trade Board have failed to come up with any support for chemical firms wishing to show at that exhibition? Is that not a pity in relation to the way our competitors from West Germany are exhibiting there?
Lord Lucas of Chilworth: My Lords, there are a number of overseas exhibitions, and one must say, if the industry requires any defence, that they cannot exhibit at every single fair right across the world. The BOTB, through sponsor divisions, offer the opportunity. If industry fails to take it up, then I might suggest that that is to that industry's disadvantage. Certainly in these instances it is rather like leading a horse to water and you cannot actually make it drink when you get it there.
Lord Morris: My Lords, my noble friend referred to a £300 million development loan to the People's Republic of China. Would he be good enough to let me know for what purpose this loan is to be utilised?
Lord Lucas of Chilworth: My Lords, five projects have been agreed with the Chinese for consideration under the £300 million development loan facility. These involve a power station, a tractor factory, a stainless steel tube mill, a fibre optics transmission equipment facility and two specialised container ships. All these matters are under discussion with the Chinese authorities.
Lord Oram: My Lords, is not the recent devaluation of the Chinese currency an indication that China is anxious to increase its exports and to conserve its resources of hard currencies? That being so, should not our exporters seek to concentrate on capital goods such as those indicated by the question of the noble Lord, Lord Tordoff—that is, goods which enable the Chinese to develop their economy and earn the hard currency that they are so anxious to have?
Lord Lucas of Chilworth: My Lords, without wishing in any way to be condemnatory of the Chinese, theirs is of course a relatively poor country and their conservation of hard currency shows a certain prudence, but there is no doubt that politically and commercially they have declared an interest in buying more from the United Kingdom.
Lord Bruce of Donington: My Lords, is the noble Lord aware that last week the Chinese made a formal application to join the General Agreement on Tariffs and Trade? In the light of the Government's declared commitment to better the whole trading atmosphere between China and this country will the noble Lord give an unequivocal assurance that Her Majesty's Government will support the Chinese application to join GATT?
Lord Lucas of Chilworth: My Lords, as the noble Lord will know, this is essentially a matter for the European Commission. We shall give what support we can in the consultations that the Community, ourselves and China have on this matter.
Lord Hatch of Lusby: My Lords, is the noble Lord aware of the very imaginative twinning scheme between the City of Sheffield and the corresponding steel city in China—
Noble Lords: Name it.
Lord Hatch of Lusby:—which has led to a development of trade and which has shown the sensitivity of the authorities in Sheffield to what the Chinese want most of all, which is co-operative schemes between British firms and Chinese state firms? Will the Government both publicise and encourage further schemes of twinning of this kind which can be of both cultural and commercial value?
Lord Lucas of Chilworth: My Lords, it is certainly not for the Government to support or in any way interfere with the individual twinning arrangements that towns and cities in this country have with towns and cities in any other country. Certainly we support joint and collaborative arrangements between our business houses and business houses in other countries.

Glorious Revolution: Tercentenary Celebrations
2.53 p.m.
Lord Grimond: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will reconsider their proposals to celebrate the revolution of 1688.
The Lord President of the Council (Viscount Whitelaw): No, my Lords. Celebrations of the Revolution of 1688 are currently being prepared by two bodies. The William and Mary Tercentenary Trust is preparing a wide programme of events to celebrate 300 years of Anglo-Dutch friendship. In Parliament, a Joint Advisory Committee of Members of your Lordships' House nominated by my noble and learned friend the Lord Chancellor and Members of another place nominated by Mr. Speaker are considering ways of commemorating the constitutional and parliamentary consequences of the Revolution and Bill of Rights and Claim of Right. The Government support both these initiatives.
Lord Grimond: My Lords, may not these celebrations appear rather provocative, particularly to Irishmen and possibly even to Catholics? Will the Government not agree that the so-called revolution of 1688 was in fact a coup d'état, carried out largely by appealing to religious bigotry, and by treachery? In a multireligious society is this the type of historical occasion which we need to go out of our way to celebrate? May I ask the Government whether they are going to promote official celebrations in Ulster?
Viscount Whitelaw: My Lords, having spent two years in Northern Ireland I understand very well the intricacies of Irish history, and I do not propose to get involved in it either this afternoon nor during the celebrations. However, I think that three hundred years of Anglo-Dutch friendship is worth celebrating. Some of the aspects of the development of constitutional monarchy and parliamentary democracy which attend this event are also something which Parliament should celebrate.
Lord Mowbray and Stourton: My Lords, with great respect to my noble friend, this is not surely just recording Anglo-Dutch friendship. This was completely unecumenical, discriminating particularly and only against Roman Catholics. Surely my noble friend will agree that later Stuarts offered to come back to the throne, if allowed to come back with their own religion, accepting all that the constitution of 1688 offered. I wonder whether my noble friend knows that my family was not able to sit in Parliament from 1688 until the Catholic emancipation. Therefore, I find very discriminating the fact that the latter Stuarts would have accepted all but this in the 1688 constitution that my noble and learned friend the Lord Chancellor likes so much; and I say this without hesitation, not doubting my loyalty to the present holder of the Throne and recent Monarchs.
Viscount Whitelaw: My Lords, it is clear that there are aspects of this particular occasion which may not evoke the happiest memories in different places and with different people. Certainly one of these has been put right in that my noble friend is now allowed to sit in this House despite anything that might have been done on that occasion.
As for the celebrations, there are different events in our history to which it is reasonable to call attention, though they may not have been universally popular or at the time particularly helpful to everyone. However, this is an important milestone and on that basis should be celebrated.
Lord Glenamara: My Lords, why should we be called upon to celebrate this so-called revolution which was not by any means glorious as the history books describe it? It was a pretty squalid affair. It amounted to nothing more than the ousting of the lawful rightful King by religious prejudice. Nobody objects to celebrating 300 years of Anglo-Dutch friendship, but why should we be called upon to celebrate this squalid coup d'état?
Viscount Whitelaw: My Lords, a large number of people thought it was appropriate, and that is why the Government are supporting the various endeavours that are being made. One has to say that those Members of your Lordships' House who do not want to celebrate need not do so.
Lord Annan: My Lords, will the noble Lord agree that this revolution, so far from being squalid, was a revolution which in fact established the basic liberties in our country, including not having standing armies which could be there without Parliament voting the money for them, and which established that judges could not be dismissed by the Government and that
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they could hold office however they behaved themselves? Is that not a most important fact in the constitution?
Viscount Whitelaw: My Lords, the last point about judges being allowed to remain however they behave themselves is quite right. The rest of what the noble Lord, Lord Annan, says is obviously correct. It shows that there are two feelings about history and the noble Lord produces one which on this occasion I am very much prepared to support.
The Earl of Lauderdale: My Lords, will my noble friend not agree that using the term "Anglo-Dutch" seems to exclude Scotland, no doubt deliberately? Is he saying that because he is aware that many Scots— Episcopalians, Roman Catholics and Jacobites— bitterly resented and suffered from the effects of this so-called glorious revolution?
Viscount Whitelaw: My Lords, I have referred to the arrangements made by the William and Mary Tercentenary Trust. I understand that the advisory committee set up by my noble and learned friend the Lord Chancellor and Mr. Speaker intends that the celebrations should cover the revolution of 1688–89 in Scotland as well as England and Wales and the Scottish Claim of Right as well as the English Bill of Rights. The membership of the advisory committee includes the noble and learned Lord, Lord Fraser of Tullybelton, who is advising on the Scottish aspects, and the Scottish Record Office is closely involved in the plans for the Parliamentary Exhibition.
Lord Elwyn-Jones: My Lords, did not the setting up and creation of a constitutional monarchy and the passing of the Bill of Rights benefit Catholics no less than Protestants? Is it not therefore, if the matter is looked at in a detached and reasonable way, an occasion which ought to be celebrated even by Roman Catholics?
Viscount Whitelaw: My Lords, as is so often the case, I am indeed grateful to the noble and learned Lord for his detached wisdom in this matter. I have thought it right so far as I was concerned all the time to keep right away from matters of religious controversy, which when answering for the Government is probably wise.
Viscount St. Davids: My Lords, ought not this day to be celebrated for at least some happy aspects? Among them there is a personal one which interests me; to whit, the day that William of Orange landed was the day when the death by hanging of my five-times-great-grandfather was suddenly cancelled.
Viscount Whitelaw: My Lords, there might be two views on whether that was a good thing or not.

Business
3 p.m.
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Report stage of
the Social Security Bill will be

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adjourned at approximately seven o'clock for approxi-mately one hour and that during this adjournment consideration of Commons amendments to the Incest and Related Offences (Scotland) Bill will be taken.

Port of Fosdyke Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
River Humber (Burcom Outfall) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Social Security Bill
3.2 p.m.
Report received.
Clause 1 [Minimum contributions to personal pension schemes]:
Baroness Baroness Hooper moved Amendent No. 1:
Page 2, line 8, at beginning insert ("Subject to subsection (3A) below,").
The noble Baroness said: My Lords, on behalf of my noble friend I beg to move Amendment No. 1. With it I propose to discuss, with your Lordships' permission, Amendments Nos. 2, 15 and 16.
When someone leaves a personal pension scheme he may decide to leave his investments in the scheme to mature for his retirement; but he may decide to transfer them to another scheme, or to use them to buy a deferred annuity from an insurance company. If so, it could happen that some minimum contributions from the DHSS in Newcastle come through for payment to the scheme after the investment has been moved elsewhere.
At present Clause 1(3) of the Bill states that the minimum contributions must be paid to the scheme. This would obviously cause practical problems in the cases to which I have referred and might mean that the money could not be used properly to provide pension benefits for the member who has taken his business elsewhere. Similar problems may also arise with incentive payments to occupational schemes under Clause 7. These amendments allow the payments in such cases to be made, with suitable safeguards about how they are to be used, to the scheme or insurer who is now responsible for the person's pension rights. I beg to move.
Lord Banks: My Lords, I wonder whether the noble Baroness can explain what would the position be if the person goes back into SERPS and the extra money comes back after he has transferred back? Where does it go then? Is it reclaimed by the Department of Health and Social Security? What happens to it?
Baroness Hooper: My Lords, I assume the answer is that payments on the transfer back to SERPS would go into SERPS and would in fact boost the personal
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pension. If I find on inquiry that there is further information I can give to the noble Lord, I shall write to him, if I may.
On Question, amendment agreed to.
Baroness Hooper: My Lords, I beg to move Amendment No. 2:
Page 2, line 10, at end insert—
("(3A) In such circumstances as may be prescribed the Secretary of State shall pay minimum contributions to a prescribed person.").
On Question, amendment agreed to.
Schedule 1 [Appropriate personal pension schemes]:
Lord Kilmarnock Lord Kilmarnock moved Amendment No. 3:
Page 92, line 10, leave out ("may") and insert ("shall").
The noble Lord said: My Lords, I return in this amendment to the matter of adequate consumer protection for those who are encouraged by the Bill to take out personal portable pensions in lieu of their SERPS entitlement or in lieu of joining an occupational scheme. Your Lordships may remember there was some discussion at Committee stage as to whether the Financial Services Bill or this Bill was to be the proper vehicle for such protection. The noble Baroness, Lady Trumpington, in replying to me at col. 746 on 17th June, said:
"The Financial Services Bill sets up a system of self regulatory protection for all sort of investments and not just for pensions".
She went on to say:
"There may be a need for extra measures because of the special position of pensions."
She acknowledged this in principle and then went on to say—and I quote again:
"In the very unlikely event of the Financial Services Bill not being passed, there are fully sufficient powers in this Bill to do all that is necessary to protect personal pension holders".
Although I am sure the noble Baroness intended that statement to be helpful, it is not as helpful as it might seem, for the following reasons. First, there is nothing written into the main text of the Financial Services Bill as to the degree of protection for personal pensions. I understand that rules will be published by the Securities and Investments Board and also by the Marketing and Investment Board Organising Committee. But the passing of the Financial Services Bill would not help us directly here.
Secondly, the regulatory powers before us in the Bill are only permissive and not mandatory, as this amendment suggests they should be. So we have no means of knowing what the Secretary of State will regard as adequate protection for personal pension purposes or what abuses he would consider to be sufficient grounds for introducing subordinate legislation at a later date. This is all wrapped in mystery in the Bill before us.
This being so, I think we are entitled to ask the noble Baroness some questions. Perhaps the greatest concern centres on cold calling, and I understand that the cooling off period prescribed by MIBOC will be 14 days. But there is a widely held opinion that a longer period of, say, four or even six weeks would be appropriate in making the important decision as to whether to opt out of a well tried scheme into something new. It is a decision which may well require

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the advice of an independent pensions consultant or some other form of consultation. In the circumstances 14 days seems quite inadequate. Do the Government share this view and, if so, what are they going to do about it?
Next, will the Government ensure that any prospec-tive purchaser of a personal pension will know clearly how much commission is payable, how much of each and every contribution wll be applied for pension purposes, and how much, if any, of the benefits is guaranteed?
There is also the question of advertising. In Clause 13 we have merely a permissive power to make regulations. What will the criteria be? What type of conduct or misconduct would trigger regulations to protect the purchaser? Surely we are entitled to know these things before we agree to allow this Bill to go forward as it stands with wide but unspecified powers for the Secretary of State.
Schedule 1 provides that a scheme must comply with such requirements as may be prescribed as regards the investment and its resources and with any directions of the Occupational Pensions Board. I yield to no one in my admiration for the Occupational Pensions Board and the excellent work it is doing and will continue to do. I understand that the noble Baroness, Lady Turner of Camden, is one of its most outstanding members, and I should like to pay a tribute to the expertise and intelligence she has brought to bear on our debates on this part of the Bill. The OPB does a splendid job; but while it is excellently equipped—and I think the noble Baroness would herself agree here—for administrative functions and is marvellous for checking documentation and so on, it has no investigatory or inspectorial capacity.
The noble Baroness, Lady Trumpington, agreed at col. 744 on 17th June that it does not have sufficient powers, sanctions or staff. She said that its staff would be increased and that Clause 2 gives it full power to withdraw approval. But the fines described by the noble Baroness in answering an amendment of the noble Baroness. Lady Turner, at col. 781 are derisory. Under Clause 52 the maximum fine is £400 and £40 per day for a continuing offence; that is simply not adequate. If, however, the provider were to fall foul of SIB requirements under the Financial Services Bill, the penalties could be very serious indeed. There are some draconian powers in the Financial Services Bill under Clause 3, 4 and 5, Schedule 2, Clauses 60 to 63, and some more which I shall not go into as we are concentrating on a different Bill.
But despite these draconian powers in the Financial Services Bill there is no specific reference, to my knowledge, to personal pension schemes, and what we may want from the Government, if they will not accept this amendment, is an undertaking to introduce regulations in this Bill involving those powers under the Financial Services Bill. The Government must clear their own mind on what is, and what is not, proper protection for purchasers of personal pensions.
I repeat, as I said at Second Reading and at Committee, that I am a supporter of these schemes. I am not approaching them from an antagonistic point of view. They are a necessary component in the choice and flexibility required by the increased volume of job
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changes that will mark the labour market of the future. But these schemes must be fair, clear, above board and subject to heavy sanctions if they are not. My Lords, I beg to move.
Lord Williams of Elvel: My Lords. I should like to support the noble Lord, Lord Kilmarnock. in his amendment. We had an extensive discussion on the Second Reading of the Financial Services Bill last Friday of the whole question of cold calling, of unsolicited calling—call it what you may. We also had discussion of what might be coming before a Committee of your Lordships' House by way of amendments to these various arrangements that are at present set out in the Bill.
The problem in this schedule, to which the noble Lord, Lord Kilmarnock, referred, is that, as I see it, there is no reference to what is set out in the Financial Services Bill. That Bill, as I think I said in Committee on this point, will be the master Bill, because personal pension schemes are just one form of investment. It is no good saying that personal pension schemes are different in terms of investment from life insurance schemes and other schemes which people may sell on the doorstep. I accept that this Bill concentrates, quite rightly, on pension arrangements. Nevertheless, the rules for those who are selling personal pension schemes, and the personal pension schemes themselves, have to chime with the rules under the Financial Services Bill for other investment schemes.
We shall be looking—and, if I understand the noble Lord, Lord Kilmarnock, rightly, he is looking—for an assurance from the Government that the same rules will apply to those who are selling personal pension schemes under this Bill as to others who are selling investment schemes under the Financial Services Bill. In that spirit, I beg to support the noble Lord, Lord Kilmarnock.
3.15 p.m.
Lord Trefgarne: My Lords, the noble Lord, Lord Kilmarnock, proposed this same amendment during the consideration of the Bill in Committee, and I am sorry that he and the noble Lord, Lord Banks, whose name also appears on this amendment, remain concerned about the use of regulation-making powers for the pensions provisions of the Bill. I know that the noble Lords' concerns are wider than the specific effect of this amendment. But I should first explain, again, why we have given the Secretary of State a power rather than a duty, in paragraph 2 of Schedule 1, to make regulations about who may "establish" personal pension schemes.
We intend to use the power in paragraph 6 of the schedule to make regulations about the kinds of investment business that can be offered as personal pension schemes. For example, we propose that the regulations should require that, to qualify under Schedule 1, these schemes should be "authorised unit trusts" under the financial services legislation, or that they should offer particular kinds of insurance contract under insurance company legislation.
This approach will ensure that the whole raft of investor protection provisions which apply to these types of investment business will apply automatically

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to personal pensions. And it will probably make it unnecessary to exercise the power in paragraph 2 of the schedule, because the new pensions providers— banks, unit trusts and building societies—will be free to enter the personal pensions market by establishing schemes in the forms specified in these regulations.
Turning to the wider concerns that have been referred to from time to time, the permissive nature of many of the regulation-making powers in the pensions provisions of this Bill has been criticised on a number of occasions during the Bill's passage through Parliament. In particular, the Government's policy of making use wherever possible of the extensive investor-protection measures that will flow from the Financial Services Bill, rather than devising a complete set of separate free-standing rules under this Bill, has, I know, caused concern among some noble Lords.
I have to say that those who advocate immediate and obligatory formulation of comprehensive investor-protection measures in the social security legislation do no service to the people they seek to protect. One part of government—the DHSS—is being asked to close its eyes, to ignore what is happening at the Department of Trade and Industry and in the City, and to come up with a package of measures in isolation to cover substantially the same ground as the relevant parts of the Financial Services Bill. I ask noble Lords to consider very carefully the consequences of such an approach.
The principal result would be confusion. There would be two sets of rules governing identical activities: advertising, for example. That means two sets of rules to be followed by the pensions providers. That would be a hard enough burden, even if the rules turned out to be consistent. But what if they differed? Which rules should then be followed? No doubt answers to that question could be found, but only after an expense of time and effort that should be better employed. It is not only the pension providers who would suffer. What about the consumers seeking to establish their rights under the rules? Which rules will be the relevant ones for them? And if we have separate sets of rules, shall we not need separate bodies to police them, with the additional bureaucracy that that could entail?
I repeat the assurances that the Government have given on many occasions now. We are not seeking the investor-protection powers in this Bill for any idle purpose. We will use them if we judge it necessary to do so to ensure that pension scheme members are properly protected—and we are determined that they should be properly protected. It will be no advertisement for our pensions policy if its introduction is succeeded by a series of frauds, financial collapses and other scandals in which scheme members lose their savings. We are clear that we have to guard against this. But from what has emerged so far under the nascent financial services regulatory framework we believe that this framework will offer valuable protection to scheme members which, for the reasons I have outlined, ought not to be duplicated in social security legislation. There are still some problems to be sorted out; indeed, it would be surprising if there were not. If these cannot be resolved
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satisfactorily—though I have every hope they will be—then we shall act to use the powers in this Bill.
This is an administratively and technically complex area. The Government believe it is essential to proceed in close consultation with all the interested parties; and this is inevitably a time-consuming process. We want to get the detailed rules right, which is why we are proposing to cover many of them in the regulations. I do not think we would win many plaudits—certainly not from the pensions organisations—if we were to abandon this process.
I understand the concerns expressed by your Lordships that this House has not yet considered in detail the Financial Services Bill. But I find it much more difficult to see why this should mean that the Social Security Bill should be considered as if the other Bill did not exist. The Financial Services Bill has of course now received its Second Reading in your Lordships' House.
Perhaps of more direct relevance are the various proposals for rules published by the Securities and Investments Board and the Marketing of Investments Board Organising Committee. These are the two bodies which are expected to become the designated agency under the Financial Services Bill. The board has already published detailed proposals which have significance for pensions. They cover, for example, the standards of conduct required by people engaging in investment business, including people who will be marketing pension schemes; they cover "cold-calling" and "cooling-off periods"; and they cover disclosure of information about investment products. I understand that proposals for compensation arrangements and for restrictions on advertising can be expected in due course. It looks like being an extensive and thorough regulatory regime. We want to see how such rules can best be applied to pensions, and discussions between the interested parties are continuing. Investor protection for pensions will of course be an important feature of the proposals for the details of the new pensions arrangements on which we shall be consult-ing publicly this year.
In the light of all these considerations and the undoubted technical complexity of this matter, I hope that the noble Lord, Lord Kilmarnock, will be satisfied with the assurances I have been able to give.
Lord Kilmarnock: My Lords, the noble Lord, Lord Trefgarne, has said that I moved the same amendment in Committee, and that is perfectly true. It was pressed to a Division there. I think, therefore, that there is no impropriety here. Possibly we may now need to draft a different amendment for Third Reading.
The noble Lord has given us a number of assurances and he spoke of the Government's intention to do a number of things. Of course, as it comes from him, we respect those assurances and we note those intentions. However, I do not see why we should not have those assurances and those intentions on the face of the Bill. The noble Lord referred to advertising. In fact, I only mentioned that in passing. The amendment is directed to Schedule 2.
The noble Lord stated that there would be a muddle if there were separate sets of rules for the same types of investment according to whether or not they were

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going to be used for pension purposes, but there would not be separate sets of rules if in fact we simply used cross-referencing between this Bill and the Financial Services Bill. Then we should know where we stand; and I am encouraged to see the noble Lord, Lord Williams, with his expertise, nodding in agreement with that. I cannot see why we should not do that in this Bill.
As the noble Lord has said, it is a complicated matter. I do not intend to divide the House this evening on this point. I shall certainly read with great care what has been said during the debate, and if we feel that the assurances are not quite as strong as we should like then I may well come back at Third Reading with an amendment couched in a different form. On those grounds, I beg leave to withdraw the amendment.
The Deputy Speaker (Lord Aberdare): Is it your Lordships' pleasure that this amendment be withdrawn?
Noble Lords: No.
On Question, amendment negatived.
Baroness Hooper Baroness Hooper moved Amendment No. 4:
Page 93, line 22, at beginning insert ("The value of).
The noble Baroness said: My Lords, I beg to move Amendment No. 4, and I propose also to discuss Amendment No. 5. These are drafting amendments, and they clarify that paragraph 7(4) of Schedule 1 is about the calculation of the value of protected rights resulting from minimum contributions and not about the form of the benefits eventually provided with those rights. The form of the benefits is dealt with by paragragh 9 of the schedule. The amendments ensure that schemes will, as intended, be free to pay out rights from contributions about the minimum level as they wish, subject to Inland Revenue rules. I beg to move.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 5:
Page 93, line 25, after ("which") insert ("the value of).
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 6:
Page 95, line 5, after ("amount") insert ("and the circumstances are such as may be prescribed,").
The noble Baroness said: My Lords, this amendment is consequential on the change made to paragraph 9(3) of Schedule 1 during the Committee consideration of this Bill. It will ensure that the provisions for commutation of the annuity resulting from minimum contributions to personal pensions follow the existing provisions in Section 39 of the Pensions Act for commutation of guaranteed minimum pensions. The simple rule is that all these contracted-out pensions may be commuted for a lump sum payment only where the amount would be small. The figure is set by the Inland Revenue and is currently £104 a year.
We also need to set the circumstances in which the pension can be commuted to cater for cases where someone has pension rights in another scheme which
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would take his total pension over the commnutable amount. The amendment provides this power for widows' and widowers' pensions to match that in paragraph 9(3) for the member's pension, and that in Section 39 of the Pensions Act for guaranteed minimum pensions. I beg to move.
Lord Williams of Elvel: My Lords, I wonder whether the noble Baroness could interpret the words "circumstances are such as may be prescribed".
Baroness Hooper: My Lords, such as may be prescribed from time to time, possibly by regulation.
On Question, amendment agreed to.
Clause 3 [Amount of minimum contributions]:
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington)The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington) moved Amendment No. 7:
Page 4, line 13, at beginning insert ("Subject to subsection (1A) below,").
The noble Baroness said: My Lords, in moving Amendment No. 7 I also propose to discuss Amendment No. 9. When we discussed Clause 3 of the Bill in Committee on 17th June, I gave the Committee an undertaking that we would propose an amendment today to modify the proposal to pay the 2 per cent. incentive to all employees who take personal pensions. I said that the detail would be for regulations, which would be subject to full consultation with the pensions industry and other interested parties. It is worth repeating that the principle we are accepting in proposing these amendments is already clear. The 2 per cent. incentive will not be available for someone who has been in a contracted-out scheme for a reasonable period and who is still eligible for membership of that scheme after leaving it.
I understand that the length of the period of membership which might be considered "reasonable" is the subject of some speculation. I must assure your Lordships that no decision has been taken about this. It is exactly the kind of issue on which consultations are appropriate, and on which we shall be listening carefully to the views which are put to us.
There are other practical issues about the precise circumstances in which the incentive addition will be withheld, which are also most suitable for regulations and on which we shall be consulting. I am pleased to be able to propose these amendments to meet what I know are genuinely felt objections on the part of some noble Lords to the Bill as it stands. I beg to move.
Baroness Turner of Camden: My Lords, I am glad to learn from the noble Baroness this afternoon that the assurances that were given to us in Committee are being honoured in this way. She is right to say that the reference to "reasonable" in the speech she made in Committee has aroused some speculation. It has been asked what is meant by "reasonable". Plainly this is something which must be sorted out. As far as we are concerned on this side of the House, we would expect that anybody who was in a contracted-out scheme, even someone who has perhaps just joined as a result of having been taken into employment, should be covered by the provisions that the 2 per cent. incentive would not be available because the scheme was an

