Lords Sitting of 21 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

The McFarlane Trust: Funding
Lord Ashley of Stoke Lord Ashley of Stoke asked Her Majesty's Government:
Whether they will expand the role and funding of the McFarlane Trust whose original purpose was to make payments to haemophiliacs infected with the HIV virus from contaminated blood transfusions.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): No, my Lords, but we will continue to keep under review the amounts available to the trust for its work of helping to meet the special needs of haemophilia patients with HIV and their families.
Lord Ashley of Stoke: My Lords, is the noble Baroness aware that virtually all the haemophiliacs who received National Health Service blood before 1985 were infected with hepatitis C? Is she further aware that the only significant difference between HIV and hepatitis C which could affect payment by the Government—not doctors—is that in the case of hepatitis C critical illness and death do not automatically follow? However, they can and they do follow. Will the Government change the rule and the funding of the McFarlane Trust so that critical illness and death trigger payment by the Government? The principle is exactly the same; the consequences are the same; and the payment should be the same.
Baroness Cumberlege: My Lords, with due deference to the noble Lord, the consequences are not the same. Many people with hepatitis C live perfectly normal lives for decades. Only a very small minority develop serious liver illnesses. Those who suffered HIV were thought at the time to have an imminent death sentence. They suffered social ostracism. People were treated, as we know, like lepers. They had their doors daubed with graffiti; they lost their jobs; their children were not allowed to mix with other children at school; and they were denied a normal family life. There were tremendous differences between the two groups.
Lord Campbell of Croy: My Lords, is my noble friend aware that I raised this subject in your Lordships' House seven years ago—in November 1987—and that in responding to another Question of mine the following October the Government referred to the launch of the McFarlane Trust? Does my noble friend accept that the trust has done a very good job within its mandate — unintentional infection with the HIV virus?
Baroness Cumberlege: Yes, my Lords. It is interesting to see the large sums of money that the trust
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has given to those who have suffered. Indeed, the trustees are very conscientious and caring. We believe that the trust is extremely well managed.
Baroness Jay of Paddington: My Lords, is the Minister aware that the terms of the McFarlane Trust were to make an ex gratia payment to those who suffered HIV as a result of blood transfusions? There was no suggestion of it being a recognition of formal compensation. So the issues that arose when the matter was previously raised by my noble friend in your Lordships' House—that this would somehow lead to the opening of the floodgates for compensation—simply do not apply. Does the Minister agree that both the legal and clinical results of this blood infection are precisely the same for those with haemophilia?
Baroness Cumberlege: No, my Lords. The results are very different. Those suffering from haemophilia knew when they received the treatment that there was a risk. They took that risk. Indeed, if they had not had the blood products we know that they would almost certainly have died.
Lord Cledwyn of Penrhos: My Lords, are there any statistics with regard to these two diseases? How many people suffer from haemophilia and how many suffer from HIV?
Baroness Cumberlege: My Lords, 1,221 people suffered HIV infection through blood products and 156 people suffered infection through blood tissue and blood transfusions. With regard to those who suffered hepatitis C infection, we do not know the exact figures. That is why a look-back exercise is taking place at the moment. However, the estimate is that for blood products the number is 4,000, and for blood transfusions, 3,000.
Lord Ashley of Stoke: My Lords, will the noble Baroness address her mind to this point? She has spoken of those with hepatitis C who live normal lives. The noble and learned Lord, Lord Hailsham, is a glittering example of that; he spoke when last I raised the issue. However, I am referring to people who are critically ill and die from hepatitis C. Those are the people for whom we want payment. All the other people are irrelevant. If there is a trigger mechanism whereby those who are critically ill or die receive payment for themselves or their families, justice will be done. That is the point at issue.
Baroness Cumberlege: My Lords, there is no question of the Government giving compensation to these people. We know that they took a risk and that in the health service treatment is given in good faith. We know that without treatment these people would surely have died.
Baroness Jay of Paddington: My Lords, with respect, the Minister has once again used the word "compensation" in relation to my noble friend's Question. Will she not accept the point I made in my supplementary question that the payments given to those who contracted HIV as a result of their haemophilia and blood transfusions were not compensated in the

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technical sense of the word? Does the Minister agree that the Government made an ex gratia payment and that this situation is similar?
Baroness Cumberlege: My Lords, the noble Baroness is right in that the Government have never accepted liability on this matter. If we were to give into such a case as this we know that there would be many other instances of people who have suffered medical accidents expecting some kind of payment for the condition they have had. Noble Lords will remember that the last time we debated this matter we drew the analogy between what is happening in the United States and what could happen here. If litigation, compensation and payments become a national sport the National Health Service will be finished.

Historic Building Repairs: Funding
2.44 p.m.
Lord Montagu of Beaulieu Lord Montagu of Beaulieu asked Her Majesty's Government:
Which historic buildings are eligible for financial assistance towards repairs from the National Heritage Memorial Fund from moneys derived from the National Lottery; and what criteria are used to assess such applications.
The Parliamentary Under-Secretary of State, Department of National Heritage (Viscount Astor): My Lords, repairs to historic buildings may be eligible for financial assistance from the National Heritage Memorial Fund if the buildings are owned by a public or charitable body.
Lord Montagu of Beaulieu: My Lords, I thank my noble friend for that reply. Does he agree that certain Ministers, Members of Parliament and the general public certainly need enlightening on this fact? Does the Minister further agree that by precluding any financial assistance to the large majority of our historic houses—which successive governments have recognised as in need of funding even since 1953—t is going to be very difficult to see how the national heritage is to survive? Can the Minister tell the House whether this statutory discrimination is deliberate or a legislative mishap? Will the Minister further agree that a simple amendment should be made to the National Heritage Act 1980, whereby the National Heritage Memorial Fund can allot funds as to need, otherwise the national heritage will suffer as a whole?
Viscount Astor: My Lords, the position as regards eligibility of privately owned historic buildings for funding from the National Heritage Memorial Fund is essentially the same as before the lottery Act and the lottery were introduced. The tests applied will be the same as in the National Heritage Act 1980 under which private individuals and companies operating for profit are ineligible for funding. However, privately owned historic buildings may be eligible if ownership is transferred to a charitable trust. I know that the trustees of the National Heritage Memorial Fund are keen to be
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flexible in their approach and to help the private owner; for example, through assistance to charitable trusts which ensure clear public benefit.
Lord Strabolgi: My Lords, why cannot these properties be eligible for assistance if they are open to the public? Does that not qualify them? It always has.
Viscount Astor: No, my Lords, that is not the case. In the types of cases which the noble Lord referred to, it is up to the historic buildings agency, English Heritage, to provide support to private owners of properties who require support for their houses.
Lord Boyd-Carpenter: My Lords, will my noble friend explain how it is that VAT is charged on repair work to historic buildings? Is that not wholly contrary to the general approach which my noble friend has adopted?
Viscount Astor: My Lords, we recently had a debate on VAT and historic houses. I only wish to add that the National Heritage Memorial Fund gives a grant for the total amount of expenditure which includes VAT and professional fees.
Lord Avebury: My Lords, will the Minister confirm that churches and cathedrals qualify under the heading of "charitable"? If that is so, on what principle will be the division of the funds available between church and lay buildings respectively?
Viscount Astor: My Lords, the position is clear as regards churches. They are in charitable ownership for the public benefit. I know that the trustees of the National Heritage Memorial Fund have had many applications concerning churches.
Lord Palmer: My Lords, can the noble Viscount please explain why the Government discriminate against the private sector? That does so much to preserve our built heritage.
Viscount Astor: My Lords, I agree with the noble Lord, Lord Palmer, that the private sector does a lot for heritage. It plays an extremely important part in repairing and looking after our heritage. It was the clear intention of Parliament that lottery funding for good causes should be for the public good. There are other issues here; for example, the National Heritage Memorial Fund trustees may consider applications for in situ purchases if they are convinced of the public benefit and if the proceeds of the sale are to be applied to the preservation of the building.
Lord Donoughue: My Lords, does the Minister agree that it would be very delicate and difficult to provide public money which would add to the equity value of private houses for their private owners? I believe that that was one of the reasons behind our approach to the Lottery Bill and earlier. In that context, will the Minister also restate that our common aim is to secure the maximum aid to heritage? Will he agree to look again to see whether it is possible to introduce any further flexibility into this matter?
Viscount Astor: My Lords, I very much agree with the noble Lord's first two comments. The historic

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buildings agencies for each of the countries of England, Scotland and Wales provide substantial help to private owners through their grant schemes. English Heritage alone this year is offering £30 million towards the preservation of historic secular buildings and monuments, so the Government take the issue very seriously. As I have said, we want to ensure that there is a clear public benefit from National Lottery funding. I know that the trustees of the National Heritage Memorial Fund are keen to be as flexible as they can be within their clear guidelines.
Lord Annan: My Lords, are schools which occupy historic buildings eligible for such moneys?
Viscount Astor: My Lords, yes. They are charitable, so they are eligible.

UNESCO
2.50 p.m.
Lord Renfrew of Kaimsthorn Lord Renfrew of Kaimsthorn asked Her Majesty's Government:
What impediments they see to the readmission of the United Kingdom to UNESCO prior to the 50th anniversary of the United Nations.
Lord Inglewood: My Lords, we keep membership of UNESCO under close review, taking into account several factors including the progress made by UNESCO on reform, existing financial pressures and other priority demands for scarce resources.
Lord Renfrew of Kaimsthorn: My Lords, I thank my noble friend for that rather familiar Answer. Will he confirm that the financial issue amounts, as we have heard in the past, to an annual subscription, if that is the term, of about £10 million per year? Does my noble friend recall that it was as a result of a conference held in London in 1945 that UNESCO was founded, that its first director general was an Englishman and that this country has played a major role in its development? Will my noble friend confirm that the two criteria which caused us to leave UNESCO—maladministration and questions relating to the freedom of the press—have been dealt with? I believe that my noble friend Lady Chalker referred to a "dead duck" in relation to those two themes. Does my noble friend agree that it is sad that we left the club on ethical grounds and that we are unable to rejoin because we cannot afford the subscription?
Lord Inglewood: My Lords, my noble friend is right in his estimate of the order of magnitude of the subscription to UNESCO which, depending on whether the United States is a member, would be either £11 million or £8 million per year. My noble friend is right to point out the distinguished contribution which British citizens have made to UNESCO over the years. He is also correct in regard to his two points about our reasons for leaving UNESCO in 1985. The matter relating to the freedom of the press has now been resolved, and reforms have been put in place to deal with many of the outstanding internal deficiencies. Having said that,
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however, UNESCO is not in what we consider to be an ideal form although we recognise and put on record the considerable improvements that have been made.
The position now is that if we were to return to UNESCO, we would have to find the subscription which, in turn, would have to come from some other part of our budget. The savings made through not subscribing to UNESCO meant increased contributions to other similar activities which fell within the general competence of UNESCO. Since there are more ways than one of skinning a dead cat—if I may use a vulgar phrase—we feel that we can contribute most effectively through bilateral means.
Lord Ennals: My Lords, we are not talking about a dead cat but about a very important international organisation in the formation of which, as the noble Lord said, we played an important part. Will the noble Lord confirm that, except for paying that modest affiliation fee, there are no other policy reasons why we should not rejoin UNESCO? Will the noble Lord also confirm that as a result of not being a member of UNESCO, we have already lost (in terms of contracts which would be beneficial to the British economy) more than we would lose by paying our affiliation fee? In view of all that has been said, why do not the British Government show some courage and decide to rejoin UNESCO?
Lord Inglewood: My Lords, the noble Lord suggests that by not being in UNESCO we have lost a large number of contracts we might otherwise have had. It is not the view of Her Majesty's Government that that is the case. We see no evidence to support that proposition. As I said, we believe that the most effective way in which we can contribute to the common good along the lines of the principles of Article I of UNESCO's charter is through bilateral means. For as long as we consider that that is the most effective way of contributing, we shall no doubt continue as at present.
Baroness Seear: My Lords, whatever the attitude to bilateral means, surely our failure to support UNESCO suggests that we are lukewarm in our support of the United Nations. Is not that particularly inappropriate in the 50th year of the United Nations?
Lord Inglewood: My Lords, no. If I may say so, I do not think that the inference drawn by the noble Baroness is either logical or based on the facts and the way in which we contribute to the United Nations in general.
Lord Beloff: My Lords, does my noble friend agree that although there may have been improvements in the way UNESCO is run it is far from being regarded as a cost-effective organisation, given its overmanning at the centre? Is it not the case that many Members of your Lordships' House could suggest better ways in which the cause of international cultural co-operation can be forwarded than by clinging to an organisation which, whatever the high hopes of 1945, when there were many other high hopes around, has not fulfilled them?
Lord Inglewood: My Lords, my noble friend is absolutely right. We are concerned about the manning

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levels in UNESCO. We consider that the organisation is perhaps not as efficient as it might be in that regard. On my noble friend's second question, I do not think noble Lords have ever been backward at coming forward with ideas for spending money along the lines which my noble friend described.
Baroness Blackstone: My Lords, can it really be the case that the Government cannot afford the subscription? It is not a huge amount of money in terms of Britain's total public expenditure or in terms of our aid budget. Is the noble Lord aware that the Government have just taken a decision to cut £11 million from our contribution to the European Development Fund? Could that saving be used to support UNESCO and so allow us to become involved in its work at a time when all UN agencies need our support and involvement?
Lord Inglewood: My Lords, the noble Baroness is not accurate about the European Development Fund as no decision has been taken on our contribution to EDFVIII. As to the total cost of contributing to UNESCO, the Government could find £11 million per year if they deemed it an appropriate way of spending public money. I hope I made clear in an earlier answer that we do not believe that that is a priority on which we should spend money at present.
Lord Chalfont: My Lords, does the noble Lord agree—
Baroness Blackstone: My Lords—
Noble Lords: Cross-Benches!
Lord Chalfont: My Lords, does the noble Lord agree that words such as "maladministration" and "irregularities" are extremely polite euphemisms for some of the extraordinary and outrageous practices that went on in UNESCO at the time of our leaving the organisation? Irrespective of the cost, can the noble Lord assure us that Her Majesty's Government will ensure that the house of UNESCO is thoroughly cleansed before we think of going back into it?
Lord Inglewood: My Lords, the noble Lord is absolutely right. The internal arrangements of UNESCO were deplorable at the time we left. Noble Lords can rest assured that, as always in the context of international organisations, we put an extremely high priority on financial regularity. We shall certainly make no exception for that organisation.
Baroness Blackstone: My Lords, I am sorry to come back again, but I must press the noble Lord. He says that I am wrong about the decision to cut our contribution to the European Development Fund. Can he tell the House whether the Government are or are not considering a substantial cut to our contribution to the European Development Fund?
Lord Inglewood: My Lords, the noble Baroness is correct. We have been considering making a cut to EDFVIII, but she puts figures to the cut which are completely hearsay.
Lord Stoddart of Swindon: My Lords, does the noble Lord think it remarkable that the Government and
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Parliament can find £1 billion extra next year to pour into the black hole of European waste and fraud and yet cannot find an extra £10 million to contribute to an organisation which will help education and culture in areas throughout the world which badly need them?
Lord Inglewood: My Lords, the noble Lord opens the whole European debate. It is not appropriate to embark on that in Question Time. I merely reiterate that in present circumstances we do not consider that a subscription to UNESCO is a priority we wish to take up.

Coal Stocking at Closed Collieries
3 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What action they propose to take on the stocking of coal at closed collieries.
The Minister of State, Department of Trade and Industry (Earl Ferrers): My Lords, the stocking of coal at closed collieries is a matter for the site owner.
Lord Dormand of Easington: My Lords, is it not scandalous that, having suffered dirt, dust, pollution and the eyesore of pitheaps for decades, mining communities, which have lost thousands of jobs in the mining industry due to pit closures, should have to put up with all that again? Is that not part of the price we have had to pay for coal privatisation? Will the Government not take much greater action than the rather timid response we have had from the Minister today?
Earl Ferrers: My Lords, I am not quite certain what the noble Lord is getting at.
Lord Dormand of Easington: My Lords—
Earl Ferrers: My Lords, the noble Lord need not bother to repeat his question. I heard what he said. I said that I did not understand what he was getting at, and that is not the same thing. When the coal industry was privatised, the new private users took over the coal stocks. It is up to them to dispose of them as they think appropriate. There were about 12.4 million tonnes in April 1994. It is now down to 11 million tonnes.
I thought that the noble Lord might be concerned about what happened at Easington, so I took the precaution of obtaining the figures. He might like to know that there 500,000 tonnes were stockpiled in September 1993. When the pit was sold in September 1994, that had decreased to 250,000 tonnes. I am informed that it is anticipated that that stock is likely to be sold completely by March of this year.
Lord Peston: My Lords, I am a bit lost. Is the industry now in private hands? I thought that the contracts had not yet been completed. Perhaps the Minister can enlighten us. He will recall that when we debated the coal industry privatisation legislation, the Government, in rejecting all sorts of amendments, reassured noble Lords in all parts of the House that we did not have to be too exercised about the environmental question because everything was well looked after and

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we did not have to worry. The point that my noble friend has raised is that it looks at this stage, with this example—there are many others to come—and the news today about water pollution from closed pits, that we were right to worry about environmental problems with respect to the privatised coal industry. Many of us will be appalled if the Government always intend to answer that it is a matter for the site owner.
Earl Ferrers: My Lords, I am not surprised that the noble Lord is lost if he does not know whether the coal industry is in private hands. British Coal was privatised on 30th December 1994 in England and Scotland and, mysteriously, one day later, on 31st December, in Wales. So the industry is in private hands. I have pleasure in telling the noble Lord that if he was not certain about it.
Pollution is always a matter of concern. It does not matter who owns the pits; it will always be a matter of concern. All mine owners are under a duty not to cause pollution to any river or stream. The regulatory bodies (the NRA and in Scotland the river purification boards) have appropriate powers to enforce those responsibilities.
Lord Peston: My Lords, I always like to be informed and educated by the Minister. Will he assure me that the Treasury now has the money from selling the whole of the coal industry to the private sector? Has some money now appeared in the Treasury corresponding to the value of the industry?
Earl Ferrers: My Lords, British Coal has been sold. If the noble Lord wants to know the precise date upon which sums of money passed, I shall have to find out. British Coal is now in private hands.
Lord Ezra: My Lords, will the Minister explain the position with regard to the stocks at closed collieries, because some of the collieries were sold? They are in private hands, and so the stocks would clearly be the responsibility of the purchasers. But other pits were not sold and remain the responsibility of the Coal Authority. What will happen to the stocks at pits which were not sold?
Earl Ferrers: My Lords, they will be disposed of as and when appropriate.
Lord Parry: My Lords, will the Minister accept that some of us rise in fear and trembling because of the pugnacious mood he appears to be in this afternoon? I try to remember that, although he is seven inches taller than I am, I am still not afraid of him.
This is a serious question, and it is asked in the context not merely of the tonnage left on the surface but of the history of the years of degradation suffered not just in the valleys of Wales but throughout the coal areas as a result of the neglect by private owners of responsibilities about which they had to be taught by various governments and public authorities. We have reached the stage in Wales where we can now call our valleys green again. Having shrugged off the responsibility, as has been done this afternoon, we are very concerned that the Government might continue to do that and that the rivers of Wales might be polluted.
Earl Ferrers: My Lords, I should be the first to apologise to the noble Lord, or indeed any other noble Lord, if he thought that I was being pugnacious. That is not my style at all, as it is not the style of the noble Lord to be alarmed or frightened.
Of course pollution is a matter of concern, but when the responsibility for owning mines passes to another, the responsibility for avoiding pollution passes to the new owners. Where those responsibilities have not passed to another, of course they remain the responsibilities of the previous owner. We are concerned to make sure that all the river authorities have adequate measures available to them to ensure that untoward pollution does not occur.
Lord Dormand of Easington: My Lords, the Minister need not have reminded me about Easington. I have lived in the shadow of the Easington pitheap for too many years.
With great respect, he is missing the whole point of the Question. We are talking about pits which have closed and which are now being used again for the stocking of coal. Unless he takes some notice of what my noble friend and the noble Lord, Lord Ezra, have said, there will be no progress. It is a serious matter for mining communities.
Earl Ferrers: My Lords, I can only tell the noble Lord that stocks at closed collieries were sold to the regional companies; in other words, all stocks in England were sold to RJB.(Mining) plc.

