Lords Sitting of 23 April 1998

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bath and Wells.

Millennium Celebrations and the Churches
Lord Rentonasked Her Majesty's Government:
Whether the Christian Churches will be invited to take a leading part in the millennium celebrations, given that the millennium marks the 2,000th anniversary of the birth of Jesus Christ.
Lord Carter: My Lords, the Government fully recognise the significance of the year 2000 to Christians as a religious anniversary. Through the Lambeth Consultation Group, the Christian Churches and other faith communities are closely involved in the planning of the national millennium celebrations, including the Millennium Experience at Greenwich. The Lambeth Group and the Government are also taking forward plans for national millennium Church services in the four countries of the United Kingdom. I understand that the Churches themselves are planning a wide range of celebratory activities and events in the year 2000 which will be focused on Pentecost in June 2000.
Lord Renton: My Lords, I thank the noble Lord for that encouraging reply. Will he confirm that the purpose of the millennium celebrations is to enable people to rejoice in 2000 years of Christianity and to ensure its future, and that there will be no question of there being any, shall we say, secular or political significance in those celebrations?
Lord Carter: My Lords, the millennium and the celebrations are both secular and religious events. The Government fully recognise that the millennium is a Christian anniversary and wish to see a proper acknowledgement of the Christian heritage of the country in the celebrations at Greenwich and around the country. However, we are a multi-faith society and we are determined to ensure that the celebrations are relevant and accessible to those who are adherents of other faiths or who have no formal religious belief. After all, the year 2000 will be significant to all the people in the world who use the Gregorian calendar.
Lord Randall of St. Budeaux: My Lords, will the Minister tell the House whether the Government are having discussions with the Churches on issues associated with the millennium?
Lord Carter: My Lords, representatives of the Department for Culture, Media and Sport, which is co-ordinating the Government's interest in the celebrations, sit on the Lambeth Consultation Group to
1242
which I referred in my first Answer, together with the Millennium Commission and the new Millennium Experience Company. This group of 29 members involves the main Christian Churches, the ecumenical bodies and representatives of other faiths in the Government's co-ordination process in order to ensure that the spiritual significance of the year 2000 is reflected.
The Lord Bishop of Bath and Wells: My Lords, bearing in mind the welcome willingness of the Government to consult with religious communities over the millennium, recognising the Government's desire that the celebration should be as inclusive as possible and recognising that there are significant communities, both Christian and of other faiths, whose spiritual conviction leads them to moral unease about the lottery, will the Minister consider increasing the grant of £20 million under the millennium festival fund to ensure that nationwide such communities will be able to participate in applying for grants and thus be encouraged in their communities to play a full part?
Lord Carter: My Lords, I am sure that the right reverend Prelate would not expect me to answer that question immediately in the affirmative. I believe that he made the same point in this House in a debate a few weeks ago. I shall ensure that it is transmitted to other members of the Government to see whether there can be an affirmative response.
Lord Sudeley: My Lords, given that the millennium is a means of counting the number of years back to the birth of Christ, should not the established Church have the pre-eminent right to proclaim its doctrine as set forth in the 1662 Book of Common Prayer, which has enjoyed the protection of both this House and another place since it is annexed to an Act of Parliament? If so, should not the Bishops take steps so to proclaim?
Lord Carter: My Lords, that question almost assumes that the year 2000 is the property of this country. The population of the world is just over 6 billion. Our reckoning is that something like 4 billion will celebrate the millennium in one way or another. So to concentrate entirely on the angle of the Book of Common Prayer would be rather too narrow.
Lord Mowbray and Stourton: My Lords, with reference to the noble Lord's remark about the millennium being not only of this country, is there any chance of a worldwide Christian spirit of uplifting, or will it be left entirely to individual countries to go their own way? It would be nice, would it not, if the whole Christian world celebrated together?
Lord Carter: My Lords, it is not merely a matter of the whole Christian world. As I said, two-thirds of the world's population, both Christian and non-Christian, will be celebrating the millennium in their own way. The Foreign Office has released an extremely useful document, Millennium Plans Around the World, which

1243
will be placed in the Library. It is surprising to see the efforts being made in countries all around the world to celebrate this great event.
The Lord Bishop of Wakefield: My Lords, are the Government aware that Christian denominations throughout the world are combined together in a particular purpose during the coming millennium; namely, to see that international debt is reduced or removed? How do the Government see their part in aiding the Churches of all denominations in that purpose?
Lord Carter: My Lords, the responsibility goes wider than the Churches. The point made by the right reverend Prelate was made previously in a debate in this House. My noble friend Lord McIntosh of Haringey has referred the view expressed to the relevant government departments and it is being considered.
Lord Avebury: My Lords, is the Minister aware that members of the non-Christian faiths, as well as atheists and agnostics, will be very relieved by the answers that he has given and to know that they are not excluded from participation in the millennium celebrations? Do the Government have any plans to consult with representatives of the non-Christian faiths to see what part they can play in the celebrations?
Lord Carter: Yes, my Lords. As I said earlier, the Lambeth Consultation Group consists of 29 members from the main Christian Churches, the ecumenical bodies and representatives of the other faiths who are involved in the co-ordination process.
Lord Elton: My Lords, does the noble Lord agree that the "micro" is as important as the "macro" in this debate? While it is heartening to hear state and Church agreeing on objectives, does he accept that the real celebration will be in the hearts of individual people practising in their individual parishes and chapel groups? Will the Government do whatever is possible to facilitate that sort of celebration, which should not be a threat but an invitation to the atheists, agnostics and humanists to whom the noble Lord, Lord Avebury, refers?
Lord Carter: Yes, my Lords. There is a proposal from the Lambeth Consultation Group that national church services should be held simultaneously in each of the home countries on Sunday, 2nd January 2000 to celebrate the millennium. That proposal is being taken forward. The views of the Queen are presently being sought. Although they would not wish to take part in such services except as observers, those from communities based on other faiths are broadly supportive of the proposal, acknowledging as they do that the millennium has a Christian basis.
Lord Moore of Wolvercote: My Lords, I understand that the Millennium Dome is to be divided into zones, and that sponsors will be required for each zone.
1244
I further understand that one of the zones will be deemed "the spirit zone", and its focus will be on Christianity. Will the Minister confirm that the Government are satisfied that suitable sponsors will be found for the spirit zone?
Lord Carter: Yes, my Lords; the New Millennium Experience Company is seeking private sector sponsorship for the spirit zone as part of its wider sponsorship strategy for the whole of the Millennium Dome. In addition, I understand that the Second Church Estates Commissioner is developing a proposal for a fund-raising committee to finance exhibits in the zone. We welcome that initiative. The New Millennium Experience Company is prepared to consider any such proposals which conform to its overall fund-raising strategy.

Access Committee for England: Funding
3.17 p.m.
Lord Addingtonasked Her Majesty's Government:
Whether they will review their decision to withdraw all funding from the Access Committee for England.
The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, the decision not to renew government funding of the central administrative costs of the Access Committee for England (ACE) from April this year was reached only after very careful consideration, and was agreed jointly by Ministers from the Department for Education and Employment, the Department of the Environment, Transport and the Regions and the Department of Health. The decision followed a recent interdepartmental review which concluded that future funding of ACE by the Government should be for specific projects, and not towards its central administrative costs.
Lord Addington: My Lords, I thank the Minister for that Answer. However, does she agree that deducting what is effectively a very small funding figureߞsome £.150,000ߞfrom a body which has acted as a secretariat for over 430 small individual groups acting at local level may well involve cutting off local people from decisions about local events, and may also cause a great waste of time and money for various departments as they will have to chase matters through individual channels?
Baroness Jay of Paddington: No, my Lords, we cannot agree with that suggestion. Much of ACE's work now overlaps that of other bodiesߞfor example, the Building Regulations Advisory Committee, the Disabled Persons' Transport Advisory Committee, and to a lesser extent the National Disability Council. There are also other voluntary organisations working in the field. The Centre for Accessible Environments is a notable one. I opened an exhibition sponsored by that group and by

1245
the RNIB Mobility Unit, the RNID and the DETR, under the title, the "Universal Access Centre", only last month.
Lord Morris of Manchester: My Lords, my noble friend may be aware of my involvement, as the then Minister for Disabled People, in the inception of this important body. As the millennium approaches, is the Minister's department aware of any organisation of disabled people that is content to contemplate its demise?
Baroness Jay of Paddington: My Lords, of course I am aware of my noble friend's extremely important record in the field. As I hope I suggested in my answer to previous supplementary questions, there are other bodies working in the field which take on many of the responsibilities that ACE originally undertook. I suspect that the organisation is one of those whose unique contribution was important in the 1980s, but it has now been overtaken by other bodies.
It is open to ACE to apply for project funding, as is normal with voluntary organisations which cease to have core funding from the Department of Health.
Lord Skelmersdale: My Lords, did I understand the Minister correctly when she said that it is now government policy to remove all core funding from charities which are supported by miscellaneous government departments?
Baroness Jay of Paddington: My Lords, I did not say that, but under the Section 64 grant system which the Department of Health administers, it has been and is the policy not only of this Government but of previous governments to try to reduce core funding for voluntary organisations and to encourage them to take on project funding.
I understand that this voluntary organisation was informed by the then Minister for Disabled People in 1996 that this was likely to happen in two years' time. However, it did not take action to avoid the position.
Baroness Masham of Ilton: My Lords, is the Minister aware that someone contacted me only yesterday about the Disability Discrimination Act in relation to golf courses and access to them? Does she agree that disability and access are complex because there are so many different disabilities? If the wrong action is taken it is much more expensive than taking the right action at the right time.
Baroness Jay of Paddington: Yes, my Lords. Of course I support that sensible position taken by the noble Baroness. However, there are organisations with specific responsibilities in that field. For example, I recall the Centre for Accessible Environments which is a prominent body working in the area. As I said in response to the noble Lord, Lord Addington, I opened an exhibition called the "Universal Access Centre" at the Building Centre where precisely the problems described were addressed.

Former Coalfield Areas: Rehabilitation
3.21 p.m.
Lord Dormand of Easingtonasked Her Majesty's Government:
Whether they are satisfied with the progress being made with the rehabilitation of the former coalfield areas.
Lord Haskel: My Lords, the Government are committed to helping communities affected by pit closures. To that end, the Deputy Prime Minister set up a Coalfields Task Force last October to look at how we can improve the co-ordination and effectiveness of existing programmes and identify what more can be done to help coalfield communities in England. The task force will report in May. The Government will launch an action plan for the coalfields on 24th June.
Lord Dormand of Easington: My Lords, is my noble friend aware of how warmly the Government's initiative in the matter has been welcomed in the former coalfields? That is particularly so as the proposals contain much more than the creating of jobs, which is of great importance. However, is he aware of some concern that the money involved may be dispersed, particularly in the regional agencies? To that extent, does he agree that there should be some ring-fencing of the resources which he announced today?
Lord Haskel: My Lords, I thank my noble friend for his words of welcome for the Government's efforts. As for his other point, some schemes specialise in the regeneration of coalfields only. For example, English Partnership's coalfield regeneration project is limited to coalfields and has a 10-year programme to reclaim 56 former collieries. RECHAR is a community initiative specifically for coalfield areas. There are eight eligible regions in England, Scotland and Wales. Again, it is an initiative specifically for coalfields.
The regional development agencies will of course play an important role in attracting new investment, but it is for the review committee to decide how the money will be divided up.
Lord Ezra: My Lords, can the Minister confirm that the task force will take full account of the high skills of all those who have worked underground, not only mineworkers but also craftsmen? I need only remind the noble Lord that an electrician who works underground has to have a much higher degree of skill than an electrician working on the surface. Will the task force ensure that those great skills are used to advantage?
Lord Haskel: Certainly, my Lords. I know that the task force is paying particular attention to that in its aim of trying to find new employment in the coalfield areas. Those skills are available for industries other than coalmining.
The Lord Bishop of Wakefield: My Lords, my diocese of Wakefield is an area which has known great

1247
pain over the past few years with the closing of coalfields. Many of my communities are grateful to the Government for the support being given to them. However, are the Government aware of the further pain that is frequently caused by the prospect of open-cast mining? In some of my areas where it is under consideration, it presents a dilemma to the local council. To the communities threatened by it, it merely adds insult to injury.
Lord Haskel: My Lords, the Government are aware of the widespread concern about the impact of open-cast coal-mining. However, they are also aware of its importance to the coal industry. That is why the Government have undertaken a review of open-cast planning policy, which will allow the views of all those concerned to be heard. That review is being carried out by the Department of the Environment, Transport and the Regions.
Lord Fraser of Carmyllie: My Lords, does the Minister appreciate that with the looming collision between the Government's environmental policy and their energy policy, all existing coalfields threaten to become former coalfields in as few as three to five years? Do the Minister and the Government recognise that if the Environment Agency's latest proposals on the reduction of emissions of sulphur dioxide were to be introduced, something like half the current production of coal in this country would cease and more than 20,000 people would lose their jobs?
Does the Minister recognise that it is all unnecessary because the existing levels of emissions in the United Kingdom are more than sufficient to meet our international obligations? Without breaching those international obligations, we could in fact increase coal production in the United Kingdom.
Lord Haskel: My Lords, I am not aware of the facts given by the noble and learned Lord. As noble Lords know, the matter is being reviewed and of course the Government are aware that there are problems of emissions from coal. That is a matter of which the task force reviewing the coal industry is very much aware. When it reports, the Government will take the appropriate steps.
Lord Northbourne: My Lords, does the noble Lord agree that an important element in the rehabilitation of coalfield areas is the rehabilitation of coalfield sites? Can he say whether, in the case of sites which have been transferred by British Coal to the Coal Authority, the liability for environmental pollution and contamination has also been transferred, or does that still remain with British Coal?
Lord Haskel: My Lords, the question is a little outside the one on the Order Paper, but the noble Lord gave me notice of it so I have a reply ready. If I may say so, it is rather a lawyer's reply.
1248
Where there is a statutory liability, liabilities have been transferred from British Coal to the Coal Authority, but where British Coal's responsibility represents an obligation rather than a liability, that obligation remains with British Coal.
Baroness Nicol: My Lords, is the Minister aware that the Westminster woodlandߞin which every noble Lord and every member of staff is warmly invited to become involvedߞis to be created on an old colliery site? Does he agree that it is an excellent way of bringing the site back to life?
Lord Haskel: My Lords, I agree with my noble friend.
Lord Hardy of Wath: My Lords, is my noble friend aware that in South Yorkshire there has been enormous and extensive progress in regard to the environmental transformation of the former coalfield area? However, anxiety is particularly acute because economic need continues to be severe. Can my noble friend assure the House that the Government will rigorously maintain efforts and take every possible initiative to secure European funding to assist in the economic transformation of those areas?
Lord Haskel: My Lords, the Government recognise that there is exceptional deprivation in South Yorkshire. Despite assistance under the previous administration, in South Yorkshire the gross domestic product is 73 per cent. of the European average. That is why the whole of the South Yorkshire area has assisted area status, making it eligible for regional selective assistance from the DTI. In addition, the European Commission's current proposals for structural funds after the year 2000 would include South Yorkshire among the areas eligible for objective one funding. The data are based on information currently available.
Lord Dormand of Easington: My Lords, as my noble friend is aware, I am slightly disappointed by the Answer he first gave to me. I am aware of the various agencies which he enunciated. However, to repeat what I said earlier, the whole purpose is that there should be ring-fencing of the resources to be allocated to this initiative. Will my noble friend reconsider that matter?
Lord Haskel: My Lords, I know that the Coalfields Task Force has been considering this question. It will address it in its report next month. I have not seen a draft of the report and therefore am not in a position to say anything further.

British Horse-racing Industry
3.30 p.m.
The Viscount of Falklandasked Her Majesty's Government:
What are the implications for the British horse-racing industry if more prominent owners decide to move their horses from Britain to be trained in France or elsewhere.
The Parliamentary Under-Secretary of State, Home Office (Lord Williams of Mostyn): My Lords, the Government are aware of the concerns at the prospect of racehorse owners moving their business overseas. Those issues are raised in the British Horseracing Board's financial plan for British racing, which we are discussing with the board.
The Viscount of Falkland: My Lords, I thank the Minister for that Answer. Is it not sad and remarkable that this country, which gave the world modern thoroughbred racingߞindeed, the horses that race are known as "English thoroughbreds"ߞshould have an industry whose finances are in such a state that it cannot produce prize money which ranks with other nations that race horses in the same way? Indeed, on average the French prize money is 2.5 times that of British prize money. Do not the moneys that come to racing from betting need to be better distributed? The whole question needs to be re-examined in order to bring us near to par with our neighbouring countries.
Lord Williams of Mostyn: My Lords, the noble Viscount mentioned betting and I must therefore declare a past interest. When I was at the Bar I acted for Ladbroke, William Hill, the Tote, Coral and Mecca. It was the purest and most refined relationship yet devised between man and bookmaker, because they paid me.
In 1996 the last government reduced betting duty from 7.75 to 6.75 per cent. and that was estimated to cost the government around £65 million a year. The Tote is beginning to thrive under its new chairman. It will provide £8 million back into horse-racing; its profits are increasing. In 1993 the government assisted the industry with a preferential hack registration concession worth £15 million to £20 million a year.
I do not overlook the point made by the noble Viscount. If Sheikh Mohammed is the originator of the theme behind the noble Viscount's Question, and if he feels that discussions with Home Office Ministers would be of assistance, we are only too willing to take part in such discussions.
Lord Burnham: My Lords, when the Government discuss with the British Horseracing Board the financial scheme of Mr. Peter Savillߞwho may or may not be chairman of the boardߞwill they bear in mind that racing is a major industry in this country as well as a sport, with many small owners? A flat return of 24 per cent. on 100 per cent. of their expenditure cannot he considered adequate.
Lord Williams of Mostyn: My Lords, I take the point made by the noble Lord, which is why I was careful earlier to describe the horse-racing world as an industry. Of course it has enormous ramifications for all
1250
sorts of trades and in all sorts of rural communities. The Government are well seized of the points made by the noble Lord.
Viscount Montgomery of Alamein: My Lords, if racing was concentrated on fewer racecourses, does not the Minister agree that that would improve productivity, efficiency and prize money?
Lord Williams of Mostyn: My Lords, not necessarily. To many people who follow horse-racing, diversity is part of the fun. Not everyone wants to go to one racecourse on every Saturday during the season. To an extent, if it is an industry, then the industry must regulate itself in terms of the number of racecourses it uses and what prize money is attached to specific races.
Lord Sandberg: My Lords, will the Minister confirm that, when the Government take decisions on this matter, they will remember that there are around 100,000 people employed in the racing industry? That is without taking into account those who worked for the Minister's previous employers.
Lord Williams of Mostyn: My Lords, 100,000 is the figure I had in mind and is the sort of consideration to which I was referring when I replied earlier in the context that racing is an industry, as well as giving pleasure to many millions of people.
Lord Peyton of Yeovil: My Lords, I am sure that the whole House will admire the candour with which the Minister lifted the veil on his past. Is it too much to hope that the Government will digest the basic fact that unless more of the profits from betting end up in racing, the future is dim indeed?
Lord Williams of Mostyn: My Lords, that is a view that is held, though not by most of the major bookmakers. As I have already indicated, we have given assistance to the industry. One does not need to be full of gloom and doom. Attendances at racecourses are at their highest level for the past 30 yearsߞmore than 5 million last yearߞand prize money has been increasing significantly over the period. In many ways racing is a successful industry. However, I hear in mind that if one has an indication of the sort given recently by the Sheikh, one must assess that with care. I read a letter from the embassy in Dubai dated only this morning. It is paying careful attention to this matter.
The Viscount of Falkland: My Lords, it is always a pleasure when the noble Lord answers one's questions so elegantly. However, if I ask another Question about racing, will the reply come from his department? I was expecting the Department of Trade and Industry to answer the Question. I know that the noble Lord's department is responsible for betting, and it would be right if it took the view that this was a betting Question. It is also right that the noble Lord should answer, and

1251
that he has done very adequately. However, can he say in which department racing as a whole would generally lie?
Lord Williams of Mostyn: My Lords, I am answering for the whole Government, as the Front Bench Opposite constantly reminds me. I am answering the Question because it specifically falls within the remit of the Home Office. No single department deals purely with the whole of the horse-racing industry.

Northern Ireland (Elections) Bill
Brought from the Commons; read a first time, and to be printed.

Bank of England Bill
3.37 p.m.
Lord Haskel: My Lords, on behalf of my noble friend Lord McIntosh of Haringey, I beg to move that the Commons reason be now considered.
Moved, That the Commons reason he now considered.ߞ(Lord Haskel.)
On Question, Motion agreed to.
COMMONS REASON
[The page and line refer to Bill (65) as first printed for the Lords]
LORDS AMENDMENT
5 Clause 13, page 6, line 8, at end insert—
("( ) Of the four members appointed under subsection (2)(c) one shall be appointed on the advice of the First Minister of the Scottish Executive.")
The Commons disagreed to this amendment for the following reason—
5A Because the members of the Monetary Policy Committee of the Bank of England are appointed solely Pr their monetary policy expertise. It is for the Committee to collect from across the whole of the United Kingdom the information it needs for monetary policy purposes, and for the court of directors of the Bank to ensure that it does.
Lord Haskel: My Lords, I beg to move that the House do not insist on their Amendment No. 5 to which the Commons have disagreed for their Reason numbered 5A.
The Bank of England Bill sets up the Monetary Policy Committee whose job it is to set interest rates in order to meet the Government's inflation target. The effect of the amendment we are discussing today is that one of the four members of the Monetary Policy Committee appointed by the Chancellor of the Exchequer should be appointed only after receiving the advice of the First Minister of the Scottish Parliament.
As your Lordships know, there will only be four outside members of the MPC. To introduce regionality as a criterion for appointment is just not practical. People would then call for representation from the different sectors of the economy as well as from
1252
different parts of the country. To accommodate all those different interests would require a committee of dozens. I repeat that that is not a sensible or practical solution.
When the Government expressed their intention to set up the Monetary Policy Committee, we said that the members of that committee would be chosen because of their skill, their reputation and their ability to reach decisions as to the appropriate levels of interest rates for the whole of the United Kingdom. And that will now be firmly on the statute book in Clause 13(4) of the Bill.
We recognised the anxiety, expressed by your Lordships, that the Monetary Policy Committee should have regard to the sometimes varying economic conditions in different parts of the United Kingdom. With that in mind we have drawn the Bill in such a way as to ensure that the court of the Bank of England has a specific duty to monitor the way in which the Monetary Policy Committee discharges that duty. In making our most recent group of appointments to the court, we have been sensitive to many of the concerns reflected by the noble Lord, Lord Mackay, and others who, at an earlier stage, spoke in support of his amendment.
The scheme of devolution that we have proposed and that will result in a Scottish parliament proceeds on the principle that power will be devolved unless it can be more effectively discharged by the United Kingdom Parliament. Monetary policy is not devolved for the simple reason that there is only one currency in the United Kingdom, and it is difficult to see how monetary policy could be conducted on anything other than a UK-wide basis. Although there are undoubted regional variations in economic performance and inflationary pressures may well be different in different parts of the United Kingdom, it is necessary to take an overall view in operating monetary policy. We believe that the Monetary Policy Committee must reach its policy decisions having regard to what is good for the whole of the United Kingdom economy. Indeed, it would be very difficult to do otherwise.
The amendment raises a concern that the Monetary Policy Committee should have regard to the differing economic conditions in different parts of the country. But in drafting the Bill we had anticipated that concern. Under the old system, the Bank of England was sometimes criticised for giving the impression that it did not acknowledge the problems experienced by different parts of the United Kingdom. That is why the Bill makes it clear, in Clause 16, that one of the duties of the reformed court of the Bank of England will be to keep under review the way in which the Monetary Policy Committee reaches its decisions, and in particular whether it has collected the regional, sectoral and other information on which it is necessary to base its decisions. This amendment is not necessary because of the safeguard that we have inserted in the Bill.
We said before the election that we thought that the court ought to reflect better the differing interests of the whole of the United Kingdom. We made the latest group of appointments in February. Your Lordships will be aware that, for the first time, there are now individuals on the court representing interests in Scotland, Wales and Northern Ireland. As we make further appointments