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acceptable one and the 2 per cent. incentive should not be used to opt against a good scheme. However, I am very glad to welcome what the noble Baroness has said, and we shall of course be supporting the amendment.
3.30 p.m.
Lord Banks: My Lords, as the noble Baroness has reminded the House, she agreed during the Committee stage that the 2 per cent. incentive should not be paid to those who switched from contracted-out occupational schemes to contracted-out personal pension schemes. I should like to speak also to Amendment No. 8. The object of that amendment was to put into the Bill what the noble Baroness had agreed to and to have it there on the Marshalled List in case there was no amendment forthcoming from the noble Baroness in relation to this matter. The Government are proposing to deal with it, as she has explained, by giving themselves the power to exempt certain prescribed employment which it is intended (although not specified) will include the 2 per cent. incentive as applied to switches from contracted-out occupational to contracted-out personal pension schemes.
There are two questions that I should like to ask the noble Baroness. I am glad that action is being taken to deal with this matter, but I am a little unhappy that we have no indication at all at this time of what a "reasonable" period might be. I wonder whether she can give any indication of the Government's thinking on that matter. I should like to ask what was meant exactly by the qualification which she put in her statement. She said that the 2 per cent. incentive would not be available for personal pensions held by someone who had been in a contracted-out occupational scheme for a reasonable period and who was still eligible for membership of that scheme after leaving it—not of that scheme at the time of leaving it, but after leaving it.
If the employer were to say—as employers might say, and as I understand it they would be free to say—that, having left the scheme, you cannot come back into it, what effect does that have? Does that mean that in those circumstances the 2 per cent. would be paid, thus undermining the whole object of what the noble Baroness and the Government are trying to do here? I should be most grateful if the noble Baroness could answer that point.
Lord Williams of Elvel: My Lords, I should like to support the noble Lord, Lord Banks, and my noble friend Lady Turner of Camden in asking, firstly, who is being consulted on the question of what is a reasonable period, when these consultations will come to fruition, and whether we shall know this before Third Reading; and, secondly (to pick up a point made by the noble Lord, Lord Banks) are those who are in possession of a deferred pension in an occupational pension scheme ruled out from this provision?
Baroness Trumpington: My Lords, if I may answer the last question first, we are consulting with the pension people and the organisations concerned with pensions, and with the noble Lords opposite or any other person who thinks that they may have
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something to offer. They may well write in, and their comments will certainly be taken into account in the consultations.
With regard to the question of the noble Lord, Lord Banks, of how long is "reasonable", I have said that we are having these consultations—in fact, I particularly said that in my original remarks. With regard to the eligibility for membership, this is still in a category of employees which qualifies for scheme membership even after leaving. I hope that your Lordships will be pleased with what I have said today because there was a very full debate on these matters both in Committee and in another place, and, having listened very carefully to all the views that were put to us, we concluded that we should take the powers to limit the application of the incentive addition and that we should, as I have done, give a clear undertaking as to the principle and the way in which we intend to use that power.
On Question, amendment agreed to.
[Amendment No. 8 not moved.]
Baroness Trumpington Baroness Trumpington moved Amendment No. 9:
Page 4, line 27, at end insert—
("(1A) In relation to earnings paid with respect to any such employment as may be prescribed, subsection (1) above shall have effect as if the words "the aggregate of and paragraph (b) and the word "and" immediately preceding it were omitted.").
On Question, amendment agreed to.
Clause 5 [Personal pension protected rights premium]:
Baroness Hooper Baroness Hooper moved Amendment No. 10:
Page 6, line 43, leave out from ("relation") to ("were") at page 7, line 7, and insert ("to that person and a widow or widower of that person as if any guaranteed minimum pension to which that person or any such widow or widower is treated as entitled under those provisions, and which derives from the minimum contributions, minimum payments (within the meaning of the Social Security Pensions Act 1975) or transfer payment or payments from which those rights derive").
The noble Baroness said: My Lords, I beg to move Amendment No. 10, with which I propose to discuss Amendments Nos. 11, 13 and 14. These are purely drafting amendments. Clause 5 and paragraph 7 of Schedule 2 provide for protected rights premiums to be paid in certain circumstances and to buy back rights in a state scheme. These amendments ensure that the premium buys back only the state scheme rights which correspond to the protected rights included in the premium. They also ensure that the cost of all the relevant state scheme benefits is assessed in determining what proportion the premium will buy.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 11:
Page 7, line 26, leave out from ("pension") to end of line 27 and insert ("such as is mentioned in subsection (9) above.").
On Question, amendment agreed to.
Schedule 2 [Money purchase contracted-out schemes]:
Lord Banks Lord Banks moved Amendment No. 12:
Page 99, line 4, leave out ("trustees or managers") and insert ("employers").
The noble Lord said: My Lords, I beg to move Amendment No. 12. Clause 6, with Schedule 2, deals with money purchase occupational schemes and the provision for them to be contracted out. In line 4, page 99, of Schedule 2 the Bill refers to the,
"trustees or managers, in their application for a certificate";
that is, a contracting out certificate. Up till now it has been the employer who applies for a contracting out certificate, and it seems right that in this line we should substitute "employers" for "trustees or managers". I beg to move.
Lord Trefgarne: My Lords, this is such an extremely difficult and incomprehensible amendment that the only thing to do is to accept it!
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 13:
Page 100, line 37, leave out from ("relation") to ("were") in line 48 and insert ("to that person and a widow or widower of that person as if any guaranteed minimum pension to which that person or any such widow or widower is treated as entitled under those provisions, and which derives from the minimum payments, minimum contributions (within the meaning of the Social Security Act 1986) or transfer payment or payments from which those rights derive").
On Question, amendment agreed to.
Baroness Baroness Hooper moved Amendment No. 14:
Page 101, line 23, leave out from ("pension") to end of line 25 and insert ("such as is mentioned in subsection (8) above.").
On Question, amendment agreed to.
Clause 7 [Schemes becoming contracted-out between 1986 and 1993]:
Baroness Hooper Baroness Hooper moved Amendment No. 15:
Page 8, line 24, leave out ("to the trustees or managers of the scheme").
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendment No. 16:
Page 8, line 34, at end insert—
(" (1 A) The Secretary of State shall make a payment under this section to the trustees or managers of the scheme except that in such circumstances as may be prescribed he shall make such a payment to a prescribed person.").
On Question, amendment agreed to.
Clause 8 [Abolition of requirement relating to requisite benefits]:
Baroness Hooper Baroness Hooper moved Amendment No. 17:
Page 10, line 10, at end insert ("and except to that extent shall be treated for the purposes of section 50 of that Act (requirement of consent of Occupational Pensions Board to alterations of rules of schemes) as if it had never existed").
The noble Baroness said: My Lords, the Occupational Pensions Board frequently have to examine the rules of schemes which, having been set up under interim documentation, replace this retrospectively with definitive documentation. There will usually be a considerable gap, sometimes more than five years, between these events. When, after the date of the coming into effect of Clause 8, the board are examining rules which are effective before that date we do not want them to be under a duty to examine the rules relating to requisite benefits.
This amendment is designed to remove that duty. It would not remove from contracted-out schemes the responsibility for any rules that date from before the clause comes into effect to contain provision for requisite benefits. Its effect would be to allow about 10 trained staff of the board to be moved to duties in connection with the examination of the rules of newly contracted-out schemes or appropriate pension schemes. I beg to move.
Baroness Turner of Camden: My Lords, we on these Benches are prepared to accept this amendment. As far as we can see, it seems to be administratively sensible. I am quite sure that the Occupational Pensions Board would be glad if it were passed, although that is not necessarily a reason for doing so.
On Question, amendment agreed to.
Clause 9 [Guaranteed minimum pensions]:
Baroness Hooper Baroness Hooper moved Amendment No. 18:
Page 13, leave out lines 39 to 43 and insert—
("(8) Except as permitted by subsection (13), (14) or (15) below, the trustees or managers of a scheme may not make an increase in a person's pension which is required by virtue of this section out of money which would otherwise fall to be used for the payment of benefits under the scheme to or in respect of that person unless—

(a) the payment is to an earner in respect of the tax year in which he attains pensionable age and the increase is the one required to be made in the following year; or

(b) the payment is to a person as the widow or widower of an earner who died before attaining pensionable age in respect of the tax year in which the person became a widow or widower and the increase is the one required to be made in the next following tax year.").

The noble Baroness said: My Lords, the purpose of this amendment is two-fold. First, it corrects defects in drafting in order to clarify that an increase in a guaranteed minimum pension may not be paid out of money which would otherwise be used for the payment of a person's benefit under an occupational scheme. In other words, a scheme may not provide a GMP increase by transferring the amount due from any part of a person's occupational pension which exceeds the guaranteed minimum.
Secondly, in order to simplify the arrangements for schemes which increase pensions in payment at times other than the beginning of a tax year, the amendment allows a small relaxation of this rule in relation to the GMP increase due at the beginning of the tax year immediately following that in which a person first becomes entitled to a GMP. It will allow schemes to retain their existing cycle of pension increases and will prevent them having to increase pensions in payment more than once a year. Our aim is to keep the administrative arrangements for occupational pension schemes as simple as possible and I commend the amendment to your Lordships. I beg to move.
Lord Williams of Elvel: My Lords, I wonder whether the noble Baroness can explain the true purpose of this amendment, because I am bound to say that I have some difficulty in understanding it. If I heard what she said correctly and interpreted it correctly, the member of an occupation pension scheme or any other scheme, including the state scheme, who has an entitlement to a benefit which increases with the gross national product, as I

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understood her to say, will be prohibited from taking out a personal pension scheme in which that benefit is enshrined. Is that what the noble Baroness is saying? Is that the purpose of the amendment?
If so, I cannot quite understand why the amendment should be there. Indeed, it seems to me that the amendment should not be there. Perhaps the noble Baroness can clarify my thoughts.
Baroness Hooper: My Lords, this is a very technical and complex area. Indeed, upon reading in Hansard what the noble Lord has said I shall, if necessary, write to him. Perhaps I can slightly simplify it by saying that the effect of the amendment is to make minor drafting changes and also to allow schemes to be exempted from the "anti-franking" rule in the new Section 37A(8) in respect only of the first GMP increase due after entitlement to the GMP arises. That probably does not simplify it and so perhaps I had better resolve the problem by offering to write to the noble Lord with a more detailed explantion.
Lord Williams of Elvel: My Lords, with the leave of the House, perhaps I may accept the kind offer of the noble Baroness to write to me about this saying exactly what it does mean.
Baroness Phillips: My Lords, I would say to the noble Baroness that perhaps it would be more helpful if she did not actually give us an explanation, no doubt provided to her in a brief, that this is a simplification. I cannot think of anything more complicated than this. We had algebra in the Gas Bill last week and now we have it in this Bill as well. It really confuses people, as anybody who has ever tried to fill in a form in relation to any of these matters will agree. If we find it difficult, how much more difficult does the ordinary widow or the ordinary person who has to cope with these things find it? I feel that it is very bad that as we reach this stage of the Bill the Government make this drafting change and then tell us that it is for simplication. I do not say that we shall vote against it, because I do not understand exactly what we would be voting for or against, and I suspect neither do the Government.
On Question, amendment agreed to.
3.45 p.m.
Clause 10[Short-service benefit:qualifying service]:
Lord Banks Lord Banks moved Amendment No. 19:
Page 15, line 40, at end insert—
("( ) This section and section 1 of the Social Security Act 1985 shall override any provision in scheme rules which would otherwise conflict with them.").
The noble Lord said: My Lords, Clause 10 reduces the period after which benefits for early leavers must be preserved and no return of contributions can be obtained by them. The reduction is from five years to two years. Many scheme rules are framed in such a way that the trustees will be unable to eliminate the existing member's right to a refund without having to obtain from the Occupational Pensions Board a modification order. This involves both the trustees and the Occupational Pensions Board in unnecessary administrative work.
A similar diffculty arises with Section 1 of the Social Security Act 1985 which abolished the age limit of 26. This amendment would ensure that Section 1 of the 1985 Act and Clause 10 of this Bill would be binding on scheme members, nowtithstanding the provision of the rules, and would cut out a great deal of unnecessary administrative work and trouble. I beg to move.
Lord Williams of Elvel: My Lords, I should like to support the amendment of the noble Lord, Lord Banks. This is a very complicated area. Early leavers from occupational pension schemes are, and continue to be, a great problem. I note that the noble Baroness, Lady Trumpington, did not reply to my question about the treatment of holders of deferred pensions which I asked earlier. These are the early leavers to whom the noble Lord, Lord Banks, refers. I think that the Government ought to think rather carefully about this.
Baroness Turner of Camden: My Lords, I support the noble Lord, Lord Banks, in his amendment. The Occupational Pensions Board has powers to make modification orders and does so under the present legislation; but if we could have legislation which obviated the need for this to be done, I am sure it would be a great deal better and would certainly save administrative time. I therefore support the amendment.
Lord Pitt of Hampstead: My Lords, I am sorry that I was not in my place when the noble Lord moved his amendment. I regard this amendment as one of the utmost importance. If we do not allow young unemployed people to have this facility—the year when they are unemployed being excluded—they will in fact have a much lower pension than would otherwise be the case. Am I speaking to the wrong amendment?
Lord Ennals: Yes.
Lord Pitt of Hampstead: I apologise, my Lords.
Lord Trefgarne: My Lords, in the hope that I am speaking to the right amendment—and the difficulties for me are no less than the ones that confront the noble Lord, Lord Pitt—may I say that the preservation requirements, which are set out in Schedule 16 to the Social Security Act 1973, are constructed on the basis that they do not have direct effect; it is the responsibility of scheme trustees or managers to make the rules conform with the requirements. It would be anomalous to make changes in the preservation requirements which override scheme rules when the preservation requirements as a whole do not. Compliance with the preservation requirements can, however, be achieved through the powers of the Occupational Pensions Board to modify those rules which conflict with the law, but which schemes are unable or unwilling to change. We still believe that the Occupational Pensions Board modification procedures are the right way to proceed, and I hope that I can persuade the noble Lord, Lord Banks, to agree with me.
Lord Banks: My Lords, I am afraid that I do not agree with the noble Lord. It seems to me that this would be a very considerable simplification, and that appears to have been the feeling of other noble Lords. Nevertheless, I shall not press the amendment at this point but shall consider again what the noble Lord has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 [Contributions to schemes]:
Baroness Hooper Baroness Hooper moved Amendment No. 20:
Page 16, line 21, at end insert—
("( ) must not prohibit, or allow any person to prohibit, the payment by a member of voluntary contributions;").
The noble Baroness said: My Lords, with this amendment I propose to discuss Amendments Nos. 21 to 24. These are purely drafting amendments which ensure that Clause 12 will work as intended. I also commend them to your Lordships as a simplification of the wording of this clause. I beg to move.
On Question, amendment agreed to.
Baroness Hooper Baroness Hooper moved Amendments Nos. 21 to 24:
Page 16, line 23, leave out from ("on") to end of line 26 and insert ("the payment by a member of voluntary contributions").
Page 16, line 27, leave out from ("any") to ("are") in line 29 and insert ("voluntary contributions paid by a member").
Page 16, line 31, leave out from ("provide") to ("and") in line 33 and insert ("additional benefits for or in respect of him").
Page 16, line 35, leave out from ("regard") to end of line 36 and insert—

("(i) to the amount of the voluntary contributions; and

(ii) to the value of the other benefits under the scheme.").

On Question, amendments agreed to.
Lord Banks Lord Banks moved Amendment No. 25:
>Page 16, line 38, at end insert—
("( ) Members of a contracted-out occupational scheme shall be able to make additional voluntary contributions to any personal pension scheme which is not contracted-out.
( ) Members of an occupational scheme which is not contracted-out shall be able to make additional voluntary contributions to any personal pension scheme which may or may not be contracted-out.").
The noble Lord said: My Lords, I moved this amendment in Committee in conjunction with several others with which it formed a package. However, in my opinion it deserves to be considered on its own, and it can certainly stand on its own.
At the present time, a member of an occupational scheme may make additional voluntary contributions to that occupation scheme or to a separate scheme run by his employer for the purpose. The total of his contributions, including the basic contribution to the occupational scheme, must not exceed 15 per cent. of his earnings. Under the Bill,
the Government are instituting a new type of contract—the personal pension. It is similar to the Section 266 retirement annuity, which is also often referred to as a personal pension. It differs from it in that it will be possible to use it for contracting out. However, as I understand it, it need not be used for contracting out. In other words, someone in SERPS will be able to contribute to a personal pension in addition to being in SERPS. Clearly, that personal pension will not be contracted out.
The object of Amendment No. 25 is to permit a member of an occupational scheme, whether or not it is contracted out, to pay additional voluntary contributions into a personal pension as established by the Bill. He is not able to pay such a contribution into a Section 226 policy as matters stand. The case against this amendment put by the noble Baroness, Lady Trumpington, was that there is nothing in social security legislation that prevents a member from paying contributions to any other scheme. The noble Baroness argued that it was only the absence of the tax exemption that prevented it and, so far as that was concerned, the matter was under consideration by the Chancellor of the Exchequer.
I agree that whether or not contributions made to a personal pension scheme enjoy the same tax exemption as those made to the occupational scheme will depend on the tax regime for personal pensions. However, I see no reason why it should not be made clear in the Bill that occupational scheme members can make contributions to personal pension schemes, and that personal pension schemes cannot refuse contributions on the ground that those contributing are members of an occupational scheme, as providers of Section 226 policies would do today. The tax regime for personal pension schemes would then have to apply to the additional voluntary contributions of occupational scheme members.
After all, to take a comparable case, there is nothing in social security legislation to prevent transfer from an occupational scheme to another sort of scheme; that is to say, to a Section 226 scheme. It is the tax regime that is the barrier, yet the Government have taken specific powers in paragraph 13(2)(c) of Section 1A of the Social Security Act 1985 to allow members of occupational schemes to transfer to other schemes. They have made it clear that they will use that for transfers to personal pensions. So there is a precedent for what I suggest.
We are setting up a new type of scheme in personal pensions and it is important to know who may join it. We are dealing with other aspects of the relationship of the occupational scheme to the personal pension scheme—for example, the right to switch from one to another—and so it seems sensible to cover that aspect as well.
The noble Baroness quoted the Chancellor of the Exchequer in his Budget speech as saying:
"I intend later this year to publish detailed proposals designed to give personal pensions the same favourable tax treatment as is currently enjoyed by retirement annuities".—[Official Report, Commons, 18/3/86; col. 176.]
That is to say, they would be treated the same as Section 226 policies. But, if personal pensions are put on precisely the same basis as retirement annuities, then providers of occupational schemes would not be included in the tax regime. If Amendment No. 25 were passed, it would seem that they would have to be. I beg to move.
Baroness Turner of Camden: My Lords, I have little to add to what has been said by the noble Lord, Lord Banks, in moving his excellent amendment. We on these Benches support his amendment and we should like to see the Government support it as well, because that would be in line with their philosophy—which I

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take it is to encourage freedom of choice and also to encourage people to enter into a saving scheme of one sort or another, of which AVCs are a vital part. I therefore support the amendment.
Lord Trefgarne: The noble Lord, Lord Banks, referred just now to the debate in Committee, when he moved an amendment in very similar terms to what was then Clause 14 and is now Clause 15. However, I fully accept that the amendments fit Clause 12 better than Clause 15.I have not overlooked the support that came from my side of the House on that occasion, but I can go no further today than could my noble friend in Committee. She explained then that there is no bar in this Bill or in any other social security legislation on members of occupational pension schemes making additional voluntary contributions to other sorts of pension scheme. But I have to say that no purpose would be served by giving them a right in this Bill to make such contributions.
The reason is that what really matters in that context is the tax rules. At the moment, tax relief is only available for additional voluntary contributions which a member of an occupational pension scheme makes within his scheme. AVCs made by someone who is in an occupational pension scheme to a personal pension would not qualify for tax relief. What is more, a personal pension scheme that accepted such contributions would lose its tax exempt status. That means that all their income and capital gains would be subject to tax and hence the interest of all the scheme members would be most adversely affected.
When we debated this issue in Committee, my noble friend reminded your Lordships of the Chancellor of the Exchequer's announcement in his Budget speech that he would be issuing consultative proposals later in the year on the tax treatment of personal pensions. However, I cannot anticipate what will be in my right honourable friend's consultative proposals. Your Lordships may feel, in the light of what I have said, that it would not be appropriate to pursue this matter, which is essentially a tax issue.
Perhaps I ought to add that the amendment as it stands is technically defective, with the reference that it makes to, "a contracted-out occupational scheme". While that is convenient shorthand and we all understand what it means, it is not a term to be found in this Bill or that would identify any particular scheme. The correct term is an "appropriate" scheme, as set out in Clause 2 and Schedule 1.I do not rest my arguments solely on the technical inadequacies of the amendment but rather on the issues of principle that I addressed earlier and which I hope will persuade the noble Lord, Lord Banks.
Lord Ennals: My Lords, before the Minister sits down, and accepting that this also is a tax issue, since the noble Lord has himself said that there is an entitlement to pay additional contributions, then why does he not agree that it should be in the Bill? Is it not a good thing that people should follow such a course; and if it is a good thing, then is it not a good thing also to put such a provision in the Bill?
Lord Trefgarne: My Lords, that is a doctrine that has been deployed on a number of occasions in your
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Lordships' House on a number of different Bills. It is not one to which I would normally subscribe.
Lord Banks: My Lords, to deal first with the technical objection that the Minister made, if the amendment were passed, then I am sure that he could table a satisfactory amendment of his own, given all his experience and skill, to meet the point that he so clearly outlined.
The Minister said again that there is no bar to the payment of contributions. However, in the course of my remarks I gave examples—and the noble Lord did not address himself to this point—of where the Government, in a very similar situation where there was no bar to a particular process, nevertheless wrote it into the Bill—a matter relating to pensions. So if one can do it on one occasion, there seems no reason why one should not do it on another. Nor did the Minister address himself to the argument that if the amendment was to be passed, it would be inevitable that the tax regime for personal pensions would cover additional voluntary contributions from pension schemes. I am not satisfied with the arguments that the noble Lord has put forward and I should like to test the opinion of the House.
3.59 p.m.
On Question, Whether the said amendment (No. 25) shall be agreed to?
Their Lordships divided: Contents, 88; Not-Contents, 139.

DIVISION NO.1

CONTENTS

Amherst, E.

Houghton of Sowerby, L.

Ardwick, L.

Hunt, L.

Banks, L.

Jacques, L.

Barnett, L.

Jeger, B.

Blease, L.

Jenkins of Putney, L.

Blyton, L.

John-Mackie, L.

Bottomley, L.

Kennet, L.

Briginshaw, L.

Kilmarnock, L. [Teller.]

Brockway, L.

Leatherland, L.

Bruce of Donington, L.

Lincoln, Bp.

Buckmaster, V.

Listowel, E.

Burton of Coventry, B.

Llewelyn-Davies of Hastoe, B.

Caradon, L.

Lockwood, B.

Carmichael of Kelvingrove, L.

Mackie of Benshie, L.

Cledwyn of Penrhos, L.

McNair, L.

Darwen, L.

Mais, L.

David, B.

Mayhew, L.

Davies of Penrhys, L.

Milford, L.

Dean of Beswick, L. [Teller.]

Morton of Shuna, L.

Diamond, L.

Nicol, B.

Dowding, L.

Ogmore, L.

Elwyn-Jones, L.

Oram, L.

Ennals, L.

Phillips, B.

Ewart-Biggs, B.

Pitt of Hampstead, L.

Ezra, L.

Plant, L.

Falkender, B.

Ponsonby of Shulbrede, L.

Fisher of Rednal, B.

Rathcreedan, L.

Fitt, L.

Ritche of Dundee, L.

Gallacher, L.

Robson of Kiddington, B.

Gladwyn, L.

Rochester, L.

Glenamara, L.

Sainsbury, L.

Graham of Edmonton, L.

Seear, B.

Grey, E.

Serota, B.

Grimond, L.

Shackleton, L.

Hampton, L.

Shepherd, L.

Hatch of Lusby, L.

Stallard, L.

Heycock, L.

Stedman, B.

Hirshfield, L.

Stoddart of Swindon, L.

697

Swann, L.

Wallace of Coslany, L.

Taylor of Blackburn, L.

Wells-Pestell, L.

Taylor of Mansfield, L.

Wigoder, L.

Tordoff, L.

Williams of Elvel, L.

Turner of Camden, B.

Wilson of Langside, L.

Underhill, L.

Ypres, E.

NOT-CONTENTS

Ailsa, M.

Kinloss, Ly.

Aldington, L.

Kinnaird, L.

Alexander of Tunis, E.

Kintore, E.

Allen of Abbeydale, L.

Lane-Fox, B.

Alport, L.

Lauderdale, E.

Ampthill, L.

Layton, L.

Arran, E.

Long, V.

Atholl, D.

Lucas of Chilworth, L.

Auckland, L.

Luke, L.

Barber, L.

Lyell, L.

Bauer, L.

McFadzean, L.

Belhaven and Stenton, L.

Macleod of Borve, B.

Beloff, L.

Malmesbury, E.

Belstead, L.

Mancroft, L.

Bessborough, E.

Massereene and Ferrard, V.

Blyth, L.

Maude of Stratford-upon-

Bolton, L.

Avon, L.

Boyd-Carpenter, L.

Merrivale, L.

Brabazon of Tara, L.

Mersey, V.

Braye, B.

Montgomery of Alamein, V.

Brougham and Vaux, L.

Mowbray and Stourton, L.

Buccleuch and Queensberry,

Munster, E.

D.

Murton of Lindisfarne, L.

Butterworth, L.

Newall, L.

Caithness, E.

Northesk, E.

Cameron of Lochbroom, L.

Nugent of Guildford, L.

Campbell of Alloway, L.

Onslow, E.

Carnegy of Lour, B.

Orkney, E.

Carnock, L.

