Lords Sitting of 20 February 1995

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

Overseas Aid
Lord Judd Lord Judd asked Her Majesty's Government:
What are the criteria by which they assess the contribution to overseas development of the United Nations, Bretton Woods and other multilateral institutions.
Lord Inglewood: My Lords, we work to ensure that contributions through multilateral agencies support the overall development objectives of the UK aid programme.
Lord Judd: My Lords, while thanking the Minister for that helpful reply, does he agree that it is essential to make the monitoring of the impact of World Bank and IMF policies on social development more effective? For example, does he agree that the introduction of user fees for health and education in countries implementing structural adjustment programmes too often have a disturbingly negative impact on the poor?
Lord Inglewood: My Lords, one of the aspects of aid which we consider to be of paramount importance is to ensure that the aid recipients are operating political and administrative systems which ensure the effective generation of wealth in their countries. One of the consequences of that may be that in the short term problems arise relating to poverty. It is only by breaking the vicious circle that, in many instances, we can help them to help themselves and thus raise their standards of living.
Lord Hailsham of Saint Marylebone: My Lords, have I correctly interpreted the brief nature of my noble friend's reply as indicating that he agrees with me that the form in which the Question is couched is too wide for oral Questions and that it would be more deserving of a general debate?
Lord Inglewood: My Lords, I thank my noble and learned friend for that comment. It is obviously a matter of major importance and certainly merits debate. Nonetheless, I shall endeavour to respond to noble Lords' Questions in a way which will satisfy them.
Lord Molloy: My Lords, can the Minister say whether our Government keep in touch with other contributing governments to ensure that all those who contribute can make reasonably certain that aid is used in the best possible way?
Lord Inglewood: My Lords, it is in the interests of all donors of aid to ensure that the money given is not
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wasted. We endeavour to work with our European Union partners and other donors to ensure that the results are as satisfactory as possible.
Lord Bruce of Donington: My Lords, does not the noble Lord agree that the evidence so far made available in the United Kingdom suggests that the overseas aid administered by the Minister for Overseas Development is usually far better directed than that directed by some of the institutions mentioned.
Lord Inglewood: My Lords, we in this country pride ourselves on the quality of our bilateral aid. At the same time, we try to ensure that our contributions to multilateral programmes are so targeted that they in turn contribute to effective multilateral projects. It is certainly the case that in a number of instances we were concerned about various aspects of multilateral aid. But we must get the matter in perspective. There is a role for both bilateral and multilateral aid and we want to see, from our perspective, that balance maintained.
Lord Avebury: My Lords, with regard to any proposals for development in Tibet, such as those recently laid before the European Union, will the Government have regard to the danger that those projects may be used as instruments of Chinese colonialism? Will the European Union, or anybody else being asked to fund development in Tibet, take advice from the Dalai Lama?
Lord Inglewood: My Lords, I thank the noble Lord, Lord Avebury, for his question. I am afraid that I am not intimately acquainted with the proposals to which he refers. However, were such proposals to be used as instruments of political oppression, that would run entirely counter to the policy of good governance which we like to see attached to our aid proposals. However, I shall take his specific suggestion back to my noble friend the Minister of State.
Lord Monkswell: My Lords, are the Government aware that their policies of trade and aid over the past 15 years have increased the disparities in income and wealth between countries and regions across the world? Bearing in mind that that has led to social instability and an increase in absolute poverty, will the Government now take steps to change that policy regarding trade and aid to ensure that income and wealth disparities are reduced rather than increased?
Lord Inglewood: My Lords, it is undoubtedly the case that during the past 15 years there have been incidents of political instability around the globe. However, it is probably ascribing too great a political potency to our aid policies to suggest that the problems are due to our aid programme. The important point is that trade and aid go together. For example, when one looks at a number of the Far Eastern countries, one sees that those countries which at one time accepted significant amounts of aid are now extremely prosperous and their prosperity is based on trade with the rest of the world. That is why we believe it is important to have an open trading system.
Lord Judd: My Lords, is the Minister aware that in response to the point made by the noble and learned

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Lord, Lord Hailsham, we on this side would welcome a debate on the international financial institutions and their role in development? However, does not the Minister agree that it is totally unacceptable that the poor, who were in no way responsible for the irresponsibility of governments in the Third World, should carry the burden of paying off the debts incurred by irresponsible leadership? Does he further agree that whenever the World Bank or the IMF undertake structural adjustment programmes there should be a thorough review of exactly where the burden will fall so that the poor can be protected?
Lord Inglewood: My Lords, it clearly is the case that problems have arisen where corrupt or misguided regimes have received aid. Where there have been large amounts of outstanding debt, the proposals of my right honourable friend the Prime Minister which led to the Trinidad terms have led to an alleviation of the problem. However, the noble Lord is absolutely right that in identifying proposals which are intended to alleviate poverty it is important to see exactly what will be their impact because, as I said in my response to an earlier question, it frequently is the case that, regrettably, things have to get worse before the economies of the countries concerned then generate wealth and matters become better.
The Viscount of Oxfuird: My Lords, does my noble friend agree that the form designed for aid and trade provision has a serious number of questions attached to it? If those questions can be answered honestly, the format of that aid and trade provision can be regarded as nothing other than honest?
Lord Inglewood: My Lords, if it is a satisfactory proposal, then it is something of which we are in favour.

Trident
2.45 p.m.
Lord Jenkins of Putney Lord Jenkins of Putney asked Her Majesty's Government:
Whether Lord Henley's statement that Trident and its predecessor Polaris were and are "independent" nuclear deterrents (H.L. Deb. 11 th January, col. 175) is compatible with the Nassau Agreement; with the Trident Purchase Agreement; and with the extension on 30th December 1994 for a further 10 years of the amendment to the 1958 agreement between the United Kingdom and the United States for Co-operation in the Uses of Atomic Energy for Mutual Defense Purposes (Cm. 2686).
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley): My Lords, the full operational independence of the United Kingdom's nuclear deterrent is not affected by any of the arrangements cited by the noble Lord.
Lord Jenkins of Putney: My Lords, for the first time the noble Lord has used the words "operational independence". On a previous occasion I pointed out that there is a general interdependence which these
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treaties confirm. Does he not agree with that? Has he seen the latest development along these lines, which was set out in a report in the Independent on Sunday whose front page was headed with the words:
"US urges Britain to ditch Trident"?
Lord Henley: My Lords, I am aware of the newspaper article to which the noble Lord refers. If he is suggesting by that article that the United States is putting pressure on us to reduce our deterrent, I can only say that we have received no representations whatever from the US to reduce the size of our Trident deterrent, which will remain as the minimum deterrent necessary for the defence of this country. With regard to the independence of the nuclear deterrent, as I have made quite clear on previous occasions and as we made quite clear at Nassau and on subsequent occasions, our forces are committed to NATO, but we have reserved the right to use it independently should national interests so require.
Lord Williams of Elvel: My Lords, has the noble Lord had the opportunity to look at the definition of the word "independent" in the Oxford English Dictionary? If he has not, perhaps I may remind him that it says:
"not depending on something else for its existence, validity, efficiency, operation or some other attribute; not contingent on or conditioned by anything else".
Does the noble Lord believe that to be a fair description of the Trident fleet?
Lord Henley: My Lords, the noble Lord's question is irrelevant and rather silly. The simple question is: can we or can we not use our independent nuclear deterrent? The simple answer is that we can: it is under the ultimate control of the Prime Minister at all times.
Lord Williams of Elvel: My Lords, if my question was silly, the noble Lord's response was ludicrous. Under what circumstances would the Prime Minister remove our Trident fleet from NATO and use it independently?
Lord Henley: My Lords, I do not have to answer that question. The important point is that he can use it if the national interest so requires.
Lord Stoddart of Swindon: My Lords, does the Trident missile depend on United States' satellites for targeting? If that is so, and the United States refused to give access to its satellites, would our deterrent still be independent?
Lord Henley: My Lords, the targeting is under our own control.
Lord Jenkins of Putney: My Lords, is not the truth of the matter that "interdependence" is the right word to describe the position of Trident and to some extent of the American nuclear missiles as well? There is a large degree of interdependence. Is the noble Lord now prepared to admit that?
Lord Henley: My Lords, since the 1958 agreement there has obviously been a considerable degree of

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co-operation between both countries. But co-operation between the two countries does not affect the operational independence and the use of that weapon.

David Rundle: Parole Board Recommendation
2.49 p.m.
The Earl of Longford The Earl of Longford asked Her Majesty's Government:
Why they have overturned the decision of the Parole Board to detain David Rundle, a mandatory life prisoner recalled to prison last March, in an open prison for one year.
The Minister of State, Home Office (Baroness Blatch): My Lords, the Parole Board recommendation was rejected because Mr. Rundle was considered to be an unacceptable risk for open conditions following his recall to prison in March 1994.
The Earl of Longford: My Lords, does the noble Baroness agree that that is one of the most pathetic Answers ever given by a Minister from that Bench?
Noble Lords: No!
The Earl of Longford: My Lords, I cannot think of a worse one. Is the noble Baroness aware that Mr. Rundle was recalled to prison last March—nearly a year ago—without having committed any criminal offence? Is she further aware that after eight months' consideration the Parole Board, having twice considered the case, came to certain conclusions? Can the Minister tell us whether the Home Secretary has any information which was not available to the Parole Board in November?
Baroness Blatch: My Lords, I do not regard considering the safety of the public or the public interest as being a pathetic reason for overruling a decision of the Parole Board. The vast majority of recommendations made by the board are accepted by my right honourable friend the Home Secretary, but Mr. Rundle was recalled because of concern about public safety following police and probation reports that he posed a danger to a vulnerable woman. Mr. Rundle had a history of volatile relationships with vulnerable partners. Mr. Rundle's deception in continuing the relationship bore similarities to the events surrounding his murdering his wife in 1978. He did not co-operate when on licence. He ignored advice from his probation officer and a formal letter from the Home Office about his unsuitable relationship with a woman. He deliberately misled his probation officer by continuing the relationship in secret. All the information that was available to my right honourable friend is made available to Mr. Rundle himself.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that her original Answer was thoroughly sensible and her second answer conclusive?
The Earl of Longford:: My Lords, does the Minister believe that that nonsensical intervention by the noble
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Lord, Lord Boyd-Carpenter, helps her case at all? He knows nothing whatsoever about Mr. Rundle, whom I have visited for 13 years. What the noble Lord believes he can contribute is beyond me. But does the noble Baroness agree that the truth is that all this information was available to the Parole Board after eight months' consideration and that the Home Secretary, knowing absolutely nothing about it, reached a different conclusion? That is the situation.
Baroness Blatch: My Lords, the noble Earl is absolutely wrong in what he says. To say that my right honourable friend the Home Secretary knew nothing about the case is totally wrong. All the information available was given to my right honourable friend. He takes advice from all his legal colleagues in these matters, including the Lord Chief Justice. Certainly part of that advice comes from the Parole Board; but consideration of the public interest and public safety must be paramount. I believe that I have made it clear that there were very good reasons to be concerned about Mr. Rundle.
Lord McIntosh of Haringey: My Lords, I accept that I know far less than either the Home Secretary or the Parole Board about this matter. The supplementary question which my noble friend Lord Longford asked, however, was as regards the information available to the Home Secretary which was not available to the Parole Board. The noble Baroness did not answer that question.
Baroness Blatch: My Lords, I did answer it. Hansard will bear me out. I said at the very end of my answer that all the information that was available to my right honourable friend was also made available to Mr. Rundle.
Lord McIntosh of Haringey: My Lords, that does not answer the question. The question was this: what information did the Home Secretary have which the Parole Board did not have, not which Mr. Rundle did not have?
Baroness Blatch: My Lords, there was no information that the Parole Board would not have had. It can consider as much information as it wishes in order to come to a conclusion. My right honourable friend is the long stop in these matters. He takes information from the Parole Board, but he also has a specific responsibility in law to consider the public interest as well.
Lord McIntosh of Haringey: My Lords, so the Minister is confirming that the Home Secretary had no further information than that which was available to the Parole Board but simply made a different judgment. Therefore, the question becomes political. Is this the right system, when an amateur politician can overrule the views of those who are paid and expert in these matters?
Baroness Blatch: My Lords, all the information which the Parole Board wishes to have to come to its conclusion comes from the police and the probation service and it can also call for information. As regards Mr. Rundle, it asked for further reports. Mr. Rundle and

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his solicitors took three months to present that information. The decision was held over until it was received. It was fully considered and all the board's deliberations were made available to my right honourable friend, who in law is accountable to Parliament. He has the long stop decision to make, taking advice from his legal colleagues, including the Lord Chief Justice, in coming to a decision about the public interest, which he is specifically charged to consider.
Lord Hailsham of Saint Marylebone: My Lords, does my noble friend agree that the Home Secretary, like other Ministers, is responsible and accountable to Parliament and that public safety is the responsibility of Parliament?
Baroness Blatch: My Lords, that is absolutely true. It is a specific obligation in law laid on my right honourable friend which he carries out to the letter. I have also made the point that in the vast majority of cases my right honourable friend accepts the advice given to him by the Parole Board. As regards Mr. Rundle, he considered that the public interest had not been fully met.
Lord Harris of Greenwich: My Lords, the Minister has referred twice to the Lord Chief Justice. Do I take it that he was consulted in this case? That sounds a most unusual proceeding in a parole recall case.
Baroness Blatch: My Lords, no. I was making a general comment that my right honourable friend can take information from the Lord Chief Justice as regards release. I cannot comment now on whether he did so in this case, but I can write to the noble Lord.
Lord Richard: My Lords, I am sure it is my fault, but can the Minister make the situation clear, at least to me? Is it right that when the Home Secretary came to his decision he had no information which had not previously been made available to the Parole Board?
Baroness Blatch: My Lords, when my right honourable friend makes a decision, which he is specifically obliged to do under the law, he will have all the information made available to him by the Parole Board. He will also have official advice from the department and he can take further legal advice. All the information that he receives in order to come to a decision is made available to Mr. Rundle. If the noble Lord is asking me specifically, I am fairly certain that there was not a word, a dot or a comma that my right honourable friend had before him which was not available to the Parole Board and which would have been material to that body had it had that information.
Lord Richard: My Lords, is that the case?
Baroness Blatch: My Lords, if the noble Lord doubts my word I shall find out. However, I can say that no information which was material to the Parole Board making its decision was withheld from it.
Lord Richard: My Lords, I am not questioning whether the noble Baroness is telling us other than that
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which she believes to be true. All I want to establish is what she is telling us. If I understand her correctly, she is now telling us that she is fairly certain that the Home Secretary did not have any additional information other than that which had previously been available to the Parole Board. If that is the situation, can she check it and perhaps write to us?
Baroness Blatch: My Lords, of course I shall. I shall check what I said. My right honourable friend quite specifically considers the public interest, and that is not a specific obligation of the Parole Board. In considering the public interest, it may well be that my right honourable friend took other advice.
Baroness Faithfull: My Lords, I am not quite clear as to the position. If the decision of the Parole Board is overturned by the Home Secretary for very good reasons, has the man a right of appeal?
Lord Hailsham of Saint Marylebone: No.
Baroness Blatch: My Lords, no, the man does not have a right of appeal when such a decision is made. The prisoner has the right to present his or her case to the Parole Board, and the full opportunity was taken as regards Mr. Rundle.

Local Education Authorities: Finances
2.58 p.m.
Baroness Hamwee Baroness Hamwee asked Her Majesty's Government:
Whether they have any proposals to recompense local education authorities which have suffered a loss in grant due to the new financing arrangements for pupils outside a local education authority's own area.
Lord Lucas: No, my Lords.
Baroness Hamwee: My Lords, perhaps I may explore the matter a little further. Do not the Government regard it as anomalous to consider a pupil to have different socio-economic characteristics—that is the basis of SSA and grants—just because he is educated in a neighbouring borough rather than in his home borough? Does the Minister agree that he is the same child with the same needs? Does she further agree that the new financing arrangements represent a penalty for an LEA running a successful education service and attracting pupils from other LEAs into its own service? How do the Government square that with their advocacy of market forces?
Lord Lucas: My Lords, it is a question of debate and there has been a great deal of it between the Government and local authorities as to how the standard spending assessment should be made up. There have been a number of authorities in the same camp as the noble Baroness saying that pupils who move from one local authority to another should bring with them the average characteristics of that authority. There have been many others who say that pupils who move tend not to carry with them the special educational needs other than the statemented typifications of the authority the child

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comes from—in other words, pupils who move tend not to have special needs. However, the Government have sided against the noble Baroness and decided that local education authorities, which have the responsibility for special educational needs in their area, should retain the funds to deal with such children in their area in the expectation that, in the main, those pupils will stay with them.
Earl Russell: My Lords, the noble Lord may not be aware that that decision caused considerable misgivings in this House when it was taken. However, is he aware that the problem that we are discussing centres not on special educational needs, but on additional educational needs—notably, the need for free school meals? Is the noble Lord further aware that since they are such a vital part of the income of families on benefit he risks being accused of exporting his problems to the Department of Social Security?
Lord Lucas: My Lords, I do not think that we take any position of principle on standard spending assessments; it is merely a matter of practicality and what arrangements suit the facts best. If the noble Earl or the noble Baroness, Lady Hamwee, can produce evidence that the current arrangements are not in accordance with the way things are, I am sure that that will be taken into account next year.
Lord Dixon-Smith: My Lords, does my noble friend agree that whenever the standard spending assessments are changed some authorities gain—and they are, of course, very pleased—but some authorities lose and they, quite naturally, feel aggrieved? I hope that my noble friend will agree that there would be considerable merit in stability, but, since the SSA is patently perceived to be a fallible formula, there is a constant need to adjust and improve it; hence the constant feelings of either glee or pain depending on which side of the adjustment an authority happens to fall.
Lord Lucas: My Lords. I agree with my noble friend who puts the matter very well. The world changes and SSAs have to change. We do not pretend that they are perfect, but we do think that they are the best that we can achieve.
Baroness Farrington of Ribbleton: My Lords, does not the noble Lord agree that the SSA is a formula for the allocation of grant? Does he not also agree that because it varies, because it is unpredictable and because it is inevitably and ultimately a crude mechanism which cannot reflect the needs of each locality, it is therefore totally wrong for the Government to cap local authority expenditure and refuse to allow local authorities to adjust their spending to meet the real needs of their localities and the children in them? Does the noble Lord further agree that children should not have to suffer simply because the Government and Whitehall have a fixed formula approach to the needs of children and their education?
Lord Lucas: My Lords, whether a local authority runs up against its cap is a matter that relates to all of its expenditure, not just to education. It is to the totality
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of their expenditure that local authorities must look if they want to see how they can best serve the needs of their populace.
Lord Pearson of Rannoch: My Lords, does my noble friend agree that it ill behoves local education authorities—and, I have to say, their allies on the Labour Benches opposite—to complain about any loss of grant when they were largely responsible throughout the 1980s for so conducting and mismanaging our state system of education that there came to be 1.5 million empty places in our schools, with all the colossal waste that that involves?
Lord Lucas: My Lords, I am sure that I would not wish to put it as strongly as that, but there is certainly considerable opportunity for savings to be generated by removing surplus school places. A number of local authorities are achieving savings in just that way.
Baroness David: My Lords, reverting to an earlier answer from the noble Lord, will the department be willing to review the arrangements for pupils with special educational needs if the new arrangements appear to penalise LEAs which have more than an average number of those pupils?
Lord Lucas: My Lords, yes.
Lord Morris of Castle Morris: My Lords, it is a fact—is it not?—that LEAs will not be encouraged to provide nursery education near the border with another LEA as parents from the other LEA will have the right to send their pupils across the border to the providing LEA, but the home LEA can refuse to pay. Will Her Majesty's Government therefore introduce recoupment for children under five and, if not, why not?
Lord Lucas: My Lords, I am sure that all those matters will be taken into account in our general proposals on nursery education, for which I hope the noble Lord can wait.
Lord Renton: My Lords, is my noble friend aware that it sometimes causes great inconvenience and family hardship if mentally handicapped people needing special education are sent long distances out of their own area in order to receive it elsewhere? Is it not therefore quite proper that the Government should be encouraging local education authorities to have their own arrangements, which pretty well all of them are capable of establishing?
Lord Lucas: My Lords, that is the sort of consideration which has weighed heavily with us and which, as I said to the noble Baroness, Lady Hamwee, has won the day with us. However, I recognise that there are other sides to the question.
Baroness Hamwee: My Lords, will the noble Lord accept that I shall spare the House the detail of the problems to which I alluded in my supplementary question, but that I shall accept with alacrity his offer to review the position further for next year? I shall pursue that with him, if I may.

South Africa Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Pensions Bill [H.L.]
3.7 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Mackay of Ardbrecknish.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMM1'ITEES in the Chair.]
Clause 83 [Inalienability of occupational pension]:
Lord Lucas Lord Lucas moved Amendment No. 164:
Page 47, line 7, leave out ("no agreement can effect any of those things") and insert ("an agreement to effect any of those things is unenforceable").
The noble Lord said: This amendment is designed to make the meaning of the subsection clearer. Its purpose is to clarify that any agreement to assign, commute, surrender or have a charge, lien on or set off exercised in respect of an entitlement or an accrued right under an occupational pension scheme is contrary to this subsection and is legally unenforceable. The amendment gives further clarification to our intention that all occupational pension rights should be inalienable. I beg to move.
On Question, amendment agreed to.
Baroness Seear Baroness Seear moved Amendment No. 165:
Page 47, line 37, leave out ("negligent").
The noble Baroness said: This amendment is intended to make the job of the trustees less of a risk than at present. We are anxious that people should act as trustees and it is important that they should not feel that they are putting themselves at considerable personal risk in doing so. The amendment deals with the provisions whereby there can be a charge resulting from a
"criminal, negligent or fraudulent act".
We agree that such provisions should apply to criminal or fraudulent acts, but the word "negligent" can be widely interpreted. It would be easy for someone, with the best will in the world and acting as competently as he was capable, to take some action which might subsequently be described as "negligent". We do not want to frighten people away from taking on such work. I beg to move.
Baroness Turner of Camden: This amendment has our full support. The word "negligent" is very wide and could mean that somebody could stumble accidentally into a situation where penalties would become applicable. That does not seem right.
Lord Mackay of Ardbrecknish: Similar provisions concerning the right of an employer to exercise a charge or lien on, or a set off, against a person's accrued right
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or entitlement to a preserved pension have been in force for some time. The existing provisions enable an employer to recover a monetary loss arising out of a criminal, negligent or fraudulent act or omission. The PLRC considered that those provisions were generally satisfactory and recommended that they be extended to cover all pension entitlements, and that is what Clause 83 does.
The amendment seeks to limit employers' rights to recover monetary losses. An employer would no longer be able to recover losses arising out of a negligent act or omission. We do not consider that such a restriction is necessary. Perhaps I may reassure the noble Baronesses that these provisions will not permit an employer to act in a totally unrestricted manner. We have put in place restrictions which will limit the recovery to either the amount of the loss or the value of the member's actual or prospective benefits, whichever is less. In addition, where there is a dispute, the employer's rights will not be enforceable without a court order or an award of an arbitrator. In the light of those reassurances, I hope that the noble Baroness will be able to withdraw the amendment.
Baroness Seear: I should like to consider what the Minister said before the next stage. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Young Baroness Young moved Amendment No. 166:
Page 47, line 37, at end insert:
("(e) a surrender or assignment of part of the person in question's benefits in connection with matrimonial proceedings in prescribed circumstances.").
The noble Baroness said: I shall speak also to Amendment No. 192. I recognise that the issue I am raising—occupational pensions in divorce—is outside the original scope of the Pensions Bill as presented to this place. The reason I raise it is the one I gave on Second Reading. This is a subject which was first drawn to my attention at least eight years ago. I have put down a parliamentary Question on it. I have been in correspondence on this matter with interested groups ever since. I have said to them all that I believe the point is important; that I hope to put right an injustice; and that I would raise it when a suitable opportunity arose. I believe that that opportunity is now before us with the Pensions Bill.
I believe that the amendment has great support from all parts of the Committee. I know that we shall hear from the noble Baroness, Lady Hollis, but I believe the same is felt by the Liberal Benches and the Cross Benches. It has great support outside this place. The matter was first drawn to my attention by the Diplomatic Service Spouses' Association, and by an organisation called Fair Shares. Judging from the number of letters on the subject that I have received, the interest and concern continue.
I spoke on this issue at length on Second Reading. I do not wish to go over all the arguments again. There are two facts as a backdrop to the amendments. The first, of course, is the greatly increased number of divorces. In 1991 there were 171,000 and, regrettably, I am sure that that number is considerably higher now.

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The second is the increased number of women living longer. There is also the particular concern of those women who are unable to earn for themselves their own occupational pension in their own right. I think especially of wives of those men serving in the Foreign Office who accompany their husbands abroad and who therefore cannot pursue a career in their own right; wives of members of the Armed Services, of the British Council; and many others whose husbands work abroad and who therefore are unable to pursue a career for themselves.
What all that shows is that times are now very different from when occupational pension schemes were first established. There is now great urgency about making amends and justice. This is not an easy issue to resolve because, if it had been, someone would have resolved it before now. The first question to be raised is: does the partner have the right to part of an occupational pension scheme on divorce? The answer to that is clearly yes, because of the changed circumstances which I have just described. There can be little doubt that a pension may be the largest financial asset a couple may have at the time of a divorce, particularly if they do not happen to own the house in which they are living.
So let us look at the situation. As I understand it, in Scotland the law on divorce is entirely different from that in England and Wales. It is covered by the Family Law (Scotland) Act 1985. That states that the matrimonial property must be taken into account in the divorce settlement. Another section in the Scottish Act states specifically that matrimonial property includes pension and life assurance arrangements. The law in England and Wales is covered by the Matrimonial Causes Act 1973, and in particular Section 25(2), which states that the court shall in particular have regard to the matters set out.
Then paragraph (g) states:
"In the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring",
and so forth. Thus we can see from Section 25(2) (g) that the pension can be taken into account, but it is not always taken into account. I understand that there has been a great deal of debate about the term "will lose". I can see that being a fruitful source of debate for lawyers and others.
What difficulties arise from the law as it stands at present? The principal difficulty is that the courts have no right to split a pension, as under pensions law it is inalienable. Hence the husband tends to keep the pension and the wife frequently receives the house. That is not an entirely satisfactory state of affairs. It is not satisfactory for three reasons, one of which I have already mentioned: if the couple have been living in rented accommodation, there may be no free assets to split, and as the pension itself is inalienable it means that the wife will receive no benefit under the separation arrangements.
Then, the pension has been built up in a tax-free environment, and, if other assets are given to compensate for pension they are not receiving, the same
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tax-free advantages that the pension has had and the pension scheme assets can be sold at the current time and transferred, whereas the pension cannot be sold.
A number of people, including the organisation to which I referred on Second Reading (the Pensions Management Institute), have looked at the matter. As I said on Second Reading, they quoted at least five occasions in the past 20 years when the matter has been looked at and upon which a report has been made. The Pensions Management Institute set up a working party which comprised members of the Family Law Bar Association, the Equal Opportunities Commission, the Solicitors' Family Law Association, the Association of Pension Lawyers, and the Law Society. They recommended that the pension on divorce should be valued by:
"The leaving service or transfer method".
That method is well known to people in the profession, and, as I understand it, does not cause any dispute. It was agreed that the pension should be split so that the wife should have the option of leaving it in the pension scheme, if she wished, transferring it to her own pension arrangements, or transferring it to a personal pension or a Section 32 annuity. If the pension were in payment, it should be earmarked in a way not dissimilar to the current position relating to salary or earnings after a divorce takes place. At the same time, the husband's pension in the pension scheme should be reduced by the corresponding amount. It would be equally true that if on divorce the wife were the earner the same arrangements should apply to her. I regard that as only fair.
The Pensions Management Institute put forward its proposals almost at the same time as the Government published the Pensions Bill. It is a great pity that the Government have not included the proposals in the Bill and have said that they are setting up another committee to look further into the matter. I am at a loss to understand what new information the committee can find. Five committees have already investigated the position and it is unfortunate that yet another will report in September after this Bill has become law.
My amendments attempt to deal with this urgent and worrying situation. It is causing some people, who never expected it, to live almost in penury. None of us wishes to see that. I hope that I have said enough on the matter today. I hope that the Minister will reflect on that and on what I am sure other Members of the Committee will say and that if he believes that the amendments are not correct he will come back at a later stage with amendments of his own. However, I should be satisfied if amendments were tabled in another place because it is important that the situation is dealt with.
The proposals meet the case for justice and it is difficult to see what additional information is needed. Above all, I do not believe that extra public expenditure will be created. There will be some loss to the Inland Revenue, but that will be more than compensated for by savings in the social security allowances currently paid to divorced wives. I regret that I do not have any figures to substantiate that statement, but I believe that if the amendment is put into effect there will be some offsetting savings.
Amendment No. 192 is an enabling amendment. If it is necessary to wait until a further report is available it will be possible to introduce the provisions at a later stage. That is not the measure that I prefer. The Scottish situation is an improvement but does not go far enough. We require an amendment that covers all the situations that I have described. What we really want is an amendment made to the Bill in this Chamber.
I assure the Minister that I speak on behalf of many people who are currently suffering, and many people who, I regret to say, will suffer in the future if the matter is not put right. I am certain that in moving the amendment today I have support from all sides of the Committee. I beg to move.
Baroness Hollis of Heigham: It gives me great pleasure to follow the clear and eloquent speech of the noble Baroness, Lady Young, in moving Amendment No. 166. I wish to speak to that amendment and to Amendment No. 182A which stands in my name. They present different approaches but achieve the same objective. I hope that the Minister will not say that he does not have an abundance of choice as regards the routes to follow.
Few women have the chance to build up a decent occupational pension of their own. During their lifetime they earn less, and often their working life is properly interrupted by having children and caring for them or by caring for elderly relatives. That is the result of a family decision taken by husband and wife together. Wives may move home several times in order to support their husbands' occupations, and each time give up a job in order to keep their families together.
Yet after a marriage of perhaps 30 or 35 years some women face divorce and possible penury in old age. I was told of a woman who had looked after her children until they were grown up. She trained to be a teacher, took a job as such and then developed multiple sclerosis. Two years after developing the disease, her husband divorced her. She was most surprised, shocked and upset. She faces an old age without pension rights. As she has no access to her husband's pension she will almost certainly have to sell the bungalow that was specially adapted for her needs.
As was said by the noble Baroness, Lady Young, one-third of marriages end in divorce with the pension being the largest single financial asset in the marriage. It is no longer enough to keep those in separate compartments. As was clear from the response to the noble Baroness's speech, all Members of the Committee recognise that the present situation is unfair and unjust. I am sure that we should all like to find a decent and fair solution for all parties in such a situation.
I am sure too that the Government will say that it is all very difficult. I do not believe that it is. The Government may well seek to persuade the Committee that while they are hugely sympathetic to the problem—and I do not doubt that the Minister is—and that they are anxious to do all that is possible, the time is not right and further research is needed.
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They have just commissioned further research and they may say that we should wait to see what the problem is. Seven pieces of research have already told us what the problem is. Many pieces of research, including the latest PMI report, tell us precisely what we might do.
I fear that the Government might seek to prevaricate and delay. I hope that the message from the Committee today will be, "We don't do that". We have a major Pensions Bill and we cannot expect another such Bill in the foreseeable future. Nor can we expect a Matrimonial Causes Bill in the immediate or foreseeable future. This is the right Bill at the right time backed by the right research and it is right for us to say clearly to the Minister that this is an issue that we can tackle today in ways that are fair, just, equitable and straightforward to all parties.
Why is there a problem? The noble Baroness, Lady Young, rightly told the Committee that under trust law, on the one hand, and the special tax privileges given by the Inland Revenue, on the other, occupational pensions cannot be split or assigned to anyone else. That is sensible; it is a protection against, say, a creditor. However, it means that an occupational pension cannot be split or assigned to a spouse, even though it may be the family's largest single financial asset.
In tabling the amendments today, we are asking that the courts shall have a duty to take pension assets into account as part of the financial settlement on divorce and that the courts shall have the power to divide them, override any trustees to that effect and without jeopardising Inland Revenue status. The way in which they are apportioned will be determined by the courts at the point of divorce and in the light of the family circumstances. We are providing a duty on the courts to take them into account and a power on the courts as to how they do so.
The PMI report outlines three basic ways in which the courts might take those assets into account. The first is offsetting; the second is earmarking; and the third is splitting. We favour the third suggestion; but perhaps I may enlarge on all three. The first way of taking a pension asset into account is by offsetting. The courts can do that now; that is, they can offset against the pension, which must remain with the scheme member (who is usually the husband) other assets such as savings or the matrimonial home. The courts can do that now; and very often, all too often, it does not work. Why is that? As the noble Baroness, Lady Young, said, there are insufficient offsetting assets and the pension is worth very much more than the rest of the assets put together so that the wife is short-changed.
Alternatively, even where both the material and pension assets balance each other out, immediate assets are being set against long-term assets. Therefore, in order to keep a pension which he may never live to enjoy, the husband is stripped of his short-term assets such as the matrimonial home and savings. Neither party would wish that to be the way forward. Therefore, offsetting does not work although it could continue if there are sufficient assets and that is what both parties want. We have that already but it does not work.