Pensions Bill [H.L.]
3.8 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 COMMITTEES in the Chair.]
Clause 119 agreed to.
Clause 120 [New requirements for contracted-out schemes, other than money purchase schemes]:
Baroness Castle of Blackburn Baroness Castle of Blackburn moved Amendment No. 184BG:
Page 69, line 42, leave out ("65") and insert ("63").
The noble Baroness said: I hope that in replying the Minister will not give me a whole list of technicalities but deal with the principle that I am trying to establish in my amendment. I am well aware that the drafting is far from perfect, and indeed that the amendment might prove to be in the wrong part of the Bill, because I have not attempted to enter into the cat's cradle of cross-references which besmirches the Bill. Indeed I would be incapable. I am too stupid to be able to enter into the competition of opacity with the Government. It takes great skill to hide the truth and it takes a lot of

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words, and this Government have always preferred verbosity to lucidity. It is part of their technique of government. I suspect that I am not alone in the Committee in having to try to put a wet towel around my head and follow the complexities of the Bill through to some kind of identifiable meaning.
I know that the issue of pensions is complex because I had to deal with it. As the Committee will be aware, I introduced my better pensions Bill in 1978. It gave birth to SERPS and so I well know what is involved. Even at its best and simplest it is sometimes difficult for the layman to understand what it is proposed should happen to him.
However, we can avoid making the matter more complex. I know because I turned up my Act and I was struck by the contrast in its clarity and simplicity. I will tell you why. When we had a complicated Bill I used to say to my draftsman, "Look, I know that you have to get in all the legal points but, for heaven's sake, try to make the Bill clear to those whom it will affect". I suspect that this Government have deliberately set out to make it obscure.
Therefore, my amendment concentrates on two straightforward, simple principles. In the amendment I am testing the political will of this Government and the purposes of their whole pensions policy. All the principles of the state earnings related pensions scheme, which I introduced, were based on the belief that there was what Dick Crossman, who also drafted an earnings-related pensions Bill, once called "apartheid in old age". In other words, we wanted to prevent the gross inequalities which afflicted our society in the retirement pensions field. So the earnings-related concept was not only introduced but it was inspired by certain political aims and not merely actuarial calculations, although they were sound enough, as the government actuary certified.
What were those principles?—that we could only adjust some of these gross inequalities if we recognised what they sprang from and whom they affected the most. Clearly, they sprang from great inequalities and variations in income, great uncertainties in earning power and great changes in the ability of people to earn as they approached retirement age.
I shared the same view as my brilliant Minister of State, the late Brian O'Malley. His death in the middle of our discussions was a very great blow, and was recognised by all sides of the House. We said that the group of people whose unjust treatment in the pensions field stood out a mile was, obviously, women. They were not even allowed to join occupational schemes when we started the demand for equal treatment in those schemes. Of course, my Bill abolished the married women's option to be dependent on her husband's pension. We had to phase that in gradually and some women are still suffering from the remnants of that dependency. We asked, "What is the earnings pattern of these women?". As the Equal Opportunities Commission has pointed out in more than one brilliant report, it is a pattern of earnings fluctuation, changing labour, casual labour, part-time labour and interrupted work due to family responsibilities. We all know it and
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I shall not bore the Committee by repeating it. However, I ask the Government to bear in mind the way in which they hope to correct it.
One of my civil servants—I do not claim the credit—had the inspired concept of the 20 best earning years. We knew as he said it that that would also help those blue-collar workers who often reach their earnings peak in middle life when they are physically strong and whose earnings may then decline somewhat. An obvious example is the miner who in the heyday of his physical strength will be at the coalface earning good money. When he can no longer bear the strain of that he will move to the surface and his earnings will drop. Of course, final salary schemes are no use to them. What is more, it would be unfair to average things out over the whole of their earning life. However, if you say to a manual workman or to a woman, "Look, pick the 20 best earning years of your life and we will base your pension entitlement on that", that is fairer.
I frankly admit that I introduced a piece of sex discrimination. The men did not like it; they had not suffered from it before. I said, "I am not going to raise the women's retirement age from 60", even though we as a government admitted that we could not at that time afford to bring the men's retirement age down from 65 to 60. I said to the men, "I am sorry. You will have to wait a bit; it will come. We have had to wait thousands of years for a bit of sex equality. It will not do you any harm to feel what it is like". So I kept it. The woman received the full benefit that she had contributed despite the fact that she retired five years earlier.
Since then we have seen this Government beat the most miserable retreat from that piece of inspired legislation, which I point out to the Committee was fully backed by the pensions industry. We knew that, by imposing these standards as a condition for contracting out of the state earnings related pension scheme, we had to help them a bit with the costs of, for instance, indexation which the conditions included. We did not mind. Good heavens, is not that what this society of ours is crying out for—a little more generous-spirited partnership—and not, "Let's have the competitive system. We are the bosses so we have to have our funds protected. You are the workers so you have to take less pay."? We have seen the recent indecent examples, which are spreading still further, of those inequalities as the man at the top takes millions. He boasts that his business is profitable so he deserves it. But that profitability has been based on keeping down already low wages.
I would like to think that this Chamber could recapture some of that spirit that we tried to infuse into our society. If we do not, the rich will suffer as much as anybody, even if it is only in poverty of spirit. But they could suffer from great social insecurity as well. Surely history has taught us that. My long life has taught me it. Therefore, I want to seize this opportunity to try to reiterate those principles and to make the Government face up to the fact that they have deliberately slaughtered them, because not only have they reduced the value of the state pension on which low-paid women depend—and very often a large majority of women receive nothing but a state pension—but they have also

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broken the earnings link. Everyone will tell you that they know how much better off those at the bottom in retirement would be if only this Government had not broken that earnings link; or at least their genetic predecessor did that—the Thatcher Government.
Women are suffering. Not only are they told that the maturity period has been lengthened and that everything has been whittled down, but they are told also that they must carry on with their low-income lives into an old age of uncertainty and instability until they are 65. I know that we have to equalise the pension age. I had my bit of fun and I won the women a breathing space; and I am darned glad that I did. But I recognise that eventually the pension age must be equalised. But if it is still true that this country of economic miracles cannot afford to reduce the pension age for everybody to 60, the obvious fair compromise is to strike a figure of 63. That is the first thing for which I ask.
But women are also the greatest beneficiaries of the restoration of the principle of basing their pension on the 20 best earning years. Women are the most insecure earners in our society by definition. It is the woman who is likely to have an interrupted career. Sometimes that may be for the happiest of reasons—she has a family. But sometimes it is for the unhappiest of reasons. As we heard in our debates yesterday, it falls to her to look after her husband's elderly parents, and small thanks she gets for it. We are snatching away that raft of security and saying to a woman, "Well, you have to contribute as long as you are earning, unless you have your home responsibility credit, or whatever, but we will enable you to retire on your 20 best earning years level".
Please, Mr. Minister, do not tell me that the amendment may be out of order in some word here or some phrase there. The nomenclature of the amendment shows the sort of minefield of obscurity which we are in. What is it—Amendment BH or GA, or something? That is easy compared with some of the enumerations of some of the clauses, subsections and sub-subsections until all the letters of the alphabet are exhausted. Please can I have some inkling that even at this late stage the Government will think again about those two basic principles?
Baroness Turner of Camden: I proffer my sympathetic support for what my noble friend has been saying about her amendments. Of course, more than anybody, she has the right to tell the Government what they should be doing. As she has reminded us, she was responsible for the pensions legislation introduced in the mid-1970s, with all-party support—I emphasise that. It was then known as the "Castle Plan" and we all thought that the debate about pensions had finished for a very long time. We had not expected a Conservative Government quite so soon to attempt to demolish the structure which had been created.
The first amendment seeks to amend the clause so that it reads, "a normal pension age of 63" instead of "a normal pension age of 65", with regard to the Government's reference occupational scheme. As we know, nowadays many occupational schemes have a lower pension age. Indeed, 63 is not at all uncommon. When seeking to equalise pension ages some years ago
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many schemes chose the age of 63 as being cost-neutral. Indeed, had the Government decided to be cost-neutral in relation to the state scheme, they could have accepted the proposition for a flexible decade of retirement and taken 63 as the principal age at which state pensions would be paid.
Unfortunately, I was not able to be here later in the Committee's proceedings last night, but I understand that there was some discussion about a flexible decade of retirement. I was a member of your Lordships' committee back in 1989 which recommended a flexible decade of retirement—a decade of choice between the ages of 60 and 70. We recommended 63 as the pivotal age at which full state benefits became payable because we were advised then that that was cost-neutral.
Moreover, flexibility surely makes sense, particularly nowadays. In view of the Government's support for flexible employment and for various changes in employment patterns, I am surprised that they are apparently not in favour of the flexible decade of retirement because, as my noble friend pointed out, there are different types of employment. In some employments people are only too happy to retire early because they have had a long and arduous life; for example, in heavy industry. Mining is obviously a case in point where it is sensible to have an early retirement age. But there are other employments where people welcome the social environment brought about by participation in the activities of the workplace and would wish to retire much later. If the Government really believe in choice, the flexible decade is the option which they should choose. As we have already said, 63 is the cost-neutral pivotal point.
As I said earlier, I know there was some discussion about that last night. I have looked at Hansard. But, on the other hand, there were no votes and it is still open to the Government to consider that option. Perhaps I may press the Minister to do so between now and Report.
As regards my noble friend's second amendment, she is quite right to say that the best 20 years provision in SERPS was of very great benefit to large numbers of the lower paid, particularly women and those who have a chequered work pattern. As she rightly points out, many employees have their best earning years when they are younger. As they get older they are given lighter or less well paid employment. Moreover, women spend time in and out of employment and a broken work record often prevents them from getting onto the promotional ladder. Therefore, when they retire the final years of their working lives are not necessarily the best years upon which entitlement to pension should be based.
My noble friend has advanced important arguments. As she said, her amendment is possibly flawed. However, the issues raised are important. There is time within the framework of our discussions on the Bill for the Government to think about what has been said and perhaps to do something between now and Report stage to try to meet some of the considerations that have been raised.
3.30 p.m.
Baroness Seear: As the arguments about the flexible decade of retirement and also about the age of 63 being

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the pivotal age have been fully aired, I shall not repeat the support we gave yesterday from these Benches to those proposals. We must remember that one of the major purposes of the Bill is to move from the pay-as-you-go scheme, with all that that involves, to a funded scheme. That accounts for some of the differences we are finding. I believe that we should welcome the change. It shows more foresight than that displayed by our predecessors who legislated in the field and by those operating in other parts of the European Union.
However, having agreed with the Minister and supported him up to this point, I press him to think again about the proposed 20 best years. The last three years is liable to be a very poor deal for people who have had to go into part-time employment or, indeed, who have been in part-time employment for a good deal of the time. The last three years for people between the ages of 60 and 65, except in certain executive and administrative jobs where people are able to continue to contribute very satisfactorily in their early 60s, is not a time of good earning for many people. I cannot see that the proposal for the 20 best years would make that much difference. No doubt the Minister has figures at his disposal that are not available to me. I doubt that it would make a great deal of difference as regards the costing of the scheme, but it would make a great difference to many less well-paid people. That applies to women in particular, but also to men who are now retiring early and getting whatever job they can, often at a very much lower rate of pay. I urge the Minister most strongly to think again about changing the provision from the last three years to the best 20.
Baroness Lockwood: I support my noble friend's two amendments. I agree, for all the reasons given by my noble friends and by the noble Baroness, Lady Seear, that pensions should be based on the best 20 years rather than the last three years. There is no doubting the fact that, for the majority of women, that would provide a much better pension.
I also support the amendment to the effect that the pension age would be 63 for both men and women. Yesterday, the Minister argued against lowering the pension age for men to 60, despite the fact that no such amendment was actually moved. I wonder whether we can persuade the Minister today to agree to a common pension age of 63, especially when the effect—as stated by my noble friend and as indicated in the Government's White Paper—would be cost neutral. Moreover, I believe that there is also a possible saving of £0.5 billion by the year 2035. So it would be cost neutral in its early years with a possible saving later.
The Minister's arguments yesterday were based on demographic factors, on our ability to pay, and on the increasing number of people being paid pensions and the effect of that on our international competitiveness. The noble Lord said that by shifting the retirement age to 65 we would be adding five more years to the working lives of women. Is the Minister sure that that would happen? For example, the Minister also said that 40 per cent. of occupational pension schemes already
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permit members to retire at the age of 63 or below. Therefore, there is already a move in occupational schemes to facilitate earlier pensions.
It would seem that there is some doubt in the Government's mind. Their proposals include extending "auto credit", now available to men from the ages of 60 to 65, to women. Clearly, they are expecting some women to retire before the age of 65. I am sure they are correct in that assumption. Indeed, we must face up to the reality of the situation that over 50 per cent. of men are now out of the labour force before they reach the state pension age of 65. The same will surely be so for women, or even more so, given their current pattern of retirement. I am certain that the Minister does not anticipate that more women than men will continue in employment up to the age of 65.
Last night, the Minister said that 40 per cent. of men were still working at the age of 64. Therefore, does the noble Lord expect 40 per cent. of women still to be working at the age of 64? Further, does the Minister want older men and women to work into their mid-60s at the expense of younger people?
One major study carried out by Hammond and Morris in 1986 assumed that half the jobs vacated by men retiring early were taken up by the unemployed and half by women coming into employment. The study concluded that if the replacement of older people by the unemployed were extended to 75 per cent. there would be a net saving because the cost of supporting the unemployed was greater than the cost of paying state pensions at an earlier age. Surely it would be more efficient to encourage the unemployed to move into the vacancies created by people retiring at the age of 63. That would also have an effect on the arguments that the support ratio is expected to decline in the next century. The support ratio surely depends not on the number of people of working age but on the number of people who are actually economically active. Therefore, if we could have a greater number of economically active people between the ages of 16, 18 or 20 up to the age of 63, that would be a much more efficient situation for the country.
I suggest that the priority for the Government is not to increase the retirement age for women to 65 but to come to a sensible compromise at 63 and to concentrate their efforts on reducing the number of unemployed by encouraging investment in industry and in training so that more people will be encouraged into employment. Similarly, the support ratio could actually be increased by the number of people who would be of working age. As 63 is cost neutral and the mid-point in all the factors, I hope that the Government will seriously consider the proposal as a useful option.
Baroness Farrington of Ribbleton: I rise to speak in support of the amendments moved by my noble friend Lady Castle, and to speak in particular in support of the second amendment. I do so because I wish to remind the Committee of the point that I raised in the debate yesterday which is that nowadays more women lose more time from their careers due to the responsibility of caring for elderly relatives than they do from caring for children. As regards the retirement age, the final three

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working years of a woman's life are often interrupted and broken, sometimes by taking unpaid leave to care for relatives. Many women do this from the goodness of their hearts; they are willing to do it. Not only do their relatives and families benefit, but it is also a good example to the next generation that we should care for members of the family. It is wicked, surely, if the legislation that we agree to here then penalises them in their own old age for having taken such a decision and such responsibility. I appeal to the Minister to give an indication that at a later stage the Government will listen to the needs of this particular group of women.
3.45 p.m.
Lord Mackay of Ardbrecknish: I have been slightly mystified by this debate because it has ranged a good deal wider than either the two amendments or indeed the clause. Many of the arguments we have heard about the ages of 60, 63 or 65 were arguments that we could properly have addressed last night if some key amendments had not been withdrawn, although we addressed them eventually but not perhaps within the variation that we had on the Marshalled List. I do not intend to revisit last night's debate on the correct age of retirement because this clause, while it is related to that, has nothing to do directly with the Government's sensible decision that the common age of retirement should be 65.
Indeed this clause is not about any real, on-the-ground pension scheme. This clause is about the reference scheme with which other schemes will be compared. While this clause and the reference scheme contain the age of 65, that does not mean that every other scheme must contain that age. It just means that the reference scheme against which they will be judged will be based on 65. I was interested to note that I brought the noble Baroness, Lady Castle, to her feet again. I was going to say that she seemed to haunt me but perhaps I would not go so far as that. When I had a short spell in the transport department one of her pet schemes of yesteryear was being changed by the Government. Now I have moved to pensions—another of her pet schemes of yesteryear—which are being changed by the Government. Therefore I am given a little lecture on what happened all those years ago. I do not know whether I wish to be transferred to the Department of Employment so that I may be given a short lecture on In Place of Strife and what happened in that area when the noble Baroness was in Government, but we shall see.
Today I wish to address in particular the two amendments which the noble Baroness has tabled to this clause. The amendment to Section 12B(3) (a) of Clause 120 seeks to alter the reference scheme under the new contracting out test by lowering the normal pension age in the reference scheme to 63. I am assuming that the noble Baroness intends to propose that pensions be calculated based on the best 20 years earnings revalued, although that is not in the amendment. But either way would be significant.
This amendment, which lowers the normal pension age of the reference scheme to 63, is not acceptable because it would have the effect of raising the level of benefits under the reference scheme. If the reference
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scheme was to require benefits at a rate of 1/80th at the age of 63, the amendment would have the effect of making the reference scheme between 8 and 10 per cent. more valuable to individual scheme members. In addition, such an amendment could increase the costs for schemes where the benefits offered were at the level of the reference scheme.
Many occupational pension schemes have equalised their pension ages at age 65 in the light of the Government's proposals to equalise state pension age. The reference scheme takes account of this and also fits well with the Government's proposals in the Bill on the state pension age. The age set in the reference scheme does not—as I said right at the beginning—require schemes to have a normal pension age of 65. Regulations under Section 12D of Clause 120 will allow schemes to have a normal pension age of between 50 and 75 in line with the current Inland Revenue rules, provided that overall scheme benefits are broadly equivalent to, or better than, those under the reference scheme. The level of the reference scheme has been set to strike a balance between the interests of employers, individuals and Government, and we believe that this has been achieved with a normal pension age of 65.
I turn to the other amendment of the noble Baroness which seeks that pensions be calculated based on the best 20 years earnings revalued. Some groups of workers may have higher earnings early in their working lives. The best 20 years revalued could reflect these differing earnings patterns. However, higher earnings at the start of a working life often reflect overtime and shift payments which may not fully count towards pensionable earnings. Most individuals have higher earnings later in their careers and would wish their pension to be calculated on the basis of their earnings prior to retirement or leaving service. Practically all salary related schemes calculate an average final salary with reference to the years immediately preceding an individual's retirement. This amendment would change the basis of this calculation in the reference scheme and result in considerable administrative complexity for pension schemes so that much of the savings from the introduction of the new contracting out test would be lost.
Calculation of benefits over the best 20 years would require schemes to keep detailed records of individuals' earnings over their working life. This could prove particularly difficult when individuals transfer between schemes and employers and between state and occupational or personal pension provision. The reintroduction of such cumbersome procedures and the recording of earnings on an individualised basis would be similar in many ways to the current GMP arrangements. These have been strongly criticised by employers as too complex.
Our proposals seek to reduce the administrative complexity for employers and schemes while offering a specified level of benefits to members under the reference scheme. This amendment could make the provision of occupational pension schemes unattractive to employers. This amendment is not acceptable to us, and we believe that it would have the effect of lowering the value of pensions under the reference scheme and it would complicate the scheme administration for

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employers. With that explanation of what this is about—it is about a reference scheme and the fact that it does not mean that all schemes have to retire people at 65—I hope that the noble Baroness will see fit to withdraw her amendment.
Baroness Castle of Blackburn: As I feared, the Minister has of course taken refuge behind technicalities and even digging up—he hoped—some terrible skeletons in my cupboard of yesteryear. I can assure him that that failed abysmally. Despite the fact that all he has done is to reveal the barrenness of ideas and arguments and the paucity of spirit which we have come to associate with this Government, I shall withdraw my amendment in order to fight another day. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 184BH not moved.]
On Question, Whether Clause 120 shall stand part of the Bill?
Baroness Turner of Camden: I rise to oppose the Motion that this clause shall stand part of the Bill.
The clause sets out new requirements for contracted out schemes other than money purchase schemes and in so doing seeks to abolish the guaranteed minimum pension, as the Minister said in response to the previous amendments.
At present in order to contract out, schemes have to meet the guaranteed minimum pension test. In this clause the Government propose an alternative based on a reference scheme which in some cases will provide an inferior substitute for GMP benefits.
The original intention with SERPS was that a contracted out scheme would have to satisfy two main complementary conditions. The first was the requisite benefits rule. That, like the reference scheme proposed by the Government, was based on a 1/80 th accrual rate. The second was the GMP rule. However, in 1988 the requisite benefits test was dropped by the Government. It was argued that it had become very complex and, secondly, that it was ineffective. There is no reason to suppose that the proposal now being made in the Bill will be any more effective.
The requisite benefits test ensures that the pension provided must be better than those set out as a reference scheme in the Bill. For some people—those on good wages, in a good scheme for a large part of their working lives—that may well represent a good deal and will guarantee them better benefits than the GMP. But for others that will not be the case. The low paid, in poor schemes and with short periods of service, stand to be disadvantaged by the disappearance of the GMP test. It is no consolation to an individual who falls through the safety net formerly provided by the GMP to be told that others have been assured of better benefits.
It must be the intention surely to try to ensure as far as possible that people do not end up worse off than they would have been had the GMP test continued in existence. That must be particularly so in the case of people who are less well off and less privileged in every sense of the term.
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During our debates yesterday the Minister referred to those of us who could look forward to final salary earnings-related pensions and those already receiving them. He spoke of such people as privileged. He surely cannot support a system which would further undermine the position of those who are not so privileged.
The reference scheme may provide lower benefits if there are periods of high inflation during a working lifetime because it provides an inadequate level of inflation protection as compared with the GMP. The reference scheme provides benefits as good as the GMP only if inflation rises no higher than 5 per cent. If it exceeds that level either before or after retirement there is the possibility of the GMP being better, depending on the extent and duration of the relevant periods of high inflation. The reason is that SERPS is inflation proofed. Even when scheme members contract out of SERPS they remain entitled to what are called residual SERPS benefits, which can be a significant part of some people's pensions.
In addition, members of contracted out schemes could suffer losses under the provisions of the Bill as a result of the removal of the guaranteed protection which the DSS currently offers for GMP benefits. The value of that protection was made clear in the Maxwell fiasco when the scheme members at least had their GMPs restored immediately because the guarantee was absolute. That is of immense value, particularly to the poorly paid.
The Minister may argue that with the other provisions in the Bill—the solvency standard and the compensation scheme —the guaranteed support represented by GMPs is no longer necessary. But the system of compensation guarantees only up to 90 per cent. of benefits as compared with the total GMP. Some types of loss will not be covered, notably losses arising from poor investment decisions. GMPs are guaranteed, whatever the reason for the shortfall.
Of course, the Government do not really like SERPS at all. I well remember the days of the Fowler review, which was referred to yesterday by the Minister in the course of debate. It was clear that at that time the Government would have liked to do away with SERPS altogether, but there was such a fuss that they withdrew from the confrontation that could have ensued and settled instead for a gradual undermining of the scheme. First the accrual rate was worsened and then the best 20 years provision disappeared. Then we had the campaign to encourage people to take out personal pensions and to opt against SERPS, with the encouragement of the national insurance rebate. Now we have the disappearance of the GMP test altogether. That is a potential worsening for the poorer paid, less privileged members of the workforce. We should not let it pass without attempting to persuade the Government that they are doing something wrong.
Coupled with my opposition to Clause 120 is my opposition to Clauses 124 and 125, both of which follow on from the clause which I currently oppose.
Baroness Castle of Blackburn: I should like to support Baroness Turner in opposing the Motion that this clause stand part of the Bill. I do not need to go

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over the ground which she has so devastatingly revealed to the Committee in her indictment of what the Government intend to do in the Bill in general and this clause in particular.
I want to reinforce the warning about the future of SERPS. I also want to refer to a recent article in the Observer by two economists from the Institute of Fiscal Studies headed:
"The strange death of a pension scheme".
They know, as everybody who is a pensions expert knows, that the Government are bent on the slow destruction of the whole scheme.
As has been pointed out, 10 years ago the Government announced that they were going to abolish the scheme. But there was an outcry because, despite the weakening of the scheme which has taken place, 9 million people are still members of it. It is a lifeline to them and the best that is available. It is better than any personal pension scheme which is supposed to give them so much choice.
The article also points out that, although the Government have failed in the abolition of the scheme, they have been tireless in ill-doing ever since. The economists claim that the benefits that accrue under SERPS have been halved in the past 10 years. They also paint out that the benefits will be further halved by this Bill. Those two economists—Richard Disney and Paul Johnson—write on the basis of expert analysis of the benefits people will receive and the attacks which the Government are making on the scheme.
The Government's long-term aim is most vividly summed up in the recent book by the No Turning Back movement which is currently lending such support to our Prime Minister. In that book the group does not hide the fact that it believes in two things. It believes that state benefits should be only for the poor—a reversion to the dear old Victorian divisions in our society and charity for the poor—and very meagre charity at that. The book goes on to state that eventually the state may have no insurance scheme of its own at all. That is the aim.
Those of us who resist that aim and believe that you cannot provide security and dignity in old age for everyone without the state coming in with its support must rally against this clause in particular.
4 p m.
The Earl of Clanwilliam: Perhaps I may ask the Minister to advise the noble Baroness, Lady Castle, of the maximum percentage of final salary to be obtained from SERPS, and what one would expect in respect of an ordinary pension, which would be at least 50 per cent.?
Baroness Castle of Blackburn: I am very fascinated by the way in which this Government, who clearly have their back to the wall, are increasingly trying to hand over the role of government to the Opposition. I should be delighted to become Minister of Pensions again. If so, I could have turned to the officials' Box and rustled up the exact figure for which I had been asked. However, I am afraid that I do not have the figure at my fingertips.
Baroness Hollis of Heigham: We should be happy to answer the question, but perhaps the Minister prefers to do so.
The Earl of Clanwilliam: My question was addressed to the Minister who will no doubt be able to answer the noble Baroness.
Lord Mackay of Ardbrecknish: I intend to reply to the debate. I shall answer the questions that arise. First, however, perhaps I may say to the noble Baroness, Lady Castle, that I have no intention of giving way from this side of the Chamber to allow the party opposite to take their places on these Benches. We intend to do our level best to see that that does not happen. That will not come as a surprise either to the party opposite, or indeed to my noble friends.
This is a complex area of social security. I hope that I can explain it as clearly as possible although I am under the strictures that nothing I say will ever be as clear as the explanations and the legislation put forward by the noble Baroness, Lady Castle.
The current contracting-out system of guaranteed minimum pensions known as GMPs has been criticised because of its complexities. There is also the problem which no one has addressed of how occupational pension schemes can provide equal pensions for women while SERPS remains unequal, as it will be until the state pension equalisation is completed by the year 2020.
We consulted widely on options for the future. Following consultation we have decided to break the links between SERPS and contracted-out schemes from 1997. For service from then, salary-related schemes will no longer be required to provide GMPs but instead will be required to meet a test of overall scheme quality.
Schemes must comply with the new statutory standard introduced by new Section 12A. I shall come back to that in a moment. Schemes must confirm that they are not exempt from the rules restricting self-investment. Schemes must have sufficient resources to warrant the issue of a contracting-out certificate; that is, they must be able to show that they can meet their contracted-out liabilities. To cover this, in the long-term we will require an assurance that the scheme complies with the minimum solvency requirement at the time of the election to contract out. During the transitional period for the introduction of the minimum solvency requirement, schemes must be fully solvent in relation to contracted-out liabilities.
We also expect to prescribe conditions relating to financial propriety to ensure that schemes have a clean bill of health at the time of election to contract out. Finally, the subsection provides for schemes not within a prescribed class. We expect to use this power to set extra conditions for overseas schemes wishing to contract out.
These contracting-out conditions, over and above the need to meet the new standard test of scheme quality, are required to ensure that the Government can appropriately permit the employer and employee to pay rebated national insurance contributions. I am sure that the Committee would agree that it would not be appropriate for the Government to permit the rebate to