Orr-Ewing, L.

Cathcart, E.

Pender, L.

Coleraine, L.

Penrhyn, L.

Constantine of Stanmore, L.

Plummer of St. Marylebone,

Crawshaw, L.

L.

Davidson, V.

Porritt, L.

De Freyne, L.

Portland, D.

Denham, L. [Teller.]

Portsmouth, E.

Denning, L.

Rankeillour, L.

Derwent, L.

Renton, L.

Drumalbyn, L.

Romney, E.

Dulverton, L.

Saint Brides, L.

Dundee, E.

St. Davids, V.

Eden of Winton, L.

Saint Oswald, L.

Effingham, E.

Sandys, L.

Ellenborough, L.

Savile, L.

Elliot of Harwood, B.

Seebohm, L.

Elphinstone, L.

Skelmersdale, L.

Elton, L.

Slim, V.

Faithfull, B.

Somers, L.

Forbes, L.

Stanley of Alderley, L.

Fraser of Kilmorack, L.

Stodart of Leaston, L.

Gainford, L.

Strathclyde, L.

Gardner of Parkes, B.

Strathcona and Mount Royal,

Glanusk, L.

L.

Glenarthur, L.

Strathspey, L.

Gridley, L.

Sudeley, L.

Hailsham of Saint

Swinton, E. [Teller.]

Marylebone, L.

Teviot, L.

Harmar-Nicholls, L.

Teynham, L.

Henderson of Brompton, L.

Thorneycroft, L.

Henley, L.

Torphichen, L.

Hesketh, L.

Tranmire, L.

Hives, L.

Trefgarne, L.

Home of the Hirsel, L.

Trenchard, V.

Hood, V.

Trumpington, B.

Hooper, B.

Vaux of Harrowden, L.

Hylton-Foster, B.

Vickers, B.

Jessel, L.

Vivian, L.

Kemsley, V.

Waldegrave, E.

Keyes, L.

Whitelaw, V.

Killearn, L.

Wynford, L.

Kimball, L.

Yarborough, E.

Kimberley, E.

Young, B.

On Question, amendment agreed to.

4.8 p.m.
Clause 15 [Terms of contracts of service or schemes restricting choice to be void]:
Baroness Hooper Baroness Hooper moved Amendment No. 26:
Page 19, line 17, leave out from ("schemes") to ("that") in line 18 and insert ("shall be void; and
(b) any such term or rule to the effect").
The noble Baroness said: My Lords, in moving this amendment I propose to refer also to Amendment No. 27. These are drafting amendments, the effect of which is to substitute a revised version of Clause 15(1 )(b). I beg to move.
Baroness Turner of Camden: My Lords, I accept that these are drafting amendments and therefore I do not intend to speak to them at length. We on this side of the House do not like the provisions in Clause 15 anyway and all that these amendments do is strengthen the provisions already there. Those are my only comments.
Baroness Hooper Baroness Hooper moved Amendment No. 27:
Page 19, line 20, leave out from ("scheme") to end of line 22 and insert ("of which the earner is not a member, or to one or other of a number of personal or occupational pension schemes of none of which he is a member, shall be unenforceable for so long as he is not a member of the scheme or any of the schemes.").
Clause 18 [Additional pensions]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 28:
>Page 22, line 44, at end insert—
("( ) was unemployed and capable of work and was, or is deemed in accordance with regulations to have been, available to be employed;
or").
The noble Baroness said: My Lords, I rise to move Amendment No. 28. It will be recalled that during the Committee stage we on this side sought to retain the "best 20 years" rule in the state earnings related pension scheme because we believe that it is a way of protecting those who have chequered work patterns, who pass in and out of the workforce, and who therefore do not have the same possibility of reaching maximum pension entitlement as do people with a consistent work record.
The Government have come to some terms with our fears in relation to women who spend some time out of the workforce for domestic or caring reasons. However, in Committee the Government were not prepared to meet our arguments in relation to the effect on unemployed people. Because SERPS began in 1978 it will be only in 1999 that the "best 20 years" calculation begins to take practical effect and it is only in 1999 that the provision to change the basis of the calculation to a lifetime's earnings instead will be implemented. This has resulted in a tendency to assume that those in the workforce today will not be affected by this change, and remarks by Ministers have contributed to this misconception. During the Committee in another place, speaking specifically about unemployed people, the Minister of State said:
"While I do not in any way suggest that there may not be a problem in relation to this group in the early part of the next

699
century, I think that it is a problem which can be sensibly examined in relation to the unemployment problem that exists at that time and is not one that we need to settle at this time".—[Official Report, Commons; Standing Committee B; col. 439.]
The noble Baroness, Lady Trumpington, when introducing the Bill into your Lordships' House, stressed the Government's view that:
"there is no great urgency about any of this. The SERPS protection does not start to apply until 1999 which is when the 'best 20 years' rule would have come into effect".—[Official Report, 3/6/86; col. 683.]
She confirmed this view in a speech that she made at Committee stage.
Far from being a matter which can be left for the future, unless it is affected by amendment in your Lordships' House this change will adversely affect the pensions of many people who at the moment are either young or middle aged. For example, a man who is 20 in 1988 and who is unemployed from 1988 to 1993 will lose 5 years from the pension that he will receive in the year 2033. Under the "best 20 years" rule he would have received a full pension despite this period of unemployment.
Particular concern must be felt for older men and women who become unemployed. They see their pension rights diminishing but probably have little chance of further employment before retirement to redress the balance. In January 1986 there were 207,500 such people over the age of 55 who had been registered as unemployed for over a year. The Government seem to be arguing that the unemployment situation does not exclude people from working and thus contributing for long periods. Indeed, the noble Baroness, Lady Trumpington, observed at Committee stage that there was a case for protecting the position of people who were out of the workforce for long periods of time and for whom the "best 20 years" rule was originally intended.
However, she maintained that certain other categories of people, including the unemployed, are by and large out of the workforce for shorter periods, when looked at in the context of a whole working lifetime. This view fails to take into account the number of people who are unemployed for very long periods. In April 1986 there were 1,805,870 people of all ages who had been registered as unemployed for over 5 years. The arbitrary nature of the effect of unemployment adds weight to the call for protection to be extended to unemployed people. It is unjust to require that people should be additionally disadvan-taged because they become unemployed. For these reasons I commend the amendment to your Lordships. I beg to move.
Lord Banks: My Lords, I should like very briefly to support the amendment which has been moved so ably by the noble Baroness. We agree that the abolition of the 20-year rule hits some groups of people particularly hard, and we believe that the unemployed should be regarded as one such group, requiring special treatment. For those reasons we support the amendment.
Lord Pitt of Hampstead: My Lords, this is the amendment to which I intended to speak earlier, when I first arrived. Someone had told me that Clause 18
700
was on the board (obviously it was Amendment No. 18), and so I rushed in and when I did not see anybody speaking I thought I had better say something.
I regard this amendment as a very important one, and I hope that the Government will accept it. As the noble Lord, Lord Banks, has just said, the abolition of the "best 20 years" rule means that some people will be adversely affected. Let us face it: unemployment is one of the problems of today. To be honest, it may well be one of our problems for a long time to come. When people are unemployed they are suffering at that time, and it is wrong for us to say that in old age also they should suffer because of the fact that they were unemployed earlier. Leaving out that period from the calculation will enable them to have a better pension than they otherwise might have had. I hope that the Government will give serious consideration to accepting this amendment. I am sure that it is of the utmost importance, in particular to the young.
4.15 p.m.
Lord Stallard: My Lords, I, too, want to support this amendment. Although the Government, and indeed the noble Baroness herself, expressed concern about this matter, the noble Baroness did not go far enough. She did not accept that there would be a problem affecting people now. She has repeated what was said at the Committee stage of the Bill in another place and told us not to worry: because this measure will not take effect for a long time yet and because nothing will happen until 1999, we should not bother about it since it is not an immediate problem.
As has been pointed out by the noble Baroness, Lady Turner, it is an immediate problem. There are people who are unemployed now who will be affected by this measure, and we have to deal with that problem now. However, there is more to it than that; to my mind the question goes deeper. It appears that those people unemployed in an area of high unemployment at the moment (such as Newquay, where the unemployment rate is about 28.5 per cent.) will be more disadvantaged than people in an area where unemployment is not so high (for example, Crawley, where the unemployment rate is about 5.6 per cent.). Why are people in those areas of high unemployment to be more disadvantaged than people in the other areas when they come to collect their pensions?
There is a great deal of concern about this measure which affects people who are in the workforce at the moment, and I do not think that the Government have answered that concern. Unless the Government will give us more assurances than hitherto, I shall have to support this amendment also.
Lord Ennals: My Lords, having been involved with the establishment of the Act from its earliest stages, perhaps I may say a very brief word on this matter. The "best 20 years" rule was perhaps one of the most important elements within the Bill that eventually became an Act. Another important element was the provision which ensured that the scheme would reach maturity in 20 years' time. We consciously put this provision into the 1975 Act so that those people who were already disadvantaged would not be disadvan-taged in their retirement years.

701
We looked at a whole range of people who were already disadvantaged, including the disabled, and the unemployed—no matter what was the cause of their disadvantage. We said—and, thank heavens, the Government have accepted this—that women who rear young families will not have a full work record. It is a relief to us that that view has been accepted by the Government in the present legislation so that women may take 10 years out from employment without suffering when it comes to their pension entitlement. That is good; but I do not understand why the Government have decided, as it seems they have, to have "a down" on the unemployed. Quite clearly, unemployed people are disadvantaged at the moment of their unemployment, and the longer they are unemployed the longer that disadvantage endures. To perpetuate that disadvantage into their years of retirement seems to me to be a very harsh measure to take.
We recognise from previous debates that the Government will not return to the "20 best years" rule—and we thought of it in terms of miners, engineers, road workers, and so on, so that it covered the whole range of the population—but we feel that the amendment should at least take in the unemployed as well as housewives and mothers.
They may be a relatively small proportion, but they are extremely disadvantaged. I plead with the Government to accept that the amendment is much less than the one we put forward before. We have picked on the one group that is greatly disadvantaged. I can see no reason why that disadvantage should be maintained into their retirement years.
Baroness Gardner of Parkes: My Lords, I find the amendment worrying because it singles out one category, and I do not think that it would work in the interests of women, in particular those who have given up work to be at home with their children. They are covered for the time they are at home, but if a woman wished to return to work part time, she would be disadvantaged more by that because that would be included in the period of employment, and yet it would lower her average earnings over the years. There would be every incentive for her not to return to work but simply to sign the form saying that she was available for work.
Many women like to work part time. They like the additional income and the satisfaction of working. I cannot see that the amendment is in their interests. I believe that the 20-best-years proposal was a good one, but I do not support the amendment because it singles out one category and does not help all.
The Lord Bishop of Lincoln: My Lords, I support the amendment. It has been spoken to so eloquently that I do not wish to add to what has been said about the unemployed. I support it in principle and because I come from a part of the world where unemployment is above the national average.
Lord Trefgarne: My Lords, as has been explained, this amendment would extend to unemployed people who have been available for employment the special protection of SERPS rights, which we have already
702
made clear we shall provide for disabled people, mothers caring for children and people caring for disabled people. In other words, it would enable anyone who qualified for national insurance contribution credits for unemployment to have any years of such credits excluded from the number of years over which their earnings would be averaged for SERPS.
There is a strong case for making special arrange-ments for mothers and disabled people, because they can be out of the workforce for very long periods. But the position of unemployed people is different. Their spells out of the workforce tend to be much shorter when looked at in the context of a whole working lifetime.
As my noble friend Lady Trumpington made clear during Committee stage, we do not consider that it is necessary at this stage to make specific provision to cover the position of unemployed people who retire next century. I should make it absolutely clear to your Lordships that what we are concerned with here is people who reach retirement age in the next century. Men over the age of 52 and women over 47 will not be affected at all by the proposed modifications to SERPS. The effects of the abolition of the 20-best-years rule on younger people who retire next century will build up gradually. For example, men retiring 20 years from now in 2006 will have their SERPS calculated on earnings averaged over 28 years from 1978, and it will not be until 2027 that men's SERPS pensions will be calculated over a full working lifetime of 49 years.
During discussion of this question in Committee the noble Baroness, Lady Turner, said that she did not accept that the abolition of the 20-best-years rule would not affect people for a long time, and she quoted the example of a 20-year-old man in 1988 who was unemployed from 1988 to 1993 and would lose five years from his pension. The point I want to make is that, while it is true that under the proposed arrange-ments those five years would be included in the calculations of his lifetime's average earnings, the effects of that would not actually apply until 2033, when he reached retirement age.
We believe that it is better to wait until nearer the time that the abolition of the 20-best-years rule begins to take effect before deciding what action, if any, needs to be taken to protect the position of unemployed people. We do not believe that it is right to take decisions now, based on unknown future levels of unemployment. It is much better to wait and see what the actual unemployment figures are up to the end of the century and the effects that these will have on individuals' pensions. That is why we have ensured that the regulation-making power in Clause 18 is sufficiently wide to enable a future administration to take whatever action, if any, they consider may be necessary to protect the position of unemployed people, or indeed any other group, without the need for further primary legislation.
I should also explain to your Lordships that as people who are unemployed and available for work already qualify for national insurance contribution credits for the purposes of their basic pension calculation, there would be no difficulty in identifying those who would also qualify for protection of their

703
SERPS rights if such protection were to be extended to them in the future.
We do not believe that there is a case for making specific provision for unemployed people at the present time. But the power is already in Clause 18 if a future administration wish to use it. For that reason I hope that the amendment will not be pressed.
Lord Ennals: My Lords, with the leave of the House, the Minister said that the majority of people are unemployed for only a short time. A significant number may be out of work for a few months only and then go back into another job. But my noble friend said that in April 1986 there were unemployed 1,805,000 people of all ages; many of them were middle-aged and will never have work again. When the calculation comes to be made, they will inevitably find that their pension is lower because they have the disadvantage of being unemployed. How has the Minister applied his mind to that problem?
Lord Trefgarne: My Lords, if I need your Lordships' permission to speak again, and if I have it, let me say that we are dealing with a fairly narrowly based problem. There are too many people in the circumstances that the noble Baroness and the noble Lord have described, or indeed in any unemployment category. Nonetheless those currently unemployed for over five years account for less than 1 per cent. of the working population. I should prefer the number to be substantially less. But I do not think that the amendment proposes an appropriate solution.
Baroness Turner of Camden: My Lords, I am disappointed with the noble Lord's response, as I am sure most of us are on this side of the House. In putting the amendment forward we thought that we were being reasonably constructive and making a suggestion that the Government would find acceptable. Protection has already been written in for the sick, the disabled, mothers and other carers, and we commend that action.
The noble Baroness, Lady Gardner, mentioned women working part time. All I can say is that in Committee I referred to the propositions of the Equal Opportunities Commission to deal with part timers and said that we should support such a solution. There are problems about the work record and pension entitlement of women who spend a number of years working part time. However, since the Government did not respond, we decided to press the issue which seemed to us of most importance—the long-term unemployed—which is what all this is about.
The noble Lord referred to the item that I quoted. But when I spoke originally I said that I was talking about a pension that the individual would receive in 2003. Pensions involve the long-term future. Indeed, I thought that that was what the Government had in mind when they told us and the country at large that we could no longer afford SERPS and the best 20 years. They were looking to the future. In many parts of the country unemployment is exceptionally high, and people in those areas also look to the future. It is on their behalf that I wish to press the amendment, as I find the noble Lord's response entirely unacceptable and unsatisfactory.
4.30 p.m.
On Question, Whether the said amendment (No. 28) shall be agreed to?
Their Lordships divided: Contents, 97; Not-Contents, 146.

DIVISION NO.2

CONTENTS

Airedale, L.

Lincoln, Bp.

Amherst, E.

Listowel, E.

Ardwick, L.

Llewelyn-Davies of Hastoe, B.

Banks, L.

Lockwood, B.

Barnett, L.

Lovell-Davis, L.

Blease, L.

Mackie of Benshie, L.

Blyton, L.

McNair, L.

Bottomley, L.

Mais, L.

Briginshaw, L.

Mayhew, L.

Brockway, L.

Milford, L.

Bruce of Donington, L.

Morris of Kenwood, L.

Buckmaster, V.

Morton of Shuna, L.

Burton of Coventry, B.

Murray of Epping Forest, L.

Caradon, L.

Nicol, B.

Carmichael of Kelvingrove, L.

Ogmore, L.

Chitnis, L.

Oram, L.

Cledwyn of Penrhos, L.

Paget of Northampton, L.

Darcy (de Knayth), B.

Phillips, B.

Darwen, L.

Pitt of Hampstead, L.

David, B.

Ponsonby of Shulbrede, L.

Davies of Penrhys, L.

[Teller.]

Dean of Beswick, L.

Rathcreedan, L.

Diamond, L.

Rea, L.

Elwyn-Jones, L.

Ritchie of Dundee, L.

Ennals, L.

Robson of Kiddington, B.

Ewart-Biggs, B.

Rochester, L.

Ezra, L.

Sainsbury, L.

Falkender, B.

Seear, B.

Falkland, V.

Seebohm, L.

Fisher of Rednal, B.

Serota, B.

Fitt, L.

Shepherd, L.

Gallacher, L.

Silkin of Dulwich, L.

Gladwyn, L.

Stallard, L.

Glenamara, L.

Stedman, B.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grey, E.

[Teller.]

Hampton, L.

Taylor of Blackburn, L.

Hanworth, V.

Taylor of Mansfield, L.

Hatch of Lusby, L.

Tonypandy, V.

Heycock, L.

Tordoff, L.

Hirshfield, L.

Turner of Camden, B.

Houghton of Sowerby, L.

Underhill, L.

Hunt, L.

Wallace of Coslany, L.

Jacques, L.

Wells-Pestell, L.

Jeger, B.

Wigoder, L.

Jenkins of Putney, L.

Williams of Elvel, L.

John-Mackie, L.

Wilson of Langside, L.

Kilbracken, L.

Young of Dartington, L.

Kilmarnock, L.

Ypres, E.

Leatherland, L.

NOT-CONTENTS

Ailsa, M.

Brougham and Vaux, L.

Aldington, L.

Broxbourne, L.

Alexander of Tunis, E.

Bruce-Gardyne, L.

Ampthill, L.

Buckinghamshire, E.

Atholl, D.

Butterworth, L.

Auckland, L.

Caithness, E.

Barber, L.

Cameron of Lochbroom, L.

Bauer, L.

Campbell of Alloway, L.

Belhaven and Stenton, L.

Carnegy of Lour, B.

Beloff, L.

Carnock, L.

Belstead, L.

Cathcart, E.

Bessborough, E.

Coleraine, L.

Blyth, L.

Constantine of Stanmore, L.

Bolton, L.

Craigavon, V.

Boyd-Carpenter, L.

Cross, V.

Brabazon of Tara, L.

Cullen of Ashbourne, L.

Braye, B.

Davidson, V.

705

De Freyne, L.

Merrivale, L.

Denham, L. [Teller.]

Mersey, V.

Denning, L.

Montgomery of Alamein, V.

Derwent, L.

Mountgarret, V.

Drumalbyn, L.

Mowbray and Stourton, L.

Dulverton, L.

Munster, E.

Dundee, E.

Murton of Lindisfarne, L.

Eden of Winton, L.

Newall, L.

Ellenborough, L.

Northesk, E.

Elles, B.

Nugent of Guildford, L.

Elliot of Harwood, B.

Onslow, E.

Elliott of Morpeth, L.

Orkney, E.

Elphinstone, L.

Orr-Ewing, L.

Elton, L.

Pender, L.

Forbes, L.

Penrhyn, L.

Gardner of Parkes, B.

Plummer of St Marylebone,

Glanusk, L.

L.

Glenarthur, L.

Porritt, L.

Gridley, L.

Portland, D.

Grimthorpe, L.

Portsmouth, E.

Hailsham of Saint

Rankeillour, L.

Marylebone, L.

Renton, L.

Hanson, L.

Rodney, L.

Harmar-Nicholls, L.

Romney, E.

Henderson of Brompton, L.

St. Davids, V.

Henley, L.

Saint Oswald, L.

Hesketh, L.

Sandford, L.

Hives, L.

Sandys, L.

Home of the Hirsel, L.

Savile, L.

Hood, V.

Sharples, B.

Hooper, B.

Skelmersdale, L.

Hylton-Foster, B.

Slim, V.

Jessel, L.

Somers, L.

Kaberry of Adel, L.

Stodart of Leaston, L.

Kemsley, V.

Strathclyde, L.

Keyes, L.

Strathcona and Mount Royal,

Killearn, L.

L.

Kimball, L.

Strathspey, L.

Kimberley, E.

Sudeley, L.

Kinnaird, L.

Swann, L.

Kintore, E.

Swinton, E. [Teller.]

Lane-Fox, B.

Teviot, L.

Layton, L.

Teynham, L.

Liverpool, E.

Thorneycroft, L.

Long, V.

Torphichen, L.

Lucas of Chilworth, L.

Tranmire, L.

Luke, L.

Trefgarne, L.

Lyell, L.

Trenchard, V.

McAlpine of West Green, L.

Trumpington, B.

McFadzean, L.

Vaux of Harrowden, L.

Macleod of Borve, B.

Vickers, B.

Malmesbury, E.

Vivian, L.

Mancroft, L.

Waldegrave, E.

Margadale, L.

Whitelaw, V.

Marshall of Leeds, L.

Wynford, L.

Masham of Ilton, B.

Yarborough, E.

Massereene and Ferrard, V.

Young, B.

Maude of Stratford-upon-

Avon, L.

On Question, amendment agreed to.

4.38 p.m.
Baroness Hooper Baroness Hooper moved Amendment No. 29:
Page 23, line 25, leave out ("6th") and insert ("5th").
The noble Baroness said: My Lords, this is a drafting amendment which corrects an incorrect date in Clause 18(6). I beg to move.
Baroness Phillips: My Lords, I would only point out that while the amendment corrects the date in this case, there seems to be some confusion about whether the Government want 5th or 6th April. When one comes to the next page the date appears to be floating between a wife who dies after 5th April and a wife who dies before 6th April. That poses some interesting
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possibilities. What is so magic about 5th April? I have been trying to check when the tax year ends and obviously it is a different date each year.
Before we come to the next stage of the Bill perhaps we can have a fuller explanation of this clause. It is bad enough trying to decipher:
"N=the number of tax years which begin after 6th April 1978 and end before the first day of entitlement to the additional pension in the period of interruption of employment in which that day falls".
It is bad enough having to interpret that, but if we are to be tied to certain dates, which seem to be elastic, I should be grateful for a fuller explanation before the next stage of the Bill.
Baroness Hooper: My Lords, with the leave of the House, I must say that I sympathise with the noble Baroness over the complexity of this and many clauses of the Bill. Nevertheless, the aim of this amendment is to achieve consistency in having 5th April stated in all the subsections. In fact 6th April is the start of the tax year. That is the reason for having 5th April as the end.
Lord Banks Lord Banks moved Amendment No. 30:
Page 23, line 35, at end insert—
("( ) Regulations requiring an affirmative resolution of both Houses of Parliament shall provide for the pensionable age for men and women to be equalised within a period of time to be prescribed.").
The noble Lord said: My Lords, in its report published in October 1982 the Social Services Committee of another place said:
"The rectification of the anomaly of different pension ages for men and women must be one of the prime objectives of any new pension age policy".
Yet the Bill before the House contains no proposals to that end. It is generally agreed that we want a pension system based on equality between men and women. We on these Benches welcome all steps taken to remove discrimination against women in our social security system. It cannot be denied, however, that the current position with regard to pension age discriminates against men. Although they do not live so long, they have to wait five years longer for their pension. However, following the Marshall case, women cannot be compelled to retire five years earlier than men (and I support that); but if they continue to work, they can postpone their pension and have it enhanced for the years of deferment between the age of 60 and 65. Meanwhile, they pay no further national insurance contributions. This clearly puts the working woman over 60 at a considerable advantage compared to her male counterpart.
The case for the equalisation of the pension ages of men and women is very strong and is supported in principle by nearly all expert opinion. There are three possible ways of doing it: one is by increasing women's normal retirement age to 65; another is by reducing men's normal retirement age to 60; and the third is to fix on some point somewhere in between. I imagine that most of us would not support raising women's normal retirement age to 65. The trouble about reducing the retirement age for men to 60 is simply the cost. Otherwise, it is the obvious choice. The Government spokesman will tell us what it would cost at current prices.
The Select Committee of another place recommen-ded a notional common pension age of 63. If this choice was phased in over a period of years, the additional cost could more easily be met. But, of course, care would have to be taken to safeguard the position of women near to retirement who had been planning for a retirement pension at 60. Not only do we want equality; we want flexibility. While there should be an equal normal retirement age, earlier or later retirement over a period of, say, 10 to 15 years, should be possible with the pension decreased or increased accordingly. This amendment would write into the Bill a commitment to equalise the pension age over a prescribed period. It does not commit the Government to a specific normal retirement age. Nor does it say how long the transitional period would be. Its acceptance, however, would make clear the Government's commitment to equalisation. I beg to move.
Baroness Turner of Camden: My Lords, I support the amendment moved by the noble Lord, Lord Banks. From time to time we have raised from this side of the House the equalisation of pension ages. In fact, I recall doing so when the Marshall judgment was announced. The Government said then that they intended to introduce legislation via the Sex Discrimi-nation Bill which would allow women to work to the same age as men where there were differential retirement ages.
Although the noble Lord, Lord Banks, has described the effects of different pension ages upon women as beneficial to some degree, there are other effects that have been less beneficial. One of these, in respect of the standard occupational scheme, is that many women were not able to get in the number of years of work to qualify for a full pension in the same way that men were able to do where the normal pension retirement age for men was 65. Although women could admittedly retire earlier, they did so on a rather less good pension.
I believe that there is a strong case for equalisation of pension benefits. Indeed, when the Occupational Pensions Board considered equality between men and women in pension schemes way back in 1976, one of its recommendations was that there should be equalisation of pension ages. But the then Government told the board that it would be rather too expensive a proposition to reduce the retirement age for men to 60. Nevertheless, the board said in its report that equalisation of pension benefits was very difficult in a situation where there were different retirement ages.
I believe that the Marshall judgment has focused attention on retirement ages. There is now, I believe, a strong body of opinion in the country that believes that there should be equalisation of pension benefits and equalisation of pension ages. One solution that I personally favour is to have flexibility. There should be an element of choice for both sexes equally so that both sexes could choose to retire at any time between 60 and 65. That would be a reasonable solution. It has been shown, as a result of the Marshall judgment, that many women would like to work on until 65 if this meant that they could acquire additional pension benefit.
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The amendment proposed by the noble Lord, Lord Banks, requires that an affirmative resolution of both Houses of Parliament should provide for the pensionable age of both men and women to be equalised within a period of time to be prescribed. It does not say that we have to do so tomorrow. It gives us time, as I understand it, for consideration of the issues that are involved. It seems a sensible and reasonable amendment and I have pleasure in supporting it.
4.45 p.m.
Lord Trefgarne: My Lords, I am pretty accustomed to rising at this Box and saying how surprised I am that this amendment should be brought forward yet again. I cannot say that on this occasion. This amendment was not brought forward at an earlier stage; and such surprise as I have is perhaps that it was not brought forward at an earlier stage, given that it is a matter of such considerable interest at the present time.
I understand that your Lordships are concerned that the equalisation for state pension age should be brought about as soon as possible. The Government agree with that view. But the issue is too major to be tackled by this proposed amendment, and particularly by a regulation-making power. Equalisation of pension age would require extensive amendment to existing pensions legislation. It could not be achieved, I fear, in the way proposed in the amendment.
The Government's views on equality in state pension age are a matter of public record. We regard such equality as a highly desirable social objective. I hope that in seeking this amendment your Lordships do not have in mind a single, inflexible minimum pension age for men and women, because clearly such a move would not be in the interests of greater individual choice in the matter. I am sure that your Lordships need no reminder of the recent judgment of the European Court of Justice in the case of Miss Helen Marshall, already referred to. Miss Marshall showed that some women want to work past 60, their present minimum pension age. Conversely, some men would like to retire on state pension at 60, or, in my case, at 45—a choice which is not at present open to them.
The Government believe that we must take individual wishes into account rather than seek to impose yet another single rigid minimum pension age which would restrict individual choice in this important matter. That is why the Government put forward in the Green Paper last year the suggestion of a decade of retirement between the ages of 60 and 70 with a pivotal point of age 65, around which men and women could retire with a higher or lower state pension, according to their own personal needs and wishes. This is the objective we intend to pursue, as we made clear in the White Paper.
But even if this amendment were a sound way of achieving equalisation—and I fear it is not—it would be rash to introduce it now without a clear idea of exactly how to make the change or how it would be financed when the time is up. Cost is genuinely formidable obstacle to change and a major reason for caution. Reducing men's pension age to 60 would involve additional public expenditure of some £3,000 million in a full year. And the effect on