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The second route is to earmark so that the pension is divided at the point of retirement. That is uncertain unless one is receiving a pension at the time at which the divorce occurs. What happens when the scheme member changes jobs? Does he carry the earmarking with him to four, five or six different jobs, with the employer having to make a record of that? What happens if the scheme member dies before he is 65 and the scheme deeds allow a widow but not somebody who is divorced to be a beneficiary? What happens if there are two or three spouses each with a charge on a pension but not knowing what they will receive or when, so that they have to wait until the age of 65 to know what are their future prospects?
Earmarking merely delays to the point of retirement the financial settlement which should have been made properly at the point of divorce. What most people would like is a clean break so that they can get on sanely and sensibly with the rest of their lives rather than continuing an on-going financial relationship for 20, 30 or 40 years after the marriage has ended.
We have offsetting now and it does not work. Earmarking is messy and chancy and leaves all parties insecure. Therefore, what is the right way forward? As the noble Baroness, Lady Young said, it is to divide pension rights at the point of divorce. That is what the PMI, the Law Society, Goode, Fair Shares and the EOC call for, and I believe that that is what voices call for on all sides of this Committee.
On divorce, the cash value of the pension so far accrued would be calculated precisely as it is now, often several times during a working life, when a scheme member changes jobs and wants his pension rights transferred with him. In other words, in relation to divorce we should be using the well-established procedure which is easily and continually used by scheme professionals and members every time a scheme member changes jobs. It is not difficult. It is easy and straightforward. It follows well-established actuarial principles. At present the cash value of a pension is calculated for transfer. It can be calculated in exactly the same way to divide it. What could be simpler than that? It is already done several times during a scheme member's working life. We say that that straightforward principle should be applied to the unfortunate situation of a divorce.
If that were done, much of the bitterness over financial arrangements on divorce would be avoided. Both parties could get on with the rest of their lives. It would not be retrospective. We have learnt that lesson in relation to the CSA. It would bring English law broadly into line with that of Scotland. It would apply to men and women alike. It would be clean, decent, fair, simple and straightforward, and we could do that now.
If the Committee were minded to support the amendment, the Bill would lay down the principles requiring the courts to take pensions into account and to divide them as appropriate at the time of divorce. Justice would be done to men who would be able to retain more of their current cash assets. Justice would be done to women who would have some financial security in their old age.
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This is a major Bill in which we are seeking to deliver a pension promise to scheme members to protect them against insolvency and fraud. If Members of the Committee will it, we can do something else; namely, share that pension promise fairly and decently between husband and wife at the point of divorce. We do not need to delay, defer or prevaricate. We do not need further research. We can just do it. Let us do it because I am sure that every one of us believes that it is the right thing to do.
3.30 p.m.
Baroness Seear: Although the amendment is not in my name, I can confirm the expectations of the noble Baroness, Lady Young, that the amendment receives wholehearted support from these Benches. Again and again we have seen cases of women who have supported their husbands, perhaps for 20, 30 or 40 years, while they are building their careers and who are then divorced at the stage at which they are beginning to need financial support in the form of a pension. There is no need to go into a great deal of detail. It is common justice that the woman should receive an appropriate share of that pension because of the contribution that she has made during her married life.
Lord Dean of Harptree: I should not wish it to be thought that only noble Baronesses support the points that have been made so powerfully by my noble friend Lady Young and others. It seems to me that the present situation is grossly out of date. It smacks of the days when the wife was the appendage of her husband who said, "The little woman will have what I assign to her but no more". That might have been appropriate at one time but the situation has changed completely now.
As has already been said, a man who earns a satisfactory occupational pension very often has a loyal wife at home keeping the show on the road. She is enabling him to do a good job and to receive improvements in his salary. In this day and age it is surely wrong that, whoever may be at fault in the divorce, the woman who has done so much is cut out completely from any right to benefit from the occupational pension scheme.
On Second Reading my noble friend was sympathetic, but when Ministers say that something is difficult one must be very cautious about what they really mean. My noble friend said that a project had been set up to look into the matter. I say to him that we have enough research. It is time for action.
Lord Milverton: I hope the Minister will accept the amendment and not merely say that he will look at it again. The amendment and the principles behind it are reasonable and fair. As my noble friend Lord Dean said, many women who have given loyal, trusting and strong support to their husbands are treated unfairly. Many of those women could have used their abilities to further careers of their own. Therefore, it is only right and proper that they should not be unfairly put upon if they find themselves involved in a divorce. I believe that there are still some decent men about who would be pleased to see fair treatment for women.

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I hope that the Government will not just reconsider the matter but will accept the amendment or agree to come back at the next stage with a better amendment if they feel that this amendment is not good enough.
The Earl of Clanwilliam: I should like to express my support for my noble friend's amendment. I hope that my noble friend the Minister will be able to respond more positively than he did on Second Reading. The reasons and benefits involved in the proposal have been well aired. However, one consideration in particular is the fact that, if the amendment were accepted, it might do a great deal to reduce the divorce rate.
Baroness Seccombe: I wish to express my wholehearted support for the amendment. I understand the complexity of finding a solution, but that is no reason for not pursuing the matter until we get an answer. Following articles that have appeared in the press during the past few days, I have received letters from women who have suffered in the past and who are continuing to do so as a result of the present situation.
I received a letter from a mother of three, one of whose children suffered from severe asthmatic attacks. She had worked throughout the marriage as a part-time teacher and, obviously, had nursed her daughter through long illnesses. The woman's consequent pension contributions were lamentably low. Meanwhile, her husband continued to build up a healthy pension fund. Now that the couple are separated, their futures are vastly different. The man has comfort and security, while the woman tries to find employment when she can, with certainly an unknown future. Another letter came from a woman whose husband's occupation took them to Japan. She gave up her practice as a chiropodist, but, now that her husband has left her, his future is assured with a pension of £70,000 per year while the woman has no such expectations.
I believe that we are discussing a problem which is very much one of our time, especially for elderly women who are left to fend for themselves. More and more women are now contributing to their own pensions. If both husband and wife have made such provision, I believe that that should be taken into account. I should have thought that most pension fund administrators would be able to assess the size of an individual's fund, as they do every time someone changes a job. It might be possible for that pension to be assigned —or, at least, part of it—to the wife and, perhaps, frozen until her retirement or assessed in another way.
At a time of divorce there is a great deal of stress and strain and those involved really do not think logically. I believe that legislation bringing pension rights into the equation is absolutely essential if we are to achieve fairness and ensure that there is a more dignified and comfortable way of life for divorced women in their old age.
3.45 p.m.
Baroness Elles: I support the amendment moved by my noble friend Lady Young to which the noble Baroness has also put her name. I believe that both of
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them spoke with great distinction and force. However, I should like to give my noble friend the Minister some encouragement. If he listens to what I have to say, he will be able to go back to his right honourable friend the Secretary of State and say, "I can save the country some money". Surely that is an ambition of all Ministers.
Both my noble friend and the noble Baroness stressed in their remarks that a considerable amount of social benefit and welfare has to be paid to women who are left with no income, especially those who are divorced later in life and who have not been able to build up a pension or save any money.
I should like to give the Committee three categories of examples as a result of correspondence that I have received. Indeed, I am quite certain that many noble Baronesses and other Members of the Committee will have received many letters on the subject, especially in view of the number of divorces. The first case relates to women who were mentioned by my noble friend Lady Seccombe; namely, those who go abroad, who are not able to work or earn and who are not, therefore, able to contribute to any pension fund. Very often, in the case of couples who go abroad on business representing British firms, the husband can build up a big pension by way of an occupational pension. Such men are very often making contributions in respect of their wives to a separate fund within the pension. However, that also is not allowed to be touched on divorce.
I received a letter from a doctor who had put money into a pension fund specifically for his wife in the event of his death so that she would receive an adequate pension based on his earnings and the way in which the pension fund was increasing. However, the couple then divorced. Therefore, wife number one received nothing because she was no longer the wife if and when the doctor became deceased. Similarly, the second wife would not receive anything because she was not the named wife. There is a case of an insurance company receiving contributions for a pension fund but, in the event, the recipient was not able to be the recipient. The first wife was left with no pension of any kind, despite the fact that money had been paid into an insurance fund for her benefit.
Another example is of a young couple where the husband is earning considerably with the wife, as has been mentioned, looking after the children. All the savings go into the pension fund. That very often happens, especially with younger people: they put all their earnings into pension funds in order to secure themselves in retirement. But, there again, where there is divorce, the court cannot take that into account. I know of a particular case where considerable sums of money were saved by way of a pension fund, but where the wife on divorce was not able to receive anything from it. In such circumstances, all the money saved during the couple's life together would go to the husband or to the second wife should he predecease his second or third wife.
The latter are examples of specific cases of gross unfairness to the wife who has worked, saved and stayed at home looking after the children while the money goes into a pension fund. She is not eligible for any of that

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money and will, as the number of divorces continues to rise, become a burden on the state. I hope that my noble friend the Minister will take that into account when considering the matter. Being a sensible man, I am quite certain that he will adopt the amendment proposed by my noble friend.
Lord Bridges: I should like to support the amendments, especially that moved by the noble Baroness, Lady Young. I have had some personal experience in seeing what happens to the wives of Crown servants employed abroad when a marriage breaks up. The result is often very distressing and can lead to great hardship. Such women will have loyally supported the careers of their husbands for, perhaps, a long period of time. In many cases it should be remembered that, although such women are highly qualified and skilled, they are unable to pursue their professions abroad because they are prohibited from doing so by foreign governments who will not allow the wives of foreign representatives to take employment in their countries. So what happens? A woman finds herself divorced with no entitlement to the pension benefit that her husband will eventually obtain to which she has made, in practically every case, a very strong material contribution.
I, too, find it odd that a Bill which deals with so many issues governing pensions does not tackle a matter which has been in the public knowledge for a very long time. I hope that it will be possible to include the provision when we reach a later stage. It is fair to say that the speeches made this afternoon have revealed a large lacuna which means that many women do not receive adequate justice. I believe that it is the duty of the legislature to try to fill that gap. If the Government believe that they are able to do so in better terms, then it is up to them to tell us the nature of those terms.
There is one further cause of delay which may be cited by the Minister. As I understand it, a case is pending before the Appellate Committee which has not yet been heard. It would not be surprising if the Minister had been advised to say that, because the matter is sub judice, it would be inappropriate for him to enter into any discussion. However, I hope that that will not deter the Minister from reviewing the matter. We cannot be sure what the Appellate Committee may decide. Indeed, our learned colleagues may feel that the matter could be more properly dealt with by legislation. I believe that that would be quite the right course for us to follow. At the end of our discussion I hope that the Minister will be able to take such matters into account and that he will bring forward something if he is unable to accept any of the amendments that have been put forward.
Lord Boyd-Carpenter: In the light of the unanimous support from all quarters of the Chamber for my noble friend's amendment I am a little disappointed and surprised that my noble friend the Minister has not already intervened to say that the Government accept it in principle even if they are not going to accept the precise terms of the amendment, and that they will themselves put in a suitable amendment at a later stage
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of the Bill. I have been hoping that my noble friend the Minister would take that line but his silence, if he will allow me to say so, seems to me a trifle ominous.
I put this point to him. This is an opportunity to deal with a real and growingly urgent problem. It can be dealt with under this Bill. If we miss the opportunity created by this Bill, one cannot tell when it will be possible in the future to introduce this amendment or its equivalent. Obviously there will be no more pensions Bills in this Parliament. Who can say whether there will be a pensions Bill early in the next Parliament? That is guesswork. I hope, therefore, that my noble friend the Minister will either accept this amendment or give a clear undertaking that an amendment to deal with this problem, and to deal with it on the lines of this amendment, will be introduced either in this Chamber or in another place, but somewhere before this Bill becomes law. I think he will find that unless the Government are prepared to accept that point of view they may be in quite serious trouble.
Baroness Farrington of Ribbleton: I, too, rise to speak in support of the amendment and to mention a particular example that was brought to my attention as a local councillor. I use this example because, contrary to popular belief, it is now the case that women lose more years from their careers caring for elderly relatives than they do for young children. There may be a short or a slightly longer career break when children are born and then, just when many women are approaching the stage when they are free from that domestic responsibility, they take on the responsibility of elderly relatives.
I remember the case of a constituent who had given up her career to look after the children when they were young and who then went back to work and was obtaining promotion and enjoying her life. Her husband's parents were later taken ill, one after the other. At the end of that time—after the final parent had died—the husband announced he had found someone else. He divorced his wife and she lost her entitlement. That is not an isolated case. It is a difficult set of circumstances that women can face. It is usually, but not always, the woman who is in that position. I urge the Minister to give a positive acceptance to this measure and to assure us that Government will tackle this anomaly and this injustice with the passage of this legislation.
Lord Boardman: I wish to support the amendment by adding one brief example, which I hope underlines the reason it should be accepted. I refer to the case of a man who was a civil servant and who spent much of his time serving abroad. He was married for many years and then he divorced. Shortly afterwards he remarried—that had no connection with the divorce—and shortly after that he died. His second wife became entitled to a full pension which she believed she had no right to have. She did everything she could to disclaim it. However, there is no mechanism by which that pension could be disclaimed. That pension was payable to her. The only way in which she could make good to the first wife what she believed belonged to the first wife was to do as she did and create a series of deeds of covenant to make

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that possible. That was a case—it may be unusual—of a second wife who desperately wanted to see justice done and to ensure that the first wife received the share of the pension she deserved. However, there was no mechanism which enabled that to be done.
Lord Monkswell: In rising to support this amendment I wish to present a slightly different scenario. It is only right that we take note of the tragic cases that have been reported this afternoon and that Parliament should take action to deal with those and ensure that fairness is brought about. However, we also need to recognise that there are changing patterns of employment and changing patterns of partnership. The point I wish to make is that it is not just a case of ensuring fairness to women and to wives who may suffer as a result of divorce. I envisage a situation where men will suffer because of the different employment patterns and the different patterns of life that prevail at the moment and probably will prevail in the future.
I give one example. Obviously an example that is picked from today we hope does not result in divorce, but the financial implications will become clear to the Committee. There may be a young couple both of whom are practising barristers. One decides to go into politics and the other stays at the Bar. The female who stays at the Bar can have an earnings expectation that is three times that of her husband who has gone into politics. After 20 or 30 years they may divorce. Surely it would be right that her higher pension entitlement, or part of it, should go to the husband. This is not just a consideration as regards improving the lot of women that we are debating this afternoon; we need to ensure fairness between the sexes.
4 p.m.
Lord Mackay of Ardbrecknish: Clearly pensions on divorce is a highly emotive and sensitive issue. I listened with some interest to all the points made, especially the point made by the noble Lord, Lord Monkswell. I am not entirely sure that a court would think that a husband going into politics was necessarily a compelling reason for awarding a larger share of a wife's pension. A court may decide that one was fairly daft to go into politics and not stay with the law. In some ways the noble Lord—whether he meant to or not—has revealed how complicated the issue is when one moves away from the serious cases which all of us know about, and which have been the basis of this debate, to situations where each member of a couple has an entitlement to a pension and they make career decisions which ought not to impinge on the other's pension rights but, if one is not careful, might do so.
I have listened to the debate, as I did at Second Reading. The amendments all seek to deal with this issue in slightly different ways. However, they undoubtedly create a scenario which would have pretty far-reaching consequences for courts, for pension schemes and for the parties to divorce. I believe my noble friend Lady Young has pressed for a more general regulation-making power in Amendment No. 192. I notice that the noble and learned Lord, Lord Simon of
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Glaisdale, is not in his place. I suspect that if I were proposing a broad regulation-making power of this nature which is not just a Henry VIII clause, it is just about a Henry VIII Bill, I would be taken to task to some considerable extent for attempting to do so. As the Committee has already expressed considerable concern at the extent of delegated powers within this Bill we would not be wise to give governments and Secretaries of State—no matter how excellent they are—a delegated power of the breadth, nature and scope that Amendment No. 192A would do.
Of course I understand her argument that she would like to have something on the statute book which we could use after the research project, which I shall mention in a minute or two, has been completed. However, I believe that it would be far better to wait until we are in a position to bring forward detailed primary legislation. It is not a question of inserting a clause or two in the Bill; it would require much more work than is suggested in the amendments.
It would be difficult not to have sympathy with those who list examples—both specific and general examples—and say that action is needed now. However, it would be irresponsible of any government, of whatever complexion, to enter into major legislation of this kind before the issues had been fully and properly considered.
The noble Baroness, Lady Hollis, suggested that under her preferred option of valuing pensions on divorce much of the bitterness would be removed. I have a great deal of sympathy for many of the other arguments put forward by the noble Baroness, but that one fell on very stony ground because I do not believe that the bitterness would be removed. Indeed, I can envisage scenarios in which it might be aggravated. I do not pray that in aid as a defence, I say simply that we would be foolish not to recognise that there could be severe problems and considerable bitterness in the scenarios being painted.
I recognise that cases of real hardship may be caused as a result of ignoring pension rights in a divorce settlement, but it is important that we do not overlook the fact that when making financial provisions on divorce the courts are already required to take into account the loss of pension rights as a result of divorce. For every case in which it is claimed that hardship occurs because pension rights have not been included in a divorce settlement there may be other cases in which a perfectly equitable settlement has been reached. The fact is that we simply do not know because nobody has taken the trouble to find out.
That is why we have commissioned detailed research, which I mentioned a few minutes ago. The project will explore the current treatment of occupational pensions on divorce. Through interviews with some 2,500 women (including 500 recent divorcees) the husbands of 400 of those women and a sample of solicitors involved in 900 recent divorce cases, we shall be able to build up a more detailed picture than that provided by the anecdotal evidence which has been cited in various debates and reports on the subject.

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The research will provide extensive information about divorce cases, including the type of pension provision involved, the value of pension assets at divorce, the method of valuation used, the treatment of contingent benefits and the use made in current divorce settlements of alternative methods of accounting for pension rights.
I have been asked by a number of Members of the Committee why matrimonial law in England and Wales is not brought into line with that in Scotland. The difference between the two jurisdictions is very slight. We need to consider what difference exists in practice. That is why we have commissioned a separate study within the research project to look specifically at the position in Scotland where, as one or two Members of the Committee pointed out, the law is different.
Clearly any changes to the Matrimonial Causes Act 1973 are a matter more for my noble and learned friend the Lord Chancellor than for me. But I can assure the Committee that we are looking very carefully at whether that Act could be amended so as to place greater emphasis on the need for pension rights to be taken into account by the courts when considering financial provision on divorce. Consideration will also be given as to whether a power should be taken to prescribe a method of valuing pension rights on divorce. I hope that the Committee will acknowledge the extent to which that shows that the Government are prepared to listen arid respond to the representations that have been made.
Both the Pensions Management Institute working group and the Pension Law Review Committee recognised the complexity of this issue. Given that complexity, I believe that we would be criticised—and rightly so—if we were to rush into hastily conceived and ill-informed decisions. We would run the very high risk of getting it wrong and creating new problems and new inequities.
The PMI working group report considered a number of options. Its preferred approach involved the splitting of pension rights between the divorcing parties at the time of divorce on a cash equivalent basis. That was the third solution to the problem suggested by the noble Baroness, Lady Hollis. The problem is not so much the difficulty of establishing the cash equivalent—that is comparatively easy—but how it should be apportioned between the parties after that cash equivalent basis has been established.
Another option was to require pension rights to be earmarked for payment to a divorced wife once her exhusband retired —a form of deferred maintenance. That was the second option. It is my understanding that the working group was divided on the relative merits of the options and that the final recommendation for the cash equivalent approach was finely balanced.
The fact that the PMI working group itself was so uncertain about the way forward is a telling indication of the potential minefield into which it was treading. The PLRC considered the PMI working group report and recommended that the Government should carry out further detailed work. That is precisely what we are doing.
My noble friend Lady Young and my noble friend Lady Elles went a little further in trying to tempt me into thinking about potential savings. I am not sure
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whether this is the right debate in which to remind my noble friend of the old adage "yield not to temptation", but I shall not yield to the temptation. However, I can tell my noble friends that preliminary analysis shows that the tax revenue losses would be well in excess of any savings on income benefits. Therefore, they ought not to use that argument, although that is not to deny that the other arguments have considerable benefits.
The PMI report was a considered and valuable piece of work which built on previous reports on the subject. But it did not set out the options in the context of a quantitative analysis of the perceived problems. Nor did it consider in any detail the possible implications and costs of the options put forward. That is the detailed work to which we believe the PLRC referred.
For any such analysis to be worth while it needs to be predicated on a clear understanding of the nature and extent of the problems. We expect that the results of the research project will provide an important contribution to that understanding, including a comparison of the position in England and Wales with that in Scotland. When we have had an opportunity to analyse the research findings we shall be very much better placed to consider the case for change and to ensure that the change we make is the right change and does not raise as many problems as it resolves. We ought not to prejudge the issue in this legislation.
I began by saying that this is a sensitive and emotive issue. I hope that I have been able to persuade the Committee that we are by no means unsympathetic to the problems that have been described. At Second Reading I said that I knew of a lady who had found herself in exactly one of the scenarios mentioned by Members of the Committee. But this is not a matter which we can decide merely because we know of some hard cases. We have to be certain that any legislation which we introduce in this very difficult and complex field is right. At the risk of repeating myself, I believe that we could add to the bitterness mentioned by the noble Baroness, Lady Hollis.
We have undertaken the research. Once we have the results of that research we shall honour the undertaking that we have given to look seriously at how we resolve the problem if there is a clear and agreed approach. We have accepted the PLRC's recommendation to undertake further work. As I mentioned in relation to the Scottish provision, we shall see whether we are able to bring something back at Report which might place greater emphasis on the need for pension rights to be taken into account in England and Wales and, importantly, to give the courts a basis on which to value pension rights.
I hope that with that explanation of the position and what we believe we can do in the Bill, my noble friend and other Members of the Committee will feel that, although we may not be going as far as they would like us to go, we are attempting to tackle this very difficult problem in a way which ought to improve the situation in England and Wales and will give the courts a basis on which to value pension rights. That should place the courts in a better position to do what they can already

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do and what many are doing—as in the case of the lady who was mentioned, if her lawyer makes sure that the court considers pension entitlements.
With the explanation of what we contemplate bringing forward in the Bill, and of what we are doing regarding the more difficult issues involved in splitting the pension, I hope that my noble friend will be able to withdraw the amendment.
Baroness Elles: Before my noble friend sits down, will the Minister be kind enough to make available the figures to which he referred in stating that it was more expensive in certain cases for the Government to give social security rather than allow income tax off on certain pension issues. I should be grateful if he would allow that information to be made available.
Lord Mackay of Ardbrecknish: My understanding is that it is very much a preliminary analysis. I doubt whether figures are available on the basis that my noble friend seeks. But I shall check on that.
Baroness Hollis of Heigham: Before the noble Baroness decides what to do with the amendment, perhaps we may press the Minister on some of his remarks. His major point—as I believe many of us expected—was that we need further research because the situation is difficult and (to use his words), "We must not rush; we must not be hasty; we must not go in for ill-conceived legislation; we must not go in for ill-informed legislation; we must not prejudge the issue", and so on. Such statements are perfect Cornford microcosmographia, are they not? The time is not ripe; we must have more research.
Let us address the specific issues that the Minister picked up. First, he said that the courts already have the right to offset the pension as an asset against other assets but that there is a need to know when that situation worked and when it did not. Why? We know now that for many families it is appropriate that the assets represented by a pension are offset against other assets. We also know—and I refer to the case that the noble Baroness, Lady Young, cited—that where there is no matrimonial home to be sold the family cannot make such offsetting apportionments. For the remainder, why does the Minister need to know that information? The courts need to know because they make the decision, but the Minister does not need to know. He needs to know that the problem exists. So long as he empowers the courts to address that problem, as they do when considering all the other financial assets that they distribute, that the problem exists is all the Minister needs to know.
Secondly, the Minister states that the PMI report was uncertain, complicated and not quite sure how far it should go. On the contrary, I have the PMI report. It is strictly unambiguous. On page 52 it states:
"We believe that throughout the UK it would lead to a fairer division of assets on divorce if the courts were given power to reallocate occupational and personal pension rights between the divorcing parties. Our detailed recommendations are as follows".
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There is nothing ambiguous about that. There is nothing uncertain. There are no doubts, no problems and no difficulties. The Minister invents them as an excuse to say, "We want to come back to this problem at some time in the future"—perhaps never.
The question is not, "What does the Minister not know?". It is, "What is it that the Minister does not know that nonetheless cannot be resolved by the courts?". The Minister has said that the courts would know how to assess the transfer cash value of that pension. That is done now. Therefore we know already what the pension asset represents in cash terms. We know too that the courts have years of experience in sorting out complicated allocations of financial assets on divorce, such as who will continue to pay the mortgage on a matrimonial home in which only the wife will remain. The courts have such experience now. So what does the Minister need to know which the courts cannot sort out?
Nothing that the Minister said today gives any evidence or weight to the argument that we could not now proceed with our current information. The research will be useful. That is fine. Let such research influence through the Lord Chancellor's guidance, steering the courts through how to apportion assets if that is appropriate. But at this point in time the need to state in the Bill that the courts must take pension assets into account and that they may do so by dividing them without jeopardising other privileges should not be undermined.
Will the Minister tell us why the courts cannot have that power, authority and discretion?
4.15 p.m.
Lord McIntosh of Haringey: I am the last person to wish to cast doubt on the good will of the Government in commissioning research on the matter. I have been a survey researcher all my working life. I was mildly encouraged by what the Minister said about the research that is being conducted. I am glad to hear that it is being conducted among those who have experience of divorce—in particular among solicitors in recent divorce cases. It sounds as though the sample size is large enough to give what may well be reliable results.
The question which has to be asked is: what is the brief to researchers and how will the results in due course be used to influence government policy? Echoing my noble friend Lady Hollis, I wonder whether the Government have fully understood the nature of the issue now before the Committee. It is not a matter of establishing down to the last decimal point the proportion of divorces in which the transfer value of a pension is an important consideration. In adding the power for the courts to take pensions into consideration, it is surely enough to know that there is widespread suffering as a result of the existing law. Whether that widespread suffering represents 1 per cent., 5 per cent. or 10 per cent. of divorces is not the essence of the problem that we consider today.
The problem is that in respect of pensions the courts are denied the power that they have regarding other assets, such as the matrimonial home. Valuable though

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statistical information on the number of cases in which that issue is a problem will be in determining public policy and the costs and effects on the pension industry, it does not go to the point of our present discussion.
I do not disagree with what my noble friend Lady Hollis quoted regarding the Pensions Management Institute report. Its views are entirely clear. However, that is despite the fact that the pensions industry will not benefit from the amendment. The pensions industry does not want to have to calculate transfer values at the time of divorce, or at any other time, if it can avoid it. It has no interest in paying pensions to two people instead of one. We are not dependent on the good will of the pensions industry for doing justice to those who have already suffered the pain of divorce. The noble Baroness, Lady Young, argued the proposal most persuasively. It is being proposed because it is right, not. because it is convenient to the pensions industry. Therefore, quite frankly, the views of the pensions industry are secondary in the matter. If the pensions industry were to be opposed to the amendment, it would not detract from justification for the amendment.
I hope that the Committee will not be unduly influenced by what the Minster said about the value and relevance of the research. Research is, of course valuable. But the principle which has to be established does not depend on the result of the research.
Baroness Seear: The Minister never took account of the most important point raised by the noble Lord, Lord Boardman. It is a point which could perfectly well be dealt with in this legislation without waiting for research. As I understood it, there is no power to allocate part of a pension. The courts are not allowed so to do. It is no good saying that one can make an agreement on the assets if the most valuable asset of all cannot be divided. In a great many cases the pension is the only valuable possession which the couple have. If that cannot be divided because the law prevents it from being divided, then the courts cannot make a proper, sensible division.
It is not possible at law to split a pension. To make that possible is surely a change which the Minister could introduce. It would be in line with his claim that the best way to deal with the matter is by division of the assets. One cannot have that division if the most important asset cannot be divided.
Lord Boyd-Carpenter: When my noble friend replies, will he clarify what he said about the actions that the Government would take on Report? Will they bring forward a proposal or merely give advice?
Lord Mackay of Ardbrecknish: I am happy to try to be helpful. However, it is always difficult to be the voice of calm reason, which I am trying to be. We all know of cases where we, rightly, feel a degree of indignation on behalf of the wife who has been left pensionless. This is a complex issue. It would be foolish of this House and Parliament in general not to accept that the issues are complex and that it is important to get them right when we act on them. I wish to make a number of points before I again rehearse what I said in my remarks about the position of my noble and learned
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friend and myself on one aspect. I remind the Committee that the PLRC broadly endorsed the PMI working group's approach. However, it recognised the complexity of the issue and recommended further detailed work.
I do not wish to take anything away from what the noble Baroness said and I hope that we do not have too heated an argument about it because we are agreed on the fundamentals. On the PMI working group, according to my information, the final decision was finely balanced.
The research project is being carried out by social and community planning research, which is an independent research institution. I must tell the noble Lord, Lord McIntosh, that the project will explore the current treatment of occupational pension rights in relation to divorce as part of a programme of research into women's pension provision in Britain. We hope that the results of the report will be available by the end of the year. The study will also cover Scotland separately, in order to pick up the difference in the legal position there.
Responding to my noble friend, I repeat that my noble and learned friend the Lord Chancellor and I will consider the proposition that the Matrimonial Causes Act 1973 should be amended so as to place greater emphasis on the need for pension rights to be taken into account by the courts when they are considering financial provisions on divorce. At the same time we shall also give consideration to whether a power should be taken to prescribe a method of valuing pension rights on divorce. Those are the two points I made and I have little doubt that we shall return to them on Report.
Lord Ezra: Will the Minister kindly elucidate on what he said about empowering the courts to take pensions into account? If the courts were to decide that a fair and equitable allocation of the assets in divorce involved the splitting of the pension, could that be done without jeopardising the tax position?
Lord Mackay of Ardbrecknish: I am not sure that that would be possible within the rules of pension schemes as they are currently constituted. In a way, that is the second part of the problem which we are trying to address this afternoon. The first part, as I have already explained to the Committee, is to ask the court to take such matters into account. The second part is what I am trying to persuade the Committee is a more difficult problem. The difficulty is not the valuing of the pension which, as I explained, is comparatively easy; the difficulty is how one sets about splitting it. The existing position is difficult: it depends on the kind of pension. As was mentioned, a case is currently before our noble and learned friends in their capacity as Law Lords. They are examining a case on the just division of the pension on divorce. So it depends on the pension arrangement whether the pension can be split.
Lord Harmar-Nicholls: My noble friend left vague exactly what he will do on Report, but he used a usually significant phrase at this stage in the examination of a Bill. Arguments have been made on various facets and when, from the Dispatch Box, a Minister says that he

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will do something at Report stage, it gives an indication that the point has been made. Will some action be taken on this Bill or will my noble friend talk to his noble and learned friend merely about what ought to be done in the future? The Minister said that certain things were better carried out in primary legislation. What does he mean when he says that he will give it consideration at Report stage?
Lord Mackay of Ardbrecknish: I am trying to be as clear as I can. I said that the question of dividing pension rights on divorce would be better dealt with in primary legislation because, whatever Members of the Committee might say, it is an extremely complex area.
The second point I made was in response to the argument that the position in Scotland is different. The Scottish courts are obliged to take pensions into account. I said that my noble and learned friend and I would consider whether or not the Matrimonial Causes Act 1973 could be amended so as to place greater emphasis on the need for pension rights to be taken into account by the courts in England and Wales when they are considering financial provision on divorce. We shall also give consideration as to whether or not a power should be taken to prescribe a method of valuing pensions on divorce. Those are the two points which I made. I wish to make clear, before anyone else jumps up, that we are talking about provisions during the course of the Bill.
Baroness Seear: The noble Lord has still not dealt with the point I made, which was raised by the noble Lord, Lord Boardman. What is the use of doing all those things unless we clear the matter of whether pensions can be split? One cannot value the assets, including dividing the pension, if the Minister is saying that, with the present state of the law, the pension cannot be split. Surely that is the position and the point could be dealt with in the Bill. Alternatively, is that a matter which the Minister says will be dealt with in an amendment to the Matrimonial Causes Act 1973, to which he referred?
Lord Mackay of Ardbrecknish: I thought I was being careful, I was trying to make a distinction between two different problems. In some cases, as I explained, pension rights can be split. The point about bringing forward legislation, as I was requested to do in the amendments of both noble Baronesses, is that it would be wiser, in the Government's view, to wait until we hear the detail of the research to see how it works out in practice. Then we shall see how to resolve some of the problems. I can assure the noble Baroness that it is an extremely complex area where we are dealing with the relationships between people. Whatever anyone says, that normally ends with a fairly bitter and acrimonious exchange.
As regards the difference between the law of England and that of Scotland, raised by some Members of the Committee, at the risk of repeating myself I point out that my noble and learned friend and I will look carefully at whether the Matrimonial Causes Act should be amended so as to place greater emphasis on the need for pension rights to be taken into account by the courts.
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I know that that does not answer or resolve the second part of the noble Baroness's question, but I believe that it goes some way towards resolving the first part.
Baroness Hollis of Heigham: I am still not entirely clear; I am sure it is my fault. Is the Minister saying that, although he would be willing to support consideration of strengthening the rights of the courts to take pension assets into account, if the only way those pension assets could be taken into account is by dividing them, he will not empower the courts to do so?
Lord Mackay of Ardbrecknish: I would not have put it like that. I would use much more sensible and, dare I say, neutral phraseology. We propose to ascertain whether the Matrimonial Causes Act 1973 should be amended so that greater emphasis is placed on the need for pension rights to be taken into account by the court, as well as the valuation of the pension rights, so that the court has a method of deciding what value to place on them.
The second part of the noble Baroness's question deals with how the pension right is split up. On a number of occasions I have acknowledged that this issue is extremely complex. My recommendation to the Committee is that we await the outcome of the research project to see how the issue is dealt with in the courts. When Parliament returns to the matter, as I have no doubt it will, we shall be in a far better position to make sensible law that will last for the long term.
4.30 p.m.
Baroness Lockwood: Nothing is being conceded. If the Minister agrees with his noble and learned friend to bring back an amendment at Report Stage and the courts are asked to take pension provision into account but there is no capacity to divide the pension that leads us nowhere. There may be no other assets that can be given to the spouse who has nothing to compensate her for half of the pension rights.
There is unanimity throughout the Committee. I have never known this Chamber so united on an issue. What could be established after this debate is the principle that we accept that pension rights should be divided on divorce. All of us accept that it is not an easy matter; it is complicated. But a timescale could be laid down in the Bill which would enable the Government to take into account the research that was mentioned as well as other research already carried out. The Government could take into account the experience of the Scottish courts, which are already required to take pension provision into account. Later, at a determined date, the courts could implement the principle for which the whole of this Committee asks. I do not see any need for us to wait until further research is before us. We all know that we support the principle of division on divorce. It is now a question of working out the mechanisms. That could be done between now and a commencement date which could be included in the Bill.
Lord Mackay of Ardbrecknish: I think that the noble Baroness invites me, as I said earlier, to propose to the Committee a Henry VIII clause, or clauses, of very considerable proportions to allow us to do