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be invested in schemes which, for example, did not have sufficient resources to match liabilities for contracted-out benefits.
The clause then sets out the arrangements for the new scheme-based contracting-out test which salary-related schemes will have to meet from the principal appointed day. Although the current GMP test will be replaced by this new test, GMPs accrued before it comes into force, planned to be in 1997, will continue to form part of the occupational pension and will continue to be subject to broadly the current rules.
New Section 12A sets the statutory standard which schemes must meet. It requires schemes to provide benefits for earners and their widows/widowers which are at least broadly equivalent to the reference scheme defined by new Section 12B. The scheme actuary will be required to certify that this requirement is met.
The new section makes powers for regulations to set the criteria for the comparison of scheme benefits to the reference scheme. It also has powers to allow the method of comparison to be explained by a guidance note prepared by a body prescribed by the Secretary of State, such as the actuarial profession. The approach of a mixture of secondary legislation and professional guidance received widespread support during the consultation exercise on the new contracting-out test.
New Section 12B sets the benchmark for the reference scheme which must be met by contracted-out salary-related schemes. The benchmark for members' benefits will be based on an accrual rate of 1/80ths—I referred to that on the last amendment—a definition of final average salary and 90 per cent. of band earnings (that is, earnings between the upper and lower earnings limit) payable at a normal pension age of 65. The benchmark for survivors' benefits will be 50 per cent. of the members' benchmark. This takes account of the response to the consultation exercise and the benchmark has been set at a level which strikes the right balance between the interests of employers and scheme members. The reference scheme has been set to ensure that contracting-out continues to offer an attractive alternative to SERPS.
The section provides powers for detailed requirements for the reference scheme to be set out in regulations. It also contains powers to make additional provisions relating to benefits for widows and widowers. Those will cover exceptions to the general requirements.
New Section 12C provides powers to prohibit or restrict the transfer of a liability or the commutation of part of the benefit into a lump sum except in prescribed circumstances. The regulations governing transfers will be used to ensure that liability for the payment of pensions, or in respect of accrued rights to pensions, can be transferred only to appropriately secure arrangements. The intention regarding lump sums is to follow current Inland Revenue limits with appropriate exceptions for public sector schemes. There will be a small effect in the long term on income-related benefit costs, although this will be a relatively insignificant amount.
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New Section 12D provides a power to prescribe the ages at which benefits become payable in the case of a salary-related contracted-out scheme where members have service which falls after the principal appointed day.
My noble friend Lord Clanwilliam asked about the average revalued salary for SERPS. That figure is 20 per cent.
The noble Baroness, Lady Turner of Camden, gave the example of the Maxwell scheme and asked whether, under the new rules, people would be able to obtain a transfer back into SERPS. I believe that that was her question. In Clause 125 there is a power for the Secretary of State to do that in conditions where the scheme fails and the employer is insolvent.
The new contracting-out test, which I explained to the Committee, is a key part of the Government's reforms of the contracting-out system. Although the detailed exceptions will be in regulations, this clause is an important part of the Bill. I commend it to the Committee.
Baroness Turner of Camden: It simply remains for me to thank the Minister for that detailed explanation. I am, of course, aware of much of what he said. But it still does not settle all my worries about the disappearance of the GMP test. For one thing, it is argued that the GMP test is too complicated. If it were so complicated, why did the Government decide in 1988 to abandon the requisite benefits test and instead maintain the GMP test? I believe they did so at that time because they saw its value as an individual guarantee to the individual scheme member or the individual worker.
The Minister referred to the solvency test and other guarantees available. The requisite benefits test, and so on, are guarantees of the scheme itself, not to individuals. I believe that that is terribly important. I do not think that there is any point in pressing the issue to a vote at this stage, but I am unhappy about the whole section of the Bill. I am very much afraid that it could leave some poor people worse off than they are at present with the GMP test. As I said in my opening remarks, whatever else we do, whatever pension reforms we endorse, we should seek to ensure that the worst paid and the worst off will not have their conditions worsened as a result of what is done in the Bill.
Moreover, it seems to me that although the Minister made much of the complications of the GMP test, with modern computerised administration the complexity and difficulties of handling it have been rather exaggerated. My recollection is that the Occupational Pensions Board progressively eased enforcement procedures, as it did while I was a member. No doubt what it has been doing will be taken over by the DSS which could continue the policy.
I do not intend to divide the Committee at this stage, although I am not happy with the Government's response. I shall read it carefully in Hansard.
Clause 120 agreed to.
Clause 121 [State scheme contributions and rebates]:
Lord Lucas Lord Lucas moved Amendment No. 184C:
Page 72, line 35, after ("made") insert:
("( ) in subsection (5), for "alteration" there were substituted "determination").
The noble Lord said: The purpose of the amendment is to replace the word "alteration" with the word "determination", so far as the report under Clause 42(1) (a) of the Pension Schemes Act 1993 is concerned, in recognition that the rebate percentages following the first review of contracting out terms after the passing of the Bill will be set for the first time under the terms of the new contracting out system. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 184D:
Page 73, line 18, at end insert:
("( ) If the Secretary of State pays an amount under subsection (3) which he is not required to pay, he may recover it from any person to whom, or in respect of whom, he paid it.").
The noble Lord said: In moving Amendment No. 184D, I wish to speak to Amendments Nos. 184E and 184F. Amendment No. 184D allows the Secretary of State to recover any erroneous payments of "top-up" age-related rebate made to contracted-out money purchase schemes. A similar power is already in place in primary legislation for rebate payments made direct to appropriate personal pension schemes. Those are used principally in the case of incorrect earnings information supplied by employers.
Such overpayments may be recovered from the scheme to which the rebate was paid or the scheme member. Under the new arrangements for direct payments of age-related rebates by the DSS, overpayments can be recovered and the national insurance fund protected.
Amendments Nos. 184E and 184F concern the age used to determine the rate of age-related rebates payable to members of contracted-out money purchase schemes and holders of appropriate personal pensions. As drafted, the Bill would lead to someone born on 6th April receiving a higher rate of rebate than they would strictly need to compensate for the SERPS forgone in that year and so higher than other contracted-out money purchase scheme members born in the same tax year. The amendment corrects that anomaly. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 184E:
Page 74, line 8, leave out ("first day of the") and insert ("last day of the preceding").
On Question, amendment agreed to.
[Amendments Nos. 184EA and 184EB not moved.]
Clause 121, as amended, agreed to.
Clause 122 [Minimum contributions towards appropriate personal pension schemes]:
4.15 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 184EC:
Page 75, line 3, leave out subsection (2) and insert:
("(2) In subsection (1), for "41(1)" there is substituted "42B(1)".").
The noble Baroness said: This amendment is quite technical. Basically, it is along the lines of the level playing field and it is intended to stop a subsidy being paid to personal pension providers by national insurance contributors. As worded at present, the Bill will ensure that age-related rebates paid to appropriate personal pensions will be higher than for those people who have a contracted-out money purchase scheme. That is because the Pension Schemes Act 1993 provides for the two rebates to be calculated separately so as to reflect the cost of providing benefits. Thus, as the costs of personal pensions (especially the costs of administration and marketing) are higher than in a money purchase scheme, the rebates will be higher.
I believe that from recent information we all accept that the typical level of expense of a personal pension can range from 15 per cent. up to 30 per cent. of the contributions in administration and selling costs alone. However, the cost of a money purchase scheme is often below 10 per cent. of the contributions. So it seems unfair to us that holders of an appropriate personal pension should receive a higher rebate simply because they have chosen the higher cost form of provision with higher commission charges, which is favoured by the Government. That is particularly bearing in mind that it comes from the national insurance scheme. I beg to move.
Lord Mackay of Ardbrecknish: As the noble Baroness explained, the amendments seek to have the same age-related contracted-out rates for appropriate personal pension schemes and contracted-out money purchase schemes. We believe that there need to be different levels of rebate.
The rates set for occupational schemes might be expected to be lower than those for personal pensions schemes for two reasons. First, the different types of schemes have different levels of expenses. While personal pensions and occupational schemes are both money purchase arrangements, there are significant differences which affect the expenses incurred. The rebates will need to reflect that fact.
Most fundamentally, occupational schemes relate to a particular employment, whereas personal pensions are entirely individualised. This means that occupational schemes would generally be expected to incur lower expenses due to economies of scale. Each member of an occupational scheme has his own fund and all the members will work for the same employer. Their contributions can be collected from the same payroll and so on. Personal pensions are entirely individual, as I have said, and can thus be expected to incur greater expenses. The Government Actuary will be asked, in advising on the levels of age-related rebates, to make allowance for the reasonable costs and charges of the more efficient personal pension providers.
Secondly, for administrative reasons, members of occupational schemes and their employers will receive part of the rebate during the course of the tax year. This will be in the form of a reduction in their national insurance contributions. The balance will be paid after the end of the tax year. For personal pensions, the whole

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rebate will be paid after the end of the tax year. This means a loss of investment return on the rebate, which will also be taken into account in calculating the rates.
The net effect of these differences is that the rebate for occupational schemes is expected to be lower than for appropriate personal pension schemes. It is important to remember that the rebate is intended to represent the amount which will need to be invested to replace the SERPS given up. If the rebate is insufficient to do that it will generally not make sense for someone to contract out through that route.
In the scenario proposed in the amendment, it would be personal pensions which would be expected to receive a lower rebate. It could well be insufficient to replace the SERPS given up. The majority of personal pension holders would, in these circumstances, be best advised to return to SERPS. It is important to remember that a personal pension is the only alternative to SERPS for many people. So there would be a reduction in choice and a greater burden would be placed on future generations through increased SERPS liabilities. With that explanation of what we propose in that part of the Bill and of the effects which the noble Baroness's amendments would have, I hope that she will be able to withdraw Amendment No. 184EC.
Baroness Hollis of Heigham: I thank the Minister for his reply. I should like to take up a couple of points. First, he said that there needs to be a different subsidy—that is what we are talking about —because personal pensions have different levels of expenses and rebates (I quote his phrase) "need to reflect that fact". They do not. That is a political decision by the Government and a personal decision by the individual. If they choose that flexibility, they must expect to pay the price for having an individually tailored personal pension scheme. There is no justification whatsoever for us, as taxpayers and contributors to the national insurance scheme, to subsidise that choice.
Earlier, when we discussed state financing of the regulator and when it suited the Minister, he was insistent that because only half the population were in occupational pension schemes, the whole population should not pay for regulation. Now, when it comes to personal pensions and we are dealing with perhaps one-fifth of the population in such schemes, it suits the Minister to argue that all of us should help to subsidise the cost. I hope the Minister realises that we shall be quoting back at him the need for the public to subsidise the particular interests of a less than complete minority when we return to this issue. He cannot have it both ways. It is a political decision by the Government to set preferential terms in order to bait people into personal pensions with our money.
My second point is this: it would be acceptable if personal pensions were indeed directed, and limited effectively, to those groups. I accept that there are those who need personal pensions. I think we all accept that for the highly mobile, the self-employed, and in some cases the highly paid, personal pensions make a suitable form of provision for their old age. But with rebates such as this, the Government have bribed people with
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their own money into schemes that are unsuitable. For example, those in the public sector, miners, nurses and teachers have been bribed to give up good occupational schemes, and sometimes SERPS, to go into personal pensions for which they are clearly not suited and for which they will receive reduced benefits. Moreover, personal provision has gone not to the better-off, but to the low-paid. The average income of a man on a personal pension is below £10,000 a year; that of a woman is below £7,000 a year. In consequence, merely rechurning the rebates that the Government will give will not produce security against poverty in old age.
What is the option? Either you have to confine the target audience for personal pensions, increase the rebates or require an additional contribution. The Government, for ideological reasons, are not willing to do the first; at our expense they propose to do the second; and we, at a later stage, may return with an amendment to do the third. The only way that personal pensions will provide suitable protection against poverty in old age is if, in addition to rebates, those who contribute to them make a personal contribution of at least 5 per cent. out of their own earnings. Unless they do that—and two-thirds presently do not—they will continue to suffer poverty.
What the Minister is saying is that he will use our money—the taxpayers' money—out of national insurance to lift up the rebates for personal pensions to cover sales costs because personal pensions, otherwise, are too poorly directed and will produce too low a return for people in their old old age.
The right response to that problem is not to put up the rebates. It is, instead, to ensure that personal pensions are taken out only by those for whom they are suitable, and then only with the addition of a personal contribution from the individual holder of a particular scheme. I suspect that we shall return to this matter at much greater length on Report. But let the Minister not think that this issue is ideologically neutral. The Minister is continuing to encourage people to go down a road which we already know to be full of pitfalls for ordinary people. In human decency, he should not continue to do that. But I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 184ED not moved.]
Lord Lucas Lord Lucas moved Amendment No. 184F:
Page 75, line 32, leave out ("first day of the") and insert ("last day of the preceding").
On Question, amendment agreed to.
[Amendment No. 184G not moved.]
On Question, Whether Clause 122, as amended, shall stand part of the Bill?
Baroness Turner of Camden: I rise to oppose the Motion that this Clause stand part of the Bill. As we know, this is the clause which enables the Government to provide age-related rebates to individuals who opt for personal pensions. As I said at Second Reading, there is a very strong feeling in certain quarters that the Government have skewed this Bill in favour of personal pension provision.

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We know of course that the Government's philosophy has always been an individualistic one. The legislation that followed the Fowler review was specifically designed to get people to opt for personal pensions even when they were in quite good occupational schemes. We are already having to deal with the problems that that campaign caused. My noble friend Lady Hollis has already made reference to that point in relation to a previous amendment. People who would have been better served to stay with their occupational schemes were persuaded by high-pressure salesmen to opt for personal pensions. The self-regulatory mechanisms in financial services—I have a personal interest as chair of the Personal Investment Authority ombudsman council—have now to pick up the pieces. It will be complicated, messy and expensive. And in the end there may well still be many dissatisfied and unhappy people.
I am surprised therefore that the Government should have chosen this Bill as the vehicle for persuading yet more people into personal pensions. The age-related rebates are specifically intended to make personal pensions more attractive at the higher age range. As matters stand at present, it is generally accepted that older people are better off either staying with SERPS or, more likely, opting back if they are currently outside it.
The Government are anxious to take more people out of SERPS. We are constantly being told that we cannot afford SERPS, and that the generation that will come after us will not be prepared to pay for public provision of this order. But I say again, as I have said before, that extolling private provision over and against public provision is mistaken. Ultimately, whether provision for the elderly is paid for out of public funds or private funds—many of the latter managed by insurance companies—does not matter to the economy as a whole. Ultimately we all have to pay for it, and arguably pay more if private provision is encouraged. It all comes out of the same economic pot, so to speak. We pay for it either in taxes or in higher insurance premiums —or, if the private sector fails, in increased social security provision.
In this clause the Government are quite openly encouraging older people into the personal pensions market. The poorer among them would almost certainly be better off staying with SERPS. Recent events have demonstrated that very few people appreciate just how much they have to pay into a personal pension scheme in order to qualify for reasonable provision in retirement. Those who simply rely on the rebate—of whom there are a large number—will be extremely disappointed. Many have realised that already.
I am therefore against encouraging more people down that road and increasing the market for personal pensions. I do not believe that it is in the interest of poorer, older people. And somehow we have to sort out the problems that have arisen with the Government's last venture into the area of encouraging personal pension provision in inappropriate circumstances.
Finally, there is the cost argument. I understand that the cost of subsidising personal pensions—that is what the rebates do—would be of the order of £300 million
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a year. Much of that would go to swelling the profits of insurance companies. For these reasons, I oppose the Motion that the clause should stand part of the Bill.
Lord Mackay of Ardbrecknish: The current flat rate rebate structure in appropriate personal pensions (APPs) means that it does not make economic sense for holders of APPs to maintain their plans until retirement. At some point they are likely to be best advised to return to SERPS. That does not help to ease the burden on the next generation of SERPS expenditure; nor is it helpful to individuals to have to change pension provision in this way.
Nevertheless, the Government are committed to choice in pension provision. We have already clearly seen that that differentiates us from the party opposite. Accordingly, this clause legislates for age-related rebates to enable most current APP holders to maintain their plans until retirement. We have already announced that we shall be capping the age related rebates at 9 per cent. This will ensure that rebate levels and costs are restrained in the early years of the scheme. With regard to relating rebate to age, the current system is that there is a fixed limit. The fixed amount, when multiplied by the number of years that it is held in the pension fund, gives quite different calculations at various stages in a person's life. As one gets older, the number of years remaining until retirement reduce. If we do not increase or vary the rebate according to age, we reach a position where it is more attractive for someone to remove himself from his APP and return to SERPS. This clause provides for the Secretary of State to make payments of age related rebates to APPs. As I said, it replaces the current arrangement of a flat rate.
The bulk of the clause inserts a new Section 45A into the Act. This provides for setting age-related rebates, following a review by the Government Actuary, in the same way as now for the flat rate rebate. The rebates themselves will be made by order, which will be subject to affirmative resolution. That, in itself, is an important step, since it puts APPs on a separate actuarial footing. For the first time, APP holders will be paid a rebate specifically designed to provide the appropriate level of pension in place of SERPS. As at present, there must be a clear tax year between the order being made and its coming into force.
In calculating suitable rates of rebate for APP holders, the Government Actuary will need to take into account reasonable levels of expenses which are incurred in providing such schemes. It is essential that some allowance of this kind is made. If only the basic rebate required to replace the SERPS given up were paid with no allowance for expenses whatsoever, it would simply not be best advice to contract out of SERPS using an APP. As I said in previous discussions, that in turn would lead to increased expenditure on SERPS in the next century, placing a burden on the workforce of the future.
People will only be willing to save for retirement if they believe that their pension rights will he secure. They must be able to rely on the highest standards of expert advice and must be able to have confidence that the regulatory framework will protect their interests against the unscrupulous and the incompetent.

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We believe that these provisions are in place so that people can feel secure in making the move to APPs. We believe that choice is important, clearly unlike the party opposite, although I notice that in certain circumstances certain people—presumably decided by socialist apparatchiks—are allowed to have personal pensions. In their case, you are not allowed to make a choice; you are not supposed to be intelligent enough or able enough to seek advice to make that choice. We believe that that element of choice is important.
We believe that APPs play a vital part both in reducing expenditure on SERPS and in extending that pension choice. They ensure that everyone has the option of contracting out of SERPS and making their own pension provision if they choose to do so. APPs are particularly valuable to those employees who do not have access to an occupational scheme.
As I explained, the introduction of age related rebates for APPs is essential to enable current APP holders to maintain their plans until retirement, and to ensure that those plans continue to offer an additional choice of pension provision to younger employees in future years.
With that explanation, I trust that the Committee will approve the clause.
Clause 122, as amended, agreed to.
Clause 123 agreed to.
4.30 p.m.
Clause 124 [Reduction in benefits for members of certified schemes]:
Lord Lucas Lord Lucas moved Amendment No. 184H:
Page 77, line 4, at end insert:
(6) In relation to earners where, by virtue of subsection (1), section 44(6) of the Social Security Contributions and Benefits Act 1992 has effect, in any tax year, as mentioned in that subsection in relation to some but not all of their earnings, regulations may modify the application of section 44(5) of that Act.").
The noble Lord said: The purpose of this amendment is to provide a regulatory power to modify the effect of subsection (1) of Clause 124. The effect that we intend to achieve by such a modification would be to ensure that those persons who have earnings in both contracted out and not contracted out employment in the same tax year will derive full SERPS entitlement from those earnings relevant to the not contracted out employment. I beg to move.
On Question, amendment agreed to.
Clause 124, as amended, agreed to.
Clause 125 [State scheme etc. premiums and buyback into State scheme]:
Baroness Seear Baroness Seear moved Amendment No. 184HA:
Page 78, line 19, leave out ("from") and insert ("to be paid from the resources of the scheme by").
The noble Baroness said: The purpose of this amendment—this matter has come up already in earlier debates—is to avoid putting too heavy burdens on trustees. We are anxious to encourage people to be prepared to be trustees but the threat and dangers of heavy financial commitment are such as to discourage the very people whom we would wish to be trustees
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from taking on the job. Therefore we want to put a limit on their liabilities and ensure that if there is a case for a repayment, it falls on the funds of the trust as a whole and not on the individual members. I beg to move.
Lord Mackay of Ardbrecknish: These amendments share a common purpose: to protect trustees from personal liability for debts relating to the scheme fund. I understand the noble Baroness's concern that trustees should not have to fund the levies from their own pockets. I can assure her and the Committee that that has never been the intention. There will be a range of provisions in place to ensure that whenever levies are payable, appropriate resources are available to the trustees. Therefore, in practice we do not consider that this amendment is necessary to safeguard the trustees' position. Nevertheless, someone has to be legally responsible for the payment of the levies. It is only right that that responsibility should be placed on the trustees.
In salary related schemes, the sponsoring employers stand to bear the balance of costs, and the minimum solvency provisions will safeguard the funding levels. In order to ensure that levy payments do not undermine the minimum solvency requirements, we intend to provide that, where necessary, amounts of levy may be included in the agreed schedule of contributions to be paid by the employers.
The situation in money purchase schemes is very similar. In both cases, failure to pay amounts due under the agreed schedule will create a debt on the employer.
However, we recognise that where a scheme is frozen or paid up, there may be no active, solvent employer standing behind the scheme. In that case, we acknowledge that there may be a danger of levy payments eroding members' benefits. In such cases, the trustees will be able to apply to the registrar to waive collection of the levies. We intend that the registrar will have the power to waive collection only in certain circumstances: where there is no solvent employer and where the registrar is satisfied that payment of the levies would adversely affect members' accrued benefit entitlements. That will ensure that the position of both members and trustees is protected in these circumstances. We do not wish to disturb the existing arrangements for liability for, and payment of, the levy, which work quite satisfactorily.
Amendment No. 184HA seeks to ensure that trustees and scheme managers should not be personally liable for the debt to the Secretary of State that will arise on full or partial restoration of a member's state scheme rights.
Unlike the levy liability, which in the majority of cases falls on schemes with active employers, such a debt can only arise where the sponsoring employer is insolvent and the scheme is winding up in deficit. As with the levy provisions, special treatment is required where there is no solvent employer.
The provisions enabling the Secretary of State to restore the member's state scheme rights, in whole or in part, closely follow present provisions contained in Schedule 2 of the Pension Schemes Act 1993. I alluded