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unemployment, often given as a reason for change, would not be as dramatic as is commonly believed. Only about half of all men aged between 60 and 64 are working. Of those who are, not all would immediately choose to retire on state pension, nor would all those who choose to do so create a job opportunity for someone else from the registered unemployed. Certainly, the cost implications of flexible pension age would be less great than the £3,000 million that I have quoted, but we would nevertheless still be facing a very expensive development. And here we should also remember the effect such increased expenditure would have on the working population, because it is they who pay today's pensions from their national insurance contributions.
The Government do not believe, in view of the formidable problems involved, that it is possible to bring forward firm proposals now; otherwise we would have done so. The Government are, and will remain, committed to the achievement of equality in state pension age, but we cannot possibly agree that the time for achieving it should be set out before the way forward is clear. For those reasons I hope that your Lordships will not press the amendment.
Lord Ennals: My Lords, the noble Lord said that he was surprised that this matter had not been raised before. He may also be surprised to learn that I wish to support him as regards everything he said, except his final conclusion. I wish to support him very strongly on the concept that we should not be moving towards a single, inflexible pension age. I say that as someone who was a Member of the House of Commons Select Committee in another place at the time when it was drawing up its proposals.
The case for flexibility is very powerful indeed. One reason is that people live totally different lives. In the case of a miner or a road repairer doing some very heavy work which may of itself not be very rewarding, there is everything to be said for permitting such a person to retire early. Of course if he retires below a certain age, it will affect his pension entitlement, and that is inevitable if the system is to be fair.
However, that opportunity is linked not only to the fact that people's jobs vary, but also to the fact that people themselves vary. There are those people for whom life is work and for whom the absence of work means almost the absence of a full, complete life. There are two effects. First, there is the effect on those who may wish to retire earlier not because they are exhausted but because they want to spend the rest of their life in a different way. If they are prepared to sacrifice what may be a higher pension, why should they not retire at the age of 57, 58 or whatever it may be? Secondly, there is the effect at the other end of the age scale. There are many people who are at their best in their middle 60s and for whom the thought of retirement is not only hard for them, but very unsatisfactory as regards the job which they are doing. It may be that in the work that they are carrying out they are at the peak of their skill. Indeed, presumably the Government think that Mr. MacGregor is at the peak of his skill; but I shall not argue whether he is or whether he is not.
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Therefore, we have a situation in which, I agree with the Minister, we ought to be aiming towards a single, flexible retirement age, but there must be a pivotal age. Indeed, I think that that was the term used by the noble Lord, Lord Banks. We want a pivotal or notional retirement age of 63 which will not involve extra cost to the Government but which will introduce fairness and ensure that men are not treated in a discriminating manner as a result of women having a lower retirement age. Therefore, I believe that it was absolutely right for the amendment to be tabled because it will be very difficult to introduce a flexible retirement system unless we have an equalised notional pension age to enable people to get equality.
If the wording of the amendment does not exactly suit the noble Lord, I am certain that he could find a way to put it right at Third Reading or it could be put right in regulations. However, I argue very strongly that if we are preparing a Bill to deal with pensions for the next 20, 30 or 40 years, this principle ought to be written into it.
Lord Banks: My Lords, I am grateful to the noble Baroness, Lady Turner, and also to the noble Lord, Lord Ennals, for the support which they have given to the amendment. I am also grateful to the noble Lord, Lord Trefgarne, for his sympathetic response to it. The noble Lord has made it very clear that the Government are committed to the concept of equal ages for the retirement of men and women. He also stressed—as every other speaker has stressed—the importance of flexibility. Indeed, I would underline again that what we are seeking is not a fixed retirement age at which everybody must retire, but a normal retirement age which can be moved up or down with corresponding adjustments in the pension to suit individual choice. The noble Baroness, Lady Turner, made a very valid point when she illustrated how retirement five years earlier for women could be disadvantageous to those in occupational pension schemes.
I quite understand the noble Lord's argument that this particular amendment is perhaps not the best way in which to deal with a very complex and difficult matter. However, there is always the danger that if we do not put anything into a Bill, we shall go on and on and nothing will be done. Nevertheless, on the understanding that we shall come back—and I am not talking about this Bill—again and again to this point, to remind the Government that their commitment has still not been put into practice, I beg leave in the meantime to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Seebohm Lord Seebohm moved Amendment No. 31:
After Clause 19, insert the following new clause:
("Annual uprating of child benefit.
PART 1A
BENEFITS UNDER THE CHILD BENEFIT ACT 1975
.—(1) Whenever the Secretary of State lays before Parliament the draft of an uprating order under section 62(2) below, he shall at the same time lay before Parliament a draft of a statutory instrument containing regulations for the purpose of increasing the weekly rate or rates at which child benefit is payable under the Child Benefit Act 1975 by a percentage not less than the percentage by which the general level of prices is greater at the end of the period specified in section 62(2) below than it was at the beginning.
(2) Subsection (1) above shall cease to have effect on such day, not earlier than 31st December 1990, as the Secretary of State may by order specify.")
The noble Lord said: My Lords, the question of whether child benefit should retain its value in real terms has been much discussed in both Houses. Members of all parties support the proposal and I find it very hard to understand why the Government will not give way on this point. The word "flexibility" has been used ad nauseam, but why should it be confined to child benefit when, as far as I can see from an examination of this formidable Bill, all the other welfare and family benefits are specifically mentioned as being subject to indexing? In the nine years that child benefit has been in operation all the voluntary bodies concerned with family welfare have praised it as the best innovation in family support so far produced to reach virtually all those families with children who are in need, compared with the miserable take-up of 50 per cent. as regards the means-tested benefits.
We cannot risk allowing this benefit to be phased out, which is the Government's clear intention. Indeed, if that were not so, there could be no reason for applying the policy of so-called flexibility to this benefit virtually alone. In nominal terms, at today's rate of inflation it would cost about £100 million per annum; in real terms it would cost absolutely nothing at all.
I have put forward an amendment which goes a long way to meet the Government—far further, in fact, than my inclinations and common sense really justify. I implore the noble Baroness to accept it. May I point out that this Social Security Bill is experimental in many ways. There is no certainty over how it will work, or what the take-up will be. The Government have indicated that they hope that the family credit will rise from 50 per cent. to 60 per cent., but it is a long way from the 100 per cent. take-up of child benefit.
Finally, perhaps I may call attention to an Early Day Motion in another place signed by 60 Conservative Members supporting,
"the continuation of child benefit paid to the mother at a level in real terms at least equal to the present value of benefit".
I must ask the Minister to state clearly what the Government policy is. If, as I suspect, it is to subsume it into the family credit system, then it becomes means tested and it will fall back to an unacceptable 50 per cent. of take up. I commend this amendment to your Lordships. I beg to move.
5 p.m.
Lord Banks: My Lords, I should like to support the amendment moved by the noble Lord, Lord Seebohm. I should like to support, too, the concept that the amendment is designed to support; namely, that child benefit should be increased in line with prices each year, as in fact is the case with national insurance benefits. Child benefit replaced family allowances and income tax allowances for children. When that was done we on these Benches welcomed it as the first step towards a tax credit system.
Family allowances and child tax allowances came into being as a means of distributing the burden
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generally between those who have children and those who have not. At the time when people had children it was felt that they should be helped right throughout the range, and indeed that if the scheme helped all levels of income, this would bring in the interest of higher income people to make sure that the benefits were maintained with the advantage that that had for lower income people.
The value of the help given by child benefit, the value of the help given for families with children, has been declining. If we allow personal allowances to be increased every year and yet allow child benefit to increase at a slower rate, the balance is being tipped further against people with children, which does not seem to be right. Of course we were alarmed by the fact that last November child benefit was allowed to decrease in value, and although at the most recent uprating account was taken of inflation, nevertheless that loss in value last November has not been made good.
We remember that other benefits, such as the pensioners' £10 Christmas bonus and the maternity and death grants, were allowed to decrease year by year in value until certainly some people began to say, "This is so small that it is not worth maintaining". What we are anxious to discover is whether the Government are determined to maintain, as an important part of their benefit for children, the real value of child benefit.
The Government say that it is their intention to maintain child benefit, but they do not say that they will maintain its value. We fear that it will be allowed gradually to decline and that this particular benefit will go. We believe that if that were allowed to happen, it would be disadvantageous to many people, and most of all to the poorest. When the Child Benefit Bill was introduced in 1975 in another place Mr. Kenneth Clarke said in Committee:
"I cannot see how a reputable case can be raised against that proposal".
The proposal was that child benefit should be index linked.
"If a case is raised against it, it runs the risk of saying that, when the child benefit scheme comes in, with continuing pressures on public expenditure from inflation, the benefit will be steadily eroded".
That is what we want to see obviated; we want to see that that does not happen. Therefore, I appeal to the House to support this amendment.
Baroness Gardner of Parkes: My Lords, I rise to oppose this amendment because I think it is misguided. I am a great supporter of help for families with children. Indeed, my father was the first Minister of Health in the New South Wales State Government to introduce what was then called "child endowment". I believe that he was the only Minister in the world for Health and Motherhood.
It is a matter of how you support these children. A quotation from 1975 has just been given by the noble Lord, Lord Banks. At that time the situation was different and we were not offering family credits which are the new concept in this Bill. I have sat on Conservative women's committees which have thoroughly supported child benefit and constant increases in child benefit. But the point has been made by both the noble Lord, Lord Banks, and the noble

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Lord, Lord Seebohm, that the take-up on child benefit is 100 per cent., and therefore it is going to the rich and those in need alike.
I think it would be preferable to give greater help to those in real need through the family credit system. I believe that there will be a gradual change towards this over a period of time. As the noble Lord, Lord Seebohm, said, only 50 per cent. seek additional help. This means that only 50 per cent. actually require the additional help, though if we allow for the fact that a small number of people do not claim, perhaps we can say that it is more than that. However, it is clear from the number who claim additional help that certainly the 100 per cent. now receiving child benefit do not require an annual increase.
This Bill aims at a totally new concept. In the way that child endowment was new when my father introduced it, the family credit system is new now. This will help those families who are in real need. It would be of no help to those on supplementary benefit to have an additional child benefit as it stands, because the amount is taken into consideration when the supplementary benefit is assessed.
Therefore, we are discussing something that might be of help only to either those who are rich and do not need it or those low paid people in employment. It is for the low paid in employment that the whole family credit system is designed and it is those whom it should help. I therefore think that this amendment fails to appreciate the new concept in this Bill which should give greater help to those families with children in real need, without giving a blanket hand-out to all families whether or not they need it. I therefore oppose the amendment.
Lord Seebohm: My Lords, may I point out what I think is a mistake in what the noble Baroness has just said? All we are asking is to have a two-year period in which it is maintained, so that we can see whether or not what the noble Baroness says is true—whether the family credit system works.
Baroness Phillips: My Lords, I would say to the noble Baroness that there is little doubt that those people who struggle—and I have worked with young wives on the new estates and in new towns—on a wage that is seemingly quite good but does not permit any kind of luxuries are the backbone of our society. Many young couples receive no help at all until they fall below the poverty line.
I can remember how the wives would collect what was then the family allowance and go out and buy some clothes for the children. The story then used to be circulated that they spent it on cigarettes and gin. That was the popular story then; it seems to have changed now. Why do we always have to wait until people fall below the poverty line before we assist them?
Let us assist the young people. They are our future. They will never ask; certainly many of them will never go for supplementary benefit even though they are entitled to it. Let them keep their pride. I should have thought that the noble Baroness, on her side of the House, would have been on the side of these people.
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This sort of amendment would certainly support them, and they are the folk we should be concerned about as well.
Lord Thorneycroft: My Lords, I believe that we debated this point a little earlier in the Bill. At that time we were considering the first part of this amendment, which effectively was to link child benefit to the cost of living. I hope that the House will not accept the amendment for the reasons which were put so eloquently and with such knowledge and force by my noble friend Lady Gardner. Quite a number of benefits are linked to the cost of living, but child benefit is a little different. Child benefit is not a case of each according to his means or each according to his needs. It affects that section of the population which has no children paying for that section of the population that is fortunate enough to have children. It is without means test and without tax. Of course, it is immensely popular; I would not deny that for one moment. The richer members of the middle classes delight in this. Never have they been offered anything so good. To have this sum of money paid regularly to the wife is a delightful thing. Members of the working classes in full employment and high pay are delighted, but many of them are slightly amazed to receive these sums of money.
It costs about £4 billion to supply child benefit, which is a substantial sum of money. It is not being contested. Those who favour child benefit can count themselves lucky that nobody is challenging the payment of £4 billion. Some of the money goes through to the children (I accept that absolutely) but not all of it. Nobody is challenging that at the moment. Lord Seebohm is taking this extraordinary bonus, which is distributed widespread throughout the population to everybody who has children, and saying that it should be classed with the rather special types of benefit which are actually linked to the cost of living.
The noble Lord, Lord Seebohm, asked, "What about flexibility?". I tentatively suggest what I think flexibility is. It means not tying a future Chancellor of the Exchequer down automatically to having to pay more money on every sort of occasion. Those of us who have been anywhere near that sort of office know the agony. I see my noble friend Lord Boyd-Carpenter here. When one considers it, everything is committed in advance. We have not been talking because we do not like to talk too much, but we have been considering amendment after amendment, whether they concern old age pensions being equalised or what you will. It is said that it will all be fixed here for it costs practically nothing to pass it in the House of Lords and it will not happen yet. This Chancellor will not have to do it tomorrow morning, but in a few years' time some Chancellor will find that this still is linked and that a further burden is placed upon the Budget. I do not think I quite accept from the noble Lord, Lord Seebohm—whose views I respect enormously—that it costs nothing. I may say that it does not look that way when you are in the Treasury. One either has to tax more or to borrow more. It does cost more money.
If it is really necessary, if this is a carefully identified section of the community in real difficulty, then I think we all ought to stretch ourselves to see whether we can do something. But it is not that kind of benefit. It is a bonus here; and I hope that we do not agree to this.

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The Government's reputation has hung not so much on spending less money: they set out with that ideal, but they have spent a very great deal of money. What they have achieved is to spend a great deal of money while at the same time managing to hold the cost of living down to minimise inflation. That is what they will be praised for and what they should be congratulated on. It is very difficult to spend a lot of money and to hold down inflation. The Government have managed to do it. But if they accepted the sort of amendments that are put down to this Bill, they would very quickly fail.
The amendments that have been put down are pushing £1 billion. We have to find it from somewhere. Therefore I urge the House not to accept this kind of amendment. It does not cover one of the necessities of social security in this country. It is damaging. It cuts across the principles which have underlined the Bill. This is a good Bill, and I think we should try to keep some of the principles associated with it.
5.15 p.m.
Baroness Lockwood: My Lords, I should like to support the amendment. My reasons are the absolute opposite to those of the noble Baroness, Lady Gardner of Parkes. On many issues affecting women we tend to have similar views. I very much regret that we do not on this occasion. But there are two overriding reasons why we should support the amendment. The first relates to equity between those families where there are children and those families where there are no children. The noble Baroness, Lady Gardner, referred to the fact that we are moving into a new system with family credit. But we are not moving into a new system to the extent where we are getting rid of tax allowances. The present family child benefit is an extension of the child tax allowance which was introduced in the early part of the century. That was a recognition that those families where there were children had additional responsibilities and expenses. It recognised the fact that the nation as a whole benefited by those children being brought up well and being well cared for.
When that tax allowance was incorporated into the family allowance and became child benefit we were going a step further, as has already been said. It was a step in the direction of a tax credit system, where we were giving an actual allowance to those who were not able to have relief on their taxation bill. In other words, they were not getting a tax allowance but a cash allowance. I think we ought to continue to recognise that and to continue with that principle of equity between families where there are children and families were there are no children.
My second reason for supporting the amendment is in relation to the independence which family allowances have given to women who have not been in employment but who are at home looking after their children. Family allowance has been their only income. It has been an income for the children, but it has been paid by and large to the mother and has been spent in the interests of the family; but it has given that additional independence which women have felt so necessary.
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I am talking now not just about those sections of the community which would benefit under the present Bill under the family credit rules, but to families generally where it is necessary that there should be additional income into the family, particularly those who are on the borderline. Therefore, I think it is important in maintaining that principle that we also maintain the principle as in other benefits that it should be linked to the rising cost of living. Therefore, I support the amendment.
Baroness Faithfull: My Lords, I rise to support this amendment. It hurts to go against my noble and most revered friend Lord Thorneycroft, but I think that on this occasion I must do so. My noble friend Lord Thorneycroft talked about—and he reminds me—the richer members of the middle band. The middle band in many cases need the child benefit as much as perhaps those who have less money in our society. The mother really benefits by having something which is her own, and therefore I support the amendment from that point of view. Also, regarding family credit may I say to my noble friend the Minister that we are not sure how family credit is going to work; inasmuch as we have this most peculiar clause a little while later supported by my noble friend LadyTrumpington and the noble Baroness, Lady Jeger. Such a thing has never happened before. But I would say also to my noble friend Lady Gardner of Parkes that we do not know how family credit is going to work.
On the question of child benefit, the noble Lord, Lord Young of Graffham, has told us on many occasions of the ebb and flow of unemployment, of the number of people who go into employment and the number of people who go out of employment. We have always been impressed by the number of men who are not out of work for a long time but for quite a short time. When a man is out of work, his standards drop. When he comes back into work again and is able to work and earn money it still means that while he was out of work his standard had dropped. That means that throughout the ebb and flow of unemployment, the mother will be able to draw child benefit.
May we come to the question of the very wealthy, to whom my noble friend Lord Thorneycroft referred? When it comes to index-linked pensions, they are taxed. However, I understand that child benefit is not taxed. I approached my noble friend the Minister and her advisers and asked whether it would not be much better if the very wealthy were taxed on child benefit rather than withdrawing the child benefit in the way that the noble Lord, Lord Seebohm, has recommen-ded. I feel that it is cost effective to look after the children of this country and that it is cost effective that the mother should draw the allowance.
I admit, as I have already mentioned to my noble friend Lord Thorneycroft, that the wealthy must find it a very happy little bonus. But there are not all that many wealthy people in the country and it seems to me that it would have been possible if the elderly can be taxed for this small amount to be taxed. I support this amendment.
Lord Kilmarnock: My Lords, a number of noble Lords have drawn attention to the fact that child

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benefit replaced family allowances—the noble Baroness, Lady Lockwood, did so, as did my noble friend Lord Banks. It is really a very important point. In that context it may be worth drawing the attention of the House to the fact that not only are tax allowances index-linked but that the married man's allowance is now 18 per cent. higher than if it had been merely index-linked under the present Government. In contrast, child benefit is worth 3 per cent. less than if it had been index-linked.
It would also be worth reminding the noble Lord, Lord Thorneycroft, although it is rather a long time ago, that in 1957 when he was Chancellor, a family paying the standard rate of tax received more for their children (with the exception of the first child aged under 11) from the state in child tax allowances and family allowances than they do now in child benefit.
My noble friend Lord Banks made the point that the Conservative Party were certainly committed to this principle in 1975 and tried to move an amendment to the Child Benefit Bill in that year. The noble Baroness, Lady Gardner of Parkes, said that the conditions were now different, that things had changed very much since 1975 and that we now have family credit as proposed in this Bill. A number of noble Lords have said—and I am sure that this is right—that we do not yet know how family credit is going to work; we do not know what the take-up will be. The Government hope that it will be higher than it is. The projected rate was 60 per cent. We simply do not know. On those grounds, it seems to me that we ought to accept Lord Seebohm's amendment. He is asking for it only until 1990, until we see how the new system is working. I think that on those grounds we ought to support it.
As a footnote, the noble Lord, Lord Thorneycroft, has not in fact even today expressed the unanimous view of the Conservative Party. Last month, Conservative MPs were given leave (by 152 votes to 3) to introduce a Ten-minute Rule Bill to index-linked child benefits. It is worth pointing out that his is not a unanimous view in the Conservative Party.
Baroness Ewart-Biggs: My Lords, I should like to support this amendment in spite of what the noble Lord, Lord Thorneycroft, and the noble Baroness, Lady Gardner, have said. I find it very hard to go against the conviction of all those who are concerned with the well-being of children who are all convinced that child benefit is the most effective way of tackling child poverty while at the same time achieving a degree of equity between the living standards of those with and without children. There can be no doubt that this is the view in other European countries. Indeed, child benefit in France and in several other of our neighbouring European countries is at a very much higher level.
The only other point that I wanted to make is that the Minister and the noble Lord, Lord Thorneycroft, have opposed index-linking because it would abolish the flexibility which we believe is essential—which is what the noble Baroness has said. But the implications were put very well recently by Sir Brandon Rhys Williams in another place when he said:
"If child benefit fails to hold its real value, the practical effect is to raise the share of the total tax burden which is borne by the
718
section of the community … who have responsibility for the care of children ‖ if its real value is reduced, there is a fall in the amount of help that we give to support poor families without obliging them to submit to a test of means".—Official Report, Commons; 18/6/86, col. 1065.]
He argued the case very well in another place when this was looked at at great length. No one during the Bill's passage so far has really sought to deny the importance of child benefits. I should like to give my very strong support to this amendment.
Baroness Vickers: My Lords, I should like to say just a few words since I have put my name to this amendment. The noble Lord, Lord Seebohm, suggested a period of only two years, I understand. The switch from the child-tax allowance to the child benefit was received with enthusiastic all-Party support from the outset. Indeed, although it was introduced by a Labour Government in 1970, a Conservative Government accepted the principle. I should like to suggest that there are a great many poorer people in this country than there are rich. For example, I know an enormous number of people who are getting only £75 a week and who have to bring up their families on that. Therefore, they want to know what is going to happen in future.
It has been said by other speakers almost without exception that we really do not know how this is going to work. Perhaps when the noble Baroness comes to reply she will be able to tell us exactly how it is going to work and we shall be able to make a definite resolution. Until that time, when we are satisfied as to the position, I would support the amendment put forward by the noble Lord.
5.30 p.m.
Lord Ennals: My Lords, I want to say how delighted I am with the speeches made by the noble Baronesses, Lady Vickers and Lady Faithfull, and also by other speakers who have recalled the history of child benefit. Before the Minister replies I think it would be wise if we went back, because, with the greatest respect to the noble Lord, Lord Thorneycroft, he has forgotten part of what happened when he was Chancellor of the Exchequer—and who can blame him? He has also forgotten some of the things that happened when he was Chairman of the Conservative Party—and, again, who would blame him for wishing to do that? So anything I say to the noble Lord will be said with great appreciation of his kindness.
If I may deviate for a moment, my earliest recollec-tion of the noble Lord, Lord Thorneycroft, was when, as a new Member of the other place, I made my maiden speech on defence, at which time the noble Lord was the responsible Minister. He paid me a very fine tribute—which he had no reason to do except that he had to—and I took it seriously. As your Lordships know, we always congratulate maiden speakers; and so I feel a great warmth towards the noble Lord, Lord Thorneycroft.
However, we have to look back at the history of this because there would be no child benefit if we had not decided to abolish child tax allowances. That point has been made by a number of my colleagues. When child benefit was first introduced, as has been said, it was then the policy of the Conservative Party that child