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something in a month or sometime next year the detail of which is at this time not very clear and which will be left to the good sense of the Secretary of State. I normally try that argument about matters which are—dare I say?—of much less importance than this. Your Lordships are very sceptical of that argument. I would be reluctant to advance it even in such a good cause.
As the noble Baroness pointed out, we are all agreed that there is a very real problem here. I should like to think that I have gone some way to alleviating people's fears that the courts in England and Wales do not take pensions into account—there is no evidence that they do not—and some way towards ensuring that they do take them into account by way of a "first step". I have little doubt that we shall have to return to the issue at some stage in the future once the research project is complete and when we see clearly how to proceed.
The noble Baroness mentioned a proportion of 50:50. It may not of course be 50:50. One has to go into much more detailed propositions—
Baroness Hollis of Heigham: The courts decide the matter.
Lord Mackay of Ardbrecknish: I am being told from a sedentary position that it is for the courts to decide. It is up to Parliament to make clear that it puts on the face of legislation what it intends should be done in circumstances such as these. This is a very difficult issue. The suggestion is that there will be two willing parties in the splitting up of pensions on divorce. I do not believe that any Members of the Committee live in such an unreal world as to believe that that is the case—
Lord Wolfson: Will the Minister keep in mind the position of a partner in the event of remarriage when deciding what recommendation the House will give to the courts on the division of the pension?
Lord Mackay of Ardbrecknish: I seem to keep repeating the same point. So far as the provisions in Scotland are concerned and the way in which they differ from those in the courts in England and Wales, I have said that although the two jurisdictions are different, the difference is not great. The research project will help us determine how great the difference is. We fully appreciate the arguments and agree with the concern expressed on this issue as divorce increases. As the noble Baroness, Lady Lockwood, said, a pension is a very considerable part of the wealth that has been created by the couple in marriage. We are prepared to look carefully at whether to amend the 1973 Act to place greater emphasis on the need for pension rights to be taken into account by the court. I accept that what I have said does not go nearly far enough for most Members of the Committee who want to get into the difficult issue of dividing pension rights but I hope that it will certainly go part of the way to ensuring that the courts take into account not only the ordinary savings and the property but also what could be a very significant part of the wealth created by the couple; namely the pension rights.
Lord Monkswell: We are—
Noble Lords: Baroness Young.
Baroness Young: We have certainly had a very good debate. I begin by thanking all those Members of the Committee who have spoken in support of this series of amendments. I do not think that I have ever heard such unanimity of view from all parts of the Chamber on any one issue. I hope very much that my noble friend the Minister will convey both the strength and the unanimity of feeling to his right honourable friend the Secretary of State. Both are very unusual.
They are unusual, not—if I may say so to my noble friend the Minister—because we are being very emotional about this matter, but because we believe that society has changed and that there is an injustice in the present state of affairs which needs to be put right. It could be put right in the course of the passage of this Bill.
In thanking all those who have supported me, I should like to underline some of the points that were made and return to what I thought was the extremely important argument of the noble Baroness, Lady Hollis. She explained in considerable detail that the legislation that was passed which governs the ability of an employee to change jobs and to take his pension with him gives us the basis of finding a way of valuing the pension and so of dealing with one of the most difficult of the issues. That legislation is now in place. It is my contention—I believe it would the contention of everyone who has spoken—that all the pieces of the jigsaw puzzle are there on the table. They simply need to be put together.
I should like to underline the point that was made by my noble friend, Lady Elles, about cost. I said that I had been unable to get precise costings; I understand that that applies also to my noble friend the Minister. It is very difficult to claim the cost of the loss to the Inland Revenue over any of the proposals that are adduced and not to be able to counterbalance it with the cost from the Department of Social Security on social security benefits. In a way, in the second half one is trying to prove a negative, which is an impossible situation. But common sense tells us that there would be a counterbalance in savings. Any information that can be given to us on costs would be very helpful.
I should like to repeat what my noble friend Lord Boyd-Carpenter set out clearly; that is, that if we do not do something on this Bill, there is unlikely to be another opportunity to do anything. I find it difficult to believe that another Bill on pensions will be introduced and it would be a curious piece of legislation which simply amended the 1973 Act, if that was proposed as the way forward.
Everyone who spoke drew attention to the difficult cases that exist, including my noble friend Lord Dean. My noble friend Lady Seccombe mentioned some of the examples in the correspondence she received and my noble friend Lord Boardman drew attention to a woman who wanted to disclaim a pension and could not do so. The noble Lord, Lord McIntosh, said that we are not defending the pensions industry; the simple fact is that divorce has made life today more complicated and pensions are one of the complicated issues that become part of divorce. Divorce is now a part of life and I for one am sad to think that it is unlikely to change in the foreseeable future.

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I have considerable sympathy with the comments made by my noble friend when he was winding up. I was a Minister and feel deeply for him in the position in which he finds himself—probably more deeply than anyone else who spoke in the debate this afternoon. I want to say something constructive and helpful at the close of the debate and I hope that my noble friend will take back the strength of feeling and unanimity of view on this matter.
The Committee wants the Government to bring forward an amendment to correct the injustice which exists. I believe I can speak for the Committee, including the noble Baroness, Lady Hollis, when I say that none of us pretends that our amendments are perfect. We want a government amendment. If that is not forthcoming by the Report stage, we would be satisfied with an undertaking that it will be brought forward before the Bill completes its passage through Parliament.
I doubt that any one of us fully understands the purpose of the further research. Though my noble friend mentioned it on several occasions, it is difficult to see what it is that we are looking for that we do not already have. I believe that my noble friend is worried that some proposals may smack of retrospective legislation. I am well aware of the difficulties that arose over the Child Support Agency which, in principle, had the support of everyone and then ran into difficulties. One of the more obvious difficulties was that in a clean break divorce people were being asked for something extra.
On the issue before us I do not believe that anybody is asking for a retrospective view. We are looking to the future. I am against retrospective legislation and believe it to be quite wrong. However, one cannot guarantee that there will not be any hard cases. In my experience, whatever one does in public life, hard cases arise as well as cases that one cannot imagine beforehand. But I hope that the Minister will recognise that we are not advocating retrospective legislation.
I shall read carefully what my noble friend the Minister said on this matter. But I hope that he too will reflect carefully on what happened this afternoon. When such a strength of feeling exists on an issue; when it is a matter of justice and when there is an opportunity to put matters right, that is the moment to act. The Minister would bring great credit on himself if he could do something today on this important issue. On the strength of what he said and because I want to give him the opportunity to bring forward an amendment at a later stage, I shall not press the amendment today. Of course we shall return to it at the next stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 83, as amended, agreed to.
Clause 84 [Forfeiture, etc.]:
[Amendment No. 166A not moved.]
Clause 84 agreed to.
4.45 p.m.
Baroness Dean of Thornton-le-Fylde Baroness Dean of Thornton-le-Fylde moved Amendment No. 166B:
After Clause 84, insert the following new clause:
Named beneficiary
(".—(1) Subject to subsection (2), any occupational pension scheme which does not contain a rule to provide for the benefits on death to be paid, whether at the same or at a lower rate, to a person who has been nominated by the scheme member as his chosen beneficiary upon death shall be treated as including one.
(2) Where the scheme member is married, the nominated beneficiary shall automatically be his spouse.
(3) Every scheme member shall be informed by the trustees of the scheme of his right so to nominate.").
The noble Baroness said: Amendment No. 166B will provide a new clause after Clause 84, which deals with forfeiture of pensions. The amendment seeks to correct an omission in the Bill. Its effect would be to allow an unmarried member of a scheme to declare a beneficiary in the event of his or her death while a member of that scheme.
This is neither a new nor a radical idea. In fact, it already applies in many private occupational pension schemes —for example, BT, Unilever, Tate & Lyle, Massey Ferguson, BP and the AA. Those companies already include the provision within their schemes. The amendment would therefore ensure that those private schemes which do not currently provide for such a declaration, will do so if the unmarried member of the scheme chooses to exercise that right. The provision will also change a disparity in the public sector. At the moment 4.5 million public sector workers are affected by rules which do not recognise their partners in the event of death. I refer to the schemes for local council workers, civil servants and even public employees who put their lives on the line day in and day out like policemen and fire fighters.
I suggest that pensions should not be based upon moral judgments or upon the lifestyle that people choose to live. Contributions are paid or assessed as paid for a pension promise at the end of a working life. If that working life is abruptly stopped by the death of the member in the scheme, then in all schemes the widow or widower will benefit. The amendment deals with schemes where members are not married. The latest government figures for 1990 show that 7 per cent. of all people between the ages of 16 and 59 live together but are not married. For men between the ages of 25 and 29 and women between the ages of 20 and 24, the figure increases to 15 per cent. We are not therefore talking of an inconsiderable number of people.
The single factor across all public pension schemes is that a partner who is not married to the scheme member receives nothing in the event of the death of that member under the scheme. Let us look at an example. Being a policeman is a hazardous job where people put their lives on the line day in and day out. Apparently they pay 11 per cent. of their salaries into the pension scheme yet, if an unmarried policeman is killed on duty, his partner receives nothing from the pension scheme. In fact the scheme makes clear that death in service benefits depend on the officer being married. The benefit can be paid to the parent, a brother or sister or a

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child over 19, but not to the partner—who is probably the parent of the officer's children. For example, a young police officer worked for ICI for five years and then entered the police force. He was killed while on duty and left his partner of seven years with a five year-old and a one year-old child. She received absolutely no benefit at all from the police pension scheme. But she received a benefit from ICI for his period of employment with that company.
Fire fighters' pension schemes are payable only to the "married spouse". The principal Civil Service pension scheme says that a pension is payable only to someone you are married to. Yet there are non-pension related benefits where the Government give recognition to a partner who is not married. For instance, if a civil servant has to move home in the course of his job the cost of that move is taken into account despite the fact that his partner may not be married to him. The local government superannuation scheme has no provision to nominate an adult partner to receive an equivalent widow or widower's pension without the member giving up part of his pension. The teachers' superannuation scheme provides for dependants, but those dependants are not the partner; they are the parent, brother or sister, or the widowed step-parent, with whom the member may never have had a close relationship. The partner gets absolutely nothing. The same is true in the National Health Service where nothing can go to the partner who is not married. In some circumstances benefits may go to the brother or sister; yet the death of that member of the pension scheme could leave the family of the member bereft.
The lack of provision for survivors at common law and for same sex partners in long-term relationships offends against equal treatment. This is a gap in the Pensions Bill. As I said at the beginning of my remarks, the proposal is not radical and is not new. It is based on a member paying contributions into a fund or being assessed as paying contributions into a fund and at the end of his or her working life getting a benefit. If he or she dies during service the widow or widower in each case will get a benefit. But if they are not married, in many cases in private sector schemes, and in all cases in public sector schemes, they get absolutely nothing. That inequality needs to be rectified. I beg to move.
Lord Mackay of Ardbrecknish: I am in some difficulty because the noble Baroness's speech did not quite accord with the amendment which she moved. The effect of the amendment would be to take away trustees' discretion to decide who should receive lump sum death benefits. It would require such death benefits to be paid to a person who has been nominated by the scheme member as his chosen beneficiary. Where the member is married, the death benefit would automatically have to be paid to the spouse. On the words in the amendment we do not consider that such a requirement for a binding nomination is necessary.
As the Committee may possibly be aware, trustees are under a duty to act fairly and not to take irrelevant considerations into account in exercising their discretion. Nor do we believe that this change would be welcomed by pension scheme members and their families. Current arrangements provide a flexibility to
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allow for circumstances where the member may have made a nomination which is out of date. Members are usually asked to fill in a formal nomination or expression of wish at the time when they join a pension scheme. They are requested to update that if their circumstances change but they could, of course, forget to do so. Under the binding nomination arrangement as proposed in the amendment, death benefits would always be paid to the nominee, whether or not the member's circumstances had changed.
In addition, payments at the discretion of trustees do not form part of the member's estate and do not therefore depend on the grant of probate of the member's will which can take some time. Trustees can make payments very quickly to cover immediate loss of current income to those financially dependent on the deceased. However, we accept that in some cases the wording of trust deeds, particularly older deeds, can be unnecessarily restrictive. We agree with the PLRC that schemes should consider amending their trust deeds where trustees' decisions on the payment of death benefits are restricted. We have therefore introduced provision in Clause 61(2) (a) that will enable trustees to modify a scheme by resolution in order to extend the class of persons who may receive death benefits. That avoids the need for the intervention of a third party, such as the courts or the authority.
In the light of what I have said about the rather narrow point that we took from the amendment, I hope that the noble Baroness will be able to withdraw it. She widened the discussion away from death benefits to public sector schemes and the question of whether only the legal spouse should be entitled. This is a wider public policy issue. I shall certainly pass on the noble Baroness's comments to my Treasury colleagues but I hope that what I have had to say about paying lump sum death benefits will satisfy her that the provisions in the Bill are perfectly satisfactory.
Lord Ezra: Will the noble Lord clarify a point which he made in his remarks? He started by saying that the noble Baroness's proposition is unnecessary because of the discretion which trustees have in the case of payment of benefits on the demise of the member. To go back to her example of a policeman who was unfortunately killed on duty and had a partner of seven years with small children, were the trustees in that case guilty of not exercising their discretion?
Lord Mackay of Ardbrecknish: That is exactly the point I made at the beginning and at the end of my contribution to this short debate. The police come inside the public sector schemes. We rather assumed that the noble Baroness's amendment was aimed at a different problem. I am afraid that I am not in a position to answer a question about public service schemes. I have only really looked into the question of lump sum death benefits in occupational pension schemes with trusts and the like.
Baroness Dean of Thornton-le-Fylde: In debating the Bill I am becoming used to the words "not necessary". We are all becoming experts on the interpretation of those words. In this case I interpreted the Minister as saying, "We do not accept the argument

945
and we are not prepared even to look at the point which has been put forward". However, it is a genuine point and what we have proposed is necessary.
In private pension schemes trustees have discretion, although they do not always exercise it. Many large multinational company schemes provide for benefits to be paid to the non-married partner where the individual member has so designated. The Minister said that many people in pension schemes are opposed to our proposal. We have been lobbied very hard on this point by a large number of pension schemes and we have been told that what we have proposed is necessary. In the public sector, there are no trustees and there is no discretion. There is no moving from that. That is the reality of the position.
On the basis of what the Minister said, I feel that I should not withdraw the amendment. It is an important point. I should like to take the opportunity to test the opinion of the Committee.
4.59 p.m.
On Question, Whether the said amendment (No. 116B) shall be agreed to?
Their Lordships divided: Contents, 79; Not-Contents, 116.

Division No. 1

CONTENTS

Acton, L.

Holme of Cheltenham, L.

Addington, L.

Hutchinson of Lullington, L

Allen of Abbeydale, L.

Jacques, L.

Avebury, L.

Jay of Paddington, B.

Barnett, L.

Jeger, B.

Beaumont of Whitley, L.

Jenkins of Putney, L.

Blackstone, B.

Judd, L.

Bottomley, L.

Lester of Herne Hill, L.

Bridges, L.

Lockwood, B.

Broadbridge, L.

Longford, E.

Bruce of Donington, L.

Mallalieu, B.

Carmichael of Kelvingrove, L.

Mason of Barnsley, L.

Castle of Blackburn, B.

McIntosh of Haringey, L.

Chapple, L.

McNair, L.

Clinton-Davis, L.

Milverton, L.

Dahrendorf, L.

Monkswell, L.

David, B.

Morris of Castle Morris, L.

Dean of Thornton-le-Fylde, B.

Nicol, B.

Donaldson of Kingsbridge, L.

Parry, L.

Dormand of Easington, L.

Peterborough, Bp.

Dubs, L.

Rea, L.

Ezra, L.

Redesdale, L.

Falkland, V.

Richard, L.

Farrington of Ribbleton, B.

Rochester, L.

Fisher of Rednal, B.

Russell, E.

Freyberg, L.

Ryder of Warsaw, B.

Gallacher, L.

Seear, B.

Geraint, L.

Serota, B.

Gladwin of Clee, L.

Shaughnessy, L.

Gould of Potternewton, B. [Teller]

Stallard, L.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Strabolgi, L.

Greene of Harrow Weald, L.

Thomas of Walliswood, B.

Gregson, L.

Tordoff, L.

Grey, E.

Turner of Camden, B.

Halsbury, E.

Weatherill, L.

Harris of Greenwich, L.

Wedderburn of Charlton, L.

Haskel, L. [Teller.]

Wharton, B.

Hilton of Eggardon, B.

White, B.

Hollis of Heigham, B.

Williams of Elvel, L.

946

NOT-CONTENTS

Addison, V.

Killearn, L.

Ailsa, M.

Kimball, L.

Aldington, L.

Lauderdale, E.

Ampthill, L.

Lindsay, E

Archer of Weston-Super-Mare, L.

Lindsey and Abingdon, E.

Ashbourne, L.

Liverpool, E.

Astor of Hever, L.

Long, V.

Astor, V.

Lucas of Chilworth, L.

Balfour, E.

Lucas, L.

Belhaven and Stenton, L.

Lyell, L.

Birdwood, L.

Mackay of Ardbrecknish, L.

Blaker, L.

Mackay of Clashfern, L. [Lord Chancellor.]

Blatch, B.

Boardman, L.

Manton, L.

Borthwick, L.

Marlesford, L.

Boyd-Carpenter, L.

McAlpine of West Green, L.

Brabazon of Tara, L.

McConnell, L.

Brigstocke, B.

Merrivale, L.

Brookes, L

Mersey, V.

Brougham and Vaux, L.

Miller of Hendon, B.

Bruntisfield, L.

Montgomery of Alamein, V.

Butterworth, L.

Mountgarret, V.

Campbell of Alloway, L.

Mowbray and Stourton, L.

Campbell of Croy, L.

Murton of Lindisfarne, L

Carnegy of Lour, B,

Napier and Ettrick, L.

Cavendish of Furness, L.

Noel-Buxton, L.

Charteris of Amisfield, L.

Norrie, L.

Chelmsford, V.

Northesk, E.

Chesham, L.

Onslow, E.

Coleraine, L.

Orkney, E.

Courtown, E.

Oxfuird, V.

Craig of Radley, L.

Park of Monmouth, B.

Craigavon, V.

Pearson of Rannoch, L.

Cranborne, V. [Lord Privy Seal.]

Pender, L.

Cumberlege, B.

Perry of Southwark, B.

Davidson, V.

Rankeillour, L.

Dean of Harptree, L.

Renwick, L.

Dixon-Smith, L.

Rodger of Earlsferry, L.

Eden of Winton, L.

Romney, E.

Elles, B.

Saltoun of Abemethy, Ly.

Seccombe, B.

Elliott of Morpeth, L.

Skelmersdale, L.

Faithfull, B.

St. Davids, V.

Ferrers, E.

Stewartby, L.

Fraser of Carmyllie, L.

Strathclyde, L. [Teller.]

Gardner of Parkes, B.

Sudeley, L.

Geddes, L.

Swansea, L.

Gray of Contin, L.

Swinfen, L.

Harding of Petherton, L.

Tebbit, L.

Harmar-Nicholls, L.

Thomas of Gwydir, L.

Hayhoe, L.

Trefgarne, L.

Henley, L.

Trumpington, B.

Hives, L.

Ullswater, V.

Holderness, L.

Vivian, L.

Hooper, B.

Westbury, L.

Hothfield, L.

Wise, L.

Howe, E.

Wolfson, L.

Hylton-Foster, B.

Wynford, L.

Inglewood, L. [Teller.]

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.7 p.m.
Clause 85 [Sections 83 and 84: supplementary]:
Lord Lucas Lord Lucas moved Amendment No. 167:
Page 49, line 3, leave out ("and other schemes falling within a prescribed") and insert ("or to other schemes falling within a prescribed class or").
The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 167ZA. The purpose of Amendment No. 167 is to clarify the

947
regulation-making powers in subsection (1) (a). We intend that regulations made under this subsection will modify the provisions contained in Sections 83 and 84 with regard to public service schemes or to other schemes of a particular class or description.
It is intended that regulations will set out the circumstances under which a public service pension can be forfeited. We intend these regulations to reproduce the effect of existing provisions contained in Section 78 of the Pension Schemes Act concerning the forfeiture of public service pensions. We believe that in certain circumstances the rules on the forfeiture of public service pensions should differ from those in the private sector. For example, in some cases forfeiture of pension is appropriate where it would be regarded as contrary to the public interest to pay a pension payable under a public service scheme.
The only other types of schemes we have in mind as suitable for possible modifications are schemes which do not have tax approval and which provide benefits in excess of Inland Revenue limits on earnings in excess of the earnings gap. Generally these so-called "top-up" schemes are not trust based and are unfunded. This power would enable us to make regulations, if necessary.
On a general note, I should like to reassure the Committee that we would only consider modifications where it was absolutely clear that certain provisions in Clauses 83 and 84 would be wholly inappropriate to a particular type of scheme.
Amendment No. 167ZA is intended to make the meaning of "pension" in Sections 83 and 84 clearer. In those clauses we want to protect all rights and entitlements under a scheme, not just those to pensions. This amendment would clarify that for the purposes of these clauses any reference to pension in relation to an occupational pension scheme includes any benefit under the scheme and any part of a pension or benefit. For example, this would include rights to a lump sum, to payments under an interim agreement or rights used to purchase an annuity. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 167ZA:
Page 49, line 7, leave out ("includes") and insert ("in relation to an occupational pension scheme, includes any benefit under the scheme and any part of a pension and").
On Question, amendment agreed to.
Clause 85, as amended, agreed to.
Clauses 86 to 99 agreed to.
Clause 100 [Provision of information]:
Lord Lucas Lord Lucas moved Amendment No. 167A:
Page 58, line 13, leave out from ("in") to end of line 14 and insert ("such a manner, at such a place and within such a period as may be specified in the notice.").
The noble Lord said: This amendment will enable the Compensation Board itself to specify how, when and where evidence should be provided. As currently drafted, the arrangements for providing such evidence would be prescribed in regulations. We do not believe that this would give the Compensation Board sufficient flexibility. The circumstances of each case will be
948
different and only the board will be in a position to decide what arrangements are appropriate. The amendment ensures that the Compensation Board has the flexibility it requires to discharge its functions. I beg to move.
On Question, amendment agreed to.
Clause 100, as amended, agreed to.
Clauses 101 to 104 agreed to.
Clause 105 [Offences by bodies corporate, partnerships and unincorporated associations]:
Lord Lucas Lord Lucas moved Amendment No. 168:
Page 60, line 22, after ("a") insert ("Scottish").
The noble Lord said: In moving Amendment No. 168, I should like to speak also to Amendment No. 181.
Clause 105(3) provides that where a criminal offence under Part I of this Act is committed by a partnership and it is proved that it was committed with the consent or connivance of, or as a result of neglect by, an individual partner, then that partner is also guilty of the offence and is liable to be prosecuted and punished accordingly.
However, this provision is required in respect of only Scottish partnerships. This is because only a Scottish partnership can be treated as corporate body with its own legal personality—which can protect individual partners from prosecution for wrongful acts committed by the partnership. Amendment No. 168 takes account of the different legal position afforded to partners of Scottish partnerships. It provides for the authority to act against individual Scottish partners in the same way as against English partners.
Clause 112 provides interpretations of terms used in Part I of the Bill. To clarify the term "Scottish partnership", Amendment No. 181 inserts a definition of the term at the appropriate place. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 169:
Page 60, line 26, leave out subsection (4).
The noble Lord said: In moving Amendment No. 169, I should like to speak also to Amendment. No. 170.
The effect of Amendment No. 169 is to delete Clause 105(4) from the Bill. As it stands, subsection (4) provides that where an offence is committed by an unincorporated association, any officer of the association or member of its governing body may be held responsible for the offence and be proceeded against accordingly. However, under UK law such an unincorporated association has no legal personality. Consequently, any action taken against such a body would have to be against its members, so subsection (4) is not required to provide for this.
Amendment No. 170 removes the words
"or failure to comply with"
from Clause 106. This is because Clause 112, which sets down the interpretations of terms used in Part I of the Bill, provides that "contravention" includes failure to comply, and the term "contravention" is already used in Clause 106. I beg to move.
On Question, amendment agreed to.
Clause 105, as amended, agreed to.
5.15 p.m.
Clause 106 [Breach of regulations]:
Lord Lucas Lord Lucas moved Amendment No. 170:
Page 60, line 33, leave out (", or failure to comply with,").
On Question, amendment agreed to.
On Question, Whether Clause 106, as amended, shall stand part of the Bill?
Baroness Seear: We oppose the clause standing part of the Bill because it embodies powers, by regulation, to create what are in effect criminal offences which, on summary conviction, can carry a fine of up to level 5. It has been said frequently during the debate that the Government are taking far too much power by regulation to deal with matters arising in connection with the Bill. We recognise that, given the nature of the Bill, a great deal has to be done by regulation, but we do not consider that "by regulation" should be a sufficient way of creating what is an offence carrying a considerable fine. An action which carries such a penalty should be an action resulting from provisions on the face of the Bill; it should not be an offence that is created by regulation. That is why we oppose Clause 106 standing part of the Bill.
Baroness Hollis of Heigham: I should like to support the noble Baroness, Lady Seear, in opposing the Question that Clause 106 stands part of the Bill. We also oppose the inclusion of Clause 134, which has been grouped with it. Of all the 200 or so regulatory powers in the Bill, I believe that those two clauses are the most worrying. Together, they give the Secretary of State power to make a criminal offence by regulation. What is more, the Secretary of State has specified no limit on the penalties that he may impose for the criminal offences that he has created. Furthermore, I understand that it will all be done by negative procedure so that neither House need have an opportunity to debate it.
That matter was of sufficient concern to the Delegated Powers Scrutiny Committee that it stated:
"In view of the extent of the powers to create criminal offences and of the difficulty of assessing the significance of individual powers, the House may wish to consider with care whether the powers in Clause 106 and Clause 134 are sufficiently clearly defined"
It also questioned whether they should be,
"subject to the affirmative rather than the negative procedure, to ensure at least some consideration in both Houses".
We expressed our concern about that both on Second Reading and earlier in Committee. We have since been joined by other noble Lords. However, the Government have not so far tabled any amendments to define the scope of their powers, to limit the penalties or to use the affirmative procedure. In the absence of any move from the Government, I support the noble Baroness, Lady Seear, in arguing that the clauses should not stand part of the Bill.
Lord Mackay of Ardbrecknish: These clauses empower the Secretary of State, when making regulations under Part I of this Bill or the Pension Schemes Act 1993, to provide for contravention of the provisions in those regulations to be a criminal offence. They also specify the maximum penalty for such an
950
offence as level 5 on the standard scale, which is currently £5,000. Consequently, it is intended that any offences created will be summary ones and will not attract a prison sentence.
Clause 134, in addition, enables regulations made under the Pension Schemes Act 1993 to provide the alternative penalty of a civil fine imposable by the Occupational Pensions Regulatory Authority. It also makes it a criminal offence for any person knowingly or recklessly to provide the pension schemes registrar with false or misleading information.
The provisions in Clause 106 are similar to those in Section 168 of the Pension Schemes Act 1993 (which Clause 134 replaces), which enables regulations under that Act to provide for the contravention of their provisions to be a criminal offence and sets down the maximum penalty for such offences.
While we expect most of those responsible for the running of pension schemes to comply with the new obligations that are to be placed on them, clearly it is essential to have appropriate sanctions for non-compliance. I am sure that neither noble Baroness would disagree with that. Although the authority will have the power to impose civil penalties, we want to ensure that the punishment fits the crime. We consider that criminal penalties are appropriate for the most serious offences in order to emphasise the severity of the offence and provide a serious deterrent to wrongdoing.
These clauses are necessary because many of the obligations that will need to attract a penalty for non-compliance are likely to be created in secondary legislation—either under Part I of the Bill or under the Pension Schemes Act 1993. The Delegated Powers Scrutiny Committee recognised that regulation-making powers were necessary, as did the noble Baroness, Lady Seear, because the legislation covers detailed, complex and technical matters. Without the provisions of these clauses we could not underpin satisfactorily all the obligations created in secondary legislation with appropriate penalties. In addition, without the provisions of Clause 134 the enforcement structure for obligations introduced through the Pension Schemes Act would not mirror that available for those introduced through the powers in this Bill.
However, we recognise the concerns that have been raised about this approach. We are aware also that the scrutiny committee considered that the powers to introduce criminal offences under Clauses 106 and 134 were too wide. An alternative approach might be to provide, on the face of the Bill, that breaches of regulations made under any particular clause would be criminal offences, but that would not improve clarity. Very few of the obligations will need to be backed up with criminal penalties. These clauses enable us to be selective when attaching penalties to breaches.
It is right that criminal penalties should be included in the range of enforcement powers available to the authority. Nevertheless, we will consider whether we can focus the scope of these provisions to meet the scrutiny committee's concerns. One way of doing so would be to take up its suggestion of requiring any regulation introducing a criminal obligation to be subject to the affirmative procedure.

951
We have already said that we will consider the options put forward by the scrutiny committee in respect of civil penalties introduced through the powers of Clause 9 and this clause. We did that during a previous debate. The alternatives proposed were that the Bill should set down the maximum penalty, or regulations introducing a civil penalty should be subject to the affirmative procedure.
I hope that what I have said persuades the noble Baronesses that I am alive to the criticism that has been made of those two clauses and that we are looking at two possible avenues which we think would answer the concerns expressed in this debate, on Second Reading, and by the scrutiny committee in its report.
Baroness Seear: It is welcome news that the Government sometimes listen. While it is by no means all that we would like, given that the Minister has said that he will at least see that the regulations are subject to the affirmative procedure, that is a very real advance.
Lord Boyd-Carpenter: Is my noble friend saying that he will introduce amendments to that effect at the next stage?
Lord Mackay of Ardbrecknish: I think that I was saying that we would look at two different approaches to the problem. We will bring forward at another stage of the Bill whichever one appears to offer the best solution.
Baroness Seear: We withdraw our objection to the clause.
Clause 106, as amended, agreed to.
Clause 107 agreed to.
Clause 108 [Powers to modify this Part]:
Lord Lucas Lord Lucas moved Amendments Nos. 170A, 170B and 170C:
Page 61, line 8, leave out ("section 68").
Page 61, line 13, at end insert ("or").
Page 61, line 15 leave out from ("scheme") to end of line 18.
The noble Lord said: I spoke to these amendments with Amendment No. 151BA. I beg to move.
On Question, amendments agreed to.
Clause 108, as amended, agreed to.
Clause 109 agreed to.
Lord Lucas Lord Lucas moved Amendment No. 171:
After Clause 109, insert the following new clause:
Consultations about regulations
(" .—(1) Before the Secretary of State makes any regulations by virtue of this Part, he must consult such persons as he considers appropriate.
(2) Subsection (1) does not apply—

(a) to regulations made for the purpose only of consolidating other regulations revoked by them,

(b) to regulations in the case of which the Secretary of State considers consultation inexpedient because of urgency,

(c) to regulations made before the end of the period of six months beginning with the coming into force of the provision of this Part by virtue of which the regulations are made, or

952

(d) to regulations which—

(i) state that they are consequential upon a specified enactment, and

(ii) are made before the end of the period of six months beginning with the coming into force of that enactment.").