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to that some little while ago when answering a question from the noble Baroness, Lady Turner, with regard to the Maxwell pension arrangements.
At present, regulations provide for the payment of any state scheme premium imposed on the trustees of a scheme to be a liability to make that payment out of the resources of the scheme. I can assure the Committee that we shall maintain that position. The amendment is, therefore, not required. I trust, in the light of that explanation, that the noble Baroness will be satisfied and feel able to withdraw her amendments.
Baroness Seear: I thank the Minister for that very clear explanation. It is useful to have it on the record. I intend to withdraw the amendment but I wish to ask him one further question. He said that the regulator would make regulations to cover this matter. Will those regulations come before the House? Will it be done by affirmative order? Will we see it? I think it would be reassuring to be told that we shall.
Lord Mackay of Ardbrecknish: If the regulator is making the regulations, I am not sure whether they would come before the House. Regulations made by the Secretary of State or by the Government come before the House in either of the ways. However, I shall check that point and let the noble Baroness know.
Baroness Seear: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 125 agreed to.
Clause 126 [Interim arrangements for giving effect to protected rights]:
Lord Haskel Lord Haskel moved Amendment No. 184HB:
Page 79, line 2, leave out ("In the case of a personal pension scheme,").
The noble Lord said: In moving this amendment I shall speak also to Amendment No. 184HC. A few moments ago the Minister spoke to us about choice. He will be delighted to know that this amendment is about choice. It asks why the Government are restricting choice.
The new facility announced in the Budget and provided for under the current Finance Bill allows for the purchase of an annuity to be deferred but cash payments can be taken from the fund in the meantime. The intention is to enable those who retire at times when investment conditions are unfavourable to wait until they are better. The provision in the Bill extends only to appropriate personal pensions. The purpose of the amendment is to find out why it is not also extended to money purchase schemes and other pension arrangements. Obviously the Government intend to encourage personal pensions whenever possible, but it does not seem reasonable that this deferment cannot be extended to people who have chosen other forms of pension. As the Government are very much for choice, I should have thought that they would accept the amendment. I beg to move.
Lord Mackay of Ardbrecknish: It is always nice to know that one's arguments on previous amendments are
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being listened to. The noble Lord will be hoping that I am listening to his arguments. The effect of the amendment would be to extend the option allowing members to draw an income from their appropriate pension fund scheme to the members of contracted out money purchase occupational pension schemes. People in those schemes could delay the taking out of an annuity in their scheme and draw down on income during the years in which they delay taking out an annuity. My understanding is that that is possible currently, or would be possible if the employer agreed, but I think the noble Lord is inviting me to go a little further and give it as a right.
Money purchase occupational pension schemes have a very different tax regime from that of personal pension schemes. Extending the flexible annuity proposals to money purchase occupational pension schemes would not be straightforward. Although, as I have mentioned, some employers may give the right, many other employers would not want to take on the extra administrative work involved with continuing, if I may so describe it, to have someone on their books after he retires. In the normal way of things the person would have bought his annuity and would have removed himself from the ambit of the employer. Members would also have the option to transfer to a personal pension scheme and they could then use the provisions which are currently in the Bill.
My right honourable friend Anthony Nelson, the Economic Secretary to the. Treasury, said in relation to this matter in another place on 30th January during the Committee stage of the Finance Bill, which extends similar flexibility to non-appropriate personal pensions:
"If there proves to be a problem in practice, we shall certainly reconsider the matter but we think that the flexibility for retirement annuity contracts and for occupational pensions is adequate".—[Official Report, Commons, 30/1/95; col. 722.]
On the understanding that the Government have already indicated in the Finance Bill that they are prepared to consider any ideas for introducing more flexibility in this area for occupational pension schemes, I hope that the noble Lord, Lord Haskel, having made the point and having listened to what I said, will be able to withdraw his amendment.
4.45 p.m.
Lord Haskel: I thank the Minister for that explanation and I am glad that he thinks that the proposal adds to the flexibility of the pension regime. Obviously we shall not pursue the matter further as it is being considered. I would just recommend that the Minister consider the proposal favourably because flexibility is another word for choice, a subject on which we were lectured earlier this afternoon. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 184HC not moved.]
Clause 126 agreed to.
Clause 127 [Requirements for interim arrangements]:
[Amendments Nos. 184HD and 184HE not moved.]
Clause 127 agreed to.
Clause 128 [Interim arrangements: supplementary]:
[Amendment No. 184HF not moved.]
Clause 128 agreed to.
Lord Lucas Lord Lucas moved Amendment No. 184J:
After Clause 128, insert the following new clause:
Monitoring personal pension schemes
. After section 33 of the Pension Schemes Act 1993 there is inserted—
"Appropriate schemes: "Blowing the whistle".
33A.—(1) If any person acting as the auditor or actuary of an appropriate scheme has reasonable cause to believe that—

(a) any requirement which, in the case of the scheme, is required by section 9(5) (a) to be satisfied is not satisfied, and

(b) the failure to satisfy the requirement is likely to be of material significance in the exercise by the Secretary of State of any of his functions relating to appropriate schemes,

that person must immediately give a written report of the matter to the Secretary of State.
(2) No duty to which a person acting as auditor or actuary of an appropriate scheme is subject shall be regarded as contravened merely because of any information or opinion contained in a written report under this section.").
The noble Lord said: This amendment introduces a new requirement on any person acting as the auditor or actuary of an appropriate personal pension scheme to blow the whistle to the department if he has reasonable cause to believe that the scheme is not satisfying the requirements for continued appropriate scheme status. This requirement will complement both the monitoring procedures for appropriate personal pension schemes which are already in place and the others that we are bringing forward elsewhere in the Bill. It will provide an additional level of protection for personal pension investors. We propose that the enforcement of the requirement and action resulting from the failure to comply will be a matter for the relevant professional body. This requirement closely mirrors Clause 41 of the Bill relating to trust-based occupational pension schemes. I beg to move.
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendment No. 185:
After Clause 128, insert the following new clause:
Consent of Regulatory Authority to exceptions
(" —(1) Section 160 of the Pensions Scheme Act 1993 (terms of contracts of service or schemes restricting choice to be void) shall be amended as follows.
(2) In subsection (1), before "subject" there shall be inserted the words "except where the consent of the Regulatory Authority has been given to such term or rule and".").
The noble Lord said: This is a probing amendment to see whether some thought has been given to the situation regarding the private pension plans and the independent financial salesmen. By removing the regulations in the Social Security Act 1986 to make membership of an occupational personal pension scheme compulsory, the Government opened up the pensions market. The activities which have led to the mis-selling of pensions eventually led to the efforts of the Securities and Investments Board to put the matter right by reviewing each personal pension plan sold.
Section 160 of the Pension Schemes Act 1993 provides some protection against continued mis-selling while leaving the pensions market open. However, there is now some doubt about whether the SIB—the regulator—has the authority over the independent financial advisers to review the mis-selling because the independent financial advisers have now obtained a judicial review. In addition, if the independent financial advisers carry out the instructions of the PIA and write to their personal pension plan customers in the manner laid down, they may lose their insurance cover.
The purpose of this amendment is to remove the uncertainty created by this situation by authorising the Occupational Pensions Regulatory Authority (OPRA) to regulate the independent financial advisors when they are selling personal pension plans. I beg to move.
Lord Mackay of Ardbrecknish: This amendment seeks to alter law which was first introduced by the Social Security Act 1986. The provision prevents employers from making it a condition of employment that their employees must join their scheme or a personal pension scheme of the employers' choice. As a result, an individual can now choose between state and non-state schemes and between occupational and personal pensions. Employers cannot make membership compulsory.
The noble Lord, Lord Haskel, drew to the attention of the Committee reinstatement for personal pension holders who have been disadvantaged by poor selling practices. Of course, we accept that remedies should be available to those investors.
However, it is for the trustees or managers of individual schemes to decide whether or not people should be able to rejoin their occupational scheme. The Securities and Investments Board has recommended that—where possible, and the scheme is willing—people who have transferred into a personal pension from an occupational scheme as a consequence of bad advice should be reinstated in their original scheme. Public service schemes such as for teachers, nurses, and so forth, are willing to readmit employees who want to rejoin. In other cases it may be best to top up the personal pension. Whatever remedy is chosen, the costs will be borne by those responsible for the mis-selling. With that clear statement of what we expect and believe to be the position, I hope that the noble Lord will be able to withdraw his amendment.
Baroness Hollis of Heigham: Intend!
Lord Mackay of Ardbrecknish: Yes, intend.
Lord Haskel: I thank the Minister for that explanation. Obviously, it seems sensible that the trustees should decide whether pensioners or beneficiaries should be reinstated. I am not sure that my understanding of the amendment and the Minister's response are exactly related to each other. I shall read with interest in Hansard what he has said and, if necessary, I shall return to this matter at Report stage. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 129 agreed to.
Clause 130 agreed to.
Schedule 5 [Amendments relating to Part III]:
Lord Lucas Lord Lucas moved Amendment No. 186:
Page 116, line 2, at end insert:
("The Social Security Administration Act 1992 (c. 5.)
. In Schedule 4 to the Social Security Administration Act 1992 (persons employed in social security administration etc.) the entries in Part I relating to the Occupational Pensions Board are omitted.").
The noble Lord said: In moving this amendment I speak also to Amendment No. 187. These two amendments are consequential on the abolition of the Occupational Pensions Board and merely remove references to it. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187:
Page 116, line 14, at end insert:
("The Judicial Pensions and Retirement Act 1993 (c. 8.)
. In section 13(9) of the Judicial Pensions and Retirement Act 1993 (election for personal pension), in the definition of "personal pension scheme", "by the Occupational Pensions Board" is omitted.").
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187A:
Page 117, leave out lines 3 to 6.
The noble Lord said: In moving this amendment I shall speak also to Amendment No. 187F. Section 34(6) of the Pension Schemes Act 1993 allows the Occupational Pensions Board to withdraw a contracting-out certificate if it is discovered that a scheme is refusing to allow individuals over particular ages to participate. Amendment No. 187F repeals subsection (6). For salary-related contracted-out schemes the responsibility will in future be on the scheme actuary to check that there is no age-discrimination when certifying that the new quality test is met. This requirement will be prescribed either in regulations which will be under Clause 120(12A) (4) and (5) of this Bill or in a guidance note. There will be no change to the existing requirement for money purchase contracted-out schemes except that in future it will be contained in regulations under Section 9(3) (a) of the Pensions Schemes Act 1993. The power will be exercised by the Secretary of State rather than the OPB.
Amendment No. 187A removes the reference in Schedule 5 to subsection (6), which is no longer needed. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187B:
Page 118, line 9, leave out from ("following") to ("percentage") in line 10 and insert ("the definition of "minimum payment" there is substituted—
"and for the purposes of this subsection "rebate percentage" means the appropriate flat rate").
The noble Lord said: This amendment revises the definition of "minimum payment" to reflect the amount of rebate received by the contracted-out money purchase scheme member and his employer as a reduction in liability to pay national insurance contributions.
The amendment makes it clear that the definition of "minimum payment" will include only the appropriate flat rate percentage as specified by new Clause 42(A) (3) and not the whole appropriate age-related percentage. That is because the balance of the appropriate age-related percentage over the appropriate flat rate percentage will be paid over direct to the scheme by the Department of Social Security. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187C:
Page 118, line 18, at end insert:
(". In section 9 (requirements for certification), in subsection (3) "22 and" is omitted.").
The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 187D and 187E. The effect of Amendment No. 187D is to repeal Section 22 of the Pension Schemes Act 1993 which requires that the resources of contracted-out occupational pension schemes must be derived in whole or in part by payments made by the employer or the employee. From 1997 there will be no specific financial requirements concerning the resourcing of contracted-out pension schemes. There will be general rules in relation to the financing of all pension schemes. Section 22 is therefore no longer required after the principal appointed day.
Amendment No. 187C merely removes a reference to Section 22.
Amendment No. 187E .omits Section 31(1) of the Pension Schemes Act 1993, which is a power to set out requirements as regards the investment of resources of a contracted-out personal or occupational money purchase pension scheme. This power is no longer needed as the Bill contains new rules on investment which cover all occupational pension schemes. Investment rules for personal pension schemes are covered in the Financial Services Act. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187D:
Page 118, line 30, at end insert:
(". Section 22 (financing of benefits) is repealed.").
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187DA:
Page 118, line 35, after ("rights)") insert ("(a)").
The noble Lord said: In moving this amendment, I shall speak at the same time to Amendments Nos. 187DB, 187EA and 187FA. As Members of the Committee will know, the state scheme premiums which buy back protected rights into SERPS are being abolished. As a consequence there will be no further justification for the current provision whereby protected rights in the case of money purchase occupational and personal pensions can be extinguished by the payment of a premium.
Amendments Nos. 187DA and 187DB omit the relevant subsection. Amendment No. 187EA concerns Section 34 of the Pension Schemes Act 1993 which covers certification procedures. New subsection (9) (2B) sets out the conditions for contracting out. As part of the on-going monitoring arrangements for contracted

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out salary-related schemes, we will use regulations to require employers and the scheme actuary to confirm, at intervals of no more than three years, that the contracting out conditions are still being complied with.
This amendment to Section 34 is needed to make it explicit that the recertification requirement applies only to salary-related contracted-out schemes. Any change of circumstances affecting money purchase contracted-out schemes or appropriate personal pension schemes will be considered in the same way as now to see whether the contracting-out certificate is still appropriate.
Amendment No. 187FA corrects an error in paragraph 20 of Schedule 5 which refers erroneously to Section 41(3) of the Pension Schemes Act rather than to Section 42(3). I beg to move.
On Question, amendment agreed to.
5 p.m.
Lord Lucas Lord Lucas moved Amendments Nos. 187DB to 187FA:
Page 118, line 36, at end insert ("and
(b) subsection (7) is omitted").
Page 118, leave out line 40 and insert:
("( ) subsection (1) is omitted, and").
Page 118, line 47, leave out from ("(1)") to ("issued") in line 48 and insert ("for paragraph (a) there is substituted—
"(a) in the case of a contracting-out certificate—

(i) on any change of circumstances affecting the treatment of an employment as contracted-out employment, or

(ii) where the scheme is a salary related contracted-out scheme and the certificate was").

Page 119, line 7, leave out ("subsection (7) is") and insert ("subsections (6) and (7) are").
Page 119, line 34, leave out ("41") and insert ("42").
The noble Lord said: I have already spoken to these amendments. I beg to move.
On Question, amendments agreed to.
Lord Lucas Lord Lucas moved Amendment No. 187G:
Page 120, line 16, leave out sub-paragraph (c) and insert:
("( ) in subsection (5), for "55(2) (ii)" there is substituted "55(2A) (c)", and
( ) subsections (6) to (10) are omitted.").
The noble Lord said: In moving Amendment No. 187G, I should like to speak also to Amendments Nos. 187H, 187J, 187K, 188 and 189.
The effect of Amendment No. 187G is to retain Section 60(5) of the Pension Schemes Act 1993, amending the cross-reference to Section 55 from subsection (2) (ii) to subsection (2A) (c). This is to ensure that accrued rights are extinguished in all the circumstances in which a contributions equivalent payment is paid. It also repeals subsections (6) to (10) of Section 55, which are no longer relevant as they refer to Section 55(3), which is itself repealed.
Amendment No. 187H clarifies the cross-reference in Section 63(1) (b) of the Pension Schemes Act 1993. It identifies Section 58 as the relevant section.
Amendments Nos. 187J and 187K expand the scope of Sections 155 and 165 respectively of the Pension Schemes Act 1993 to include contracted-out money purchase pension schemes. The provisions will make it possible for the Secretary of State to require information from contracted-out salary-related and appropriate schemes.
Amendment No. 188 removes the reference to the Occupational Pensions Board from Section 176 of the Pension Schemes Act 1993. It replaces paragraph 42 of Schedule 5.
Amendment No. 189 corrects a duplication in the Bill as currently drafted. I beg to move.
Baroness Hollis of Heigham: I do not want to sound churlish, but is it not remarkable to have 22 government amendments following each other in an attempt to correct the drafting of the Government's own Bill? Obviously such corrections may occasionally be needed due to typing mistakes or occasional cross-references, but we are talking about 22 government amendments. The number of regulations in the Bill—200—is paralleled only by the number of the Government's amendments to their own drafting. I thought that the noble Lord might like to be made aware of that fact, if he was not already conscious of it.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendments Nos. 187H to 189:
Page 120, line 37, at end insert ("and, in subsection (1) (b), for "that section" there is substituted "section 58'"').
Page 121, line 7, leave out sub-paragraph (c) and insert:
("( ) for the words from "sections 7" to "premiums)" there is substituted "Part III").
Page 121, line 23, at end insert:
(". In section 165 (application of certain provisions to case with foreign element), in subsection (2) (a), for the words from "sections 7" to "premiums)" there is substituted "Part III"").
Page 121, leave out line 34 and insert:
(". In section 176 (fees), for "either by the Secretary of State or by the Board on his behalf" there is substituted "by the Secretary of State".").
Page 121, line 43, leave out from ("omitted") to end of line 46.
On Question, amendments agreed to.
Lord Lucas Lord Lucas moved Amendments Nos. 190 and 191:
Page 122, line 8, after ("(1)") insert ("for the words from the beginning to "make" there is substituted "Subject to subsection (2), before the Secretary of State makes" ").
Page 122, line 9, at end insert:
("( ) in subsection (2), at the end of paragraph (c) there is added—

"(d) regulations in the case of which the Secretary of State considers consultation inexpedient because of urgency, or

(e) 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 have already spoken to these amendments with Amendment No. 171. I beg to move.
On Question, amendments agreed to.
Lord Lucas Lord Lucas moved Amendment No. 191A:
Page 122, line 28, leave out paragraph 54 and insert:
(". In Schedule 6 (transitional provisions and savings), paragraph 11 is omitted.
In Schedule 9 (transitory modifications)—

(a) in paragraph 1—

(i) in the Table in sub-paragraph (1), entries (iii) to (v) are omitted,

(ii) in sub-paragraph (3), in paragraph (a) (i) of the definition of "appointed day", for "to (v)" there is substituted "and (ii)", and

(iii) in sub-paragraph (5), "or (4)" is omitted, and

(b) paragraph 4 is omitted.").

The noble Lord said: This amendment is consequential on the Government's decision not to require contracted-out salary-related occupational pension schemes to provide guaranteed minimum pensions for married women and widows who have elected to pay national insurance contributions at the reduced rate. Such women are otherwise known as "reduced rate optants". These provisions would be inappropriate under the new contracting-out arrangements and the Government signalled their intention to repeal the provisions in the White Paper Security, Equality, Choice: The Future for Pensions published last June.
Paragraph 54 of Schedule 5 to the Bill identified references in Schedule 9 to the Pension Schemes Act 1993 which needed to be omitted in the light of that decision. This amendment will remove further redundant material. I beg to move.
On Question, amendment agreed to.
Schedule 5, as amended, agreed to.
Lord Freyberg Lord Freyberg moved Amendment No. 191B:
Before Clause 131, insert the following new clause:
("War widows' pensions
. The widow of a deceased member of Her Majesty's forces whose death was adjudged to be attributable to service shall continue to be entitled to a war widows pension regardless of any subsequent change of status.").
The noble Lord said: In moving Amendment No. 191B, I should like to speak also to Amendments Nos. 191C and 191D.
The reason for these amendments is to rectify three long-standing inequities in war and service widows' pensions. It is extremely important to act now as many of the widows worst affected are over 70 years old—the majority are very much more—and the 50th anniversary of the end of the Second World War is a timely opportunity to restore their dignity and to ensure that their last years are spent living above the poverty line.
The first of these amendments, Amendment No. 191B, concerns the right of a war widow to a pension for life. At the moment, there are just under 50,000 war widows who receive a war widow's pension. They fall into two categories. Those widowed before 1973 receive the DSS war widow's pension plus a supplement that was won as a result of the 1989 parliamentary campaign. Those widowed after 1973 receive an MoD attributable forces family pension and the DSS war widow's pension but without the supplement.
The pensions are generous in themselves but come with a cruel and financially punitive sting. Both the DSS and MoD pensions are removed if a war widow remarries or is discovered cohabiting. That is particularly serious for the most elderly and for widows with small children. In the case of a widow with dependent children, should anything go wrong with her second marriage—divorce or a second bereavement—she will be left high and dry. It is unreasonable to expect a second husband to bear all the costs of the children of the first marriage, especially when he is likely to have children of his own. The DSS war widow's pension is never restored, while the MoD pension is only restored subject to an uncertain and demeaning means test. That deters most widows from applying and others from even considering remarriage. In 1993, only one in 100 war widows under the age of 60 remarried.
Such treatment is outdated and hard to reconcile with practice elsewhere. Indeed, 84 per cent. of current UK occupational schemes pay a pension for life regardless of marital status. Moreover, among comparable armed forces schemes abroad, the UK is isolated in respect of its treatment of war widows. Of the 14 schemes studied by the Officers Pension Society, eight give a pension for life. In Europe, only the UK fails to restore war widows' pensions after a second bereavement or divorce. That should not be allowed to continue.
The second amendment (Amendment No. 191C) concerns the pensions of service widows of post-retirement marriages; that is, widows who married their husbands after they had retired. At the moment, those whose husbands retired before 1978 receive no service pension. Servicemen are in a unique position. They retire far earlier than any other profession. Typically, other ranks retire at 40 years of age, while most officers retire between 45 and 55. Those are not advanced ages for marriage or remarriage, but if a serviceman who retired before 1978 marries or remarries, his years of service (typically 34 for an officer and 22 for other ranks) count for nothing so far as concerns provision for his wife. He is therefore being penalised for the age at which he has chosen to marry.
The change of regulation in 1978 allows a fraction of a pension for post-retirement widows, but only on their husband's years of service after 6th April 1978. For officers' widows, each year of service after that date earns 1/34 of his service retired pay, while for other ranks each year counts for 1/22 of his pension. Today, 16 years on from the ruling, an officer will have earned for a post-retirement wife 16/34, or half of his pension. That is slightly less than a quarter.
It will not be until 2012 that an officer who retires and then remarries will have earned the maximum half rate pension for his wife. For pre-1978 post-retirement widows —those over 70—the situation is bleak. Very many receive no pension. The amendment asks for no special privileges, only that a pre-1978 serviceman's length of service be allowed to contribute towards his wife's pension. There is virtually no problem with precedent.
In the early 1970s virtually all civil servants worked to the age of 65. The amendment will put servicemen of those years on a par with civil servants of the same