719
benefit should be index-linked. A proposal was made at the time of the 1975 Act, when I suspect that the noble Lord, Lord Thorneycroft, was still Chairman of the Conservative Party: at any rate, if he was not, he was not very far off. I wish that the proposal had been carried. I was not the Minister dealing with the matter at the time; but it was linked with the level at which child benefit was first introduced. That was the same level as the child tax allowance which was being taken away. In other words, you took away child tax allowance but introduced instead child benefit. Speaking for the then Labour Government, we always said that we wanted to see child benefit linked, but linked at a proper level. It was phased in because it would have been hopeless to have index-linked it at a very low level.
If we go back to the beginning of this, there was an absolutely all-party approach, first, that there should be child benefit to replace the tax allowance; secondly, that it should go without tax to all families; and, thirdly, that it should be linked to the rise in the cost of living. We have seen a retreat from that position over a number of years. The noble Baroness, speaking at col. 685 on the 3rd June, said (and I quote):
"The future level of child benefit will be determined uprating by uprating according to the circumstances of the appropriate time, including in particular the pattern of family support as a whole and the needs of families on low incomes".
That was very much more of an "if, but or maybe" situation than the commitment made by Mr. Patrick Jenkin when he was Secretary of State in 1980. He said then that child benefit would be increased in line with prices and added, "subject to economic and other circumstances". It would be nice if the Government would put even those words by the former Secretary of State into the Bill. Some of us would feel that was at least a modest advance.
However, as I say, we must look at the history. At the Committee stage the noble Lord, Lord Thorneycroft, warned against adding child benefit,
"to that list of exceptional items which happen to be, by general agreement, linked to the price index".—[Official Report, 30/6/86; col. 708.]
But it is child benefit that is exceptional because it is not being so linked. The majority of the major benefits are in fact linked to the cost of living. Retirement pensions are linked to the cost of living; and, if that is done, why not child benefit, which goes to help families with children? Weekly national insurance benefits and personal tax allowances are linked to the price index by statute. Supplementary benefit and other means-tested benefits are linked to the index by convention. Moreover, the Government have given a firm pledge to maintain the real value of all long-term benefits. So child benefit is now being put into a category of not being index-linked, whereas the majority of benefits are in fact index-linked.
The noble Lord also argued at Committee stage (and I am quoting):
"It goes to families who would have been amazed in any other generation that the state should assist them in keeping their children".
He was very much more generous himself when he was Chancellor of the Exchequer. And not only was it the noble Lord, because if we go back to 1789 and to 1806—I think there was a momentary Liberal
720
Government in power at the time: the noble Lord has referred to another example, but that was a century before—we find that even in those days more was being done to help families with children by means of the tax allowance than is now being done by means of child benefit. I think it is that which we have to put right.
The principle of child benefit is accepted by all, and the noble Baroness has said this herself. She said it was (and again I quote from col. 685 on 3rd June):
"a simple, straightforward and well-appreciated way of providing a measure of financial support for all families".
My Lords, that is absolutely right: good old Baroness! No, I will change that: good young Baroness! She voiced exactly the right principle, because this has never been a party political issue.
We have already had quoted to us the position of the Conservative Women's Council. The noble Baroness, Lady Gardner of Parkes, referred to the discussions as a result of which the council is still in favour of the index linking of child benefits. The members have not changed their view: they are still in favour of that, even though the noble Baroness may have sought to argue otherwise. They still solidly stand in the position which is accepted by this side of the House.
The reason why it is so widely agreed is because all who have studied it—and I do not mean me, but experts such as voluntary organisations and the statutory bodies—have seen child benefit as the most effective way of tackling child poverty and of achieving at the same time a degree of equity between the living standards of those with and those without children. One of the great merits has been that the money has gone directly to the mother to help look after the children. It has not just gone into the family pool of income. That is why it has been so popular and has been taken up almost 100 per cent.
In conclusion, I want to draw your Lordships' attention to what the amendment says. I fear that because we discussed the issue before we decided to retreat over the position we would take. If one looks at subsection (2) it says:
"Subsection (1) above shall cease to have effect on such day, not earlier than 31st December 1990, as the Secretary of State may by order specify".
The noble Lord, Lord Seebohm, explained why we had done that. It is because we do not know what the take-up of family credit will be, and by then we can make an assessment; but surely it would be best to stick by the principles that both sides of this House have shared, although there has not been a Bill in which this could be introduced. This is a Bill to do what we want done for social security for the next few years; but let us do this until 1990 so that the then Secretary of State can make his or her judgment as to whether this is the best thing to do. I strongly plead with your Lordships to support what I think is a balanced and, at the same time—because it has a time limit—a very modest amendment.
Baroness Trumpington: My Lords, I take off my hat to the noble Lord, Lord Seebohm, for his diligence and persistence in trying to persuade us that it is essential to link the rate of child benefit to the retail price index. His proposition has now been distilled to the point of

721
effectively linking child benefit to the RPI for four years.
As the noble Lord, Lord Ennals, said, we have now spelt out our commitment to the principle of child benefit on many occasions. The fact that the nature of the benefit places a considerable burden on taxpayers has to be accepted. However, I must emphasise that that burden amounts to about £4.4 billion for the current year.
The noble Lord, Lord Seebohm, mentioned the present rate of inflation. This Government have brought the rate of inflation down to the lowest level for many years; but it is of course not possible to look into the future and foresee what the rate of inflation or the general economic situation might be even in four years' time.
Let me give the noble Lord, Lord Ennals, some history. In 1975, in another place, during the Committee stage of the Child Benefit Bill under a Labour Government, the then Parliamentary Secretary for Social Security said that it took a brave person to predict the public expenditure situation in the future. I agree with him. We cannot cripple taxpayers or constrain future governments by tying the payment of child benefit to a precise formula. Moreover, child benefit is not a maintenance benefit. It is no more than a contribution (and a jolly good one) available tax free to every mother towards the cost of bringing up a child. It is not and was never intended to be the sole means of support for the children of low-income families. As my noble friend, Lady Gardner of Parkes, said, increases in child benefit do not assist the poorer families who are on supplementary benefit. Child benefit is taken into account when the resources and needs of these families are assessed. Their needs will be met in due course by the new income support scheme, including the new family premium. I accept that the family income supplement scheme has failings. That is exactly why we are bringing in the new scheme of family credit to provide better help for low-income working families with children.
As my noble friend Lady Gardner of Parkes said (and I entirely agree) family credit will be a major improvement on family income supplement. We have discussed family credit in very great depth and very thoroughly in Committee. It will provide more generous help than FIS and reach about twice as many families. It will tackle both the poverty and unemployment traps. Family credit will be a more attractive benefit than FIS and the expectation is that it will be appreciably more effective than FIS.
Baroness Jeger: My Lords, forgive me. Can the noble Baroness say on what evidence she says that these changes in attitude will take place? How does she know this will happen?
Baroness Trumpington: My Lords, if the noble Baroness will let me continue I may reach that point. I believe that with regard to tax allowances, child benefit is an entirely different creature than a tax allowance, and on occasions child benefit has been increased when tax allowances have not. Tax allowances benefit the vast majority of working families. My noble friend Lady Faithfull, whose
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arguments I sometimes have trouble following, mentioned child benefit and income tax. I am sure that if I had difficulty in following Lady Faithfull's arguments, it is entirely my fault; but I did have difficulty.
There is an objection, in principle, against bringing child benefit into taxation. It would mean the application of income tax to a benefit which had replaced a tax allowance. I would depart from the principle of universality which has been recognised for many years as providing a measure of support for all families and children.
If child benefit was simply to be taxed, the effect would be broadly equivalent to a £700 reduction in personal tax allowances for a family with two children. The same result could be achieved by simply adjusting the rate of benefit. Such a step would increase the extent to which individuals receive benefit and pay tax simultaneously. If a principle of universality were to be set aside for those paying tax at higher rates, what would the effect be? My Lords, I am taking infinite trouble to explain and I should be grateful for the attention of the House.
If child benefit were to be denied to higher rate taxpayers entirely it would create a particularly steep earnings taxation trap where £1 of additional earnings for a man or a women with three children would produce a loss of £21 a week. The effect on incentives is obvious, but the product of higher taxation may not meet expectations. If a taper were to be introduced (perhaps on the basis of applying to child benefit a rate of tax of the difference between the standard rate and any higher rate that might be payable) the result would be to realise only modest resources. Clearly this would not fund a significant increase in child benefit—in fact, about l0p.
The Government's record on child benefit is a good one. The commitment to its maintenance as a universal benefit has been given and the existing provision in the legislation has been used to maintain the rate of child benefit in line with the general level of prices whenever practicable. Indeed, we have gone further on two occasions (in November 1983 and November 1984) when child benefit was increased to its highest ever real value. Perhaps I also ought to make it clear that the legislation, while allowing for flexibility of up-rating, provides that the basic rate cannot be reduced without amending primary legislation. The importance of this is of course that if any government had plans to make such a reduction in child benefit, the issue would have to be debated by the House.
I can understand the intention of the noble Lords, but we cannot accept the limitation on the freedom of action even for the four years that would be imposed by the amendment. We are concerned with the impact of a coherent social security policy for all families and especially for those who are in the greatest need. Earmarking resources in the way the noble Lord, Lord Seebohm, envisages, could well mean the taxpayers' money would not be available for other purposes near and dear to your Lordships' hearts. I cannot advise the House to accept the amendment.
Lord Seebohm: My Lords, naturally, I am very disappointed. We have had a fairly gentle debate in

723
many ways and people have praised the noble Lord, Lord Thorneycroft, for what he said. I agree with many of the things he said. It is a tragedy to my mind that social security and fiscal policy are not hand in hand. Until they are, I think we shall always be in this kind of muddle. For instance, there is still in existence something called a married man's allowance. This in fact costs the country twice as much as child benefit. That could be phased down, but this is not a fiscal Bill. There is no point in arguing about whether this should be taxed or whether we should tax other things. To my mind, the case for not indexing is completely unproved. The noble Baroness explained that the taxes would bring in very little and would be incompatible with other policies. So although we have been very nice to each other up until now, I propose to be thoroughly beastly and to divide the House.
5.50 p.m.
On Question, Whether the said amendment (No. 31) shall be agreed to?
Their Lordships divided: Contents, 118; Not-Contents, 137.

DIVISION NO.3

CONTENTS

Addington, L.

Hatch of Lusby, L.

Airedale, L.

Hayter, L.

Allen of Abbeydale, L.

Henderson of Brompton, L.

Ardwick, L.

Heycock, L.

Attlee, E.

Hooson, L.

Banks, L. [Teller.]

Houghton of Sowerby, L.

Barnett, L.

Hunt, L.

Birk, B.

Ingleby, V.

Blease, L.

Jacques, L.

Blyton, L.

Jeger, B.

Boston of Faversham, L.

Jenkins of Putney, L.

Bottomley, L.

John-Mackie, L.

Briginshaw, L.

Kilmarnock, L.

Brockway, L.

Kinloss, Ly.

Bruce of Donington, L.

Listowel, E.

Buckmaster, V.

Llewelyn-Davies of Hastoe, B.

Burton of Coventry, B.

Lockwood, B.

Caradon, L.

Longford, E.

Carmichael of Kelvingrove, L.

Lovell-Davis, L.

Chitnis, L.

McIntosh of Haringey, L.

Cledwyn of Penrhos, L.

Mackie of Benshie, L.

Crawshaw of Aintree, L.

McNair, L.

Croham, L.

Mais, L.

Darcy (de Knayth), B.

Masham of Ilton, B.

Darwen, L.

Mayhew, L.

David, B.

Meston, L.

Davies of Penrhys, L.

Milford, L.

Dean of Beswick, L.

Milner of Leeds, L.

Denington, B.

Molloy, L.

Diamond, L.

Monson, L.

Elwyn-Jones, L.

Morris of Kenwood, L.

Ennals, L.

Morton of Shuna, L.

Ewart-Biggs, B.

Mulley, L.

Ezra, L.

Murray of Epping Forest, L.

Faithfull, B.

Nicol, B.

Falkender, B.

Ogmore, L.

Falkland, V.

Oram, L.

Fisher of Rednal, B.

Paget of Northampton, L.

Fitt, L.

Phillips, B.

Gallacher, L.

Pitt of Hampstead, L.

Glenamara, L.

Ponsonby of Shulbrede, L.

Graham of Edmonton, L.

Rea, L.

Gregson, L.

Ritchie of Dundee, L.

Grey, E.

Robson of Kiddington, B.

Hampton, L.

Rochester, L.

Hanworth, V.

Sainsbury, L.

Harris of Greenwich, L.

Seear, B.

724

Seebohm, L. [Teller.]

Tordoff, L.

Serota, B.

Turner of Camden, B.

Shannon, E.

Underhill, L.

Shepherd, L.

Vernon, L.

Silkin of Dulwich, L.

Vickers, B.

Somers, L.

Wallace of Coslany, L.

Stallard, L.

Walston, L.

Stedman, B.

Wells-Pestell, L.

Stoddart of Swindon, L.

Williams of Elvel, L.

Strabolgi, L.

Wilson of Langside, L.

Taylor of Blackburn, L.

Young of Dartington, L.

Taylor of Mansfield, L.

Ypres, E.

NOT-CONTENTS

Ailsa, M.

Kimball, L.

Alexander of Tunis, E.

Kimberley, E.

Atholl, D.

Kinnaird, L.

Barber, L.

Kintore, E.

Belhaven and Stenton, L.

Lane-Fox, B.

Bellwin, L.

Lauderdale, E.

Beloff, L.

Layton, L.

Belstead, L.

Lindsey and Abingdon, E.

Bessborough, E.

Liverpool, E.

Blyth, L.

Long, V.

Boyd-Carpenter, L.

Lucas of Chilworth, L.

Brabazon of Tara, L.

Luke, L.

Braye, B.

Lyell, L.

Brougham and Vaux, L.

McAlpine of West Green, L.

Broxbourne, L.

McFadzean, L.

Buccleuch and Queensberry,

Macleod of Borve, B.

D.

Malmesbury, E.

Buckinghamshire, E.

Mancroft, L.

Butterworth, L.

Marchwood, V.

Caithness, E.

Margadale, L.

Cameron of Lochbroom, L.

Marshall of Leeds, L.

Campbell of Alloway, L.

Massereene and Ferrard, V.

Carnegy of Lour, B.

Maude of Stratford-upon-

Carnock, L.

Avon, L.

Cathcart, E.

Merrivale, L.

Constantine of Stanmore, L.

Mersey, V.

Craigavon, V.

Montgomery of Alamein, V.

Crathorne, L.

Mottistone, L.

Crawshaw, L.

Mountgarret, V.

Cross, V.

Mowbray and Stourton, L.

Cullen of Ashbourne, L.

Munster, E.

Davidson, V.

Murton of Lindisfarne, L.

Denham, L. [Teller.]

Northesk, E.

Derwent, L.

Nugent of Guildford, L.

Drumalbyn, L.

Onslow, E.

Dulverton, L.

Orr-Ewing, L.

Dundee, E.

Pender, L.

Eden of Winton, L.

Peyton of Yeovil, L.

Ellenborough, L.

Plummer of St Marylebone,

Elliot of Harwood, B.

L.

Elliott of Morpeth, L.

Portland, D.

Elphinstone, L.

Portsmouth, E.

Elton, L.

Rankeillour, L.

Forbes, L.

Renton, L.

Fortescue, E.

Rodney, L.

Gardner of Parkes, B.

St. Aldwyn, E.

Glanusk, L.

St. Davids, V.

Glenarthur, L.

Saint Oswald, L.

Gray, L.

Sandys, L.

Gridley, L.

Savile, L.

Grimthorpe, L.

Sharples, B.

Hailsham of Saint

Skelmersdale, L.

Marylebone, L.

Soames, L.

Hanson, L.

Stodart of Leaston, L.

Harmar-Nicholls, L.

Strathcona and Mount Royal,

Henley, L.

L.

Hertford, M.

Strathspey, L.

Hesketh, L.

Sudeley, L.

Hives, L.

Swinfen, L.

Home of the Hirsel, L.

Swinton, E. [Teller.]

Hood, V.

'Thorneycroft, L.

Hooper, B.

Torphichen, L.

Inchcape, E.

Tranmire, L.

Kaberry of Adel, L.

Trefgarne, L.

Kemsley, V.

Trenchard, V.

Keyes, L.

Trumpington, B.

Killearn, L.

Vaux of Harrowden, L.

725

Vesty, L.

Wynford, L,

Vivian, L.

Yarborough, E.

Waldegrave, E.

Young, B.

Whitelaw, V.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.59 p.m.
Clause 20 [Income-related benefits]:
Lord Banks Lord Banks moved Amendment No. 32:
Page 25, line 24, at end insert—
("(1A) In the case of persons who satisfy the conditions of subsection (10)(a) and (b) below, no account shall be taken of differences of age within the range of 18 to 60 for the purpose of determining whether any such person is entitled to an income-related benefit or the amount of any such benefit.").
The noble Lord said: My Lords, at present single childless claimants receive benefit, whether on the householder or non-householder basis, regardless of age. Under the Bill, lower rates of benefit will be paid for single childless people under 25 and this will affect some 350,000 young people. Single childless people under 25 will receive £6.60 a week less income support. Single childless people under 25 in low paid work will receive much less housing benefit. A young person living independently and earning £70 a week now receives a rent and rates rebate of £13.04 if he is paying average rent and rates of £25.23 weekly. As I understand it, this will go down to £1.54 after April 1988 on the basis of the figures that we have so far seen. That would be a loss of £11.50. I should like to ask the noble Baroness whether that is right. Will those people lose £11.50?
Childless unemployed people under 25 who are single and live independently will no longer have householder status. They will receive the lower under-25 rate of £24 a week. That is £5.50 less than they now receive. Out of the £24 a week they will have to pay all of their water rates. The average for that at the moment is £1.65 a week. If the 20 per cent. rates refund were reinstated, that would be a further loss of £1.40 a week on average. These deductions from £24 a week would leave less than £3 a day for heating, lighting, clothing, food, transport and the search for work.
Many young people have no choice but to live independenlty. They cannot go home. For example, there are those leaving care; there are refugees; there are young disabled people who are provided with independent accommodation. Under the board and lodging regulations there are exemptions for cases of special need—people who have left care; people who have had to leave home because they were in physical or moral danger; people who have no parent or guardian. There is nothing of that kind in the Bill so far as concerns these benefits. It is important to bear in mind that the provisions that I have been describing will affect black people in particular because they have a higher proportion under the age of 25 and they are twice as likely to be unemployed.
At the Committee stage I moved an amendment to remove the lower rate for under 25s. That amendment was defeated by one vote. This amendment is more limited. It would exclude those eligible for housing benefit and would therefore exempt those living
726
independently and who would have householder status at the present time. Those so exempted would not receive a lower amount of income-related benefit on account of age. The object of the amendment is to ensure that those who are householders at the present time would not be subject to a lower rate if they were single and childless and under the age of 25. I beg to move.
Lord Ennals: My Lords, I must admit that I have never really understood why the Government have introduced this measure. During all the years that I recall since the welfare state was created we have never sought to draw a distinction between the financial responsibilities of those who are aged 25 and those who are aged 26. I can well understand it if the Government came forward with a measure which sought to make provision for those who were living at home so that they could say that within a home situation parents would be able to look after a young lad or a young girl but eventually they would move on and become adults. In this clause the Government are trying to draw a distinction between different groups of adults.
It is probably true that there are many people between the ages of 20 and 25 whose expenses are higher than those of people between the ages of 30 and 35. One has only to think of people who have managed to estalish themselves in life. They are in reasonable accommodation; they have managed to cope with their young children. Yet it is at the lower age range that responsibilities are often greatest. At no stage in the debate have the Government put forward a series of cogent arguments as to why we should treat people of a particular age—under 25—in a different way. Let us look at one or two examples.
If you are a disabled person and aged 20, 21, 23 or 24, you may have a need not only for a regular income but for special payments. Whatever they are, the needs of a young disabled person are likely to be just as great as the needs of an older disabled person of 25 years and above. One can do this in a variety of different groups. Let us take single childless people under 25 years old and disabled. There is here a real problem. They are going to lose very substantially in a way that I believe will make life very difficult for young people. I do not believe that the Government could genuinely have intended this when they drafted this Bill, recognising all the problems of young people—and many of us here either have young people of this age range or may even have grandchildren of that age. I am halfway between one and the other. My children are all above the 25 age range, but I remember very clearly what were their needs when they were under he age of 25.
It is quite clear that in other fields the Government have recognised that there needs to be in a sense some special protection for younger people. The Government have seen fit to exempt certain categories of young people from the board and lodgings regulations. They have exempted young people leaving care. That is very important. The majority of young people who leave care are under the age of 25. One hopes that many of them will go back to their families; but in the case of a very substantial majority, they have already lost the contact that their family provided. They are going out into a society in which

727
they have to make their own way. We are saying in this Bill that they are going to have to make their own way with a lower level of income because they have not reached the age of 25.
Let us look at the proportion of young people who are unemployed. I am not producing any statistics. Everyone in this House knows that there is a frighteningly high level of unemployment among the under 25s and that the number of youngsters who leave school and go to a job is steadily decreasing. Of course they have opportunities for training, and I am not starting to attack the Government on any of those grounds at all. But young people who are unemployed are likely to have very special needs.
Let us look at the categories that the Government have already exempted in the case of board and lodging regulations. One can take not only young people leaving care but young people who are chronically sick or mentally or physically disabled. I spend a good deal of my time working with the mentally ill, the mentally handicapped and the physically disabled. I do not understand why it should be supposed that these young people have less need in life for support than if they were 26. On the board and lodging regulations the Government have also given special protection for young pregnant women, for young people with no parent or guardian, and for young people who have had to leave home because they are in physical or moral danger. One has to recognise that that is the case all too frequently today. Those exemptions, in my submission, are an implicit acceptance that certain groups of young people have special needs and are vulnerable.
All the groups that I have touched upon, having special needs and being especially vulnerable, are among those who will do worse out of the provision that the Bill is providing. I honestly do not believe that your Lordships wish that to be the case. The same would apply to all single childless persons under 25 years of age, whether or not they are vulnerable, and whether or not they are able bodied or disabled. No exceptions seem to be made at all.
Young people leaving care represent a group in which all of us are interested, because we now have under 100,000 youngsters in care. It is encouraging that more and more of them are coming into society to make their own way. There are some housing associations that make special provision for young people who have been in care. There are some housing associations that make special provision for the young disabled. I was just thinking of the John Groom Society, which has 150 units for single disabled people; some of those units will be allocated to those aged under 25.
I do not understand why it is thought that the needs of those aged under 25 are in this case less than the needs of those who are older. It means of course that their financial situation will be worse. What might be the consequences of that situation? We live in a society in which we already accept that there are grave problems with the unemployed, with the mentally handicapped, with the mentally sick, with the homeless, and so on, and we accept that we live in a society in which there is increasing violence among
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young people—far more so than there is among older people. Most of the acts of violence that come before our courts—or which never get to court—involve young people in the age range that the Government have chosen to place at a disadvantage.
I believe that that whole principle is utterly wrong. I could understand it if the Government came forward with a proposal and said, "We shall have special arrangements for those who live in families. We shall perhaps have special arrangements for those aged under 16". But why choose the age of 25? People of 25 are adults and have legally been adults for seven years. Many of them have families. Their problems, as I said earlier, are as great as those who are 10, 20 or 30 years older. Why should the Government decide to place at a disadvantage, consciously and by statute, a very large element of young people?
If the noble Baroness were to say that it was to save money, and if she were to say to the House, "We are doing this to save money", that would be a disgraceful admission. There must be some better explanation than that. If there is not an explanation that satisfies your Lordships, you should vote for this amendment, and that is what I plead with you to do.
6.15 p.m.
Baroness Ewart-Biggs: My Lords, perhaps I may also assist with the point that my noble friend Lord Ennals made. I should like to ask the Minister to explain the inconsistency of a Government who see fit to exempt certain groups of young people from the board and lodging regulations, thereby accepting that there are certain groups that have special needs and who are vulnerable, but who do not see fit to make certain exemptions in this case. That is difficult to understand and I hope that the noble Baroness will have an answer.
The noble Lord, Lord Banks, pointed out very clearly the losses that would be felt by the young people in question. To begin with, they will surely get in debt and into arrears with their rates and rent. Time and time again we have said that debt is growing in Britain, and anything that might increase that growth in debt is to be avoided. Arrears of rent and rates will have the most serious consequences for the authorities which house these young people. Many young people with special needs will face homelessness because of the level of their arrears.
As has also been pointed out on several occasions, many such young people come from care, and all the good that has been done will be lost completely with the risk of them again becoming homeless due to the Government's proposal. It would seem to have the most unjust effect on all young people who are householders. Why should there be an inconsistency, in that there is an exemption so far as concerns board and lodging regulations but not in this particular case?
Baroness Lockwood: My Lords, Like other noble Lords, I am rather surprised at this particular clause, which draws a distinction at the age of 25. There are many groups who will be affected. Noble Lords, and my noble friend Lord Ennals in particular, have listed some of the groups that will be at risk. It seems to me that those groups fall into two categories. First, there are the very vulnerable young people who need care,