The noble Lord said: I shall speak also to Amendments Nos. 190 and 191. Amendment No. 171 introduces a new clause which places the Secretary of State under a statutory duty to consult those he considers appropriate before making regulations on pension matters. I trust that that will be a welcome addition to the Bill.
Amendments Nos. 190 and 191 are consequential amendments relating to consultation on regulations. Their effect is to ensure that the Secretary of State will be under the same statutory obligations on consultation for regulations made under the Pension Schemes Act 1993 as he will be for regulations made under the Bill. I beg to move.
Lord McIntosh of Haringey: We are not going to oppose an amendment which introduces an obligation to consult. That is a constant theme in legislation, and Ministers will know that one of the constant devices by which oppositions seek to open up discussion on legislative matters is by introducing amendments to require consultation. But this is a pretty feeble attempt at introducing consultation into the Bill.
Let us concede that the amendment provides that the Secretary of State must consult, but then it states:
"such persons as he considers appropriate".
What kind of people are considered appropriate for consultation on regulations? In particular, I want to know whether the Secretary of State will consider consultation with the pensions industry itself adequate for the purpose because, of course, there are many kinds of people who are affected by pensions legislation. There are those who are responsible professionally for producing pension schemes; there are those who, by virtue of their role as employers, are responsible for pension schemes; and there are the punters—those who pay into and receive pensions. I should like an assurance that the Government do not exclude the third category from the proposed consultation.
It is not clear what is meant by subsection (2) (b):
"regulations in the case of which the Secretary of State considers consultation inexpedient because of urgency".
We have had consultation amendments before, but I have never seen a consultation amendment which makes that provision. Perhaps the Minister will tell us what precedent there is for what, on the face of it, appears to be a loophole which would enable the Secretary of State to avoid consultation in any case, because it is only up to the Secretary of State to consider what is urgent.
What if another person thinks that something else is not urgent, and that there are other opinions which could well be canvassed before regulations are made? It seems odd, at the very least, to put that matter entirely into the Secretary of State's hands. I suppose that we could let the transitional arrangements in paragraphs (c) and (d) go through without comment, but if the Government are going to introduce consultation provisions let us at least ensure that they have some real teeth.
Lord Boyd-Carpenter: Will my noble friend say whether there is any precedent for subsection (2) (b)?
Lord Lucas: Yes, I am told that the SSAC has the same provisions. Perhaps I may address the point more widely. The purpose of the provisions is to ensure that we have the power to deal with another Maxwell; in other words, someone innovative and powerful making things go wrong quickly and radically. We do not wish to be without the powers necessary to deal with such a situation, if and when it happens. We do not envisage using subsection (2) (b) under ordinary circumstances. We shall consult whenever possible.
Perhaps I can say to the noble Lord, Lord McIntosh of Haringey, that we shall include members' representatives, trade unions, consumer groups, and similar organisations, in our consultation and not just people who might be considered to be pensions experts.
On Question, amendment agreed to.
Clause 110 agreed to.
5.30 p.m.
Schedule 3 [Amendments consequential on Part I]:
Lord Lucas Lord Lucas moved Amendment No. 171A:
Page 101, line 20, after ("Authority") insert ("or the Pensions Compensation Board").
The noble Lord said: I shall speak also to Amendment No. 171B. These amendments allow information to be disclosed to the Pensions Compensation Board by any self-regulating organisation under the Financial Services Act 1986. They also allow the registrar of occupational and personal pension schemes to disclose information to the Pensions Compensation Board. I beg to move.
Lord McIntosh of Haringey: On the face of it, the amendment appears to be welcome. However, I am puzzled why the information should be given under the Financial Services Act and the Pension Schemes Act but not, for example, under the Companies Act or any other legislation that is spelt out in detail in Schedule 3. Can the Minister help the Committee?
Lord Lucas: I do not believe that I can immediately help the Committee. I shall write to the noble Lord.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 171B:
Page 102, line 25, after ("Authority") insert ("or the Pensions Compensation Board").
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 172:
Page 103, line 4, leave out paragraph 26 and insert:
(". Section 144 (deficiencies in assets on winding up) is repealed.").
The noble Lord said: I shall speak also to Amendments Nos. 173, 175, 176, 177, 178, 179, 180, 193, 196 and 197.
Amendment No. 193 inserts after Clause 139 a new clause which repeals Sections 136 to 143 of the Pension Schemes Act 1993. These sections contain the Occupational Pension Board's powers to wind up schemes and to modify schemes for specified purposes.
954
They are either no longer required or will transfer to the new regulatory authority under Clauses 10 and 62 to 64 of the Bill.
Sections 136 to 143 of the Pension Schemes Act are incorrectly partially repealed in Schedule 3 to this Bill. Amendment No. 193 makes the full repeal as a new clause in Part IV of the Bill. Changes to other legislation consequential to the new clause should then appear in Schedule 6, not Schedule 3. The remaining amendments in the group achieve that.
The only exceptions are Amendments Nos. 172 and 173, which take account of the need to repeal Section 144 of the Pension Schemes Act. This contains the provisions for employer debt on wind up which are re-enacted by Clause 68 of the Bill. I beg to move.
Lord McIntosh of Haringey: I am grateful to the Minister for that explanation. This series of amendments caused us a great deal of head scratching. One started with Amendments Nos. 172 and 173 in a grouping which appeared just before lunch today and then discovered that it all depends on Amendment No. 193. Even as regards those who spend a fair amount of time looking at amendments to legislation, it is possible to become confused—and I certainly did.
I am grateful for the explanation. I take it that all the other amendments are consequential on Amendment No. 193, which removes the relevant sections of the Pension Schemes Act 1993. I wish to be assured that the only purpose of the amendment is to ensure that those parts of the 1993 Act no longer appear on the face of the Bill.
Lord Lucas: I am happy to give that assurance.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 173:
Page 103, line 9, leave out from ("omitted") to end of line 10 insert:
("at the end of paragraph (b) there is inserted "or", and paragraph (d) and the preceding "or" are omitted, and
( ) subsections (6) and (7) are omitted").
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 174:
Page 103, line 13, at end insert:
(" . In section 158 (disclosure of information), after subsection (7) there is inserted—
"(7A) The Secretary of State may disclose to the Regulatory Authority any information received by him if he considers that the disclosure would enable or assist them to discharge their functions under—

(a) this Act, or

(b) the Pensions Act 1995,

or any corresponding enactment in force in Northern Ireland, and no such obligation as is mentioned in subsection (7) shall prevent him from doing so."").
The noble Lord said: The amendment inserts a new subsection into the Pension Schemes Act 1993. The new Section 158(7A) provides for the Secretary of State for Social Security, his department and its agencies to disclose information to the authority where it is considered that the disclosure would enable or assist the authority to discharge its functions.
We need to ensure that the authority can be provided with appropriate information from all relevant sources. This is one of a number of information gateways to the authority that we have opened up in our legislation. We consider this an important one. It is right that the Secretary of State for the Department of Social Security should be able to pass relevant information on to the authority. In particular, the Contributions Agency, which will have responsibilities in relation to contracted-out schemes, may need to report problems with a scheme to the authority.
There are already appropriate provisions in Section 158 of the Pension Schemes Act to allow the Secretary of State to disclose information to the registry. This amendment inserts appropriate provisions in respect of the regulator. I beg to move.
Lord McIntosh of Haringey: Again, the amendment appears to be all right. However, I do not believe that the Minister would wish it to be recorded that he said "the Secretary of State for Social Security". As regards legislation, there is only one Secretary of State and he can change his departmental responsibilities and title without legislation thereby being made ineffective. I ask out of genuine puzzlement what obligations there are in subsection (7) which prevent the Secretary of State from doing so. I know that I should have looked at the legislation but it will do no harm for the answer to appear in Hansard.
Lord Lucas: I am afraid that again I am not clear as to what the answer might be. I shall write to the noble Lord.
Lord McIntosh of Haringey: I will gladly speak for as long as is necessary for the Minister to be handed a message from the Box. Although I accepted without hesitation his previous offer to write to me on what was, after all, a relatively trivial matter, the obligation as mentioned in subsection (7) appears in the amendment which the noble Lord has moved. It is not unreasonable of me to pick up the wording of the amendment and to ask what it means. I am sure that if the noble Lord, Lord Renton, were in his place he would do so with much greater effect. However, even in my amateur way, I believe that I am entitled to some kind of explanation. I see an answer being handed to the Minister. Under those circumstances, I am content to leave it to him to respond as best he can to my entirely innocent and well-meaning question.
Lord Lucas: I am informed that information gathered under social security provisions cannot be passed on unless legislation expressly provides for it.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendments Nos. 175 to 180:
Page 103, leave out lines 15 to 19.
Page 103, line 23, leave out from ("omitted") to end of line 25.
Page 103, line 29, at end insert ("and").
Page 103, line 31, leave out from ("160" ") to end of line 32.
Page 103, leave out lines 34 lo 36 and insert ("in subsection (3)—

(a) for "97(1), 104(8) and 144(5)" there is substituted "and 97(1)",

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(b) the words from "or, in the case of" to "determined" are omitted, and

(c) the words following paragraph (b) are omitted").

Page 103, line 38, leave out paragraph 37.
The noble Lord said: I spoke to these amendments with Amendment No. 172. I beg to move.
On Question, amendments agreed to.
Schedule 3, as amended, agreed to.
Clause 111 ["Connected" and "associated" persons]:
[Amendment No. 180A not moved.]
Clause 111 agreed to.
Clause 112 [Interpretation of Part I]:
Lord Lucas Lord Lucas moved Amendment No. 181:
Page 63, line 20, at end insert:
(" "Scottish partnership" means a partnership constituted under the law of Scotland").
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendment No. 181A:
Page 63, line 48, at end insert:
("( ) References in this Part to the trustees of a trust scheme shall include references to the directors of a corporate trustee in cases where a company has been appointed to act as a trustee of a trust scheme.").
The noble Lord said: Part I of the Pensions Bill does not apply to corporate trustees. However, many occupational pension schemes have a sole corporate trustee rather than individual trustees, or sometimes they have individual trustees together with one corporate trustee.
A corporate trustee is a company which has been appointed to act as trustee of a pension scheme and whose constitution allows it to act as a trustee. Often a corporate trustee is preferred to individual trustees partly because it is easier to replace directors of the company than to go through the rather more cumbersome procedure required to remove individual trustees and appoint replacement trustees.
In the case of a corporate trustee, the trustee remains the same but the directors can be changed from time to time. Also, a corporate trustee company has the special knowledge and skills readily available which may take an individual trustee some time to learn.
Since corporate trustees are appointed widely in relation to occupational pension schemes, there seems to be no logical reason why Part I should not extend to the directors of corporate trustees. The purpose of the amendment is to put directors of corporate trustees on the same footing as individual trustees. I beg to move.
Lord Mackay of Ardbrecknish: We agree with the principle of the noble Lord's amendment and we were already considering the point that he has raised.
Where a scheme is controlled by a corporate trustee, it is only right that the requirements of this part should apply to the company directors in the same way as to individual trustees. I do have some reservations about the drafting of the amendment but I would not, of course, as I have said on a number of occasions, wish to base any argument on that.

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In the case where, for example, the employer sets up or uses a subsidiary company as a trustee, we consider that equivalent provisions to the member-nominated trustee requirements under Clause 14 should apply to the directors of the company. However, we do not think it is practical that those requirements should apply to professional corporate trustees. Such professional independent trustees may act for a large number of pension schemes. If they were obliged to include members from all those schemes on their board of directors, it could swell to unmanageable proportions. Schemes which wish to use that type of trustee will either have to accept the corporate trustee as a single trustee who sits alongside member-nominated trustees with exactly the same functions, or opt-out of the member-nominated trustee requirements under the provisions of Clause 15.
Nevertheless, I am willing to take away the issue and look carefully at the individual provisions of Part I to see whether it might be necessary to make clear that they do apply to corporate trustees, and if so whether any modification or amendment is necessary. If it is, I will bring forward suitable amendments on Report. In the light of that, I hope that the noble Lord will withdraw the amendment.
5.45 p.m.
Lord Haskel: I thank the Minister for that undertaking. As we seem to agree that the principle is right, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 112, as amended, agreed to.
Clause 113 [Section 112: supplementary]:
Baroness Dean of Thornton-le-Fylde Baroness Dean of Thornton-le-Fylde moved Amendment No. 182:
Page 64, line 19, after ("Part") insert (", except section 14").
The noble Baroness said: This amendment will add to Clause 113(4) the words "except section 14" which deals with member-nominated trustees.
Clause 113 as presently worded provides for regulations to change the meaning of the word "member". That is an extremely wide authority which goes right to the heart of the Bill, because the Pensions Bill is all about members of schemes. We suggest that the amendment is necessary. Clause 112 provides definitions of words in Part I. The clause defines "member" as:
"any active, deferred or pensioner member".
We do not challenge that. We think that is correct. But Clause 113 as it stands undermines that definition. More important, it also undermines the provisions of Clause 14, which go to the heart of the Bill.
On the one hand, the Bill gives and on the other hand it takes away by extending the definition of "member". We do not understand why there is any need for that. Clause 14 as drafted is clear. The definition contained in Clause 112 is also clear. And yet the very next clause gives authority to undermine that definition.
We must bear in mind that when the Bill becomes law, there will be considerable changes as regards trustees of occupational pension funds because, as we have said so many times in this Committee, only 35 per cent. of current schemes have serving, working member-trustees. A great many changes will take place. Regulations are no substitute for primary legislation. They will provide a wide remit for changing the definition of "member". Essentially, that weakens the Bill. That is why we have tabled the amendment. I am sure that the Minister will explain why regulations may be needed to change the definition of "member" and why those changes will exclude any changes with reference to Clause 14, which deals with member-nominated trustees.
If the Minister does not feel able to accept the amendment, will he explain why that definition may need to be changed? What are the situations which have existed or which factors has the Goode Committee drawn to the attention of Ministers which led to that provision in the Bill? We see no reason for it. If the Minister insists that it remains in the Bill, then this amendment is needed to prevent any weakening of Clause 14. I beg to move.
Lord Mackay of Ardbrecknish: In introducing the amendment, the noble Baroness appeared to imply that there is a hidden agenda as regards Clause 14, which is certainly not the case. We have been frank and open about the term "member" in Clause 14. There is no mystery. I shall try to explain in some detail exactly our intentions in this regard.
Clause 14(1) offers the potential to all members to select trustees. Subsection (3) gives existing trustees the freedom to develop appropriate rules for selecting member-nominated trustees. Those rules will, no doubt, be tailored to the particular circumstances of their scheme. It is those rules, rather than the clause, which will determine those members who will be eligible to select trustees. However, the rules will be subject to the approval of active and pensioner members as well as deferred members if trustees so wish.
There is also the power in subsection (3) to prescribe rules in regulations. We intend that prescribed rules will provide a procedure which is simple and easy to implement and will secure the basic policy intention that, where members wish it, there should be at least one-third member-nominated trustees.
The arrangements that we intend to adopt are those recommended by the Pension Law Review Committee as the most convenient and cost effective for schemes. They will require schemes to invite at least all active members to nominate persons for selection as trustees. We feel that it would be wrong to impose a requirement to involve members other than active members because that could impose significant cost and additional complexity on some schemes. We hope that it will be a measure of last resort.
The rules will lack the flexibility of rules developed by scheme trustees. We hope that that will encourage the majority of schemes to devise their own procedures for selecting member-nominated trustees. Prescribed rules, however, will be an integral part of the

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member-nominated trustee requirements. Their purpose is twofold: first, as a fallback option for those schemes whose members and trustees cannot agree on an appropriate formula to select member-nominated trustees; and, secondly, we have no desire to allow schemes to avoid those requirements by delay or procrastination. Once the legislation comes into effect, we intend member-nominated trustees to be in place within a prescribed time-scale. As I indicated during the previous debate, we are looking at the possibility of that being a period of six months.
If trustees fail to take reasonable steps to introduce member-nominated trustees they may be sanctioned and removed by the authority. The authority may find itself in a position where it has to sanction trustees unless they introduce member-nominated trustees. In such a case, a readily available procedure which can be followed is required.
Finally, the term "member" in subsections (9) and (10), as defined in Clause 112, means any member, whether active, pensioner or deferred. We intend that any member may be nominated and selected as a member-nominated trustee and that there will be no restrictions on that. It is a matter for scheme members to decide who is best suited to carry out the duties of that position.
I hope that I have made our intentions crystal clear and that the noble Baroness will appreciate that her suspicions are unfounded and her amendment unnecessary. I see no reason to single out Clause 14 as the one in which the word "member" should not be extended or restricted. With that explanation of what we intend in that respect, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Dean of Thornton-le-Fylde: I thank the Minister for his extremely detailed and helpful explanation as regards understanding the Government's intention on Clause 113. I should stress that I did not intend to imply that there was a hidden agenda. That is certainly not the view with which I approached the matter. I was trying to encourage the Minister to put on the record the reason for the provision. If, in fact, the Minister read into my comments that I was so implying, I withdraw those remarks. I do not have a problem in that respect. I certainly did not intend to imply that. I repeat, the Minister may have chosen to interpret my contribution in that way, but it was not my intention that he should do so.
However, the amendment has made the Minister give us assurances regarding circumstances in which the change through regulation of the definition of the word "member" will apply. I was heartened by the Minister's assurance that the change of definition of "member" will be to make the legislation work to ensure that the provisions of member-nominated trustees and the requirements under the Bill are put into effect. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 113 agreed to.
[Amendment No. 182A not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 182B:
After Clause 113, insert the following new clause:
Entitlement to share in occupational pension
(".—(1) If a resident of residential accommodation (other than a temporary resident) being a member of an occupational pension scheme, has a spouse (referred to in this section as "the remaining spouse") living other than in residential accommodation, the remaining spouse shall be entitled on application to the trustees of the scheme to receive one-half of the gross occupational pension which the resident would, apart from this section, be entitled to receive.
(2) Any payment made to the remaining spouse under subsection (1) of this section shall not be treated as the resident's income but shall be treated as the remaining spouse's income for all purposes.
(3) In this section—

"residential accommodation" means either accommodation provided under Part III of the National Assistance Act 1948 or accommodation in a nursing home or residential care home as defined in Regulation 19 of the Income Support (General) Regulations 1987 if such accommodation is not provided under Part III of the National Assistance Act 1948;

"resident" means a person provided with residential accommodation;

"temporary resident" has the same meaning as in the National Assistance (Assessment of Resources) Regulations 1992; and

"gross occupational pension" means the amount of occupational pension to which the resident is entitled before deducting any income tax which would, apart from this section, he payable on that pension.").

The noble Baroness said: When Amendment No. 182A was called it occurred to me that Members of the Committee would have liked another hour-and-a-half of discussion on divorce, but I noticed that the Minister was looking, I hoped, still appropriately bruised, battered and, therefore, not willing to pursue the matter.
However, Amendment No. 182B raises the issue of residential care and also exactly the same issue that we dealt with as regards divorce. As we know, having spent a considerable time on the matter, occupational pensions at present cannot be divided or assigned. As we saw, that is a major issue when it comes to the division of assets on divorce. But the fact that occupational pensions cannot be divided or assigned raises even more poignant questions when an elderly couple are divided not by divorce but by long-term illness.
For example, the husband—and it is usually the husband with a substantial occupational pension—may have developed a long-term illness such as Alzheimer's disease. He may have been nursed tenderly at home by his wife until she could no longer cope. The wife is, perhaps, in her 70s or 80s. The husband goes into a nursing home or into residential care and, because his occupational pension cannot be divided or assigned, he takes with him his entire occupational pension towards the fees. His wife, elderly and with no occupational pension of her own—indeed, three-quarters of elderly women do not have such pensions—can be left with nothing other than the state dependent pension; namely, about £35 a week, topped up by income support from which she has to find, perhaps, the additional cost of visiting her husband, telephoning him, buying him treats and keeping their home repaired.
The husband and wife may have been sharing an occupational and state pension entitlement of £350 a week. Had the husband died, the wife would have received half of that amount as his widow. As, instead, she has lost him to Alzheimer's, the wife receives nothing but very inadequate state benefits. If the couple have modest savings, the wife will not even receive that amount until their savings have been eaten away to below £8,000 a year.
Local authorities can take such circumstances into account if the wife pleads poverty and contributes to his fees. As local authorities are in dire straits at present, they are very reluctant to make a discretionary contribution when, at the same time, they are having to cut statutory services. Where the husband's fees are met by the DSS in part or in whole because his occupational pension does not fully cover them, the DSS has no discretion whatever; indeed, his entire occupational pension must be taken because it cannot be divided. Therefore, the wife is left devastated twice over: first, by the loss of a husband to a dreadful illness; and, secondly, by her own financial insecurity which has arisen as a result of the loss of his occupational pension.
It should not be like that. If the amendment were accepted, it would not be. The amendment proposes that, in such circumstances, the trustees would be able to assign half of the occupational pension to the wife exactly in the way as it would come to her were she to be widowed. How many people are we talking about? According to Age Concern, about 10,000 men and 5,000 women who have occupational pensions are married and are living in residential care. Those are not very large numbers; but, for those involved, it is a problem of great poignancy. It is true that the DSS and local authorities may contribute more, as a result of the amendment, towards the cost of the husband's upkeep, but some of that would be offset by savings on income support to the wife who is left at home.
Perhaps I may conclude by quoting the case of Mrs. F. which has been given to me by the Alzheimer's Disease Society. Mrs. F. is 77 and her husband is 80. He has had Alzheimer's disease for the past 10 years and has recently had to go into a nursing home because of the effect on his wife's health. He served in the Army during the Second World War and has worked all his life. The whole of his occupational pension is being used to pay the cost of his care. At present, Mrs. F. is living on £66 per week, including income support. She writes,
"I feel this is wrong as the pension was meant for both of us. Is there anything that I can do as I cannot live on £66 a week? This is worrying me very much".
No, there is nothing she can do. But there is something we can do. We can press the Government to accept this amendment tonight. I beg to move.
6 p.m.
Baroness Seear: I shall be brief because the noble Baroness has made the case plainly. I am certain that no one ever intended this situation to arise. It was not foreseen. It is obviously extremely hard on the person who remains at home when the partner who cannot remain at home any longer has to go into residential
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accommodation of some kind. This is yet again a problem arising from what we discussed at such length in connection with divorced women—the ability to assign part of a pension to someone other than the person who receives the pension in the first place. I hope that the Minister, who, I know, will recognise the seriousness of this problem, can find a way, either by accepting this amendment or by producing an amendment of his own, to ensure that such spouses are not left in the penurious situation in which so many of them now find themselves.
Lord Dean of Harptree: I support the amendment. As the noble Baroness, Lady Hollis, reminded the Committee, married women in these circumstances can be worse off than widows or indeed divorced women. That seems, on the face of it, to be an unfair situation in which to be placed. I do not wish to repeat the arguments that have been used but I make one point to which I am indebted to the Alzheimer's Disease Society. The society states:
"Local authorities do have discretion to increase a resident's personal expenses allowance … in order to enable him or her to continue to support their spouse at home. Recent guidance made specific reference to occupational pensions as one instance where local authorities should be using such discretion".
I am informed by the Alzheimer's Disease Society that it knows few cases where such discretion has been used. It appears that the Government are wholly sympathetic to the points made in the amendment. I hope we shall receive a sympathetic response from my noble friend the Minister.
Lord Swinfen: As my name is attached to this amendment I also wish to support it. The arguments have been made and well made. If my noble friend feels that he cannot accept the amendment because of the wording perhaps he will indicate to the Committee that he intends to bring back a more suitable amendment to achieve the same ends at Report stage.
Lord Mackay of Ardbrecknish: This is a difficult and complex issue. If I take a few minutes to explain what the situation is currently, we can then see our way through the issue and to the amendment. Currently local authorities are required to allow residents to retain part of their income as a personal expenses allowance and they have discretion to vary the amount of the allowance in special circumstances so as to leave the resident with a larger sum. Local authorities may use this discretion to allow the resident to retain sufficient money to enable him or her to support his or her spouse remaining at home where the resident receives the major part of the couple's income and the spouse has little or no income or capital of his or her own on which to live.
I have in my hand a local authority circular from the Department of Health dated January 1994 in which paragraphs 6 and 7 deal with the treatment of couples. I do not wish to read it all out but I hope that with some judicious pruning I can convey the main parts of it. It states that,
"the way in which the charging assessment rules apply is less clear-cut where the resident is one of a couple who had sufficient joint resources before admission to remove the need to claim Income Support. Most often these are couples, now retired, where one of the couple has a significant occupational pension. Concern has been

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expressed that, where the resident is the main recipient of the couple's income, (eg the occupational pension), the charging rules cart take all the resident's income into account and as a consequence the income remaining for the spouse at home is considerably reduced".
That encapsulates the problem the Committee has raised with me. The circular continues:
"In such cases local authorities should bear in mind that it may be appropriate for them to use the discretion available to them under section 22(4) of the National Assistance Act 1948 to increase the resident's personal expenses allowance (PEA) in special circumstances in order to enable him/her to continue to support the spouse at home. The use of this discretion is for the local authority to consider in the light of the individual circumstances of each case. The Department considers it reasonable to take into account factors such as the usual standard of living of the spouse at home, and if the spouse has higher than average outgoings for whatever reason".
That is the position at the moment. The circular continues:
"If a local authority is satisfied that special circumstances exist which make it appropriate for them to vary the PEA—"
that is, the personal expenses allowance—
"they should negotiate a reasonable figure which addresses the specific difficulties which give rise to these special circumstances".
The circular then points out:
"These points are covered in the annexed CRAG amendment pages".
That is a clear circular to local authorities from the Department of Health giving them the outline of how they should exercise the discretion. Perhaps I can go a little—
Baroness Hollis of Heigham: Perhaps I may ask the Minister a question. Can he tell us from his knowledge how many local authorities are doing as his noble friend Lord Dean said and making these allowances? What is the current state of practice?
Lord Mackay of Ardbrecknish: I was going to turn the question round the other way because clearly that sort of information—like so much information as regards local authorities—is not collected. It would be expensive to collect it. It is not collected and therefore we do not know the answer. As I said, I was going to turn the question round and say that we have little evidence that local authorities are not exercising the discretion as we intend them to. The noble Baroness, Lady Hollis, mentioned Mrs. F. I do not want to discuss—
Lord Swinfen: May I interrupt?
Lord Mackay of Ardbrecknish: May I answer this point?
Lord Swinfen: My comment is specifically on this point. If my noble friend has little evidence one way, has he any evidence the other way because he gave the indication that he had not?
Lord Mackay of Ardbrecknish: I believe I indicated that. If my noble friend will be patient, I shall explain that: what I said was that we do not collect the kind of statistics that would allow us to assess whether local authorities carry out this measure. The noble Baroness, Lady Hollis, mentioned Mrs. F. I always feel that it is wrong for us to bandy particular cases across the Dispatch Box. However, we would be interested in
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receiving the details of Mrs. F and indeed of any other cases. If my noble friend Lord Swinfen has any specific cases which suggest that local authorities are not obeying the letter and spirit of the circular I read out, we would be interested to hear about those cases.
The amendment before the Committee is not required because if regulations made under the National Assistance Act 1948 were changed we would arrive at the same position. To that extent the amendment is unnecessary as the powers already exist through regulations made under the 1948 Act. However, the sort of change the amendment seeks to achieve could cause problems. The change would not necessarily benefit everyone. Take the case where the remaining spouse receives a means-tested benefit, most commonly income support. All means-tested benefits have to take occupational pensions fully into account. In such cases therefore the spouse at home would benefit only if the share of pension he or she received was substantial enough to lift him or her entirely above the level of benefit.
At the other end of the scale, the spouse at home might have substantial resources, for example large savings. If people in this situation were allowed to retain a half-share of their spouse's occupational pension, while the spouse in residential care was having to be supported by the local authority, I am not sure that that ought to command a high priority in the use of any additional public funds which could be made available. Therefore, we have to consider the matter very carefully. We also have to take into account the legal liability of husbands and wives to maintain each other. The legislation which provides for local authorities to place people in residential accommodation is the National Assistance Act 1948 Section 42 of which makes each spouse liable to maintain the other. The implications of that provision for the amendment we are considering would, to say the least, be complicated. There might be potential costs to local authorities.
As I have admitted, we have not been able to quantify the extent of the problem and it is difficult to provide any hard information in respect of the questions as to how many are involved and how much it would cost. Given all the demands on government and on local authorities, we have to be careful before we set off down a road involving more expenditure, and we have to be sure that we target that expenditure.
As the Committee will have deduced, I cannot commend the amendment to the Committee. However, it raises difficult and complex issues. I shall be grateful if any noble Lords care to draw particular cases to our attention. My right honourable friend the Secretary of State for Health is fully aware of the discussion about the problem and is sympathetic to the concerns which underlie it, as I am. That is why I shall be grateful for details of particular cases.
It is important to provide proper support for spouses and for other carers in the circumstances we are discussing. My right honourable friend the Secretary of State for Health keeps under regular review the whole question of the charging system for residential care. I can assure the Committee that this particular issue is one which will be considered as part of that process. I shall

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certainly draw the attention of my right honourable friend to the discussion we have had today and to any letters which any Member of the Committee cares to send me after the debate.
I hope that with those words the noble Baroness will feel able to withdraw her amendment.
Lord Ezra: It is quite clear from the remarks of the noble Lord that he feels sympathetic towards the issue, as we all do. He reminded us that local authorities have a discretion, but the discretionary terms he read out seem to be extremely widely drawn. There is a view that they are not applied as extensively as the Minister implied, although he admitted that he did not have details. It depends on what the noble Baroness, Lady Hollis, decides, but it is for consideration that we should return to the matter. If the Minister objects to the present form of words perhaps we can find some other form of words which would deal with these difficult cases more effectively than they are dealt with at present.
Baroness Hollis of Heigham: The noble Lord, Lord Ezra, spoke also for those of us on these Benches. We noted that the Minister had genuine sympathy for the problem. He does not know the scale of the problem because apparently the department has not undertaken research to identify the scale of the problem, even though this is a major issue in community care and for his fellow Ministers in the Department of Health. I am a little surprised that the Minister had been unable to acquire more information to buttress his case. Certainly the information which has come from both the Alzheimer's Disease Society and Age Concern suggests that, although local authorities have a discretionary power, that discretionary power is used increasingly seldom and certainly not in a manner which would float a spouse off the need for income support.
It is also clear that at the core of the issue is the same problem as we discussed in relation to divorce; namely, that a pension cannot be divided as it would be were a woman widowed.
The Minister's reply is inadequate. We shall need to return to the matter. Providing him with information concerning individual cases is not enough. A principle is involved. Half of the pension which is reflected in the situation of widowhood should be assignable to the spouse where the expenses of the domestic home and so on continue. It is a principle that we should like to see reflected on divorce and also reflected here. It is clear that local authorities cannot be expected to make good the problem on a discretionary basis.
Lord Mackay of Ardbrecknish: There is an advantage in leaving this as a discretion. The noble Baroness talked about half the pension. That should be judged in the light of individual circumstances. I do not want to read the words out again, but they indicate that, in order to maintain the spouse at home, it would be reasonable to take into account factors such as the usual standard of living of the spouse at home. The spouse may have outgoings which are
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higher than average, for whatever reason. I would not be willing to draw such a hard and fast line as specifying half of the pension.
Baroness Hollis of Heigham: I wonder what the Minister thinks is the reason for tabling the amendment at all. Two of the most eminent organisations in this field—the Alzheimer's Disease Society and Age Concern—recognise that, although there may be a nominal discretion for local authorities, it is not being exercised in ways which allow the spouse decent maintenance because of the need for fees to provide for private residential care.
Lord Mackay of Ardbrecknish: I am grateful to the noble Baroness for giving way. When I discussed the amendment with officials I raised the question of whether complaints were being received and there was information on individual cases. Subsequently they contacted Age Concern, which I am told knows of no cases. I am therefore more than interested to hear of cases from Members of the Committee who have such information. That is a sensible way to proceed. That is the advice that I received about Age Concern. I did not want to bring that into the debate because I am more interested in encouraging such cases as there are to be brought to my attention. However, my officials contacted Age Concern which knows of no cases in the same grim circumstances portrayed by the noble Baroness.
Baroness Hollis of Heigham: I am surprised because my briefing, with which I did not trouble the Committee, includes three or four cases from Age Concern. Perhaps I can pass that briefing to the Minister if he wishes. I am puzzled. However, eminent organisations have identified a problem. There is a discretionary power for local authorities, but in their straitened financial circumstances they are not exercising that discretion. At present they have to underfund statutory services. As a result many women find themselves in a situation which they could never have foreseen and which we in this Chamber could mitigate.
The unhelpful and uninformative response of the Minister—although entirely sympathetic in tone—is not enough. A sympathetic tone is not good enough when people in this situation are being left almost destitute because the husband they have nursed for 10 or 15 years has developed Alzheimer's disease and they have no resources. We shall return to the matter. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.15 p.m.
[Amendments Nos. 182C and 182D not moved.]
Clause 114 agreed to.
Lord Stallard Lord Stallard moved Amendment No. 183:
After Clause 114, insert the following new clause:
("Entitlement to retirement pensions not to be affected by absence from Great Britain
. Section 113(1) (a) of the Social Security Contributions and Benefits Act 1992 (which, except where regulations otherwise provide, disqualifies a person for receiving any benefit under Parts