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period. It asks that, provided the serviceman's post-retirement marriage took place before his 65th birthday (the end of his recall liability) and has lasted for at least three years, his widow should be given a pension related to the number of years in the forces—a minimum of 22 for other ranks and 16 for an officer.
Of the 14 comparable armed forces schemes every one, except that of the UK, makes pension provision for widows of post-retirement marriages. A woman in Suffolk has written to me saying:
"My first husband who had paid all his life into the Widows and Orphans Fund, died aged 60 in 1969 and for 12 years I received his widow's pension".
She remarried and lost that pension. Today, if predeceased by her second husband, who had also paid into the widows and orphans fund all his life, she would receive no pension from either husband. Surely something should be done to rectify such an injustice.
My final amendment (Amendment No. 191D) seeks to rectify an unjustifiable anomaly for service widows whose husbands retired or died in service before 31st March 1973. That date marks a crucial difference to the rate of pension the widow can expect. I shall explain.
Widows of servicemen who joined the Army after 31st March 1973 automatically receive a pension of 50 per cent. of their husbands' retired pay. Widows of servicemen who joined earlier but who retired or died after that date had the option to buy into a scheme for a 50 per cent. pension for their wives. Widows whose husbands died or retired before 1973 receive only a 33 per cent. pension and had no option to buy into a higher one. That is dramatically lower than any other comparable armed forces scheme in Europe, the USA or Israel. None of those countries pays any of its service widows less than a 50 per cent. pension. In France, the figure is 50 per cent.; in the USA 55 per cent.; in Germany 60 per cent.; in Australia and Belgium up to 67 per cent.; and in the Netherlands 71 per cent. Our 33 per cent. is out of step. Do we really think so much less of the men who fought for this country's freedom? It is mean, inadequate and a disgrace.
For example, there is a widow living in Oxford whose late husband was a Fleet Air Arm pilot. He flew throughout the war, including the famous raid on the "Tirpitz" in Alten Fiord. His death at 37 of a massive heart attack while still serving as a pilot was not judged to be attributable to service, and after tax the MoD pension to which his widow is entitled amounts to £29.6 a week. Were she to receive a 50 per cent. pension (about £44 a week), she says that that extra £1,000 a year would make all the difference.
Again, it is the most elderly and vulnerable widows who are being made to suffer. Most are over 75 and many are in severe financial difficulties necessitating income support —not a cost-effective or dignified way of looking after them. My amendment proposes that their pensions be raised to 50 per cent. in line with post-1973 widows and the rest of Europe.
To conclude, most of the widows for whom the three amendments are sought watched their husbands go to war. On the Government's own figures, some 80 per cent. are over 70, with most aged between 75 and 85.
Many war widows are living lives of loneliness, dictated by the character of the pension regulations. Most service widows are in severe financial difficulty, necessitating various forms of government expenditure through income supplements. The true cost of honouring them in this victory anniversary year would be modest compared with the £5 billion saving being made by the Government through their retrospectively applied deferment of state retirement pensions for women. I beg to move.
5.15 p.m.
Baroness Seear: I support the amendments so ably and fully moved by the noble Lord, Lord Freyberg, following his most excellent maiden speech, which impressed us all so greatly. The question will be asked—this is the only objection that can be raised—as to why war widows should be treated differently from other widows. There are a large number of widows who have suffered bereavement, perhaps in industrial accidents or in pits or in a great many other ways. Why then should we treat war widows differently? That is the question that may be asked.
My mind goes back 50 years, as will the minds of many Members of the Committee. I recall a conversation with a friend who had just come off the Murmansk convoys. He made a remark—it was in no way critical of his fellow sailors —that when the chips are down and the danger is great, it is impossible for a married man not to have in his mind the idea that his wife will suffer grievously if he carries the full burden of that fight. He was not suggesting, and I am not suggesting, that in those circumstances men would be any less brave, but surely the least we can do is to see that, when they are in those circumstances, they can be fully assured that their widow, if she is to be a widow, will be looked after properly. So I am glad to support the amendments.
Baroness Faithfull: I support the amendments, and, in particular, Amendment No. 191B. The Children Act 1989 lays down that the welfare of the child is paramount. I want to speak on behalf of the children of the widows and of their fathers who were killed in war. If a war widow wants to remarry, she realises that she will have her war widow's pension taken away. If the man is single, she realises that he has to take responsibility not just for her but for the children. If he is wealthy, all well and good, but supposing he is not wealthy, supposing he is taken ill, supposing he has a job or does not have a job—these days many men are losing their jobs—then the mother will realise that financially the children will suffer. If the man she seeks to marry is a widower with children, his financial burden will be heavy. There will be his children and her children. Just let us remember what happened over the Child Support Bill, now an Act, perhaps unhappily.
If under all those circumstances the widow decides not to marry but to live on her own, she deprives her children of a steady home and a stepfather. She deprives herself of companionship.
I believe that in all the circumstances we should consider the widows of men killed in the war. I realise

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that I cannot be objective about the matter. My father was killed in France in 1916 and my mother was left a widow. She would not remarry because of losing the pension and becoming dependent on someone else, with the possibility that her children might suffer. Therefore, she lived without remarrying and I know that that was a great sorrow to her. I support the amendment.
Lord Bramall: I am in an awkward position as regards the amendment because I am a member of the steering group which, under the leadership of the noble Viscount the Lord Privy Seal, is planning on behalf of Her Majesty's Government all the official events marking the 50th anniversary of VE Day and VJ, end of war, Day. Of course the steering group has no responsibilities for war widows' pensions as such. But it is charged with ensuring that any commemorative events and the expenditure on them are appropriate and in keeping with the sentiments and the mood of the country, in particular the veterans. With that mood rightly placing considerable emphasis on the gratitude felt for the service and sacrifice that made victory possible, the plight of some war widows cannot be completely divorced from the significant sums of money being spent on commemoration and, this time, on celebration. While on the one hand I have some representational responsibilities to the veterans, I do not wish to be too critical of any government action in relation to this anniversary, for which I and my colleagues on the steering group are prepared to take full collective responsibility. At the same time, fairness compels me to say that I agree so much with what was said by my noble friend Lord Freyberg in putting forward his important amendment to the Pensions Bill.
The whole subject is immensely complex because there are many different categories and degrees of hardship in a system which in principle and in practice is full of the most appalling and absurd anomalies. At this stage I need only remind the Committee that, because of the way in which war and service widows' pensions are paid in practice, a large number of elderly widows, many over the age of 75, are in severe financial difficulties. Surely in this 50th anniversary year of all years there is a golden and perhaps unique opportunity to improve the discreditable situation. After all, one of the main themes of the end-of-war commemoration, which is fully endorsed by the Prime Minister, is that of tribute and promise. There will be a tribute to those who served and suffered and a promise that those who did so and their families will he supported while that is necessary and encouraged to live out their lives in dignity. That pledge is essentially one made by the veterans, the associated voluntary organisations and, it is to be hoped, the younger generation. It involves no commitment on the part of the Government.
However, this year would provide a wonderful opportunity to make some gesture towards saying that at least war widows and those whose husbands' deaths were attributable to active service would never have their pensions removed from them and that an entitled service widow whose husband retired or died before March 1973, as many of the World War II generation did. should in future have the same half-rate pension as is currently available.
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Surely, this is an occasion for Ministers to show some imaginative spark of compassion and common sense which will capture the spirit of the moment and reflect the pulse of the veterans, rather than meekly harkening to Scrooge-like counselling ever reminding them of the dangers of precedent, the impossibility of retrospection—which governments are prepared to break when it suits them—or our inability to afford such gestures. No doubt that claim is insisted upon by the Treasury, whose policies between 1926 and 1938 we should never forget all but lost us that war. Now, thanks to so much sacrifice, we are able to remember its successful outcome with pride and gratitude.
I urge the Government to take heed of the amendment tabled by my noble friend Lord Freyberg. I urge them fittingly to mark this unique occasion by a significant gesture in the pension field, in particular as regards war widows. That would probably be more appreciated by the veterans than anything else that is being done to mark the 50th anniversary. I suspect that it will also be appreciated by the rest of the country, which will not be too enamoured by the thought of significant sums of money being spent, however sensibly, on commemoration and celebration when the widows of those who made the victory possible are still seen to be suffering.
Lady Saltoun of Abernethy: I am glad that I gave way to the noble and gallant Lord, Lord Bramall, and was able to hear his speech before speaking myself. I, too, support the three amendments tabled by the noble Lord, Lord Freyberg, but I wish to comment in particular on Amendment No. 191B.
A widow on remarriage, or if it is proved to the satisfaction of the DSS or MoD that she is cohabiting, will lose her pension. Few widows remarry because they are afraid of losing their pension and finding themselves in financial straits later on in life. That can happen, however well-off the proposed partner may be. Therefore, the Government would find their expenditure very little higher if they did the decent thing and allowed such widows to keep their pensions on remarriage. That would enable those women to find renewed happiness without the fear of financial stringency. In any event, having equalised the retirement age for men and women at 65, the Government will in a few years be making considerable savings and will be perfectly well able to afford to do that.
I do not know how much the Government are proposing to spend on the celebrations of the 50th anniversary of the end of the Second World War. But as I am not involved in those arrangements I can say what I like. I do not know what the Government propose to spend on feasting and fireworks, but to spend money on such things while maintaining that they cannot afford to abolish this wicked rule is utterly wrong.
Whatever the cost, this is a wrong which should be righted, however late in the day. And as for the weasely argument which I fear I may hear that it would be retrospective, perhaps I may say that the Government have never hesitated to legislate retrospectively when it suited them. To impose a burden retrospectively must be wrong but to right a wrong retrospectively must be right.

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War widows are not in the same category as other widows. They are the widows of men who lost their lives as a result of service in the Armed Forces. It is thanks to such men that we are able to celebrate the 50th anniversary of the end of the Second World War. Their widows cannot be in the same category as the widows of people who died in an industrial accident.
The treatment of war widows in this country since the Second World War by all governments, regardless of party, has, I am sorry to say, been one of the meanest, shabbiest, most shameful pieces of ingratitude ever perpetrated in a civilised country. I call upon the Government to take this unique opportunity, as was said by the noble and gallant Lord, Lord Bramall, and to accept these amendments, rectify a grievous wrong and give the war widows of this country something to celebrate at last.
5.30 p.m.
Lord Carver: I strongly support all three amendments proposed by my noble friend Lord Freyberg. He has explained clearly the reasoning behind the amendments, and the emotion provoked by them has been expressed forcefully by my noble and gallant friend Lord Bramall.
Whether it is looked at from the point of view of need or equity—that is, equity between one widow and another, equity within the Armed Forces or equity between the Armed Forces and other professions—or whether it is looked at from the point of view of comparison with other nations, there can be no doubt whatever that the amendments should be accepted by the Government.
When these matters have been discussed on previous occasions, the only reason ever given for not taking the course proposed is that it would cost a lot of money. It has always been impossible for the Government, whichever department is concerned, to argue against the need. This time, for heaven's sake, let the Government put their hand in their pocket, which they do for other things. As the noble and gallant Lord, Lord Bramall, said, on this occasion we are remembering the men who died and the women who were left behind. Let the Government be generous for once.
Lord Boyd-Carpenter: There could not be a more appropriate occasion for making a spectacular improvement for war widows than this year when we are celebrating—and I use that word deliberately—the 50th anniversary of our victory in the war.
I am sure that it would have a great appeal to the British public to know that in that way, rather than in formal celebrations, we are marking our gratitude to those who died and those who lost their husbands during the obtaining of those victories. The noble and gallant Lords opposite spoke with very great authority on this matter. I am sure that the Committee will wish to pay great attention to them.
There is no doubt that the proposed new clauses will cost a certain amount of money. But, on the other hand, they are different from almost any other improvement
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in benefits of one kind or another because, whereas most improved benefits increase in cost, these benefits will diminish.
As has been said, most of the widows concerned are of a mature age and therefore, sadly, the tendency will be for the costs to reduce. One can distinguish that particular social improvement from any others which one can mention. I hope that the Government will take this matter very seriously. The noble Lord, Lord Freyberg, made an admirable speech following his admirable maiden speech which your Lordships greatly appreciated. The fact that these proposals are made by someone from the age group of the noble Lord, Lord Freyberg, is rather impressive, far more impressive than the fact that they are supported by people in my own age category.
Therefore, the Minister must realise that there is very strong feeling about this. The Government have an opportunity to do something which will strike at and stimulate the imagination of the British people. The British people will approve of the Government taking a step which does justice to a section of society which has lost the most important thing of all. To have lost one's husband or wife in the service of one's country is the most terrible penalty. The fact that at this 50th anniversary, we are making some provision—I hope, ample provision—to help them will, I am sure, be widely appreciated by the British people. I beg the Government not to put this matter aside. I beg them to realise that this is a very serious matter which will move the opinion of the people of this country perhaps more dramatically and drastically than any other step which they could take.
Baroness Nicol: As vice-president of the War Widows Association, I strongly support all three amendments. The question which the noble Baroness, Lady Seear, has had put to her has also been put to me. I have been asked why service widows should be treated differently. My answer is that the life of a service wife is very different. She is obliged to move house frequently. She is unable to put down roots, to build a career or even to obtain a job of sufficient status to build up her own pension rights. That is becoming more important as the system moves away from state pensions and towards personal pension provision. She may have to travel abroad when her husband is stationed away or alternatively, she may have to spend long periods alone coping with family problems. The wife of a middle-ranking or senior officer or a senior NCO is expected to support her husband in his career. She becomes an unpaid social worker to other wives. That is expected of her.
Whenever the armed services are discussed in this Chamber, whether at Question Time or in longer debates, there is much interest and many speeches are made about how we should value our servicemen. As others have said, surely the most tangible way in which to record our appreciation would be by ensuring that those men have the comfort of knowing that in the event of their death, their bereaved wives would be adequately and permanently compensated. I strongly urge the Government to accept the amendments.
Lord Dean of Harptree: I declare an interest as a war pensioner. I am extremely grateful for my war pension and I am even more grateful for the fact that

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the Inland Revenue cannot get at it because it is tax free. I am sure that all Members of the Committee would agree, as has been stated already, that we should give special priority to war widows and that they should receive a higher rate of pension than other widows.
In recognising that fact, we must also take into account the needs of other widows. One of the matters which strikes me about the first amendment moved by the noble Lord, Lord Freyberg—Amendment No. 191B—is that it deals only with war widows. It does not deal with other widows. I dislike intensely the withdrawal of all pensions on remarriage. That seems to me to be a relic of a past age. It is out of tune with modern thinking and the sooner we can be rid of that, the better. However, we must consider other widows in the public sector because they are all affected by that same restriction: that the pension is withdrawn on remarriage. For example, what about the widow of a policeman? Is she to be excluded from the provisions while war widows are included? What about the widow of a fireman? He does a very difficult job and it may well be that he dies young. What about the widow of a doctor?
I hope that the time will come when my noble friend will be able to assure the Committee that those restrictions can be removed from the public sector as a whole. But I am doubtful whether it is wise to remove it just for war widows, in spite of the fact that they are in a category which commands the sympathy of us all.
If the Government do not feel able to agree to get rid of all the restrictions throughout the whole of the public sector, it seems to me that it would be far better to concentrate on really generous increases in war widows' pensions. That would benefit all war widows, particularly in this 50th anniversary year.
Lord Chalfont: I support the amendment moved so ably by my noble friend Lord Freyberg. However, I should like to speak briefly to Amendment No. 191B, upon which I feel very strongly. That amendment deals with the removal of a pension from a widow if she remarries or, if she is not willing to remarry, cohabits while she is still a widow.
That seems to me to be a harsh and even cruel procedure and one which I hope the Government will see fit to look at very closely. There has been a certain amount of discussion already as to why we should make the provision only for war widows and what is different about their case as opposed to other cases. There is a very simple answer to that. Sometimes it is known as the unlimited liability. By the very nature of his profession, a soldier, sailor or airman is risking his life—that is, the asset which he brings to his profession. It is his life that is at stake when he goes about the business of his profession. I believe that that is one of the major differences.
That also leads to another point which should be made; namely, that war widows of soldiers, sailors and airmen killed in action, tend to be young because the husbands whom they have lost tend to be young. Soldiers killed in action are, by the very nature of their profession, usually fairly young men. Therefore, when they leave their widows behind, they leave them with a
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long life in front of them. The only recompense and tribute that war widows have to the life that has been lost is their pension. Yet, as things stand at present, we take that away if there is, as the legislation so dryly puts it, "a change in status".
I should like Members of the Committee to contemplate what that change in status actually means and ask themselves whether the pension of a serviceman's wife, especially that of a war widow, should not be regarded as a lifelong entitlement and not something to be arbitrarily removed; and certainly not something to be subjected at some stage to the demoralising process of means testing.
The effect of the current system is to discourage war widows—who are sometimes, as I said, quite young—from remarrying. They fear that they will lose the only financial support that they have. Therefore, some of them choose, as the language has it, to cohabit; in other words, to live with someone without marrying. But if such women seek the kind of comfort and the kind of companionship that marriage can bring—and it is sometimes the only course open to them—and are discovered to be cohabiting, the pension is, again, arbitrarily removed. Let us not forget the ever-present whistle blower: the person who goes and tells the official that the woman is living with someone else.
The latter gives rise not just to the harshness of the application of the law, but also to ludicrous rulings from officials about what constitutes cohabitation. For example, I have heard people trying to describe it as being a matter of days which one spends under the same roof with someone else and even a question of whether those days are during the week or at the weekend. What an extraordinary way to deal with someone's life.
I am sure that there is no one in the Government who can be happy with the present state of affairs. I do not dismiss arguments about cost or about retrospection. I believe that they are real arguments and that the Government are right to put them forward. However, I put it to the Government that here we have an inequity, a harshness, and, as I said before, even a cruelty which they ought to be prepared to put right, even at the risk of retrospection and even at some considerable cost. I support the amendments.
Lord Elton: I trust that Members of the Committee will permit a very brief intervention on the third of the amendments. I am in favour of all of them, but the third amendment actually addresses a point of straight equity in my view. It has been suggested that the 1973 watershed is defensible because officers serving at the time were able to choose to buy back the right for their wives, when they were widowed, to receive half the pension that they had received during their lifetime after retirement. Some officers opted to do so, while others did not. Therefore, it is suggested that none should now benefit from a change in the law. However, that overlooks the fact that an officer who retired long before 1973 was not given that option. His widow has never had the chance of receiving such a benefit.
In this day and age when we have to declare the most tangential interest, I have to say that I had a second cousin who retired as an air vice-marshall in about 1959

1077
and who died last year. His widow is now receiving one-third rather than one-half of his pension. Had he lived and served longer beyond the permitted age, he would have had a chance of buying in; but he did not. It is a question of equity. I hope that my noble friend the Minister will be able to make some gesture in the direction of restoring equity. Otherwise, I shall find it impossible to agree with him on the issue.
5.45 p.m.
Baroness Dean of Thornton-le-Fylde: I, too, support the amendments. However, I should like to speak especially to Amendment No. 191B. I should first declare an interest, but it is not a pecuniary one. Until recently, I was a member of the Armed Forces Pay Review Body. That gave me the privilege of seeing close at hand the work that our service personnel carry out in such a committed and loyal way. It also gave me the opportunity to talk to them and their wives during the many visits that we made during the course of our work.
I hope that the Minister will accept the amendments today with good grace. How much better that that should happen than, perhaps, the Government having to do a "U" turn in the future because public opinion forces it upon them. How timely that it should happen this year.
I know that some people say, "Well, of course, the dichotomy that we have is that when a war widow remarries she in fact loses her public service pension". Indeed, the noble Lord, Lord Dean of Harptree, mentioned that fact and the issue of policeman, firefighters and public sector workers. That is an issue which we raised from these Benches yesterday and asked the Government to look into. Unfortunately, but not too unexpectedly, the Government turned their face against it. I hope that that will not be used as an argument today to turn down what I would call a reasonable request.
The question has been put regarding the difference between a widow who was widowed because her husband was killed at war and the widow of an industrial worker who was killed in industry. It is difficult if not impossible to balance that kind of question; but there is a difference. The difference is that, in most cases, the widow of an industrial worker would receive a pension for life and would not lose it under the occupational pension to which her husband had contributed should she remarry. However, war widows automatically lose their pension in such circumstances.
We should also bear in mind the fact that our service personnel are young; indeed, many of them were young when they gave their lives in the service of our country. Some people say that that is an emotive argument. Yes, it is. If there were no emotion in the argument, I would suggest that we were a pretty cold-hearted nation. There has to be some emotion involved; but it is backed up by logic, justice, standards and the kind of way that we value those people who gave their lives in the service of their country.
We must also bear in mind that young men who left young widows often left them to bring up very young children. Are we seriously saying that the nation expects
1078
such women to go through the rest of their lives alone, bringing up a family, only to pay the price, if society finds out, of losing their widows' pension if they seek companionship through living with someone else. Yet if those widows took the moral course that most Members of this Chamber would expect, they would pay the price of losing their widows' pension.
This year is an important year. Of course costs are always a factor. However, I do not think they should weigh sufficiently in this argument for us to say that we can do nothing. I support these amendments and particularly Amendment No. 191B. Surely we can do something this year of all years to ensure that we treat the war widows fairly. They do not have their husbands to talk and argue for them.
I doubt very much that any one of those young men who gave their lives even thought that the country would do anything less than the right thing. The right thing has to be to meet the responsibilities that we have as a nation in paying these war widows their pension and ensuring, if they are lucky enough to marry again, that they do not lose their pension, and—the Government may decide that they will not go that far—if the second marriage does not work out or if the women become widowed again, that their pension should be given back to them. Something has to be done. I support all the contributions in this worthwhile debate.
Lord Brookes: The amendments address the obligations, the honour of patriotism and of blood freely, nobly and gallantly given. Such debts and such obligations are not diminished and are not eroded by time. Time is with us tonight. Let a Government, who I believe will want to respond to reason, to honour and to duty, act now.
Baroness Park of Monmouth: I, too, should, like to support the amendments of the noble Lord, Lord Freyberg, very strongly. Successive defence reviews from Options for Change right through to Front Line First have had much to say about equipment, armaments, weapons, capacity for defence and men and women as resources, and all too little so far about morale, incentives for recruitment in the future and what holds the services together—tradition, pride and the sense of being valued. It is vital that service widows should retain their pension for life rather than forfeit those in many cases far from generous pensions if they get a second chance to marry. It is surely bad enough that the pension itself is far lower as a proportion of the husband's service retired pay or pension than in a dozen other countries. I shall not give details as they have already been given.
If the Government want to send a further signal to confirm the low esteem and value which in the eyes of many in the services they place on service to the country by rejecting this amendment, I feel that that would be a grave mistake. I do not think the Government have begun to take in the quite widespread feeling of rejection and the feeling that the country thinks of the forces solely in terms of perks and so-called empty ceremonial. That is contributing to low morale within the services and will certainly affect future recruitment.