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who are disabled and who are provided with independent accommodation, who might have been the victims of sexual abuse, and who feel that they have to move into their own premises, and so on. They are all at risk. It is surprising that a Government concerned with the growing increase in the crime rate should not take account of the fact that groups of young people are likely not only to become victims of the financial constraints that are being placed upon them, but also be put at risk in other respects.
The second category that I have in mind is quite different from the first. There are new patterns emerging in our society. In my own personal sphere I am surprised at the number of young people who want to show their independence and initiative and who move into accommodation on their own. Sometimes it is a case of taking a flat. At other times it is a question of buying a house. They may start with a small house and then build up with a better house in the future, perhaps with their minds ultimately on marriage and a family. In any other circumstances we would praise the initiative of such young people. We would say that they should be given every encouragement. But this clause is a disincentive for young people to try to spread their wings, so to speak, and establish themselves independently.
Therefore, while I sympathise deeply with the groups that have been described earlier, I also think we need to take account of that other group—it is a growing group—in our society. The interests of young people up to the age of 25 are just as important as those over that age.
Lord Stallard: My Lords, I too support the noble Lord, Lord Banks, on this amendment. Like him, I can recall the debates we had on the board and lodging regulations and I was amazed—I suppose I was amazed—to find a clause in the Bill that seems to undo, or go back on, all the concessions we were able to wring from the Government on those regulations.
As far as I am concerned there seems to be no justification whatever for going back to this 25-year age barrier and introducing a lower rate of benefit. I thought that we had made the case—and it is a case that has been made by every speaker on this amendment—and that it had been accepted, that there are many thousands of youngsters aged 25 years and under who are in difficult circumstances and who are forced to live away from their home. As has been said, there are youngsters who have no home anyway; for example, those who were in care and who have left care to take up a job. They have no home and have to live independently.
We also know that there are young black youngsters under 25 years old who are doubly more likely to be unemployed. Many are living independently by reason of a number of circumstances. They will be severely adversely affected by this age barrier of 25, with all that that means. I can therefore see no justification for reducing the rate of benefit for people under the age of 25.
We know, too, that councils give independent accommodation to youngsters aged 25 and under. It is common, for a number of reasons into which we have
730
gone at length, for councils to give housing accommo-dation to single youngsters under the age of 25. They will now be in difficulty because their housing benefit will be much lower than would have been the case had this barrier not been erected. As I understand it, the Bill will introduce lower rates of benefit for single childless people under the age of 25. That must dramatically affect the lives of, it has been estimated, at least 350,000 young people who currently receive social security and housing benefit.
The Government are recommending in these clauses that single childless people under 25 years of age should receive £6·60 per week less income support than older people in identical circumstances. As I said, we argued that case on a previous occasion and there is no need to go back to it. In addition, single childless people under the age of 25 in low paid work will receive much less housing benefit than older people in exactly the same circumstances. Again, there is no justification, given all the circumstances, for that state of affairs.
The consequences must be perfectly obvious to all. If we further deprive the under-25 age group, and the people involved in that age group, we are building up trouble for ourselves in a whole number of areas. That ought to be self-evident when we read this clause. I give some examples. A young person living independently and earning £70 a week will now receive a rate and rent rebate of £13·04 if that young person is paying average rent and rates of £25·20 per week. After April 1988 that rebate will go down to £1·54; that is, from £13·04 to £1·54—a loss of £11·50. Where could one expect youngsters of 25 and under to make up that gap of £11·50? It is impossible. I am almost scared to think of what might be the consequences for our society of widespread deductions of that and more.
Childless unemployed people under the age of 25 who are single and living independently face losses in benefit of at least £7 a week. That is a lot of money to childless people and youngsters in those circumstances. It may not seem much to us but £7 is a fortune to some people. It helps pay for their food and a lot of their expenses. Their householder status will no longer be recognised and they will receive the lower rate for under 25 year-olds of £24 a week. Out of that they have to pay all their water rates and other expenses; and all the other expenses for which youngsters need money these days.
The Government are introducing these dramatic cuts but will need to have some special justification for doing so. The House debated this point in the social security regulation debates on a number of occasions, during which there was cross-party and cross-Chamber support for the arguments put forward. The support was such that the Government made exceptions for some youngsters under 25 years of age in these categories. It is logical, and we are entitled to expect, that the Government will extend those exceptions into this legislation and continue the payments to youngsters aged 25 and under in the same way.
Lord Boyd-Carpenter: My Lords, the debate so far has naturally, from a debating point of view, centred on the age of 25 as the line of demarcation. Whether or not that is precisely the right age is a question which

731
I willingly concede is a matter for discussion and on which views may well differ.
However, the amendment goes a great deal further than looking after the 25 year-olds. If your Lordships accept this amendment you will be saying that the 18 and 19 year-olds similarly should have the full rate of benefit. If noble Lords opposite had been particularly concerned with the 25 year-olds they could have tabled an amendment specifying a lower age. As it is, they have gone the whole way and proposed an amendment under which, right down to the age of 18, the full rate of benefit will be payable. I do not think that that is justified.
The noble Baroness, Lady Lockwood, referred, understandably, to those enterprising young people who like to set up and develop themselves on their own. I share her respect for them. But is is quite another thing to say that if, for good reasons of their own, they decide to do that, they must be entitled at the public expense to the full rate of benefit given to older people. I do not think one is forced to take that for granted. If they can manage, by hard work and their earning capacity, with the lower rate of support, good luck to them. One applauds them. But it is, again, quite another thing to say that, because this is a good thing on their part, they must be entitled to the full adult rate of benefit.
One then comes to the noble Lord, Lord Ennals, who beat the Dispatch Box with characteristic vigour in his horror at the idea that any provision of the Bill might save money. The noble Lord, Lord Ennals, seemed to think that saving money was somehow a disreputable or discreditable aim. In this Bill we are dealing with enormous financial commitments, running for a very long time ahead and placing an immense burden for many years ahead both on the taxpayer and on the contributor to national insurance. No responsible Government of any colour will be other than concerned to save money if they reasonably can do so.
Therefore, I suggest to the noble Lord, Lord Ennals, that we come back to the point, not of whether, among other things, this measure will save money, but whether it is a sensible method of lightening somewhat the otherwise very heavy burden indeed that we are placing on the future contributors to national insurance and the future taxpayers. The whole business of social security, with which, as your Lordships will know, I was fairly closely associated a good many years ago, is a matter of assessing priorities. If we had unlimited wealth we could do unlimited good. We have not. It is the hard and difficult function of Ministers to try and assess the direction in which the limited amount of money available can best be expended. I do not ask your Lordships to take that statement from me. I ask your Lordships to take it from the late Mr. Aneurin Bevan, who, in what I think was his last speech in another place, remarked that the language of socialism was the language of priorities.
6.30 p.m.
Lord Pitt of Hampstead: My Lords, I want to say to the noble Lord, Lord Boyd-Carpenter, that it is right that people should in fact receive benefits from the age of 18. That is when they assume adult responsibilities;
732
that is when they vote. It is from that age that we regard them as having adult responsibilities, so they should also have the benefits.
Moreover, if young people are in care, it is at that age that they have to leave, and often they do not have anywhere to go and must set up home independently. Therefore, they must have the benefit—or they should have, because up till now they will not get it. I do not see why the noble Lord should deprecate the support given by the noble Baroness to their enterprise and independence, encouraging them to set up home and begin to build a life at 18. I think it is right and proper that they should be encouraged to do this if that is what they want, and society should help them in their endeavours.
I should like my contribution to this debate to be limited to the effect that this measure will have on black people. As the noble Lord, Lord Stallard, has said, the blacks suffer more from unemployment than do the whites. Figures I have in front of me suggest that in certain areas 60 per cent. of black youths are unemployed. The consequences of that situation will be recognised. Moreover, these may also be the children of unemployed parents, because unemployment affects more black adults than white. So in that sense also they are deeply affected.
There is also the problem posed by one-parent families. The young person may come from a one-parent family where the mother herself is in difficulties. How will this woman bring up this "adult" child—because, after all, at 18 we are speaking about an adult. The Government are saying that in this case a single woman should be responsible for bringing up that 18 year-old.
I hope that your Lordships will see the issue in that way. In general terms it is a bad thing to make this distinction. It is a bad thing to create hardship for youngsters generally. As I have said before, we are in danger of creating rootless youngsters, and actually of doing worse than that. I should like the Government to reconsider their attitude to this issue. I understand the case that was made by the noble Lord, Lord Boyd-Carpenter, as regards saving. But the benefit of the saving always has to be balanced against the cost—and the cost is too high. I should like the Government to look at this question again, and I ask the noble Baroness the Minister not just to reject the amendment (as I am sure her brief has already advised her to reject it) but to undertake to look at it again. We still have the Third Reading of this Bill when we can come back to it and look at it again.
In fact, we are about to inflict real difficulties on a large number of people, and not only young people, since this measure is also bound to affect their parents. Therefore, we are in the process of inflicting difficulties on a very large number of people. I ask your Lordships to consider where we are heading and to try to change course.
Baroness Trumpington: My Lords, this is an ingenious amendment which seeks to provide that, where a person is considered a householder for the purposes of housing benefit, then he should not have his benefit altered by reference to his age. In effect the amendment seeks to retain the householder distinction in the income-related benefits.

733
Perhaps I may immediately reply to the question asked by the noble Lord, Lord Banks, at the start of his speech concerning young people who will lose £11·50 a week in housing benefit. My answer is that we have repeatedly stressed that the benefit rates that we have published are illustrative. Given the complexities of housing benefit, it is of course possible to devise all kinds of hypothetical examples of individual losses, but it is not sensible to seek to draw wide conclusions from such examples. It is the broader picture which is relevant. Overall, our proposals represent a fairer and simpler scheme.
Your Lordships will recall that as the noble Lord, Lord Banks, said, we discussed this whole matter at length during Committee, and I do not intend to go over the same ground again in the same detail. However, your Lordships will recall that we moved from the householder/non-householder distinction to the age 25 split for a variety of reasons. The former criterion was becoming increasingly difficult to administer within the heart of the supplementary benefit scheme. It was outdated and dealt with matters which were increasingly the responsibility of an entirely separate scheme—the housing benefit scheme. It was important that we should find an alternative determinant of benefit, which we succeeded in doing.
I am most grateful to my noble friend Lord Boyd-Carpenter for his remarks, and perhaps I may continue with his theme. This modified proposal would not be as costly as scrapping the age split at 25, which would cost over £200 million. But even this more restricted amendment could cost something approaching £50 million. This money would have to be found from somewhere, as my noble friend has said, and perhaps it would be at the expense of sòme other group of claimants; and when found, these resources would be directed to single and childless claimants. The scale of the resources cannot be underplayed and the use to which they would be put at the possible expense of other groups is questionable.
I must also protest at the terms of some of the criticism of our proposals. I was asked, "What is magic about the age of 25?" Of course, there is no "magic" about it. Such dividing lines are always a matter of judgment; and in our judgment age 25 is a sensible place to draw a demarcation line. It is of course supported by the significant way that it reflects the existing demarcation line of householder and non-householder. I suggest also that there is no magic about the use of "non-householder" either. It, too, has its drawbacks. It can embrace a wide range of circumstances. A middle-aged, grown-up daughter caring for an elderly parent or an unemployed man who has lost work and moved back to live with his parents are assumed to be in the same basic position as a youngster of 18 who has recently left school. It is wrong to assume that the balance of argument is all one way.
The noble Lord, Lord Ennals, referred to those with most responsibility; for instance, people with children. I remind your Lordships that our Green Paper proposals to abolish the householder/non-householder distinction received a certain amount of support. There was, it was true,
734
criticism of the proposed age split at 25, but that concern quickly centred on the effect of paying a lower rate of benefit to young couples with children. We listened carefully to the concern that was expressed and decided to modify our proposals accordingly. The White Paper proposed that all couples over the age of 18, with or without children, would receive a single rate of benefit. That means that the age split operates only for single, childless claimants.
With regard to people coming out of care, to whom both the noble Lords, Lord Banks and Lord Ennals, referred, the number of those leaving care and becoming householders immediately is not large. Some return to their families and others remain with foster parents; others are placed by local authorities in hostels or in after-care accommodation as part of a programme of rehabilitation or resettlement. In those circumstances they will be exempt from the restrictions on board and lodging allowances so long as they remain in that accommodation.
The board and lodging exemptions apply to the time limits that apply to those in board and lodging. That has to do with retaining their place of accommodation. The analogy is more with housing benefit than payment of rent and rates. I trust that the new-found enthusiasm of noble Lords opposite for board and lodging rules will still be there when we next debate that subject.
We must not overlook the following points. First of all, those who pay rent and rates will continue to get housing benefit for their housing costs. That is the most significant help for those with housing responsibilities. Secondly, the great majority of people under 25 live in other people's households. In pointing out exceptions noble Lords should not overlook that basic point. Thirdly, we have recognised the position of those who most clearly have extra responsibilities—those with families. All lone parents over 18 will get the full rate, and there is no age split for couples.
The noble Lord, Lord Pitt, speaking about the effect on one-parent families, has overlooked the fact that they will receive the higher rate. I repeat that there is no age 25 split for that group.
Lord Pitt of Hampstead: My Lords, I am talking about the one-parent family where the child is regarded as an adult and therefore the lower rate applies.
Baroness Trumpington: My Lords, I repeat that one-parent families will receive the higher rate. A family includes children. There is no age 25 split for that group.
I simply cannot agree that, when we are making a sensible move in reforming the structure of income-related benefits, we should find some way to restrict the change in the way that the amendment proposes. Indeed, it would add to the complications. In order to assess the entitlement to income support of a person aged under 25, we should have to send him to have his eligibility to housing benefit established. That cannot be right. I ask your Lordships not to accept the amendment.
Lord Ennals: My Lords, may I ask the Leader of the House to say a few points in regard to my intervention before the noble Lord, Lord Banks, winds up the debate? A number of important points were made concerning refugees which the noble Baroness did not touch upon. I am involved with the British Refugee Council and to my knowledge one-third of the young, unmarried adults who seek its advice are under the age of 25.
Baroness Macleod of Borve: My Lords, I am wondering whether the noble Lord realises that we are at the Report stage. I think that he may have asked the leave of the House, but instead of asking a question I think that he is going a little beyond the rules of the House in making another speech.
Lord Ennals: My Lords, if I ask the leave of the House and it appears that the House does not wish to give me leave, I am the servant of the House. If the view of the noble Baroness is shared by the House, I make no further comment.
Lord Banks: My Lords, I much appreciate the support that has been expressed by so many speakers in the debate. Many have underlined the point that I made at the outset, that at least in the board and lodging regulations there are exemptions for people under 25 who would otherwise be affected. We are not saying that we like the regulations. We have made it clear that we do not, but at least they have exemptions, whereas for the category that we are now considering there are no exemptions.
I asked the noble Baroness whether the figures that I gave were correct. I assume from her answer that they are. She says that they are illustrative and must not be taken too seriously. In that case what they are supposed to illustrate I do not know. If they are supposed to illustrate the effects of the Bill—and one cannot suppose that they are intended to illustrate anything else—they seem to indicate that it will fall hard on the class of person that we have been considering: that is to say, young people who are living independently, many of them with no other alternative; people who would at the moment have householder status and who will suffer a severe reduction as a consequence of what is proposed in the Bill.
The noble Lord, Lord Boyd-Carpenter, thought that we had been too extravagent in going back to the age of 18. He would apparently have considered 22 or 23, but 18 was going too far. The noble Lord, Lord Pitt, had the answer: the majority age is 18. That is when people assume the responsibilities of an adult. I do not think that we can have two adult ages: class one and class two adults. We have to have a uniform age, and it is the practice in social security legislation to have a uniform adult rate.
The noble Baroness said that the provision was a sensible method to secure saving of expenditure. When one considers the effect that it will have from the illustrative figures, it does not seem sensible for those about whom we are talking. I repeat that we are talking about young people who for one reason or another are obliged to live independently and who will suffer as a result of what is proposed in the Bill. I want to test the opinion of the House on the amendment.
6.49 p.m.
On Question, Whether the said amendment (No. 32) shall be agreed to?
Their Lordships divided: Contents, 96; Not-Contents, 140.

DIVISION NO.4

CONTENTS

Addington, L.

Kilbracken, L.

Airedale, L.

Kilmarnock, L.

Ardwick, L.

Llewelyn-Davies of Hastoe, B.

Attlee, E.

Lockwood, B.

Banks, L.

Longford, E.

Barnett, L.

Lovell-Davis, L.

Blease, L.

McGregor of Durris, L.

Blyton, L.

Mackie of Benshie, L.

Boston of Faversham, L.

McNair, L.

Bottomley, L.

Mais, L.

Brockway, L.

Mayhew, L.

Bruce of Donington, L.

Meston, L.

Buckmaster, V.

Milner of Leeds, L.

Burton of Coventry, B.

Molloy, L.

Caradon, L.

Morris of Kenwood, L.

Carmichael of Kelvingrove, L.

Morton of Shuna, L.

Chitnis, L.

Mountevans, L.

Cledwyn of Penrhos, L.

Murray of Epping Forest, L.

Crawshaw of Aintree, L.

Nicol, B.

Darcy (de Knayth), B.

Northfield, L.

David, B.

Ogmore, L.

Davies of Penrhys, L.

Oram, L.

Dean of Beswick, L.

Phillips, B.

Denington, B.

Pitt of Hampstead, L.

Diamond, L.

Ponsonby of Shulbrede, L.

Elwyn-Jones, L.

Ritchie of Dundee, L.

Ennals, L.

Robson of Kiddington, B.

Ewart-Biggs, B.

Rochester, L.

Ezra, L.

Seear, B.

Falkland, V.

Seebohm, L.

Fisher of Rednal, B.

Serota, B.

Gallacher, L.

Shackleton, L.

Graham of Edmonton, L.

Shepherd, L.

[Teller.]

Silkin of Dulwich, L.

Grey, E.

Stallard, L.

Hampton, L.

Stedman, B.

Hanworth, V.

Stoddart of Swindon, L.

Harris of Greenwich, L.

Taylor of Blackbum, L.

Hatch of Lusby, L.

Taylor of Mansfield, L.

Hayter, L.

Tordoff, L. [Teller.]

Henderson of Brompton, L.

Turner of Camden, B.

Heycock, L.

Underhill, L.

Hooson, L.

Vemon, L.

Houghton of Sowerby, L.

Wallace of Coslany, L.

Howie of Troon, L.

Walston, L.

Hunt, L.

Wells-Pestell, L.

Ingleby, V.

Whaddon, L.

Jeger, B.

Wilson of Langside, L.

John-Mackie, L.

NOT-CONTENTS

Ailsa, M.

Buckinghamshire, E.

Airey of Abingdon, B.

Butterworth, L.

Alexander of Tunis, E.

Caithness, E.

Ampthill, L.

Cameron of Lochbroom, L.

Ashbourne, L.

Campbell of Alloway, L.

Auckland. L.

Camegy of Lour, B.

Barber, L.

Carnock, L.

Belhaven and Stenton, L.

Cathcart, E.

Beloff, L.

Coleraine, L.

Belstead, L.

Colville of Culross, V.

Bessborough, E.

Colwyn, L.

Boyd-Carpenter, L.

Constantine of Stanmore, L.

Brabazon of Tara, L.

Craigavon, V.

Braye, B.

Craigmyle, L.

Brougham and Vaux, L.

Crathome, L.

Broxbourne, L.

Crawshaw, L.

Bruce-Gardyne, L.

Cross, V.

Buccleuch and Queensberry,

Cullen of Ashbourne, L.

D.

Davidson, V.

737

Denham, L. [Teller.]

Mountgarret, V.

Derwent, L.

Mowbray and Stourton, L.

Drumalbyn, L.

Munster, E.

Dulverton, L.

Murton of Lindisfarne, L.

Eden of Winton, L.

Northesk, E.

Elliot of Harwood, B.

Orr-Ewing, L.

Elliott of Morpeth, L.

Pender, L.

Elphinstone, L.

Peyton of Yeovil, L.

Elton, L.

Plummer of St Marylebone,

Fortescue, E.

L.

Gardner of Parkes, B.

Portland, D.

Glanusk, L.

Portsmouth, E.

Glenarthur, L.

Rankeillour, L.

Gray, L.

Renton, L.

Greenway, L.

Renwick, L.

Gridley, L.

Ridley, V.

Grimthorpe, L.

Rodney, L.

Hailsham of Saint

Russell of Liverpool, L.

Marylebone, L.

St. Aldwyn, E.

Harmar-Nicholls, L.

Saint Oswald, L.

Henley, L.

Sandford, L.

Hesketh, L.

Sandys, L.

Hives, L.

Savile, L.

Home of the Hirsel, L.

Shannon, E.

Hood, V.

Sharples, B.

Hooper, B.

Skelmersdale, L.

Hylton-Foster, B.

Soames, L.

Inchcape, E.

Stodart of Leaston, L.

Kaberry of Adel, L.

Strathclyde, L.

Keyes. L.

Strathcona and Mount Royal,

Kimball, L.

L.

Kimberley, E.

Sudeley, L.

Kinloss, Ly.

Swinfen, L.

Kintore, E.

Swinton, E. [Teller.]

Lane-Fox, B.

Thomas of Swynnerton, L.

Lauderdale, E.

Thorneycroft, L.

Lawrence, L.

Torphichen, L.

Layton, L.

Tranmire, L.

Lindsey and Abingdon, E.

Trefgarne, L.

Liverpool, E.

Trenchard, V.

Long, V.

Trumpington, B.

Lothian, M.

Tryon, L.

Lyell, L.

Vaux of Harrowden, L.

Macleod of Borve, B.

Vestey, L.

Malmesbury, E.

Vickers, B.

Mancroft, L.

Vivian, L.

Marchwood, V.

Waldegrave, E.

Margadale, L.

Whitelaw, V.

Maude of Stratford-upon-

Wynford, L.

Avon, L.

Yarborough, E.

Merrivale, L.

Young, B.

Monson, L.

Young of Graflham, L.

Montgomery of Alamein, V.

Zouche of Haryngworth, L.

Mottistone, L.

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

6.58 p.m.
Lord Denham: I move that further consideration on Report be now adjourned. It will be fair to say that your Lordships will not come back to this Bill before 8 p.m.

Incest and Related Offences (Scotland) Bill [H.L.]
6.59 p.m.
Lord Wilson of Langside: My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Wilson of Langside.)

COMMONS AMENDMENTS
[References are to [Bill 150] as first printed for the Commons].
1 Clause 1, page 2, line 40, leave out "under the age of 16 years".
2 Page 2, line 41, after "offence", insert "if that step-child is either under the age of 21 or has at any time before attaining the age of 18 lived in the same household and been treated as a child of his or her family.".
3 Page 3, line 2, leave out "16" and insert "21".
Lord Wilson of Langside: My Lords', with the leave of the House, I beg to move that this House do agree with the Commons in their Amendments Nos. 1, 2 and 3 en bloc. The amendments amend Clause 1. The Bill, when it left your Lordships' House, inserted a new section into the Sexual Offences (Scotland) Act 1976. That was Section 2B. The section makes it an offence for any step-parent to have sexual relations with his or her step-child under the age of 16. The effect of the poposed amendments, with which I ask your Lordships to agree, is to constitute the offence where the step-child is under 21 or has at any time before the age of 18 lived in the same household and been treated as a child of the step-parent's family. The amendments are obviously designed to bring the Bill into line with the Marriage (Prohibited Degrees of Relationship) Act 1986.
I can appreciate and understand the concern felt about this aspect of the Bill as it originally stood. However, I should certainly have preferred the Bill as it stood. The amendments proceed, I believe, from a perhaps inadequate appreciation of the social and legal implications of this measure. I can see that without offence. Indeed, my first thought, when I originally looked at the matter, was to make the age in this context that of 21. The danger of the change is that relationships may be criminalised that should not be so treated.
As the matter now stands, the Lord Advocate will have to keep a watchful eye on the working of the Bill in this context because the offence can carry a sentence of life imprisonment. 1 shall not weary your Lordships during the dinner hour by repeating some examples that were touched upon during the debates that took place as the Bill was going through your Lordships' House—the dangers and the undesirability of criminalising certain relationships that should not be so treated. I am sure that all your Lordships can imagine human situations that should not be regarded as criminal developing in this context. I say no more, however, except to ask your Lordships to agree to the amendments.
Moved, That this House do agree with the Commons in the said amendments.—(Lord Wilson of Langside.)
Lord Skelmersdale: My Lords, I beg to move that the House do now adjourn during pleasure until eight o'clock.
[The Sitting was suspended from 7.4 p.m. until 8 p.m.]