967
II to V of that Act, and precludes an increase of any such benefit being payable in respect of any person as the beneficiary's wife or husband, for any period during which the person is absent from Great Britain) shall cease to apply in relation to a retirement pension of any category or graduated retirement benefit (including any increase of the amount payable in respect of any such retirement pension for adult and child dependants) payable under that Act; and accordingly a person who is absent from Great Britain shall be entitled to be paid the same amount in respect of any of those benefits as if he were resident in Great Britain.").
The noble Lord said: The amendment is intended to ensure that expatriate pensioners living abroad shall be entitled to be paid the same amount in respect of retirement pensions as if they were resident in Great Britain.
The amendment gives us an opportunity to rectify an injustice which has existed for many years despite numerous attempts in both Houses of Parliament to remedy it and mounting public disquiet both here and abroad about the discrimination practised against expatriate pensioners, mainly in Commonwealth countries such as Canada, Australia, New Zealand and South Africa.
At present United Kingdom law permits pensions to be paid anywhere in the world. However, unless the beneficiary lives in a country with which the UK has concluded a social security agreement which provides for the indexing of pensions, his or her benefits are not adjusted annually for increases in the cost of living. They are frozen at the rate which existed when he or she left Britain or when he or she reached retirement age.
Obviously that creates a number of anomalies. There are many variations in pensions in those countries, depending on when the beneficiaries retired and how long they have lived there. Most of them will have qualified in the same way that we do: through contributions for benefits. That means that some people receive less pension than others with exactly the same contribution qualifications. That situation creates many problems.
At present some 400,000 United Kingdom state pensioners worldwide have their pensions frozen. The great majority, some 340,000, live in Commonwealth countries. Approximately 300,000 pensioners living in 33 other countries, including all the countries in the EC and the USA, have their pensions index linked. They qualify for all increases because they have that arrangement. The arbitrary division based on domicile is because the United Kingdom has bilateral social security conventions which provide for index linking in those 33 countries, excluding the Commonwealth countries to which I have referred.
Inevitably, after debates on this issue in this House and in another place we are asked why that is the situation. People outside do not understand why one can live in America and receive a full index-linked pension, when those living next door in Canada receive £4.50 or £7.50 for exactly the same contribution qualifications. They are entitled to ask why. The main reason given by the Government for maintaining that arbitrary and manifestly unjust situation is cost. In a reply given by the Prime Minister some time ago, the estimated cost was about £35 million. We have had estimates ranging
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from £100 million to £300 million. The current estimate is £230 million. That has to be found from social security.
However, it can be argued that those pension entitlements are not social security benefits, but state superannuation —there is a difference—which has been earned through individual contributions. Although £230 million might seem a high figure, it is a drop in the bucket. It represents a tiny percentage of available funds: one-third of 1 per cent. of the total social security budget.
Another reason put forward by Government for not indexing overseas pensions is that the position is the fault of previous social security legislation. They outline a number of enactments. The Government state that in 1955 it was decided that pensions payable abroad should be paid permanently at the rate initially awarded without any subsequent cost of living increases. Most of the agreements with other countries outside the EC which allow increases to be paid there were entered into a long time ago when constraints were not so bad as now.
Moreover, that is a poor defence. We are no longer in 1955 but in 1995. The Government have already blown that argument sky high by introducing bilateral conventions which mean that nearly 300,000 British pensioners living abroad have their pensions index linked. One cannot argue that the position results from previous legislation and then, through altering the legislation by introducing conventions, and so on, achieve the result that 300,000 pensioners receive upgraded pensions. There is a contradiction.
Some Government spokesmen have conceded that full indexation of British pensions worldwide could be achieved by a change in our domestic legislation. We would not have to go through any palaver and nonsense. That result could be achieved by a change in domestic legislation and that is what we seek.
Moreover, the Government concede that the relationship between the contributor and the state is an agreement giving entitlement to benefit, whose apportionment is clearly beyond their discretion. An insurance company which arbitrarily paid some of its superannuates less than others would be totally laughed out of court. The position is unthinkable.
The Government argue that the social security system is designed primarily for people living in this country. Money received by pensioners in the UK is largely spent on goods and services in the UK. They say that pension money received by those resident in Australia is not clawed back in the UK via indirect taxes. But, again, the UK retirement pension must not be confused with the many social security schemes which are funded by taxes. The British worker buys his retirement pension, which is in fact a state superannuation scheme, and discrimination by domicile is inappropriate and unacceptable.
It is a strange argument to advance that index linking is denied because some 17.5 per cent. of revenue from indirect taxation would be lost. We have often asked the question, "What would happen if those pensioners with overseas domicile were to come back?" Alternatively, if they do not come back, who has calculated how much is saved by the Exchequer in benefits relating to health,

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social services, residence, and many others? If one wishes to argue that 17.5 per cent. of revenue from indirect taxation is lost, one has to argue that, by the same token, one is saving money which would have to be spent if those pensioners were still living in the UK.
Again, the Government state that the agreement between an individual and the state is that payment contributions will give entitlement to benefit subject to certain conditions, which are set out in leaflets. They emphasise that one condition is that retirement pension upratings are not generally payable abroad. But contributors to national insurance funds are not made aware of that condition. I have never yet met a pensioner who was informed when his pension was due, "Don't forget that if you leave this country, you won't get any increases". It may be that that condition is written in the small print. But one cannot blame people who have been brought up to believe what was clearly outlined by Sir Norman Fowler in his 1985 Green Paper. Paragraph 2.6 states:
"in return for contributions, benefits would be given as of right".
Paragraph 2.7 states:
"all insured people—rich or poor—would pay the same contributions for the same security".
The Green Paper continues at paragraph 2.8:
"the basic national insurance pensions must remain as an entitlement earned by people from paying national insurance contributions. That has been at the heart of our national insurance system since its inception and the Government is committed to it".
With those assurances, and it being written in Government documents, why should one search for a tatty sentence which states, "Yes, but we did not mean you to leave the country"? That document does not state that; it clearly sets out the position.
I do not wish to take up too much time. However perhaps I may refer to one or two letters that I have received which I believe are important. One is from the High Commissioner of Canada who outlines the position there. He states:
"Since 1977, the Government of Canada has sought to persuade the British Government to negotiate a social security agreement that would provide for this index-linking (to inflation) of UK pensions paid to the 118,000 British pensioners in Canada. This issue has been brought up at every level. It was also raised when Prime Minister Chrétien met with Prime Minister Major in June 1994, on the occasion of the commemoration of the 50th anniversary of D-Day. At that time, Mr. Chrétien stressed the injustice of freezing the pensions of tens of thousands of servicemen, and their widows, who fought in the UK during World War II and who have decided to spend their retirement years in Canada. I too raised the matter with Prime Minister Major this January but to no avail. The UK has consistently rejected the Canadian approaches because of the costs of indexing its pensions in Canada. I should add that the British Government does not try to defend the obvious unfairness of the current UK policy on pension indexation".
He then cites some examples which indicate the anomalies to which I referred. He states that the average UK retirement pension paid in Canada amounts to £20. The amount goes down to £4.50, with steps in between. But the average is a pension of £20 compared with the retirement pension in this country of £57.50 for a single person. In Canada the pension, translated into sterling, is £91.78. There is a tremendous difference. The majority of the 20,500 UK pensioners in Canada who receive pensions of less than £10 a week are women—
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a total of 17,600. Therefore, 85.5 per cent. of pensioners living on reduced pensions in Canada are women. The Canadian Government are particularly anxious to resolve the issue this year, given that it is the 50th anniversary of VE Day.
In Australia, a press release states:
"The Minister for Social Security, Peter Baldwin, said today that he hoped the United Kingdom Government would finally do something about indexing British pensions paid to people in Australia … The Australian Government has tried many times to raise the issue of the non-indexation of British pensions with the UK Government so that the current social security agreement between Australia and the United Kingdom could be amended to provide for indexation. The Australian Government is, and has been, ready to re-negotiate the Social Security Agreement to provide for indexation".
So who is stopping it? We have asked on numerous occasions why negotiations could not start with those countries for reciprocal agreements in the same way as they were conducted and completed last year with Finland. That was the 33rd country to qualify. Mr. Baldwin continued:
"When one of our pensioners goes to live in the United Kingdom or anywhere else for that matter, we index the pension twice a year to protect them".
So an Australian here is indexed twice a year to protect his pension but a Briton living in Australia is starving, or at least is in trouble. So Mr. Baldwin is also hoping that the debate which, he says, is to take place in the House of Lords this week—his timing is perfect—will be an opportunity to ensure that British pensioners living overseas,
"finally get a fair go. The same fair go that we give our pensioners who live over there. It would also give the same treatment to British pensioners living in Australia as, say, British pensioners living in many other countries such as the Philippines, Turkey, Barbados, the United States of America and Europe, who all have their pensions indexed".
I have another item from Australia News which refers to recent discussions that have taken place between the Australian Government and the Foreign Secretary, Mr. Douglas Hurd. The article refers to a number of difficult issues in recent years that had been solved. There were the Maralinga and Nauru compensation issues. After many discussions, those have been resolved. The only blip left in the UK/Australian relations is the outstanding issue about the pensioners and index-linked pensions. Senator Evans, Australian Minister for Foreign Affairs, said that the Australian Government had to top up the pensions of British pensioners living in Australia because the British Government had declined to index-link them, even though they did so for British residents living in European countries.
I conclude by saying that this selective and quite unwarranted discrimination is suffered by people who have served their country well as taxpayers and electors. We can remind ourselves of the propaganda at colossal cost; a few years ago the Central Office of the Conservative Party spent vast sums in trying to persuade all those people to vote in a general election. All those who have been denied pensions were asked for donations to the election funds with a form to fill in giving their vote by proxy or in some other manner. "We need their votes, we need their money, but we cannot pay them their pensions". So they are penalised

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for obeying an irresistible longing to spend their declining years with their children who are now raising families in the former Dominions, once viewed by the British Government as the natural destination of our young emigrants. We .can all remember the schemes through which young people were persuaded to go to Australia immediately after the war, in their thousands, to take up residence there. Those people have grown up, but their parents are still here. If they decide to go to live there and watch their grandchildren grow up—a perfectly normal thing to do—they are penalised.
In her speech at the Normandy ceremony, Her Majesty the Queen said:
"You deserve the nation's thanks. May we, your fellow countrymen, be worthy of what you did for us".
I suggest that we can test and display our worthiness by voting tonight for the amendment to ensure that expatriate British pensioners receive fair and just treatment, by index-linking their pensions. I beg to move.
6.30 p.m.
Baroness Seear: I shall be extremely brief as the noble Lord, Lord Stallard, made the case so fully. I wish to underline three of the points that he raised. The first is that the pension is a statutory right because, unlike social security which is based on need, it is based on the right arising from contributions paid throughout the time that the pensioner was in this country.
Secondly, and very important, I know that the Government will say that the problem is money—"We cannot do it because of the money". What is to prevent them getting a reciprocal agreement? We have such agreements with other countries and if the Government give an undertaking that they will embark on a reciprocal agreement, that would go a long way towards establishing what we want.
Thirdly, where there is such a right, based on the claim to a pension which anyone who has contributed to a pension has, it is not good enough to say, "We can't afford it". That would be to say that a principle is of no consequence if it is expensive. If the principle is that people are entitled to the pension, then the money must be found from some other source which is a less good cause. That is all one can say. If it is a right, the money must be found in some other way. One cannot just disregard a moral obligation based on a right and say "In this case it is too difficult to find the money", when the money is being spent in other ways from which it could be taken.
Lord Pearson of Rannoch: In supporting the amendment which has been so eloquently moved by the noble Lord, Lord Stallard, and supported by the noble Baroness, Lady Seear, there may not be much new that I can add. But I would like to put a little flesh on some of the bones which they presented to the Committee.
I wish to underline two fallacies in the Government's position on the issue. The first is the suggestion that our pensioners, who have gone to live overseas—particularly in the Commonwealth—knew what they were doing when they went. The second is that we
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should not afford the £230 million annually to keep their pensions level with those who have continued to live here.
As to the first contention, the British Australian Pensioner Association strongly denies that the vast majority of its members knew what they were letting themselves in for when they left. I, for one, have no reason to believe that they are in bad faith. But my interest in this matter was awakened by a friend and business associate who lives in South Africa. He has been good enough to send me excerpts from his correspondence over more than 10 years; first with the DHSS and, more recently, the Benefits Agency.
Any fair-minded person reading that file could not possibly claim that my friend should have been aware of the disadvantage he was about to suffer when he moved to South Africa. He is not part of any official lobbying organisation, but he has recently spoken to six other people in similar circumstances there, only one of whom was aware of the problem before he left.
I feel fairly sure that that is a proportion which may apply to all our 400,000 overseas pensioners. I feel that it is up to the Government to show that what I and other noble Lords say on the matter is incorrect and that the Government's position is therefore vaguely tenable morally.
Certainly, the file from my friend in Johannesburg would not help them. Two longish letters, one from the DHSS in 1984 and another from the Benefits Agency in 1993, studiously avoid any mention of the disadvantage which the recipient was about to suffer. It is true that the DHSS did enclose a leaflet numbered NI 38, dated April 1978 and entitled National Insurance Guidance for People Abroad. But it is only with the benefit of hindsight that any normal person would be able to discover the warning hidden away on page 10. Indeed, even with hindsight the leaflet is printed in such a way as to make one think that index-linking would be withdrawn from the benefits only under point 19 of the document which covers:
"the widowed mother's allowance, child special allowance and guardian's allowance".
I would, of course, be happy to show my noble friend the Minister the leaflet in question and I believe he would have to agree that the wording and the layout are grossly misleading.
So to me at least—and I think to other noble Lords who support this amendment—it is clear that most of our 400,000 pensioners living abroad did not know of their impending disadvantage before they left this country.
However, I believe that the Government's position becomes even less sensible when they say that we cannot, and should not, afford the £230 million per annum required to bring all our overseas pensioners into line with those at home. This contention seems to miss the point that the 400,000 pensioners for whom we seek justice certainly save the Treasury very much more than the £230 million that it could cost to give them that justice. Indeed, a tiny indulgence in lateral thinking would show the Government that it is economically sensible to encourage our older people to go and live in the Commonwealth if they want to, rather than

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discourage them from doing so, as we do now by withholding their index-linked pensions. I suggest this because they are no longer a burden on, for example, our health budget when they live abroad. I hope that a very few figures might help convince my noble friend of this and persuade him to look favourably on this amendment tonight.
According to the latest departmental health report of March 1994, our hospital and community health services cost £14,788 billion for the 1990–91 year. Of this figure, some 42 per cent., or £6.01 billion, was spent on the over-65s. Likewise, local authority net current expenditure on personal social services amounted to £4.6 billion in 1991–92, of which, again, some 40 per cent., or £1.84 billion, was spent on the elderly. Thus, of these two voices alone—and of course there are many others—some £7.85 billion was being spent on our resident pensioners in 1991. Our resident pensioners numbered some 10,087,000 in 1993. The 400,000 pensioners considered by this amendment therefore amount to some 4 per cent. of our pensioners here. It must be fair to assume that if they had continued living here they would have incurred 4 per cent. of the costs in the two areas that I have quoted. Four per cent. of £7.85 billion is, if I am not mistaken, £316 million, or £86 million per annum more than the £230 million which the Government say that the amendment would cost. So by going to live in the Commonwealth and elsewhere, these 400,000 pensioners would still save the Treasury £86 million per annum, on the voices I have quoted alone, even after they had been fairly treated and topped up at a cost of £230 million annually.
Of course, my noble friend may be tempted to reply that he does not have to pay the £230 million annually, and so he can happily save that and the notional additional £86 million as well. With much respect, if he is minded thus to reply, could I suggest that the Government look a little further ahead? People are living longer nowadays, and the number of our resident pensioners is rising, together with their associated costs. There were, for example, 8.7 million pensioners in 1979 and 10.09 million in 1993. I do not know what proportion of our total DHSS budget and other expenditure they consume—perhaps my noble friend on the Front Bench can help us here—but it must be a very much larger figure than I have quoted. Indeed, total DHSS expenditure now stands at £102 billion per annum, of which £31.75 billion is for health and £70.36 billion is for social security. So colossal figures are involved. That is why I suggest it must be in the interests of the Treasury to encourage as many of our pensioners as wish to live in the Commonwealth to do so. Over time—and not very much time —the benefits would be far greater than the £230 million per annum at stake this evening.
6.45 p.m.
Lord Dean of Harptree: It is very unusual for a pensions Minister to have any friends when this matter is discussed. But I wish to be at least half a friend to my noble friend the Minister. As Members of the Committee know, the reality is that this particular
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provision has existed in the National Insurance scheme ever since 1948. It has been quite clear from that day to this that any pensioner who goes to live overseas, unless there is a reciprocal agreement, will receive the pension at the level at which it stood when he left this country.
With respect, I do not attach much importance to the arguments of ignorance. The information is there if the pensioner wishes to seek it before he goes. The reality is that this matter has been discussed with governments of both political colours over most years; and they have all reached the view that the present position should obtain. There are some very substantial arguments, which I have no doubt my noble friend will deploy when he comes to reply to the debate.
There is of course another fact too; namely, that pensioners who have gone over—
Lord Stallard: Before the noble Lord continues, he mentioned the provision in the 1948 Act. But if we accept his argument, did that not apply equally to the 300,000 pensioners who went to other countries? Why should there be discrimination? The noble Lord discriminates in saying that this payment was there for all but we waived it in the case of 300,000. That is pure discrimination.
Lord Dean of Harptree: I believe that the noble Lord refers to reciprocal arrangements. I intend to come to that point. I agree that it creates anomalies which make it very difficult for pensioners living overseas to understand. Perhaps I may develop the other arguments first.
The reality is that pensioners who live overseas are not subject to United Kingdom tax. That is a harsh fact, but it has to be taken into account. We also have to take into account that in our arrangements the now annual increases in the National Insurance pension are based on cost-of-living increases in this country. There are no equivalent criteria that one can use for pensioners living in Australia, New Zealand, South Africa or other countries with which we do not have reciprocal agreements. So I hope that my noble friend will feel that at least he has one "half friend". There are of course the anomalies, the disparities, which grow year by year. Every pension increase which takes place in this country means that the gap between pensioners in this country and those overseas grows bigger.
I wonder whether my noble friend is able to say anything at all about the possibility of progress through reciprocal agreements. I accept the point that the noble Lord, Lord Stallard, made. It is very difficult to explain to a pensioner who lives in Canada or in the United States that the disparity between the pensions should be as great as it is. If it were possible to have some progress with reciprocal agreements, that would help in dealing with the understandable grievance that overseas pensioners feel.
If that is not possible, I wonder whether my noble friend has considered, or would consider, the possibility of doing something special for pensioners who, say, are over 80 years of age. There is a precedent for a pension being introduced in this country for those who have not earned one through contributions. If no other progress is possible through reciprocal arrangements, is there any

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possibility of some special consideration perhaps being given to those who are over the age of 80? I hope that I have not entirely spoilt the friendship with my noble friend with which I started my speech. But I very well understand the position, that Her Majesty's Government, like previous Governments, are likely to take up on this difficult issue.
Baroness Young: I, too, would like to say to my noble friend the Minister that I hope he will not accept this amendment. The arguments were very clearly set out by my noble friend Lord Dean.
I listened with great care to what the noble Lord, Lord Stallard, had to say and am very conscious of the hard cases that have arisen. Indeed, when I was a Minister in i he Foreign and Commonwealth Office, I met groups of pensioners and frequently heard their case. But perhaps it is a very telling point that no government of any complexion have done anything about this point. When the Party opposite were in power, they did nothing. Nor have the present Government, for the reasons which the noble Lord, Lord Dean, set out, felt able to support it.
My noble friend Lord Pearson said that two fallacies existed. One was that pensioners did not know what they were doing. That may be the case, but when one is making what must be an important decision—namely, to emigrate—then one must look at the consequences, particularly in regard to one's income. I should think that one would ask a great many serious questions. I have not seen the leaflets concerned but if they need to be rewritten and made clear then that should be done. However, I believe in individual responsibility. When one is making such an important decision as moving abroad one should find out what the financial consequences may be.
I agree with those who say that at this stage we cannot commit the Government to an extra £230 million a year. It is a gross over-simplification to say that the Government can find that amount annually. I do not know what the Front Bench opposite will say. Commitments to huge increases in government spending, ultimately paid for from taxation, are unwise, particularly when the suggestion comes from your Lordships' Chamber. This is not the correct place in which to advocate that kind of expenditure.
It may be that, if all the pensioners returned, they would be a charge on the National Health Service and other services in this country, but it is most unlikely that most of them will return. The whole argument therefore is based on a sum we cannot deduce. We must face up to the cost of £230 million. That is a large sum of money and if it were indexed it would clearly cost more. It would be wrong to commit the Government to that amount at this stage. For those reasons I hope that my noble friend the Minister will not support the amendment, sympathetic as one may feel towards it. It would be inappropriate, and particularly so for this Chamber, to commit the Government to such vast sums of increased expenditure at this time.
Lord Boyd-Carpenter: I agree with my noble friend. This is the oldest issue of all in the national insurance world. I dealt with it many years ago when I was the Minister concerned and ever since it has been raised by
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oppositions and voted down by governments of all political colours. I venture to suggest that that practice will continue.
It may seem difficult to justify freezing someone's retirement pension. We must remember that the amendment is only concerned with retirement pensions. One or two speakers strayed on to other benefits such as service pensions, but they are not dealt with by the amendment. The amendment deals only with retirement pensions. Whenever a government had to face up to the issue, they rejected it. However, the possibility of reciprocal agreements is always open. I must confess to being responsible for negotiating a number of them, which probably benefited many people in many countries. There is also a good deal to be said for confining the relief to countries where it is possible to undertake reciprocal arrangements.
It is not right to say that we will suddenly reverse what has been the policy for the best part of 50 years. It is a considered policy and on the whole works well. No government will accept the change proposed by the amendment. It is clear that those going abroad as pensioners had full opportunity to find out what the effect of their absence would be. If they did not bother to find out, that is a pity. But information on the effect we are discussing was available to them, just as it was that they would be excused British taxation. That is perhaps also a relevant consideration. The people with whom the amendment is concerned pay no British tax; they pay whatever the tax may be in the country in which they have chosen to reside. Therefore, although they are on the whole worthy and admirable people, I hope that my noble friend the Minister will resist the amendment and do what all governments have done so far and which I believe all governments will continue to do for years to come.
Lord Belhaven and Stenton: When national insurance was introduced—a long time ago when I was quite young—we all assumed that pensions were contributory. If the Treasury has thrown the money away or wasted it in other ways, or perhaps not increased the contributions by as much as they should have done, that is not our fault. I do not understand what right that department, the DSS or the Government have to tell us where we must live after we retire. Also, people who have retired and who qualify for United Kingdom pensions, paid tax all their working lives. So I do not believe that the tax argument really washes either.
Lord Skelmersdale: To an extent my noble friend is right. If the state scheme was a fully funded one, the case for the amendment would be totally unarguable. I am sure that we would all accept that. Unfortunately it is not and never has been. Today's workers pay the pensions of today's pensioners in relation to the state scheme.
One point that has not been raised in the excellent defence put up by my three noble friends is how well today's worker, paying for the state pension, would take to the upgrading of the state pension paid abroad. I should have thought that they would take rather a dim view of it.
I want to take up two points made by the noble Lord, Lord Stallard. He said that index linking of British pensions paid abroad could be achieved by domestic

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legislation. The Bill is the domestic legislation the noble Lord chooses to achieve that object. I agree that if it is to be done, it must be done by domestic legislation. The other point that occurs to me is that when we are talking of pensioners paying tax, it is not only the 17.5 per cent., or in rare cases 8 per cent., VAT mentioned by the noble Lord, Lord Stallard. Pensions in this country are also taxable as income. There are people receiving pensions who have enough income generally, as my noble friend Lord Boyd-Carpenter said, to pay income tax. That point too must be thrown into the equation.
There seems to be a slight disparity of view between the Benches opposite. The noble Baroness, Lady Seear, said that if we could encourage reciprocal agreements she would be happy with that, so long as agreement was arrived at. I understood that to be what the noble Baroness was saying. However, the noble Lord, Lord Stallard, wants a one-sided amendment to primary legislation.
7 p.m.
Baroness Seear: The noble Lord must not take words out of my mouth. I would prefer what the noble Lord, Lord Stallard, has suggested. But if we cannot have that, I would settle for a reciprocal agreement. I am always open to a deal.
Lord Skelmersdale: I am grateful to the noble Baroness. I am well aware that she is always open to a deal, having had experience in social security matters debating with the noble Baroness on this and many other points in the fairly recent past. The point about a reciprocal agreement is that it must be reciprocal. It must be reciprocal in terms of payments; but, as importantly, it must be reciprocal in terms of the numbers being paid. If there is a great disparity in the number of Canadian pensioners here compared with the number of British pensioners in Canada, with the best will in the world, that cannot be reciprocal.
Lord Mackay of Ardbrecknish: This amendment requires the Government to pay retirement pensions in payment outside Great Britain at the same rate as if the beneficiary were still resident here and, as a few of my noble friends have kindly said, still paying taxes here—value added tax, excise duty, which has not been mentioned, and income tax. I was grateful for some support this time, unlike during the previous general debate earlier when I felt very much alone in my corner.
Baroness Hollis of Heigham: You were.
Lord Mackay of Ardbrecknish: As the noble Baroness has pointed out, I was alone in my corner at that stage. I have noticed with some interest that the noble Lord, Lord Stallard, has not managed to get his Front Bench to rise to their feet to make any kind of commitment on this issue. I suspect I can understand why.
This issue, as my noble friend Lord Boyd-Carpenter, who has been around these matters for very many years, rightly pointed out, keeps returning. People who go to certain countries and receive British pensions do not receive the annual cost of living increase for cost of
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living rises in this country. Those who emigrated when they retired continue to receive the pension at the rate payable when they left this country and those who emigrated when younger receive a pension payable throughout their retirement at the rate in force when they reached retirement age, as they may have had some qualifying years in this country before they left to go abroad; and, presumably, when they went abroad, they entered into pension schemes in Australia, New Zealand, Canada, or wherever, which built up over the years.
The expression commonly used about these pensions is "frozen". This provision existed in the 1948 Act. In 1955 United Kingdom retirement and widows' pensions were made payable anywhere in the world but normally at the rate in payment when the pensioner left the UK or retired when living abroad. So this policy has been pursued by successive governments since 1955. Clearly, the fact that the noble Lord, Lord Stallard, is arguing it here today means that he had absolutely no success in persuading his own government when they were in office during some of the years between 1955 and 1979.
There has been a debate with regard to whether or not people knew their pension would be frozen when they went abroad. I find it quite difficult to believe that someone taking the very serious step of moving abroad, either as a pensioner or as an economically active person, would not ask a number of questions, including what effect that would have on his pension. That must be particularly true for people who are already retired when they go abroad. If they asked that question, and if they told the Department of Social Security that they were emigrating, as they are advised to do, they would have received the leaflet NI38 Social Security Abroad, which would tell them that pension increases are not normally payable to people abroad. If they were to contact their local office they would be told the detailed position in the country they were going to if they wanted any clarification. If they did not take such advice, they might not know the position. But I believe that the DSS did provide and has provided over the years advice and I find it very hard to believe that people taking this quite serious step did not make at least some inquiries as to what their position would be vis-à-vis any remaining obligations that the United Kingdom had to them on pension matters or anything else.
Lord Monkswell: The Minister is talking about the advice which a pensioner might have received from the department or from his local office. We can accept that if pensioners had sought that information and had obtained it, they would have been told that if they moved to certain countries their pension would not have been increased in line with inflation. But that is not the only information that they would have had. Will the Government not recognise that the other information that would form the background to their making the decision, more particularly since 1979, is the Conservative Government's thrust to reduce inflation and keep it low? On that basis, given that climate, the pensioner might have taken the decision to go abroad while thinking that it would not matter too much because the Conservative Government would keep inflation down. Do not the Government feel that they

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have a certain responsibility because in that respect they are rather different from any previous government we have had?
Lord Mackay of Ardbrecknish: I am not entirely sure where that intervention takes me. If someone went abroad in 1980, 1983 or 1984 and decided that inflation would not be very bad through the rest of his lifetime in the UK and that he could therefore afford it, that is a view which he himself had to take. Interestingly enough, over recent years, it would not be too bad a view. But inflation goes on. Although it is low, it is not as low as we would like. It is still there and over time it is one of the problems that we have with inflation. If the noble Lord is a recruit to our campaign against increases in inflation, he will certainly be a recruit at the end of the debate to me preventing another £250 million of public expenditure, because the two are related.
This year the Government will spend around £900 million on pension payments to people who live outside Great Britain. Noble Lords have said—and I shall say it for the first time and not for the last—that if we were to pay out pensions to all pensioners who live abroad at the same level as we pay to pensioners in this country, the cost would rise. That £900 million would rise by about £235 million a year, an increase of £250 million. That figure is the latest estimate based on an actual count of 90 per cent. of the pensioners overseas and what their entitlement would be.
Some noble Lords might consider that £250 million a year is a small sum in relation to social security spending as a whole. Indeed, the noble Baroness, Lady Seear, invited me to take money from less good causes. She did not actually give me a list of the less good causes from which I might take £250 million. By any reckoning that is a very considerable amount of money. It would have to be found either from the existing social security budget or from an increase in taxation.
If I were offered by the Treasury, which seems an unlikely scenario, an extra £250 million to spend on the social security budget, I regret to say to noble Lords who have supported the amendment that unfreezing these pensions would not he my first priority by quite a long way. There are many other cases in this country of people who live here that I would certainly prefer to attend to than spending £250 million in that regard. Although I hope that the problem does not arise, a point which arose in one of our debates earlier this afternoon about people with Alzheimer's disease certainly springs to my mind as one area which I would certainly have higher up my shopping list of things I might do. I am quite sure that most Members of the Committee are in exactly that category.
Pensioners in the European Economic Area or in countries with which we have reciprocal agreements have their pensions uprated. We have some 30 agreements. The great majority came into force when cost was a less important factor than it is now. Other more recent agreements fulfil long-standing commitments entered into when the modest costs involved were considered affordable. It is part and parcel of our commitment to the European Economic Area. But some 90 per cent. of pensioners who do not
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receive uprating live in Australia, Canada, New Zealand or South Africa. While we do have reciprocal arrangements with Australia, Canada and New Zealand, they do not provide for uprating. I know that Members of the Committee are particularly concerned about those countries. But one cannot unpick countries because those which I have mentioned would account for £210 million of the £250 million I have mentioned. That is the cost.
During the Second Reading of the Bill and today, the noble Lord made a point about the United States and Canada and the fact that pensioners in the United States receive indexation whereas pensioners in Canada do not. Annual pension increases have been payable in the United States since 1969 by virtue of a reciprocal agreement. I should explain that shortly after we concluded the agreement with the United States, the then UK Government offered to enter into negotiations with Canada to unfreeze UK pensions paid there. The Canadian Government were unable to discuss the issue at that time because of the federal nature of their social security system. By the time they were able to do so, inflation in this country had taken off and created a financial climate in which unfreezing for Canada was no longer affordable.
It has been argued that the cost of uprating these pensions would be offset by savings to public services here, like the health service and so on. Of course, they are not real savings; it simply means that we may have had to spend more. The argument that one gets a quarter of a billion pounds out of these savings is not very sensible in the real world, but I understand it.
It has to be said that pensioners who go abroad either when they are in work or are retired, no longer pay tax in this country, but are paying it in the country in which they are resident. They may be paying tax on more than just the United Kingdom retirement pension. They may pay tax on the portion of the Australian retirement pension on which they become eligible to pay tax or on their occupational pension, which was either earned in this country before leaving or in the country in which they now reside. Therefore, the balance of advantage is a much more complex problem than my noble friend Lord Pearson tried to pray in aid, and whether one can set out a credit and debit sheet as regards this group of people.
My noble friend Lord Dean of Harptree, in being "half friendly" with me, as he put it, asked whether we were looking at any further negotiations on social security conventions. There are no new negotiations leading to unfreezing which have been initiated in recent years. Due to the financial position I have laid out and the need to keep control of public spending, I do not foresee any prospect of re-opening negotiations in the next few years.
This is an emotive issue and Members of the Committee who have spoken in its favour have certainly done so in an emotive way. But the blunt fact of the matter is that in this country our social security spending is running at over £80 billion a year. Despite the measures which we are taking to contain costs—not universally approved of by the Benches opposite—they are expected to grow to something like £90 billion by

981
1996–97. We are committed to an efficient, effective and affordable social security system which protects the needs of the most vulnerable in our community. But we have to ensure that social security spending does not outstrip the ability of people in our country or the economy to pay for it. I believe that to look for an extra quarter of a billion pounds for this particular case is a bridge too far. As I mentioned earlier, if I had a quarter of a billion pounds (and it is billions) to spend—and I suspect most Members of the Committee would agree with me—I can think of other cases which might have a higher priority than this one.
Despite the sympathy which many have shown for those who have decided to live in climes other than our own, the Government's case is unanswerable on the ground that the amendment of the noble Lord, Lord Stallard, would impose a very considerable increase in expenditure on us. For that reason, if the noble Lord divides the Committee, I hope that noble Lords, having heard my argument, will support me in the Division Lobby.
Lord Pearson of Rannoch: Has my noble friend read leaflet NI 38 which he prayed in aid in support of the fact that people who have gone abroad will have been sent that document and will know exactly what is in store for them? If my noble friend has not read it, can he do so and do something about the drafting at .19 on page 10? As I mentioned in my few remarks, the pensions which are not to be index linked relate entirely to widows, the mother's allowance, the child special allowance and the guardian's allowance. That might make matters easier for people in future.
7.15 p.m.
Lord Mackay of Ardbrecknish: Of course I shall read the leaflet in some detail, including the small print. I do not think that that takes away from the point I made. If a pensioner had made inquiries about his position, either through leaflets or through officials of the department over nearly 50 years, he would have been told the situation.
Lord Stallard: I have listened very carefully to the debate and I would like to thank all those on both sides of the Committee who have participated. I have heard nothing new from the Front Bench opposite. In fact, that speech must have come from the files because there was nothing in it which has not been said by umpteen Secretaries of State in the noble Lord's position over many years. He said that Labour Governments have never done anything about this matter. It must have been a Labour Government in 1969 which negotiated the reciprocal agreement which the Minister mentioned.
Nonetheless, the whole tenor of the Minister's speech and others seemed to be that it was the pensioners' fault and that they should not have gone to Canada; that if they had listened to the Government they would have gone to some other place: one of the other 33 countries. The Government are not prepared to discuss reciprocal agreements with those countries. It is only the United Kingdom Government who are stopping the pensioners having the benefit.
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The Government have been saying ever since I was a Member of the other place that the offer is there and those countries should come to talk to us. The Minister said that in 1972 an offer was made, but there were difficulties in Canada at that time. He covered that up by saying that when the Canadians had solved their problem, and when renegotiation was considered, the Government said that inflation had taken over and was sky high, so they could no longer discuss the matter. But when inflation was virtually nothing the Government still did not want to talk about it.
From all that, one can only assume that the Government are hell bent on continuing this discrimination. They have done nothing to solve the rift which exists. In fact, they have worsened it and spread it. On that basis I have no alternative but to take the opinion of the Committee.
7.18 p.m.
On Question, Whether the said amendment (No. 183) shall be agreed to?
Their Lordships divided: Contents, 45; Not-Contents, 98.