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The Government believe in value for money. Let them recognise the equal importance of money for value. Service widows have a special claim on decent and equitable treatment and the means to lead a normal life with normal access to companionship and happiness. I hope the country will do the honourable thing and agree to these proposals.
Viscount Slim: I see no reason why there should not be a special clause for war widows. I am afraid I take issue with the noble Lord who wanted to generalise the matter. I am sad that Her Majesty's Government have not come forward with a gesture already in this particular year. That would have been strategically sensible. Every government need all the friends they can get, and this one particularly so perhaps.
I hope that the Minister will listen to what has been said today—I shall not repeat the arguments—and I hope the Government will come forward with something now. It would not cost much. The widows are dying every day. The Minister is aware that I have an interest in this subject through my business helping charities and veterans' associations. I would say to the Government of the day, "Here is your chance". Here is the time for the Government to do something that will be recognised throughout the country as the proper gesture in this particular year of commemoration so that the war widow will be remembered and made safe for ever.
Lord Boardman: My wife (whom I married happily 46 years ago) was then a war widow. I therefore consider that if the House should divide on these amendments I would be precluded from taking part in any such Division. The purpose of my intervention is merely to place on record that such an abstention would not be for any lack of support for the amendments that have been so ably moved and which I fully endorse.
Lord Craig of Radley: I rise to support the three amendments which have been so ably moved by the noble Lord, Lord Freyberg. In particular, I wish to speak to Amendment No. 191B. The merits of the case have been well argued on moral and humanitarian grounds; on grounds of equity; and on grounds of comparison with other countries. This surely is a good case. There are not too many war widows and the measure should not cost too much. If the Government are worried that a low cost settlement today could become expensive if we were ever to be involved in another major conflict, all I say is that the cost of that conflict would make the cost of war widows' pensions following it shrink into very small sums.
War widows who seek renewed happiness and companionship are faced with a difficult dilemma. It is indeed impossible for them to get a proper definition of cohabitation, as the noble Lord, Lord Chalfont, has explained. I was amazed when looking at the figures to note the cost to the taxpayer of war widows who feel that they cannot remarry or cohabit. Take the case of a young 25 year-old widow with children, a widow perhaps of the Gulf War. At the time of her bereavement she will receive an MoD attributable pension, index linked and taxable, plus a DSS war widows' pension, index linked but not taxable. If she decides to remain single and lives to the age of 80—assuming an inflation
1080
of 4 per cent. per annum—she will have cost the DSS budget alone in the region of £800,000. If the widow were persuaded, or decided to remarry, she would receive a lump sum payment of one year's pension from the DSS and no further right to claim a DSS war widows' pension, whatever her circumstances.
The average number of war widows in this category created year by year is between only 40 and 50. At present few remarry but most are reluctant because they fear for their future security and they fear possible poverty. If they could be assured that they would retain their Armed Forces pension, more perhaps would take the step, and the saving to the DSS budget could be very large indeed. The Armed Forces attributable pension should be seen, I believe, as compensation and therefore not be withdrawn. The contributions have been paid not only in financial terms through the pay packet but also in the loss of life of the servicemen and in the sacrifices made by the service wife and widow. Thus the constraints made on widows wishing to remarry are not only seen as an injustice and deeply resented but also are not cost effective. We have before us a Bill to amend the law on pensions. Surely this is now the time to amend these difficulties.
Viscount Montgomery of Alamein: I feel that I, too, should intervene briefly in this debate for the fairly obvious reason of the name that I bear. But on this occasion I have another reason in that my mother was widowed in World War I. Her husband was killed at Gallipoli, and some 12 years later she made the rather extraordinary decision to forfeit her rather modest pension to marry my father—a fact for which I must be eternally grateful because otherwise I would not be able to speak here this evening.
The arguments have been put forcefully in this Chamber by Members of the Committee who have spoken. The amendments put forward by the noble Lord, Lord Freyberg, are worthy of support.
Lord Palmer: After the moving speeches we have heard I do not believe that the Government have a moral leg upon which they can stand, particularly if one thinks of pensions awarded to civil servants. The Government are on record as saying that they are a caring government. Let us hope and pray that tonight we will see full evidence of that caring.
6 p.m.
Lord Mackay of Ardbrecknish: I feel a little like the spectre at the feast. Never mind. It is not the first time, and I expect it will not be the last. I have little doubt that some of my noble friends and other Members of the Committee who have spoken in the debate understand well the position in which I find myself, because I presume that when they had responsibility for this issue, either directly because they were in my department or indirectly as members of the government, they defended the position taken by their government—whichever it was. No doubt that was similar to mine this evening.
First, I should like to make the position clear because, although I do not suppose that anybody intended it, there was some wandering between two quite different

1081
pension schemes during the course of the debate. We are talking about two separate provisions. Each of the three amendments stands alone. They address quite different problems and two different schemes. The first proposed new clause addresses the Department of Social Security's war widows pension scheme, which is related to the rather larger scheme we run for war disabled servicemen. The other two new clauses refer to the Armed Forces pension scheme, which is the occupational pension scheme for servicemen and servicewomen. I should like to address the two schemes and each of the amendments separately.
Amendment No. 191B seeks to amend war pensions legislation so that a widow may continue to receive a war widow's pension even if she remarries. It has always been the case that the very preferential DSS war widows' pension is awarded for the maintenance of the widow of a man whose death is attributable to service in the Armed Forces, not only in warfare but when serving as a member of the Armed Forces. That applies if he dies due to an accident, disability or disease contracted due to his service in the Armed Forces. In those circumstances a war widow's pension will be paid. Therefore, the death does not have to be due to war or even to active service. The rationale behind the pension is to assist with the loss of support a widow could have expected from her late husband. The pension is not in any way intended to compensate for his loss.
Remarriage alters the widow's status. She is no longer a widow and, as a consequence, her war widow's pension is withdrawn. A gratuity equivalent to one year's pension is awarded, which for many war widows would be about £7,000. Should she be unfortunate enough to be widowed again there is, as has been pointed out, no provision under the war pensions scheme for the restoration of the pension. Like other widows, there is the provision for widows in those circumstances to look to the social security system for support.
I said that I thought that I was being cast as the spectre at the feast. While Members of the Committee may say that the Government are less generous than they ought to be, nobody should be left with the view that the DSS war widows pension scheme is other than generous. I am grateful to a number of speakers, including the noble Lord, Lord Freyberg, who pointed that out. Our disagreement relates to issues outside the payments involved.
It may be worth my while reminding the Committee that the war widows' tax free pension paid currently to most war widows is £140 a week. That is more than double the basic national insurance widows' pension, which is £57.60. There is the additional difference that the basic widows' pension is taxable income, whereas war widows receive their pensions tax free. If my arithmetic is right, that is equivalent to £178.50.
Over the past few years we have taken steps to improve the position of war widows. For example, the real value of war widows' pensions has been fully maintained in the uprating statements in line with RPI. As I mentioned earlier, the war widows' pension was made completely tax free in 1979. Previously half of it
1082
was taxable. The war widows' age allowance was significantly improved in 1984 with extra help for those over the age of 80. MoD special payments of £40 a week for pre-1973 war widows were introduced in April 1990, tax free and completely disregarded for income-related benefits. That was uprated to £48.70 and is an important part of the £140 a week tax free payment I have mentioned. In addition, £10 of the basic war widows' pension is disregarded in claims for income-related benefits, and local authorities have discretion under their local schemes to disregard more than that sum in claims for housing and council tax benefit.
My predecessor before I took over this job, my noble friend Lord Astor, announced extra money for British widows with New Zealand war widows' pensions, who were found to be badly off, and some Northern Ireland war widows. That change was announced on 23rd June last year and took effect from October last year.
I would not like anybody to be left with the idea that we are not mindful of the position of war widows and the special way in which we ought to treat them. I hope that by indicating briefly what we have done since 1979 I have demonstrated that we are mindful of that and have reacted. I hope that no Member of the Committee will accuse us of being Scrooge-like because those are fairly generous provisions. Indeed, exceptionally, a war widow is also able to receive a retirement pension based on her own contributions without any diminution in her war widow's pension. That would increase her income to nearly £200 a week, irrespective of any other resources she may have.
Amendment No. 191B proposes that the law should be changed to permit that very preferential pension to continue for life, regardless of any change in the widow's marital status. Even if that were justified—and I believe strongly that it is not justified—it would be very expensive. We know that since 1939 about 90,000 war widows have remarried. We do not know how many are still living and would claim restoration of their pension but, with the help of actuaries looking at life expectancy of people in that group and so on, we have estimated that the cost could be of the order of £60 million a year. "Small beer", I hear some noble Lords say. Those who have taken part in the debate who have been involved in government know the competing demands from that group and from other groups on governments and on taxpayers, who are always reluctant to pay even higher taxes. There is no bottomless pension pit. I do not suppose that anybody believes that there is.
We fully appreciate the sacrifice that the late husbands of these widows made on behalf of their country. We have ensured that the rate of the war widows' pension fully recognises those circumstances. That is no more than the country or the Committee would expect while the state of war widowhood remains. However, to continue to pay this very preferential pension when a war widow has remarried and either still has or has had the support of a second husband is neither justified nor fair to the widow who loses her national insurance widow's pension on remarriage. And it would be totally regardless of the

1083
income and wealth of the second husband and, in the event of widowhood again, the pension and other assets left to her by him.
As the debate has clearly shown, this is a difficult and emotive area. We have to strike the right balance and I believe that we have done that. Bearing in mind the original rationale behind the provisions for the war widows' pension, we see no justification for amending the legislation so that the pension may be received after remarriage when the widow is no longer a widow.
I turn to the other two new clauses which address, and would make changes in, the provisions of the Armed Forces pension scheme. Here we are discussing an occupational pension scheme similar in character to other public service schemes and broadly subject to the same principles, although with markedly different terms and benefits. My noble friend Lord Dean of Harptree drew attention to the fact that the characteristics complained of by the noble Lord, Lord Freyberg, in both new clauses are in fact common to other public service schemes. I think it might be helpful if I explain how the current Armed Forces pension scheme actually works.
Service personnel do not have a monthly deduction on their payslip for superannuation, as many other people do. However, their rates of pay are abated—currently by 9 per cent.—to take account of the pension benefits so that in any comparison with outside earnings that abatement is brought into play to look at the total earnings of servicemen. The minimum term for an immediate benefit—in other words, an immediate pension—for an officer is 16 years' reckonable service, and for other ranks 22 years' reckonable service. At that point or thereafter up to 55 years of age, the serviceman can retire on an immediate pension, not uprated until 55, then uprated in full to account for the intervening years, then uprated annually thereafter. Those who do not qualify for an immediate pension because they do not have that length of service are treated in the same way as other deferred pensioners and receive a pension depending on rank and years of service at the age of 60. Widows and widowers are treated similarly and are eligible for a pension of one-half the spouse's rate. This provision includes those who marry after retirement.
That is the current position, but, like all pension schemes, these improvements have been introduced over the years and count only for service after the date of introduction. If retrospection is made available it is done on the basis of the person "buying back" some or all of the preceding years.
In order to comply with the Social Security Pensions Act 1975, provision was made in the Armed Forces pension scheme for the payment of pensions to widows of service pensioners who married (or re-married) after retirement. I believe that this is the issue which the third new clause addresses. But this change benefits only the widows of those giving service on or after 6th April 1978 and only service on or after that date is taken into account when calculating the level of pension due. Thus, in time, as the entitlement extends over the years, the wives of those sevicemen who married after their retirement will increasingly come to share the same rights on widowhood as other service wives. Like the
1084
Armed Forces pension scheme, other public service schemes also now provide for widows' pensions where the marriage has taken place after retirement.
Before the introduction of improvements in the early 1970s, public service pension schemes provided for an eligible widow to receive a pension at one-third of the rate of her husband's own pension. The proportion was increased to one half; for the Armed Forces pension scheme the operative date was 31st March 1973. Coupled with the change, which applied to service given from that date, opportunities were provided for those serving on or after that date to make direct contributions so as to qualify previous service for half rate widows' pensions also. For those who did not choose to contribute, previous service continued to count at one-third rate and subsequent service counted at one-half rate. I am sure that some noble and gallant Members of the Committee, having been given that option and being sensible men, took it and bought in the years prior to 1973. But some probably decided for a variety of reasons that they did not wish to do so.
The principle of non-retrospection is fundamental to the issue of not extending the option to "buy in" to those who have already left the service—those who had left before 1973. The "buy in" opportunities given to those serving on that date in 1973 were at rates which were actuarially assessed. Similar arrangements applied in other public service schemes which made the change at about the same time. A "buy in" for those who are ineligible would be a clear breach of non-restrospection, since it would apply new provisions to those who had retired before the operative date. I almost said the "actuarial date" but the two are related because, if those persons are no longer active members of the scheme, they cannot be asked to buy in.
The option for members of the Armed Forces serving on or after 31st March 1973 to buy in their previous service if they wished would in itself make it impossible in equity to extend the half rate pension to widows whose husbands had left the service before that date and who had not, as a result, contributed financially towards the improvement. That would also apply to those serving on that date who chose not to buy in.
When it comes to the remarriage of a widow, the Armed Forces pension scheme, like other public service schemes, ceases to pay. On subsequent divorce or re-widowhood, a simple test is applied by the Armed Forces pension scheme. It is not a complicated means test. It is simple: has the second widowhood left the widow better or worse off than if she had not remarried? If worse off, then the Armed Forces pension scheme widow's pension is restored in full.
Therefore the second and third new clauses would make considerable changes to the normal rules governing all public service pension schemes. The costs to the Armed Forces pension scheme would be considerable. However, the read-across to other public service schemes would impose very substantial additional burdens on the taxpayer. As I have said, it would be very unfair to those who bought in years prior to 1973 to give their widows one-half pension if those

1085
who chose not to do so were now to be given, if I may use the word, a "free" improvement. And re-opening the buy in is not practical.
All of us in occupational pension schemes—that is what the Armed Forces pension scheme is—know and accept that improvements made either after we leave or during our service are not backdated. I urge the Committee not to break that important principle when it comes to the second and third new clauses before us.
On the first new clause, I simply reiterate the arguments I made about the generosity of the scheme and the very considerable amount of concern and detail that we in the Department of Social Security and, I know, my noble friend Lord Henley and his colleagues in the MoD give to making sure that we have a fair and equitable scheme.
I believe that in both the DSS scheme and in the Armed Forces pension scheme we have a fair and equitable scheme. It is clear from the speeches that everyone understands the emotive reasons underlying wanting to make the changes. However, I believe that they are not sensible when considered across the broad aspect of public policy and when considering the generosity of the schemes themselves. I hope that, when he reflects on what I said, the noble Lord, Lord Freyberg, will be able to withdraw his new clauses.
6.15 p.m.
Baroness Jeger: Before the noble Lord sits down, perhaps I may speak from personal experience. After all we had been through, it was difficult for many of us to be told on remarriage that we would lose our pension if we were under 60 when we remarried again. That is an awful penalty on all widows. Many of us were in that age group when, unhappily, we were widowed. We then remarried, accepting that we had to abandon our war widow's pension. However, if we remarry, and the husband then dies, we are told that if we are under 60 we cannot reinstate the pension. What is left for us?
Lord Mackay of Ardbrecknish: I tried to answer those points in my speech and I do not wish to go over them all again. In the DSS scheme, the widows' pension exists in order to help maintain the widow who has lost her husband. When she remarries, she ceases to be a widow. That is the principle on which the scheme has been run for many years, under successive Governments, Ministers, Under-Secretaries, Ministers of State and government supporters of whichever party. I invite the Committee to consider that we would do better to leave the matter as it is, given the generosity of the whole scheme to existing war widows.
Lord Freyberg: I am grateful to those who have taken part in the debate on my amendments. I thank them for their useful and heartfelt contributions. I am disappointed in the Minister's reply and should like to come back on one or two points which he made.
I wish to respond to his statement that war widows' pensions are intended not as compensation but for maintenance. It is not enough to treat a war widow generously only when she is single; she is considering
1086
remarriage precisely because her husband was killed in the service of his country. The only solution is to accept that war widows' pensions should be regarded as compensation and never removed.
It is also true that on a widow's remarriage, the DSS awards each widow a gratuity equivalent to one year's pension. For some widows, that amounts to £7,000, but for the vast majority who married before 1973, the payment was as little as £250. I entirely agree with the Minister that generous provisions are made for war widows, but the £7,000 per annum is nowhere near what their husbands would have expected, had they lived.
On costs, the Minister claims that restoring a DSS war widow's pension to all widows who have remarried since 1939 would have cost £60 million a year. With respect, that is only part of the story. On remarriage, post-1973 war widows would retain only their MoD attributable forces family pension and not their DSS war widows' pension. That would lead to significant DSS pension savings.
Finally, according to the Government's figures, 80 per cent. of war widows are over the age of 70, with some 1,300 dying per year. Awarding them a pension for life is not a long-term or permanent commitment. I do not accept that on remarriage a war widow should forfeit all her rights as the widow of a man who has died for his country. I therefore feel compelled to test the opinion of the Committee. I commend the amendment.
6.22 p.m.
On Question, Whether the said amendment (No.191B) shall be agreed to?
Their Lordships divided: Contents, 124; Not-Contents, 131.

Division No. 1

CONTENTS

Acton, L.

Dean of Beswick, L.

Addington, L.

Dean of Thornton-le-Fylde, B

Airedale, L.

Derwent, L.

Aldenham, L.

Dormand of Easington, L.

Allenby of Megiddo, V.

Dormer, L.

Ashbourne, L.

Dubs, L.

Bancroft, L.

Elis-Thomas, L.

Bath, M.

Ennals, L.

Blyth, L.

Erroll, E.

Boyd-Carpenter, L.

Ezra, L.

Bramall, L.

Faithfull, B.

Bridges, L.

Falkland, V.

Brightman, L.

Fanshawe of Richmond, L.

Brookeborough, V.

Farrington of Ribbleton, B.

Brookes, L.

Feversham, L.

Carmichael of Kelvingrove, L.

Fisher of Rednal, B.

Carnarvon, E

Freyberg, L. [Teller.]

Carver, L.

Gainsborough, E.

Chalfont, L.

Geraint, L.

Chapple, L.

Gilmour of Craigmillar, L.

Chichester, Bp.

Gladwin of Clee, L.

Chorley, L.

Gould of Potternewton, B.

Cocks of Hartcliffe, L.

Gray, L.

Coleridge, L.

Grey, E.

Congleton, L.

Halsbury, E

Craig of Radley, L.

Hamwee, B.

Craigavon, V.

Harris of Greenwich, L.

Cross, V.

Haskel, L.

Darcy (de Knayth), B.

Henderson of Brompton, L.

David, B.

Henniker, L.

1087

Hilton of Eggardon, B.

Nelson, E.

Holme of Cheltenham, L.

Nicol, B.

Hooson, L.

Palmer, L.

Howie of Troon, L.

Park of Monmouth, B.

Hughes, L.

Parry, L.

Hylton, L.

Pearson of Rannoch, L.

Hylton-Foster, B.

Rennell, L.

Jeffreys, L.

Ritchie of Dundee, L.

Jeger, B.

Rochester, L.

Jenkins of Hillhead, L.

Rodgers of Quarry Bank, L.

Kennet, L.

Saltoun of Abernethy, Ly.

Keyes, L.

Seear, B. [Teller.]

Kinloss, Ly.

Sefton of Garston, L.

Kirkhill, L.

Shannon, E.

Kitchener, E.

Shaughnessy, L.

Lawrence, L.

Simon of Glaisdale, L.

Liverpool, E.

Simon, V.

Lockwood, B.

Slim, V.

Lytton, E.

St. Davids, V.

Macaulay of Bragar, L.

Strabolgi, L.

Mar and Kellie, E

Strafford, E.

McAlpine of West Green, L.

Swinfen, L.

McConnell, L.

Thomson of Monifieth, L.

McGregor of Durris, L.

Thurlow, L.

McNair, L.

Tope, L.

Meston, L.

Tordoff, L.

Milne, L.

Waverley, V.

Monson, L.

Weatherill, L.

Montgomery of Alamein, V.

Westmorland, E.

Moran, L.

Wharton, B.

Munster, E.

White, B.

Napier and Ettrick, L.

Wilberforce, L.

NOT-CONTENTS

Abercorn, D.

Fraser of Carmyllie, L.

Addison, V.

Geddes, L.

Aldington, L.

Goold, L.

Archer of Weston-Super-Mare, L.

Goschen, V.

Astor, V.

Gowrie, E.

Balfour, E.

Gray of Contin, L.

Barber, L.

Gridley, L.

Beloff, L.

Hailsham of Saint Marylebone, L

Belstead, L.

Hambro, L.

Bethell, L.

Harding of Petherton, L.

Biddulph, L.

Hardinge of Penshurst, L.

Birdwood, L.

Harmar-Nicholls, L.

Blaker, L.

Hayhoe, L.

Blatch, B.

Hemphill, L.

Borthwick, L.

Henley, L.

Brabazon of Tata, L.

Hives, L.

Bradford, E.

Hogg, B.

Braine of Wheatley, L.

Holderness, L.

Brougham and Vaux, L.

HolmPatrick, L.

Buckinghamshire, E

Hothfield, L.

Butterworth, L.

Howe of Aberavon, L.

Cadman, L.

Howe, E.

Caithness, E

Inglewood, L. [Teller.]

Campbell of alloway, L.

Ironside, L.

Campbell of Croy, L.

Jenkin of Roding, L.

Carnegy of Lour, B.

Kenilworth, L.

Carnock,L.

Kingsland, L.

Chalker of Wallasey, B.

Leigh, L.

Chelmsford, V.

Lindsay, E.

Chesham, L.

Lindsey and Abingdon, E.

Clark of Kempston, L.

Long, V.

Colwyn, L.

Lucas of Chilworth, L.

Constantine of Stanmore, L.

Lucas, L.

Courtown, E.

Mackay of Ardbrecknish, L.

Cranborne, V. [Lord Privy Seal.]

Mackay of Clashfem, L. [Lord Chancellor.]

Cumberlege, B.

Dean of Harptree, L.

Mancroft, L.

Denton of Wakefield, B.

Marlesford, L.

Dixon-Smith, L.

Massereene and Ferrard, V.

Eccles, V.

McColl of Dulwich, L.

Eden of Winton, L.

Merrivale, L.

Ferrers, E.

Mersey, V.

Flather, B.

Miller of Hendon, B.

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Milverton, L.

Seccombe, B.

Monk Bretton, L.

Selborne, E.

Moore of Lower Marsh, L.

Shaw of Northstead, L.

Mottistone, L.

Sheppard of Didgemere, L.

Mountevans, L.

Skelmersdale, L.

Mowbray and Stourton, L.

Soulsby of Swaffham Prior, L

Moyne, L.

Stewartby, L.

Murton of Lindisfarne, L.

Stockton, E.

Norrie, L.

Strathclyde, L. [Teller.]

Northesk, E.

Sudeley, L.

Orkney,E.

Teviot, L.

Oxfuird, V.

Thatcher, B.

Parkinson, L.

Thomas of Gwydir, L.

Perry of Southwark, B.

Trefgarne, L.

Platt of Writtle, B.

Trumpington, B.

Plummer of St. Marylebone, L.

Tugendhat, L.

Quinton, L.

Ullswater, V.

Rankeillour, L.

Wade of Chorlton, L.

Rees, L.

Wakeham, L.

Renton, L.

Walker of Worcester, L.

Rodger of Earlsferry, L.

Wise, L.

Rodney, L.

Wynford, L.