1253
over the next few years we shall ensure that the court has a wide base throughout the whole country. Its supervision will help ensure that the Monetary Policy Committee reaches decisions that will be good for the whole of the United Kingdom.
Members of the Monetary Policy Committee will be appointed on the basis of what is best for the whole of the country, not just one part of it. The reforms that we have made to the court, and the people whom we have put on it, will ensure that the interests of Scotland and other parts of the United Kingdom are taken into account so that the amendment is not necessary. Therefore, I urge your Lordships' House not to insist on the amendment.
Moved, That the House do not insist on their Amendment No. 5 to which the Commons have disagreed for their Reason numbered 5A.ߞ(Lord Haskel.)
3.45 p.m.
Lord Mackay of Ardbrecknish: My Lords, it will not come as any surprise to your Lordships that I am deeply disappointed that the Government have decided to overturn the amendment. Your Lordships made a number of amendments to the Bank of England Bill and this is the only one the Government have chosen to overturn. I really must have a discussion with the noble Lords, Lord Barnett and Lord Peston, to see what particular magic they haveߞand clearly I do not haveߞin getting amendments accepted by the Government both in this House and in the other place.
However, the more I listened the other day to the Chief Secretary to the Treasury in the Commons and the more I listened to the noble Lord, Lord Haskel, today, the more convinced I have become that the Government have not read their own Bill. The basis of the most important of the noble Lord's arguments is the one expressed by the Chief Secretary to the Treasury, interestingly enough, a Scottish Member of Parliament, for refusing to have a Scottish person on the Monetary Policy Committee. Every Scottish Labour MP trotted into the Lobby in order to make sure that the new Scottish government that will come about should have absolutely no say over even one of these appointments.
I was not surprised because, since the election, the Labour Party has been peculiarly inept in Scotland. It is almost as if it has decided, "We have a Scotland Bill. That is Scotland dealt with. We have ticked the Scotland column. We will not bother anywhere else." It is not bothering about Scotland on the Monetary Policy Committee; it is not bothering about Scotland when it comes to student fees. Another amendment of your Lordships on Scottish universities and the fees charged to English, Welsh and Northern Irish students was overturned earlier this week.
When the Chief Secretary, the right honourable Member for one of the Edinburgh constituencies, was discussing the amendment, he said, exactly as the noble Lord has said, that,
"the court of the Bank of England has a specific duty to monitor the way in which the Monetary Policy Committee discharges that duty".ߞ[Official Report, Commons, 20/4/98; col. 508]
1254
The Bill makes it clear that one of the duties of the reformed court of the Bank of England will be to keep under review the way in which the Monetary Policy Committee reaches its decisions. Clause 2(1) states:
"The court of directors of the Bank shall manage the Bank's affairs, other than the formulation of monetary policy".
Clause 10, where the Monetary Policy Committee is introduced, makes it perfectly clear that in Section 4(1) of the Bank of England Act 1946 (power of the Treasury to give directions to the Bank) there shall be inserted,
"except in relation to monetary policy".
The whole point of the Bill is to give the Monetary Policy Committee independenceߞindependence of the Chancellor of the Exchequer and independence of the court. I would suggest to the Minister that he asks his friends at the Treasury to look carefully at their own Bill before they trot out the argument that the court will look after the regional aspects. Of course, as I acknowledged when I introduced the amendment to your Lordships, the court has indeed a number of nominations from other parts of the United Kingdom. I warmly welcome that.
Lord Randall of St. Budeaux: My Lords, I am grateful for the courtesy of the noble Lord in giving way. He makes a strong and powerful case for Scottish influence in policy making here. Is he aware how many of the Ministers in the Treasury are Scottish?
Lord Mackay of Ardbrecknish: My Lords, one of my noble friends said "too many-, but I would not subscribe to that myself. I think three of them are, a point I drew to your Lordships' attention. I expressed even greater surprise that they did not understand the politics and the economics behind the amendment I successfully argued in your Lordships' House.
The fact of the matter is that the court of the Bank of England, worthy body as it will be, with lots of excellent people on itߞI do not deny that for a minuteߞhas no say over monetary policy. Clause 2(1) makes that abundantly clear. So the noble Lord's argument, and that of his right honourable friend the Chief Secretary, is a non-argument. Their own Bill negates that argument.
I suppose that their second argument is that the Chancellor picks people for those four jobs who know about the economy of the country and in that way the whole country is catered for. As I explained to your Lordships earlier, I would have a little more confidence in that argument were it not for the fact that all four members inhabit a huge geographical triangle in the United Kingdom which has Oxford, Cambridge and London at its three corners. That is not exactly a wide geographical spread. I do not believe for a minute that the first minister of the Scottish parliamentߞfrankly, I would prefer to call him prime minister since it seems to be an easier way to describe himߞwill not be able to find in one of the Scottish universities an academic economist who is the equal ofߞnot better thanߞany of the four current members of the board. After all, the country which gave birth to Adam Smith surely contains at least one decent economist with some knowledge of monetary policy who can bring expertise to the Monetary Policy Committee. I do not accept that

1255
argument either. Of course, there can be only one monetary policy and I have never suggested otherwise. That is exactly why I want someone from Scotland on that committee.
The other argument is this: why Scotland? There are different sectors with different interests. But I sometimes believe that this Government have not understood the consequences of their own constitutional changes. They have made a huge change in the government of Scotland, which is far bigger than what has been done in Ireland or in Wales. The government of Scotland will be a very significant player in the Scottish economy. There is no doubt that from time to time the economic cycle in Scotland has differed from that in the rest of the country. If, because of an overheated economy, let us say, in the south east of England, interest rates are set at a level which has an adverse effect on the Scottish economy, then future members of a Scottish government, of whatever hue, will complain that one of the reasons for that happening is that no one on the Monetary Policy Committee understands what is happening in Scotland. I have given the noble Lord a way out of that difficulty. I am deeply disappointed that the Government have not chosen to take it.
It is, as I say, part and parcel of a very serious problem. The Government do not understand what is going to happen in two to three years when the new Scottish parliament is set up and running. It will be a much more powerful and influential body than the Government seem to realise. It will debate economic and monetary policy. It is allowed to do that under the Scotland Bill. These issues will be debated and the Scottish parliament will become very exercised if it believes that the interests of the Scottish economy are not being properly looked after.
I know it is not in the nature of your Lordships' House to play ping-pong with the other place, as it is elegantly described. I would never have given any thought to being tempted to do that except for one thing. When I advanced this amendment in your Lordships' House I discovered, to my amusement and surprise when I called a Division, which, thanks to the wisdom of some noble Lords I managed to win, that the Liberal Democrats voted against me. I thought that was quite surprising given the fact that they tried to pretend that they are great advocates of the Scottish interest. But, clearly, someone realised what had happened in the few minutes in the Division Lobby because I discovered that when this matter reached the Commons last Monday the Liberal Democrats there voted for my amendment and against the Government. Is that not amazing? In your Lordships' House they voted with their friends in the Government and in the other place they voted against their enemies, the Government. That is quite surprising. In my view, that appears to be one all.
I am tempted to see if we can have a replay, or decider, to allow the Liberal Democrats to come down on one side or the other. It was a brilliant exposition of the position of the Liberal Democrats. I have no doubt that in Scotland the Liberal Democrats are telling the Scots that the position they hold was the one they
1256
adopted down the corridor and that they are trying to keep as quiet as possible the fact that the Liberal Democrat position in this House, when this issue first arose, was that they were as opposed to a Scot being on the Monetary Policy Committee as are the Government. To be honest, the Liberal Democrats should be ashamed of themselves, but I suppose they have no shame in this particular regard because sitting on a barbed wire fence, and arguing on the one hand and on the other, is part of the principle of being a Liberal Democrat. We should not be too surprised at that.
I see the noble Lord, Lord Newby, the Liberal Democrat spokesman, is in his place. He argued vehemently against me in your Lordships' House. I hope that he is going to explain why he is now doing a sort of "Father William" act and standing on his head on this issue at the instruction of his colleagues down the corridor. I look forward to hearing from him on that.
I am greatly disappointed. I believe that, in Scottish terms, the Government will genuinely regret this. They are already regretting the view that is gaining ground in Scotland that the Government are anti-Scottish. Their opinion poll lead was enormous this time last year, but it has been whittled away to nothing by the Scottish National Party, which is playing heavily on the fact that the Government do not seem to be bothered about Scottish interests. Their actions on this Bill show that the Government are not bothered about Scottish interests and, worst of all, that Scottish Members in the Treasury are prepared to make sure that the first minister of the Scottish parliament will not have any say over even one of the appointments to the Monetary Policy Committee. I hope that one of the Liberal Democrats is going to explain their present position; otherwise I may be tempted to find out if there is a third Division Lobby in your Lordships' House.
Lord Newby: My Lords, I hope that the noble Lord, Lord Mackay, will not object too much if I agree with him on one point at least; namely, that the argument the Government advanced both in another place and here that the interests of the regions of Scotland and Wales would be met by members of the court will not hold up. As far as I can recall, it was not an argument that was advanced during the debates in this place when the Bill was first considered. One read about it for the first time in the other place and we have heard it again here today. I do not believe that the argument for having a regional voice on the Monetary Policy Committee is adequately dealt with by reference to membership of the court.
Noble Lords who sat through earlier debates on this Bill will remember that we had a number of discussions about how we would get beyond what I have called the "charmed circle" in terms of members of the Monetary Policy Committee, which the noble Lord, Lord Mackay, called the "home team" and the "away team". In our view the Bill clearly does not do that because it sets no constraints in terms of regional representation on the Monetary Policy Committee. At Committee and subsequent stages we discussed how best to make sure that the nations and regions of the country should be represented on that committee. We grappled with that issue here, and my colleagues in another place attempted

1257
to do so by tabling an amendment when your Lordships' amendment was debated there. That amendment would have attempted to address the matter. However, as noble Lords may be aware, that amendment was not called. There was frustration because the Liberal Democrats were unable to put forward their own amendment and the Government were not prepared to give any commitment whatever to regional or national participation on the Monetary Policy Committee. Therefore, for reasons which I perfectly well understand, the Liberal Democrats decided to vote in favour of this amendment.
One factor which has been extremely enjoyable for those of us who have been advocating a large measure of devolution for Scotland, Wales and the English regions as this Bill has progressed has been the extraordinary enthusiasm with which the noble Lord, Lord Mackay, has advanced these causes. It is an enthusiasm which I did not have the advantage of hearing before the last election. It may be that that was because I was not a Member of this House and therefore was unable to hear the passionate speeches by the noble Lord about the role the Scots should play by having their own parliament and a great degree of devolved authority. Perhaps the noble Lord has been able to spend more time in Scotland since ceasing to be a Minister and therefore has a greater understanding of the views of the Scots on these matters. It is interesting and gratifying that the noble Lord is now such a firm and resolute advocate of the Scottish interest.
For a long time we have been seeking ways to give the Scottish, Welsh and English regions far greater control of their own decision-making on economic and social issues. We continue to argue that case on this Bill. We have grappled to find the best solution. I am not sure whether the noble Lord, Lord Mackay, intends to divide the House on this matter but, if he were to do so, we on these Benches would vote as we voted previously. I hope that that answers the noble Lord's questionߞ
Lord Mackay of Ardbrecknish: Where?
Lord Newby: In this House!
4 p.m.
Lord Haskel: My Lords, far be it from me to enter into an argument between the parties opposite on their voting records. I am afraid that I do not have the courage for that this afternoon.
The noble Lord, Lord Mackay, quoted Clause 2(1), which delegates to the Monetary Policy Committee its precise responsibility for judging the effect of monetary policy on inflation. However, a little further into the Bill, we find Clause 16(1), from which I quoted, which states:
"The court of directors of the Bank shall keep the procedures followed by the Monetary Policy Committee under review".
It follows that if the Monetary Policy Committee does not follow the procedure of taking into consideration regional and sectoral interests, the court can do something about it. I do not agree with the noble Lord that the wording of the Bill negates my argument. I believe that in those two clauses it strengthens my argument.
1258
The noble Lord, Lord Mackay, said also that he would prefer to choose the members of the Monetary Policy Committee on the basis of where they live rather than on their ability. I should prefer to see appointments being made according to ability to control inflation. The members of the Monetary Policy Committee are appointed for their expertise, knowledge and ability to reach decisions about the appropriate level of interest rates for the whole of the United Kingdom. I can only repeat that Clause 16 will place a statutory duty on the court of the Bank of England to keep under review the way in which the Monetary Policy Committee reaches its decisions—
Noble Lords: No!
Lord Mackay of Ardbrecknish: My Lords, I am grateful to the noble Lord for giving way, but I cannot let him off on that point. The provisions state that the court has a duty to make sure that the committee,
"has collected the regional, sectoral and other information necessary".
There is a huge difference between collecting information and making decisions based upon it. I am concerned about the decisions, not about whether the committee collects the paper. I am sure that it will have more than enough paper.
Lord Haskel: My Lords, but the Bill also places on the court the statutory duty to review the way in which the committee reaches its decisions. Therefore, I urge the House not to insist on their Amendment No. 5.
On Question, Motion agreed to.

Social Security Bill
4.4 p.m.
The Parliamentary Under-Secretary of State (Department of Social Security) (Baroness Hollis of Heigham): My Lords, I beg to move that the Bill be now further considered on Report.
Moved, That the Bill be further considered on Report.ߞ(Baroness Hollis of Heigham.)
On Question, Motion agreed to.
Lord Haskelmoved Amendment No. 39:
After Clause 50, insert the following new clause—
CLASS 1 CONTRIBUTIONS
(".ߞ(1) For subsection (1) of section 5 of the Contributions and Benefits Act (earnings limits for Class 1 contributions) there shall be substituted the following subsection—
"(1) For the purposes of this Act there shall for every tax year be—

(a) a lower earnings limit (for primary Class 1 contributions);

(b) an upper earnings limit (for primary Class 1 contributions); and

(c) an earnings threshold (for secondary Class contributions);

and those limits and that threshold shall he the amounts specified for that year by regulations which, in the case of those

1259
limits, shall be made in accordance with subsections (2) and (3) below."
(2) For subsection (1) of section 6 of that Act (liability for Class 1 contributions) there shall be substituted the following subsection—
"(1) Where in any tax week earnings are paid to or for the benefit of an earner over the age of 16 in respect of any one employment of his which is employed earner's employment—

(a) a primary Class 1 contribution shall be payable in accordance with this section and section 8 below if the amount paid exceeds the current lower earnings limit (or the prescribed equivalent in the case of earners paid otherwise than weekly); and

(b) a secondary Class 1 contribution shall be payable in accordance with this section and section 9 below if the amount paid exceeds the current earnings threshold (or the prescribed equivalent in the case of earners paid otherwise than weekly)."

(3) For subsections (1) and (2) of section 8 of that Act (calculation of primary Class 1 contributions) there shall be substituted the following subsections—
"(1) Where a primary Class 1 contribution is payable, the amount of that contribution shall be the primary percentage of so much of the earner's earnings paid in the tax week, in respect of the employment in question, as—

(a) exceeds the current lower earnings limit (or the prescribed equivalent); and

(b) does not exceed the current upper earnings limit (or the prescribed equivalent);

but this subsection is subject to regulations under section 6(5) above and sections 116 to 120 below and to section 41 of the Pensions Act (reduced rates of Class 1 contributions for earners in contracted-out employment).
(2) For the purposes of this Act the primary percentage shall be 10 per cent; hut the percentage is subject to alteration under sections 143 and 145 of the Administration Act."
(4) For section 9 of that Act there shall be substituted the following section—
"Calculation of secondary Class 1 contributions.
9.ߞ(1) Where a secondary Class 1 contribution is payable, the amount of that contribution shall be the secondary percentage of so much of the earnings paid in the tax week, in respect of the employment in question, as exceeds the current earnings threshold (or the prescribed equivalent).
(2) For the purposes of subsection (1) above, the secondary percentage shall be 12.2 per cent; but the percentage is subject to alteration under sections 143 and 145 of the Administration Act.
(3) Subsection (1) above is subject to regulations under section 6(5) above and sections 116 to 120 below and to section 41 of the Pensions Act."").
The noble Lord said: My Lords, in moving Amendment No. 39, I should like to speak also to Amendments Nos. 40, 51, 75, 89 to 102, and 105 to 107. This large group of amendments puts into effect changes to the structure of national insurance contributions for employees and their employers from April next year. As noble Lords will know, the Chancellor of the Exchequer announced in the Budget a radical reform of the national insurance system. These amendments are a crucial part of that strategy.
I readily acknowledge that the amendments are complex and technical. That is why we have placed in the Library a note which explains what each of them does, together with a compliance cost assessment of their effects on business. We sent copies of the explanatory note to the noble Lord, Lord Higgins, and
1260
to the noble Earl, Lord Russell, on 20th April. I hope that they will find the documents helpful, although I am afraid that they did not receive them very quickly.
If the amendments themselves are complex and technical, their objectives are straightforward. The amendments modernise the structure of national insurance and are in line with the recommendations made by Martin Taylor, the head of the Government's tax-benefit review, following his wide consultation with business. They improve incentives to work by increasing take-home pay; they simplify the structure of employers' contributions, making the system easier for employers to administer; and they make it more attractive for employers to employ people moving from welfare to work.
The major part of the changes is dealt with in the new clause which is Amendment No. 39. First, it provides that employees will pay national insurance only on the portion of earnings which exceeds the lower earnings limit. Under the current system, no national insurance contributions are payable by employers and employees when total earnings are below the lower earnings limit, which is currently £64 a week. However, when earnings reach the lower earnings limit, employees have to pay 2 per cent. contributions on all their earnings up to that point. That "entry fee" amounts to £1.28 a week for all employees paying contributions. It means that in some cases employees earning above the lower earnings limit can be worse off in terms of take-home pay than those earning below it. That cannot be right.
The amendment abolishes the 2 per cent. entry fee for all employees. It means that employees will pay contributions only on that part of their earnings that exceeds the lower earnings limit.
Secondly, the starting point at which employers begin to pay national insurance will be raised from the lower earnings limit to the level of the single person's tax allowance (set at the equivalent of £81 a week in 1998–99). The actual level of the new earnings threshold for employers will be set each year in regulations.
The employer entry fee will also be abolished so that employers will not be liable to pay national insurance at all on any earnings below the level of the single person's allowance.
The new clause also simplifies the structure of employer national insurance contributions, bringing in a single rate of 12.2 per cent. in place of the four separate rates that apply now. That package of changes to employer national insurance will be revenue neutral for employers as a whole. These changes do not affect people's rights to contributory benefits, their ability to build up such rights or the speed at which they build up those rights.
Amendments Nos. 40 and 51 ensure that the proposed single rate of employer contribution will apply to the new Class 1B contribution.
Lord Higgins: My Lords, I am grateful to the Minister for allowing me to intervene. A moment or two ago he said that this amendment would not affect the rights of people to certain benefits. But in his Budget Statement the Chancellor of the Exchequer made it clear

1261
that, as a result of these changes, he would have to make further adjustments to ensure that those people who had not paid contributions would in future receive contribution benefits.
Lord Haskel: My Lords, I was referring to the current situation. The noble Lord is right in quoting the Budget Statement of the Chancellor of the Exchequer, but he was referring to the future. The regulations that we are discussing now will not affect people's rights. Future regulations may affect people's rights, and those regulations will appear as a result of future Bills. I have been provided with an answer by the Box which confirms that point. The Chancellor announced that he intended in future reforms to raise the lower earnings limit for employees to the level of the single person's tax allowance, and that remains the Government's intention.
Amendment No. 89 makes a similar change in respect of Class 1A contributions paid by employers on company cars and car fuel provided to employees. Amendment No. 100 is a new clause which ensures that the changes to the structure of national insurance contributions do not in any way reduce the occupational pensions people build up.
Noble Lords discussed general issues on contribution rebates for occupational pension schemes contracted-out of the State Earnings Related Pension Scheme during the debate on the rebate orders on 27th March. I do not intend to go over that ground today. This amendment is also somewhat technical, and again I do not propose to go into the detail here. However, I shall gladly say more if noble Lords want me to do so. In straightforward terms, the new clause will ensure that the rebates for employers with occupational pension schemes contracted-out of the State Earnings Related Pension Scheme are not reduced as a result of the restructuring of national insurance contributions. The restructuring would not in any case affect employee rebates or other types of pension scheme. The remaining amendments in this group, Nos. 75, 90 to 99, 101, 102, 105, 106 and 107, make changes to Schedules 7 and 8 by way of minor consequential amendments arising from the new contribution structure.
Before I finish I am sure that the House would find it helpful if I addressed some of the points made by the noble Lord, Lord Higgins, at the start of the Report stage last Monday. He was concerned that these national insurance measures were being introduced to the Bill at a relatively late stage. He raised questions about Commons privilege and argued that the measures might better have been included in the Finance Bill rather than this Bill. As the noble Lord said, these are important issues. I can assure the House that the Government would not wish to introduce these matters to the Bill after its Committee stage without very good reason. I set out those reasons.
First, these national insurance changes will play a major part in helping people to move from welfare into work. The changes have received widespread support. It is important that people can enjoy the benefits of the new structure as soon as possible, and for that reason the Chancellor announced his intention to introduce the
1262
changes in April next year. Employers have to implement the new system and clearly need time to prepare for the change to develop new payroll software and new administrative arrangements. I am sure that the noble Lord, Lord Higgins, is sympathetic to the needs of employers. Employers would not have the time they needed if the primary legislation was held back until the 1999–2000 session. We therefore need to legislate in this session, and the Social Security Bill provides the ideal vehicle.
Secondly, the noble Lord argued that the changes should be included in the Finance Bill, suggesting that national insurance contributions were really no different from tax. The Government are committed to bringing national insurance and income tax more closely into line. Greater alignment eases the administrative burden on employers. These and other measures announced in the Budget will be a major step in that direction. But national insurance contributions remain quite distinct from income tax. Payment of these contributions gives individuals rights to contributory pensions and benefits.
Lord Higgins: My Lords, earlier the noble Lord said that some people would not make such contributions.
Lord Haskel: My Lords, all people will make contributions to the National Insurance Fund. National insurance contributions remain quite distinct from income tax. Payment of these contributions gives individuals rights to contributory pensions and benefits, and there is no parallel in the tax system.
Lord Goodhart: My Lords, I am grateful to the noble Lord for giving way. I point out to the noble Lord that in his Budget Statement the Chancellor of the Exchequer described employers' national insurance contributions as employers' tax and changes to the national insurance contribution system as tax reforms.
Lord Haskel: My Lords, I can only repeat that the two are absolutely distinct. If those were the words of the Chancellor of the Exchequer in his Budget Statement, I am sure that he had very good reason for using them. They are part of the contribution that employers make towards funding the pension and benefit rights of both their employees and employees in general.
National insurance contributions are quite distinct in principle, therefore, from income tax. They are part of the social security system and are dealt with in social security legislation. Such legislation is scrutinised by both Houses of Parliament, and I am sure that this House would argue strongly against any suggestion that it does not have a role in social security matters.
The noble Lord, Lord Higgins, also suggested that these measures might better have been introduced in the Finance Bill rather than in this Social Security Bill. The scope of the Finance Bill is defined by several centuries of parliamentary tradition. This House cannot amend finance Bills as they concern aids and supplies and are a matter of non-waivable Commons privilege. Finance Bills deal with general public revenue and the finance of central government. Their scope does not

1263
cover provisions to authorise borrowing or impose a charge for a specified expenditure purpose. As the House will be aware, national insurance contribution revenue is paid into the National Insurance Fund. The uses to which revenue to the fund can be put are very clearly specified in legislation. National insurance contributions are not therefore part of general public revenue, and hence they clearly fall outside the scope of the Finance Bill. I hope that that has clarified the position.
Thirdly, the noble Lord also expressed concern that to introduce these national insurance measures at this stage of the Bill ran counter to Commons privilege. It is true that contributions payable into the National Insurance Fund are the subject of Commons privilege, but it is a privilege that the Commons is able to waive and it will be invited to do so when the Bill returns there. I hope that these comments address the concerns expressed by the noble Lord about the introduction of these measures into the Social Security Bill. I also hope that the noble Lord, Lord Higgins, in particular and other noble Lords in general will welcome these important changes. The amendments will reduce the amount of national insurance paid by employees. If the new structure was in place today, each and every employee paying national insurance would pay £1.28 a week less. Existing benefit entitlements will be maintained.
The reforms will also reduce the amount employers pay on the earnings of some 12.5 million lower and middle income employees. The complicated system of four separate rates of employer national insurance will be replaced by a single rate. This will remove distortions from the system and make it easier for employers to understand and administer their national insurance.
The overall effect will be to improve work incentives and make it more attractive to employ those moving from welfare into work. That is a major objective of this Government. I beg to move.
4.15 p.m.
Lord Higgins: My Lords, I should like to make it clear at the outset that we on this side of the House have no objection to the measures which are before us. On the whole, we believe that they are worthy of support. But having said that, we believe that there are fundamental objections to the way in which the Government are introducing these measures in this House at this stage. In our view, that reflects, to a considerable extent, the increasing contempt with which the Government seem to be dealing with parliamentary matters. It has become almost a hallmark of the Government's approach to legislation that there should be more and more reliance on regulations and statutory instruments. This Bill is yet another example.
One has only to look at the number of amendments of a "normal" kindߞnot the ones we are dealing with hereߞwhich the Government have found it necessary to introduce in your Lordships' House, to realise how badly prepared and drafted this legislation is. The number of amendments which the other place will have
1264
to consider as a result of those which have been introduced by the Government in this placeߞI refer here to the normal amendmentsߞis something which gives one very deep cause for concern.
I turn to the fundamental objections which I made. First, this particular set of amendments is, in effect, a complete Bill in its own right. In making this speech one is, in effect, making a Second Reading speech. These amendments constitute a Bill within a Bill. Not infrequently noble Lords have before them amendments which have not been discussed previously in the other place. The noble Baroness, in replying to a point I made on Monday, pointed out that that is so. Of course it is, but that is something of a totally different order of magnitude to what we are being asked to consider here.
This set of amendments involves something like £1.3 billion. I shall argue later that the sum which they should cover may be double that amount. These measures on such a scale are coming to your Lordships' House at this stage. The noble Lord fully accepts the complexity of the matter. The House of Commons has had no opportunity to scrutinise them in the normal way; that is, on Second Reading or, in particular, in Committee upstairs where they can consider them in detail in a way in which we cannot possibly hope to do here this afternoon.
We are dealing with these amendments now, but it is well known that one can make only one speech on Report. However deficient, complex or unclear the answer from the Government Benches may be, the ability for one to question it in a way which one can in other circumstances is very limited. I shall do what I can to pick up some of the points which the noble Lord made in his opening remarks. But clearly, on a matter of this importance, it is a wholly unsatisfactory way to proceed. That being so, there are further points that I should like to make.
The right procedure, in my view, would have been for these amendments to have been included in a separate Social Security Bill which would have gone through the House of Commons and then through this House in the normal way. We have had no explanation why that should not have been the case. In order to find a convenient way of dealing with these mattersߞbecause this Bill happened to be in this House at this timeߞthe Government have sacrificed the opportunity to have the measure properly scrutinised.
I am not making a party point. Parliament always regrets matters when it does not give adequate scrutiny in detail to the drafting of the legislation. That is what the Government are doing in this case. The right procedure would have been to include the matters in a Social Security Bill starting in the normal way. The noble Lord, a moment or two ago, sought to justify the way in which the matter is being rushed through Parliament. These amendments will go to another place, but the scope for it to debate the detail, the nitty gritty of this group of amendments is extremely limited.
The noble Lord said that it was necessary to rush it through in this way; that the proposals are not coming into effect until April 1999, but industry will need time to prepare. The provision does not have to be on the