Division No. 2

CONTENTS

Addington, L.

Liverpool, E.

Beaumont of Whitley, L.

Longford, E.

Belhaven and Stenton, L.

Mar and Kellie, E.

Bottomley, L.

McConnell. L.

Brookes, L.

Methuen, L.

Chesham, L.

Monkswell, L. [Teller.]

Cocks of Hartcliffe, L.

Nicol, B.

David, B.

Pearson of Rannoch, L.

Donaldson of Kingsbridge, L.

Rochester, L.

Dubs, L.

Saltoun of Abernethy, Ly.

Ezra, L.

Seear, B.

Fisher of Rednal, B.

Sefton of Garston, L.

Gallacher, L.

Serota, B.

Shannon, E.

Geraint, L.

Shepherd, L.

Grey, E.

Stallard, L.

Gridley, L.

Stoddart of Swindon, L. [Teller.]

Harris of Greenwich, L.

Taylor of Blackburn, L.

Hilton of Eggardon, B.

Thomas of Walliswood, B.

Jeger, B.

Tope, L.

Jenkins of Hillhead, L.

Tordoff, L.

Kinloss, Ly.

Westmorland, E

Leigh, L.

White, B.

NOT-CONTENTS

Acton, L.

Carnegy of Lour, B.

Addison, V.

Carnock, L.

Ailsa, M.

Cavendish of Furness, L.

Aldington, L.

Chelmsford, V.

Alexander of Tunis, E.

Clanwilliam, E.

Archer of Weston-Super-Mare, L.

Clark of Kempston, L.

Arran, E.

Colwyn, L.

Astor of Hever, L.

Courtown, E.

Balfour, E.

Craigavon, V.

Blatch, B.

Cranborne, V. [Lord Privy Seal.]

Blyth, L.

Cumberlege, B.

Boardman, L.

Darcy (de Knayth), B.

Borthwick, L.

Dean of Harptree, L.

Boyd-Carpenter, L.

Dixon-Smith, L.

Brabazon of Tara, L.

Elles, B.

Bridges, L.

Elton, L.

Brigstocke, B.

Ferrers, E.

Brougham and Vaux, L.

Flather, B.

Cadman, L.

Fraser of Carmyllie, L.

Caithness, E.

Gardner of Parkes, B.

983

Glenarthur, L.

Norrie, L.

Goschen, V.

Northesk, E

Gowrie, E.

Orkney, E

Gray of Contin, L.

Palmer, L.

Greenway, L.

Parkinson, L.

Hacking, L.

Perry of Southwark, B.

Harmar-Nicholls, L.

Rankeillour, L.

Hayhoe, L.

Rennell, L.

Henley, L.

Renton, L.

Hooper, B.

Renwick, L.

Howe, E.

Rodger of Earlsferry, L.

Hylton-Foster, B.

Rodney, L.

Inglewood, L. [Teller.]

Seccombe, B.

Kenilworth, L.

Shaw of Northstead, L.

Lawrence, L.

Simon of Glaisdale, L.

Lindsay, E

Skelmersdale, L.

Lucas of Chilworth, L.

Skidelsky, L.

Long, V. [Teller.]

Stewartby, L.

Lucas, L.

Stockton, E

Strathclyde, L.

Lyell, L.

Tebbit, L.

Mackay of Ardbrecknish, L.

Thomas of Gwydir, L.

Mackay of Clashfern, L. [Lord Chancellor.]

Torrington, V.

Trumpington, B.

McColl of Dulwich, L.

Ullswater, V.

Mersey, V.

Vivian, L.

Miller of Hendon, B.

Wade of Chorlton, L.

Monteagale of Brandon, L.

Wise, L.

Mountgarret, V.

Wynford, L.

Napier and Ettrick, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
Lord Lucas: I beg to move that the House be now resumed. In moving this Motion, I suggest that the Committee stage begins again not earlier than a quarter past eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

National Health Patient Accommodation Bill [H.L.]
7.26 p.m.
Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Central European Time Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Green Belt: Institutional Development
7.28 p.m.
Lord Stallard Lord Stallard rose to ask Her Majesty's Government why, contrary to their previous opinion, they now consider that appropriate institutional development in extensive grounds would conflict with "the fundamental green belt aim of keeping land permanently open" [H.L. Deb., 5th December, 1994 col. 794].
The noble Lord said: My Lords, perhaps I should say at the outset that it is not my intention to criticise the concept of the green belt, the "girdle of open space" as it was once known. As a former chairman of an inner London borough planning committee during the 1950s, I know something of the background and the workings of the policies relating to green belts. I recognise too the great importance which all governments have attached to green belts and the part they have played as an essential element of planning policy since their inception.
It is significant also that the purposes of green belt policy have remained pretty intact with very little change for some decades—until now. Twelve months ago, the Department of the Environment published a consultative paper relating to planning policy on green belts. It proposed revision of current Planning Policy Guidance Note 2 (Green Belts). Among the changes proposed was the deletion of the general provision for institutional use in green belt planning policy which was introduced by Circular 42/55 of 1955. Paragraph 5 of the circular stated that,
"inside a green belt approval should not be given except in very special circumstances for the construction of new buildings or for the change of use of existing buildings for purposes other than agriculture, sport, cemeteries, institutions standing in extensive grounds".
That policy has been little used and appears nowhere in land use statistics. However, where it has been used the imprecise expression "institutions" and "extensive grounds" have created difficulties due to lack of clarity. In November 1992 following a case affecting the borough of Barnet on which Mr. Justice Auld commented, the Department of the Environment issued a letter to clarify the position. It states that,
"institutions standing in extensive grounds are included amongst the categories of appropriate development because it is considered that an institutional building which formed a relatively small and unobtrusive part of an extensive site would preserve the openness of the Green Belt".
In 1993 a DOE report, Effectiveness of Green Belts, recommended deletion of the category without any factual reason or justification. It was followed by a draft PPG2 in February 1994 which, in paragraph 3.2 recommended,
"the deletion of institutions in extensive grounds, on the basis that the category is inappropriate to the Green Belt, and difficult to define".
In the consultation that followed, representations were made by 674 organisations or individuals. Of those, 100 supported removal of the category and 249 made representations that the category be retained. Among those who supported the category's retention—I shall not bore the House by reading them at length—the Church Commissioners said:
"The Church makes an important contribution to the social fabric of rural areas and it is therefore vital that the special circumstances referred to include the provision of new churches (whether or not in replacement of redundant buildings) and parsonages".
Surrey County Council, which had discussed the consultation paper, said:
"The clarification of guidance on uses can be generally welcomed. However, the deletion of institutions in extensive grounds as an appropriate use of Green Belt land could cause difficulties as there

985
can be a genuine need for such developments to have a Green Belt location and the nature of extensive grounds is often contributory to preserving the openness of Green Belt".
The county council went on to ask the Secretary of State to take note of its deliberations.
The RICS said:
"Paragraph 3.2 lists a number of types of development that should generally be permitted in Green Belts. The associated notes indicate that institutions in extensive grounds are to be deleted from this list on the basis that 'the category is inappropriate to the Green Belt and difficult to define'. We do not agree that institutions should be deleted. They are not difficult to define. The Use Classes Order sets out institutional uses in Classes DI and C2. The recent High Court cases relating to institutional use in Bristol and Barnet did not present the judges with any insurmountable difficulties".
Following that, on 5th December 1994 a Question was tabled in your Lordships' House. In reply the Minister, the noble Earl, Lord Howe, gave two reasons for the removal of the category. He said, first, that
"it conflicted with the fundamental green belt aim of keeping land permanently open";
and, secondly,
"It had … proved unclear in operatin and had provoked extensive litigation".—[Official Report, 5/12/94; col; 794.]
The first reason given is contrary to the Government's clarification issued in November 1992 and to the more recent decision issued in February 1994. No reason is given for that about turn. On the second reason, everyone agrees that the policy is unclear. I said so in the Question I asked in December. The 1992 clarification helped a little. However, the Government have said that the clarification did not prevent the arguments continuing. That means that there is need for greater clarity. It does not mean that we have to delete the provision altogether. It means that there is need for greater clarity, and, according to the reports I have just read, that is not a problem.
The question of "provoked litigation" is covered in the Effectiveness of Green Belts report; three specific cases are referred to. In each case permission was given finally on the basis that the proposed development was appropriate in the green belt. The fact that local authorities and the Secretary of State have not accepted or applied their own policies cannot be laid at the applicant's door.
The Government went on to suggest that development could nevertheless take place if very special circumstances existed. That is unacceptable because "very special circumstances" is no clearer than the previous description. There may still be difficulties in clarifying and explaining what are "very special circumstances". They are not defined, so it is even less clear than before. Such an application is contrary to policy. It would have to be referred to the Secretary of State. Experience shows that local authorities refuse such applications, forcing an appeal, with its uncertainty, expense and delay—the litigation to which the Minister referred.
With regard to the specific instances where "very special circumstances" may exist, mention is made in PPG2 of motorway service areas and places of higher education which may qualify if there is a need which cannot be met elsewhere. Supermarkets and such places
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could have been mentioned. In the case of places of higher education, it is stated specifically that it is government policy to encourage more people to take higher and further education. It is our policy too and one with which I agree wholeheartedly. Should it not also be government policy to encourage places of religious worship for the moral education and well-being of the country? We hear enough about that from the Government Benches. I am now asking them: should they not pay the same attention to moral education and well-being as we all do to further education?
Where developments have been allowed, they have provided an opportunity to clear up derelict sites. Most of the applications that have been approved have received approval on the basis that they were on derelict sites. Those derelict sites have been improved environmentally and the landscaping has been improved. Everyone who has known and seen them has said that. What is needed is a clear national policy presumption for places of worship. Their unsuitability in many urban areas means that some carefully guarded provision for green belt use is essential where no other suitable site is available. I hope that it is the Government's intention to issue a circular of guidance to local authorities which will include the points I have tried to make in reference to places of worship.
7.38 p.m.
Baroness Thomas of Walliswood: My Lords, the noble Lord, Lord Stallard, has raised an interesting aspect of the revised green belt guidelines. He showed me some of his notes before the debate, and it was obvious that he was concerned in particular about places of religious worship. I am sorry that I did not consult him earlier because I might have been able to make a more accurate response to what he has said.
The 1955 green belt circular allowed for institutional development in extensive grounds as appropriate in the green belt. Perhaps that reflected the reality of the existing situation where large hospitals—for instance, those in Epsom, Redhill and so forth—had long existed on land which was subsequently included in the green belt.
I am advised that when a year ago the revised guidance note was circulated, the ACC, for example, made no response. As the noble Lord suggested, there was among the counties a certain amount of disagreement as to what the response should be.
My understanding of the guidance is that if applicants wish to place an institution in the green belt they must make a special justification for that application. No matter what happens, it is likely to be called in by the Secretary of State rather than there being a presumption that all other aspects of green belt policy—for instance, visual impact, disturbance and causation of traffic—have been satisfied. Under the old guidance, the presumption would be that such an application would be granted.
Prior to speaking in today's debate, I contacted a number of people. My contacts suggest that the new approach is generally welcomed among many planners and conservationists because it represents a stronger protection for the green belt. As such, I welcome it. The

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county of Surrey has a large green belt area; almost the whole of Surrey is within the green belt. Nevertheless, there are heavy urban concentrations in the north of the county and there is a constant desire on the part of developers to nibble away at the edges of the green belt. The district council in which I live has always resisted that. Sometimes one may quarrel about the individual application but the principle that such applications should be resisted is good.
It is worth noting that green belts around other cities are far less substantial than that around London. Therefore, one might suppose that they are even were more fragile and that the additional protection is welcome.
I find it difficult to understand why places of worship should be treated differently from, say, hospitals or old people's homes run by charities. I believe that all those institutions should be obliged to make their justification in the same way, rather than giving a list of specific uses which have a presumption in their favour and a list which do not have a presumption or have a presumption against them. I believe that that is a better way of proceeding.
I am not sure why people would wish to establish places of worship out in the country. I can see the financial attraction of such an approach but there are disadvantages; for instance, those who wish to go to such places of worship must travel longer distances. That would be against my understanding of protecting the countryside, reducing air pollution and so forth.
I am waiting for the noble Lord, Lord Stallard, to explain that matter in his response. I apologise; I understand that the noble Lord cannot respond to the debate. Perhaps the noble Lord, Lord Williams of Elvel, will do so. I believe that a special plea on behalf of places of religious worship needs to be justified.
The issue of traffic leads me to the only problem that I can see in the present regulations. Let us suppose, for example, that with the amalgamation of hospitals, which is almost bound to happen during the next few years, it were found necessary to bring together two large institutions. It would be extremely unlikely that they could be developed on existing sites, unless those sites were large. That may be one of the problems of any given hospital. Let us suppose that they cannot be developed on the green belt. In fact, during the past 15 or 20 years two hospitals have been developed on the green belt in Surrey. The implication is that they must go beyond the green belt into the countryside or rural areas. Again, that would increase the length of journey time, pose difficulty in access and so forth. We are all trying to avoid such difficulties.
7.45 p.m.
Lord Williams of Elvel: My Lords, the House will he grateful to my noble friend Lord Stallard for tabling this Question. I wish, first, to ask the Minister a number of questions about the status of policy planning guidance notes. PPG2 has been issued by the Department of the Environment but we are not entirely certain whether PPGs are meant to be policy statements, which was the original intention, or procedural statements. They appear
988
to be policy statements dominated by procedure. It would be more useful to have smaller documents concentrating on policy, leaving the implementation of policy to the local authorities. Otherwise, as regard procedure, there is no point in local authorities having a planning committee.
Perhaps I may give the example of Wales. The Secretary of State for Wales has been pruning Welsh PPGs down to their policy content and I understand that the Department of the Environment has employed consultants to review PPGs. If that is the case, will the Minister tell us when the consultants are to report? If they report in the way in which I hope, and recommend that PPGs should become policy statements and that procedures are handled by local authorities, will there be a proper statement from the Government of their intent?
I understand that the legal status of PPGs is that they are a material consideration when deciding planning applications or proposing development plans. They are not therefore determinant; in other words, a local planning authority can disregard the PPG. I should be grateful if the noble Viscount will tell me whether I am right or wrong. If they are more than a material consideration—that is to say, if they are binding on local planning authorities—what is the point of having local authority planning committees going through the whole procedure of planning applications? They are simply processing something which central government have handed down.
As regards the Question asked by my noble friend, we believe that PPG2 has, in its new version, some awkward problems. What are "very special circumstances"? If we take the instruction to local authorities that they are to have regard only to very special circumstances when giving planning permission to, say, motorway service areas or places of higher education, would it not be the case that on the whole local authorities will be negative about any application? If one is sitting on a planning committee and is told to give authorisation only under very special circumstances, one would naturally be reluctant to do so. One starts off by saying, "This is not very good and we will have a substantial bias against it".
As regards places of worship, the churches are being closed down in the centres of towns and in the inner cities because of the movements of population. That is certainly true of the Church of England. In answer to the point made by the noble Baroness, Lady Thomas, it has been shown that, although places of worship are not large institutions, such as supermarkets, where developments have been allowed in the green belt, they have provided an opportunity to clear up derelict sites and considerably improve the environment and the landscape. That is a fact of life which is reasonable. If we had an arrangement under which, on derelict sites and on sites that need clearing up, there could be some clarification of "very special circumstances", then all sides would probably be satisfied.
It is no use saying that existing buildings should be reused or that development plans should have regard to PPG12 in allowing for places of worship unless we are allowing local authorities to make specific decisions on a fairly specific basis. With my noble friend, I very

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much hope that the Government will look at that and will say, "There is a problem here and we will issue clarification, guidance, of PPG2 along the lines already suggested". That is the right way to go in moderation. I agree with the noble Baroness, Lady Thomas, that in general we want to protect green belts, but there are some exceptions which the Government could easily allow, and with reason.
7.51 p.m.
The Minister of State, Department of the Environment (Viscount Ullswater): My Lords, the Question on the Order Paper is concerned with one of the changes to green belt policy made in the revision of PPG2 published last month. Before I respond specifically to the Question and the debate, it may be useful to the House if I indicate the statutory basis of PPGs, because that was one of the questions which the noble Lord, Lord Williams of Elvel, asked me.
Under the Town and Country Planning Act 1990, local planning authorities must have regard to current national policies. That is the wording in the legislation. Planning policy guidance is current national policy. That is how the PPGs must be taken into consideration by local planning authorities in formulating general policies in relation to unitary development plans (Section 12(6)) and structure plans (Section 31). And local plans, which are what we are talking about in this instance, must conform generally with structure plans. That is provided in Section 36(4).
The noble Lord, Lord Williams, seemed to say that that is all very well; but he asks whether there is a basis on which the Secretary of State can enforce what he sees to be the policy statement. Of course, it is no good having a policy statement and saying that the authorities must have regard to it unless there is some force behind it. Therefore, the Secretary of State is a statutory consultee in the preparation of development plans. He examines them carefully to identify whether they appear to conflict with national policy guidance and PPGs. He normally draws the attention of local authorities to those conflicts which do not appear to be justified by local circumstances. If necessary, he will make a formal intervention by objecting to a draft plan deposit, and by directing that a draft plan should be modified or, ultimately, by calling in all or part of a draft plan for his determination. That is under various sections—and I shall not weary the House with them—of the Town and Country Planning Act 1990. That gives him authority to move planning policy guidance into areas to which local authorities must have regard when formulating their development plans.
Having said that and having explained the statutory basis of PPGs, it may be helpful to explain the thinking behind the amended PPG2.
Green belts are a cornerstone of our town and country planning system. The revised PPG2 reaffirms the Government's resolute commitment to them. Since 1979 their extent has more than doubled. They now cover 12 per cent. of England. Research which we published in 1993 confirmed their effectiveness in preventing urban sprawl.
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The 1995 edition of PPG2 is the first significant revision of national green belt policy in its 40 years of existence. Much of the policy, including its key elements, is rightly unchanged. The amended PPG takes account both of recommendations in our published research for making policy still more effective, and of extensive public consultation. The thrust of the revision is to buttress the strict controls over development which are fundamental to the long-term protection of green belts, and to boost the contribution they make to the quality of life. This should ensure that green belts are valued even more highly in future.
Within a framework of continuity, the revised PPG makes six main amendments: it reinforces the aims of green belt policy; it sets positive objectives for the use of green belt land; it encourages proper consideration of the long-term direction of development; it provides for the future of existing major developed sites; it fits policy on the re-use of buildings better to the circumstances of the green belt; and it applies the same rules to "institutions" as to other developers.
The new document seeks to provide the most clear and comprehensive guidance on green belt policy. The consultation draft was described by planning consultants as:
"A quantum leap in clarity over … the existing Planning Policy Guidance Note 2".
It should, they said:
"drastically reduce misinterpretation and abuse."
The final version has been widely and warmly welcomed, by, for example, the Royal Town Planning Institute, the Royal Institution of Chartered Surveyors, the Countryside Commission, and the CPRE. According to an editorial in the property press, it provides:
"a sensible framework for local authorities, developers, environmentalists and the public to reach decisions about the future of their areas. Encouragingly, the generally positive response ... by widely different interest groups seems to signal that the second half of the 1990s may see less confrontation and more consensus about how we use our land."
The revised PPG2 learns from the experience of the last 40 years, and strengthens green belt policy to meet the even tougher challenges of the next century. It reaffirms that:
"The fundamental aim of green belt policy is to prevent urban sprawl by keeping land permanently open; the most important attribute of green belts is their openness."
In a nutshell, the revised PPG permits new building on previously undeveloped sites only for uses of land which preserve the openness of the green belt and do not conflict with the purposes of including land in it; for example, agriculture or essential facilities for outdoor sport.
I now turn to the specific issue of institutions. The noble Lord, Lord Stallard, asks how the Government have come to the conclusion that institutional development in extensive grounds would conflict with the openness of the green belt.

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National green belt policy was first formulated in the 1950s. In the words of the research report we published two years ago:
"Those who devised the original prescription saw the institutions category as recognising a pre-existing land use in the countryside. Sanatoria and similar hospital buildings, often Victorian in origin, were seen as necessarily located in the countryside to avoid the spread of infectious diseases."
The noble Baroness, Lady Thomas, mentioned hospitals.
In recent years the institutional provision has increasingly been used to press for wholly new development on a scale that is inappropriate in the green belt. Such development damages the openness of the green belt. The fact that the developer is an institution does not lessen the effect on the green belt. Nor is the green belt intended to be parcelled up into a series of developments in "extensive grounds". It is meant, as PPG2 says, to be kept permanently open. Moreover, as the noble Lord, Lord Stallard, indicated, and understood, the concept of "institutions in extensive grounds" caused such difficulties of interpretation in recent years that it became effectively unworkable. That was evidenced by many planning appeals and extensive litigation. There was great confusion over what was and what was not an "institution"; and, still more, over what constituted "extensive grounds". I believe that the concept was tested to destruction.
In the revised PPG2 published last month, development by institutions is subject to the same controls as other development in the green belt. That was recommended in the research report we published in 1993, and proposed in the draft revision of PPG2 which we published for public consultation a year ago. That does not downgrade the value of religious institutions. As the noble Lord, Lord Stallard, said, they are important to the well-being of the individual and society and to the life of the nation. Planning policy rightly recognises religious needs.
The Town and Country Planning (Development Plan) Regulations 1991 require planning authorities to have regard to social considerations. Planning Policy Guidance Note 12, which was mentioned by the noble Lord, Lord Williams, advises that they should consider the likely impact of their policies and proposals on religious groups. It states that development plans should make provision for land for places of worship and other community facilities.
The development plan process provides full opportunities for public consultation. Religious groups should involve themselves in plan preparation where they consider it necessary to seek provision for places of worship. I turn now to the query made by the noble Lord, Lord Williams. As regards the concerns of the bodies that he mentioned, I believe that that is the right place that those bodies should have in the development process; namely, to go in where there is opportunity for consultation.
However, there is no basis for giving religious institutions special treatment in green belt policy. Many interests might see themselves as equally deserving; for example, as the noble Baroness, Lady Thomas, pointed out, charities.
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The revised PPG2 does not rule out all possibility of development in the green belt in any circumstances. For the first time, it creates scope for the limited infilling, or the partial or complete redevelopment of major existing developed sites. It provides for the suitable re-use of existing buildings, and drops the former requirement for them to be redundant. It clarifies the leeway for development in existing villages. That applies both to villages which are inset into the green belt to allow limited development or expansion, and to those villages washed over by the green belt where infill development is permitted. Finally, essential facilities are allowed for uses of land which preserve the openness of the green belt and do not conflict with the purposes of including land in it.
Those provisions apply to religious institutions just as much as to any other group. They should use the opportunities to the full. They also have the same scope as anyone else to plead very special circumstances to justify development which is normally inappropriate in the green belt.
The noble Baroness, Lady Thomas, posed a question regarding two hospitals amalgamating or requiring the concept of leap-frogging over the green belt. In those circumstances, I believe that those concerned could argue "very special circumstances" if one of the institutions within the green belt needed to develop in order to create the facilities for the amalgamation of the two. I believe that the concept of "very special circumstances" gives local authorities flexibility whereas, if there was no concept of very special circumstances, a local authority might say, "It's green belt and you can't develop". It could draw on this flexibility which allows authorities to consider such matters very carefully. In paragraph 3.2 of PPG2 there is extra guidance on the meaning of "very special circumstances". The noble Lord, Lord Williams, asked me about the research on the effectiveness of the PPGs. We expect to publish it later this year.
In conclusion, I should like to leave the House with two points. First, planning policy does give due weight to the need to plan for land for places of worship and other community facilities. It is for the groups concerned to make full use of the opportunities available to them.
Secondly, as we approach the 21st century, it is more important than ever to protect green belts from growing development pressures, and to enable them to make an even fuller contribution to the quality of life. That is why we have strengthened the policy, learning from previous experience. Over the years, the provision for institutions came to mean something with far greater effects on the green belt than were originally envisaged. In modern circumstances, there was no proper justification for continuing it.
Lord Stallard: My Lords, before the Minister sits down, I have a further question to ask him. The noble Viscount did not mention the reason for the 1992 clarification. That clarification was to preserve the openness of the green belt. That has suddenly become inappropriate. Apparently, the Government do not

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preserve the openness of the green belt. That is an about-face. Why was that decision taken? The Minister said nothing on that point.
Viscount Ullswater: My Lords, the clarification in 1992 was given in order to help overcome something which the people who were interested in developing in green belts were finding very difficult. Then, subsequent to that, a revision of PPG2 was undertaken in 1994. I do not accept that the clarification given in 1992 was sufficient to demonstrate that no clarification after some 40 years of PPG2 being in existence was the end of the matter. Therefore, a full revision of PPG2 was undertaken, with a great deal of consultation resulting from research which was carried out in 1993. The answer is that which was published last month.
The Earl of Lindsay: My Lords, I beg to move that the House do now adjourn during pleasure until a quarter past eight.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.7 to 8.15 p.m.]

Pensions Bill [H.L.]
House again in Committee on Clause 114.
The Earl of Clanwilliam The Earl of Clanwilliam moved Amendment No. 184:
After Clause 114, insert the following new clause:
("Level of pension to be limited on basis of other taxable income
. After section 43 of the Social Security Contributions and Benefits Act 1992 there shall be inserted the following new section—
"Level of pension to be limited on basis of other taxable income.
43A. Notwithstanding the provisions of this or any other enactment, there shall be an upper limit on the total amount of retirement pension payable to any person, such limit being determined on the basis of that person's other taxable income as specified in the following Table—

TABLE

Other taxable income

Maximum level of pension

Under £12,000

100%

£12,001–£14,000

80%

£?14,001–£16,000

60%

£16,001–£18,000

40%

£18,001+

20%.").

The noble Earl said: In moving Amendment No. 184 I wish to speak also to Amendment No. 200. The Committee may be relieved to hear that Amendment No. 200 states that the section shall not come into force until 6th April 2010. There is therefore no immediate danger of any revolution with regard to that amendment.
It is a fact that state pensions are regarded by some not only as an article of faith but also as a statutory right, and that everyone is entitled to a state pension which they have paid for throughout their working lives. The fact that they have not paid for it throughout their working lives, but have merely paid for other people's pensions is beside the point. It is perceived that they
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have a right to this provision. People understand that the state pension is graduated according to the contributions that have been paid.
No one should misunderstand me. I fully understand that there is a strong feeling that the pension is considered to be a right. Nevertheless, the real world marches on and it is accepted on all sides of the political spectrum, with the exception of those who have a conviction that the economy will grow faster than the population will age, that the state pension will be an increasingly intolerable burden on the working population in 20 years' time who may be asked to pay not the 10 per cent. of National Insurance contributions that they are now required to pay but probably 20 per cent. or more. It is a general misconception that the economy will grow faster than the population will age. This amendment is designed to relieve that pressure on the working population. This is only a parting shot across the bows of those who will retire from 2010 onwards. This is therefore a probing amendment.
The figures in the amendment are perhaps not entirely accurate. I have prepared some alternative figures to those which appear on the Marshalled List. It is possible that the starting range could be anywhere from £12,000 onwards. Where the figures on the Marshalled List show large and sudden drops of income, that could be relieved by reducing the range by 2 per cent. per £100 or 2 per cent. per £500. According to the Inland Revenue statistics and economics office, 89 per cent. of people who are in receipt of pensions have less than £12,000 a year. Therefore only 11 per cent. of the pensions population would be affected by an amendment to their income that would reduce from the figure of £12,000 onwards. As I say, the £12,000 figure could start at any point one wanted, but it would reduce the pressure upon the working population. I beg to move.
Baroness Turner of Camden: I am obliged to the noble Earl, Lord Clanwilliam, who was kind enough to tell me in advance about the amendment that he intended to move. I do not believe that he was at all surprised to learn that we on this side of the Chamber would have great difficulty in supporting it. The reasons are clear.
We do not want to see a further erosion of state pension provision, which we believe the amendment would bring about. That is not to say that we are opposed to a partnership between public and private provision. I strongly supported the legislation introduced in the mid-1970s which was designed precisely on that basis. I agree with the concept of two-tier pension provision—a basic pension payable to everyone irrespective of their income and a second-tier pension provided either by SERPS or a good occupational pension scheme.
In my view, the amendment of the noble Earl, Lord Clanwilliam, undermines that system still further. It may be argued that we have to cut down on state provision because of cost or demographic changes, but in my view pension provision is a form of contract between the generations. Once, perhaps, that contract was filled by the extended family, which was expected to look after old people. However, we have long passed that stage.

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We now have a situation in which it is up to the community to provide for basic pensions. It is because it runs against that concept that I cannot commend the amendment of the noble Earl, Lord Clanwilliam, to the Committee, although must confess that it is very innovative, given the philosophy that lies behind it.
I believe that we have to maintain a basic pension provision which has been paid for by national insurance contributions. I still support the insurance concept originally introduced by Beveridge all those years ago, which still has validity nowadays. I hope that the Government do not support the amendment. I certainly cannot commend it to the Committee.
Lord Dean of Harptree: The Committee owes a great debt to my noble friend for thinking the unthinkable and speaking the unspeakable. That certainly would not be possible in another place where, understandably, Members have to think about being re-elected. I would be very surprised if my noble friend the Minister warmed to the amendment at this time. Perhaps in a hundred years time the situation will be different. Nevertheless, this is a serious point which is worthy of a short debate, even at this late hour.
In 1948, when the national insurance scheme was introduced and extended to virtually everybody, very few people, apart from those in public service, had occupational pension schemes on which to rely. There were the thin '30s when the possibilities for savings were very limited. The situation now is completely transformed, very much to the good. I am told by my grandchildren that we now have a phenomenon called Woopies (well off old people). That does not apply to everybody, of course, but nowadays a growing number of people retire with the national insurance pension, an occupational or public service pension and also savings which they have managed to accumulate during their working lives.
Therefore, my noble friend is right to ask whether it is really necessary any longer for those comparatively well-off pensioners to be an obligation on the state. The answer to that question is no. How does one achieve that? My noble friend would achieve it by a means test for everybody, which would be extremely unpopular. My noble friend will realise the implications for the re-election of our party at the general election were his proposal to be introduced.
Having said that, this is a serious point. The time could well arrive—probably later rather than sooner—when we ought to reconsider whether the Beveridge approach is still necessary and whether it is appropriate that those who are comparatively well off in retirement should place this great obligation on the state and the large and ever-increasing social security budget, to which my noble friend the Minister has referred on more than one occasion during these debates.
Lord Mackay of Ardbrecknish: This has been an interesting debate. My noble friend Lord Clanwilliam has approached the issue of retirement pensions from a different point of view from the normal one.
In general terms our policy on pensions has three strands. First, we are pledged to maintain the value of the basic state pension in line with prices as a solid
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foundation for all in retirement. Secondly, we wish to encourage personal responsibility for additional pension provision through occupational and personal pensions. Thirdly, we wish to focus additional resources on the safety net of income-related benefits to help those without other income.
It is often argued, and my noble friend argued this evening, that the £25 billion that we spend on pensions is poorly targeted. Some people think it wrong that contributors should fund pensions for millionaires and believe that state pensions should be withdrawn from richer retirees. While the proposed measure would clearly save money and target payment to less well-off pensioners, it was only five years ago that we abolished the earnings rule that applied to the basic retirement pension. I can tell my noble friend that we do not intend to introduce such a measure, even by the route he outlines in his amendment. It would be extremely unpopular. A means test of the kind he suggests could act as a disincentive to individuals to provide for their retirement and it would penalise pensioners who have made private provision for an adequate retirement income or who choose to continue working after state pension age.
Other measures in the Bill—and we shall come to some of them later this evening—are being introduced to help to ensure that the basic pension entitlement is affordable as it stands for future taxpayers. We maintain that the basic pension should act as the foundation of pension provision.
My noble friend's methods of dealing with the problem are ingenious, especially the proposal he puts forward to reduce the effect of the "cliff edges". We have tried to think what it might mean financially. Without working up a detailed scheme and making a number of assumptions about future incomes, because it would be difficult to take the future of SERPS into account, if such a scheme were introduced today and applied only to the basic state pension, we think tentatively that savings at 1995–96 prices would be around £900 million out of a budget of £27.8 billion. Taking account of the tax loss, the PSBR effect would be around £600 million per annum. Means testing on the scale envisaged is administratively complex and would be expensive to run.
I am grateful to my noble friend for encouraging me to turn my mind to this particular way of looking at the problem of pensions in retirement, but I believe that the basic state retirement pension is highly valued in this country. We are looking at different ways to address the problem of affordability. In addition, people who receive larger incomes in retirement as mentioned in my noble friend's amendment are liable to pay income tax on that income. Therefore, there is a certain amount of clawback in that regard.
With those few words, I hope that my noble friend will be able to withdraw his amendment.
The Earl of Clanwilliam: I thank the noble Baroness, Lady Turner, and my noble friend Lord Dean of Harptree for speaking on my behalf. I am glad that I was found to be both innovative and unspeakable.