Sanderson of Bowden, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
6.33 p.m.
[Amendments Nos. 191C and 191D not moved.]
Clause 131 [Extension of scope of right to cash equivalent]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 191E:
Page 82, leave out lines 15 to 18.
The noble Baroness said: I am sure that the Minister will be glad to know, after a somewhat harrowing debate, that these are genuine probing amendments. They are concerned with the clauses in the Bill that relate to the scope and right to guarantee cash equivalents.
The first amendment is a probing amendment in that it seeks clarification of the circumstances in which the Government envisage using the power to exclude certain final salary schemes from the obligation to pay transfer values in respect of deferred members whose service terminated prior to 1986. In principle, all scheme members should be entitled to transfer any benefit, and it is up to the Government to justify any need for exceptions.
The Government may argue that in some circumstances it would constitute retrospective legislation to give such a right where the benefit accrued prior to the date on which transfers became obligatory. But the restriction applies only to members who left service prior to 1986 and not in all pre-1986 benefits. Thus, if exceptions are to be permitted, it will mean that a member with a benefit based on 10 years' accrual who left on 31st December 1985 would not be entitled to a transfer, while if he or she had left two days later they would be. This really does seem unfair, and also unnecessary now.
The second amendment with which this one is grouped, refers to "the prescribed period". Clause 132 relates to the right of a statement of entitlement for members of schemes. It stipulates that within a prescribed period a member should be entitled to a

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statement of entitlement. We seek to delete "the prescribed period" and insert "one month". As I said earlier, this is a probing amendment seeking a statement from the Government on what period they intend to prescribe within which the guarantee date must be set.
In practice, there is no good reason why any well managed scheme should not be in a position to quote a transfer value as at a date within a month of when a member makes application. Unfortunately, more than a few schemes have an evident inability to meet such deadlines. But that may very well be due to poor administration on their part. As a member of the OPAS council, I must say that a frequent complaint received from scheme members is that they have to wait far too long to be notified of transfer values. I see no reason why "one month" should not be inserted as the requirement in this clause. Again, perhaps the Government will tell us what they mean by "the prescribed period".
The third amendment in this grouping relates to the manner and calculation of transfer values. The amendment seeks to retain the existing basis for the calculation of cash equivalent for transfers out of final salary schemes. It simply puts into primary legislation the wording which I understand appears in the current actuarial guidance note, issued in accordance with regulations, which determines how actuaries are required to calculate cash equivalents.
It seems that the Government, and perhaps some people in the actuarial profession, want to see the basis of calculating cash equivalents changed to one that is less secure. In particular, it is being suggested that the calculation should not be based on gilt yields, as at present and as stated in the proposed amendment, but should instead allow for equity yields, particularly in respect of younger members. That could mean a substantial reduction in the security that is involved, since, as we know, the benefits which such people may receive under a new basis will have to depend on the vagaries and risks of the Stock Exchange; and there could be only an even chance that they would receive their accrued benefits. Given the normal ups and downs in equity values, it can be assumed that part of the time they may well end up being worse off than can be guaranteed under the existing system.
As I said at the outset, all three are probing amendments. We want to know where the Government stand; why they have put this wording into the legislation; and whether they will accept the manner of calculation that is proposed in the final amendment to which I have just spoken. I beg to move.
The Earl of Buckinghamshire: Perhaps I may intervene before the Minister stands up. I should like to speak to Amendment No. 191G. My understanding on this amendment is that it introduces a method of calculating cash equivalents or transfer values where there is none now. I know that the Institute of Actuaries and the faculty have laid down guidelines on how to calculate transfers. But I do not believe that it is true to say that they have stipulated that gilts should be the basis in all instances.
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The schemes have very different age profiles. I should like to put the question: should a scheme with a very young average age have cash equivalents and transfer values calculated in the same way as a scheme which has a very high average age? I suggest that that should not be the case. It would be true to say that the whole area of how to calculate transfer values and cash equivalents is difficult and controversial. Many members do not understand how that is done in final salary schemes. Nonetheless, I suggest to my noble friend the Minister that he exercise some caution in dealing with this technical area.
Scheme portfolios for younger members include a significant proportion of equities, the theory being that higher returns will come via such investments. To use transfer values which are based purely on gilts' yields will mean that the cash equivalent for many younger members in particular is likely to be higher than is necessary to support those benefits. I realise that in investment areas the past is no guide to the future. A debate is taking place in investment and actuarial circles about the gilt and equity yields converging. That debate is ongoing. We shall not know the answer in fact until it is finished.
With regard to this amendment, I believe that we should not interfere in the process. Schemes have very different structures in their actuarial management, investment policies and pi actices on discretionary benefits. In conclusion, I should not be happy to see Amendment No. 191G accepted by my noble friend the Minister. However, I appreciate that it has been put forward as a probing amendment.
6.45 p.m.
Lord Mackay of Ardbrecknish: Perhaps I may explain the position in the order of the three amendments.
Amendment No. 191E revises Clause 131, with the effect that the statutory right to transfer pre-1986 accrued pension rights is extended to all members of occupational pension schemes. The current position is that pre-1986 early leavers from occupational pension schemes have no statutory right of transfer. Clause 131 extends the right of transfer to that group but provides a regulation-making power to exclude from salary-related schemes pre-1986 early leavers in respect of whom prescribed arrangements are satisfied.
I should explain the purpose of the regulation-making power which this amendment seeks to remove. Most pre-1986 early leavers have pensions which are frozen, in the sense that they are not protected by the revaluation provisions which apply to those who left after 1st January 1986. The policy intention of Clause 131 is to give members with frozen deferred rights the opportunity to transfer those rights to another occupational pension or a personal pension fund.
However, we do not intend to require those schemes which have fully protected the rights of pre-1986 early leavers to provide them with transfer values. As now, such schemes will be free to offer transfer values if they choose to do so. We feel that it is right to focus that extra freedom on those with frozen rights.

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Amendment No. 191F seeks to impose a one-month time-limit on the production of a guaranteed statement of entitlement. I sympathise with the purpose of the amendment, which is to speed up the transfer process, but we believe that the proposed time limit is unreasonably short.
Let me explain the current situation. The current legislation allows a scheme two months to produce an estimate of a member's cash equivalent. There is no requirement under current law for the estimated level of the transfer value to be guaranteed. Under our proposals for guaranteed statements, schemes may well feel the need to take even more care in producing the statements because there will be guarantees.
The calculation of a cash equivalent in any event is a complex process. It is important that a guaranteed transfer value should be accurately assessed. In particular, contracted-out salary-related schemes may often wish to check details of the guaranteed minimum pension element of the transfer value with the Contributions Agency. Such queries are more rather than less likely in the light of the Barber judgment and would consume most, if not all, of the time that this amendment allows for the statement to be produced.
The regulation-making power that we have taken is designed to enable us to consult with the pensions industry on a suitable time limit. I can tell the Committee that we should not expect the time allowed to be less than the two months currently allowed for production of an estimate, but we have not excluded the possibility that a slightly longer period might be appropriate. I should add that the time taken to produce a statement will not bite into the three-month guarantee period within which the transfer request must be received. The guarantee period will start when the statement has been produced.
Amendment No. 191G seeks to make it a statutory requirement that in calculating transfer values the scheme actuary shall base his assessment on the market redemption yields of British Government stocks at the time of the transfer. In short, transfer values for all—young and old members—should be gilt-based. That is indeed one of the ways in which the actuary is currently advised that transfer values may be assessed in the actuarial guidance note (GN11) which deals with this complex subject. Indeed, my noble friend Lord Buckinghamshire underlined the fact and warned me that this was a complex subject. He made some very good points in suggesting to me that I should be cautious. I fully intend to take his advice on this matter.
The amendment proposes to elevate the advice in the guidance note, which is permissive, to a statutory requirement in all cases. I believe that it is necessary to maintain a balance between actuarial guidance and statute. The Government have no objection to schemes paying transfer values in line with returns on gilts. Many schemes already do so and there is no reason why they should not continue to do so. Moreover, we propose to regulate in due course so that in future the calculation of transfer values should reflect at least the level of investment in gilts specified in the new minimum solvency requirement. That will effectively put a floor on transfer values so that they cannot be calculated
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assuming an excessive level of equity investments. To go further and insist that in all cases transfer values would be based on an assumption of gilts-only investment would be unreasonable and inconsistent with our wider proposals on minimum solvency.
The practical effect of the noble Baroness's amendment would be to require schemes to fund above the minimum solvency requirement, since a scheme which was exactly 100 per cent. solvent would not be funded to pay transfer values based on gilts for younger members. Let me repeat that we have no objections to schemes funding significantly above 100 per cent. of the minimum solvency, but we cannot accept that that should be a statutory requirement.
With those explanations of the three issues, I hope that the noble Baroness will feel able to withdraw her amendments.
Baroness Turner of Camden: I thank the Minister for those explanations. I said earlier when moving the amendments that they were probing amendments. We were anxious to find out exactly what was in the mind of the Government in drafting these clauses of the Bill.
I noted with great interest what the Minister said about my first amendment. I am glad that he indicated that the intention was to do something more special about those with frozen rights. I shall read his remarks in Hansard tomorrow with some interest.
With regard to my second amendment, I noted that he sympathised to some extent with our concern that there should be a time limit and that people should not be left hanging around waiting for that very necessary information. I also noted that the intention is to ensure that there will be at least some guarantee that people will not have to wait too long. In that respect, I am grateful for the Minister's explanation.
It has been very apparent that my final amendment concerns a highly technical matter. I do not claim to be an expert in that area. I was interested in what the noble Earl, Lord Buckinghamshire, had to say because I know that he is expert in that area, which is very much a part of his profession. On the other hand, I am assured—indeed, the Minister confirmed it to be the case—that the amendment reflects the precise wording from the current actuarial guidance note.
The Minister's case is that he does not want the guidance imported into the legislative requirement. He says that, if we were to do so—and he is quite right—it would mean that the minimum solvency standard would be higher than that originally envisaged. I am quite aware of that. In fact, when we discussed the minimum solvency standard earlier, I indicated that many people felt that the minimum solvency standard was not an adequate guarantee of solvency and that we wanted rather more in the way of security than was promised in the minimum solvency requirement. However, I note what the noble Lord has said and, in the circumstances, I shall certainly not press the amendments this evening. As I said at the opening of this short debate, these are probing amendments. We were anxious to find out exactly where the Government stood on these three quite important issues. Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 131 agreed to.
Clause 132 [Right to guaranteed cash equivalent]:
[Amendment No. 191F not moved.]
Clause 132 agreed to.
Clause 133 agreed to.
[Amendments Nos. 191G to 192A not moved.]
Clauses 134 and 135 agreed to.
Clause 136 [Jurisdiction of Pensions Ombudsman]:
Lord Lucas Lord Lucas moved Amendment No. 192B:
Page 85, line 21, leave out from beginning to ("amended") in line 22 and insert ("Sections 146 to 151 of the Pension Schemes Act 1993 are").
The noble Lord said: In moving this amendment, I wish to speak at the same time to Amendments Nos. 192C to 192G. The purpose of Clause 136 is to extend the jurisdiction of the Pensions Ombudsman along the lines recommended by the PLRC so that he will be able to investigate complaints and disputes arising between the trustees or managers of an occupational pension scheme and the associated employer, and between trustees or managers of different occupational pension schemes. It will also bring into primary legislation an existing power, currently contained in regulations, to allow the Pensions Ombudsman to consider complaints and disputes arising between an individual and the employer.
Disagreements between trustees and employers and between trustees of different schemes can often result in lengthy and costly litigation. We believe it sensible that, as an alternative to court action, the Ombudsman should be given the power to consider such cases.
The drafting of the clause inadvertently brought employers of personal pension holders within the Ombudsman's jurisdiction. References to personal pensions are, however, inappropriate. Employers do not administer personal pensions and so cannot be properly described as managers. Personal pensions are contracts between individuals and the pension provider and complaints or disputes which arise between them are already within the scope of the Pensions Ombudsman's jurisdiction. Amendments Nos. 192C to 192F, therefore, remove inappropriate references to personal pensions to restore the position to the original policy intention. Amendment No. 192G further clarifies this by defining those responsible for the management of a personal pension scheme as the trustees or managers. Amendment No. 192B will give consistency with the other provisions of the Bill by specifying exactly which sections of the Pension Schemes Act 1993 will be amended by Clause 136. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendments Nos. 192C to 192G:
Page 85, line 35, leave out ("or personal").
Page 85, line 40, leave out ("or personal").
Page 86, line 9, leave out ("or personal").
Page 86, line 23, leave out ("or personal").
Page 86, line 29, at end insert:
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("( ) For the purposes of this Part, a person is responsible for the management of a personal pension scheme if he is a trustee or manager of the scheme.").
On Question, amendments agreed to.
Clause 136, as amended, agreed to.
Clause 137 agreed to.
Clause 138 [Disclosing information to the Authority]:
Lord Lucas Lord Lucas moved Amendment No. 192H:
Page 88, line 2, leave out from ("to") to the end of line 10 and insert ("any person to whom subsection (6) applies, if the Ombudsman considers that the disclosure would enable or assist that person to discharge any of his functions.
(6) This subsection applies to the following—

(a) the Regulatory Authority,

(b) the Pensions Compensation Board,

(c) the Registrar,

(d) any department of the Government (including the government of Northern Ireland),

(e) the Bank of England,

(f) the Friendly Societies Commission,

(g) the Building Societies Commission,

(h) an inspector appointed by the Secretary of State under Part XIV of the Companies Act 1985 or section 94 or 177 of the Financial Services Act 1986,

(j) an inspector appointed by the Department of Economic Development in Northern Ireland under Part XV of the Companies (Northern Ireland) Order 1986,

(k) a person authorised under section 106 of the Financial Services Act 1986 to exercise powers conferred by section 105 of that Act,

(l) a designated agency or transferee body or the competent authority within the meaning of that Act, and

(m) a recognised self-regulating organisation, recognised professional body, recognised investment exchange or recognised clearing house, within the meaning of that Act.

(7) The Secretary of State may by order—

(a) amend subsection (6) by adding any person or removing any person for the time being specified in that subsection, or

(b) restrict the circumstances in which, or impose conditions subject to which, disclosure may be made to any person for the time being specified in that subsection."").

The noble Lord said: In moving this amendment, I wish to speak also to Amendment No. 192J. The purpose of these amendments is to clarify those regulatory bodies to which the Ombudsman may pass information and to extend the current protection of the Ombudsman from the law of defamation. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 192J:
Page 88, line 13, leave out ("to the Regulatory Authority").
On Question, amendment agreed to.
Clause 138, as amended, agreed to.
Clause 139 agreed to.
Lord Lucas Lord Lucas moved Amendment No. 193:
After Clause 139, insert the following new clause:
Modification and winding up of occupational and personal Schemes
(". Sections 136 to 141 (modification) and 142 and 143 (winding up) of the Pension Schemes Act 1993 are repealed.").
The noble Lord said: I spoke to this amendment with Amendment No. 172. I beg to move.
On Question, amendment agreed to.
Clause 140 [Annual increase in rate of personal pension]:
[Amendments Nos. 193A and 193B not moved.]
Clause 140 agreed to.
Clause 141 agreed to.
Clause 142 [Power to reject notice choosing appropriate personal pension scheme]:
[Amendment No. 193C not moved.]
Clause 142 agreed to.
Clause 143 [Levy]:
[Amendments Nos. 194 to 195ZB not moved.]
Clause 143 agreed to.
Clause 144 agreed to.
Lord Lucas Lord Lucas moved Amendment No. 195A:
After Clause 144, insert the following new clause:
Equal treatment in relation to official pensions
.—(1) Section 3 of the Pensions Increase Act 1971 (qualifying conditions for pensions increase) is amended as follows.
(2) In subsection (2) (c), "is a woman who" is omitted.
(3) In subsection (10)—

(a) for "woman is in receipt of a pension" there is substituted "person is in receipt of a pension the whole or any part of', and

(b) for "woman and that pension" there is substituted "person and that pension or part".

(4) In subsection (11)—

(a) for "woman's" there is substituted "person's", and

(b) for "woman" there is substituted "person",

and accordingly for "she" there is substituted "he".
(5) This section shall have effect, and shall be deemed to have had effect, in relation to pensions commencing after 17th May 1990, and in relation to so much of any such pension as is referable to service on or after that date.").
The noble Lord said: In moving this amendment, I wish to speak at the same time to Amendment No. 199A. These amendments remedy a small inequality in the way public service pensions are protected against inflation.
Public service pensions are increased in line with inflation under the provisions of the Pensions (Increase) Act 1971. Pensions for widows and widowers, children's or ill health pensions, and pensions for those aged over 55, are protected against inflation. Under age 55 no increases are made, but when the pensioner reaches that age the full value of the pension at retirement is restored.
An exception to the rule that no pensions increase is paid below age 55 was made for women with dependent children, but not for a man in the same situation. That was contrary to the terms of the equal treatment directive (86/378), which, broadly speaking, required pension schemes to provide equal treatment to men and women by 1st January 1993. Accordingly, the Pensions (Miscellaneous Provisions) Act 1990—the 1990 Act—equalised the entitlement by removing the exception in favour of women for service after 1st January 1993.
The European Court, in the Barber judgment issued in May 1990, just before the 1990 Act took effect, ruled that pensions were to be regarded as pay, and therefore subject to the requirement of equality in Article 119 of
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the Treaty of Rome. Other important aspects of Barber were unclear, and have only recently been clarified in a series of ECJ judgments given on 29th September last. Following these, it is now clear that the approach taken in the 1990 Act, to equalise by levelling down, is not unlawful, and that the Barber judgment applies to official pensions such as public service pensions. The Barber judgment itself requires pensions to be equal from 17th May 1990. The requirements of European law are therefore clear. Men aged under 55 with dependent children must be eligible to have their pensions increased on the part of the pension attributable to service in the period 17th May 1990 to 31st December 1992. The amounts involved and the numbers affected are likely to be very small, but the principle is of course an important one. We would be in breach of our obligations under the Treaty of Rome were we not to amend our legislation so that schemes could lawfully make these payments. The amendment makes the necessary change to the Pensions (Increase) Acts. I commend it to the Committee.
Clause 145 agreed to.
7 p.m.
Schedule 6 [Amendments relating to Part IV]:
Lord Lucas Lord Lucas moved Amendment No. 196:
Page 124, line 17, at end insert:
(". In section 164(1) (b) (i) (Crown employment), the words from "136" to "143" are omitted.
. In section 166(5) (reciprocity with other countries), the words from "136" to "143" are omitted.
. Section 172(1) (b) (review of Board's determinations) is omitted.
. In section 177 (general financial arrangements), in subsection (3) (b) (i), the words from "136" to "143" are omitted.
. In section 178 (meaning of "trustee" and "manager"), in paragraph (b), the words from "136" to "143" are omitted.
. In section 181 (general interpretation), in subsection (3), the words from "136" to "143" are omitted.").
The noble Lord said: This amendment was debated with Amendment No. 172. I beg to move.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 197:
Page 124, line 18, after ("(sub-delegation)") insert:
("(a) in subsection (1), the words from "136" to "143" are omitted, and
(b)") .
On Question, amendment agreed to.
[Amendment No. 198 had been withdrawn from the Marshalled List.]
Schedule 6, as amended, agreed to.
Clauses 146 and 147 agreed to.
Clause 148 [Parliamentary control of orders and regulations]:
[Amendments Nos. 198A, 198B, 198C and 198D not moved.]
Clause 148 agreed to.
Clauses 149 and 150 agreed to.
Schedule 7 agreed to.
Clause 151 [Extent]:
Lord Lucas Lord Lucas moved Amendment No. 199:
Page 93, line 3, after (" 16(2)") insert (" 61(5)").
The noble Lord said: Clause 61(5) deals with the relationship of modifications under subsection (2) (d) of the Income and Corporation Taxes Act 1988. As taxes are an accepted matter under the Northern Ireland Constitution Act 1973, it is appropriate for Clause 61(5), like the 1988 Act, to extend to Northern Ireland. I beg to move.
On Question, amendment agreed to.
Clause 151, as amended, agreed to.
Clause 152 agreed to.
Clause 153 [Commencement]:
Lord Lucas Lord Lucas moved Amendment No. 199A:
Page 93, line 23, leave out ("section 144") and insert ("sections 144 and (Equal treatment in relation to official pensions)").
On Question, amendment agreed to.
[Amendment No. 200 not moved.]
Clause 153, as amended, agreed to.
Clause 154 agreed to.
House resumed: Bill reported with amendments.

Civil Evidence (Family Mediation) (Scotland) Bill [H.L.]
7.6 p.m.
Baroness Carnegy of Lour: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Baroness Carnegy of Lour.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTLES (Lord Murton of Lindisfarne) in the Chair.]
Clause 1 [Inadmissibility in civil proceedings of information as to what occurred during family mediation]:
Baroness Carnegy of Lour Baroness Carnegy of Lour moved Amendment No. 1:
Page 2, line 4, at end insert:
("(4) A certificate by the Lord President approving an organisation under subsection (2) above shall be—

(a) in such form as may be prescribed by Act of Sederunt; and

(b) admissible as evidence in any civil proceedings and sufficient evidence of the matters contained therein.").

The noble Baroness said: In moving this amendment, and if the Committee agrees, I shall speak at the same time to Amendment No. 4 which is consequential. Clause 1(2) establishes that family mediation which is protected by this Bill must be conducted by the accredited mediator and accreditation may only be to an approved organisation. That is clearly an important
1098
principle, given that the Bill's purpose is to render information about what occurs in family mediation inadmissible as evidence in civil cases.
Because this rule of admissibility applies to civil proceedings in all Scottish courts, it is the Lord President of the Court of Session who will grant approval to accrediting organisations. In the course of consideration of how the accreditation procedure will work in practice, it has become clear that the Lord President will need a certain amount of flexibility in the form of approval of organisations. It is also important that the means by which he conveys his approval shall not be called into question. Amendment No. 1 seeks to provide that.
The first part of the amendment states that the form of the certificate of approval shall be by Act of Sederunt, a common enough proceeding, I understand, in such circumstances. It is suggested as the right way to proceed in the Law Commission report.
The second part of the amendment establishes that the certificate of approval will be admissible in evidence and be sufficient proof in itself that the organisation named on it has been approved by the Lord President for the purposes of the Bill; that is to say, if a certificate of approval from the Lord President is presented in evidence to a civil court, the organisation to which the certificate refers is indeed an approved organisation. I hope that the Committee can accept Amendment No. 1.
I now turn to Amendment No. 4. This amendment becomes necessary because Amendment No. 1 includes the word "prescribed". The Lord President's power to prescribe by Act of Sederunt as proposed in Amendment No. 1, unlike the Secretary of State's powers of prescription elsewhere in the Bill, does not involve regulations, nor the approval of this House or another place. Amendment No. 4 therefore ensures that Clause 3(2) is not applied to an Act of Sederunt. I hope that the Committee will feel able to accept the amendment. I beg to move Amendment No. 1.
The Earl of Mar and Kellie: The two amendments expand further on the power of the Lord President to approve organisations involved in family mediation. Clause 1(2) refers to organisations concerned with family mediation which are approved by the Lord President for inclusion in the inadmissibility of evidence scheme. Clause 1(3) allows the Lord President to place a time limit on the approval and to withdraw approval at any time if unsatisfactory circumstances arise.
Amendment No. 1 would create subsection (4), explaining that approval for the organisation will be expressed in a legally backed certificate issued by the Lord President. That certificate will be the only proof required in civil proceedings that the organisation is approved; hence evidence generated during its family mediations is inadmissible. I support the amendment and believe it will establish beyond doubt the status of evidence from family mediation.
Lord Macaulay of Bragar: We have always made it clear that we shall give the Bill a fair wind through your Lordships' House, but I have not yet had an opportunity to discuss with the noble Baroness, Lady Carnegy, the question of consultation before the Lord President approves a particular organisation. The Bill does not seem