1265
statute book for industry to realise that it ought to be making preparations. That is a totally phoney argument. It is not reasonable to act, as the Government are doing with this set of amendments.
I suggested that the alternative would have been to include the amendments in the Finance Bill. Undoubtedly it is a major budgetary matter. The noble Lord says that there is a long history which excludes us from doing that. The distinction between social security contributions and a tax has been steadily eroded. The distinction now virtually does not exist at all. The reason for that is that the Government themselves, in these proposals, have further eroded the difference between contributions, on the one hand, and a tax, on the other. One has only to look at some of the later amendments we shall be debating in this Chamber this afternoon to see that the responsibilities for many of the measures are being transferred from the Department of Social Security to the Inland Revenue. The Inland Revenue, one feels bound to point out, deals with taxation. But there is a more important point. The more one looks at it, the distinction between contribution and taxation disappears. As the noble Lord rightly points out, the money received into the national insurance fund is used for that purpose, but not all the money in the fund comes from the contributions. Much of it comes from taxation. Similarly, there are amounts going out which do not come from contributions. So that distinction is not one which can validly be made.
The other important differenceߞuntil nowߞbetween national insurance contributions and taxation, has been the need to preserve the so-called contributory principle. That is very important becauseߞwe know only too well from talking to people in the streetߞpeople believe that their national insurance stamp, or whatever, entitles them to benefits. That is an important principle, and it has been well established over many years. But, as I pointed out in my intervention, the Government themselves, in this measure, are undermining the contributory principle. They will correct me if I am wrong, but there will be some people now who do not have all their contributions paid in the normal way by their employer. If the Government's proposals are agreed, it is the case that people will be receiving benefits to which they have not contributed. That is a fundamental change.
The Chancellor of the Exchequer in his Budget speech clearly recognised that, as a result of the changes in the amendments that we are debating, he will find some other means of restoring the link with people's entitlement to benefits which were previously contributory. He has gone ahead with the reform, but we do not know how he will ensure that people can say, "I'm entitled to this particular benefit". The clearest example is pensions.
I strongly believe that the distinction between tax and contributions has, as a result of the measures we are discussing in the Bill, virtually been eliminated. Therefore, it is arguable whether your Lordships should be discussing the matter at all. However, as the noble Earl, Lord Russell, recently pointed out, we have always
1266
discussed matters such as these. I have no objection to discussing financial matters in this place, but that would be contrary to the normal conventions.
My fundamental point is that it is foolish of the Government to proceed in this way. I can think of no precedent for it. No doubt the noble Lord will tell me whether there is one, but certainly it will not be on this scale. I hope that it will not be regarded as a precedent in the future.
I turn to an important point in the context of this group of amendments. I wish to quote from the Budget speech of the Chancellor of the Exchequer. He stated:
"I am abolishing the perverse entry fee that every employee pays to he part of the national insurance system and, in doing so, I ant cutting national insurance for every employee in the country. Further reforms will also ensure that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their rights to benefit protected".—[Official Report, Commons, 17/3/98; col. 1106.]
We are totally in the dark as to how that is to be achieved.
In the Budget Red Book much play is made of making work pay and the improvements which the reforms will make, but what appears on page 152 is remarkable. There appears a table for national insurance contributions, abolishing the entry rate for employee national insurance contributions from April 1999. There appear the years 1999 to 2000 and a sum of £1,200 million. For the years 2000 to 2001 there appears a sum of £1,350 million. That gives one an idea of the scale of the measures we are debating today.
However, there are absolutely no figures in the table relating to the extract which I read a moment ago. There is no figure for the change which the Chancellor proposes to make so that no one pays national insurance for the first £81 of their weekly earnings. All employees earning between £64 and £81 will have their rights protected. There is no figure for that change in the Red Book. An Answer to a Parliamentary Question in the other place suggests that the amount is roughly the sameߞjust by coincidenceߞas the figure of £1.3 billion to which I referred.
The Chancellor clearly gave the impression in that extract from his Budget speech that there will be a relief for all employees earning between £64 and £81. There is no figure for that in the Red Book. Why not? We should like to know why not. I give notice that that is an appropriate matter to debate on Third Reading.
It would appear from exchanges in the Treasury Select CommitteeߞI have not been able to obtain an exact extractߞthat the Chancellor did not confirm the firm commitment to achieve that in April 1999. If he had done so it would have been in the Red Book. But not only is it not in the Red Book for this year, it is not in the Red Book for the rest of this Parliament. Yet in the course of his Budget speech the Chancellor gave his marvellous assurance that everyone will be better offߞexcept that the money does not appear. I give notice that we will wish to pursue the matter on Third Reading because it would seem appropriate to do so. It is like the Sherlock Holmes story about the dog barking in the night. The answer was that the dog did not barkߞand the money does not appear. This is a serious matter.

1267
There are many technical issues in these pages. The noble Lord was kind enough to fax to me what, if the measures had been contained in a proper national insurance Bill starting in the normal way, would have been the explanatory notes to clauses. Here they are; what I hold in my hand is what would have appeared in the explanatory notes to the Bill we do not have. It is kind of the noble Lord to provide them for us, but I do not know how many noble Lords have studied them in detail. One could raise many points by way of amendment and we may have to turn to some of them on Third Reading.
This is not a satisfactory way of legislating in this Parliament. I believe that it is wrong for the Government to do so and we shall pursue the matters as best we can in the unbelievably limited way in which they have been put forward.
4.30 p.m.
Lord Goodhart: My Lords, this is a truly remarkable group of amendments. It is remarkable for two reasons which have been outlined by the noble Lord, Lord Higgins, with whom to a large extent I agree. First, it changes in substance, if not strictly speaking in form, tax law. The conventions of the constitution require those changes to be introduced in another place. Secondly, perhaps the most important clause in the Bill is being introduced at Report stage in the House of Lords, the Bill already having been through another place.
Perhaps I might first examine the change to the tax law. As a technicality, I accept that national insurance contribution changes are a matter of Commons' privilege which the other place can waive and are not, strictly speaking, equivalent to taxation. But national insurance contributions are unquestionably a tax. The principle is that tax is a matter for the other place. Over the years, the distinctions between contributions and tax have become increasingly blurred. It is true that the original national insurance scheme resembled insurance; one paid flat rate contributions in return for which one received flat rate benefits. We then moved to graduated contributions which led to graduated benefits. We now have graduated contributions, but have returned to flat rate benefits. The result is that the link between contributions and the amount of benefits has been broken. The only major benefit where the amount is linked to the amount of contributions is the state earnings related pensions scheme. That scheme is, and I believe, rightly, under threat. Once the link has been broken, contributions change from insurance premiums and become tax. That was recognised by the Chancellor of the Exchequer in that part of his Budget speech which I mentioned. Again, administration is now a matter of tax rather than the previous separate contributions system. It is many years since we stopped paying national insurance contributions by way of stamps and started paying those contributions through the tax system; that is, PAYE for employees and the annual tax returns for the self-employed.
1268
We now have proposals, which indeed we support, that the Contributions Agency should be moved from the DSS to the Inland Revenue. There are other changes in the Budget of which, of course, the amendment which we are now debating is the most important, which also bring national insurance contributions closer into line with income tax on earnings.
It is of course true that national insurance contributions go into the National Insurance Fund, but that is not a true fund; it is merely an accounting device. I would describe it not as a reservoir but as a pipe. It is not isolated from general taxation, as the noble Lord, Lord Higgins said, but it is frequently topped up from general taxation.
National insurance contributions are simply a form of hypothecated tax. They are hypothecated to the payment of contributory benefits, especially the retirement pension.
The second reason that I say this is a remarkable amendment is because, as I said, it is the most important clause in the Bill. It creates fundamental changes in the structure of national insurance. It was something which was in the forefront of the Chancellor of the Exchequer's Budget Statement and, as such, it surely requires full consideration. We are having some debate today in what is a fairly thinly attended House.
The only opportunity that this House will have to table amendments will be on Third Reading, which is not satisfactory. The only opportunity the other place will have to debate those changes will be on consideration of Lords' amendments. The result is that neither your Lordships' House nor the other place will have an adequate opportunity to consider this clause. Outside bodies were not alerted to the Government's plans to include this clause in the Bill until 30th March. Since then, the Easter holidays have intervened. I do not believe that outside bodies, such as the CBI, have been given an adequate opportunity to comment on the proposals. What has happened is that, for the convenience of the Government, this clause has been spatchcocked into a Bill which is already 80 per cent. of its way through Parliament.
However, I wish to look not only at the procedure but also at the substance. As this is our first opportunity to look at the clause, I believe that it is my duty to do so; and, as the noble Lord, Lord Higgins, said, this is in effect the Second Reading of an important Bill.
The substance consists of two elementsߞemployees' national insurance contributions and changes to the employers' contributions. The changes to the employees' national insurance contributions plainly make a great deal of sense. The eventual alignment of the lower earnings limit with the single person's allowance for income tax is something which we support. The removal of the entry fee by the abolition of national insurance contributions for the slice of earnings below the lower earnings limit is plainly correct. The flat rate on earnings between the lower and upper earnings limit, again, is plainly correct.
I turn to employers' national insurance contributions. The main structural change there is the removal of employers' contributions on earnings up to the single

1269
person's tax allowance, which is £4,195. I am uncertain about the merits of that. It may well be justified as an encouragement to take on lower paid workers. But with the exemption stopping at £80 per week, it may also encourage part-time employment rather than low-paid full-time employment. For example, for a job paying £4 an hour, an employer will be £10 per week better off by hiring two people to work for 20 hours each than by hiring one person to work for 40 hours. I am not sure that that is the right direction in which to go. It may be, but it needs more discussion. It is possible that it may be better to turn employers' national insurance contributions into a straight pay-roll tax which would simplify matters even further.
Those changes will cost money and the Government plan to get that money back by increasing employers' national insurance contributions above the threshold from 10 per cent. to 12.2 per cent. I do not believe that on this occasion it is right to go into the question as to whether there is, in the present financial circumstances, a need to claw back the cost of the changes. But assuming that there is such a need, that is not necessarily the best way of doing it.
First, employers' national insurance contributions are a tax on jobs. The Government have rightly been critical of non-wage employment costs incurred in mainland Europe. While I appreciate that there is no net change in national insurance contributions, we should be looking at shifting from taxes on jobs to taxes on pollution and non-renewable resources. That could have been done by leaving employers' national insurance contributions at 10 per cent. and increasing green taxes. That is a missed opportunity.
Secondly, there is a problem that a change in the system will hit bodies such as universities and high-tech companies. The change means that there will be an increase in the tax burdens on employers with a relatively well-paid workforce and a reduction for employers with a relatively poorly-paid workforce.
The cross-over pointߞthe point where the higher rate of employers' NICs exceeds the savings from the employers' NICs on the first £4,195 of annual incomeߞappears to be a salary level of little more than £23,000 per contracted-in employee and a little more than £22,000 for a contracted-out employee. If that means that it will cost more to employ a city banker, that is absolutely splendid. But universities employ many academic and administrative staff on salaries above the cross-over point. Lecturers are not well paid by the standards of people with equivalent qualifications working in commerce and industry, but they are still above the cross-over point except for the most junior of them.
The Committee of Vice-Chancellors and Principals currently estimates that the annual net cost of those changes to the higher education sector will be £20 million. That may not seem a great deal of money but in a sector which is being squeezed as hard as higher education, even £20 million is a serious loss. Therefore, the squeeze on the universities is a serious matter and the increase could even hit some secondary schools.
1270
Therefore, I hope that the Government will at least undertake to provide money which will fully compensate organisations, such as the higher education bodies, which are supported by public funds and which suffer as a result of the increase in employers' NICs.
I am conscious of the time that I have taken with these comments, but I make no apology because of the importance of the issues involved. As I have made clear, I have doubts as to the propriety of bringing in an amendment of such importance at such a late stage. That would not be sufficient to justify your Lordships' House, on those grounds, rejecting the amendment. In any event, the rejection of the amendment may well be inappropriate because it would be an interference by this House with the Government's powers to levy taxes if they did not achieve a majority in another place. In addition, I welcome the substance of the amendments in relation to employees' NICs, although I am uncertain about the changes to employers' contributions.
Certainly I believe that the latter changes need fuller and more informed discussion than it will be possible to give them today. Therefore, while we intend to support the amendment, we may well table amendments to the amendment in order to obtain a further debate on this matter at Third Reading.
4.45 p.m.
Lord Newton of Braintree: My Lords, I intervene briefly to indicate my support for some of the concerns expressed by the noble Lord, Lord Goodhart, and especially by my noble friend Lord Higgins from the Opposition Front Bench. I ought to admit that in private conversations within the department when I was Secretary of State I heretically observed from time to time, in very much the same terms as the noble Lord, Lord Goodhart, has, that the distinction between national insurance contributions and taxation was rapidly becoming unsustainable and, indeed, was gravely undermined by the disappearance of earnings-related benefits quite a long time ago.
However, I have to sayߞand this echoes some of the remarks made by my noble friend Lord Higginsߞthat in a position where not only is that distinction becoming increasingly difficult to maintain intellectually but also where we now find that the Treasury has, in effect, formally taken over responsibility for the setting of national insurance rates and the collection of national insurance through the Contributions Agency, it is virtually indefensible for it to be treated, whether legislatively or in any other way, as something distinct and separate from taxation. I well understand the Treasury's long-standing resistance to having anything to do with national insurance in the Finance Bill becauseߞto be honestߞI tried, from time to time, to persuade it to take some of my national insurance proposals into finance Bills, with notable lack of success. However, I do not think that it will be sustainable in the world into which we have now been moved by the last Budget and the changes associated with it.
I do not for one moment expect the Minister, who has been handed a rather unenviable task in speaking to these amendments today, to be able to give me much of

1271
a response to that very wide and general point in the course of this debate. I simply underline the fact that I believe the Government need to give very serious consideration to how national insurance is to be handled in the future against the background of the changes made in the Budget.
The only other comment I wish to make relates to what I thought was a very compelling series of questions posed by my noble friend Lord Higgins about the apparent hole in the Government's figures for delivering something that was presented as a kind of flagship, so to speak, in the context of the proposals and their attractions for the people as a whole and, in particular, the less well paid. Again, I have no great quarrel with the principle of what is proposed. Indeed, much of it seems to me to build in one way or another on things that we also sought to do in modifying the national insurance system and in seeking to reduce both the adverse impact on low-paid people and the disincentive for employers to take on people at relatively low rates of pay who might otherwise not be employed at all.
As I said, I have no quarrel with that. But if, as my noble friend Lord Higgins was saying, no financial provision has been made for such measuresߞwhether or not they have been costedߞand, therefore, they are a kind of "goody" which is postponed into the indefinite future, that is a significant point. We need to be clear as to what the Government are bringing forward in these amendments before determining the attitude that this House or, indeed, the other place may take.
Lord Haskel: My Lords, perhaps I may, first, acknowledge the long experience of the noble Lord, Lord Higgins, on the Treasury Select Committee. I am sure that the Government will take careful note of his warnings about legislation which is not properly considered. Indeed, a warning coming from someone with the noble Lord's experience certainly ought to be listened to.
I accept that this is not a usual way of dealing with matters but our course of action was determined by the Budget. I regret that we have had to bring forward provisions at this late stage of the Bill. However, it is sometimes necessary to do so and I have explained why it has happened on this occasion. The Government have made every effort to provide information and assistance to noble Lords to ensure that proper scrutiny takes place. Indeed, copies of the new clauses which change national insurance structure and other provisions have been made available to organisations representing business and those with a professional interest in national insurance matters. We wish to ensure that all the measures in the Bill are properly scrutinised, both within and outside Parliament, and that we get them right. We believe that the steps we have taken ensure that that will indeed be the case, despite the fact that the new measures have appeared rather late in the day.
1272
I turn now to the matter of Commons procedures for considering amendments made in this House. It is, of course, a matter for those in the other place to determine what procedures they follow when this Bill returns to them with our amendments. The Government are aware of the recommendations of the Commons Modernisation Committee, but I do not think that it is proper for me to comment on them at this time.
The noble Lord, Lord Higgins, asked why such provisions were not in the Finance Bill and suggested that I might probably have some sort of a quotation to give him in that respect. Indeed, I do. I can refer the noble Lord to Erskine May to back up my arguments. The latest edition states clearly on page 782:
"To the extent that they are payable into the National Insurance Fund, contributions paid by earners, employers and others under the provisions of social security legislation are not regarded as charges upon the people or as subject to the rules of financial procedure".
Of course it is possible to include matters in the Finance Bill which are not strictly within its scope, but we believe that it would be wrong for benefit-related issues to be introduced in that context. It would mean that this House would not have the opportunity to discuss them.
As for the criticisms about the drafting of the Bill and the number of amendments that are needed, it is certainly true that we have had many amendments. The number is perhaps excessive for a Bill of this size. However, social security legislation is complex. It is important to ensure that we get it right as it affects everyone. Therefore, we have continued to check and double check, and, we hope, improve the legislation, even though that means that there are many technical amendments. This is an important part of the normal scrutiny procedure, which is the task of your Lordships' House.
I move on to the arguments regarding tax and national insurance contributions and whether people are entitled to benefit without paying anything. I must tell the House that that is simply not so. These amendments do not give people access to contributory benefits when they have not paid contributions. They simply reduce the amount people have to pay, with the greatest proportionate reduction being enjoyed by the lower paid. That is something which the noble Lord, Lord Goodhart, said that he welcomed. We are abolishing the 2 per cent. "entry fee" paid on the portion of earnings below the lower earnings limit so that all employees who pay national insurance pay less. Employees will pay contributions on earnings exceeding the lower earnings limit and will gain entitlement to benefit as a result of those contributions.
I turn now to the question put by the noble Lord, Lord Higgins, as to why these figures are not in the Red Book. The Chancellor of the Exchequer announced that he intends future reforms to raise the lower earnings limit for employees to the level of the single person's tax allowance. That remains the Government's intention; but the change is not being made in this Bill. The Government will be considering

1273
the nature of the link between contributions and benefit over the coming months. I suggest, therefore, that we await the outcome of those considerations. Of course, the figures will be in the Red Book at the appropriate time. That is why they are not in it now.
I turn to the quotation—
5 p.m.
Lord Higgins: My Lords, I am having difficulty understanding what the noble Lord is saying. He appears to say that the figures are not in the Red Book. But I thought the Chancellor made it absolutely clear that it was his intention that the Government would go ahead with the changes next year. The noble Baroness shakes her head. If that is not so, let us have it clearly on the record.
Lord Haskel: My Lords, as I said earlier, the Chancellor has said that it is his intention to introduce the measures, but he has not said when that will be. I turn to the quotation—
Lord Higgins: My Lords, I am grateful to the noble Lord for giving way. Will it be in this Parliament?
Lord Haskel: My Lords, we have to await the Chancellor's statement. It has been suggested that employees' national insurance charges are just a tax and that the Chancellor has said that is the case. I repeat they are a charge on employers but they are intended to pay for specific benefits. Unlike income tax, they form part of the national insurance scheme. There is a big distinction here. Surely the point is that national insurance charges are a burden on the employer, whereas taxes may be subject to all kinds of exemptions. One can have write-offs, for example. There are all kinds of ways of dealing with tax, but national insurance charges are a burden on employers.
Lord Goodhart: My Lords, I thank the noble Lord for giving way. However, with respect to the noble Lord, national insurance contributions are simply a hypothecated tax. They are hypothecated to payment of retirement benefits and other benefits.
Lord Haskel: My Lords, they give people entitlement to certain benefits. Whether they collect them or not depends on their circumstances. Therefore national insurance contributions are not a hypothecated tax. The noble Lord, Lord Higgins, said that people will not make contributions. The changes in this Bill do not take anyone out of the contributions scheme. As regards the detail not having to be on the statute book, for employers to prepare for the measure of course it needs to be on the statute book, as one of the main preparations one needs in order to instigate changes in national insurance these days is to reprogramme one's computers. One cannot reprogramme one's computers unless one has the relevant figures. That is why it is essential for the detail to be on the statute book.
The noble Lord, Lord Goodhart, said that contributory benefits are partly funded by tax anyway. It has been a long established practice that there may be a grant from general taxation to the National Insurance Fund. That is
1274
not new. The grant is relatively small in relation to the fund. It may be of interest to noble Lords to learn that this year no grant is expected. The noble Lord, Lord Goodhart, said that these measures will encourage employers to hire more part-time workers in place of full-time workers. He also mentioned the position of people in universities. These changes make 12.5 million employees, earning up to £440 a week, cheaper to employ. I am not talking about part-time workers. The noble Lord, Lord Goodhart, also suggested that the measures may encourage a low skill economy and may penalise high value firms. Certainly, higher costs fall on employers who pay more. They can afford a small rise in their costs. However, this will be a relatively small addition to the wage costs of the highly paid compared with the recent pay settlements in the private sector. I believe that my right honourable friend the Chancellor made that observation at the CBI only yesterday.
Lord Goodhart: My Lords, do the Government intend to compensate the universities for the £20 million that this will cost them over and above the grants which have already been announced?
Lord Haskel: My Lords, I am not in a position to respond to a question of that kind. I shall certainly write to the noble Lord about it.
The noble Lord, Lord Goodhart, asked about green taxes rather than employer national insurance charges. I know that this is a matter which is dear to the heart of the Liberal Democrat Party. The Government believe that the reduction in employer contributions at the lower end of the scale is best offset by increases in contributions for the higher paid. The Government believe this is an important part of the welfare to work programme. In this way we shall encourage employment which is a high priority for the Government at the moment.
I believe that I have responded to all the points that were raised. This debate has continued for some time. All noble Lords have agreed that they are in favour of the objectives and the purpose of this series of measures. We could discuss the detail for some time, but I feel it is time that the Question was put.
On Question, amendment agreed to.
Clause 52 [Class 1B contributions]:
Lord Haskelmoved Amendment No. 40:
Page 36, line 22, leave out ("10") and insert ("12/").
On Question, amendment agreed to.
Clause 53 [Contributions paid in error]:
Lord Haskelmoved Amendment No. 41:
Page 36, line 33, leave out ("a period falling in").
The noble Lord said: My Lords, in moving Amendment No. 41 I wish to speak also to Amendments Nos. 42, 43, 44, and 45. These are minor technical amendments designed to clarify existing provisions of the Bill. Amendments Nos. 41 to 44 propose changes to Clause 53. That clause addresses the situation where payments of national insurance contributions are made in error on the basis that the earner was employed when he was in fact self-employed.

1275
Under current rules, refunds of national insurance contributions paid in error can normally be made for up to six years only. Under Clause 53, contributors will be able to claim refunds of Class 1, 1A or 1B contributions only until the end of the tax year following that in which they are made. As presently drafted, Clause 53 does not allow for the situation where the error has been recognised by the Contributions Agency before the end of the following tax year.
Amendment No. 42 which introduces a new paragraph (c) into Section 19A(1), confirms that the new section will operate only where the contributor has not been notified by the Secretary of State of the error before the end of the tax year following the one in which the payment was wrongly made. For ease of comprehension, these amendments also introduce changes to describe the tax year in which the erroneous payment is made as "year 1", and the following tax year as "year 2". These are all minor technical amendments designed to clarify the legislation.
Amendment No. 45 is a minor technical amendment to clarify Clause 56. The reference to the coming into force of Section 56 reflects the fact that different parts of the Act will come into force at different times. Some sections will come into force on Royal Assentߞfor example, the provisions on restrictive covenants, Clause 50. Other sections, including Clause 56, will be brought into force by way of a Commencement Order. The amendment makes it clear that the period referred to in sub-paragraph (8) of new paragraph 7B is the period before Clause 56 is brought into force by way of Commencement Order. I beg to move.
On Question, amendment agreed to.
Lord Haskelmoved Amendments Nos. 42 to 44:
Page 36, line 34, leave out from ("year") to end of line 37 and insert ("("year 1");
(b) the payments are made in error, in that the employment from which the earnings are derived (or by reason of which the benefit is made available) is not employed earner's employment; and
(c) the person making the payments has not been notified of the error by the Secretary of State before the end of the tax year following year 1 ("year 2").").
Page 36, line 38, leave out ("the tax year following that mentioned in subsection (1) above") and insert ("year 2").
Page 36, leave out lines 44 and 45 and insert ("as if the earnings were derived from (or the benefit were made available by reason of) employed earner's employment."").
On Question, amendments agreed to.
Clause 56 [Collection of contributions by Secretary of State]:
Lord Haskelmoved Amendment No. 45:
Page 40, line 2, leave out ("passing of this Act") and insert ("coming into force of section 56 of the Social Security Act 1998").
On Question, amendment agreed to.
Lord Higginsmoved Amendment No. 46:
Leave out Clause 56.
The noble Lord said: My Lords, this amendment is to omit Clause 56 which concerns collection of contributions by the Secretary of State. We were somewhat puzzled as to precisely why the provision should be in this form. We should be grateful if the Minister could explain. I beg to move.
Baroness Hollis of Heigham: My Lords, I cannot resist such an invitation. I shall do my best.
This clause does not stand in isolation. It forms part of the revised measures on penalties which introduce a new, modern civil penalty regime to enable the Contributions Agency to deal more effectively with non-compliance with national insurance legislation.
It aims to modernise the collection process of national insurance contributions. It introduces the power for regulations to be made to prescribe the circumstances when contributions are to be paid to and collected directly by the Secretary of State, and the circumstances in which interest and penalties may be imposed. It also allows for the Inland Revenue to impose interest or penalties on late paid contributions which are due to be paid to the Secretary of State if they are discovered. To ensure equity of treatment with contributions collected by the Inland Revenue, a similar regime for charging interest on late paid contributions or imposing penalties for underpayments will apply no matter by which route the contributions are paid.
I do not know how much more the noble Lord wishes me to say. I can suggest why the clause is needed. I can add to the points about the method of extracting improved compliance. I can talk about the reasons for the transfer. I know that this is unusual at Report stage, but I accept the limitation mentioned already by the noble Lord: that he cannot apply Committee procedures at Report stage. If he were to indicate further before I sit down, as is the convention of the House, any area on which he requires elucidation, I should do my best to be helpful.
Lord Higgins: My Lords, I am grateful for the invitation. We were puzzled as to the argument for abolishing the Contributions Agency as regards the Secretary of State, and returning power mostly to the Inland Revenue.
Baroness Hollis of Heigham: My Lords, we are transferring Contributions Agency activity to the Inland Revenue so that there is one service. The Inland Revenue already collects 94 per cent. of contributions. However, transferring full responsibility for administration of the contributions scheme will itself require primary legislation. Until that legislation has been properly considered and brought forward to Parliament, it does not make sense to start taking provisions out of the current Bill. The deeper thought underlying this issue is that we are trying to rationalise the contact employers, businesses and the public have with government bodies. The transfer of the Contributions Agency will enable employers and representatives to deal with one organisation for tax and national insurance. That will reduce burdens on