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I wish to refer to one point. A number of people will pay 40 per cent. tax. That is a disadvantage to my own case. Those who pay the higher tax of 40 per cent. will not receive as much benefit. Therefore they might not be missing so much income in their retirement which they do not need anyway. With those remarks, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8.30 p.m.
The Earl of Clanwilliam The Earl of Clanwilliam moved Amendment No. 184A:
After Clause 114, insert the following new clause:
("Mandatory personal pension contributions
. No person shall be eligible for a retirement pension under the provisions of the Social Security Contributions and Benefits Act 1992 unless, from the date of their 25th birthday, they have made a contribution, amounting in each year to at least 10 per cent of their gross annual income, to an Appropriate Personal Pension Scheme to which contribution would be made on contracting out of SERPS.").
The noble Earl said: If I were innovative on the last amendment I shall be even more so now. We are now in the realm of personal pensions. Having examined in great depth the navel of the occupational pension schemes, we turn to the subject of personal pensions. There is the need for personal savings, not only for the benefit of the saver but also to create a savings philosophy and culture throughout the nation and to involve the estimated 50 per cent. of the working population who are not covered by some independent pension arrangement. Indeed, I believe I am right in saying that it was Beveridge's vision that we should make personal savings provisions and that in organising security, the state should leave room for voluntary action to provide more than the minimum. We need to provide more than the minimum because the £4,000 or £5,000 retirement pension, of which we have just been speaking, is not very much.
It is remarkable that Japan, which finances most of the world's debt, has successfully encouraged the accumulation of private capital. As a result, almost alone in the world, its pensioners as yet are self supporting. As I said on the last amendment, it is clearly acknowledged on all sides of the political spectrum that our own prospects of being able to support our old age pensioners in the 21st century are slim—certainly in the manner they might have expected. That was clearly debated in Second Reading speeches. Yet in this country some £500 billion is invested in pension funds largely provided from employers' profits. There is the need therefore to make radical improvements to existing pension provisions and to reduce the drain on corporate profits by providing increased investment for industry. I suggest that we do so by personal savings rather than at the expense of the company's profit and loss account.
There is the need for everyone to start a constant savings stream throughout their life. Would indeed that I had done so myself. The amendment proposes that a mandatory savings scheme shall be started by every national insurance contributor before the age of 25 by contributing 10 per cent. of his or her salary or wages to an appropriate personal pension plan with a minimum
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contribution ideally of £1,000 a year. According to Part A of the New Earnings Survey 1994, Summary A14.2 indicates that of the 20.8 million people employed in this country, 12.8 per cent. earn less than £10,000. One thousand pounds a year is 10 per cent. of £10,000. Therefore, it should not be difficult to achieve that figure.
For those who contract out of SERPS, the appropriate personal pension plan already receives 4.8 per cent. of rebate. Assuming that contributions attract tax relief at 25 per cent., an additional 2.7 per cent. is all that is required to make up a total gross contribution of 10 per cent. Surely that is not too great an additional sum to ask of savers, or with regard to the very low paid, of their employers—although it is not my intention to involve the employer except in extreme circumstances. It can be shown that just 10 per cent. of earnings adjusted in line with inflation and earnings will provide the traditional two-thirds of final salary after 38 years, using a growth factor of 8 per cent. Some figures extracted from Money Management of November 1994 detailing performance figures for unitised personal pension funds show that such performance figures are not exceptional, and indeed are accepted by LAUTRO. However, I must confess that the 8 per cent. figure to which I referred does not account for commissions and charges. I shall come to costs in a moment.
In this context, it may be relevant to quote the BZW Equity-Gilt Study of the Real Return on Equities since 1918. I emphasise that it is 1918 and not 1980. From 1918 to 1993, the annual return on UK equities with taxed income reinvested was 7.9 per cent. over 75 years. Therefore 8 per cent. may not be considered over optimistic, especially in view of the fact that it is a LAUTRO-approved figure, a figure that includes cost of commission and management of funds.
There is the need to make savings and pension plans more efficient and by the same token less expensive. Plans which are mandatory need no selling. Hence there can be lower commission rates and charges. Fund management can be awarded by the recently conceived fund based commission. The basic management charge could be increased with fund performance. Fund managers of occupational schemes would equally manage the separate savings or appropriate pension plan. That will provide a bridge between the two systems which I envisage would meld over time. It is not too much to expect that as company funded occupational schemes become too expensive for a variety of reasons (which are obvious and which have been widely discussed previously) companies will start money purchase group personal pension plans instead which can incorporate, if only for investment management purposes, an appropriate personal pension plan such as I propose.
Crucially there will be a fund performance table run by SIB or PIA which could perhaps license specific funds and management teams in order to ensure that we achieve the 8 per cent. performance. There is, too, a need to simplify the transfer calculation on changing jobs and to provide for instant recognition by the saver of the value of the fund accumulated and to create an identity between the saver and his or her fund. Such

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plans already exist in the form of the additional voluntary contributions and personal plans. Many of the additional voluntary contributions are applied to occupational schemes.
The mandatory appropriate personal pension plan which I propose is only an extension of the contracted out portion of SERPS which presently runs in parallel with existing occupational schemes and the AVCs which I mentioned. The APP would receive all transfer contributions. It already satisfies the requirement for portability between occupations. There should be reformed transfer charges but that would be the responsibility of the occupational pension fund managers and trustees who at present have a frightfully complicated system. The existing capping and funding limits of pension plans would continue to apply. The noble Baroness, Lady Seear, referred to a variable retirement age. That would be between 60 and 75—not just covering a decade. There would be no tax free cash sum. A compulsory pension would be taken from the accumulated fund.
One already has PEPs, additional voluntary contributions and many other additional ways of adding money to one's pension plan, if wished. Those could be applied through the normal routine of the present rate of charges and expenses and would top up the 10 per cent. that I propose. Capital sums would be available to pay off mortgages or other personal charges on retirement. Equally, the additional voluntary contribution scheme would be a vehicle for that extension of the principle.
The problem of the self-employed needs equal consideration, but only in respect of the enforcement of the contribution. That can be rated in the income tax return or the fund manager's certificate at present available. I have in my hand the BZW return on gilts, which carries through from 1918 to 1993 a figure of 7.9 per cent. The document has come from your Lordships' Library.
The suggestion may be considered innovative or even unspeakable, but I think that it is important. It is a contribution towards making personal pensions the new form of personal savings to look after our retirement and our old age. I beg to move.
Baroness Seear: This is an interesting proposal, but I do not believe it is compatible with what we are doing in the Bill. Some time ago the Liberal Democrats came to the conclusion that it would have been wiser to abandon SERPS and have a compulsory contribution along the lines that the noble Earl suggested. The more one considers pensions, the more one is aware that it is an enormous undertaking to attempt to provide adequate pension provision on the scale that people rightly wish to have. Sooner or later some changes much more fundamental than those proposed in the present Bill will be necessary. I suspect that something along the lines that the noble Earl spoke of will have to be considered. However, I do not think that it is possible to consider them in the light of this Bill, which has its own slant and approach to the problem. That is probably the best progress we can make at present.
Lord Mackay of Ardbrecknish: Of course, I agree with my noble friend Lord Clanwilliam that to provide an
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adequate income for people in retirement there is a need for a second tier of pension provision. By creating incentives to opt for occupational and personal pension schemes we have allowed for people and their employers to match their provision for retirement to their resources and needs. In that way, we have also shifted the balance from a pay-as-you-go state-based system towards funded private provision. As my noble friend pointed out, assets in British pension funds amount to £500 billion, which is more than all the funds in the rest of the EC put together. We are in favour of a range of non-state pension provision, including both occupational and personal pension schemes. However, no one is obliged to join any particular scheme, which is what my noble friend suggests we ought to consider doing.
Instead, we believe that it is crucially important that individuals have a choice of pension provision, so that they can make the best arrangements for their own circumstances. My noble friend believes that occupational pension schemes will eventually be replaced by group personal pensions. We expect salary-related schemes, a very important type of pension provision, to continue to play a major role in pension provision in the future. Moreover, contracted out money purchase schemes, which first became available as recently as 1988, already have half a million members. The measures contained in the Bill to introduce age-related rebates should ensure the continued popularity of this type of provision, and thus a continued range of pension choices.
My noble friend referred to the levels of charges for appropriate personal pensions, and mentioned that these could be reduced if such plans were mandatory, since no selling would be required. Making appropriate personal pensions mandatory with this objective in mind would surely be using a sledgehammer to crack a nut. Such compulsory investment is likely to act as a disincentive to other forms of savings, some of which may provide a better return to individuals than paying more into a pension scheme.
I can appreciate that my noble friend is trying to ensure that people invest sufficient funds for their retirement income and make adequate contributions over and above the rate of the contracted out rebate. In this aim, we are of one mind, but I do not believe that this amendment proposing compulsion is the right way to go. It is better to promote confidence, to educate and to use publicity to encourage people to plan to maximise their retirement incomes. I hope that with those few words of reaction to my noble friend's proposal he will feel able to withdraw his amendment.
The Earl of Clanwilliam: I thank the Minister for his reply and the noble Baroness, Lady Seear, for her kind words. I agree that we have a problem. The most important point that I made in the amendment was that the savings should start before the age of 25. That is a vital requirement. Anything that one does before the age of 25 will give a reasonable and successful result when one is 65. That vital point is missing from my noble friend's kind remarks. However, I quite agree that this is neither the time nor the place for such an amendment

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to the Bill. I put it forward for consideration in the future. With those remarks, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 4 [Equalisation]:
The Principal Deputy Chairman of Committees (Lord Tordoff): I should advise the Committee that if Amendment No. 184AA is agreed to, I shall not be able to call Amendments Nos. 184AB or 184AD to 184AG.
[Amendments Nos. 184AA to 184BA not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 184BC:
Page 109, line 48, at end insert:
("( ) In section 44(3) (b) of that Act (as amended by this paragraph) following the words "for the relevant years" there is inserted "or, if there are more than 39 such surpluses, of those 39 which are the largest".").
Page 109, line 50, at end insert:
("( ) In section 44(3) (b) of that Act (as amended by this paragraph) following "for the relevant years" there is inserted "or, if there are more than 44 such surpluses, of those 44 which are the largest").
The noble Baroness said: I wish to move Amendment No. 184BC and speak to Amendment No. 184BD. The amendments deal with the best years rule. Our anxiety is that equalising the pension age at 65, as the Bill proposes, hurts women twice over. They not only have to work five years longer for the basic state pension, but because their SERPS additional pension is averaged over the whole of their lifetime and in the last five years they may not be in work or only in low paid work, they will receive a lower pension at the end. They work five years longer for a lower pension. We cannot believe that that is what the Government intended and these amendments would correct that situation.
The first of the amendments proposes that instead of averaging SERPS over the whole of one's working lifetime of 49 years, as with the basic state pension, it should allow a modest flexibility to discard up to 10 years under the first amendment, or up to five years on the second amendment. By dropping the 10 weakest years, as the first amendment suggests, we would bring SERPS into line with the state pension where five years may be dropped at any rate and a further five years by autocredit.
The second amendment would allow the dropping of the five weakest years, thus at least ensuring that women are no worse off than at present and low paid men—those not in occupational pensions but in SERPS—would similarly benefit. Thus, the amendment benefits women and low paid men alike. It is well targeted. Without subverting the whole-life basis of SERPS, it introduces a modest flexibility; the discard of some years which the basic state pension allows. It would permit years to be dropped at the end of the working life or, for someone in part-time work, caring for a partner, or if they are unemployed.
The cost would be relatively modest for the state. No expenditure would come until 2017 or 2024, according to whichever amendment was pursued. It would be
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phased in gradually and it would mean that women would not enter the new regime penalised twice over by working longer for less. I beg to move.
Baroness Seear: Very briefly, I support this amendment. I want to underline the fact that it gives some additional help to the worst paid of the people who are likely to be most poor in old age. The second point to emphasise is that it is helpful to both men and women. In these days when the earnings of both sexes are very much interrupted, the ability to choose the best years rather than having to average over the whole uneven earnings, therefore pulling down the ultimate amount of the pension, is very valuable. It is particularly valuable to the poorest people, who will need the greatest help in retirement in old age.
Lord Mackay of Ardbrecknish: The purpose of this amendment is to provide for SERPS to be calculated on the basis of the best 39 years, or, as in one of the other amendments, on the basis of the best 44 years of a person's earning. Either option would cancel out the effect of moving the SERPS working life for women to that which currently applies to men. The 39-year option represents a significant improvement on the current position for women reaching state pension age after 2017; while the 44-year option would ensure that the current position remained for most women. Either option would represent a significant improvement for men compared with current arrangements. The amendment seeks to improve—or, in the noble Baroness's words to safeguard—the position of women as the retirement age moves to 65. I am quite surprised that we have not discussed the movement from 60 to 65, but we have not. This is, as it were, a consequential amendment—
Baroness Seear: I assure the noble Lord that we shall.
Lord Mackay of Ardbrecknish: I am glad to hear that we are to discuss that point—I presume under Schedule 4. But we have not discussed all the various options that were on the Marshalled List. We seem to have passed them by.
To return to the point that I was making, the principle involved here is this: because we are shifting the retirement age for women to 65, it obviously adds five years to their working life. In doing so, we add five years to what perhaps I might call the "denominator" in the SERPS provision. The SERPS provision will obviously take account of the five extra years of working, both of the income during that time and of the years themselves. We have here two proposals from which to select; namely, that we return to the best 39 years, or that we take the best 44 years—and in order to keep matters equal between men and women, we drop the retirement age for men to the same as it was for women. The 39-year option would represent a significant improvement on the current position for women reaching state pension age after 2017; while the 44-year option would ensure that the current position remained for most women. As I have said, either option

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would represent an improvement for men—one of five years and the other of 10 years compared with current arrangements.
We see here another amendment that is designed to mitigate the effect of our proposals for women and to bring benefit to many better-off men. There have been a number of amendments during the course of today, and on other days, which have explored the possibility of more public expenditure when it comes to the matters that are before us.
SERPS was introduced in 1978 with a view to providing all employed people with a second-tier pension and to reduce reliance on income-related benefits. We recognised in the mid-1980s that the cost of the scheme would escalate rapidly. My right honourable friend, Norman Fowler, was then Secretary of State. The Fowler reforms were introduced, which were designed to curb that cost in the next century.
The original intention was that SERPS would represent 25 per cent. of average revalued reckonable earnings over the best 20 years of a person's life. The 1986 reforms removed the best 20 years' provision, and reduced the accrual rate in stages for people retiring after April 1999 to 20 per cent. for people retiring in 2010 and indeed later. We decided—and Parliament agreed with us at the time—that the provision of SERPS, as it was then being worked out, would become unsustainable into the next century. We therefore made those changes.
At the same time, provision was made for home responsibility protection to be extended to SERPS from April 1999. That was intended to cushion the impact of the reforms for people in vulnerable groups who would have particular difficulty building up additional pension provision. In the State Pension Age White Paper we confirmed that we would fulfil our commitment to bring in the necessary regulations to do this. We have already discussed the importance of home responsibility protection when it comes to the state retirement pension. People—it has to be said that it is most usually women, but that may not necessarily always be the case—who have responsibilities, let us say, for looking after children and who opt to look after the children at home, or those who stay at home and give up their job in order to care for an elderly relative, can receive home responsibility protection. This reduces the number of years that they have to target before they are eligible for a full state pension. That is an important aspect of the retirement pension provision that we have made in order to help women who find that they cannot have a full lifetime's contribution record because they stay at home to look after their children or perhaps to look after somebody who is unwell and who needs the kind of care and attention which they have to give up their jobs to provide. So home responsibility protection is already there for old age pensions. It will be introduced. As I say, provision is in the White Paper. We confirmed that we would fulfil our commitment to bring in the necessary regulations to do this.
The Bill also introduces a further measure that will provide help for families and working disabled people with low incomes to improve their additional pension entitlement. I am sure that everyone accepts that the
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same argument applies to people who have families and to working disabled people because they cannot accumulate over their lifetime the kind of income that will give them the level of pensions that we are looking for. I believe that that is one of the points to which my noble friend Lord Clanwilliam referred in his speech a few moments ago; namely, that if people are asked to make compulsory savings, there is something of a problem in providing for those people for whom such compulsory pension provision would make quite a dent in their income. Clearly, we appreciate that there is a problem with regard to these matters. We are trying to help in this regard.
Both men and women in low earning families will be helped by the two measures that I mentioned; namely, family credit and disability working allowance. These measures treat FC and DWA as if they were earnings in the calculation of both SERPS and basic state pension, thus focusing help on workers with low incomes. That help is targeted on groups of people with low incomes who will face particular difficulty in preparing for their retirement—both those with families and those with disabilities. It promotes working, and it encourages the take-up of in-work benefits such as family credit, which are there to help people who can only find low earnings. To encourage them to take up work, the family credit scheme comes into effect and makes up their income. We believe—and I believe that everybody agrees—that this is an important part of the provision to encourage people into work, to encourage those who are in work, and to make sure that those in work (even if it is quite low paid) are helped with their family responsibilities. These provisions in the Bill will be directed at this particular group of people, whom, I am sure, the noble Baroness would wish to help. I am referring to the kind of people who may find themselves with a poor contribution record towards the end of their working lives. The noble Baroness rather hurried over that argument. But I am saying that our measures on family credit and DWA will help. The improvements to family credit and DWA, such as the £10 premium for those working 30 hours or more per week as announced in the Budget, will provide further enhancement of SERPS entitlement.
Any of the improvements—such as the various systems that will come to your Lordships' House later in the Session when we come to the job seekers' Bill—on the income of low-wage earners will eventually feed through to their SERPS provision, as does home responsibility protection when it comes to people looking for the old age pension.
The reforms before us ensure the continued affordability of the scheme into the future, while protecting the position of the most vulnerable groups in our country, some of which I explained. By contrast, the amendments would make inroads into the steps we are taking to put SERPS on a long-term sustainable basis. They would raise expenditure in the long term in a poorly-targeted way. Indeed, high earning men would benefit as well as low earning women. I cannot believe that that is what the Benches opposite seek to do. I find it hard to square their normal desire to help the poorest

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in the community with the way in which the amendment brings in for help some high earning men who would gain from the reduction in the number of years.
We need a viable, affordable, long-term SERPS provision. It does not make sense to make available across the board the five or 10-year "free" period which the amendment would provide. Earlier this evening, when asked to find another £250 million in order to fund the frozen pensions of people in retirement abroad, the Front Bench opposite did not vote —I presume because they realised that that kind of commitment is not responsible. I presume it was also felt that in the unlikely event of their being elected into government, they would find it extremely difficult to find that amount. They probably also felt that if they had voted in favour of spending another £250 million, I would have my calculator ready to add that on to the total amount of public expenditure that they were happily and busily pledging.
Therefore, earlier this evening, we saw a small indication of what we must probably welcome as financial prudence and responsibility. It is important that we take a financially prudent and responsible attitude to the provision of SERPS. Many of the proposals on SERPS, such as those put forward by my right honourable friend Sir Norman Fowler, were designed to make SERPS a more affordable provision into the next century. If we had not done that, we would be putting on people in 2020 and 2030—just as we would be if we did not move the pension age of ladies to 65—considerable extra expenditure which is not sensible. It is certainly not sensible for those of us who hope, with a bit of good luck and keeping fit, to be there to see those days come. We hope that the taxpayers and workers at that time will be able to fund the pension provision and the SERPS provision which will be in place at that time.
Those of us who are in the happy position of being members of occupational schemes, where the funds are already earmarked, in place and being invested, are particularly privileged. We must recognise that in order to ensure that those who are not in occupational or personal pension schemes are able to obtain some money in retirement to give them a reasonable life, which is what we all want.
The proposal is that we add five or 10 years; that is, by reducing the number of years in the denominator over which the SERPS entitlement will be calculated by five years in the case of one amendment and 10 years in the case of the other. We would have to consider whether such a proposal could or would work alongside the generous assistance already built into the system by means of HRP. I have already mentioned how HRP will help women—and that is what the noble Baroness, Lady Hollis, is worried about—both in accumulating a full record for a full state retirement pension and also in helping them with SERPS provision, which we intend to take forward by April 1999 as we promised.
The SERPS position of those people—mainly, though not always, women—who have to stop work at 60 because of caring responsibilities or if they are receiving incapacity benefit, is something the noble Baroness,
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Lady Hollis, specifically mentioned in her speech. One of the problems, whether in this debate or in the 60/65 age limit debate, is that there is a tendency to assume that the situation today will be the same at the end of the century, in 2010, 2020 and 2030. But that is not so. The position of women in the workplace is changing—some noble Baronesses and even some noble Lords may say too slowly. But more and more women are in occupational pension schemes and will have full contribution records. They will therefore accumulate, whether it be one-eightieths or one-sixtieths, the same sort of pension provision as their male equivalents. Equally, more and more women will be working for the whole of their working life and make the necessary Class 1 contributions. That means that they will be eligible for a full state pension in their own right.
A change was made in 1977 to remove what was then the married woman's small stamp under which married women did not contribute to their own pension provision but were entirely dependent on their husband's contribution record. That is working through the system. However, more and more women will be coming to retirement—not immediately but we are looking into the next century—for whom that option was not available and therefore they did not make that choice. If they were in employment they paid class 1 contributions and therefore will be building up pensions in their own right.
We have to look ahead when we are discussing these issues: whether it be this issue which concerns changing the basis of the SERPS calculation or looking at the 60/65 argument. We must not look at the position as if nothing will change between now and 2010/2020. The position will change. It is gradually changing already as women take an equal place alongside men. They are expecting—and perfectly correctly expecting—to retain their jobs just as long as men. Consequently, many younger women may continue working until their new pension age of 65 and will get more SERPS from the extra years of earnings revaluation. In fact, they may well get a higher pension than the lower one which the noble Baroness fears.
As we look ahead to 2020 we come on to the point which arises in later amendments. I am surprised that it has not already arisen as there are down on the Marshalled List two important amendments. There is an amendment in the name of the noble Lord, Lord Monkswell, whom I so missed hearing this evening, on the subject of whether we should go to the age of 63 as a sensible compromise between men and women. But we did not hear about that. I am not sure whether we are past the amendment which introduces a flexible decade of retirement. I am quite surprised at how matters which were considered at Second Reading to be great issues have not been discussed. I prepared quite lengthily for an interesting debate on all these items. However, all of a sudden the noble Baroness, Lady Hollis, and the noble Baroness, Lady Seear, have had a change of heart and think that there is no point in inviting the noble Lord the Minister to have a discussion about the matter because the arguments are so clearly on his side and they have therefore withdrawn the amendment. I am tempted to give them the arguments

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whether or not they ask for them because I took so much time looking at them and working out their consequences.
The same is true of SERPS whether the age is 60, 63 or 65 or whether there is a flexible decade. The situation is moving dramatically. It is changing and will continue to change over the next few years. As we move into the next century the ratio of those available in the workforce to those who are retired will go in what I might describe as the wrong direction—certainly, the wrong direction if one is elderly. In 1991 the number of people of working age in the population was 34.4 million. In 2010 the number will be 36.2 million. In 2030 the number will be 33.7 million. In 2050 the number will be 32 million. With that kind of picture, I do not think one can say that just because today unemployment is happily corning down, and coming down quite considerably, although it is still too high, the same factors of people moving out of the workforce as readily as they do today will be the same in 20 or 30 years time when the number of people of working age will have declined by the kind of figures I have just mentioned. We cannot assume that people who today might not be able to have a job or keep a job between 60 and 65 will be in the same position when we come to the years ahead.
Women will be able to secure and stay in reasonably paid work until they are 65. With our proposals not starting until then I do not believe that one can predict forward from today. Even today just over half the men between the ages of 60 and 64 are still in work or are seeking work. Even at the age of 64, 40 per cent. of men are still working. When one considers the various occupations, such as the Civil Service, which already allow for a retirement age of 60, one can see that a great many people who want to carry on working are perfectly able to carry on and to build up SERPS entitlement, if they are still in SERPS, or to build up their ordinary occupational pension entitlements.
One has to look quite carefully at this amendment and ask whether it is really sensible. A situation is proposed where the SERPS divider, if I can call it that, will be related to the number of years people will be able to work. The idea of giving a five-year or 10-year free period is not soundly based. It ignores what the labour market is likely to look like in the years ahead. It also ignores people who are well enough off and who will gain an advantage, as I am sure the noble Baroness does not intend. It will increase the cost of SERPS on the working population at that time. The correct way forward is that which we outline in the Bill. With that explanation I hope that the noble Baroness will withdraw her amendment.
Baroness Hollis of Heigham: I have heard what the Minister said at great length. I am unimpressed by his argument but, with the leave of the Committee, I withdraw my amendment.
Amendment, by leave, withdrawn.
The Principal Deputy Chairman of Committees: In calling Amendment No. 184BD I point to an error in the Marshalled List. The amendment should refer to page 109, line 48, not line 50.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 184BD:
Page 109, line 48, at end insert:
("( ) In section 44(3) (b) of that Act (as amended by this paragraph) following "for the relevant years" there is inserted "or, if there are more than 44 such surpluses, of those 44 which are the largest"").
The noble Baroness said: I beg to move. The Minister's reply was unsatisfactory. I wish to test the opinion of the Committee.
9.15 p.m.
On Question, Whether the said amendment (No. 184BD) shall be agreed to?
Their Lordships divided: Contents, 105; Not-Contents, 61.

Division No. 3

CONTENTS

Acton, L.

Hughes, L.

Addington, L.

Irvine of Lairg, L.

Airedale, L.

Jacques, L.

Archer of Sandwell, L.

Jay of Paddington, B.

Ashley of Stoke, L.

Jeger, B.

Barnett, L.

Jenkins of Putney, L.

Beaumont of Whitley, L.

Judd, L.

Blackstone, B.

Kennet, L.

Brooks of Tremorfa, L.

Kinloss, Ly.

Bruce of Donington, L.

Kirkhill, L.

Callaghan of Cardiff, L.

Lockwood, B.

Carmichael of Kelvingrove, L.

Longford, E.

Carter, L.

Lovell-Davis, L.

Castle of Blackburn, B.

Mallalieu, B.

Chandos, V.

Mar and Kellie, E.

Cledwyn of Penrhos, L.

Mason of Barnsley, L.

Clinton-Davis, L.

McCarthy, L.

Cocks of Hartcliffe, L.

McIntosh of Haringey, L.

David, B.

McNair, L.

Dean of Beswick, L.

Merlyn-Rees, L.

Dean of Thornton-le-Fylde, B.

Methuen, L.

Diamond, L.

Milner of Leeds, L.

Donoughue, L.

Molloy, L.

Dormand of Easington, L.

Monkswell, L.

Dubs, L.

Morris of Castle Morris, L.

Eatwell, L.

Murray of Epping Forest, L

Ennals, L.

Nicol, B.

Falkender, B.

Ogmore, L.

Falkland, V.

Parry, L.

Farrington of Ribbleton, B.

Peston, L.

Fisher of Rednal, B.

Plant of Highfield, L.

Freyberg, L.

Prys-Davies, L.

Gallacher, L.

Redesdale, L.

Gladwin of Clee, L.

Richard, L.

Gould of Potternewton, B.

Rochester, L.

Graham of Edmonton, L.[Teller.]

Rodgers of Quarry Bank, L.

Russell, E

Greene of Harrow Weald, L.

Seear, B. [Teller.]

Gregson, L.

Sefton of Garston, L.

Grey, E.

Serota, B.

Hamwee, B.

Shepherd, L.

Harris of Greenwich, L.

Stallard, L.

Haskel, L,

Stedman, B.

Hilton of Eggardon, B.

Stoddart of Swindon, L.

Hollick, L.

Strabolgi, L.

Hollis of Heigham, B.

Taylor of Blackburn, L.

Holme of Cheltenham, L.

Thomas of Walliswood, B.

Howie of Troon, L.

Tope, L.

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Tordoff, L.

White, B.

Turner of Camden, B.

Wigoder, L.

Varley, L.

Williams of Elvel, L.

Wedderburn of Charlton, L.

Williams of Mostyn, L.

Whaddon, L.

Young of Dartington, L.

NOT-CONTENTS

Addison, V.

HolmPatrick, L.

Ailsa, M.

Howe, E.

Aldington, L.

Inglewood, L. [Teller.]

Astor of Hever, L.

Leigh, L.

Balfour, E.

Lindsay, E

Birdwood, L.

Liverpool, E.

Blatch, B.

Long, V.

Blyth, L.

Lucas of Chilworth, L.

Boardman, L.

Lucas, L.

Borthwick, L.

Lyell, L.

Brabazon of Tara, L.

Mackay of Ardbrecknish, L.

Brougham and Vaux, L.

Mackay of Clashfern, L. [Lord Chancellor]

Carnegy of Lour, B.

Carnock, L.

Miller of Hendon, B.

Cavendish of Furness, L.

Monteagle of Brandon, L.

Clanwilliam, E.

Northesk,E.

Clark of Kempston, L.

Rennell, L.

Cranborne, V. [Lord Privy Seal.]

Rodger of Earlsferry, L.

Cumberlege, B.

Seccombe, B.

Dean of Harptree, L.

Shaw of Northstead, L.

Dixon-Smith, L.

Stewartby, L.

Ferrers, E.

Stockton, E.

Flather, B.

Strathclyde, L. [Teller.]

Fraser of Carmyllie, L.

Thomas of Gwydir, L.

Glenarthur, L.

Torrington, V.

Goschen, V.

Trumpington, B.

Gray of Contin, L.

Ullswater, V.

Harmar-Nicholls, L.

Vivian, L.

Harmsworth, L.

Wise, L.

Hayhoe, L.

Wynford, L.

Henley, L.

Young, B.

Resolved in the affirmative, and amendment agreed to accordingly.
9.25 p.m.
On Question, Whether Schedule 4, as amended, shall be agreed to?
Lord Monkswell: The Minister complained earlier this evening that he had not heard my contribution on the flexible decade of retirement and the alternative dates upon which a common retirement age could be determined. In agreeing to the previous amendment, the Committee has demonstrated that it wants to see, and has obtained, some improvement to the SERPS for the vast majority of comparatively low paid people.
We must recognise that we have a complicated position regarding the requirement to ensure that men and women retire at the same time. One of the ways in which we can look at the problem is from the point of view of the cost of any change to the Exchequer. Another is to look at the fairness of the position. There is a further view. It is the message that our decision sends to the people of this country. The message we have already agreed this evening is that this place wants to be fair to those people who probably do not have a personal pension or an occupational pension. They are probably among the least well off men and women in our society.
We have taken that decision, and we are all glad that we have done so. However, we are still faced with the question of what common retirement age we should aim
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for. There are those who suggest that we should have a common retirement age at 60. There are some who suggest that it should be 63. The Government have suggested 65. My preference is for the age of 70, and I shall seek to explain that.
We must recognise the message that we send out to the people of this country. If we say that we shall have a state retirement age of 60, we are saying effectively that we do not expect people to work over 60. We are expecting them to work to 60 and then to retire. That would be a sad message to convey. Unfortunately what has happened over the past 10 or 15 years is that more and more people have been forced out of work and effectively retired. In the earlier debate, the Minister gave the figure which shows that 50 per cent. of people between the ages of 60 and 65 are effectively unemployed. I hesitate to ask what the figure would be for those between the ages of 55 and 60.
As a result of economic circumstances, one of the problems is that people have come to expect that they will be finished on the labour market at the age of 50, 55 or 60, when 15 or 20 years ago women could have expected to work until they were 60 and men until they were 65. It is a sad message to send to people that they are considered to be valueless and worthless to our society because of the statement which the Government accept—that it is okay to be retired and not to work at a relatively young age.
One of the messages we could send today on the subject of a common retirement age is, "Yes, we expect and wish the citizens of this country to continue to be economically active". We know that they can be because people live longer and are comparatively more fit. There are also many more jobs which do not require the expenditure of hard physical labour.
We want people to be economically active for as long as possible and that is one of the reasons why I argue that the state retirement age should be 70. Implicit in that is a recognition by the Government and Parliament that we expect people to work until they are 70. If the economy is not running in such a way as to ensure that people can be economically active, it should be the job of Government and Parliament to ensure that steps are taken to enable people to contribute usefully to society.
It is important to recognise that we expect some people to work in particular ways but where there is no market for their labour in the general accepted sense of that term. I am talking in particular about women, although men enter the category too. I refer to carers; that is, the carers of young children or of elderly or disabled relatives. We recognise the changing attitude to the concept of looking after children or caring after relatives.
In the Bill the Government acknowledge that the work of carers should be recognised. However, they undervalue the work. I argue that, instead of the years spent as a carer counting towards the basic old age pension, a credit should be made to the SERPS contribution record that is equivalent to average earnings. That credit should be given for the years when they were performing that caring role and contributing so effectively to the well-being of our society.