Social Security Bill
Consideration of amendments on Report resumed.
Baroness Faithfull Baroness Faithfull moved Amendment No. 33:
Page 26, line 21, at end insert—
("( ) In urgent cases income support shall be payable in accordance with this Act as modified by regulations, and regulations shall prescribe the cases which are urgent cases for the purpose of this subsection.")
The noble Baroness said: My Lords, this amendment concerns urgent cases of income support. When a claimant applies for income support quite rightly his circumstances are looked into and his case is considered. I have to say that such a process very necessarily and understandably sometimes takes some time. However, there are times when urgent cases need to be helped immediately; for example, when a child is taken ill very suddenly and has to go into hospital and the doctors and nurses advise either the mother or the father, or both, that they must visit the hospital frequently or that they must stay. Very often those men and women—the parents—cannot do that because of lack of money.
There is also the example of the hospice. People are taken into hospital when they are dying and money is needed immediately for perhaps fares or special equipment. There is also the question of women who leave their husbands because they have been cruelly treated and are admitted to a women's hostel. Those cases need urgent help—either help on a one-off basis or sometimes for a week or so.
All that the amendment asks is that there should be regulations which,
"prescribe the cases which are urgent cases for the purpose of this subsection".
It is recommended that those cases be prescribed so that the doctors, the social workers and the nurses will know what they can advise parents or claimants they can or cannot have. I beg to move.
Lord Ennals: My Lords, I rise briefly to support the amendment which has been tabled by the noble Baroness, Lady Faithfull, and to say that I agree with the arguments which she has put forward. We are talking about something which is not expensive; in fact, it will probably not cost any more than the present measures contained in the Bill. However, it will lead to rapid decisions, which I think is what the noble Baroness has in mind.
In very special cases—and the noble Baroness has described some of them—humanity demands that assistance be given in order that those needs can be met. However, we cannot write humanity into a Bill, but we can humanely prescribe or list the type of situations which can be dealt with. Indeed, as I understand it, that is what is behind the amendment.
I very much hope that the Minister will feel that she can accept the amendment. If she were to do so, it would bring some pleasure to the House, especially bearing in mind that so many amendments have been defeated or the Minister, no doubt with wisdom as she thought, has put up arguments against them. On this occasion it seems that the arguments in favour of the amendment are overwhelming.
Baroness Ewart-Biggs: My Lords, I support my noble friend and the noble Baroness, Lady Faithfull. It seems that what is requested by the amendment is most extraordinarily reasonable and moderate. After all, every family has its crises and those crises, because of their very nature, always need an immediate response. The amendment seems to deal with the situation and obviously would only focus on particular cases which need immediate help. Therefore, as my noble friend Lord Ennals has said, the amendment seems to be a proposal that may melt what up to this moment has been the rather frigid heart of the noble Baroness opposite.
Viscount Buckmaster: My Lords, I also rise to support the amendment and in doing so I should like to ask the noble Baroness whether she will bear in mind particularly the special needs of asylum-seekers and those awaiting leave to remain in this kingdom. I think that your Lordships will agree that many of those people have very special needs, some of which were mentioned in Committee, and I feel that those needs are particularly applicable to this amendment.
Baroness Trumpington: My Lords, the question of benefit provision in cases of urgent need is clearly an important one, and I thoroughly appreciate the reasons why my noble friend has moved the amendment and the support that she has received for it. We have already had a substantial debate on this subject in Committee, but I welcome this further opportunity to reassure your Lordships that we recognise the continuing need to provide for urgent needs after 1988.
The present urgent cases regulations cover a wide variety of circumstances—17 in all. They all have two common factors; namely, that a normal payment of supplementary benefit is not payable, and the person has no other resources available. But that is essentially all that they have in common.
In fact these payments range widely. At one end of the scale there is payment to a person who has had his wallet stolen. At the other end you can have a continuing payment to a person from abroad awaiting a decision by the Home Office on his immigration status. These are completely different types of payment. Clearly both persons have a need, and one which is outside the scope of the normal supplementary benefit scheme. While one is a one-off financial crisis, the other situation could clearly continue for weeks, if not months.
In considering the best way of helping those people after April 1988 we have come to the conclusion that there is no logical or convincing argument for continuing to provide for urgent cases in the same way as we do now under current supplementary benefit regulations. We have always made clear that we see the social fund as providing for people who are facing an immediate financial crisis. Indeed, that is how we would expect to help the man with the stolen wallet or to pay fares for the parents of a child who has been run over and is in hospial—regardless of whether they were on income support or in full-time employment.
But the second type of circumstances should be met within the weekly benefit system. I am happy to repeat my comments made in Committee that we see some

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merit in allowing for the treatment of circumstances such as these in the income support scheme rather than the social fund. We believe that income support should deal with weekly benefit including those cases where circumstances mean that it is not possible to start normal weekly benefit. Therefore, I can reasssure my noble friend Lady Faithfull that we are in sympathy with the intention behind her amendment. However, I hope that my noble friend will recognise that, despite the fact that I still have such a chilly heart on the surface, we cannot recommend acceptance of the amendment. There is simply no need to amend the Bill in this way to achieve the results which my noble friend is seeking.
Your Lordships and, in particular, the noble Viscount, Lord Buckmaster, will recall that in Committee I indicated that we can pay asylum-seekers income support in the normal way without amendment to the Bill. In the same way we can pay income support in circumstances where a person not otherwise entitled to benefit requires help because his normal source of income has been disrupted by circumstances beyond his control. I do not believe that we should amend the Bill without good cause. I hope that what I have said will have reassured both noble Baronesses that this amendment is not necessary.
Lord Ennals: My Lords, before the noble Baroness sits down may I ask her a question? Obviously it is important, and she would agree, that those who have to take decisions about this sort of payment in offices up and down the country would want to have some common pattern. How will she be able to ensure that common pattern if the nature of the cases is not prescribed as suggested by her noble friend?
Baroness Trumpington: My Lords, as the noble Lord knows, for the social fund there will be directions for people working in local offices. There is also a lot to be said for good common sense under these circumstances. I think that the combination of the two answers the noble Lord's question.
Baroness Faithfull: My Lords, may I thank my noble friend the Minister for her sympathetic reply? I am a little sad from a practical point of view that, as stated in the amendment, the cases are not to be prescribed. The supplementary benefit offices are not on duty over weekends, whereas social service departments are on duty over weekends.
Many has been the time when I have had to give money out of the social services department for emergency cases. If it had been in regulations one would have known whether one could do that or not. Having said that, I am grateful to my noble friend the Minister for her sympathetic response to this amendment, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Trumpington Baroness Trumpington moved Amendments Nos. 34 to 37:
Page 26, line 22, at beginning insert ("Subject to regulations under section 50(l)(a) below.").
Page 26, line 23, leave out ("his") and insert ("the").
Page 26, line 29, after ("he") insert "or, if he is a member of a married or unmarried couple the other member of the couple,")
Page 27, line 19, leave out subsection (13).
The noble Baroness said: My Lords, I beg to move Amendments Nos. 34 to 37, and speak at the same time to Amendments 39, 44, 65, 66, 76 and 77. These amendments give effect to the announcement I made at Committee stage that the Government had decided that when family credit is introduced in 1988 it will be paid direct to recipients by the Secretary of State rather than by employers, with wages, as originally proposed. The amendments also make the necessary provision in the entitlement clauses to allow entitlement to rest with the mother in two-parent family cases.
As your Lordships will see, we are removing all the material in the Bill relating to payment through employers, and all the bits and pieces arising there from concerning recovery from national insurance contributions and so on. There is no need for us to make specific provision on the face of the Bill for payment to be made by the Secretary of State. As with other benefits, this is covered by the common provisions powers in Clause 50.
I should point out some further consequentials of no longer paying family credit through employers. We have removed the provision for family credit to be terminated on the recipient becoming unemployed or changing his job. We now intend that once family credit is awarded it will run its full term without regard to changes in circumstances; just as in FIS at present, except of course that family credit will last for only six months instead of 12. Secondly by deleting Clause 28 in its entirety we have removed the provision for family credit to be suspended when the recipient is on strike or otherwise temporarily off work.
The detailed arrangements for claims and payments will be specified in regulations. However, I can tell your Lordships that we envisage that the regulations will provide that the mother will normally be the one to make the claim—though wherever possible we should want the man to countersign the claim form to endorse the information about his employment, etc., and as acknowledgment that he is aware of the claim. Similarly, regulations will provide that the woman will normally be the main payee, with the order book addressed to her, but that as in FIS the man would be shown as alternative payee.
Also included in this group of amendments is a minor technical amendment to the provisions regarding aggregation of resources in Clause 22(3). During our examination of the issues raised by the family credit changes, a slight doubt emerged over the precise wording used in that subsection. We have therefore brought forward a minor technical amendment designed to remove these doubts and clarify our intentions. I would remind your Lordships that the purpose of this particular subsection is to provide that income and capital of members of a family are to be added together and treated as belonging to the claimant. This of course, is not a new concept, my Lords. Rather it is a continuation of an approach accepted by successive Governments as essential for income-related benefits.
Finally, my Lords, with regard to Amendment No. 44, this must surely be unique in that the Front Bench

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spokesman for Her Majesty's Opposition and the Minister on the Government Bench have joined hands with a joint amendment. All I wish to do is to quote from the old song:
"Lord help the Mister who comes between me and my sister. And Lord help the sister who comes between me and my man."
I commend these amendments to your Lordships. I beg to move.
8.15 p.m.
Baroness Jeger: my Lords, I can only say how happy I am that the noble Baroness and I have our joint names to Amendment No. 44. I am not sure which of us is Queen Elizabeth I and which of us is Mary Queen of Scots, or who is going to chop off whose head. But for the moment, this is a practical and acceptable amendment. I appreciate that what we are asking the Government to agree with tonight is not a defeat. The propositions that have been put forward arise out of a consensus not only of people on all sides of this House but of people outside who do a great deal of work and who know the difficulties.
Therefore, I am happy that we are able, I feel on an historic occasion, to have our joint names to the same amendment. 1 only wish to ask the noble Baroness, and I hope not in any unfriendly way, what is going to be put in instead of Clause 28. It is all very well for us to take out Clause 28, but what are we going to put in instead of Clause 28? I hope that the noble Baroness will be able to tell me that. Apart from asking that simple question, I am glad that we have this unanimity.
Lord-Boyd Carpenter: My Lords, I too very much welcome this implementation of the noble Baroness's promise to take out of the Bill the original provision for payment for this benefit through the employer and through wages. Apart from the social aspects, that promised a considerable burden, particularly for small employers. As your Lordships may recall, when my noble friend made the announcement it was generally welcomed, and it is nice to see it being implemented.
Lord Ennals: My Lords, may I also add a word? I know that at some stage in this Bill, and possibly in a previous Bill, I made a criticism of the way in which the noble Baroness said "No" to everything, however convincing the arguments seemed to those who presented them. I remember saying to her that the purpose of a Committee stage here or in another place was to get the best possible result, and therefore to give way if the case presented to the Government was a convincing one.
Having said that on a previous occasion, 1 think it is proper that I should say to the noble Baroness how grateful I too feel that the representations that came from so many different quarters have been listened to. They make a major change to the Bill not only to the women (because it will be mainly the women who benefit, and their children) but, as the noble Lord, Lord Boyd-Carpenter, said, to employers and particu-arly small employers. I think it is a very wise decision that the Government have taken. When we criticise them for taking stupid decisions it is also appropriate that we should congratulate them on taking wise decisions.
Lord Kilmarnock: My Lords, we on these Benches also welcome this series of amendments. This clearly was a matter which gave rise to considerable concern in that the family credit might not find its way into the right pocket or the right purse. As the noble Lord, Lord Ennals, has said, there were also considerable concerns on the part of employers, particularly small employers. Both on the one hand and on the other the Government have listened on this occasion. We welcome that, and also the evidence of good intentions in the case of the amendments we shall be moving later. We shall reach them in due course. In the meantime, we welcome this very much indeed.
Baroness Trumpington: My Lords, with the leave of the House, I should like to thank my noble friend Lord Boyd-Carpenter and the noble Lords, Lord Ennals and Lord Kilmarnock, for their general welcome to these amendments. I should like to point out that we are a listening Government, and that these amendments have come about through consultation with women's organisations, small businesses and other interested parties. I am sure that my right honourable friend in another place will be glad to hear the remarks that have been made this evening. To the noble Baroness, Lady Jeger, about the clause, the answer is, "Nothing".
Baroness Jeger: My Lords, with the leave of the House, I asked the noble Baroness a question about what would be put in instead of Clause 28.
Baroness Trumpington Baroness Trumpington. Nothing, my Lords.
Baroness Jeger: Then, my Lords, there is a vacuum in legislation, which I shall enjoy.
Clause 22 [Calculation]:
Lord Kilmarnock Lord Kilmarnock moved Amendment No. 38:
Page 29, line 29, at end insert ("and shall include an amount which shall be the whole of any mortgage interest for which a member of the family is liable on the home of the family.")
The noble Lord said: My Lords, after that note of happy consensus I am afraid that I have to return to a more contentious issue; that is, the question of docking 50 per cent. from the mortgage interest relief at presently available in full to those who become unemployed during the first six months that they are receiving benefit. This is a matter of great public interest, as was evidenced by the half-hour programme devoted to it last Thursday night on "TV Eye". The amendment provides that
"an amount [shall be included] which shall be the whole of any mortgage interest for which a member of the family is liable on the home of the family".
Essentially, this is a problem arising from the extension down the income scale of home ownership by people on much lower incomes or in less than stable employment. Nearly a million houses have been sold under the right-to-buy, and many of them to very low income people. This may seem an excellent thing in itself, but since 1982 it has been accompanied by a quantum leap in the number of mortgages in arrears from 8,500 to 50,000 and in the number of

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repossessions from 2,500 to 16,000. The housing aid centre cases have doubled in number. In one Liverpool private housing estate alone 70 per cent. of the homes are subject to repossession orders.
I do not know how many of your Lordships saw it, but in the "TV Eye" programme Mr. Newton, the Social Services Minister, dismissed the rise in arrears as an inevitable by-product of the success of the home ownership promotional campaign. But it seems rather disproportionate when a 17 per cent. increase in home ownership since 1979 is accompanied by a 600 per cent. rise in arrears.
When one considers the effect of the Government's proposals on families, it could be pretty devastating. Even if the lender will agree to reschedule the loan (that is incorporating not only the principal but the interest payments back into the loan) the householder is constantly increasing his or her debt. Here we come to a strange anomaly. If that householder is able to survive the first six months, during which period the Government are proposing to reduce assistance, he or she will then qualify for full remission under the supplementary benefit rules and the Government will find themselves paying interest on deferred interest instead of paying interest in the first place. This could have a boomerang effect.
Furthermore, the six-month period during which the Government are intending to penalise could prove a crucial period, particularly for deserted women or those who have obtained an exclusion order, for example, against a violent husband. A woman in this position may be aware that she will be unable to keep the house in the longer term, but it is during the first few months after marital breakdown that she needs a secure roof and a breathing space to recover her self-confidence and make plans for the future, which may involve seeking alternative rented accommodation. If relief is not forthcoming the importance of keeping a roof over the family's head may cause some mothers to use benefits intended for their children to maintain mortgage interest payments.
On the question of equity, I submit that the argument falls heavily in favour of continuing this support with mortgage interest during the first six months of unemployment or supplementary benefit. The state accepts responsibility for the full housing costs of tenants claiming supplementary benefit. There is no cogent reason for refusing similar assistance to those who have been encouraged to buy their own homes as an expressed aim of Government policy. It is among those who have bought their council houses under the right-to-buy and who have subsequently lost their jobs that the greatest number of mortgage casualties has arisen.
In the "TV Eye" programme to which I referred Mr. Newton suggested that it was not wholly a problem for the Government; the building societies, banks and finance houses were also involved. That may seem a fair point. Building societies and banks have undoubtedly been competing to lend 100 per cent. mortgages or even more if some of the ancillary services on offer are included. So how much blame should they take for over-easy lending and not scrutinising people in the way they used to? In the
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programme the chief general manager of Nationwide claimed that his society was performing an act of social conscience in lending to buyers at the bottom of the market. That may be true of Nationwide, but it does not prevent other societies from repossessing for arrears for as little as £300. Social conscience or no, the Nationwide general manager was, to quote his words on the programme:
"wholly opposed to the Government's proposal".
His view was shared by a number of Conservative Members of Parliament, who voted against the Government on this issue.
Where does all this leave us? I think it leads us on these Benches to demand that, at the very least, the Government rethink their policies on this matter. I know that there is an appetising saving to be gained from the Government's proposals which would be in the region of £30 million, as I understand it. But this has to be set against the £4 billion to £5 billion of mortgage tax relief extended to people in jobs and often on very high salaries which stretches right up the tax scale to the high rates. It also has to be seen against the 100 per cent. relief given to tenants in similar circumstances. It is not, therefore, inequitable that new home owners in difficulties should receive similar assistance.
In its last report the Social Services Advisory Commitee (this was its opinion in paragraph 3.39) said:
"We do not think a scheme of this kind could be justified at all, unless the building societies and other mortgage-giving bodies were prepared to give comprehenisive assurances about the availability of rescheduling. In commercial terms many cases would presumably arise where because of previous unemployment or sickness and the claimant's likely income when employed, a building society would be extremely reluctant to reschedule the debt. These are issues which would need to be fully resolved before a decision could realistically be taken to limit mortgage payments for any sizeable length of time. However, even if such points could be settled satisfactorily, we would still doubt the wisdom of the proposal because of its inequity. Both on income support and in low-paid work, a claimant who was an owner-occupier would be treated less generously than a tenant with similar total housing costs, even after mortgage tax relief had been taken into account. This discrimination sits very oddly with the Government's expressed policy of encouraging owner-occupation as the preferred form of tenure."
That is the view of the Social Security Advisory Commitee. I want to be fair to the committee, and I take Mr. Newton's point that lending bodies should at least accept a measure of co-responsibility. They could improve their scrutiny and reduce their eagerness to lend at all costs. This would reduce the eventual cost to the public purse in the event of failure. The social conscience claimed by Nationwide could take the form of either better counselling initially or rescheduling the debt when a home owner falls on hard times. Presumably that is a minimal act of social conscience.
As I have already indicated, rescheduling can present mounting problems for home owners on low incomes, and if they fail to find work, it can also present a problem for the Government in meeting additional interest payments after the first six months. The Government have, after all, promoted the homeownership explosion. They must recognise that the number of those who fall by the wayside is likely to increase as a result of it—and, in fact, is increasing dramatically.
The Social Security Advisory Committee is at present holding an inquiry for which I assume it has invited evidence from professional and consumer bodies. What I want to hear from the noble Baroness tonight is that the Government will not prejudge the results of the inquiry and that they will keep an open mind on withdrawing their proposal until they have received and studied the report. I do not think that the Government would want the impression to get about in the country that under the Tories you get the right to buy your own home but you do not get the right to keep it. I beg to move.
8.30 p.m.
Lord Stallard: My Lords, I rise to support the amendments moved so eloquently by the noble Lord, Lord Kilmarnock, and since he has covered most of the points to which I would have liked to refer, perhaps I can be brief. The problem we are discussing is part of our own making, as the noble Lord rightly says; and it is part, certainly, of the Government's own making. It was one of the Government's main policy planks—and one may argue whether it is right or wrong—to encourage home ownership, to sell council houses and council flats to tenants at cut-down prices or reduced prices. Many people went into that because so far as they were concerned it was as cheap, or nearly as cheap, as renting. One can understand that.
Then all sorts of other factors came into being—unemployment among others. This has created difficulties for those families who were already stretched to buy their house and now find themselves over-stretched. So the problem which is outlined by the change in this clause is partly of the Government's own making. It seems churlish, to say the least, that having encouraged these people to buy and to get themselves into this situation, we then say at the same time that we are going to cut by half the amount of assistance that they would get, having got into these difficulties that were not their fault in the first place. That seems a bit hard to accept, and we know that many people in that situation are in real trouble. There has been a sharp increase in the number of people who own their own homes; it is a fact that two-thirds of the households in England and Wales are now owner-occupiers. Many new owners are people who are just about able to manage, just struggling to make the best of it. But the number of those in arrears has trebled since 1979. In 1984, according to the latest figures that are available, there were 54,754 mortgage possession cases, compared with 35,471 in 1981. Possession for mortgage arrears is now one of the more worrying causes of homelessness, and certainly more worrying than possession for rent arrears. Homelessness created by mortgage arrears is now in excess of that created by possession for rent arrears; that is something which is different and which certainly worries us all.
The Joint Consumers Council-Social Security Committee looked at this problem and produced a research document called, Behind the Mortgage: 1985. They identified three causes for the problem: the increase in unemployment; the increase in divorce and separation; and the stretched budgets as lower-income households struggle to meet repayments. There is a real problem here. The lenders' different approaches to the arrears has been mentioned by the noble Lord,
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Lord Kilmarnock. Many of them take different approaches. Some of them will accept interest-only repayments—but not all of them. In fact, 16 per cent. of local authorities refuse to accept interest-only repayments in any circumstances. A total suspension of interest payments is extremely rare. I think that probably the only instances of that were when some societies did so in the recent miners' dispute. But it is exceedingly rare and it is linked to the capabilities for future payments by the tenants.
Most of the people in these circumstances have nowhere to go. It is almost impossible for people on low incomes with high arrears to trade down; there is no way in which they can manage it. They cannot do it. So there is nowhere to go. If they sell before the repossession order comes in, they will be deemed to have made themselves deliberately homeless and they will not even qualify for local authority assistance or bed-and-breakfast accommodation. It can be an exceedingly worrying situation. Reposssession is growing through all these factors. Many of these unemployed and divorced families have survived, and are surviving, only because of the supplementary benefit provisions that were included prior to this clause. Now it is the intention of the Government to cut those payments by half. That means that there will be a dramatic increase in the number of people who are in severe difficulties. Amendment No. 38 seeks to rectify that, and I support it.
Baroness Jeger: My Lords, I support this amendment and I want to ask a specific question. I referred to this matter on 23rd June when I asked the Minister what would happen if someone was unemployed for six months, got his mortgage interest paid, got a job for a little while, but then lost it. Would he have to go back to the beginning of the six months, or would he be helped? The noble Baroness said:
"The noble Baroness, Lady Jeger, raised questions of linking arrangements for people who have two spells of benefit with only a short time in work. I shall consider this along with other matters". [Official Report, 23/6/86; col. 114]
All that I ask tonight is, what has been the result of the Minister's consideration.
Baroness Trumpington: My Lords, there is little that I can add to what I have already said in Committee. However, I shall add what little I can. I have set out the Government's conviction that it is unfair to give 100 per cent. guarantee of state help on mortgage interest to people out of work when others in work on comparable incomes have a much greater burden to carry themselves.
We are also very concerned that a proper balance must be struck between the interests of borrowers, lenders and taxpayers. I have also said that we have referred draft regulations to give effect to our proposals to the Social Security Advisory Committee. The committee has not yet completed its consultations with interested organisations and the general public. We expect to receive its report some time in August, and I assure the noble Lord, Lord Kilmarnock, that only after that will we take final decisions. It would be premature to make a firm choice now, as the amendment invites us to do. Also of course there will be an opportunity for Parliament to debate any regulations which we eventually decide to bring forward.

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I think I should also leave your Lordships absolutely clear on one point: that in rejecting this amendment no irrevocable decision on future help with mortgage interest is being taken. The regulations we shall be bringing forward under Clause 21 will specify in detail the help we intend to make available for mortgage interest, and we have made special provision in the Bill to have those regulations laid before Parliament in draft so that they can be fully debated.
In Committee the noble Lord, Lord Kilmarnock, expressed the view that people who had bought houses under the right-to-buy scheme and then become unemployed may be made homeless if this regulation comes into force. While I accept that lending organisations will need to operate sensitively—and I am confident that they will do so—I do not think the proposals in themselves will have the effect envisaged by the noble Lord. On average, arrears arising from the proposals will amount to no more than £200—not an over-significant amount if added to the average 25-year mortgage debt. Even for people with relatively larger mortgages, the arrears will total no more than the equivalent of three months' interest payments. It is unlikely that a lender will repossess for such a sum. Furthermore, building societies have indicated their preparedness to help individual borrowers over short-term difficulties. That is why we have decided to limit the state guarantee for the first six months.
The Government encourage home ownership through tax reliefs, discount sales of rented homes and the right-to-buy schemes. Taxpayers should not have to underwrite these forms of support from the very first day on benefit to the extent that they do now. Building societies should accept that to expand business as they have done carries with it some social responsibility. The capitalised arrears concession will assist societies to reschedule loans.
The noble Baroness, Lady Jeger, asked about linking arrangements, and I well recall what I said to her at an earlier stage. To protect people with short breaks in entitlement to benefit we also propose to introduce an eight-week linking rule. Anyone who goes off benefit for eight weeks or less will not have to start the six-month period again. With those assurances, and in the expectation of the report coming shortly from the Social Security Advisory Committee, I would ask your Lordships not to press this amendment.
Lord Pitt of Hampstead: My Lords, before the noble Baroness sits down, I notice that the Government are willing to think again on the question of the mortgage. Will they also think in terms of taking into account the cost of repairs and insurance to cover the structure? These are all things which can be difficult when somebody is out of work and needing help.
Baroness Trumpington: My Lords, with the leave of the House, I have said that it is premature for me to answer now. The general rule is that we do not take into account repairs to houses.
8.45 p.m.
Lord Kilmarnock: My Lords, I am grateful to those noble Lords who have participated in this short debate
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on this rather important matter. I was interested to hear the noble Lord, Lord Stallard, say that mortgage arrears are actually in excess of rent arrears. That is certainly an important point. Also I think he said that 16 per cent. of societies refused to accept interest-only repayments. I hope those are two considerations which the Government will bear in mind.
Obviously we welcome the announcement made by the noble Baroness in response to the noble Baroness, Lady Jeger, on the eight-week rule. I find it difficult to go along with the noble Baroness when she says it is unfair to those in work to have to support those out of work. She made no reference to the far greater unfairness of not giving homeowners the same protection as tenants. That really is the essential issue of equity in this matter, in my view.
However, at the same time I was glad to hear her say that the report is expected from the Social Security Advisory Committee in August and that no irrevoca-ble decision has been taken by the Government in recommending the rejection of this amendment. She said it would be premature to make a decision, and in fact I agree with her. I was not going to press this amendment, but I wanted to air this important matter. It represents an area of growing concern and we have now had an opportunity to discuss it.
There are other points one could take up, such as the unliklihood of repossession for a debt of a little as £200; but that is probably a minimum figure and, when added back into the debt, presents a further problem for the eventual reduction of that debt. I agree with the noble Baroness that the building societies have some social responsibility in the matter, and I imagine that this will be discussed during the consultation process with the Social Security Advisory Committee. Bearing in mind all those points I shall not press the amendment, but certainly when the Government finally come forward with regulations, if they are unsatisfactory or inequitable, we shall return to this matter. On that note I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Trumpington Baroness Trumpington moved Amendment No. 39:
Page 29, line 35, leave out from ("shall") to end of line 36 and insert (", except in prescribed circumstances, be treated as the income and capital of that person.")
Baroness Faithfull Baroness Faithfull moved Amendment No. 40:
Page 30, line 4, at end insert—
(", provided that, in calculating or estimating income from employment, any expenses necessarily incurred in connection with that employment shall be deducted from the income ").
The noble Baroness said: My Lords, this amendment deals with the difficult question of volunteers' expenses. I do not wish to detain your Lordships by making a Second Reading speech, but at this point I would just say that in your Lordships' House we pay tribute to the volunteers in this country who do so much voluntary work, whether they are unemployed or in work on low pay.
When the Government put forward the proposals to raise the earnings disregard for unemployed people to £5 from £4 but to allow no deduction for work expenses, many of us thought it could adversely affect