1277
businesses so that they can focus on their business objectives. I believe that the move has been widely supported.
Lord Higgins: My Lords, I am grateful to the Minister. I do not wish to pursue the point. It simply seemed a further reflection of the way in which the whole of this side of things is moving towards the Inland Revenue rather than the Department of Social Security. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.15 p.m.
Clause 63:[Liability of directors etc. for company's contributions]:
Lord Goodhartmoved Amendment No. 47:
Page 45, line 40, leave out ("appears to the Secretary of State to be") and insert ("is").
The noble Lord said: My Lords, this clause was introduced by the Government at Committee stage. Its aim is to deal with the problem of the phoenix companies. A phoenix company is a company which is started up, carries on business for a while, pays its directors large salaries and then goes bust. Almost inevitably it turns out that there is nothing left for the creditors, which include the Inland Revenue and the Department of Social Security in respect of PAYE and national insurance contributions.
Where the non-payment is due to the fraud or neglect of a director, it is obviously right that that director should not be able to hide behind the screen of the company's limited liability and should be personally liable. Therefore we on these Benches entirely support the principle underlying Clause 63.
My concern is that the clause is seriously defective. The amendment is non-partisan. Its sole purpose is to correct defects. The noble Lord, Lord Higgins, has put his name to the amendment. We have had meetings to try to persuade the Government of our case. Those meetings have not so far been successful.
There are two serious defects. First, the clause is, I believe, plainly incompatible with the European Convention on Human Rights and therefore with the Human Rights Bill which recently passed through this House. Article 6 of the European convention provides:
"In the determination of his civil rights and obligations … everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".
What happens under Clause 63? First, the Secretary of State, through members of her staff, investigates the reason for the company's failure to pay contributions. Secondly, the Secretary of State, through another member of staff, concludes that the failure has been due to the fraud or neglect of a director or a group of directors. There is no provision for any kind of hearing before that conclusion is reached. Thirdly, a personal liability notice is served on the director who is found culpable who becomes liable to pay contributions to the Secretary of State.
The Secretary of State is the plaintiff, the prosecutor and the judge. There is no independent and impartial tribunal. A right of appeal is provided, but it cannot save
1278
a defective first tier procedure, in particular because the right of appeal is itself limited. The appellant can only raise issues which are specified in the substituted Section 121D(2) of the administration Act. The appellant cannot argue therefore that the company was never in fact liable for those unpaid contributions in the first place. I believe that it will take approximately five minutes for a court to decide that this procedure is a clear breach of Article 6. It appears from the drafting at present that the burden of proof on the issues will be on the appellant.
It has been suggested that there are precedents. Section 61 of the Value Added Tax Act and Section 703 of the Income and Corporation Tax Act have been pointed to. I have looked at them and they are plainly not comparable. I believe that the provision entirely fails to pass the test of compatibility with the Human Rights Bill and the European convention.
Secondly, the Secretary of State has saddled herself with the complicated and unnecessary duty of apportioning blame between different culpable officers of any particular company. The Secretary of State, or anyone else making a first-tier decision, must of course satisfy himself or herself that any given officer is at least partly involved. But if she finds that the failure to pay contributions is attributable to the fraud or neglect of more than one officer of the company, there is no reason why each officer should not be made jointly and severally liable to the Secretary of State for the entire shortfall. If one of them is called upon to pay, there are well-established procedures by which he can call upon the other culpable officers to make appropriate contributions to recompense him in part for the sums that he has had to pay. There is no reason why the Secretary of State should waste the department's time or money in apportioning fault rather than leaving the culpable officers to fight it out at their own expense. Again, approportionment will mean a shortfall if one of the culpable officers of the company to whom part of the blame has been allocated is personally bankrupt or skips the country.
The effect of this group of amendments is, first, that where the Department of Social Security believes that failure to pay is due to fraud or neglect, the department will claim payment through the ordinary court system and will have to prove its case in the ordinary way. That will guarantee that there will be no problem with the European Convention on Human Rights. Secondly, under my proposed amendments, there will be no need to apportion culpability. The whole shortfall can be recovered from any of the company's officers who is found culpable. Thirdly, a provision which, as drafted, consists of two sections with 14 subsections will be reduced to one section with three subsections. That is in every way an improvement. I hope that the Government will look more favourably upon this proposal than they have in the past. I beg to move.
Lord Higgins: My Lords, I suspect that in the course of this debate I shall find myself an innocent surrounded by lawyers. That may not be the case; I am not sure. But at all events I have added my name to this amendment. The Minister was kind enough to arrange

1279
some discussion about it a few days ago. I certainly do not think that there is any difference between us on the need to act with regard to the directors of so-called phoenix companies. The noble Lord set out the arguments clearly in moving the amendment. It may be that we should give some further thought to the matter between this stage of the proceedings and the next. It would be superfluous for me to add to the noble Lord's remarks, save to make one point with regard to the existing Clause 63. In subsection (9)(a), the "officer" of a body corporate means:
"any director, manager, secretary or other similar officer of the body corporate".
There is some danger that the expression "manager" in the context of such companies might be rather broad and might take into its scope someone who did not have sufficient responsibility to be held accountable.
Other than that, my own feeling is that in these matters inadequate or insufficient use is sometimes made of the disqualification of directors who engage in this sort of practice. However, as I say, I am to some extent an innocent among lawyers. The arguments advanced by the noble Lord, particularly regarding the difficulties that may arise in relation to the European Convention on Human Rights, deserve serious consideration.
Lord Haskel: My Lords, the noble Lord, Lord Higgins, is certainly not an innocent no matter who surrounds him—even if he is surrounded by lawyers. The noble Lord, Lord Goodhart, found two defects in the clause as drafted: in relation to the European Convention on Human Rights, and in the matter of apportioning blame.
So far as concerns the European Convention on Human Rights, we have discussed the matter with him and with officials on two occasions. We are satisfied that the clause meets the Government's obligations under the European Convention on Human Rights. We shall simply have to agree to differ with the noble Lord on that point. It might be helpful if I briefly restate the Government's aims in introducing these provisions. I shall then be able to explain why we have arrived at the need to apportion blame.
The first important point to make is that this clause must be considered in the context of the whole package of penalty measures in the Bill. The current outmoded criminal offences relating to national insurance are being replaced by civil monetary penalties. That will bring national insurance penalties in line with tax penalties and accords with the recommendations in the Keith Committee. The whole thrust of the Government's approach is to encourage better compliance by employers and the self-employed and to get contributions paid over on time. The Government are placed in the position of always being a creditor without any means of prevention.
The majority of company directors are honest business people, and pay the national insurance contributions due for themselves and for their employees in the proper way. Clause 63 allows the
1280
Government to make directors personally liable for debts which cannot be paid by the company in cases where directors or officers of a company have perpetrated fraud, or been negligent in carrying out their responsibilities.
To answer the question put by the noble Lord, Lord Higgins, as to the meaning of "manager" in company law, I have before me two quotations:
"A manager would he, in ordinary talk, a person who has the management of the whole affairs of the company; not an agent who is to do a particular thing, or a servant who is to obey orders, but a person who is intrusted with power to transact the whole of the affairs of the company".
A manager has also been described as,
"a person holding, whether de jure or de facto, a post in or with the company of a nature charging him with the duty of managing the affairs of the company for the company's benefit".
Those definitions arise from Re B Johnson & Co.(Builders), Ltd. 1955. That is the meaning given to the term "manager".
Lord Simon of Glaisdale: My Lords, will the noble Lord allow me to intervene? Does that not amount to saying that a manager is a person who manages?
Lord Haskel: It probably does, my Lords.
Baroness Hollis of Heigham: If it does not, we are in trouble!
Lord Haskel: My Lords, perhaps I may briefly describe how decisions will be taken by officials. I shall then be able to arrive at why we think it right to apportion blame and responsibility to individuals rather than jointly and severally.
Decisions in these cases will be taken by a specialised unit which will have the necessary training and expertise to deal with the issues involved. I emphasise that these are not entirely new areas of work for the Contributions Agency. Staff in the agency, and of course also in the Inland Revenue and Customs and Excise, regularly deal with cases of fraud, and with insolvent companies. But administering this measure will be specialised work and it will be done by specialised staff.
Secondly, a decision will be made only after all the relevant facts have been fully investigated. All interested parties, including the company's accountant, will be interviewed and statements will be taken. The compliance history of the firm will also be looked at. Only after all those facts have been weighed up will a decision be made to issue a personal liability notice or notices.
I hope that this reassures your Lordships that we will be taking all reasonable steps to ensure that the initial decision to issue a liability notice under this clause will be a high-quality decision taken in the knowledge of all relevant facts.
The noble Lord, Lord Goodhart, spoke about the appeals mechanism. The amendments before us would mean that the cases would all be heard by a court in the first instance. The Government do not consider that that would be appropriate. Tribunals are effective, quick and

1281
less costly than court procedures. We believe that it is better for the directors to have a speedy route by which to appeal. It is also better for the general taxpayer, who does not have to bear the cost of lengthy and expensive court hearings. It allows the Government to proceed more speedily to stop the rogue director offending again by setting up another company and perhaps withholding more government money.
The noble Lord, Lord Goodhart, expressed concern that Section 121D—covering appeals in relation to personal liability notices—does not make clear that it is possible for an appeal to be made on the grounds that no debt is owing from the company, or on the grounds that the amount of the debt had been incorrectly calculated. It is certainly the Government's intention that these matters should be appealable, and I am happy to take away these points and consider whether a government amendment would be appropriate at Third Reading.
The noble Lord is also concerned that the onus of proof should fall clearly on the Secretary of State to prove guilt rather than on the appellant to prove innocence and that when an appeal goes to a tribunal it will be able to hold a full hearing on the matter. I understand the noble Lord's concerns on this point and I am happy to take this matter away for further consideration.
I wish now to deal with the other question which the noble Lord, Lord Goodhart, raised. That is the apportionment of the debt between culpable directors. The amendments provide for debts to be recovered from any culpable director. That would mean that any one of the officers deemed at all culpable could have to pay the whole amount.
The Government propose to apportion the debt between the directors who have been culpable in accordance with their degree of culpability. We recognise that all directors may not be equally culpable. It may be that a decision not to pay national insurance contributions in full was taken at a board meeting. Equally, however, the decision might have been taken only by one or two of the directors acting on their own and steps taken to hide the non-payment would be hidden from the other directors. Limited liability is a principle of key importance in company law, but the Government recognise that the device of incorporation can be used for an improper or illegal purpose. Where that happens, we believe that it is right to allow the corporate veil to be lifted, provided that the persons penalised are those who are guilty of wrongdoing. We decided against making directors jointly and severally liable under the new clause because we want to ensure that the officers served with a personal liability notice are those who are culpable of fraud or neglect. That is why under subsection (3) of the clause the Secretary of State is required to assess an officer's culpability and, where appropriate, to apportion the sum to be paid between the officers of the company who are individually culpable. That will neither penalise individual directors unfairly nor weaken the concept of limited liability; it will allow us to pursue directors or managers who have acted dishonestly or committed a gross breach of their duties. That is a position which
1282
I believe everyone should be able to support, and consultations that we have carried out indicate that it has support.
Much thought and consultation went into the planning of this measure. Its aims are to recoup moneys owing to the National Insurance Fund from which contributory benefits must be paid and, by showing that the Government mean business, to deter further thefts from the fund—for that is what they are. I beg to move.
Lord Goodhart: My Lords, I think it is my amendment.
Lord Haskel: My Lords, I am sorry, I hope that the noble Lord will be able to withdraw his amendment.
Lord Goodhart: My Lords, I was becoming rather hopeful! I am grateful for the small degree of movement that has been made by the Government on the appeal process. I presented the amendment to the Government as a gift horse. However, the noble Lord, Lord Haskel, looked it in the mouth and rejected it. I shall therefore ask leave to withdraw the amendment and look forward with some interest and anticipation to the first occasion on which Clause 63 is challenged in the courts. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.30 p.m.
[Amendments Nos. 48 to 50 not moved.]
Clause 64 [Class 1B contributions: supplemental]:
Lord Haskelmoved Amendment No. 51:
Page 48, line 17, leave out from ("rate") to ("of) in line 19 and insert ("specified as the secondary percentage in section 9(2)").
On Question, amendment agreed to.
Clause 68 [Validation of certain housing benefit determinations]:
Baroness Hollis of Heighammoved Amendment No. 51A:
Page 49, line 34, leave out from third ("the") to end of line 35 and insert ("first payment of the revised amount of benefit was made.").
The noble Baroness said: My Lords, Amendments Nos. 51A and 51B are technical amendments to the provision which proposes to legitimise payments of housing benefit where this has, in the past, incorrectly met service charges for personal general counselling and support or "personal care" which are payable as a condition of the tenancy.
Amendment No. 51 A replaces a reference to
"benefit … paid on the first pay day after the review"
with the words
"first payment of the revised amount of benefit made."
As a consequence, Amendment No. 51B removes the definition of "pay day", which is now superfluous.
The amendments clarify the policy intention in respect of a particular group of cases where housing benefit entitlement has been reviewed and revised by the local authority prior to the end of the financial year cut-off date set out in subsection (4). They ensure that housing benefit expenditure in respect of previously

1283
ineligible service charges for personal support ceases to be validated from the beginning of the period for which the first payment of the revised amount of benefit was made. These are technical amendments and I commend them to the House. I beg to move.
On Question, amendment agreed to.
Baroness Hollis of Heighammoved Amendment No. 51B:
Page 50, leave out line 8.
On Question, amendment agreed to.
Clause 70 [Budgeting loans: criteria for making awards]:
Baroness Anelay of St Johnsmoved Amendment No. 52:
Page 51, line 11, after ("grant") insert ("or a budgeting loan").
The noble Baroness said: My Lords, Clause 70 amends Section 140 of the Social Security Contributions and Benefits Act 1992. It covers the question of budgeting loans as a criterion for making awards. Subsection (3) inserts a new provision into Section 140 of the 1992 Act whereby directions may specify circumstances where applications for community care grants may be treated as applications for crisis loans and vice versa.
The amendment would make it possible for an application for a budgeting loan also to be treated as an application for a crisis loan and vice versa in circumstances specified by directions. I appreciate that the noble Baroness, in responding, may say that the amendment would make the system more complex. I appreciate that such an argument was adduced in another place. I would not be against improving the administrative system; far from it. I very much favour simplifying the system while also maintaining fairness between claimants and also between claimants and the taxpayer. Of course, I agree with the underlying objectives of the Bill.
However, I am concerned about the number of people who could be put at a disadvantage by the change in this part of the Bill. Approximately 13,000 people a year could be put at a financial disadvantage. I believe it is therefore worth while adding a little to the complexity of the clause to protect those people. I have not plucked the figure of 13,000 out of the air. Of course not. It is a figure readily available from Hansard of another place in a Written Answer on 2nd March this year at col. 501. The Minister, Mr. Denham, stated that the number of applications for first-tier reviews which had resulted in a loan being changed, either in full or in part, to a grant over the following years were in 1994–95, 12,507; in 1995–96, 15,089; in 1996–97, 13,937; and in the part year 1997 to the end of January 1998, 11,173.
The Minister went on to say that 3 per cent. of the total number of applications for first-tier reviews resulted in a loan being changed to a grant, again either in full or in part. In those circumstances, this amendment is necessary to safeguard the interests of a significant number of people. I beg to move.
Earl Russell: My Lords, I am happy to support the amendment. The noble Baroness, Lady Anelay of
1284
St. Johns, made the case for it pretty completely; I do not propose to gild her lily. But it is important to have the capacity for interchangeability. In trying to reduce it, the department is putting administrative tidiness before the interests of the claimant.
Carrying the amendment should do something to help to deal with the people who are found not to be able to afford a budgeting loan and therefore, in the past, have been found to be too poor to receive help from the social security system. If that is not an oxymoron, I do not know what is. I hope that the Minister will look upon the amendment with sympathy.
5.45 p.m.
Baroness Hollis of Heigham: My Lords, Amendment No. 52 would effectively mean that the full simplification of the Social Fund applications and decisions process, as provided for in Clauses 69 and 70, could not be achieved. That simplification involves introducing, through the provisions of Clause 69, a separate and shorter application form for each of the three types of discretionary Social Fund payment—namely, budgeting loans, crisis loans and community care grants—and, through the provisions of Clause 70, a separate fact-based approach to budgeting loan decision making.
At present there is one single and all-embracing application form, and one single discretionary-based decision-making system. The proposed amendment provides that applications for budgeting loans may be treated as applications for crisis loans in specified circumstances, and vice versa, in the same way that Clause 70 already allows for such a link between applications for community care grants and crisis loans.
I entirely understand the reasons why the noble Baroness and the noble Earl who supported her tabled this amendment, and I appreciate the concerns which prompted it. On the face of it, the amendment would provide extra protection over and above that already made explicit in the Bill for individuals who apply for one type of payment when another would be more appropriate. However, I hope to persuade your Lordships that I can provide adequate assurance on that issue without the need for an amendment.
It may be helpful to noble Lords if I remind the House of the difference between the three types of payment. Budgeting loans are intended to help people on income support or income-based jobseekers allowance with the cost of one-off household expenses of the kind routinely encountered by most people. The budgeting loan scheme recognises that those who have been on benefit for a period of time may find it difficult to cope with such lump-sum payments out of their weekly benefit—the costs of a carpet, a cooker, and so forth. Community care grants are designed to help people lead independent lives in the community; for example, a mother and children setting up home after marital breakdown or a young person leaving local authority care. Crisis loans are designed to assist with expenses arising from an emergency or disaster which threatens the health and safety of the applicant or a member of his family—typically a fire in a council house or the like.

1285
It is because of the very different nature of each of those payments that we propose to introduce a fact-based approach to budgeting loan decisions, while leaving in place the existing discretionary basis for the consideration of applications for community care grants and crisis loans.
That is where I take issue with the comment of the noble Earl, Lord Russell, that we are concerned with administrative tidiness. We are not. We are putting the budgetary loan process on an entirely new footing in which the length of time on which one has been on benefit, together with the size of one's family, will allow the application to be dealt with speedily. Far from being administrative tidying up, it is recognised that lone parents in particular—they are the largest single claimants of budgetary loans who seek such one-off payments to help them as they have been for a long time on benefit—will now have speedier access to that benefit system. It is a significant improvement in the situation of benefit claimants who have been on benefit for a long time.
The new procedure for making budgeting loan decisions will be easier for applicants to understand and the basis of decisions will be more transparent. We believe it is very much in the interests of claimants to make this move. The use of specified personal circumstances will enable the process to be automated. Therefore, applications will be handled consistently; decisions will be speeded up; explanations to the applicant will be clearer, and there will be a more cost-effective and efficient administration.
Decisions on community care grant and crisis loan applications will continue to be made by Benefits Agency staff exercising their powers of discretion and, for such discretion to be applied, a considerable amount of detailed information needs to be supplied by the applicant. Thus, were the amendment to be accepted, it would require the existing, extensive applications procedure for budgeting loans to be retained alongside the new, simplified, fact-based decision-making process. That would be the only way to enable a budgeting loan application to be considered as an application for a crisis loan, and vice versa, as the amendment proposes.
I have thought about this matter at length because I shared some of the preliminary concerns of the noble Baroness, but believe that there would be no advantage to applicants or to the department if that were to be the case, and the opportunity for a marked reduction in Social Fund administration costs would be lost. In other words, due to the length of time claimants had been on benefit and the size of their families, even though they merely wanted a budgetary loan, they would have to act as though they fulfilled the criteria for a discretionary scheme. They would therefore have to fill out a much more complicated form and give far more information than they would otherwise need to do under the simplified and fact-based system that we are proposing to introduce under Clause 70 of the Bill. I would be loath to see that go. It would mean that, in order for a few people to move smoothly between the two systems, everybody else would have to re-invent the procedures for a discretionary system.
1286
I should make it clear, however, that we intend applicants to have ready access to comprehensive publicity and advice, through leaflets and from Benefits Agency staff, so that they can decide, or be advised on, which type of payment is most appropriate to their particular circumstances.
Nonetheless, I accept—and we accepted in Committee—that there may still be some applicants who will apply in all good faith for one type of payment when another may be more appropriate to their circumstances.
It is for that reason that subsection (3) of Clause 70 retains provision for the consideration of an application for one of the discretionary-based payments to be treated as an application for the other. The sort of information the applicant will need to supply in order to obtain one of those payments could, in some cases, also enable consideration of whether the other type of payment is appropriate.
However, since applicants for budgeting loans will be required to supply the information which relates to the standard factual criteria to be used in making determinations, it will not be possible to consider whether a discretionary-based payment is appropriate from that information. The information required will not be relevant to either community care grants or crisis loans. That is the reason why no provision, such as the amendment proposes, has been made. As I say, we have already considered and have put in place plans to protect those who either do not qualify for a budgeting loan or who have applied erroneously for one but are in need of some sort of help.
Perhaps I can repeat some of the assurances I gave in Committee. First, all letters notifying that an application, of whatever type, has been turned down will also contain advice about other payments from the Social Fund. Secondly, as my honourable friend the Parliamentary Under-Secretary, John Denham, M.P., has already confirmed in another place, the Secretary of State will issue a specific direction to Benefits Agency staff. It will require them to take account of a prior refusal of a budgeting loan as a factor in determining any subsequent application for a crisis loan. Thirdly, I wish to confirm what I said when this clause was debated in Committee. Where staff are dealing with an application for a budgeting loan but know from previous knowledge of the applicant that a grant may be more appropriate, they will be able to invite a grant application; also, that we will be expanding guidance to Social Fund staff so that where a budgeting loan is refused on grounds that the applicant is too poor to repay it—the point raised by the noble Earl—that would be taken into account in dealing with any subsequent grant application.
Finally, the Secretary of State, in her annual report, will be reporting on the effectiveness and working of these changes, and she has asked the Social Fund commissioner to inform her of his views on the effectiveness of the new system. We shall thereby keep a watching brief on the efficacy. If the noble Baroness's fears are realised, the department is able, by changing forms, to adapt to the considerations and go back

1287
somewhat closer to the existing discretionary-based information gathering system. However, we would be reluctant to do so at this stage in the hope and belief that the system we are proposing will be swifter and fairer to the claimant as well as more economical to the department.
We can learn from experience. Our hands are not tied. We have flexibility in the system. If, as I hope will not be the case, the fears of the noble Baroness are realised, we have that power to adapt and to learn from that experience. I hope that the safeguards will provide the necessary reassurance that vulnerable people will still be protected under the new scheme while at the same time allowing the advantages of the changes for both customers and staff alike to proceed. I therefore urge the noble Baroness and the noble Lord to withdraw their amendment.
Baroness Anelay of St. Johns: My Lords, I shall read very carefully in Hansard what the Minister has said. First, I should put on record that I apologise to the noble Baroness for promoting above her station her colleague in another place. I referred to him inadvertently as the Minister of State and thereby put him above her.
I listened with great interest to what the Minister had to say with regard to improving administration by creating three forms instead of one. I shall not seek to make capital out of that with regard to increasing the amount of paper flying around. I appreciate that there may be good reasons for doing so in order to simplify the system.
From what the noble Baroness said, I may be reassured with regard to the conversion of budgeting loans into crisis payments or community care grants. That point may have been covered. However, I am not so convinced at this stage that my concerns with regard to converting the discretionary loans into budgetary loans have been answered. As the noble Baroness will be aware, although budgetary loans are intended to cover expenditure on a less crisis-based matter than crisis payments or community care grants, they have become very much a part of everyday life for claimants. It is not unusual for people to have 10, 15 or 20 budgetary loans, running one after the other, in succession. It has become a serious matter of concern for claimants.
I take issue with the Minister's comment that only a few people may be affected. We might differ on the definition of "a few". I shall certainly read carefully the arguments which she put forward. I appreciate the consideration she showed in going into such detail in trying to reassure me. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Russellmoved Amendment No. 53:
After Clause 70, insert the following new clause—
LONE PARENT REGULATIONS
(" .—(1) The Social Security (Lone Parent) (Amendment) Regulations 1997 ("the 1997 Regulations") shall cease to have effect.
1288
(2) The Secretary of State shall not make any regulations in substitution for the 1997 Regulations which enter into force before 1st October 1999.").
The noble Earl said: My Lords, in moving Amendment No. 53, I should also like to speak to Amendment No. 60. The slogan of this amendment is "bridge that gap", and I must apologise to anyone whom I am preventing from doing it at an appropriate time of day by moving it. Some of the cuts for single parents came in on 6th April and so are already in force and some come in on 6th June. The concessionary measures in the Budget which are meant to bridge the gap come into force in a series of instalments but are not complete before October 1999. That is quite a long time.
I shall run through the detail now to save the House's time later. There are two separate blocks of cuts. The first came in through regulations, which went through this House on 4th November, and concerned the single parent premium on income support, housing benefit, council tax benefit and so forth. That came into force on 6th April. It involves the loss of £4·70 a week on income support, and on housing benefit, depending on the house and the rent, up to £9–35. It means that when people are trying to get back into work they meet the steep taper of housing benefit at the same time as they lose the income support. One has to have tapers somewhere, as I am sure the Minister is just about to say, but if one puts two of them together, one turns a step into a cliff. That is not a very sensible procedure. The other cut, which comes in through Clause 71 of the Bill, is to the single parent addition to child benefit. That is £5·65 a week and comes into force on 6th June next. So total losses can be up to £19·70 a week. It is really quite hefty.
What is being given back in return through the Budget? There is an increase in the child premium on income support for children under the age of 11 only—£2·50 a week. It comes into force in November 1998. There is a gap there but it could be worse. The next one is £2·50 on the family premium, coming into force in April 1999. The next one is an addition of £2·50 to child benefit for the eldest child only, which comes into effect in April 1999. Up to that point it is £7·50 to replace £19·70. We do not get anything more substantial until the working family tax credit and the child care tax credit which come into effect in October 1999. That is why it is the purpose of these amendments to defer the cuts in benefit until October 1999, when the working family tax credit kicks in.
There are some people who do not benefit at all from the Budget concessions—people on income support who are in part-time work of under 16 hours a week; people in receipt, or wishing they were in receipt, or supposed to be in receipt, of child maintenance. They may be particularly hard hit because, as well as losing income support because they go on to maintenance, they lose the passported benefits as well. As we all know, the maintenance very often does not come. In fact, in the latest sample of the Policy Studies Institute, only 5 per cent. are getting adequate maintenance through the CSA. When their maintenance does not come—and it takes the CSA an age to inform the Benefits Agency—