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it is only right that Parliament and Government should recognise the role that women in particular play in that caring role. They should recognise the contribution that they make to the well-being and economy of our society. I argue that there should be a credit to the SERPS contribution record of those people who are carers and not in the normal labour market.
The Minister was curious as to why we did not move the amendments which identify the different ages for common retirement and so forth. We must recognise that in Committee it is probably useful to probe the Government on this issue and to ask for information. I am glad to have opened what I hope will be a probing debate and asked the Government for their response to my contribution and those of other Members of the Committee.
9.30 p.m.
Baroness Lockwood: I support the opposition to Schedule 4 being agreed to. On occasions, I reach different conclusions from my noble friend but, despite the slight improvement made by the passing of the previous amendment, many parts of the schedule make the position more detrimental to women.
In responding not only to the amendment which my noble friend moved but also to the other amendments which the Minister thought would be moved, he put forward once again the case for equalising the pension age at 65. Once again, his arguments left out a number of important considerations. Of course, he failed to acknowledge that women will be worse off financially under the Government's proposals and, secondly, that men are moving in a reverse direction because 40 per cent. of men are already retired before they reach the age of 65.
As the Minister said, it is true that an increasing number of women are going into paid employment. Regrettably, it is true also that, under the Government's employment policies, a large proportion of those women are going into part-time low-paid employment. Therefore, they are failing to build up a sufficiently large pension to support themselves in retirement.
The Government's assumption is that by 2010, 90 per cent. of women will have a pension in their own right. One has to ask what kind of pension that will be given the following factors. First, in 1992 only 54 per cent. of full-time and 19 per cent. of part-time women workers were in an occupational pension scheme.
Secondly, 2.25 million women in work earn less than the lower earnings limit and therefore do not contribute even to the basic pension. Thirdly, 1.1 million women workers still pay the married women's national insurance contribution, which means that they are relying on their husband's pension rights and not their own.
On my reckoning, that means that at least some 7 million women of the 10 million women workers will not earn anything like an adequate pension by the year 2010 or even by the year 2020, when the Government believe that they will have a full pension. The
1012
Government's proposals fail to address historic and contemporary social factors which constitute indirect discrimination against women.
Nor can one be certain that the Government's actuarial calculations will have the outcome that they expect. Government actuaries have cautioned against their likely accuracy when they move into the years ahead. That doubt about the forecast can certainly be supported by the fearful predictions that we had a few years ago about the demographic timebomb which was to go off in the early 1990s. It was predicted that the number of 18 year-olds would be reduced drastically and therefore there would be a great shortage in the labour force. Certainly, the number of 18 year-olds coming out of schools has reduced drastically but the difference from the predictions is that instead of there being a shortage in the labour market unemployment among 16 to 19 year-olds has been running at 22.4 per cent. and among 20 to 24 year-olds at 16.3 per cent. Similar consequences may follow if more 60 to 65 year-old men and women continue in employment. Indeed, the Government's pension scheme for the Civil Service now has a compulsory retirement age of 60.
In May 1993, 53 per cent. of Civil Service pensioners drew a pension of less than £3,000 per annum—that is, £57.70 per week. Although the normal retirement age in the Civil Service has been reduced to 60, those with very low pensions had been able in the past to continue work in order to accumulate a more adequate pension. However, it is now government policy that they must all retire at the age of 60, as a means of reducing the number of civil servants.
Women on the lowest earnings, and, thus, on the lowest pensions, will not be able to draw the state pension which helps make retirement possible for a further five years under the Government's present Bill. The normal retirement age of 60 is now common throughout the public sector and the finance industry, but that will not be so in the future. I really believe that this is double-think on the part of the Government. If they are having to reduce the retirement age in the Civil Service, thus creating such problems for low-paid civil servants, what will happen to workers in other industries?
We must not create more poverty or perpetuate the already existing poverty in retirement. There is no doubt that women would lose out by increasing the retirement age to 65. I suggest that the Government need to rethink the whole of this section of the Bill and, perhaps, come back to us with an improved Schedule 4.
Baroness Hollis of Heigham: I, too, should like to support my noble friend Lord Monkswell in his opposition to Schedule 4 standing part of the Bill. I do so in response to the Minister's invitation at an earlier stage in his recent, extremely long speech when he requested the benefit of our thoughts on the flexible decade of retirement. The Minister said that he could not understand why we had not reached the stage where we could explain to him the implications of that flexible decade of retirement. However, now that we are discussing Schedule 4 which would equalise pension ages at 65 and, therefore, remove the possibility of a

1013
certain degree of choice for men and women, I am sure that the Minister wants to hear the arguments in favour of the flexible decade of retirement that, unfortunately, we were not able to explore in rather greater depths earlier this evening.
As we know, the world of work has changed hugely since the 1960s. Yet, we have a fixed retirement age devised when most men had very similar working lives. They worked continuously from the age of 16 to 65, often with the same employer, while the wives worked without pay at home. However, over the past 20 or 30 years, many events have come together. For example, we have seen growing unemployment with 40 per cent. of all men being unemployed in the past five years. We have seen greater job mobility in that men and women together have, on average, between five and six employers. We have seen a fragmentation of full-time jobs into part-time fragments which, if one is fortunate, can be reclustered into a portfolio. We have also seen men dropping out of the labour market earlier; indeed 57 per cent.—that is, more than half—of all men between the ages of 55 and 64 are not in work, compared to only 8 per cent. in 1977. Moreover, we have seen women joining the labour market both as full-time and part-time workers. While the years spent in child care have reduced, we have often seen increased years spent in caring for the elderly.
Therefore, compared to 20 or 30 years ago when most men worked and expected to work full time until the age of 65 and most women expected to be supported by their husbands' earnings and pension, that similarity of experience has now fragmented for the reasons that I have outlined. Each family is now positioned differently. What we ought to do, what we want to do, what we should all be able to do, and what we should choose to do will vary enormously. Yet while we recognise that increasingly divergent experience from family to family we still persist in a fixed state retirement age which will be even more inflexible when men and women are both required to retire—if this Bill goes through unamended—at 65.
We need to have our pension provision reflect the same flexibility that people now experience in their working lives. Men, for example, may contentedly retire with a decent occupational pension at 55 or 60 if they are in certain jobs such as the Armed Forces, the police, mental health nursing or if they are air pilots. Indeed, 43 per cent. of occupational schemes permit retirement at 63 or earlier. But, equally, they may want to continue to do full-time work until 65. Perhaps if they are an MP, or in another job equally rewarding and not too demanding, they may seek to continue their employment beyond 65 to 70. On the other hand, they may suffer poor health and not be fit to return to manual work. Although a man might be fairly fit himself his partner, or in her case her partner, could develop, for example, multiple sclerosis or severe rheumatoid arthritis and may wish to work part-time or take early retirement. Equally, someone may be made redundant, and, particularly if it is a man who is unskilled or has unsuitable skills, at the age of 57 or 62 he is unlikely to work again.
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Equally, if there are several years disparity in ages between husband and wife—one might be 65 and one might be 61—they might wish to retire at the same time. I have given a dozen different examples of the ways that men and women and their families are now differently positioned from what they might have expected 20 or 30 years ago. Every Member of the Chamber could add several more such instances to the ones I have given. They are all different. Yet with this Bill the Government are trying to shoehorn all of this experience, all of this diversity, all of this variety and all of this need for choice into one common state retirement age. It is absurd. Why should the state make that decision when men and women and their families could and should make that choice—a choice which reflects their circumstances, their needs and their wishes? They may have to leave the labour market earlier than they want; they may want to leave the labour market earlier than they are permitted, but the state is not allowing people to make that choice for themselves.
If we are to have a flexible life of work—as the Government insist is the future ahead of us—why should we have an inflexible year of retirement? Why not allow different retirement choices before as well as after the pivotal year? Of course, families must make that choice in the light of its financial consequences. But if, for example, we supported a flexible decade of retirement but with a pivotal year of 63—that is our alternative to Schedule 4—it would cost no more than present arrangements. The increase in start-up costs would be offset by the fact that men and women now have to have an income when not in work. Whether one calls it income support, incapacity benefit or state pension it still for the most part has to be paid. However, with a pivotal year of 63—the position that certainly we on these Benches and I believe Members on the Liberal Democrat Benches share—and a flexible decade of retirement, if people retired before that date they would have a reduced pension. If they retired later than that, they would have an increased pension.
I accept that those seeking to retire earlier may be the neediest who would then have a proportionately lower state pension—but that is the case now—while the great majority of families under such a proposal would instead be free to make the choice of when to retire as best suits them, their health, their wealth and their family circumstances. A further advantage to a flexible decade of retirement, and another reason for agreeing with my noble friend that Schedule 4 should not stand part of the Bill, is that such a proposal is attractive to employers. That is why the National Association of Pension Funds also supports a flexible decade and a pivotal year of 63 because it gives flexibility not only to employees but also to the employer who can agree with staff individually the retirement arrangements that suit them both. The NAPF has suggested it would expect an 8 per cent. to 9 per cent. compound discount below or addition above the pivotal year to be financially cost neutral.
Such a proposal would not be especially complex to administer as that principle is already in place for those who stay on in work past 65 and add to their basic state pension. I repeat that with a pivotal year of 63 the

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proposal is certainly financially neutral and may even generate modest cost savings. It is fair as between men and women. It is flexible. It places the choice back where it belongs, with the families, the men and women who have earned their pension rights.
That is why I join with my noble friend in believing that Schedule 4 should not stand part of the Bill and instead the Committee should be considering a flexible decade of retirement.
9 45 p.m.
Baroness Seear: The Liberal Democrats have long had a policy of a flexible decade of retirement. We are delighted that the Labour Party has caught up with us on yet another item of policy. We therefore support the proposal.
Lord Mackay of Ardbrecknish: I am grateful that the noble Baroness, Lady Hollis of Heigham, has come off the fence and told us what the Labour Party's policy is i n this regard. It is a pity that she did not do so in the form of moving an amendment which would have provided us with a proper debate on that proposition instead of telling us about it when we debate the Motion that Schedule 4 stand part of the Bill and the option of 65.
Baroness Seear: Had she done so, we would have had an even longer speech from the Minister, because he had to fill the time.
Lord Mackay of Ardbrecknish: I advise the noble Baroness not to tempt me. As I said in the first debate today, yield not to temptation. That is easier in this case but I had a great many words to say about flexible decades of retirement and retirement ages of 63, 65 and the like.
I turn to the point at issue; namely, Schedule 4. I could reasonably assume that opposition to Schedule 4 standing part of the Bill indicates some disagreement with some of the detail of Schedule 4, but I am pretty certain that it does not indicate that at all. It indicates a desire for a general debate. In fact, a more relevant point for a general debate is Clause 114 which introduces the proposition of a common retirement age of 65. Therefore, I may resist the temptation—although I shall leave it in front of me in case I decide that I ought not to resist it —to explain in some detail what Schedule 4 actually does. However, it is tied in with Clause 114 which introduces the retirement age of 65.
Clause 114 answers the question, which came about due to the fact that, as a result of the changing face of society, we have all decided that the different retirement ages for men and women of 65 and 60 are no longer relevant in today's world and that men and women should retire at the same age. There are as many propositions as one likes.
The noble Lord, Lord Monkswell, in a welcome intervention—I had thought that he had taken a vow of silence this evening—suggested that 70 ought to be a possibility. We do not have a retirement age of 70 in front of us. If the noble Lord could give guarantees that we would all reach 70 hale and hearty, we might all sign
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up to his proposal very quickly. However, as I suspect that he is unable to give that guarantee, we shall have to stay with the options which are in front of us.
The options are to fix on the age of 60, to fix on 65, to fix on something in between or to fix on something called a flexible decade of retirement. An important part in that argument is where one places what is called the pivot. I shall not go into the interesting actuarial proposition at great length, but it is one of the problems. One cannot merely say that we shall have a flexible decade of retirement without looking at the question of the pivot. The noble Baroness has helped me and suggested 63 would be the pivot. I was listening to her with some interest. I do not wish to become diverted too far because the proposition before us is whether we agree or disagree with the age of 65. The option of debating those other choices in some detail really has passed us by. As I explained already, I am deeply sorry that it passed us by. However, the fact is that wherever one makes the pivot—whether at 65, as one could do, or at 63—there is the choice that the person who retires earlier than at the pivotal point will have his or her pension abated not just for the two or three years between 60 or 61 to the pivot, but for the remainder of his or her life.
We are all concerned about pension provision over the whole of retirement. I believe that the flexible decade, with the pivot at 63, has drawbacks for the individual who decides to retire at 60. There is some evidence from other countries that flexible decades mean that people retire at the earlier age without thinking about the consequence. If the pivot is at 63 or 65, one does not have one's pension restored to what it would have been if one had retired at that point. One loses every year for the rest of one's life. That is the situation.
I am glad to see that the party opposite has managed to put out a press release already about the small victory it had earlier this evening. If I need to do so I might even read out the noble Baroness's words. I wonder whether it was prepared before the event; I do not know.
In Government, we were confronted with the problem of equalising the state pension age. There was some suggestion creeping into the speech of the noble Baroness, Lady Hollis, that somehow the state was compulsorily retiring people at whatever age the state chose. That is not the case. People can go on working, as indeed they do in your Lordships' House, long after the state retirement age. Currently one can retire at 60 or 65 and be eligible for the retirement pension. It is important that we differentiate in the terminology. Although we are all guilty of shifting between one and the other, I am sure that we all know exactly what we mean: that people can work on after the normal retirement ages of 60 and 65.
However, in our splendid document, Equality in State Pension Age, we address the problem. In December 1991, we put forward the options. We looked at the ages 60, 63, 65 and the flexible decade. In December 1993 after consultation and careful consideration of all the options, with the publication of the White Paper we announced our intention to equalise the state pension age at 65. The change will be phased in gradually

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between 2010 and 2020, allowing people, we believe, plenty of time to alter their pension and retirement plan. That is what Schedule 4(1) provides for. It states that pensionable age is 65 for men. It is 60 for women born before 6th April 1950, 65 for women born after 5th April 1955, and, according to a table which is laid out, for every two months that passes one month is added to the retirement age. During that decade, women will gradually move from 60 to 65. That is a 10 year phasing which starts in 15 years' time.
We believe that 65 is the right choice. The consensus of opinion is also moving towards that view for the only realistic option for the future. Both the Social Security Advisory Committee and—dare I mention it?—the Commission on Social Justice set up by the party opposite recommended a retirement age of 65. Equalising the retirement age at the age of 65 recognises women's changed role in the workplace. I discussed that briefly when I was responding to the last amendment. Women represent a large and increasing share of the labour force; they are able to make their own provisions rather than relying on their husbands.
It is also true that we are all living longer and healthier lives. People who are now drawing their pensions do so on average for four years longer than in Beveridge's time. That leads me to the argument about the demographic effects of two factors coming together, not just in our population but in the population of most of the economically advanced countries in the world and certainly all our European neighbours. There is an increasing proportion of elderly people who have to be supported by the working population of the day. That working population is declining. If we do not take these measures then the cost of pensions would rise from just under the £30 billion now to over £66 billion in 2030. That reflects the real growth in pension value through the maturing of the state earnings related pension, as well as increased numbers. Equalising at the age of 65 will save £5.2 billion in benefit expenditure by 2030. I believe that that is an important aspect.
If that were all and we had a population which we thought could afford to fund that, then we might be prepared to accept that increased expenditure. I discussed it during the last debate, but the simple fact is that the number of people over the state pension age is increasing. The population of working age is decreasing. What is called the support ratio—the number of people of working age per pensioner—is declining. For example, I give as base figures the current scheme if we did nothing. In 1991, four years ago, there were 10.3 million people of state pension age. That increases slowly until it reaches a peak in 2040 of 16.3. By 2050 it falls back a little to 15.8. If we reduce the state pension age to 60, then the position is that the figures increase from 10.3 million at the beginning of this decade to 15.3 million in 2020, 17.9 million in 2040 and then it falls back to 17.5 million in 2050.
With the age at 63, the same trend is quite apparent, although at a lower level as the age has increased. At the age of 65—which is what we propose—the number
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of pensioners rises in each decade: 10.3 million, 11.7 million, 11.6 million, 13.7 million in 2030, 14.7 million in 2040 and 14.0 million in 2050.
The population of working age moves in the opposite direction. Without any change in the retirement pension age, in 1991 it was 34.4 million, in 2010 it will be 36.2 million; in 2030 it will be 33.7 million; and in 2050 it will be 32.0 million. If we reduce the age to 60, in 2030 it would be 31.6 million people of working age and in 2050, 30.2 million.
Our proposals would bring about 35.8 million in 2030 and 33.8 million in 2050. A quick calculation will show that the support ratio—the number of people of working age per pensioner—if we do nothing, would move in each decade from 3.3 at the beginning of this decade to 3.1 in 2010, 2.7, 2.1 and 2.0. If the age is decreased to 60, then by 2030 it is 1.8 and by 2050, 1.7. The age of 63 is naturally better, but even that is not what is proposed and it would be 2.2 and 2.1. The age of 65 keeps us in the middle between 2.0 and 3.0 in 2030 and 2050. Thus there are compelling demographic reasons for shifting the pension age to 65. Those, taken together with the financial ones, are the first two arguments. There are other arguments to do with our competitors. But I do not want to get a reputation for making long speeches.
Noble Lords: Oh!
Lord Mackay of Ardbrecknish: I read out a table at Second Reading.
Baroness Hollis of Heigham: I think the Minister wants us to vote again!
Lord Mackay of Ardbrecknish: I am enjoying myself. Am I not allowed to? I read out a table at Second Reading which showed that many of our competitor countries were moving to 65. It showed Denmark already at 67; Iceland at 67; and Norway at 67. It was quite interesting. That is the third reason: the international trend means that we have to guard against damaging our ability to compete internationally.
Part II of the schedule provides equality for men and women in certain pensions and other benefits. It also introduces other changes which will improve the retirement income of many people. I have already mentioned some of them, but they are worth putting on the record. I fully accept that some of them are important. It will equalise the treatment of married couples, irrespective of whether the man or woman is the older partner. For example, the older spouse, be it man or woman, will, on reaching 65, be able to claim an increase in respect of a dependent spouse who has not yet reached pension age. Similarly, where both partners are of pension age, either the husband or the wife may be able to claim a pension of their own based on their partner's contribution where their own record is incomplete.
Secondly, it will increase the amount of basic state pension payable by deferring a claim from 7½ per cent. a year now to approximately 10 per cent. from 2020. The present ceiling of five years' deferral will be abolished. These changes will make postponing a pension claim worth more, and will enhance flexibility

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and the options that are available. In other words, they will introduce a little flexibility after 65 and not close it down after five years. Powers will be provided to equalise the award of graduated retirement benefit for men and women. That will also come into effect in April 2010.
Both in the introductory clause to this schedule and i n the schedule itself, we accept that it is wise and sensible from the point of view of the taxpayer, of the economy and of pensioners themselves in the years to come to make this decision now in the interests of all those people, and that we should go for a common pension age for men and women of 65. That is what the clause that leads into Schedule 4 does, and that is what Schedule 4 does. I heartily commend the schedule to the House.
Baroness Hollis of Heigham: Before my noble friend decides what he wants to do about his proposition, could I ask the Minister how many of our competitors who are moving to a higher retirement age also allow flexible retirement from a younger age? I understand that it is rather a lot.
Lord Mackay of Ardbrecknish: I am looking at a table. I see just one proposal to make pension age flexible from 61 to 70 in Sweden. But I do not see any other proposal in the other countries. Of course, I never believe that I am totally the fount of all knowledge, and I may be missing something. Yes, I see that currently Belgium has a flexible arrangement, from 60 to 65; it is considering equalisation, which I do not think helps: That is what I am advised. Then there is mighty Luxembourg, in which the age is 65 currently and which is considering flexibility, but I am not sure to what extent. Those are the two countries (along with a proposal from Sweden) that propose to move from 65 to a flexible age. But our major competitors are certainly not considering that.
Baroness Seear: Perhaps I might drop one point into the discussion over the flexible retirement age. The Minister quite rightly made the point that people who took the earliest possible retirement age under a flexible decade would have a much lower pension, and that that lower pension would continue. I think he was implying that that would cause considerable disadvantage and hardship as people got very much older. My party at one point put forward an idea in favour of a flexible retirement age but recognised the difficulty of having it actuarily adjusted and the problems as people grow older. The suggestion was that those who survived to a ripe old age—I think we said 80, but that could be fixed at whatever was appropriate—should then be brought up to full pension. By that time their numbers would be greatly reduced. People still die during that period so the cost would also be considerably reduced. However, there would be security when people reached the age of 80, which is normally thought of as being so old that there is very little that they can usefully do.
Lord Mackay of Ardbrecknish: Even at this time of night and with limited attendance in your Lordships' Chamber I make no observations about 80 being a great age or not a great age. It sounds as though the noble
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Baroness, Lady Seear, is playing a typical Liberal trick in trying to have her cake and eat it. She sees a major problem and tries to find a nice, balancing way out. I hear what she says. If the Government fell for that, in no time at all it would be 75, then 70 and then we would be arguing about bringing the pivot down altogether. The complications of a flexible decade of retirement, added to the difficulties it may cause for individuals who are tempted into thinking about today rather than about the 10 or 20 years that lie ahead of them, do not make it an attractive proposition.
Lord Monkswell: I thank all those who contributed to the debate. The speeches ranged somewhat and I was concerned that the Minister did not see fit to comment on my suggestion regarding the value of the contribution made to society and our economy particularly by women through the work that they do at home, either caring for young children or elderly disabled relatives. Perhaps the Minister will take that matter away and consider it.
Lord Mackay of Ardbrecknish: I do not want the noble Lord to think that I have not noticed it. I responded earlier in relation to home responsibility protection to protect people who take time off work to look after children or elderly parents. However, the Opposition seem to be so little bothered by that that we rolled over that amendment by it not being moved. I am deeply sorry about that because I wanted to debate the issue.
Lord Monkswell: I shall not rise to that comment. One of the difficulties with which the Government are faced is the practical realities of their policies rather than the theory of their numbers. In that regard I recognise the contribution made by the noble Baroness, Lady Lockwood, when she pointed out that civil servants are being compulsorily retired at 60, yet the Government are effectively saying that they will not be able to collect their state pension until they are 65. Even though some civil servants are well paid and have inflation-proof pension provisions and so forth, a number of people—particularly women—are low paid and will effectively have a gap in their provision. The Government effectively made no response to that.
One of the other practical aspects of the Government's policies concerns me. The Minister mentioned various figures and what would happen to the state pension bill if we had a common retirement age of 60. He was indicating that there would be a 30 per cent. increase in one year—2040 or 2050—which in absolute numbers sounded enormous. In fact the reality is that there would have to be contributions to pay for that, and the Minister did not mention that side of the equation.
The Minister went through a whole list of figures in relation to the number of people it was computed would be in the retired or the working population. But he did not say what proportion of that computed working population would be productively employed in the economy. If we look at the situation now compared with what it was 20 years ago, we can see that the Government have an abysmal record when it comes to ensuring that people of working age in our country are productively employed.

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Obviously, we shall face problems if we reduce the retirement age for both sexes and at the same time do not harness the productive potential of those of working age. But it does not need to be like that. We could have a government who say, "We shall make use of all the people. We shall productively employ them; and where they are not productively employed in the market economy we shall recognise the contribution that they can make to the benefit of society and the economy by working at home in an unpaid capacity." But the Government have not sought to address any of those practical realities. What they have done is to decide on a figure for a common retirement age which will be the cheapest option they can get away with and sell politically and then call in aid to suggest how responsible their decision is a whole set of figures which are suppositions about the future and which do not reflect what could be the reality or what would be the reality if the Government stayed in power until that point in time.
I recognise that we still need to tease out a few more elements in this whole debate. Given that the amendment which was passed prior to this debate changed Schedule 4, it would be unfortunate if we did not agree to Schedule 4 as it is amended. I shall therefore withdraw my opposition to the schedule being agreed to.
Schedule 4, as amended, agreed to.
Clause 115 agreed to.
10.15 p.m.
Clause 116 [Additional pension: calculation of surpluses]:
On Question, Whether Clause 116 shall stand part of the Bill?
Baroness Hollis of Heigham: I do not wish to take up very much of the Committee's time but we are concerned about this clause which the Government have presented as a technical change for the annualisation of SERPS. We do not believe it is technical. We believe that it has serious implications. As far as we can tell, its effect will be to cut the value of SERPS—SERPS is the pension which women and the poorest paid men enjoy—by about 14 per cent., or more than £2.5 billion in current terms, by 2020. If so, that is not exactly technical.
The clause changes the basis for revaluing earnings each year on which SERPS is based. At the moment total PAYE earnings up to the upper earnings limit are revalued to retirement age and then the lower earnings limit is deducted. Under the new arrangements the lower earnings limit will be deducted and only the excess will be revalued each year. In other words, it will be annualised. In the process the Government will cut 14 per cent. of SERPS' value. That was never part of the original legislation which made clear that revaluation would be done at the point of retirement and not at each and every year. We fear that this is a device for cutting still further the value of SERPS and therefore the value of the retirement pension for women and poorer paid men.
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The Government have already halved the value of SERPS by averaging it over the lifetime, minus five years as a result of tonight's amendment, rather than the 20 best years. That cut, along with others, will further severely reduce the value of SERPS. We believe it is deeply unfair. Why are the Government doing it except to save still more money from those who are among the poorest of our population?
Lord Mackay of Ardbrecknish: This clause introduces new subsection (5A) into Section 44 of the Social Security Contributions and Benefits Act 1992. The new subsection amends the method of calculation of State Earnings Related Pension for those who qualify after 5th April 2000.
The change (known as annualisation of SERPS) will correct an anomaly, which has arisen since moving to prices indexation and has meant that small entitlements are going to groups who were never intended to receive SERPS, such as the self-employed.
The present calculation revalues total earnings (up to the upper earnings limit) for each year in line with the increase in average earnings and then deducts the annual lower earnings limit for the last complete tax year from each year's revalued earnings to give a surplus for each year. Because the lower earnings limit grows in line with prices, SERPS entitlements have been growing in an unintended way. Annualisation will change the calculation so that the annual lower earnings limit is deducted before revaluation takes place. That simply means that when one looks back at a person's working life in each year the amount which is used for the revaluation calculation up to the date of retirement is the difference between the salary, if it is below the upper earnings limit, and the lower earnings limit. It will be on that portion above the lower earnings limit which will be revalued.
The current situation was not intended when the position was changed. The current situation is that the total and the lower earnings limit are revalued on a different basis. I shall not make any secret of the fact that this is not a small technical change. It is a technical change, but it is certainly not small. The change will result in a public expenditure saving of £400 million in 2010 rising to £2.3 billion by 2050. The maximum weekly reduction in individual entitlements is estimated to be £2.70 in 2000, rising to £4.90 in 2020 at 1994–95 prices. This effect is a flat rate one and applies to those with a complete work history of earnings above the lower earnings limit since 1978. For those with broken work records the effects will be smaller. There will be no loss for people reaching pension age or who qualify for widow's benefits before 6th April 2000. This fulfils undertakings made during the passage of the 1986 Social Security Act that no changes would be made to SERPS this century.
The purpose of this clause is, as I said, simply to correct an anomaly and to restore policy intention that State Earnings Related Pension entitlements are based on average earnings between the lower and upper earnings limits. I commend the clause to the Committee.
Clause 116 agreed to.
Clause 117 agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 184BE:
After Clause 117, insert the following new clause:
Improved pension rights for separated women
(".In section 48 of the Social Security Contributions and Benefits Act 1992 after subsection (1) there shall be inserted—
"(1A) Where a person has reached pensionable age and is married but either—

(a) is not residing with his spouse and has been residing apart from his spouse for two years previously, or

(b) is residing apart from his spouse because the spouse is resident in residential accommodation (other than as a temporary resident) and

(c) in respect of the tax year before he reached pensionable age and any previous tax year, does not, with his own contributions, satisfy the contribution conditions for a Category A retirement pension,

then, for the purpose of enabling him to satisfy those conditions (but only in respect of a claim for a Category A retirement pension), the contributions of his spouse may to the prescribed extent be treated as if they were his own contributions.
(1B) In this section—
"residential accommodation" means either accommodation provided under Part III of the National Assistance Act 1948 or accommodation in a nursing home or residential care home as defined in Regulation 19 of the Income Support (General) Regulations 1987 if such accommodation is not provided under Part III of the National Assistance Act 1948;
"resident" means a person provided with residential accommodation;
"temporary resident" means a person whose stay is unlikely to exceed 52 weeks.").
The noble Baroness said: Again, I shall be brief. This amendment deals with the other side of the discussion which we had earlier on occupational pensions and residential care. Nearly all elderly married women do not at the moment have a basic state pension in their own right which is worth £58 a week. Instead, they have the Category B pension, which is the married woman's dependant's pension worth only £35 a week. If such a woman were divorced she would, on the substitution rule, be eligible for the full basic pension of £58. But if she is elderly and separated from her husband —perhaps for religious reasons they are reluctant to be divorced or are living apart because the husband has, say, Alzheimer's Disease and is living in a residential home—she remains eligible only for the dependant's pension of £35. If she is divorced or widowed she gets £57. If she is separated by the illness through which she nursed him for many years, she gets just £35.
A number of women are affected by this. It appears that there are about 83,000 women over the age of 60 whose husbands are not living with them either because of marital breakdown or because of long-term illness. This amendment will ensure that such women are no worse off than if they were either divorced or widowed. I am glad to say that we recognise that this is a diminishing problem in time because more and more women will qualify for the basic state pension in their own right. However, in the meantime it is a problem for many women who are among the poorest of our elderly.
Such an amendment might help to lift them above their dependence on income support. I very much hope that the Government will feel able to accept the amendment. I beg to move.
Lord Mackay of Ardbrecknish: As the noble Baroness has explained, this amendment seeks to extend the scope of what are known as the "substitution provisions" to people who are married, but are not residing with their spouse. The "substitution provisions" allow people whose marriages have ended by death, divorce or annulment and who do not remarry before reaching pension age to improve their basic pension entitlement by substituting their former spouse's contribution record for their own for the period up to the termination of the marriage.
The provisions were introduced in 1957 primarily to help divorced women to gain pension entitlement. As the Committee will be aware, historically, many married women did not work or pay full rate contributions and were reliant on the "married woman's" pension, based on their husband's national insurance contributions. Where a couple divorce before pension age, the woman loses access to the "married woman's" pension and she may not be able to qualify for a basic retirement pension on the contributions she pays following her divorce.
The "substitution provisions" are therefore designed to help her to gain entitlement to a basic retirement pension in her own right to replace the "married woman's" pension to which she would have been entitled had her marriage not ended.
Separated couples do not come within the scope of the substitution provisions for the simple reason that the fact that a couple are not residing together does not exclude the woman from entitlement to the "married woman's" pension.
I can well understand the noble Baroness's reasons for seeking this amendment. The "married woman's" pension, or "married person's" pension, as it becomes under the provisions of paragraph 20 to Schedule 4 to this Bill, is paid at a lower rate than the standard basic pension. However, we need to look at the amendment in the context of the retirement pension provisions as a whole.
Entitlement to state retirement pension for couples has always been linked to legal marriage. As there are over 10 million recipients, half a million of whom reside abroad, the conditions of entitlement must by necessity be easy to understand and administer. The fact that a marriage has been terminated by divorce is fairly readily ascertainable —a decree absolute will have been granted. However, establishing whether the "residing apart for two years previously" condition at paragraph (a) of the amendment is satisfied could involve detailed and time-consuming inquiries of both parties.
Turning to the point about where separation occurs because one spouse is temporarily or permanently resident in residential accommodation, that is part of the wider issue that we discussed earlier. I believe that I indicated that I understand the importance of that issue. I have already discussed our debate with my noble friend Lady Cumberlege—although admittedly briefly because that discussion occurred during one of the

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Divisions. However, I have discussed the matter with my noble friend and shall certainly draw the Secretary of State's attention to our debate and I look forward to hearing in detail about the problems. Therefore, perhaps we might leave that matter to one side for the moment to be dealt with under the terms of that debate. I hope that my explanation of the difficulties with the amendment will persuade the noble Baroness to withdraw it.
Baroness Hollis of Heigham: I thank the Minister for his reply. I understand the difficulties about women who are separated but not divorced. I am grateful that the Minister has indicated to the Committee that he has already spoken to his noble friend about the position of people entering residential care. I hope that on Report the Government will find themselves able to bring forward an amendment to cover both the situation affecting occupational pensions, about which we talked
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earlier, and that facing women on the basic state pension, about whom we are speaking now. This is a real and poignant problem for those who are affected by the provisions. Under the Bill, we could, if we choose, do something about that.
I look forward to the Minister coming forward on Report with something helpful. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 118 [Minor amendments]:
[Amendment No. 184BF not moved.]
Clause 118 agreed to.
Lord Lucas: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
House adjourned at twenty-nine minutes before eleven o'clock.