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people doing voluntary work who have their expenses reimbursed. It is easy to exempt volunteers' expenses. The problem arises where the person is receiving some small remuneration in addition to the reimbursement of expenses. For example, a volunteer driver who had £10 expenses reimbursed would suffer no loss of benefit because the £10 would be ignored; but someone doing similar work and earning £5 a week on top of the expenses would presumably not be treated as a volunteer. The earnings of £5 would be covered by the £5 disregard, but the expenses of £10 would be deducted from the benefit. Of course the regulations may say that if your earnings are only £5 net, you can be treated as a volunteer; but then what about someone who earns £10? Would my noble friend the Minister not agree that perhaps the simplest thing of all would be to say that work expenses should be deductible? I beg to move.
Lord Ennals: My Lords, I shall be brief in supporting the noble Baroness. I think the problem of definition between a volunteer, on the one hand, and a volunteer who gets a small honorarium for the work he or she does, on the other, is a very difficult one. As I have had the privilege of seeing, there is a very substantial growth across the country of schemes, sometimes based on a volunteer plus a driver and sometimes based on a volunteer plus a home helper (not a home help) for those who are disabled and elderly. I think it is difficult to say just what the difference is between a volunteer and a volunteer who might actually be making a very small sum of money because he or she probably lives on a low or modest income. It seems to me that the noble Baroness has hit on a very reasonable way of dealing with this particular problem. I shall be very interested to hear the Minister's answer, because clearly an answer has to be found, and if the Minister has that answer I shall leap up and say "Thank you".
Baroness Ewart-Biggs: My Lords, as I had my name down to the amendment when it was mooted at Committee stage, and as it now appears in a different form, perhaps I can say a few words. As many of us know from our postbags a great deal of concern has been expressed about the effect of the proposal in the Bill. The majority of people involved were unemployed and doing voluntary work, as the noble Baroness, Lady Faithfull, said, for which they were paid only expenses. At Committee stage the Minister was very sympathetic and said:
"I understand the concern that people should not be put off volunteering by this change. We have a great deal of sympathy and admiration for the valuable work undertaken by volunteers. Genuine expenses will continue to be disregarded. Therefore, the amendment is unnecessary".—[Official Report, 24/6/86; col. 132.]
We accepted that the Minister was sympathetic and that there was little to fear. Since then we have understood there have been discussions between officials and outside advisers and that a concession limited to volunteers' expenses would create new and indefensible anomalies. These are of such complexity that I do not think that I can go into them now, but it does mean that the anxiety is still there. We are very much looking forward to a slightly different answer from the Minister this evening.
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May I add that I have received in particular a number of letters from Northern Ireland. Northern Ireland has already been mentioned as suffering a great deal more from some of the provisions than other places. As your Lordships will know, volunteer work in Northern Ireland is really one of the great professions, and I think there are more people involved in voluntary work there than perhaps anywhere else in the United Kingdom.
I have received, as I say, many letters. One of those letters comes from the Belfast Voluntary Welfare Society, and it says:
"We have been finding increasingly that motivation has been weakening among the young unemployed and that the little extra expenses have been absolutely critical in ensuring that we are able to move unmotivated youngsters onto the beginning of a pattern which moves through volunteering, hopefully on to either a training scheme or an MSC type of employment scheme and then on into employment. If our reading of the new Bill is correct, the Government is going to remove a key link in our very tortuous attempts to tempt some of the young unemployed towards the employment market."
My Lords, the anxiety is still there despite what the noble Baroness said at Committee stage, and the noble Baroness, Lady Faithfull, has suggested a way in which those anxieties can be diminished. I very much hope that the Minister will take that road.
Lord Banks: My Lords, I should like briefly to support this amendment and testify to the fact that the anxiety referred to is still very prevalent for the reasons so cogently expressed by previous speakers.
Baroness Trumpington: My Lords, there has undoubtedly been some confusion between two issues here, and that is why I was particularly anxious to take these amendments separately. I hope my explanations will have the noble Lord, Lord Ennals, leaping like a Lord.
First, there is the question of how we define the earnings or resources which will be included in the calculation which determines the level of benefit. The second is the extent to which these earnings will be taken into account in calculating the benefit. This latter question raises the subject of specific automatic disregards—i.e., we say a certain level will be ignored. It is on this that we have made a firm proposal in the Green and White Papers. However, the other issue, the definition of earnings, should not be confused with this kind of automatic disregard. Thus it is possible to define the resources to be taken into account in such a way as to exclude expenses such as volunteers or two-thirds of the income from child-minding. We should not confuse these two matters.
Nevertheless, I think discussion of this topic in the past has created some confusion, and I shall describe the two sides to the problem to clear this up. Your Lordships may know that at present lone parents have a complicated earnings disregard whereby they are allowed to keep £4 of earnings plus one-half of earnings between £4 and £20 before their benefit is affected. Thus, if she earns £ 12 she can keep £8 a week before the benefit begins to reduce. In deciding what level of earnings to which that complicated taper can be applied regard is taken of child-minding expenses. They are taken off the earnings.

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The Government have proposed two things in relation to this disregard: first, there should be a flat-rate disregard of £15 (which is higher than the former maximum at present); and, secondly, individual assessment of expenses like child-minding costs should no longer take place. This second is the subject of an amendment tabled by Lady Ewart-Biggs, so I shall say no more on the merits of it. But I shall ask your Lordships to note that the Government's proposal relates only to the child-minding expenses of a person going out to work. I fear some people have felt that our proposal relates to the treatment of income from child-minding of someone who does so as a part-time occupation. This is not the case. Certainly at present when assessing the income of someone in this position, two-thirds of it is ignored. This is provided for in Regulation 10(2)(c) of the Supplementary Benefit (Resources) Regulations.
There is nothing in the current Supplementary Benefit Act which covers this detailed point. The main legislation provides the power for certain resources to be disregarded. Your Lordships will see that we have similar power in Clause 22(7)(b) to disregard capital or income, so when drawing up the regulations for the treatment of capital under income support we shall be able to carry forward the same treatment—should we want to.
I do not want to pre-empt decisions at this stage. We Ministers will have to look at the details of the regulations under the new scheme, to see what extent provisions in the current supplementary benefit scheme should be in the income support scheme when it is introduced nearly two years hence. I am sure that when doing so we shall be helped by the views that have been expressed in this House and in another place on a whole host of issues, including the subject of this amendment.
I have now to confess that the most terrible thing has happened to me. My replies to amendments have been put in the wrong way round. I have been speaking to Amendment No. 41 with immense conviction, and I am very sorry but the numbering has gone wrong. What would your Lordships like me to do? I am totally in your hands. I can either start all over again—
9 p.m.
Baroness Faithfull: My Lords, I am very grateful to my noble friend. I was beginning to think that I had the lowest possible IQ in your Lordships' House, before she said that the numbers had gone wrong. This is a very complicated situation and it is very hard on the Minister that she should have to go through it all over again. I wonder whether she could bear it in mind for the next stage of the Bill and whether it could be clarified for us then. I still cannot understand whether, under her statement, the child minder will have a disregard of one-third of the payments received in respect of child minding. It will be extremely difficult for my noble friend the Minister and, if your Lordships agree, may I ask her whether she will clarify the whole situation for us by writing to us and then raising the matter at the next stage of the Bill?
Baroness Trumpington: My Lords, with the leave of the House, may I say that I could not be more
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embarrassed and I could not be more grateful for the kindly spirit in which my noble friend has taken this great shock to my nervous system. Probably the best thing to do would be for me to undertake to speak at Third Reading of the Bill on these two matters, by which time I hope that the numbering system will have sorted itself out. This has no bearing at all on the amendment of the noble Baroness, Lady Ewart-Biggs, which is quite a different matter. But if your Lordships are willing for me to do it in that way, I shall be very grateful. I do not believe that, basically, we are at odds over this matter. It is simply a question of clearing up the confusion that exists in the minds of everybody, to which I have unwittingly added.
Baroness Jeger: My Lords, I should like to say on behalf of my noble friends that we appreciate the situation and look forward to the Third Reading when the Minister will speak further.
Baroness Faithfull: My Lords, with the assurance of my noble friend the Minister, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 41 not moved.]
Baroness Ewart-Biggs Baroness Ewart-Biggs moved Amendment No. 42:
>Page 30, line 4, at end insert ("; save that for the purpose of calculating income support there shall be deducted from earnings derived from any employment expenses incurred in respect of child care.")
The noble Baroness said: My Lords, I hardly dare to move my amendment on account of the deep shock of the last few minutes. However, the Minister said that my Amendment No. 42 is quite separate from anything she has been saying, and therefore I shall move it. This amendment seeks to allow child care costs for parents, mainly single parents in receipt of income support, to be regarded as a work-related expense and therefore to be disregarded in the calculation of benefit, as is the case under the supplementary benefit scheme. At present, parents are able to set their work expenses, such as child care costs or fares to work, against their earnings before entitlement to supplementary benefit is calculated. This is in addition to a maximum earnings disregard for a single parent of £12.
As the National Council for One Parent Families has pointed out:
"This enhanced disregard, together with deductions for work expenses, was introduced in recognition of the special needs of one-parent families to enable lone parents to take advantage of a valuable source of extra income through part-time work with provision for necessary child care costs, and to increase the labour market participation of lone parents who are dependent upon supplementary benefit".
During the Committee stage, the Minister put forward a rather misleading view because she cited research from the Social Policy Research Unit at York University to justify abolishing the disregard for child care costs. She said that the average fare to work for single parents in 1982 was £1.18 a week, and child care costs were 94p. But such averages do not really relate to the actual costs incurred by single parents paying for child care, the reason being that the figures quoted by the noble Baroness the Minister must have been based on the inclusion in the sample of many

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parents who do not pay anything for child care; for example, single parents whose relatives look after their children for nothing. Indeed Professor Jonathan Bradshaw at York confirmed this and agreed that it is misleading for the Government to use the figures in this way.
The figures showed that 77.6 per cent, of the mothers in paid work did not pay anything for child care, but these were included in the sample. They therefore distorted the reality of the actual costs, because if you add up all the costs and divide by the mothers, a whole lot of whom do not pay anything, you get a very much lower cost than the real cost of child minding. In this sample in 1982, 14 per cent, spent over £3 on travel and 5.6 per cent. spent over £5 on child care; and today the figures would be much higher, especially in London.
A further important point is set out in the paper on earnings disregard from York University. It welcomes a flat rate disregard for single parents but also says:
"It should be noted that as the proposal stands this will mean a loss in income for some lone parents because work related expenses are positively associated with earnings. Those who lose tend to be those with the highest earnings which means that this change will penalise the people who are making the greatest effort to keep in contact with the labour market".
Perhaps I may quote another paragraph:
"One way round this would be to increase the level of disregard to compensate for the removal of work related expenses. Indeed we would argue that the proposed level of £15 is too low for this and for other more important reasons. The Green Paper is very brief about the aims of the disregard saying only that they are intended to help them in seeking employment and helping themselves.
"As an incentive to take up employment or remain in jobs, not only is the level of disregard likely to be important but also how it relates to the number of hours worked".
According to the new earnings survey of 1984 the average gross hourly earnings of women in part-time manual jobs of £2·09 plus a disregard of £15 represents only about seven hours of paid work a week. Given any rise in earnings between 1984 and 1987 when the change is introduced this will still be further reduced. Indeed seven hours bears very little relation to the actual hours of paid work for female part-time employees.
For a lone mother on income support to take a typical part-time job of about 18 hours would therefore mean that there would be no financial gain from more than half the hours she worked. In this context the cash incentive of an additional £15, although it might be quite a substantial increase on her benefit income, may be seen as representing only a very low return from the hours worked. That really seems to give justification for our amendment. As I said in Committee it is important for lone mothers to go out and work. Not only does it help with a very low income but it is also therapeutic and helps the mother to avoid depression. Such factors are important for the child. Anything that can be done to encourage and help single mothers to go out to work should surely be encouraged. I beg to move.
Baroness Lockwood: My Lords, I should like briefly to support the amendment in the name of my noble friend Lady Ewart-Biggs. She has outlined the difficulties arising from the low pay of the majority of women workers and in particular the low pay of part-
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time women workers, who constitute more than 40 per cent. of women workers generally.
There is another aspect of the problem on which I should like to focus. I refer to the use of child minders as carers of children where the mother is at work. A few years ago the whole question of child minding was one of great concern in this country. Unfortunately, we do not have a good reputation for being generous in the provision of nurseries for small children. The majority of women have to rely largely on child minders if they want their children to be cared for. It will be recalled that at that time a number of cases appeared to suggest that there could be a great deal of abuse in the child minding services.
Since then there have been tremendous steps forward in professionalising the child minding service. Obviously if you are going to professionalise a service, the cost of that service will increase accordingly. One of the fears is that if the expenses for child care were not to be allowed, as this amendment indicates, there might be a tendency for children to be withdrawn from the better kind of child care facilities and placed into less well provided child care facilities. That would be a very retrograde step. I would have made this point on the previous amendment had the noble Baroness, Lady Faithfull, been able to move it, but it is relevant both to the case that she would have been making on Amendment No. 41 and to Amendment No. 42 of my noble friend.
Lord Pitt of Hampstead: My Lords, before the Minister replies, I have had my attention drawn to a striking consequence of the Government's programme. It is an example of one piece of Government legislation defeating the aim of their employment programme. A particular project has been advertising part-time jobs under the community programme. There have been several applicants who are women with children. Child minding fees of £30 and £34 per week is the borough average, and with that they can embark upon the community programme while their children are looked after. However, without those expenses being offset, that will not be feasible and access to the community programme and to other part-time opportunities and avenues of employment will be denied to them. That is an example, but I am told it is quite typical. I thought that I should throw that point into the pond at this moment. I have just been given that information but it seems to me that it illustrates the situation.
9.15 p.m.
Baroness Trumpington: My Lords, I am still so unnerved by my recent experience that your Lordships must stop me if my reply does not sound right. This issue is one that has been discussed at length during the Bill's progress. Indeed, we debated this point in Committee three weeks ago, and I find myself in some difficulty because I do not want to test the patience of your Lordships by repeating the remarks I made then. However, as I said in my ill-starred last few moments on my feet, this amendment raises an entirely different matter from that raised by my noble friend Lady Faithfull in her amendment. It is specifically directed at the cost of child care as met by someone who goes out to work. It seeks to have those excluded from the

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amount of earnings that will be taken into account in determining the level of benefit.
I have already pointed out that the current treatment of those expenses in the supplementary benefit scheme is at odds with the approach of housing benefit and family credit: the benefit for those out of work is more complicated and generous than the benefit for those in low-paid full-time work. Our moves to put all three income-related benefits on a common footing have been widely welcomed. I do not believe it is sensible to perpetuate inconsistencies.
I mentioned during Committee stage that the available evidence suggests that the part-time work expenses, including child minding expenses, of those on supplementary benefit are relatively low. In the nature of things, most part-time work by those on supplementary benefit is likely to be undertaken locally.
The noble Baroness, Lady Ewart-Biggs, raised the question of SPRU research. We shall of course consider her point, but the point she accepted was that the majority of people did not have costs. That is unsurprising, because much such part-time work will be local and for short periods. There has to be a balance. The point remains that for most lone parents the new system will be simpler and better.
Our proposals on earnings disregards generally offered substantial improvements over the present arrangements. I am sure your Lordships will agree that direct incentives of that kind are preferable to the complications of the current system, which would be carried forward by this amendment. We propose to increase the general earnings disregard from £4 to £5. We are proposing also enhanced disregards of £15 for certain special groups, including lone parents, who are the people most likely to incur child minding expenses. The other groups are disabled people and long-term unemployed couples. We have said we shall monitor that aspect.
So, regretfully, I cannot recommend acceptance of this amendment. The Government's proposals represent increased help to a majority of lone parents without involving them or our local office staff in a complicated assessment. I hope that the noble Baroness, Lady Ewart-Biggs, will agree with my explanation.
Baroness Ewart-Biggs: My Lords, I agree that the explanation of the noble Baroness was related to my amendment but I cannot say that I am very happy about it. The noble Baroness said yet again that she felt that child minding expenses were relatively low, but I thought that I had made a very definite point to show that some parents who do not have relatives to look after their children when they are working have to pay a high price. As my noble friend said, what we worry about is that these lone parents will either retire from work or put their children into the hands of carers who cost very much less.
Therefore, I believe we have brought forward a very important point and there are many people who are extremely worried about it. There is no doubt that the number of single parents is increasing and the more we can involve them in the life of the community and avoid any kind of social isolation the better it will be,
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not only for them but particularly for their children.
I am of course very disappointed that I did not receive any further response from the Minister. However, it is a little late to do anything but heave a great sigh of sorrow and ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Banks Lord Banks moved Amendment No. 43:
Page 30, line 11, at end insert—
("( ) Where a person has a Purchased Life Annuity to which Section 230 of the Taxes Act 1970 applies—

(a) when assessing income the annuity received shall be treated for the purposes of this part of this Act as consisting partially of income and partially of capital and the proportion to be treated as capital shall be the proportion prescribed by Regulation and shall be disregarded as income when calculating income related benefits; and

(b) the capital of such person for the purposes of this part of this Act in respect of such Purchased Life Annuity shall be the original purchase price of that annuity less—

(i) the total amount of the capital sum calculated as prescribed by Regulation received by that person up to the relevant date for the assessment of the income related benefit and

(ii) where such person has obtained a loan to purchase such life annuity to which paragraph 24 of Schedule 1 of the Finance Act 1974 applies the amount of the loan outstanding at the relevant date for the assessment of income related benefit.").

The noble Lord said: My Lords, in assessing a person for income-related benefits, both income and capital are taken into account. A purchased life annuity is composed of both income and capital elements, and this amendment is concerned with the recognition of that fact and a proper division between the two.
The amount of annuity payment is determined by taking the purchase price of the annuity, which is capital, and adding an estimate of the interest to be earned on it between purchase and death. Since the date of death is not known the expectation of life of the individual is used. A deduction is made for expenses and the resulting total is divided by the number of years of the expectation of life to arrive at the annual annuity payment. There is clearly an interest and capital element in each payment.
For income tax purposes only the interest element is taxable. The consequence of this amendment would be that only the interest element would be assessed as income for earnings-related benefits. The capital value of the annuity would be determined by deducting from the original purchase price the sum of the capital elements paid since purchase. This would clearly be a declining figure year by year. The capital value in the early years would probably bring the annuitant over the cut-off point for capital. As time went on he would fall below it, assuming he had no other capital.
Where the annuitant had raised a loan to purchase the annuity—as in a home income plan effected by an elderly person—the amount of the loan would be offset against the capital value. Since it would always exceed the capital value, there would be no net capital value in those cases.
It is already the practice (and it is a welcome return to the former practice) to offset the mortgage interest in those cases against the annuity for assessing housing benefit. With the separation of capital and interest

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which I envisage, the mortgage interest would be offset against the interest element in the annuity in the determination of income. Thus, the amendment would be of value to elderly home owners, supplementing low incomes by means of a home income plan by eliminating capital value and reducing income for assessment.
However, as I have explained, the amendment covers all purchased life annuities and not merely those which form part of the home income plan. The aim generally is not to secure special favours for annuitants but rather to put purchased life annuitants on as near as possible an equal basis—a level playing field, as it is described—with other forms of saving such as building society and bank deposits. I beg to move.
Baroness Turner of Camden: My Lords, I rise to support the amendment moved by the noble Lord, Lord Banks, and to highlight one particular aspect of what he had to say in his very technical but very interesting speech when moving it. This amendment affords an opportunity to highlight the small but significant anomaly that affects elderly homeowners who have a home income plan to which the noble Lord, Lord Banks, has referred. I understand that about 15,000 of them exist. In conjunction with a building society or assurance company such elderly people have mortgaged their homes and used the proceeds to buy life annuities to supplement their incomes. Through taking this action and seeking to use their own resources to provide for themselves some extra income, they have been put at a disadvantage with regard to income-related benefits.
As noble Lords have said earlier in the debates on other aspects of this Bill, there has been a drive on the part of the Government to encourage people to become homeowners. The increase in home ownership has meant that more elderly people are living in their own homes and facing the bills that go with that situation, and with reduced Government expenditure there is often less help for house maintenance. What such elderly people have been doing, as has been indicated, is to undertake home income plans. If the amendment were passed, it would mean that in future the anomaly to which the noble Lord has referred would no longer exist and the elderly people who have embarked upon such home income plans would not be put at a disadvantage. Because it seems to us to be fair and reasonable, and because after all it is a relatively small anomaly to which the noble Lord has referred we hope that the amendment commends itself to your Lordships.
Baroness Vickers: My Lords, I also should like to support the amendment of the noble Lord, Lord Banks. He may remember that some time ago there was a similar amendment in front of us which was unsuccessful. I hope that this one will be successful. The noble Baroness has entirely covered the issues raised by Age Concern that I wished to express, but I also have some other points to add.
The link between these measures is that, for housing benefit purposes, the entire income from the annuity counts as income. It therefore will take the claimant off the scale, although in practice much of that income
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is immediately "spent" as a repayment. The net income would be a fairer measure. The difficulty occurs since income arising from certain fixed term annuities and bank and building societies deposits is treated consistently both for tax and housing benefit purposes and only interest is assessed. Part of the fixed term annuity is regarded as a return of capital. Moreover, for tax purposes, since 1955 whole life annuities are similarly treated, with part of the income regarded as a return of capital. However, this has not been applied to housing benefit. Indeed, the June 1985 guidance manual specifically requires income from whole life annuities to be considered in full.
In May, the Government announced that in future a change in the guidance manual will advise that mortgage interest deductions should be disregarded. However, life annuity plan holders are still at a disadvantage. I suggest that the amendment is therefore very helpful. It affects only a very small number of people—as the noble Baroness has said, about 15,000 altogether.
The amendment has been well thought out, if I may say so, by the noble Lord, Lord Banks. It may affect only a very small group of people but it may be a very important source of income to elderly homeowners in the future.
Lord Kilmarnock: My Lords, I wanted to say that just because my name does not appear in this amendment, as it does in most others in tandem with that of the noble Lord, Lord Banks, that is not to say that I do not support it. It is purely an oversight that my name is not there.
I simply add my voice to those of other noble Lords who have spoken to say that those home income plans are an extremely important way of enabling elderly people with a little capital to stay in their own homes by mortgaging their homes in order to purchase an annuity. I should have thought that that procedure was absolutely straight in line with the Government's policy of helping people to stay in their own homes. So I very much hope that the Government will look favourably upon this amendment.
Baroness Trumpington: My Lords, this is not the first occasion that the noble Lord and I have discussed this subject in your Lordships' Chamber. He originally raised it through an Unstarred Question last November, with particular reference to housing benefit. Since then we have, as he knows, partly as a result of the arguments he advanced then, been able to offer an improvement in the way in which one form of life annuity—the home income plan—is treated in the housing benefit assessment. The noble Lord was kind enough obliquely to mention that this evening. The noble Baroness, Lady Turner, may not have been aware of it when she made her comments. As a result of that improvement, some 7,500 elderly owner-occupiers will be better off from the 28th of this month.
This leaves the wider question of how life annuities in general should be treated in future. When I spoke in the short debate last November I told the noble Lord that I was not persuaded by his arguments. I shall now eat humble pie—I am doing a lot of that this evening—and modify what I said. I am prepared to

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keep an open mind on the issue. I fully accept that many of the noble Lord's arguments carry weight. Equally, though, he must remember that from 1988 a capital cut-off will be in operation for all three income-related benefits, with a tariff income applied to those with capital of between £3,000 and £6,000.
This means two things. First, treating life annuities as consisting partly of capital could be extremely complicated to administer. This is not simply a bureaucratic point. If it is complicated to administer, staff may get it wrong and elderly claimants may not understand it. Secondly, it would by no means be to the advantage of all those with a life annuity to treat them in this way. There would no doubt be swings and roundabouts. But, for example, someone who already had a small amount of savings in the building society could be knocked off income-related benefits completely by this method of assessment. I think this in particular merits further thought, and indeed the noble Lord might like to consider whether it is right to penalise some people with life annuities simply in order to achieve what he believes is theoretically the correct way to treat them in the assessment.
I would therefore like to invite the noble Lord to consider withdrawing his amendment on the basis of three assurances. First, as he is no doubt aware, his amendment is not necessary in order to achieve his purpose. There is already sufficient power in this clause to make the regulations which would be needed. Secondly, we shall not lose sight of this issue and will continue to consider all the possible options before we finally draw up the regulations. The Association of British Insurers has already initiated discussions with the department. Those discussions will continue, and I hope that the noble Lord will agree that it would be wrong to pre-empt them before the implications of all the options have been fully explored. And, thirdly, as I said at the outset, we shall keep an open mind on this issue. I am not ruling out the solution that the noble Lord has proposed, and we shall bear in mind everything that he has said in reaching a final decision, but I do not want to rush headlong into it. I hope that, with those assurances, the noble Lord will feel able to withdraw his amendment.
Lord Banks: My Lords, the noble Baroness referred, as I did, to the offset of mortgage interest in the case of home income plans. I certainly welcome that. Under a home income plan somebody may raise a mortgage on his house in order to purchase an annuity. Out of that he pays the interest on the mortgage and the balance is the additional income which helps him to meet his expenses. He never actually receives the mortgage interest. It never comes into his hands, because it is retained by the life office which is providing the plan. It seemed reasonable for the Government to offset the mortgage interest, and I am glad that they have done that.
As the noble Baroness recognised, in the amendment I was dealing with purchased life annuities as a whole, not just those which are bought in connection with a home income plan. While what I proposed would help, as I and others have shown, those who have home income plans, I was not seeking advantage for any particular section. I fully
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understand the point that the noble Baroness made when she said that there would be swings and roundabouts. I was trying to find a basis for treating purchased life annuities by separating capital and income so that we could deal with them in the way in which capital and income are proposed to be dealt with in the Bill.
I am aware that the Association of British Insurers has submitted suggestions, and the amendment is based on one of the bases which it put forward, and there are others. I am grateful to the noble Baroness for the sympathetic way in which she received the amendment; for the fact that she said that she would keep an open mind, and because she obviously contemplates something being done eventually under regulations to meet the points which are raised in the amendment. That being so, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 28 [Payment and recovery of family credit]:
Baroness Trumpington Baroness Trumpington moved Amendment No 44:
Leave out Clause 28.
The noble Baroness said: My Lords, I have already spoken to this amendment. I beg to move.
Baroness Hooper: My Lords, I beg to move that further consideration on Report be now adjourned.
House adjourned at twenty-four minutes before ten o'clock.