1289
very often the child benefit is the only thing they have left. So losing the single parent addition to child benefit is for them really quite serious.
The other case is students who are receiving a loan which is imputed to them as income. There is of course a partial gap for people with children over the age of 11. Children over the age of 11 do not become as cheap to look after as one sometimes hopes they might. In fact the tendency is known to be the reverse on occasions.
When we discussed the amendment in Committee the Minister agreed that the gap was there. In fact, in reply to questions from her noble friends Lord Ashley of Stoke and Lady Turner of Camden, she did not dispute the basic facts of the situation. So the question is: what is the Minister going to do about it? She may plead spending limits. In that case I want to repeat the question I asked her on 4th November. I am still waiting for an answer. Why have the Government adopted the previous government's spending limits? I cannot judge the arguments for doing that until I hear what those arguments are; and until I have heard them, they have no force to restrain me.
I am sure that the Minister has noticed the latest figures for the public sector borrowing requirement which show an almost dramatic improvement. That means that money appears to be a lot less tight than it did last November. That is not only because of increasing revenue, which I welcome, but also because of a large number of public expenditure programmes coming in under forecast. Memorably on one occasion, the Prime Minister accused these Benches of the longest pee in history. But we should remember that comes from a government whose public spending record is of the shortest undershoot in history. They may be prepared to do something about that.
The Minister may urge administrative difficulty. That is genuine. But, frankly, the Government have made a mess. They may wish to say that it was their predecessor's mess. Of course, by definition, all messes are always made by one's predecessors. But it is only a valid argument that it is their predecessor's mess if they believe that the spending limits were entailed on them so that it was beyond their sovereign power to change them. If the Government have any reason for thinking that I have yet to hear what it is. If one makes a mess one clears it up. It may be difficult, but one has to do it.
It is not as though the level of support available for single parents was so generous that there was a safety margin for that type of error. At the Minister's suggestion, I have been reading the work on the costs of children by Oldfield and Yu. They remark,
"Income support is failing to meet the most minimal needs of children".
That is a serious judgment. To make further cuts from that point does not seem reasonable to me. If one makes further cuts one had better fetch the bandage. I beg to move.
6 p.m.
Baroness Hollis of Heigham: My Lords, there are three reasons why I ask the House to reject this amendment. First, there are questions of principle;
1290
secondly, there are questions of cost; and, thirdly, there is the serious question of public administration. As regards principle, as the noble Earl knows well, there are two key principles underlying the government strategy for benefit rates for families. First, we do not believe that the current structure which pays a higher fixed rate of child benefit and family premium to all lone parent families, but not to any two-parent families, is the best way of addressing the extra costs and needs which particular families may face. I am sure that noble Lords will press me further on that point when we debate subsequent amendments. I fear that the noble Earl is gearing himself up for an extended debate on research evidence on this point.
The Government believe that it is right to align the rates of benefit paid to families in respect of their children. In other words, what matters is not family structure, but family need. That is why we are going ahead with this measure. Secondly, the Government are committed to supporting all families with children. We believe that support for families should be based on the needs of those children and not on whether they are headed by a single parent or by two parents together. What matters is their poverty.
Our second concern is the financial strategy within which we are working. We came into government with a commitment to stay within existing spending plans for two years and to continue to be financially prudent thereafter. We inherited a number of unimplemented measures which were built into those spending plans, which included measures that aligned the rates of benefit for lone parents and couple families. Our inheritance from the previous government meant that there were difficult choices to be made about priorities.
As regards lone parent measures, we did not, and do not, believe that simply turning the clock back was the right approach even if it were affordable because, as I have said, we do not accept the principle that lone parents should receive special cash benefits beyond—
Earl Russell: My Lords, before I decide what to do with this amendment, can the Minister tell me why the Government adopted the previous government's spending limits? That is a very material point.
Baroness Hollis of Heigham: My Lords, we made a manifesto commitment in that respect. Hoping that the electorate would endorse our manifesto, we did not give undertakings that we did not then intend to observe when in office. That is why we made that commitment and why we are observing it. It is perhaps not the same situation that applied to the Liberal Democrat Party.
As regards the lone parent measures, we did not, and do not, believe that simply turning the clock back would be the right approach even if it were affordable. As I have said, we do not accept the principle that simply by being lone parents they should receive special cash benefits over and beyond what couple families in similar workless situations should receive. Instead, as and when resources have become available, we have chosen to spend them on our priorities, by helping those lone parents who want to work to do so through the New Deal; helping all families, whether with one parent or

1291
two, through increases in child benefit; helping all low-income families out of work to increases in out-of-work income-related benefits and helping all low-income families in work through the working families tax credit and the childcare tax credit. It is now clear that, as resources become available, we are implementing those measures. As I said in Committee, the total value of all those measures is something like £3 billion extra going to help lone parents and workless couples alike who have children and who need help into work or who are in low-paid work.
Nonetheless, we have protected the right of those lone parents already on benefit while they remain on benefit. There are no current cash losers. Today nobody will find that tomorrow, or sometime in October, November or any other time, their actual income will drop from what they are currently receiving. I was pressed on this matter by my noble friends in Committee. We have introduced a linking rule to protect them for 12 weeks so that if they start a job which does not work out they can return to their benefit level.
The year 1998–99 is a tight year for expenditure, not least because we have uprated all the main benefits in line with the actual inflation we inherited rather than the lower figure assumed in the 1996 Budget which we inherited. That has given the department an additional bill of some £600 million which was not built into the original budget figures, but nonetheless we have honoured it in order to uprate benefits in line with inflation.
That means that there are real constraints on the budget and our priority and choice has been to help all vulnerable families, especially those on low incomes with young children. After that we have made it our priority to give more help to all families from next April as extra resources are available. We are delivering this help through increases in child benefit and to the family premium in the income-related benefits.
Once that strategy has unfolded, over 1 million lone parents will have a direct financial gain. We have ensured that the earliest help, in November of this year, is directed to the most vulnerable families, such as those on low incomes with young children. From April 1999 no family with a child under the age of 11, and in receipt of income-related benefits, will be any worse off and some families will see significant gains. Many lone parents will also gain from the opportunities to work created by the New Deal, the working families tax credit and the national childcare strategy, to say nothing of the proposals that we hope to bring forward through the reform of the child support system. Work will bring further gains in the standard of living of lone parents, and the important benefits of improved self-esteem and increased independence, as well as providing a role model for future generations.
If the Government were to accept this amendment it would increase expenditure not only in this year and the next, but there would be a knock-on effect for a number of years and beyond. It would add over £250 million to our expenditure in the first three years alone.
1292
Our priority is to divert available resources to all families and specifically to low income families with young children. These amendments would reduce the resources available to us and undermine our strategy to direct assistance to those groups. Our principles are clear. We will align benefit rates for children for all family types, but we shall ensure that the financial needs of families, especially those with younger children, are recognised through the benefit system. We will do that while maintaining our commitment to the prudent management of government finances.
We have already announced almost £3 billion of extra help for families, and a £300 million investment in childcare and already we are investing almost £200 million in the New Deal for lone parents. We believe that we are working with lone parents to deliver what they themselves are asking for.
Our first problem with the amendment is, therefore, the principle. Our second problem relates to cost. As the noble Lord anticipated, our third problem relates to public administration. It is not only a question of the amendment being technically flawed; although I fear that it is flawed; we cannot revoke the 1997 regulations, as the amendment seeks, because they have been revoked already by the Budget. Therefore, even if Amendment No. 53 were to be passed, it could have no effect.
The Social Security (Lone Parents) (Amendment) Regulations 1998 are already in force. The administrators have already made all the necessary computer changes. I do not want to hang on the technical points because clearly the technicalities could be amended, but the significant point is that the regulations are already in force and are taking effect. The necessary computer changes have been made, together with all the necessary changes to procedures, leaflets, guidance and forms to administer the new legislation. Many thousands of lone parent claimants are already being paid on the basis of the new benefit rates. If we were now to make a retrospective change, we would create a huge administrative problem, particularly given that we are to make another change, a step up, for the same lone parents in November, with a further step up taking place from April 1999.
Even if we were able to accept the amendment, staff would have to work around computer systems; existing recipients would have to be re-identified and their order books recalled, adjusted and reissued. Mistakes would be made and error rates would rise. Recipients would be paid the wrong rate of benefit. It would be a huge administrative operation. Given good notice of changes, computers can be adapted and staff issued with the necessary training and guidance. However, the amendment does not give good notice. It would make a retrospective change, and that would lead to mistakes and bad policy.
The amendment would also add to the confusion that benefit claimants face. To date, the Government have given a coherent and consistent message. New lone parents will receive the same rates of family premium and child allowances as other families, and existing lone parents will retain their existing protected rates. If the

1293
amendment were to be adopted by the House, having been technically redrafted to include a change of year, the message would become very confused. Who would know whether they were a protected lone parent? Who would know whether they were one of the current recipients who should return their payment book for adjustment?
If we were to accept the amendment, it would not just be wrong in principle; it would result in poor administration of public policy and create immense difficulties and confusion to add to the problems which benefit claimants already face. For those three reasons, I very much hope that your Lordships will not be minded to support the amendment.
Lord Ashley of Stoke: My Lords, I have listened carefully to my noble friend and, as usual, she puts a very good case indeed—
Noble Lords: Order!
Earl Russell: My Lords, is the noble Lord asking a question before the Minister sits down?
Lord Ashley of Stoke: No, my Lords, I am making a contribution.
Baroness Hollis of Heigham: My Lords, perhaps I may help my noble friend. We are now at Report stage, rather than in Committee and, although I do not want to handcuff any Member of your Lordships' House, and I try always to be helpful, the convention of the House is that the Minister speaks to wind up the debate and is then normally followed by the proposer of the amendment who then decides what to do with the amendment in the light of the Minister's reply. In other words, we are not in Committee when the debate could continue. As I do not want in any way to impede my noble friend, I wonder whether he would like to make a brief comment before I sit down, perhaps in the form of a question to me, so that I may respond to it before concluding my remarks.
Lord Ashley of Stoke: My Lords, that is very generous of my noble friend. I had been about to rise before my noble friend sat down, but she moved so very quickly that it was impossible for me, as an old man, to do so. The Minister is young and fit. However, she is not fit enough to make a convincing case on this issue. I support the amendment. If my noble friend will allow me to do so, I ask her to reflect on her comments in Committee when she said:
"lone parents with children under … 11 who will lose the child benefit from June 1998 will, nonetheless, gain in April 1999 by the sum of £1·85".—[Official Report, 6/4/98; col. 513.]
I cannot see people dancing in the streets because of a payment of £1·85. According to my noble friend, people with older children will not have the same recompense as my noble friend had hoped—that is, according to that extract from her speech. I wonder what the Government were hoping for. Single parents were hoping to win the lottery—if they could afford a ticket, which is doubtful. I cannot believe that the Government would go into that.
1294
Briefly, the basic fact, which has been candidly admitted by my noble friend, is that there is a gap between the cut in the income of lone parents and that payment by the Chancellor of the Exchequer.
Will my noble friend answer one question? Is it true that, although single parents will make some gains in the period before October 1999, the main gain will come from the working families tax credit in October 1999? If that is the case, it means that single-parent families will suffer between now and October 1999. Perhaps my noble friend could enlighten the House on that point.
6.15 p.m.
Baroness Hollis of Heigham: My Lords, perhaps I may clarify the position. All existing lone parents on the higher rate of lone-parent benefit will continue to receive it. There will be no cash losers. All existing lone parents will have their position protected. Indeed, if they move into work but then come back on to benefit within 12 weeks, they will resume their former higher level of benefit. From April this year, in terms of the income support regulations and subsequently in terms of child benefit or premium (for those on income-related benefits), in benefit terms new lone parents will start life as lone parents on a lower rate of benefit than they would have received six or 12 months previously. However, in the course of the forthcoming year most of that loss will be recovered for them by two steps of increase. If they have children under the age of 11—most lone parents who are not in work are in that position—they will recover £2·50 of that benefit in November and in the following April—that is, April 1999—they will regain a further £2·50 either directly through child benefit for the oldest child or through the additional sum for the family premium. But—this is the important point—it will not only be lone parents who will gain that amount; the provisions will apply equally to workless couples or to couples in work for their eldest child, in relation to child benefit. In other words, the poor and the most vulnerable will be paid first under our system.
I entirely accept that in an ideal world it would be desirable to have continuity from one system to the other, but that could not happen, given that we inherited these measures. They were introduced to your Lordships' House in July. It was only in the context of the Budget that the Chancellor was able to find the resources to mount a new attack on the poverty of lone parents, workless couples and couples with young children who are vulnerable in terms of their poverty. As a result, there is an inevitable gap. We are doing our best to cover that gap by our staged increases, which will come into effect in November and next April. There will subsequently be improvements through the working families tax credit. As a result, lone parents and workless couples alike will have not only a more generous benefit regime; they will have not only access to child care which will enable them to move into work; but, once in work when the working families tax credit is operating, they will have a lower taper for the withdrawal of various sums and a more generous benefit regime.

1295
I believe that, with those strategies, the Chancellor of the Exchequer has devised an attractive and supportive package for families with young children, whatever the family structure. I very much hope that with that broader picture in mind your Lordships will not be minded to support the amendment moved by the noble Earl, Lord Russell.
Lord Wedderburn of Charlton: My Lords, before my noble friend finally sits down, given her latest intervention and the comments of the noble Lord, Lord Ashley, it is a pity that this debate has developed in this way. There is also a convention that Ministers do not intervene too quickly in order to shut out debate in effect, but never mind. Let us deal with the matter by way of questions, as we now have to. My noble friend made a most important statement which for me has cleared the air. She has found a small group who will suffer: new applicants. However many they may be—perhaps not as many as the noble Earl suggests—my noble friend said candidly that that small group exists. I cannot understand why a government of the intelligence and ability of the one formed by our party is unable to find a way out of that difficulty. The Budget just will not do. Surely, my noble friend accepts that it is open to the Chancellor to introduce measures at different dates, whether they be taxes or allowances. There is no golden rule about October 1999. Is my noble friend finally saying that as to that small group whom she identified—I do not deal with the other groups because I accept and understand her analysis—she cannot find a way?
Baroness Hollis of Heigham: My Lords, I have tried to be as helpful to the House as I can. This is not Committee stage but Report stage. I resist the suggestion of my noble friend that I have tried to shut out debate. I do not believe that that is an acceptable comment. When the noble Earl sat down I looked round the House. I looked at the Tory Benches and hesitated to see whether there were any other contributions. No one spoke, and then I did. At that point I had every reason to believe that the intentions of the House had been expressed and that the debate was closed. I followed the procedure.
I respect the position of my noble friend Lord Ashley. He made a significant contribution at Committee stage and I did not wish to preclude him because of any possible communication problem from intervening in the normal way should he wish to do so. He made his contribution as short as possible. But I believe that it would be improper to become involved in an extended Committee stage debate at this stage of the proceedings of your Lordships' House and at this time of night.
Lord Wedderburn of Charlton: My Lords, I did not suggest that my noble friend intended to cut down the debate. I believe that Hansard will confirm that; if not, I regret it. I said that at Report stage it was always a problem and the Minister should not come in too early because sometimes a debate had to take the form of questions. I thought that we had moved away from that.
1296
I am sorry that my noble friend has gone back to it. I do not attribute to her any particular intention as to that.
Earl Russell: My Lords, I entirely and totally acquit the Minister of any intention to curtail debate. I observed her to look around with care. There was no one standing. I also thought that no one intended to rise. She gave way with great generosity to her noble friend Lord Ashley of Stoke whose remarks I was very glad to hear. I agree entirely with what he said. We have here a straightforward issue. I do not believe that we need to muddy the waters with any complaint about procedure. We simply disagree about this matter.
The Minister has not denied the existence of the gap. In effect, she says that the Government cannot help it. I shall try to meet her arguments as they go. First, she invoked an argument of principle. One must always take care when "principle" and "the Treasury" appear in the same sentence. She said that it was a matter of principle that the Government wished to equalise benefits between single parents and couples. So it is. But to say that that is the principle of the Government does not say when the Government should put that principle into force. The Government could have said, in good Augustinian style, that they wanted to make the benefits equal but not yet, in which case they would have been open to a great deal less criticism. I believe that the Government are wrong about that principle, but I shall save that for Amendment No. 59 either tonight or perhaps on Third Reading if the time gets late.
Secondly, the Minister invoked the spending limits. She did not give me any reason why the Government had adopted those spending limits. She appeared to be saying that the Government did it because they did it because they did it. Maybe they did, but I do not find that very persuasive.
Baroness Hollis of Heigham: My Lords, I believe that I answered that question, because the noble Lord intervened. I said that it was a manifesto commitment that we would observe the spending plans of the previous administration. I also said that the Government intended to carry out any such promises were we to be elected.
Earl Russell: My Lords, I heard the Minister say that but she did not say why it was a manifesto commitment. I cannot help but have a certain curiosity about the point. I am also rather surprised to hear a member of this Government talk about the Government having inherited a policy. I thought that this Government did not believe in inherited power. It looks an entail. I accept what the Government have said about trying to make it easier for single parents to return to work. Many of the measures I welcome, some warmly. The Minister and I have argued for some of these measures for a very long time. However, these measures do very little for those who do not work. We on these Benches believe that just as it is a right for single parents to work so it is a right for them not to. Therefore, we are concerned about both groups. My noble friend Lady Williams of Crosby will say more about that when speaking to the next group of amendments.

1297
When we come to gains, the picture is not quite as rosy as the Minister suggested. I have a few figures to hand. In June 1998 a lone parent on income support with one child under 11 and one over 11 would be £4·70 worse off compared with new claimants. In November 1998 the lone parent would be £2·20 worse off. The lone parent catches up by just 30p in April 1999. The figures for those in work are a little better but no one really catches up until October 1999, which is the point of the debate on this amendment.
The Minister invokes cost. Of course she does. I know that she is familiar with the report of the Policy Studies Institute published last week entitled What happens to lone Parents. The institute finds that 29 per cent. of lone parents have a long-standing illness and that there is more than an even chance that within four years in a lone parent family one member will acquire a serious illness. That is expensive. I entirely understand the argument about administrative confusion, but if there is a shipwreck in the middle of the night the duty rosters must be upset. That cannot be helped. I should like to ask the opinion of the House.
6.27 p.m.
On Question, Whether the said amendment (No. 53) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 80.

Division No. 1

CONTENTS

Addington, L.

Milverton, L.

Alderdice, L.

Newby, L.

Ashley of Stoke, L.

Ogmore, L.

Beaumont of Whitley, L.

Razzall, L.

Carlisle, E.

Redesdale, L.

Cross, V.

Rochester, L.

Dacre of Glanton, L.

Rodgers of Quarry Bank, L

Dholakia, L.

Russell, E. [Teller.]

Elis-Thomas, L.

Sandberg, L.

Falkland, V.

Simon of Glaisdale, L.

Glasgow, E.

Smith of Clifton, L.

Goodhart, L. [Teller.]

Stoddart of Swindon, L.

Halsbury, E.

Thomas of Swynnerton, L.

Hamwee, B.

Thomas of Walliswood, B.

Harrowby, E.

Thomson of Monifieth, L.

Lester of HemeHM,L.

Thurso, V.

Linklater of Butterstone, B.

Tope, L.

McNair, L.

Tordoff.L.

McNally, L.

Wallace of Saltaire, L.

Maddock, B.

Wedderbum of Charlton, L

Meston, L.

Williams of Crosby, B.

NOT-CONTENTS

Acton, L.

Cocks of Hartcliffe, L.

Archer of Sandwell, L.

Currie of Marylebone, L.

Bassam of Brighton, L.

Davies of Oldham, L.

Berkeley, L.

Desai, L.

Borrie, L.

Diamond, L.

Brooke of Alverthorpe, L.

Donoughue, L.

Brooks of Tremorfa, L.

Dormand of Easington, L.

Burlison, L.

Dubs, L.

Carter, L. [Teller.]

Erroll, E.

Castle of Blackburn, B.

Falconer of Thoroton, L.

Cledwyn of Penrhos, L.

Farrington of Ribbleton, B.

Clinton-Davis, L.

Gallacher, L.

1298

Gilbert, L.

Monkswell, L.

Gladwin of Clee, L.

Montague of Oxford, L.

Gould of Potternewton, B.

Murray of Epping Forest, L.

Graham of Edmonton, L.

Nelson, E.

Grantchester, L.

Nicol, B.

Greenway, L.

Paul, L.

Hanworth, V.

Pitkeathley, B.

Hardie, L.

Plant of Highfield, L.

Hardy of Wath, L.

Prys-Davies, L.

Haskel, L. [Teller.]

Puttnam, L.

Hayman, B.

Ramsay of Cartvale, B.

Hilton of Eggardon, B.

Randall of St. Budeaux, L.

Hollis of Heigham, B

Renwick of Clifton, L.

Howie of Troon, L.

Richard, L. [Lord Prim Seal.]

Hoyle, L.

Rogers of Riverside, L.

Sewel, L.

Hughes, L.

Shannon, E.

Hughes of Woodside, L.

Simon, V.

Hunt of Kings Heath, L.

Simon of Highbury, L.

Irvine of Lairg, L. [Lord Chancellor.]

Strabolgi, L.

Symons of Vernham Dean, B

Janner of Braunstone, L.

Thomas of Macclesfield, L.

Jay of Paddington, B.

Watson of Invergowrie, L.

Jenkins of Putney, L.

Whitty, L.

Kilbracken, L.

Williams of Elvel, L.

Lockwood, B.

Williams of Mostyn, L.

Mallalieu, B.

Winston, L.

Milner of Leeds, L.

Young of Dartington, L.