1099
to cover that. Unlike most Bills, it does not contain a provision stating, "The Lord President, having consulted with interested parties or with any parties designated by the Secretary of State, shall approve" an organisation.
I am not trying to be awkward, but it seems that the Lord President will have an absolute right to say yes or no to a particular organisation without any representation from that organisation. That may be a matter to return to on Report, after consultation with the Scottish Law Commission and the Government.
The Lord Advocate (Lord Rodger of Earlsferry): I am grateful to my noble friend Lady Carnegy for her explanation of the reasons for the amendments. I understand that they derive from representations made by the Lord President as to the arrangements which should be made in connection with his functions under Clause 1. I am sure that the amendments will achieve the effects which my noble friend explained and I am pleased to confirm that the Government are willing to see them incorporated in the Bill.
Baroness Carnegy of Lour: Before my noble and learned friend sits down, does he have a view on the question of consultation, about which the noble Lord, Lord Macaulay, asked?
Lord Rodger of Earlsferry: Before approving any particular organisation, obviously the Lord President will have received an approach from it and will have made such inquiries as he thinks appropriate before taking a decision. It is precisely to allow him to obtain the necessary information that the power is given in the amendments.
Lord Macaulay of Bragar: Before the noble and learned Lord sits down, it is not so much a question of consultation as of allowing others to say, "This is not an appropriate body to he involved in such matters". I think that the field should be opened and that this matter should not be left to the Lord President absolutely. Nothing in the Bill states that the Lord President "shall consult" with anybody before approving an organisation.
Lord Rodger of Earlsferry: It is certainly the case that there is nothing on the face of the Bill to deal with that.
Baroness Carnegy of Lour: I thank my noble and learned friend for his comments, and am grateful also to the noble Earl, Lord Mar and Kellie, and the noble Lord, Lord Macaulay. On the question of how the Lord President will proceed, I take it that it will be a matter for him unless something is set down in the Bill which compels him to take some action.
I shall go a little further into this and let the noble Lord, Lord Macaulay, know of any helpful information that I discover. I hope that that will satisfy him and that it will not be necessary to amend the Bill further. In the meantime, I commend the amendment to the Committee.
On Question, amendment agreed to.
7.15 p.m.
Baroness Carnegy of Lour Baroness Carnegy of Lour moved Amendment No. 2:
Page 2, line 4, at end insert:
("(5) The Lord President may, in connection with the performance of any of his functions under this Act, require an organisation which is seeking, or has been granted, approval under subsection (2) above to provide him with such information as he thinks fit.").
The noble Baroness said: This amendment allows the Lord President either when he is considering approval of an organisation or, having previously approved an organisation, to require it to submit such information as he finds necessary. As with Amendment No. 1, the need for this amendment has come to light in the course of discussion about the detailed working of the Bill. I take it from what my noble and learned friend said that that includes discussion with the Lord President.
Clearly, for the Lord President to make a judgment as to whether to approve an organisation for the purposes of the Act he must have the information that he needs. In addition, at Clause 1(3) the Lord President can approve an organisation for a fixed period of time and has the power to withdraw approval at any time. He must therefore be able to require an organisation being considered for approval (or one which is already approved) to submit whatever information he needs for proper consideration or review. I am advised that it would not be a tenable position for the Lord President to have to rely on organisations supplying information voluntarily. As the Bill stands, should necessary information not be forthcoming, his only sanction would be to refuse approval or to withdraw approval. That might well be seen as heavy-handed—and perhaps controversial. I hope that this amendment will strike the Committee as necessary. I beg to move.
The Earl of Mar and Kellie: This amendment to Clause 1 seeks to add subsection (5), which would spell out the powers of the Lord President to determine which agencies in family mediation are acceptable to the Court of Session. The process of approval should lead to the achievement and maintenance of high standards of performance. The Lord President will decide if an organisation can be approved, based on his investigation of the organisation, its aims, methods, training practices and arrangements.
I visited Family Mediation Central last week at its Stirling accommodation. I learnt that it speaks with many new referrals, some of which become mediations lasting between three and eight sessions. Family Mediation Central also runs an access centre in Alloa. The training programme for mediators requires attendance at a basic training course for 11 days, followed by supervised mediation practice of at least 50 hours. To be accepted as an experienced mediator, a probationary mediator will have to gain considerable experience in mediation. Mediation is, of course, different from counselling, advice, guidance and education. Family mediation is the management of other people's negotiations.
The Lord President will also be able to scrutinise and reassess currently approved organisations should there be grounds for concern. In the worst case, he will be

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able to determine disapproval and subsequently to withdraw the certificate which was mentioned in Amendment No. 1. I support the amendment, which will keep approved organisations on their mettle.
Lord Macaulay of Bragar: I make the same point. There is nothing in the Bill as drafted to allow people to make representations against a particular organisation being approved as mediator. I hope that it will be a matter for discussion. I shall not take up the Committee's time discussing the whys and wherefores of that; I am just making the point. I hope that it will be taken on board by the Government.
Lord Rodger of Earlsferry: As my noble friend has made clear, the amendment provides the Lord President with the power to require from organisations which are seeking approval for the purposes of the Bill any information which he thinks fit. It would also allow him to require that information when he is monitoring the performance of the approved mediation organisation.
The amendment is desirable. One has to be a little cautious in that all that the Lord President is doing is approving these organisations for the purposes of the Bill—that is to say, so that they attract the particular evidential status. One could not expect the Lord President to act as some sort of guardian of the whole standard of mediation organisations. That is not something that he would be able to do.
Baroness Carnegy of Lour: I listened to what my noble and learned friend said. When we are discussing the Bill, we must keep reminding ourselves that it has a limited purpose. The approval of mediation organisations has to be seen in that light. Again, if anything further comes to hand, I shall let the noble Lord, Lord Macaulay, know. The noble Earl, Lord Mar and Kellie, said that the arrangement will keep the organisations on their mettle. I am sure that he is right. It has to do with standards, and that is a very good thing. I am glad that he said that.
On Question, amendment agreed to.
On Question, Whether Clause 1, as amended, shall stand part of the Bill?
Lord McCluskey: I want to say one thing that I would have said had I been here on Second Reading—that is, I am entirely in favour of the principle, and congratulate the noble Baroness on introducing the Bill. A technical matter arises in relation to Clause 1 as it stands amended. It is that subsection (4) refers to:
"A certificate by the Lord President".
It might be wise to consider putting in a provision to the effect that a document purporting to be such a certificate under the clause shall be accepted as such unless the contrary is proved. So if a document emerges signed by the Lord President, in whatever signature he may be sporting at that time, it will be deemed to be a certificate under the Bill unless the contrary is proved. That might avoid some awkwardness which one might occasionally have with a particular kind of case.
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There is one other thing I would like to say. The principle embodied in the Bill is one which I should like to see extended, if it works here, to other forms of litigation.
Baroness Carnegy of Lour: I thank the noble and learned Lord for his remarks. I do not know whether it is a coincidence but it is a happy fact that we have such a distinguished judge to help us with the Bill. I am sure that my noble and learned friend on the Front Bench will note what he has said. I shall consult him to see whether the Government agree that this approach should be extended. I do not believe that I can be expected to know the merits of the case at the moment. It is quite beyond me, as I am sure the Committee will appreciate.
Lord Macaulay of Bragar: Before the noble Baroness sits down, it may be my ignorance but a definition of a "purported marriage" is not included in the Bill. Is it proposed to define a "purported marriage"? It may be in the Law Commission's report, which I have not yet had a chance to look at in detail. Perhaps we might look at that between now and Report stage. "Purported marriage" is a contradiction in terms. I do not know what it means. As it is part of the Bill, perhaps we may have it defined in a definition clause. I know what purported marriages are, but I should like to have them defined.
Baroness Carnegy of Lour: I asked the same question. I was told that it was a supposed or apparent marriage. It may, for example, be a bigamous marriage which is not a marriage in law. I do not want to get into all that. I was told that it was not necessary to define the words. Again, I shall find out and ensure that the Bill is right.
Lord Macaulay of Bragar: I appreciate the noble Baroness's difficulty. We are dealing in precise terms with questions of mediation, and with whom the mediator has to deal. If two people come in and the mediator says, "Who are you?", and they say, "We are a purported marriage", what is the mediator supposed to do? It may be unnecessary to put such a phrase into a modern Bill. Perhaps we should just forget about it and say that the mediator shall mediate between parties involving the child, as was said on Second Reading. It may be a matter for consideration. I am not trying to be facetious in any way; but I can see the problems that might occur when people come before the mediator and say, "We are a purported marriage. This is a product of a purported marriage". The product of a purported marriage could be a purported child.
Baroness Carnegy of Lour: The phrase was in the Law Commission's draft Bill, as the noble Lord will know. Obviously the Law Commission thought that it was all right. One departs from the Law Commission's phraseology with reluctance. I do not know whether my noble and learned friend wants to say anything about it. I shall have a look at it.
Clause 1, as amended, agreed to.
Clause 2 [Exceptions to general rule of inadmissibility]:
Baroness Carnegy of Lour Baroness Carnegy of Lour moved Amendment No. 3:
Page 2, line 46, leave out ("the child of any such person") and insert ("a child who is the subject of such a family mediation").
The noble Baroness said: The amendment makes it clear that it is the child who is the subject of mediation, and not any other child, who is to be regarded as a participant in family mediation. The amendment responds to a point which I raised with the Minister. My noble and learned friend Lord Fraser of Carmyllie was on the Front Bench at the time, and he acknowledged the point on Second Reading.
The amendment seeks to remove an ambiguity in Clause 2(2) as to precisely when, for the purposes of that clause, a child shall be regarded as a participant. As subsection (2) is currently worded, the child participant could be any child of any adult participant even if that child was not the subject of family mediation. Of course that is not the intention of the Bill.
Likewise, as the subsection stands, it excludes the possibility that the child might be the subject of mediation between adults who included, say, a grandparent, uncle or aunt. The child to be regarded as a participant is the child who is the subject of family mediation which deals with the matters affecting him or her listed in Clause 1 (2) (a). This clarification is important, because in Clause 2(1) (c) one of the exceptions to the general rule of inadmissibility is that if all the participants, including the child participant, agree. I hope that the Committee will accept the amendment and the clarification it brings. I beg to move.
The Earl of Mar and Kellie: The amendment broadens the range of children referred to in Clause 2(2) (b). It is most appropriate in view of changing social trends, in particular, the increased frequency of step-families and single parent arrangements. We are beginning to come across families where there are "his" children, "her" children, and "their" children. We must try to legislate for all foreseeable eventualities. For example, I am fortunate that my marriage continues to thrive, but, had it broken down before my step-children became adults, I should have wanted to seek legal access arrangements on the grounds that I had been a de facto parent and also because I like them.
There is an increased need for a mediation service for grandparents who seek access to their grandchildren on the break-up of their children's marriage. The amendment would clear the way for a wider range of parenting arrangements to come within the scope of the inadmissible evidence scheme.
7.30 p.m.
Lord McCluskey: The noble Baroness drew the Committee's attention to Clause 2(1)(c). If the idea is that every participant might agree, the Bill, whether as drafted or as it is proposed to be amended, involves the possible agreement by a child. Let us suppose that the child is not of an age when he can grant or withhold agreement. That might make it difficult for Clause 2(1) to operate.
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I may have misunderstood the Bill but, if not, it may be that an additional provision is required in order to avoid the need to seek agreement by a participant who is not of an age to grant agreement.
Lord Macaulay of Bragar: The noble and learned Lord may find a response to his observation at Clause 2(3), which deals with the age of legal capacity. It states:
"any child who is regarded as a participant in family mediation by virtue of subsection (2) above shall have legal capacity to agree that information should be admitted as evidence if at the time when the mediation took place he was capable of understanding the nature and significance of the matters to which the information relates".
The noble and learned Lord raised his eyebrows—or his noble and learned brow. I had intended to raise the matter on the Question of Clause 2 standing part of the Bill because certain matters in relation to the child must be looked at closely between now and the Report stage.
Lord McCluskey: I am obliged to the noble Lord for pointing that out, but it does not deal with the matter which I raised. Subsection (3) gives the child the legal capacity to agree but it does not deal with the situation in which the child is not of an age to agree.
Lord Rodger of Earlsferry: Notwithstanding what was said by the noble and learned Lord, the provision is intended to deal with that matter. Only when the child is of such an age is his consent relevant. I do not understand the intention of the provision to relate to the case in which the child is so young that he cannot agree. However, perhaps the matter should be investigated further.
As regards the matter raised by the noble Lord, Lord Macaulay, one must remember that here we are not concerned with the question of children in relation to mediation in general but only in relation to whether what occurs in mediation should be admissible in evidence. While there may be other questions which relate to children in relation to mediation, we are now concerned only with the question of admissibility of evidence in relation to that matter.
As regards the point raised by the noble and learned Lord, Lord McCluskey, we shall look at it again to see whether anything needs to be done.
Baroness Carnegy of Lour: I am grateful to the noble and learned Lord, Lord McCluskey, for drawing attention to the issue. It is a matter of the changing practice of family mediation. The Law Commission report suggested that any child present at the mediation would be a participant. The Bill has slightly shifted the focus because the practice is changing. Children are not generally present at family mediation. Some 80 per cent. of children who are the subject of mediation are under the age of 12. It would not be in the best interest of most of those children to be present at mediation sessions involving adults with responsibility for them. That is because it is important that young children are not burdened more than is necessary with the differences which their parents or other adults concerned are seeking to resolve. Equally, they should not be put in the position where strange and divided loyalties are

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imposed on them. Family mediation is about parents and others with custody exercising their parental responsibilities properly.
That means that when the agreement of the child is required for information to be admitted as evidence, it will be necessary for the situation to be explained to him or her and the child's view obtained by someone specially trained in talking with and relating to children who can determine how far that child is capable of understanding the nature and significance of the matters to which this information relates.
I have not discussed the subject with my noble and learned friend the Lord Advocate. The mediation procedure—and not the legal procedure—means that a child of any age who can understand what is happening may be asked whether he or she agrees, even though they have not been at the mediation at all. That is how I understand the Bill to fit in with current practice and that is my information from Family Mediation.
It may be that we need to have further discussions about the issue and decide whether this is the correct way to express the provision in law. Certainly it is the practice at the present time as regards Family Mediation Scotland. I hope that, given that explanation, the Committee will accept the amendment. If necessary, we can go into the matter further at a later stage.
On Question, amendment agreed to.
On Question, Whether Clause 2, as amended, shall stand part of the Bill?
Lord Macaulay of Bragar: The Bill began as a simple Bill but it now raises larger issues. In speaking to the Question, I speak in general terms. I believe that there are matters which require sober thought. All parties involved, looking in particular at the interests of the children, should get round the table to see whether they can hammer out a solution to problems which are beginning to emerge as the debate proceeds.
On Second Reading I raised the issue of the representation of the child. The noble Baroness's last comments focus on that issue. She shakes her head, but perhaps I may ask, if the child is to be the subject of mediation—and the child is included in Clause 1—who represents the child? It is not enough for the mediator to represent the child; that is not his function. Presumably the function of the mediator is to hold the balance between the parties and the child. I wonder whether we should be looking more closely at the role and function of the mediator and the consequences that will fall upon the person acting as the mediator as regards later court proceedings.
I notice that the Bill is entitled:
"An Act to make provision for the inadmissibility as evidence in civil proceedings in Scotland".
I believe that a better phrase might be "the admissibility", but that is another matter. If people are being asked to come forward as mediators in those
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fraught situations, they must know where they stand. Are they to be called as witnesses in subsequent proceedings? Clause 2(1) states:
"Nothing in section I of this Act shall prevent the admissibility as evidence in civil proceedings … of information as to what occurred during family mediation if every participant (other than the mediator) in that mediation agrees that the information should be admitted as evidence".
Therefore, the mediator may very well be caught in a no-win situation.
I am not trying in any way to obstruct the passage of the Bill. I am merely trying to foresee problems that might arise. If there is to be family mediation, notes must be taken of the evidence given in the mediation because they may be used at a later stage. It is not sufficient to call in the mediator to ask him what he has written in his notes, because we all know how defective notes may be.
I am rather concerned about the mediator's role. This afternoon on my way to your Lordships' House from the frozen north (as it was when I left), I was wondering, what would happen if, in the course of the civil proceedings—the Bill relates to civil proceedings—an admission were made by a husband that he threatened to kill his wife, or vice versa, as happens in these days of equality. If the husband then murders his wife, is the admission made before the mediator to be relied upon during the course of criminal proceedings?
I raise that question quite seriously. The O.J. Simpson trial starts with his threats to kill his wife and the call to the emergency services some years before the incident. Obviously, whoever killed her is not a matter for this Committee. But one can see the difficulties. If a man makes an admission before the mediator, and then goes on to kill his spouse, is the mediator to be called to say, "Yes, he did admit that he threatened to kill her on 23rd August 1992"? I do not know.
I raise those difficulties because I hope that we can discuss them. I do not wish to impede the progress of the Bill; but I wish to ensure that the interests of all the people that may be affected are protected. I hope that the noble Baroness will accept that I shall try not to be obstructive. I hope that we can sit around the table and sort out any problems which might arise.
Lord Rodger of Earlsferry: The noble Lord will be aware that the Title of the Bill refers to provision for the inadmissibility of certain matters. That is because, at present, all those matters are admissible. Therefore, the Bill seeks to introduce an area in which evidence will not be admissible. That is to assist the process of mediation, and so on. As the noble Lord has perceived, that does not apply to criminal proceedings. Therefore, the short answer to the noble Lord's question is that nothing in the Bill would render that inadmissible.
There must always be a balance in relation to these matters; but there are certain exceptions to the inroads that are being made in relation to admissibility of evidence. Those exceptions are set out in Clause 2(1). That is the general thrust of the Bill.
Lord Macaulay of Bragar: Before the noble and learned Lord sits down, is he saying as a matter of law that if, within the context of mediation, a person admits

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that he threatened to kill his wife with a knife and later does just that, what he said to the mediator in the course of the civil evidence family mediation procedure is admissible in criminal proceedings?
Lord Rodger of Earlsferry: I said that if it were otherwise admissible, then nothing in this Bill would render it inadmissible because Clause 2(1) deals with the exceptions.
7.45 p.m.
Baroness Carnegy of Lour: I believe that if the noble Lord, Lord Macaulay, studies the Law Commission's report, he will see that several of the points which he has raised are dealt with there. That report indicates why it has followed that approach in the Bill. That has not been changed since it left the Law Commission. I believe that that covers the point about somebody who talks about a criminal offence. I may be wrong. As the noble Lord knows, I am not a lawyer; but, speaking from memory, I believe that those points are covered in that report.
I shall read with great interest what the noble Lord has said. It may be that a meeting will be necessary. Certainly, we shall need to be clear about this matter. It is very important that we know how the child is to be approached in relation to that one issue which arises; namely, consent as a participant and whether what has occurred in the mediation is to be admissible or inadmissible.
Lord Macaulay of Bragar: I am grateful to the noble Baroness for her guidance, and of course I shall look again at the Law Commission's report. However, the courts are not concerned with interpreting Law Commission reports but with interpreting the Bill, or the Act as it will become in due course. I hope that the noble Baroness, myself and all those concerned with this matter will get together to discuss it.
Clause 2, as amended, agreed to.
Clause 3 [Short title, construction, commencement and extent]:
Baroness Carnegy of Lour Baroness Carnegy of Lour moved Amendment No. 4:
Page 3, line 12, after (" "prescribe" ") insert (", except in relation to an Act of Sederunt,").
On Question, amendment agreed to.
Baroness Carnegy of Lour Baroness Carnegy of Lour moved Amendment No. 5:
Page 3, leave out lines 15 to 17 and insert:
(" (3) This Act shall come into force on such day as the Lord Advocate may by order made by statutory instrument appoint; and such order may include such transitional or incidental provisions as appear to him to be necessary or expedient.").
The noble Baroness said: This amendment relates to two important points raised on Second Reading. First, it responds, at any rate in part, to the request made by the noble Lord, Lord Macaulay, to the Minister that he should look again at the question of the status of the child. The Minister's reply made the link with the Children (Scotland) Bill which is making its way through another place.
The amendment allows the Lord Advocate flexibility in bringing the Bill into force. Rather than the Bill coming into force two months after Royal Assent and then having to amend it subsequently to reflect provisions in the Children (Scotland) Bill, the amendment would make it possible to delay implementation of this Bill until the Children (Scotland) Bill has received Royal Assent.
That seems to be a sensible approach. I do not wish to hold up the progress of this Bill; but with regard to the status of the child and in a number of other respects, there may well need to be cross-referencing. That can best be done later—probably while the Children (Scotland) Bill is under consideration in this Chamber.
My noble and learned friend may wish to say more about that. For my part, I hope that the noble Lord, Lord Macaulay, and the noble Earl, Lord Mar and Kellie, who have a particular interest in this matter, will welcome that aspect of the amendment.
I also hope that the flexibility introduced by the amendment will, to some extent, meet another concern which I expressed on Second Reading and one about which Family Mediation Scotland is particularly anxious. Whenever the provisions of the Bill come into force, there will be a family mediation in progress. Clearly the legislation cannot be retrospective; but it is surely desirable that, once it is in force, mediation should be covered as soon as possible.
As the Bill stands, the legislation will apply to proceedings commenced on or after the day upon which it comes into force. The nature of proceedings varies and much time may elapse before proof begins—time during which mediation may take place. Can my noble and learned friend the Lord Advocate give me an assurance that the transitional provisions allowed for in the amendment will in fact be used to apply the protection of the Bill to mediation relating to cases where proof has not yet begun by the date of implementation? That was the approach suggested by my noble and learned friend Lord Fraser of Carmyllie on Second Reading.
I had hoped that I would be advised that that could, with advantage, be placed on the face of the Bill. However, my advice now is that the amendment would be more workable. I accept that fact. However, I should like to be sure that some arrangement can be made to meet the anxieties on that point raised by Family Mediation Scotland. I look forward to hearing any further explanation that my noble and learned friend can give Members of the Committee. I should especially like to receive the assurance that I have just requested. I beg to move.
The Earl of Mar and Kellie: The amendment alters the timing of the implementation of the Bill after enactment. It obviously relates to the passage of the important Children (Scotland) Bill through another place and, subsequently, through this Chamber. I should prefer a firmer commitment to the implementation of the Bill with a more precise date. I appreciate that the Bill may need to be modified in the light of the somewhat superior legislation contained in the potential Children (Scotland) Act.

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We shall have to learn new terminology for failed relationships. Out will go the words "custody" and "access" and in will come residence and contact orders. That will reflect the changes in parental responsibilities and parental rights proposed in the Children (Scotland) Bill. A significant change will be the responsibility and right to regulate the residence of a child who is no longer living with the parent and also that parent's opportunity to participate in the estranged child's health, development and welfare.
I do not believe that a child has the right to decide the style of his upbringing. That must be the responsibility of the parents. I shall not oppose the amendment in Committee, in the hope that a more precise date of commencement will be forthcoming.
Lord Rodger of Earlsferry: The intention of the amendment is not to delay unnecessarily the commencement of the Bill, but rather to provide a certain measure of flexibility. It is a little difficult to foresee how far it will be necessary to have that flexibility in relation to the children Bill because it depends on whether or not it contains provisions which substantially affect the Bill now before us. Obviously it would be rather foolish if, for example, the legislation commenced and very shortly thereafter it needed to be amended. In those circumstances, it might be sensible to wait until the legislation had been amended before it was allowed to commence. However, I do not believe that that issue should cause any undue delay. It is certainly not intended that it should.
As regards the other matter, I understand the concerns of members of Family Mediation Scotland, who desire that the provisions of the Bill should come into force as soon as possible and should, therefore, affect their work as soon as possible.
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I hope that I can respond to the invitation from my noble friend by indicating that it would be my intention in framing the terms of the commencement order to consider whether it should contain a transitional provision whereby the Bill's provisions will apply to cases in which proof has not yet taken place—that is, in cases where the evidence has not yet been led—at the commencement date. We want to look at that aspect of the matter with a little more care. However, as my noble and learned friend Lord Fraser said on Second Reading, that is certainly our intention.
Baroness Carnegy of Lour: I thank my noble and learned friend for that response. I believe that Family Mediation Scotland and I perhaps cannot expect much more. I do not think that any Minister has ever given a cast-iron assurance as to what he will put in an order long before it is made. However, the fact that my noble and learned friend's response will be recorded in Hansard is most comforting to us. I shall read the report of the proceedings to ensure that that is indeed as far as we can go.
I am sorry that we cannot accommodate the noble Earl by including a more fixed date. I do not believe that that would be possible. After all, the children Bill might not reach the statute book and, if the fixed date were linked to that legislation, it would not be very helpful. On that score, I believe that we should leave the Bill as it stands.
On Question, amendment agreed to.
Clause 3, as amended, agreed to.
House resumed: Bill reported with amendments.
House adjourned at three minutes before eight o'clock.