Mishcon, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
6.36 p.m.
Baroness Williams of Crosbymoved Amendment No. 54:
After Clause 70, insert the following new clause—
LONE PARENTS WITH CHILDREN UNDER 5
(" . Regulations shall provide that single parents with dependent children under 5 shall continue to receive the single parent premium on income support, housing benefit and council tax benefit, and may make consequential amendments to the Social Security (Lone Parent) (Amendment) Regulations.").
The noble Baroness said: My Lords, I should like to associate the amendments with Amendment No. 58. I shall begin by asking the Minister to show her usual magnanimity. As she will know, when Amendment No. 58 was originally put down in my name, I was very much involved in social security and employment matters. Subsequently, in January of this year, I became involved directly in European and foreign affairs matters. I was therefore unable to attend most of the debate in Committee. I must therefore plead for the indulgence of my colleagues in reappearing at this inappropriate stage, as it now turns out. It is a matter about which I feel very strongly, and have done for a long time. I invite the Minister and her colleagues to accept, and not to feel too strongly about, my reappearance on these Benches.
The two amendments are directed in particular at single parents with children under the age of five. The purpose of these amendments is to ensure that single parents in that situation will be free without any form of pressure—economic or moral—to decide what is in the best interests of their very young children.
The Minister talked about the equivalence of single parents with married couple parents. The extensive statistical material in this field shows quite clearly that

1299
single parent families are, by and large, very much poorer than married couple families. I shall give a few examples of that.
The evidence is that 41 per cent. of single parents live on an income of less than £100 per week. The equivalent figure for married couple parents is 5 per cent. That is 5 per cent. against 41 per cent. The evidence on that issue from the Rowntree Foundation Study, published in 1997, was that 43 per cent. of single parents fell within the poorest fifth of all the income deciles. That is a much higher figure than the figure for married couple families. The evidence, according to the EU report, which was itself based on the Luxembourg Income Study comparing 20 countries, is that 56 per cent. of single parent families in Britain live below the median wage. Fifty-six per cent. of single parent families living below the median wage, which is an appalling figure, compares with a figure, according to a study, of 3 per cent. in Sweden and 4 per cent. in Finland. Of all European countries we have the worst record in terms of the proportion of single parents living in profound poverty.
I do not accuse the present Government of being responsible for that. The evidence is clear that in the 1980s the speed with which this country became unequal was not matched by any other industrialised country, save New Zealand. That rapid growth in inequality has, to be fair, been somewhat mitigated since the administration of Mr. John Major and more markedly since the new administration took office. Nevertheless, overwhelming evidence shows that, compared with other European countries, the United Kingdom has an extremely serious problem of single-parent poverty.
Secondly, it is worth pointing out that approximately 62 per cent. of single parents in this country do not represent the tabloid presentation of single parents as irresponsible teenagers, but are single parents for reasons of widowhood, divorce and separation. Among them is a particularly tragic group which is not as small as one might wish. It comprises the single parents who have separated from their spouses or partners because the spouse or partner abused either the wife and mother or the children. Some single parents are profoundly reluctant single parents. They are single parents through no choice of their own, but, in some cases, to protect their families.
When I tabled the amendment I would have felt even more passionate than I do tonight. That was before the Government brought forward the proposals in the Budget. The Minister and all Members of the House will recognise that, not knowing what would be in the Budget, many Members of the Government's party and the Opposition parties were appalled by the idea that those already in poverty should become more deeply impoverished as a result of the Government's decision to withdraw single parent premiums.
The Budget measures have considerably mitigated that problem, but they have not fully met all the requirements to put the single parent back in a position where she or he is not suffering profound poverty. First, there is the period of 18 months, referred to by my noble
1300
friend Lord Russell, which falls between the original cuts in single parent premiums and the making good of them and more in the Budget. That is the first existing and continuing aspect of deepening poverty, but one may say that it is short-term. The second is the loss of lone parent premium from housing benefit and council tax benefit, and for a proportion of parents that will continue to be a real loss.
In our debate on the previous amendment, the noble Lord, Lord Wedderburn, referred to the losses which will continue even after the Budget changes. He is correct, because in an Answer to a Written Question tabled on 31st March the Government agreed that 60,000 families would be worse off even after the Budget changes. Many of those people are likely to be working but, because of the loss of the lone parent premium for housing benefit and council tax benefit, they will be net losers. I must repeat that those 60,000 families fall within the range of the very poor—not necessarily extremely poor—or they would not be in receipt of housing benefit and council tax benefit.
Thirdly, there is the group of people who, responding to the Government's wishes, take a job and therefore find themselves moving off benefit but returning to it because the job does not work out. I recognise that in the Budget the Government made a concession. The concession is called the 12-weeks linkage. As the noble Baroness fairly pointed out, it means that if a single parent on benefit starts work but after 12 weeks finds it impossible to continue she will return to the same level of benefit as previously. As someone who has been a single parent, I ask your Lordships to examine the position of such a man or, more likely, a woman. She starts work and endeavours to obtain childcare. The words "quality childcare" have become combined in a phrase. When people speak of childcare they make sure that the word "quality" precedes it. Obtaining quality childcare is like trying to get a rich man through the eye of a needle. It is the hardest possible thing to do because little is available. The available facilities are full to the gunnels; every quality childcare minder around has a waiting list. I will give evidence as to why I say that.
Our parent starts work, makes some childcare arrangements, but within a matter of five or six months they break down. I appeal to your Lordships' human experience. In my human experience, childcare broke down time and again when I was a single parent, and I was an infinitely wealthy single parent because I was a Member of Parliament and a junior Minister. Nowadays, the single parent whose already limited income is cut has to pay £25 to £30 a day to hire a childminder. That is not an exceptional figure, and in London the figure is higher. She then finds that her childcare arrangements break down. She has no option but to give up her work. She then finds herself for ever penalised for having tried to so do. I wish the Government would look again at the 12-week linkage—although I welcome the concession—and ask themselves whether that linkage can be extended for a considerably longer time.
The fourth difficulty which troubles me relates to the single parent who starts work, but, because of her loss of single parent premium in the ancillary benefits, finds

1301
herself worse off. Perhaps the noble Baroness will comment on that. Those are four instances of the way in which, even with the changes the Government have made, some single parents will for a period or for ever find themselves worse off.
I ask your Lordships to consider two other crucial factors. We on these Benches seek as a minimum a strong reassurance from the Government that no pressure will be put on mothers or young parents to go to work and that they will look again at the linkage issue. We know from a great deal of research that children who have suffered a bereavement—a father who walks out on his family is a bereavement as surely as is widowhood—desperately need the care of the remaining parent, be it a man or a woman. We know that children who have gone through the trauma of divorce are likely to suffer emotionally much more than research conducted a few years ago suggested. Major research has been undertaken by, for example, Boston College and other universities in the United States, but also in this country, which shows that divorce, in particular for children between five and seven, has serious emotional consequences. Therefore, on these Benches we believe that if single parents believe that their presence is important for the well-being of their children, they should be able to make that decision freely and without feeling constraints upon them.
We know also—and I am sure that the noble Baroness, who is extremely knowledgeable, knows about this—that extensive studies carried out in Canada by the office of the present prime minister have produced dramatic evidence that the impact on the early development of the brains of children under the age of three who are deprived of both physical and emotional care is much more serious and less remediable than was once thought. There is a great deal of evidence, most recently from the University of California at Davis, to show that the development of a child in terms of its long-term expectations and prospects is much more seriously affected even than was believed a decade or so ago.
I do not wish to detain the House too long. In this country, even today, we seriously underestimate the effect of the first five years of a child's life on its future chances. Many children are virtually excluded from the opportunity to advance into high skills and advanced education because of what happened in the first five years. If that were not so, such programmes as Headstart would not have such a dramatic impact on childrens' opportunities.
Therefore, I plead with the Government to think extremely carefully about that impact on the first years of their children's lives of parents not being there to help, if they choose to do so—nobody suggests coercion. I speak as somebody who shares many of the Government's values, as do my colleagues on these Benches and, I am sure, members of the Conservative Party also. It is important to say that we should not give the impression that paid work is the only kind of work that we value because the unpaid work of bringing up children is the most important work that anybody can do.
Having talked a little about early development and emotional factors, I wish to refer now to the economic factors. Quite bluntly, the rational decision of most single parents of young children not yet of school age is not to work. I am well aware that the Social Security Secretary has referred to, if I may say so, somewhat shaky evidence to indicate that the working parent will receive as much as £50 per week more than will a parent on benefit. That is only the case if she has made arrangements which cost less with regard to childcare.
Baroness Hollis of Heigham: My Lords, for the sake of accuracy, to my knowledge the Secretary of State has never said that the lone parent in work will be £50 per week net better off. She has always said that she will he £50 better off. As the noble Baroness anticipated, that does not take into account additional costs, including childcare. That is partly because they vary hugely from parent to parent. But I should not wish remarks or views which are incorrect to be attributed to my honourable friend.
Baroness Williams of Crosby: My Lords, of course I defer to the noble Baroness. The figure of £50 per week has been thrown around quite loosely, including in the media. It is fair to make the point that £50 per week net is a very different proposition from £50 per week gross. In a situation in which childcare costs, according to the most recent estimate, somewhere between £120 and £160 per week for someone in a full-time or nearly full-time job, it is obvious enough that the net gain is actually a net deficit for many women with young children.
I turn now to the issue of childcare. I very much welcome the provision that the Chancellor of the Exchequer proposed in the Budget which, incidentally, if it covered the full costs of childcare would cover—I believe I am right in saying—about 60,000 single parents.
I am very troubled about the quality of childcare to which parents will be asked to commit their children. We understand that there is to be some training of childcare minders. I understand that the training is likely to be a matter of days rather than very much longer. We know that there have already been troubling cases of frightened and inadequate young women finding themselves responsible for numbers of children. I can speak from personal experience, having been the Secretary of State concerned with the registration of child minders, that in all too many cases, childminding is equivalent to what one might describe crudely as child-warehousing—children simply in rows, not encouraged to develop, to speak to or interact with adults. That is a very frightening possibility.
Therefore, in moving this amendment, I have already pleaded with the Government to indicate what is their view in relation to parents of under-fives; what is their view about pressure being brought to bear on them to work and about how far they believe that there will be no losers in this group as a result of the changes to be made, and I have listed some of the losses about which we have not yet heard.

1303
Lastly, I wish to return to the issue of the kind of childcare training the Government envisage will be provided because I am worried that the poorest sections of our society will find themselves committed to forms of childcare which the better-off sections of our society would not accept for a moment for their own children. I beg to move.
Baroness Hollis of Heigham: My Lords, I am delighted to welcome the noble Baroness, Lady Williams of Crosby, back to the debate. My only regret is that such an important and wide-ranging speech on lone parents has come not only very late at night but also very late in the debate, and I do not criticise the noble Baroness for that. She raised many issues and only some of her remarks were addressed to this amendment. Given the structure at Report stage, I must seek to address the amendment on the Marshalled List rather then engage in a Second Reading or Committee stage debate. I hope that the noble Baroness will forgive me if I do not deal with all her points but I shall of course write to her.
I am sure that the noble Baroness does not doubt that the Government are committed to helping vulnerable families. We recognise that families can face particular difficulties for a number of reasons. For families with young children, their opportunities to maximise income from work can be limited by their parenting responsibilities. That applies to lone parents and couples. Therefore, the Government believe—and I am sure that the noble Baroness does not dissent from this—that it is right to help all families with young children who need it rather than to base help on the family structure.
I suggest to the noble Baroness that in her remarks today she rather moved between the issue of poverty and the issue of family structure without, perhaps, giving the appropriate signals to the House as to what she was doing.
I entirely take her point that it is right that lone parents are more likely to be poor than coupled families. There is no doubt about that. But that is because far more lone parents are likely to be on benefit. In other words, the issue is not comparing lone parents with couples, because most couples will be in work and most lone parents will not. That is not a relevant comparison. With respect, that is comparing apples with oranges and that is what the noble Baroness did to some extent in her speech. What matters is the comparison of lone parents on benefit, and whether they are relatively poorer than couples on benefit. That is the nature of the debate in which we have been engaged with these amendments. I believe that they are not.
I am sure that the noble Baroness will agree that the second reason is that lone parents become poorer over time because they are on benefit for longer. One lone parent in three is on benefit for five years or more whereas only one couple family in eight is on benefit.
Earl Russell: My Lords, the Minister makes an extremely interesting suggestion. However, is she aware
1304
that the Policy Studies Institute research, What happens to lone parents, does not confirm that suggestion? Rather to my surprise, it found that single parents who stay longer on benefit tend to be in slightly easier circumstances.
7 p.m.
Baroness Hollis of Heigham: My Lords, I was also puzzled by that comment. However, it appears at the beginning of the report and, if the noble Earl reads through to the end, he will find that it says that those who suffer severe hardship are also those who have been longest on benefit. The report is actually inconsistent in that respect. I have already asked the officials to check with the author as to why the report seems to be saying two things in the space of 50 pages.
I return now to the points raised by the noble Baroness. The point is not whether lone parents are poorer than couple families; they are poorer than couple families on average because far more of them are on benefit. It is important, therefore, to address why they are on benefit and, in particular, why they remain on benefit for so long because that is why they are trapped. The true reason is that lone parents in Britain are far less likely than those in Europe or the United States to be in work; indeed, a far lower proportion, compared with their equivalents in Europe or the US, will be in work. Moreover, lone parents are far less likely to be in work than married women as regards age for age of children.
There is no dissent between myself and the noble Baroness that lone parents with children, especially with young children and immediately after the break up of a relationship when those children are vulnerable, have the right to choose not to work. I do not believe that anyone in this House, certainly not myself, would argue with the view that parenting is not only the most important job but also one of the most difficult that any adult can do.
I have to stress that that has been abundantly confirmed by the report that both the noble Earl and the noble Baroness just cited. The Rowntree Report published this month makes it abundantly clear—if there was any doubt—that not just the material well-being of lone parents but also their emotional well-being are determined by whether or not they are in work. Indeed, that has been confirmed much more so than I had expected and it took me by surprise. The report is entirely clear that not only are lone parents materially better off but they are also emotionally better off. It is a longitudinal study which looks back over the experiences of lone parents during the previous four to five years. Those lone parents who have said that their lives have improved are those who have moved into work; not those who have re-partnered, but those who have moved into work. Therefore, the quality of the life of the lone parent has been immeasurably enhanced much more so than I expected. I had expected a recognition of a material gain, but not necessarily a gain in the emotional quality of life. However, it is there and unambiguously there in the voices of lone parents over time.

1305
I turn now to the amendment. I produced those wider points which I had not meant to make simply because the noble Baroness made a Second Reading speech, to some extent, which contained very important points that I did not believe should go entirely unaddressed. The Government have demonstrated their commitment to support vulnerable families. There will be increases in both the family premium and in allowances for children under 11 years in the income-related benefits. This means that no lone parent receiving an income-related benefit who has a child under 11 will be worse off, after taking account of all the changes to benefits for families. In fact, a lone parent who is out of work with two young children making a new claim will be £2·80 a week better off compared with the situation before the changes.
In addition to providing extra help to lone parents who cannot or who choose not to work because they have young children, those whose opportunity to maximise income from work is limited will benefit from the increases in child benefit and family credit. Even more help will be available through the working families tax credit which will kick in in October 1999. We have also put in place measures to ensure that all four year-olds have an early education place from the start of the next school year.
I take the point that the noble Baroness made about the availability of affordable and quality childcare. I believe that not only the increase to family credit but also the working families tax credit will take care of the affordability point. In response to this, it is already clear to me that many new initiatives for childcare are opening up. There are issues associated with unregistered childminding, but now is not perhaps the right time to explore them. However, we may wish to return to them at some subsequent time. The Government are satisfied that both the quality of childcare and its affordability should be there to meet the needs of lone parents.
While some lone parents may choose not to work immediately, because they have young children, they will have the opportunity to take up work much sooner when they are ready to do so. That will reduce the time they spend on benefit thereby reducing the high levels of hardship that they experience. We are extending that help not just in the way proposed in the amendment to children under the age of five; we are extending it to families with children up to the age of 11—and not just to the children of lone parents but to all couples in that situation. There is no magic cut-off point at the age of five. Children need parental involvement beyond that age.
Therefore, unlike the amendment, we are seeking to provide help for children up to the age of 11. Moreover, if a lone parent under the proposed amendment received extra benefit because his or her child was three or four, the benefit would drop when that child hit its fifth birthday. Therefore, with the fifth birthday of the child would come an actual cash reduction to the lone parent. If the amendment were adopted, the only cash losers in the entire lone parent system would be those who did not go into work on the day that their child reached the age of five. I am sure that that is not a consequence which the noble Baroness would wish to see.
1306
In my view, the amendment is not well judged. The Government's proposals, which give benefit to all couples who are workless with children under the age of 11, irrespective of whether they are single families or couple families, are a better and more appropriate way to move forward. Our proposals have a wider age range: they do not stop at the age of five but continue up to the age of 11. Of course, in any event at that point the higher range of benefit for 11 year-olds kicks in for income support, so there is a smooth movement. We feel that our proposals also support the situation whether it concerns a single lone parent or a couple. Therefore, we believe that the Government's proposals are better focused on the needs of poverty and of poor children than those that the noble Baroness's amendment would offer. Therefore, I invite the House to reject the amendment.
Baroness Williams of Crosby: My Lords, I thank the Minister for her very comprehensive response. I should like to pay her the compliment of saying that I believe she is one of the best advocates in the House. However, one of the reasons why I cannot withdraw my amendment is that the two specific points that I outlined were not fully addressed in her response.
The first related to the 60,000 lone parents who, I understand, will suffer, as a result of the withdrawal of the single parent premium from council tax benefit and from housing benefit. I believe that those 60,000 will be worse off at the end of the day after all the changes that we are discussing have taken place. That seems to me to represent a formidable group of people. The second point, which the Minister did not address in her most comprehensive response, was the extremely serious issue of the 12 week linkage and the inability to go beyond that point. I give way to the Minister.
Baroness Hollis of Heigham: My Lords, I am most grateful. The reason that I did not do so was deliberate. We shall be dealing with a specific amendment later in this respect. I had in mind the length of time that we are taking at present to debate amendments, although I do not wish in any way to speed up noble Lords. It seemed to me that the noble Baroness's speech covered so many different areas that I felt it right not to address those points now but to allow them to be re-debated on the appropriate amendment. I apologise to the noble Baroness if she feels that I neglected her argument in any sense. However, if I may say so, there is no real need for her to push her amendment at this stage because there will be a later opportunity to discuss such issues.
Baroness Williams of Crosby: My Lords, in no sense do I wish to avoid a later debate of any kind nor, indeed, to trespass upon it. I find myself in a slight dilemma in that I am not quite sure what the Minister's reply will be to that later amendment. Obviously that is a most important factor as regards what happens to the parents about whom I am concerned.
However, perhaps I may briefly address just two points. First, the Minister is right to say that one of the reasons that single parents are poorer than couple

1307
parents is because many more of them are on benefit and stay on it for longer. But one of the reasons why many more of them are on benefit and for longer is because of the extreme difficulty of making childcare arrangements. In this country we have many fewer women at work who have children than is the case elsewhere because, as the Minister pointed out, in almost every other country in Europe there is much more effective provision of childcare for the under-four year olds. For example, there is the école maternelle in France and the similar kindergartens in Germany. Again, that is not the fault of the present Government; but our childcare provision for very young children is shockingly backward compared to many other countries of a similar level of development. I shall only touch lightly upon the Scandinavian example. They have, perhaps, the most comprehensive system of young childcare. We simply do not have that in this country. That means the responsible single parent is put in an almost impossible dilemma. Therefore many live on benefit when they do not wish to do so.
I fully accept what the Minister said about the emotional value of work. However, as I said, these single parents face a moral dilemma which it is almost impossible to resolve in a reasonable way. That moral dilemma will remain until such time as the opportunities the Minister mentioned are in place. I think she will agree that they are certainly not yet in place.
I conclude by giving the example of one working mother, Ruth Kelly of Cambridge, who approached 42 child minders as she wanted to work very much. She obtained a useful job for which she was well qualified. She had a two year-old child. Of the 42 child minders she contacted in Cambridge, only three were able even to consider caring for her child. Two of those child minders subsequently were not able to care for her child. The only one out of 42 who could do so turned out to be almost wholly unsatisfactory. That is a common dilemma, as many noble Lords will know from their own experience and the experience of those in their regions. It is extraordinarily difficult to obtain childcare of an adequate standard for young children unless one can pay substantial sums of money. That gap in provision exists. I say with good will to the Minister that it is not yet met. Therefore I must ask the House to express its opinion on this matter.
7.10 p.m.
On Question, Whether the said amendment (No. 54) shall be agreed to?
Their Lordships divided: Contents, 33; Not-Contents, 70.

Division No. 2

CONTENTS

Addington, L.

Goodhart, L. [Teller.]

Alderdice, L.

Hamwee, B.

Avebury, L.

Kingsland, L.

Carlisle, E.

Lester of Herne Hill, L.

Dholakia, L.

Linklater of Butterstone, B

Elis-Thomas, L.

McNair, L.

1308

McNally, L.

Sandberg, L.

Maddock, B.

Smith of Clifton, L.

Meston, L.

Stoddart of Swindon, L.

Newby, L.

Strathcona and Mount Royal, L

Ogmore, L.

Thomas of Walliswood, B.

Razzall, L.

Thomson of Monifieth, L.

Redesdale, L.

Thurso, V.

Tope, L.

Rochester, L.

Tordoff, L.

Rodgers of Quarry Bank, L.

Wallace of Saltaire, L.

Russell, E.

Williams of Crosby, B. [Teller.]

NOT-CONTENTS

Acton, L.

Hughes of Woodside, L.

Ampthill, L.

Hunt of Kings Heath, L.

Archer of Sandwell, L.

Irvine of Lairg, L. [Lord Chancellor.]

Ashley of Stoke, L.

Bassam of Brighton, L.

Janner of Braunstone, L.

Berkeley, L.

Jay of Paddington, B.

Borrie, L.

Kilbracken, L.

Brooke of Alverthorpe, L.

Mallalieu, B.

Burlison, L.

Milner of Leeds, L.

Carter, L. [Teller.]

Mishcon, L.

Cledwyn of Penrhos, L.

Monkswell, L.

Cocks of Hartcliffe, L.

Montague of Oxford, L.

Currie of Marylebone, L.

Murray of Epping Forest, L.

Davies of Oldham, L.

Nicol, B.

Desai, L.

Norton, L.

Donoughue, L.

Paul, L.

Dormand of Easington, L.

Pitkeathley, B.

Dubs, L.

Plant of Highfield, L.

Falconer of Thoroton, L.

Prys-Davies, L.

Farrington of Ribbleton, B.

Puttnam, L.

Gailachcr L

Ramsay of Cartvale, B.

Gilbert, L.

Randall of St. Budeaux, L.

Gladwin of Clee, L.

Renwick of Clifton L

Gould of Pottenewton, B.

Richard, L. [Lord Privy Seal.]

Rogers of Riverside, L.

Graham of Edmonton, L.

Sewel, L.

Grantchester, L.

Simon, V.

Hanworth, V.

Strabolgi, L.

Hardie, L.

Symons of Vernham Dean, B.

Hardy of Wath, L.

Thomas of Macclesfield, L.

Haskel, L. [Teller.]

Watson of Invergowrie, L.

Hayman, B.

Whitty, L.

Hilton of Eggardon, B.

Williams of Mostyn, L.

Hollis of Heigham, B.

Winston, L.

Howie of Troon, L.

Young of Dartington, L.

Hoyle, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
7.20 p.m.
[Amendments Nos. 55 and 56 not moved.]
Clause 71 [Power to reduce child benefit for lone parents]:
Baroness Hollis of Heighammoved Amendment No. 57:
Page 51 , line 15, leave out from ("parent") to end of line 17.
The noble Baroness said: My Lords, the Government intend to use the powers in Clause 71 to remove the differential in child benefit rates for lone parents and two parent families.
In Committee, I acknowledged that the drafting of the clause (then Clause 70) was causing concern and agreed to come back to the matter at Report stage. I am doing so by bringing forward this amendment which I hope will allay any concerns over the

1309
Government's intentions. The amendment makes clear that Clause 71 only allows the Government to align the rates for couples and lone parents. I beg to move.
Earl Russell: My Lords, I thank the noble Baroness warmly for the amendment and welcome it with alacrity.
On Question, amendment agreed to.
[Amendments Nos. 58 to 60 not moved.]
Lord Higginsmoved Amendment No. 61:
After Clause 71, insert the following new clause—
LONE PARENT BENEFIT: RE-ENTITLEMENT
(" . After subsection (1) of section 135 of the Contributions and Benefits Act, there shall be inserted—
"(1A) Regulations relating to income support, income-based jobseeker's allowance, housing benefit and council tax benefit which contain a provision reducing the applicable amount of such benefit attributable to being a lone parent ("the lone parent element") shall also contain a provision that, where a person ceases to be entitled to the benefit in question after the coming into force of the regulations but becomes entitled again, as a lone parent, within I year of the cessation of his previous entitlement, the applicable amount of such benefit in his case shall include the lone parent element; and the Social Security (Lone Parent) (Amendment) Regulations 1997 shall he construed as if they contained such a provision."").
The noble Lord said: My Lords, the amendment stands in my name, and that of my noble friend Lady Anelay of St. Johns, and the noble Lord, Lord Goodhart, and relates to lone parent benefit.
I appear somewhat in the role of Oliver Twist. Given the timing of the debate, that is perhaps not wholly inappropriate. Considerable discussion has taken place about the position of lone parents who obtain a job. They then find that the job folds. They become unemployed again, and find that they have moved from the higher rate of lone parent benefit, and all that that involves, to the lower rate which the Government propose.
Paragraph 3.11 of the Red Book points out that the Budget also makes changes to benefit rules to introduce a 12 week linking rule so that lone parents on benefit can take a job knowing that they will not be worse off if the job turns out to be short term and they have to return to benefit. Against the Government's overall background of welfare to work, we believe that that concession—it is why I refer to this as what one might call an Oliver Twist point—is unlikely to be sufficiently encouraging for a lone parent to risk coming off the higher rate of benefit and find that having had a job and losing it they suffer as a result.
The new clause suggests that through regulations made under this legislation relating to income support, jobseeker's allowance, and so on, the person should continue to be entitled to the benefit after the coming into force of the regulations, but become entitled to that benefit, again as a lone parent within one year of the cessation of the previous entitlement. That seems to us a sensible measure and consistent with
1310
the Government's overall approach on welfare to work. It is largely a judgment as to the period involved in order to encourage people to take the risk of coming off the higher rate of benefit. The Government are prepared to preserve that entitlement for 12 weeks. However, those people would lose it if that were not the case.
The amendment seems to us sensible and consistent with the Government's own policies. At the same time it is likely to fulfil the objectives shared on both sides of the House.
Earl Russell: My Lords, we on these Benches support the amendment for reasons that my noble friend Lady Williams and I have already given. I shall not repeat them.
Lord Newton of Braintree: My Lords, I did not move my previous amendment in the interests of speeding up the procedure. Perhaps I may express my strong support for what my noble friend Lord Higgins said from the Front Bench. A lone parent who has been out of the labour market for a long while may be uncertain about the prospects of employment, and how long he will be able to hold down the job.
By holding down the job for only 12 weeks and one day one loses all the benefits of the current lone parent premium arrangements. That is a large risk to ask people to take in those circumstances. There are consequences relating to housing benefit and help with rent. Had I moved the amendment a few moments ago I should have spoken on that at great length. Over the next 18 months, my noble friend's arguments will be greatly strengthened because of the gap which exists before the subsequent measures come into effect. During that period the penalty is greater than if the whole of what has been described (with a certain lack of credibility) as a package were in place.
There is a strong case for a period of 12 months. That case is even stronger because of the way in which the Government are introducing the changes in bits and pieces. I hope that the noble Baroness will see some way to make a further concession.
Baroness Hollis of Heigham: My Lords, I have listened carefully to the arguments on the amendment. The aim which we share is that lone parents are not discouraged from taking up work by the risk of losing a somewhat higher rate of benefit should the work break down.
As noble Lords know, our priority is to provide support to lone parents in overcoming barriers to work. We are already doing this through the new deal for lone parents and the national child care strategy.
We have listened to the concerns of lone parents participating in our new deal. It is clear that they were concerned—noble Lords were right to raise the issue—about the absence of a linking rule for the lone parent premium in income support, and this was affecting their confidence in taking work. That is why the Chancellor announced in his Budget our intention to address these concerns.

1311
That is why it was made clear in Committee that we have introduced a 12 week linking rule for the lone parent premium in income support and jobseeker's allowance. This means that lone parents who are currently receiving either of these benefits will be able to take a job knowing that if it turns out to be short term they will not be worse off if they have to return to benefit. It also means that a lone parent who finds a partner can return to the same rate of benefit if the relationship turns out to be short lived.
The introduction of a 12 week linking period is in line with the recommendation of the Social Security Advisory Committee which recommended a linking period of "at least eight weeks". We have exceeded that. We believe that 12 weeks is a reasonable period for linking. It provides the lone parent with enough time, once they have started work, to decide whether any problems which arise, for example with childcare, can be resolved. Unlike the noble Baroness I believe that over a period of three months one learns whether one's childcare arrangements are robust. And our new deal for lone parents will provide in-work support to help them address these problems.
However, if the lone parent decides that a problem is insurmountable they will be able to return to benefit at the same rate as before. We therefore believe that a 12 week linking rule in income support and jobseeker's allowance will increase lone parents' confidence in taking work, by taking some of the risk from them on to our shoulders.
Amendment No. 61 recommends a one year linking rule. We believe that this is an unnecessarily long period. Disabled people may have, in addition to other problems of risk, the difficulty of their own health. In particular those with mental health problems may have the difficulty as to whether their health can withstand sustained work over a long period of time when their condition may fluctuate. That is why we have proposed a different linking period for disabled people. We believe from experience that the risk for them is that much greater. We do not believe that the same arguments apply to lone parents. We believe that by following the suggestions of the very real expertise embedded in the Social Security Advisory Committee the 12 week linking period is valid. A longer period would prove not only costly but complex to administer. As a result, I hope that your Lordships will feel able to reject the amendment.
Lord Higgins: My Lords, I listened with care to the noble Baroness's remarks. It is essentially a question of assessment of risk so far as the individuals are concerned. That said, the fact also has to be taken into account that if they continue in employment, then there will not be any additional problem. It is a matter of judgment as to exactly how this matter ought to be tackled. On balance, it is better that it should be done in the way that we suggest. I therefore feel it appropriate to take the opinion of the House.
7.31 p.m.
On Question, Whether the said amendment (No. 61) shall be agreed to?
Their Lordships divided: Contents, 64: Not-Contents, 65.

Division No. 3

CONTENTS

Addington, L.

McNair, L.

Alderdice, L.

McNally, L.

Ampthill, L.

Maddock, B.

Anelay of St. Johns, B.

Miller of Hendon, B.

Avebury, L.

Newby, L.

Balfour, E.

Newton of Braintree, L.

Blatch, B.

Northesk, E.

Brabazon of Tara, L.

Ogmore, L.

Bumham, L. [Teller.]

Rankeillour, L.

Byford, B.

Rawlings, B.

Carnock, L.

Razzall, L.

Chesham, L.

Redesdale, L.

Denton of Wakefield, B.

Renton, L.

Dholakia, L.

Rochester, L.

Dixon-Smith, L.

Rodgers of Quarry Bank, L

Elliott of Morpeth, L.

Rotherwick, L.

Ezra, L.

Russell, E. [Teller]

Fraser of Carmyllie, L.

Sandberg, L.

Gisborough, L.

Seccombe, B.

Goodhart, L.

Skelmersdale, L.

Hamwee, B.

Smith of Clifton, L.

Higgins, L.

Stoddart of Swindon, L.

Hooper, B.

Strathclyde, L.

Kenilworth, L.

Thomas of Walliswood, B.

Kingsland, L.

Thurso, V.

Leigh, L.

Tope, L.

Lester of Herne Hill, L.

Tordoff, L.

Linklater of Butterstone, B.

Trefgame, L.

Lyell, L.

Wade of Chorlton, L.

McColl of Dulwich, L.

Wallace of Saltaire, L.

Mackay of Ardbrecknish, L.

Williams of Crosby, B.

Macleod of Borve, B.

Wise, L.

NOT-CONTENTS

Acton, L.

Hardy of Wath, L.

Archer of Sandwell, L.

Haskel, L. [Teller.]

Bassam of Brighton, L.

Hayman, B.

Berkeley, L.

Hilton of Eggardon, B.

Borrie, L.

Hollis of Heigham, B.

Brooke of Alverthorpe, L.

Howie of Troon, L.

Burlison, L.

Hoyle, L.

Carter, L. [Teller.]

Hughes of Woodside, L.

Clinton-Davis, L.

Hunt of Kings Heath, L.

Cocks of Hartcliffe, L.

Janner of Braunstone, L.

Currie of Marylebone, L.

Jay of Paddington, B.

Davies of Oldham, L.

Jenkins of Putney, L.

Desai, L.

Kennedy of The Shaws, B.

Donoughue, L.

Kilbracken, L.

Dormand of Easington, L.

Mallalieu, B.

Dubs, L.

Monkswell, L.

Falconer of Thoroton, L.

Montague of Oxford, L.

Farrington of Ribbleton, B.

Murray of Epping Forest, L

Gallacher, L.

Nicol, B.

Gilbert, L.

Paul, L.

Gladwin of Clee, L.

Plant of Highfield, L.

Gould of Potternewton, B.

Prys-Davies, L.

Graham of Edmonton, L.

Puttnam, L.

Grantchester, L.

Ramsay of Cartvale, B.

Hanworth, V.

Randall of St. Budeaux, L.

Hardie, L.

Renwick of Clifton, L.

1313

Richard, L. [Lord Privy Seal.]

Watson of Invergowrie, L.

Rogers of Riverside, L.

Wedderburn of Charlton, L

Sewel, L.

Whitty, L.

Simon, V.

Williams of Mostyn, L.

Winston, L.

Symons of Vemham Dean, B.

Young of Dartington, L.

Thomas of Macclesfield, L.

Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.
7.39 p.m.
Lord Higginsmoved Amendment No. 62:
After Clause 71, insert the following new clause—
MAINTENANCE OF LONE PARENT PREMIUM: DISABILITY
(" . In making regulations under Part VII of the 1992 Act, the Secretary of State shall ensure that a lone parent who was before 1st April 1998 in receipt of the disability premium payable with income support or income-based jobseeker's allowance and who ceases to he eligible for that premium shall continue to be entitled to the lone parent rate of family premium.").
The noble Lord said: My Lords, I was hesitating, given the recent result of the Division. Amendment No. 62 stands in my name and that of my noble friend Lady Anelay of St Johns. It concerns the maintenance of the lone parent family premium. The amendment seeks to clarify a point, which was made by the advisory body, regarding lone parents who were in receipt of a disability premium which was payable with income support. The amendment seeks to protect their position if they cease to be eligible for the premium and to ensure that none the less they continue to be entitled to the lone parent rate of family premium.
The matter was considered by the advisory body. The Government, in a rather strange response—their initial response, as I understand it—suggested that the numbers were so small that they were scarcely worth bothering about. Perhaps it was not quite as harsh as that, but broadly speaking it was to that effect. It seemed to us that there was a case for the amendment which the advisory body considered, and we would appreciate the Minister's comments. I beg to move.
Baroness Hollis of Heigham: My Lords, the amendment seeks to protect the position of those lone parents who are disabled and receiving income support or jobseeker's allowance. The noble Lord and the noble Baroness were concerned because those lone parents receive a disability premium instead of the lone parent premium. They are worried that if their health improves they will not then qualify for the lone parent premium, but will continue instead to receive the ordinary family premium. I entirely sympathise with those concerns. They were my anxieties before the Budget. After all, those vulnerable people are current lone parents. The Government want to protect the position of current lone parents. There has been no difference between us on that fact.
We have listened to concerns over lone parents who have disabilities. The amendment has given me the opportunity and I am happy to clarify what the position is now. We have already laid before Parliament new regulations which achieve the position that this amendment seeks to achieve. I am pleased to inform
1314
the noble Lord and the noble Baroness that current lone parents who are receiving the disability premium in income support or jobseeker's allowance will now qualify for the lone parent premium, even if they have a break in their benefit claim of up to 12 weeks. I therefore hope that the noble Lord will feel able to withdraw his amendment.
Lord Higgins: My Lords, in the light of that reply I shall, of course, be happy to withdraw my amendment. I am glad that the Government have reconsidered the position which was originally established, and I welcome the assurance which the noble Baroness has just given. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Russellmoved Amendment No. 62A:
Before Clause 73, insert the following new clause—
CLAIMS FOR SECONDARY BENEFITS
(". After section 1 of the Administration Act there shall be inserted the following new section—
"Claims for secondary benefits.
1A. — (1) This section applies in a case where—

(a) the ability of a person to make a successful claim to a benefit ("the principal benefit") depends on him or some other person being awarded another benefit ("the secondary benefit"): and

(b) a claim for the secondary benefit has been made.

(2) If a person makes a claim for the principal benefit at any time before the end of a period of one month beginning on the day on which notification is given of the award of the secondary benefit—

(a) he shall be treated as having made the claim for the principal benefit on the day with effect from which the secondary benefit is awarded; and

(b) he shall be entitled to the principal benefit for the period between the day with effect from which the secondary benefit is awarded and the day on which he made the claim for the principal benefit.

(3) If a person ("the claimant") makes a claim for the principal benefit before the day on which notification is given of the award of the secondary benefit and the claim for the principal benefit is refused, the Secretary of State or the Adjudication Officer, as the case may be—

(a) shall, on receipt of a written request from the claimant within a period of one month beginning on the day on which notification is given of the award of the secondary benefit; and

(b) may, in any event,

award the claimant the principal benefit with effect from the same day as the day on which the award of secondary benefit has effect."").
The noble Earl said: My Lords, this amendment was put down in Committee in the name of the noble Baroness, Lady Pitkeathley. She is unable to move it and I move it with her full knowledge and approval. Both the noble Baroness and I felt great pleasure at her inability to move it in Committee, which resulted from the Minister's generous concession on backdating. Nevertheless, the point needs addressing.
The point of Amendment No. 62A is to allow a claim that is dependent on another claim to be backdated to the date from which the principal claim was made. Invalid care allowance is, strictly speaking, a passported benefit. It is characteristic that it is passported on receipt

1315
of attendance allowance or one of the higher rates of disability living allowance. The procedure at the moment, if you want to get the benefit to run right back to the beginning of the disability, is that you have to put in the claim for invalid care allowance before the disability benefit has been awarded. So you have to put in a claim which is not valid at the time of making it in order to make it become valid thereafter.
We talk about passported benefits, but this is a case where you have to buy your tickets before you have your passport. If you should happen to run into trouble at the Passport Office, that puts you in a pretty pickle. The present system lets the Benefits Agency in for a great deal of unnecessary work. So one argument for the amendment would be administrative tidiness. I have occasionally made remarks at the expense of administrative tidiness, but other things being equal, it is good and something which we should hope to achieve. It is also in the interests of the claimant.
The debt of this country to carers is more than we can ever calculate. I believe the Social Security Select Committee, at the end of the last Parliament, calculated it at £30 billion a year. I have an uncomfortable suspicion that that figure might be an under-estimate. I cannot speak to this amendment in the way that the noble Baroness, Lady Pitkeathley, would have done, and I shall not attempt to do so, but we should not attempt to discourage carers. That is something which would be very far indeed from the public interest.
There is a special problem affecting carers where an appeal is involved. To take one hypothetical case: someone claims attendance allowance in August 1997; it is turned down, but awarded after appeal in January 1998. The claimant can then claim income support as the applicable amount is higher because of the severe disability premium. The claimant can get backdating for up to three months if he or she satisfies the conditions for a late claim. But if he or she had applied for income support in August 1997, it would have been turned down and then he or she would have to receive backdating to August.
I do not know whether your Lordships followed that rather tortuous example, but if noble Lords did not, then perhaps that is the point. The system is confused. It works against claimants and it creates a great deal of unnecessary administrative work. Since the carer's claim is based on the claim of the person with the disability, a claiming date which links one with the other only recognises the facts of the case. I hope therefore that the Minister may be prepared to look on this with sympathy. I beg to move.
Baroness Hollis of Heigham: My Lords, the effect of this amendment would be to allow backdating of a claim to one benefit to the start of the claim for another benefit on which entitlement to the first benefit is dependent.
I recognise the concerns that the noble Earl raised. He addressed them almost entirely in terms of the carer's benefit, ICA, and the benefit on which it is passported, so I shall address my remarks to that. I shall deal with
1316
double claiming. First, I should explain the term "double claiming". At present we ask carers to claim ICA when caring begins. However, the claim will fail if DLA or AA has not been awarded, as entitlement is dependent on one of these qualifying benefits being in payment. In order to ensure that claimants do not lose benefit once the DLA or AA claim is decided, we allow a further claim for ICA made at that stage to be backdated to the date of the earlier claim or award of the qualifying benefit.
I accept that that sounds tortuous, as described by the noble Earl. Therefore, on the face of it the amendment seems entirely reasonable. However, it would remove any liability on the claimant to make a claim for a benefit at the right time which is, for example, with ICA, when the caring duties start. Allowing for a claim to the benefit to be made after the qualifying benefit has been awarded carries with it the assumption that all the qualifying conditions for the principal benefit have been constant during the past period. That was assumed by the noble Earl when he introduced the amendment. I wish that it were as administratively tidy as the noble Earl suggested. It is not.
For example, the caring might not have been continuously undertaken for at least 35 hours a week during the whole of the past period. The disabled person might have spent some time in hospital so that the caring duties were not undertaken by the carer. Alternatively, the carer might for some period in the preceding time have had earnings in excess of the ICA earnings limit during that period.
Perhaps I may give an example from my personal knowledge. I am sure the experience has been shared by many other people. An individual in my family went on to the highest rate of DLA in July. The family shared the care. It was not until December that one of the family became the principal carer and was therefore eligible for ICA. It would not have been appropriate automatically to backdate that claim to the start of DLA because the caring responsibility was not co-terminous—though it often is—and is not automatically co-terminous with the date that the person starts receiving DLA.
There are therefore three examples: first, where carers share responsibility and then one person becomes the carer; secondly, where a disabled person might have spent time in hospital or, thirdly, where the carer was trying for a time to combine it with waged work which took them above the earnings threshold, and then did not.
I hope that the noble Earl will understand that it is not because we are not sympathetic to the intent behind the amendment, but that we cannot do it in that way. Making the claim for the ICA at the time the caring starts ensures that the carer's position is protected and that he or she can be clear about satisfying the other qualifying conditions for the benefit.
I accept that it is a tortuous process, but we cannot go down the route described by the noble Earl. We have tried to make the "second claim" process therefore as simple as possible. There is already an easement in place to keep inconvenience to claimants to a minimum. The

1317
disallowance notice on the initial claim to ICA includes a tear-off portion to be returned when DLA or AA is awarded. A further enquiry form is sent out if confirmation of the conditions of entitlement is needed, but there is no need to go through the whole claims process again because receipt of the tear-off is treated as a claim. Again, I know that local benefit offices remind people under those circumstances of their right to ICA.
I hope that, in describing the benefit of ICA as I have, the noble Earl will appreciate that, while we sympathise with the spirit of his amendment, we cannot do it in the way he suggested because of the anomalies that result. However, we are, in a practical way, trying to ensure that claimants take up their ICA at the point at which the caring responsibilities meet the terms of ICA and, alas, that is not just when DLA is taken by the person for whom they are claiming. The two can be synonymous, though they need not be. We have tried to bridge that appropriately in discussions with CLAs. I hope therefore that the noble Earl will feel able to withdraw his amendment.
Earl Russell: My Lords, I thank the Minister for a sympathetic, thoughtful and careful reply. I understand the point she makes regarding conditions which are not continuous and care which is not continuous. Those are two separate possible discontinuities. I understand that those may create considerable difficulties. However, I am not yet convinced that those difficulties are entirely insuperable.
The Minister is aware that the present route also contains considerable difficulties. Usually, when one gets into this situation, one needs a little bit of lateral thinking. Usually there is some other way one can come at the problem. But I have been in social security long enough to know that coming into it and thinking that one can simplify it is not nearly as easy as it looks.
I hope that the Minister will be prepared to think about this matter again, because there is a real problem to consider. We will not solve it tonight. I thank the Minister for the care and thought she gave the matter and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heighammoved Amendment No. 63:
After Clause 76, insert the following new clause—
EXPENDITURE FOR FACILITATING TRANSFER OF FUNCTIONS ETC
(".— (1) The Secretary of State and the Commissioners of Inland Revenue may incur expenditure in doing anything which in his or their opinion is appropriate for the purpose of facilitating either of the following things, namely—

(a) the transfer to the Commissioners of such of the functions of the Secretary of State as are exercisable by the Contributions Agency; and

(b) the exercise by the Commissioners of those functions.

(2) The powers conferred by subsection (1) above—

(a) shall be exercisable whether or not Parliament has given any approval on which either of the things there mentioned depends; and

(b) shall he without prejudice to any power conferred otherwise than by virtue of that subsection.

1318
(3) Any expenditure incurred under this section shall be defrayed out of money provided by Parliament.
(4) In its application to Northern Ireland, this section shall have effect with the following modifications, namely—

(a) for the first reference to the Secretary of State there shall be substituted a reference to the Department of Health and Social Services for Northern Ireland;

(b) for the reference to such of the functions of the Secretary of State as are exercisable by the Contributions Agency there shall be substituted a reference to such of the functions of that Department as correspond to those functions; and

(c) for the reference to money provided by Parliament there shall he substituted a reference to money appropriated by Measure of the Northern Ireland Assembly.").

The noble Baroness said: My Lords, we switch back to the delights of national insurance. I had hoped your Lordships would agree this amendment formally at this late hour. However, in moving Amendment No. 63, I shall speak also to Amendment No. 113.
At the Committee stage of this Bill my noble fried Lord Haskel explained that the Government would be bringing forward amendments to give effect to the reforms of national insurance announced in the Budget. We have already debated the amendments that we introduced to give effect to the structural changes to national insurance.
My noble friend also explained that, for one of these reforms, the transfer of the Contributions Agency to the Inland Revenue from April 1999, the Government might need additional powers. Those would allow us to incur necessary preparatory expenditure in advance of the completion of the substantive legislation which would effect the transfer. That is the purpose of Amendments Nos. 63 and 113.
The transfer of the Contributions Agency—we covered some of this ground earlier today—to the Inland Revenue represents a major streamlining of the system which will benefit employers and contributors alike. We want to effect the transfer as quickly and smoothly as possible.
The Inland Revenue already carries out much of the collection of national insurance contributions—around 94 per cent. —and has powers covering areas of contributions work. What will be needed is a Bill to transfer those powers not already within its remit. We are currently considering the issues and plan to bring forward legislation in due course. However, we do not anticipate that it will be possible to finalise the details in time for the new Bill to be brought in this Session.
It is essential to make sure that we provide continuity of service to contributors and employers in moving to the new structure. There is much to be done to achieve this: we must change computer systems; redesign forms and leaflets; and ensure that we keep employers informed. Prudent management suggests that we should start making operational preparations in good time so that there is no risk of disruption of service in April 1999.
Amendment No. 63 and the consequential amendment linked to it—Amendment No. 113—would ensure that there is no doubt about the propriety of spending what needs to be spent at the right time to bring about the necessary improvements to the system. They lay an essential foundation for a smooth and speedy shift of

1319
responsibilities. I hope your Lordships will agree with me that in the circumstances our approach is sensible and pragmatic, and feel able to support this necessary measure. I beg to move.
Lord Higgins: My Lords, in one sense this is largely a mechanical matter, but it would seem clear that the transfer of responsibilities from the Secretary of State to the commissioners of the Inland Revenue does much to reinforce the contention I made earlier; namely, that the contributions are now in virtually every sense a tax.
This clause largely involves the approval for spending money and making the transfer. I am not clear as to what effect that has on the efficiency of the operation. Presumably the intention is that there should be some savings as a result of the consolidation of the collection of social security contributions and tax, which also sometimes goes towards paying that amount since the National Insurance Fund itself is topped up on a substantial scale from general taxation.
Unless my memory fails me, we have not had justification for this specific transfer. Perhaps the noble Baroness will quickly give us a reason why we are doing this at all, if it is not a tax.
Lord Goodhart: My Lords, I welcome this step in the continuing evolution of national insurance contributions into taxes. I felt that they had crossed the boundary line already, but they are certainly moving forward. This step is one which will enable several consequential reforms to take place, such as the one that we debated what now seems a long time ago, on the first day of Committee, in relation to the transfer of questions on contributions from the social security appeal tribunals to the special commissioners of income tax. This is therefore something, for my part, that I am happy to support.
Baroness Hollis of Heigham: My Lords, the noble Lord, Lord Higgins, asked more generally why we are doing this, as well as querying the savings we envisage.
The reason for bringing the Contributions Agency and the Inland Revenue together in a single organisation is that we believe that it will promote greater alignment of tax and national insurance contributions, which is one of the Government's long-term aims.
Lord Higgins: My Lords, did the noble Baroness say integration?
Baroness Hollis of Heigham: My Lords, I said "alignment". On such matters, which are beyond the reach of my usual role, I am careful to stick to my brief and the word is "alignment". It will therefore reduce the burden on businesses and people so that they can sort out taxes and contributions through one organisation. It will help the two departments to share experience, knowledge and skills in combating avoidance. It will make better use of resources and
1320
help in fairness in taxation. It will enable the departments to combine their efforts and customer service. It will give business and other representative bodies one focus for discussion of improved legislation, procedures and guidance and make it easier over time gradually to align the tax and national insurance rules.
Obviously all that will be labour intensive. Savings are estimated at around 200 members of staff in the first two years and longer-term efficiencies are expected. I hope that the comments made by the noble Lord, Lord Goodhart, were to welcome the measure and hope that it may be built back into some of the decision-making appeals procedure. That point may or may not come up at Third Reading, but it certainly arose earlier.
Lord Higgins: My Lords, perhaps the noble Baroness will allow me to intervene to say that I was surprised by the figure she gave. Having represented a large chunk of the Inland Revenue for 33 years, the savings of 200 that she mentioned seem very small.
Baroness Hollis of Heigham: My Lords, it relates to the numbers of staff.
Lord Higgins: My Lords, in the light of this integration, that seems to me to be an extraordinarily small number.
Baroness Hollis of Heigham: My Lords, I take refuge at this time of night in the phrase "longer term efficiencies are expected". I am sure the noble Lord will hold us to account to that effect. As he will understand, most of the work continues. The efficiency savings come from the integration of the overlap of work, but most of the work continues. However, I do not doubt that we shall return to the matter in due course. As the noble Lord will know, this was suggested by the Taylor Committee and has had broad support. It seems a sensible way forward. I hope the House will accept that.
On Question, amendment agreed to.
8 p.m.
Clause 77 [Regulations and orders]:
The Lord Advocate (Lord Hardie)moved Amendments Nos. 64 to 66:
Page 54, line 1, leave out ("sections 14(11) and 15(6) above") and insert ("subsection (1A) below").
Page 54, line 3, at end insert—
("(1A) Regulations with respect to proceedings before the Commissioners (whether for the determination of any matter or for leave to appeal to or from the Commissioners) shall be made by the Lord Chancellor; and where the Lord Chancellor proposes to make regulations under this Act it shall be his duty to consult the Lord Advocate with respect to the proposal.").
Page 54, line 37, at end insert—
("( ) In this section "Commissioner" has the same meaning as in Chapter II of Part I.").
On Question, amendments agreed to.
Clause 78 [Parliamentary control of regulations]:
Baroness Hollis of Heigham: My Lords, I beg to move Amendment No. 67. This amendment seeks to—
Baroness Anelay of St. Johnsmoved Amendment No. 67:
Page 54, line 40, after ("7,") insert ("10,").
The noble Baroness said: My Lords, if the noble Baroness had been prepared to give way at this very early stage to my modest request in Amendment No. 67, I would have been happy not to take to my feet and allow the noble Baroness to move my amendment for me.
The amendment would ensure that the affirmative procedure should apply to regulations under Clause 10. At Committee stage, when speaking in support of an amendment moved by the noble Lord, Lord Goodhart, I referred to the 10th Report of the Delegated Powers and Deregulation Committee. Paragraph 10 of the report specifically covers the provisions of Clause 10. It states:
"These powers may seem wide but the explanatory memorandum"—
that was provided by the DSS—
"explains that they will be used for only two limited purposes. Provided that the Minister is prepared to give an undertaking to this effect, the committee therefore considers that the negative procedure is appropriate".
The corollary of that is that if the Minister is not prepared to give such an undertaking, the negative procedure would not be appropriate.
At Committee stage I invited the noble and learned Lord the Lord Advocate to give that undertaking. He declined to do so. He said that he could not give an explicit assurance that the powers would be used for these two purposes given the fact that, in a sense, the Government at that stage were steering into uncharted waters and needed some flexibility. I believe it is right that we should follow the judgment of the Delegated Powers and Deregulation Committee. I hope therefore that the noble Baroness will agree with that proposition. I move this amendment to make the statutory instrument regulations under Clause 10 subject to the affirmative procedure. I trust that that is acceptable to the Government. I beg to move.
Lord Goodhart: My Lords, I rise only to say that, for the reasons given by the noble Baroness, Lady Anelay, I wish to support the amendment.
Baroness Hollis of Heigham: My Lords, I am now overwhelmed by the strength of opinion coming from the Liberal Democrat Benches in support of the amendment. That was clearly the all-purpose back pocket support speech. I agree with the views put by the noble Lord and I wish to second them for those reasons.
The amendment seeks to make the regulation making powers contained in Clause 10 on superseding decisions subject to affirmative resolution. Conscious of your Lordships' views on the importance of parliamentary scrutiny and the Government's accountability to this House, we have looked at this matter closely. I am sorry
1322
but we feel unable to accept the amendment. These will not be novel or contentious regulations and will in the main continue current rules and processes.
The Select Committee on delegated powers took the view that the regulation-making powers in Clause 10 were appropriate to the negative resolution provided that certain assurances were given about the limited circumstances in which they would be used. I am more than willing to give those assurances—given Pepper v. Hart—in Hansard.
Clause 10 allows the Secretary of State to supersede decisions in the case of circumstances prescribed in regulations. When a decision is superseded, a fresh decision is made and takes its place. Our intention is to use the powers in the clause in two circumstances; first. when the original decision needs to be replaced by a fresh one because there has been a change in circumstances; and, secondly, when an error in the original decision has not been identified within the dispute period of one month.
The provision of these regulations has been debated in this House and during consideration of the Bill in another place. The 10th Report of the Select Committee on Delegated Powers and Deregulation expressed the view that it would be content to keep the regulations subject to negative resolution provided reassurances given in the House of Commons were given in this House. I have repeated those reassurances in the House tonight. We take the views of the Delegated Powers and Deregulation Committee extremely seriously. I believe that we have met its concerns. In the light of that, I hope that the noble Baroness will feel able to withdraw the amendment.
Baroness Anelay of St. Johns: My Lords, I am grateful to the Minister for giving the explicit assurance which her noble and learned colleague the Lord Advocate was not able to give in Committee. I am pleased that the recommendations of the Select Committee have been adopted. I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hardiemoved Amendment No. 68:
After Clause 78, insert the following new clause— —
REPORTS BY SECRETARY OF STATE
(".— (1) The Secretary of State shall prepare, either annually or at such times or intervals as may be prescribed, a report on the standards achieved by the Secretary of State in the making of decisions against which an appeal lies to an appeal tribunal constituted under Chapter I of Part I.
(2) A copy of every such report shall be laid before each House of Parliament.").
On Question, amendment agreed to.
Schedule 6 [Transitory provisions]:
Lord Hardiemoved Amendment No. 69:
Page 64, line 19, at end insert—
("Constitution of appeal tribunals
. In relation to any time before the commencement of section 7 of this Act so far as it relates to appeals under section 12 of this

1323
Act, section 41 of the Administration Act (constitution of social security appeal tribunals) shall have effect as if—

(a) in subsection (1), for the words "and two other persons" there were substituted the words "sitting either alone or with one or two other persons";

(b) in subsection (2), for the words "The members other than the chairman" there were substituted the words "Any members other than the chairman";

(c) for subsection (6) there were substituted the following subsection—

"(6) Where the appeal tribunal hearing a case consists of more than one member it shall, if practicable, include at least one member who is of the same sex as the claimant."").
On Question, amendment agreed to.
Lord Hardiemoved Amendment No. 70:
Page 65, line 34, leave out ("has") and insert ("means").
The noble and learned Lord said: My Lords, in moving this amendment, I wish to speak also to Amendments No. 71 to 73.
Schedule 6 contains transitory provisions to give effect to the policy behind certain provisions in the Bill for the purposes of the current adjudication and appeals system. It will have effect for the period between Royal Assent and the date when the corresponding provisions in Part I of the Bill take effect.
Amendment No. 70 simply corrects a drafting error. It replaces the word "has" with the word "means", thereby restoring the proper sense of the provision. Amendment No. 71 will clarify the restrictions on arrears of benefit which are imposed through the provisions of paragraph 5 of Schedule 6. Paragraph 5 of Schedule 6 amends Section 69 of the Social Security Administration Act 1992 until the commencement of Clause 27 of the Bill. The provisions ensure that restrictions on arrears of benefit will apply to claimants who applied for a review of their decision either before or after the determination of a lead case. Claimants in this position will have any change to benefit applied from a common start date— the date of the "determination" of the commissioner or the court in the lead case.
The amendment makes it clear that the restrictions on arrears under the transitory provisions will only apply to reviews requested after the passing of this Bill. Reviews requested prior to implementation of paragraph 5 of Schedule 6 will be dealt with under the law as it stands currently.
This is a simple amendment which is intended to make clear that the provisions of paragraph 5 of Schedule 6 do not apply to cases already in the pipeline as they will be dealt with under the law as it stands now. As such I trust that noble Lords will agree to the amendment.
Amendments Nos. 72 and 73 are simple drafting corrections to replace "appropriate officer" with "social fund officer". Social fund officers will continue to make determinations during this interim period. When the new decision-making arrangements are introduced they will be replaced by "appropriate officers" under Clause 38 of the Bill. Therefore "social fund officer" is the correct term for the transitory provisions. I commend the amendments to your Lordships.
On Question, amendment agreed to.
Lord Hardiemoved Amendments Nos. 71 to 73:
Page 66, line 2, leave out from ("to") to ("Act") in line 3 and insert ("applications under section 26(1) or 30 of the Administration Act made after the passing of this Act and any time before the commencement of section 27 above, section 69 of that").
Page 66, line 19, leave out ("an appropriate officer") and insert ("a social fund officer").
Page 66, line 47, leave out ("an appropriate officer") and insert ("a social fund officer").
On Question, amendments agreed to.
Schedule 7 [Minor and consequential amendments]:
Lord Hardiemoved Amendment No. 74:
Page 69, line 20, leave out from ("to") to end of line 22 and insert ("such a decision, or on which such a decision is based, shall be conclusive for the purposes of—

(a) further such decisions;

(b) decisions made in accordance with sections 8 to 16 of the Social Security Act 1998, or with regulations under section 11 of that Act; and

(c) decisions made under the Child Support Act 1991."").

On Question, amendment agreed to.
Lord Hardiemoved Amendment No. 74A:
Page 69, line 30, at end insert—
("Fotfeiture Act 1982 (c.34)
.—(1) In subsection (2)(b) of section 4 of the Forfeiture Act 1982 (Commissioner to decide whether rule applies to social security benefits), for the words "section 59 of the Social Security Administration Act 1992" there shall be substituted the words "section 16 of the Social Security Act 1998".
(2) In subsection (5) of that section, in the definition of "Commissioner", for the words "Social Security Administration Act 1992" there shall be substituted the words "Chapter II of Part I of the Social Security Act I998".").
The noble and learned Lord said: My Lords, in moving this amendment I seek the leave of the House to speak to Amendments Nos. 102A, 102B, 102C, 103 and 108. These are only minor and consequential amendments to other legislation as a direct result of the provisions in this Bill.
Amendment No. 74A amends the Forfeiture Act 1982 to replace references to the Social Security Administration Act with new references to analogous provisions in the present Act once it is passed.
Amendments Nos. 102A, 102B, 102C and 108 aim to ensure that the Bill's provisions for revising and superseding decisions of the Secretary of State also apply fully to certain decisions taken on jobseekers' allowance.
The amendments specifically replace references to "review" in Sections 6 and 7 of the Jobseekers Act 1995 with reference to the new provisions in Clauses 9 and 10 of the Bill; that is, to the new provisions for revising and superseding decisions made by the Secretary of State. The amendments also remove the superfluous words "the first determination" in those sections of the Jobseekers Act.

1325
Amendment No. 103 is a minor and consequential amendment to the Employment Rights Act 1996. It changes a reference in Section 215 of the Act from
"the Social Security Administration Act 1992"
to
"Chapter II of Part I of the Social Security Act 1998".
I commend these amendments to your Lordships. I beg to move.
On Question, amendment agreed to.
Lord Hardiemoved Amendment No. 75:
Page 70, line 7, at end insert—
("Income and Corporation Taxes Act 1988 (c.1)
. In subsection (3) of section 172 of the Income and Corporation Taxes Act 1988 (exceptions from tax) —

(a) for the words "Class 1 contributions" there shall he substituted the words "secondary Class 1 contributions"; and

(b) for the words "lower earnings limit" there shall be substituted the words "earnings threshold".").

On Question, amendment agreed to.
Lord Hardiemoved Amendment No. 75A:
Page 71, leave out lines 35 to 38 and insert—

("(a) for the words "who was the chairman of the child support appeal tribunal" there shall be substituted the words "who constituted, or was the chairman of, the appeal tribunal";

(b) for the words "such other chairman of a child support appeal tribunal" there shall be substituted the words "such other person".").

The noble and learned Lord said: My Lords, in moving this amendment, I shall speak to Amendments Nos. 78A and 78B. These all make minor alterations to provisions regarding appeals to child support commissioners.
Amendment No. 75A amends the Child Support Act 1991 and relates to leave to appeal to the child support commissioners. Under the provisions introduced in this Bill, it will be possible to have single or two person-appeal tribunals. This means that references to the "chairman" of the tribunal will not always be appropriate. The new wording reflects this change, and brings the wording for child support into line with that for other aspects of social security.
Amendments Nos. 78A and 78B relate to the handling of applications for leave to appeal to child support commissioners, and reflect amendments introduced at Committee stage for the social security commissioners.
These amendments allow the chief child support commissioner to direct such applications to a tribunal of commissioners, where the application involves a question of law of special difficulty. At present, all applications for leave to appeal are considered by a commissioner sitting alone, although the appeals themselves may be heard by a tribunal of commissioners.
The approach proposed here is unlikely to be used frequently, but it does offer benefits for the development of child support case law. It is likely to be particularly
1326
relevant in instances where the application for leave to appeal is important to a number of subsequent applications.
Finally, Amendment No. 78B also introduces a provision which gives a casting vote to the child support commissioner presiding over a tribunal of commissioners, where the tribunal would otherwise be equally divided as to the outcome of the appeal.
These amendments extend provisions already in place for social security commissioners to child support. I therefore commend these amendments to your Lordships' House. I beg to move.
On Question, amendment agreed to.
The Deputy Speaker (Lord Ampthill): My Lords, as far as I am aware, Amendments Nos. 76 to 108 have already been debated.
Lord Hardiemoved Amendments Nos. 76 to 103:
Page 72, line 32, at end insert—
(" . After subsection (2) of section 43 of that Act (contribution to maintenance by deduction from benefit) there shall be inserted the following subsection—
"(3) Schedule 4C shall have effect for applying sections 16, 17, 20 and 28ZA to 28ZC to any decision with respect to a person's liability under this section, that is to say, his liability to make payments under regulations made by virtue of this section.").
Page 73, line 9, leave out from ("to") to end of line 11 and insert ("such a decision, or on which such a decision is based, shall be conclusive for the purposes of—

(a) further such decisions;

(b) decisions made in accordance with sections 8 to 16 of the Social Security Act 1998, or with regulations under section 11 of that Act; and

(c) decisions made under the Vaccine Damage Payments Act 1979.").

Page 73, leave out line 33 and insert—
("(b) in paragraph (b), for the words "section 18 or 19" there shall be substituted the words "Schedule 4C".").
Page 74, line 25, leave out from ("In") to ("after") in line 26 and insert ("sub-paragraph (1) of paragraph 5 of Schedule 4 to that Act (Child Support Commissioners) —
(a) for the words "that an appeal" there shall he substituted the words "that—
(a) an application for leave under section 24(6)(b); or
(b) an appeal,";
(b) for the words "that the appeal" there shall be substituted the words "that the application or appeal"; and
(c)")
Page 74, line 27, at end insert—
("( ) At the end of sub-paragraph (2) of that paragraph there shall be inserted the words "; and the presiding Child Support Commissioner shall have a casting vote if the votes are equally divided".
( ) After that sub-paragraph there shall be inserted the following sub-paragraph—
"(3) Where a direction is given under sub-paragraph (1)(a), section 24(6)(b) shall have effect as if the reference to a Child Support Commissioner were a reference to such a tribunal as is mentioned in sub-paragraph (1)."").
Page 75, line 14, leave out ("or a reduced benefit direction") and insert ("a reduced benefit direction or a person's liability under section 43").

1327
Page 75, line 24, leave out ("or a reduced benefit direction") and insert ("a reduced benefit direction or a person's liability under section 43").
Page 75, line 37, at beginning insert ("Subject to sub-paragraphs (1A) and (1B),").
Page 75, line 41, at end insert ("or
(ii) with respect to a person's liability under section 43,").
Page 75, line 44, at end insert—
("(1 A) On an appeal under section 20 as extended by sub-paragraph (1)(a), the appeal tribunal shall—

(a) consider the matter—

(i) as if it were exercising the powers of the Secretary of State in relation to the application in question; and

(ii) as if it were subject to the duties imposed on him in relation to that application;

(b) have regard to any representations made to it by the Secretary of State; and

(c) confirm the decision or replace it with such decision as the tribunal considers appropriate.

(1B) No appeal shall lie under section 20 as extended by sub-paragraph (1)(b)(i) unless the amount of the person's benefit is reduced in accordance with the reduced benefit direction; and the time within which such an appeal may be brought shall run from the date of the notification of the reduction.").
Page 76, line 4, leave out ("or a reduced benefit direction") and insert ("a reduced benefit direction or a person's liability under section 43").
Page 76, line 43, after ("made") insert ("by the Secretary of State").
Page 76, line 44, leave out ("by the Secretary of State").
Page 76, line 49, leave out ("or a reduced benefit direction") and insert (", a reduced benefit direction or a person's liability under section 43").
Page 77, line 2, leave out ("or a reduced benefit direction") and insert (", a reduced benefit direction or a person's liability under section 43").
Page 77, line 38, leave out from beginning to ("there") and insert (".— (1) In subsection (5) of section 10 of that Act (Class 1A contributions), for the words from "for secondary" to "earnings bracket" there shall be substituted the words "specified as the secondary percentage in section 9(2) above".
(2) After subsection (8) of that section").
Page 77, line 42, at end insert—
(". After subsection (3) of section 14 of that Act (restriction on right to pay Class 3 contributions) there shall he inserted the following subsection—
"(4) Where primary Class 1 contributions have been paid or treated as paid on any part of a person's earnings, subsection (1)(a) above shall have effect as if such contributions had been paid or treated as paid on so much of those earnings as did not exceed the upper earnings limit."").
Page 77, line 42, at end insert—
(" After subsection (5) of section 21 of that Act (contribution conditions) there shall be inserted the following subsection—
"(5A) Where primary Class 1 contributions have been paid or treated as paid on any part of a person's earnings, the following provisions, namely—

(a) subsection (5)(c) above;

(b) sections 22(1)(a) and (3)(a), 23(3)(a), 24(2)(a), 44(6)(a) and 45A(1)(a) below; and

(c) paragraphs 2(4)(a) and (5)(a), 4(2)(a), 5(2)(b) and (4)(a) and 7(4)(a) of Schedule 3 to this Act,

shall have effect as if such contributions had been paid or treated as paid on so much of the earnings as did not exceed the upper earnings limit."
1328
. In subsection (4) of section 22 of that Act (earnings factors), for the words "upon which" there shall be substituted the words "in respect of'.").
Page 78, line 38, leave out ("and") and insert—
("( ) the definitions of "initial primary percentage" and "main primary percentage" shall cease to have effect;
( ) for the definitions of "lower earnings limit" and "upper earnings limit" there shall be substituted the following definitions—
""lower earnings limit", "upper earnings limit" and "earnings threshold" are to be construed in accordance with subsection (1) of section 5 above, and references to the lower or upper earnings limit, or to the earnings threshold, of a tax year are to whatever is (or was) for that year the limit or threshold in force under that subsection;";").
Page 78, line 43, at end insert ("and
( ) in the definition of "primary percentage", for the words "section 8(1) and (2)" there shall be substituted the words "section 8(2).").
Page 79, line 27, at end insert—
(". In subsection (1) of section 163 of that Act (interpretation of Part XI), in the definition of "employer", after the words "but for" there shall be inserted the words "the condition in".
. In subsection (1) of section 171 of that Act (interpretation of Part XII), in the definition of "employer", after the words "but for" there shall be inserted the words "the condition in".").
Page 79, line 33, at end insert—
("( ) For sub-paragraph (2) of paragraph 1 of that Schedule there shall be substituted the following sub-paragraph—
"(2) Where earnings in respect of employments which include any contracted-out employment and any employment which is not a contracted-out employment are aggregated under sub-paragraph (1) above, then, except as may be provided by regulations—

(a) if the aggregated earnings exceed the current lower earnings limit, the amount of the primary Class 1 contribution in respect of the aggregated earnings shall be determined in accordance with sub-paragraph (3) below; and

(b) if the aggregated earnings exceed the current earnings threshold, the amount of the secondary Class I contribution in respect of the aggregated earnings shall be determined in accordance with sub-paragraph (6) below."

( ) In sub-paragraph (3) of that paragraph, immediately before the words "does not exceed", in each place where they occur, there shall be inserted the words "exceeds the current lower earnings limit and".
In sub-paragraph (6) of that paragraph—

(a) in paragraph (a), for the words "the APPS earnings" there shall he substituted the words "such part of the APPS earnings as exceeds the earnings threshold";

(b) in paragraphs (b) and (c), for the words "the part of the aggregated earnings attributable to such service" there shall he substituted the words "such part of the aggregated earnings attributable to such service as exceeds the earnings threshold"; and

(c) in paragraph (d), for the words "the remainder of the aggregated earnings" there shall be substituted the words "such part of the remainder of the aggregated earnings as exceeds the earnings threshold".

( ) In sub-paragraph (1) of paragraph 3 of that Schedule, for the words "his own secondary contribution" there shall be substituted the words "any secondary contribution of his own".").
Page 83, line 10, at end insert—
(".—(1) In subsection (1) of section 143 of that Act (power to alter contributions with a view to adjusting level of National

1329
Insurance Fund), for paragraphs (a) and (b) there shall be substituted the following paragraphs—

"(a) the percentage rate specified as the primary percentage in section 8(2);

(b) the percentage rate specified as the secondary percentage in section 9(2);".

(2) In subsection (4) of that section, for paragraph (a) there shall be substituted the following paragraph—
"(a) to increase for any tax year the primary percentage, or the secondary percentage, to a percentage rate more than 0.25 per cent higher than that applicable at the end of the preceding tax year;".").
Page 83, line 13, at end insert—
(". For subsections (1) to (3) of section 145 of that Act (power to alter primary and secondary contributions) there shall be substituted the following subsections—
"(1) For the purpose of adjusting amounts payable by way of primary Class 1 contributions, the Secretary of State may at any time make an order altering the percentage rate specified as the primary percentage in section 8(2) of the Contributions and Benefits Act.
(2) For the purpose of adjusting amounts payable by way of secondary Class 1 contributions, the Secretary of State may at any time make an order altering the percentage rate specified as the secondary percentage in section 9(2) of the Contributions and Benefits Act.
(3) No order shall be made under this section so as to increase for any tax year the primary percentage, or the secondary percentage, to a percentage rate more than 0.25 per cent higher than that applicable at the end of the preceding tax year."
. Section 146 of that Act (power to alter number of secondary earnings brackets) shall cease to have effect.
. In subsection (1), (2) and (3) of section 147 of that Act (orders under sections 145 and 146: supplementary), the words "or 146" shall cease to have effect.").
Page 83, line 38, at end insert—
("( ) In subsection (5)(b) of that section, for the words "those contributions" there shall be substituted the words "primary Class 1 contributions".").
Page 85, line 20, at end insert ("and
(b) "146," shall cease to have effect."). Page 88, line 1, at end insert—
(" . For subsections (1) and (1A) of section 41 of the Pension Schemes Act 1993 (reduced rates of Class 1 contributions) there shall he substituted the following subsections—
"(1) Subsections (1A) to (1C) apply where—

(a) the earnings paid to or for the benefit of an earner in any tax week are in respect of an employment which is contracted-out employment at the time of the payment, and

(b) the earner's service in the employment is service which qualifies him for a pension provided by a salary related contracted-out scheme;

and in subsections (1A) and (1B) "the relevant part", in relation to those earnings, means so much of those earnings as exceeds the current lower earnings limit but not the current upper earnings limit for that week (or the prescribed equivalents if the earner is paid otherwise than weekly).
(1A) The amount of the primary Class I contribution in respect of the relevant part of those earnings ("amount A") shall be reduced by an amount equal to 1.6 per cent of that part.
(1B) The amount of any secondary Class 1 contribution in respect of the earnings ("amount B") shall be reduced by an amount equal to 3 per cent of the relevant part of those earnings ("amount C").
(1C) Where amount C exceeds amount B, the excess shall be set off against the amount which the secondary contributor is liable to pay (under paragraph 3 of Schedule 1 to the Social Security Contributions and Benefits Act 1992) in respect of amount A."
1330
. For subsections (1) and (2) of section 42A of that Act (reduced rates of Class 1 contributions, and rebates) there shall be substituted the following subsections—
"(1) Subsections (2) to (3) apply where—

(a) the earnings paid to or for the benefit of an earner in any tax week are in respect of an employment which is contracted-out employment at the time of the payment, and

(b) the earner's service in the employment is service which qualifies him for a pension provided by a money purchase contracted-out scheme;

and in subsections (2) and (2A) "the relevant part", in relation to those earnings, means so much of those earnings as exceeds the current lower earnings limit but not the current upper earnings limit for that week (or the prescribed equivalents if the earner is paid otherwise than weekly).
(2) The amount of the primary Class 1 contribution in respect of the relevant part of those earnings ("amount A") shall be reduced by an amount equal to the appropriate flat-rate percentage of that part.
(2A) The amount of any secondary Class 1 contribution in respect of the earnings ("amount B") shall be reduced by an amount equal to the appropriate flat-rate percentage of the relevant part of those earnings ("amount C").
(2B) Where amount C exceeds amount B, the excess shall he set off against the amount which the secondary contributor is liable to pay (under paragraph 3 of Schedule 1 to the Social Security Contributions and Benefits Act 1992) in respect of amount A."").
Page 88, line 2, leave out ("the Pension Schemes Act 1993") and insert ("that Act (disclosure of information between government departments etc.)").
Page 89, line 8, at end insert—
(" . After subsection (3) of section 2 of the Jobseekers Act (the contribution-based conditions) there shall he inserted the following subsection—
"(3A) Where primary Class 1 contributions have been paid or treated as paid on any part of a person's earnings, subsections (2)(b) and (3) above shall have effect as if such contributions had been paid or treated as paid on so much of the earnings as did not exceed the upper earnings limit."").
Page 89, line 9, leave out ("(8) of section 6 of the Jobseekers") and insert ("(6) of section 6 of that").
Page 89, line 10, after ("employment),") insert—

("(a) the words "("the first determination")" shall cease to have effect; and

(b) for the words "on a review of the first determination" there shall be substituted the words "under section 9 or 10 of the Social Security Act 1998".

( ) In subsection (8) of that section,").
Page 89, line 11, at end insert—
(". In subsection (7) of section 7 of that Act (actively seeking employment) —

(a) the words "("the first determination")" shall cease to have effect; and

(b) for the words "on a review of the first determination" there shall be substituted the words "under section 9 or 10 of the Social Security Act 1998".").

Page 91, line 20, at end insert—
("Employment Rights Act 1996 (c.18)
. In subsection (5) of section 215 of the Employment Rights Act 1996 (employment abroad etc.), for the words "the Social Security Administration Act 1992" there shall be substituted the words "Chapter II of Part I of the Social Security Act 1998".").
On Question, amendments agreed to.
Schedule 8 [Repeals]:
Lord Hardiemoved Amendments Nos. 104 to 108:
Page 95, column 3, leave out line 15.
Page 95, line 34, column 3, at beginning insert— ("In section 122(1), the definitions of "initial primary percentage" and "main primary percentage".")
Page 96, line 16, column 3, at end insert— ("Section 146. In section 147(1). (2) and (3), the words "or 146".")
Page 96, column 3, leave out line 29 and insert— ("In section 190, in subsection (1)(a), "146," and subsection (4).")
Page 97, line 46, column 3, at beginning insert— ("In section 6(6), the words "("the first determination")". In section 7(7), the words "("the first determination")".")
On Question, amendments agreed to.
Clause 84 [Short title, commencement and extent]:
Lord Higginsmoved Amendment No. 109:
Page 56, line 8, at beginning insert ("Subject to subsection (2A)").
The noble Lord said: My Lords, this amendment is concerned with the introduction of the various proposals in the earlier sections of the Act, in particular Sections 4 to 7. It is suggested that they should not come into operation until such time as the Secretary of State has been satisfied that decisions have been improving and he should evaluate them before the proposals which we discussed earlier come into effect. In a sense this is a probing amendment and I would appreciate the Minister's comments. I beg to move.
Lord Hardie: My Lords, noble Lords will appreciate that these amendments are identical in substance to Amendments Nos. 160 and 163, which the noble Lord, Lord Higgins, and the noble Baroness, Lady Anelay, tabled in Committee and which we debated fully. It remains our position that a delay in changes to the appeal system would be in no one's interest and would have unwelcome consequences.
Let us consider once more some examples of what the amendments would leave in place. A legal framework for appeals has grown up piecemeal over time as the welfare system has developed. There are five separate appeals jurisdictions with different powers and different rules. There is a leaflet of over 100 pages which tries to explain the differences. Appeals have to go to commissioners when tribunals know that an error has been made because tribunals cannot correct their decisions. There is a lack of clarity about the proper functions of the tribunal as regards the reopening of undisputed aspects of a case. There is a statutory requirement for every type of appeal to be heard by a
1332
three-person tribunal regardless of the issues that are raised. Most importantly, there is an average wait of six months for each appeal to be heard by a tribunal and an average of one year for an appeal to the commissioners.
I welcome the support which noble Lords have given for the changes that we are making to improve the standards of decision-making at first tier. It is our intention that those changes should also help to reduce the number of disputes which lead to an appeal; for example, by providing better explanations making it easier for agencies to correct mistakes. As my noble friend Lady Hollis has said, we shall be monitoring closely the effect of the changes.
However, I do not believe that reforms of the first tier alone will make sufficient inroads into the time that people have to wait for their appeal to be heard. Noble Lords will recall that the noble Lord, Lord Renton, who is not in his place, indicated at Committee stage that he was concerned, as noble Lords were, about the length of delay. He quoted the well known phrase that justice delayed is justice denied.
Current waiting times are not acceptable. I do not believe that we would be fulfilling our responsibilities to claimants and appellants if we did not take active measures now to deal with delays. In our view a fundamental review of the system from one end to the other is long overdue and that is what we are aiming to achieve. We believe that now is the time to do it and that the benefits will be greater if reforms are introduced as a coherent package with links between the first and second tiers properly thought through.
As I also pointed out in Committee, there are a number of difficulties about these amendments. There will be unwelcome consequences. We have identified at least 16 consequences. I do not propose to go through them, but the effect of some of them will be that there will be no right of appeal against any decision under Clauses 8, 9 or 10 because Clause 12 would not be in force. That is the theme that runs through the consequences of this amendment; that the power to revise an appeal decision in relation to child support or vaccine damage would also be lost. I am sure that these consequences are not such that noble Lords would intend or wish. In those circumstances I invite the noble Lord to withdraw his amendment.
Lord Higgins: My Lords, I think that was the most convincing set of arguments that I have heard all afternoon—
Baroness Hollis of Heigham: Thank you!
Lord Higgins: My Lords, I shall not go so far as to say that it was the only set of convincing arguments that I have heard all afternoon. None the less, in the light of what the Minister said, I do not want to press the issue. We look forward to resuming these discussions in greater detail on Third Reading. I thank the Minister for his reply and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hardiemoved Amendments Nos. 110 and 111:
Page 56, line 11, at beginning insert ("subsection (1) of).
Page 56, line 13, at end insert ("and subsections (1A) to (3) of that section,").
On Question, amendments agreed to.
[Amendment No. 112 not moved.]
Lord Hardiemoved Amendment No. 113:
Page 56, line 27, after ("58") insert (", (Expenditure for facilitating transfer of Inactions etc.)").
On Question, amendment agreed to.

Royal Assent
8.20 p.m.
The Deputy Speaker: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:
Bank of England Act.

The Financial Statement and Budget Report 1998–99
8.21 p.m.
Lord Whittyrose to move, That this House take note with approval of the Government's assessment as set out in the Financial Statement and Budget Report 1998–99 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.
The noble Lord said: My Lords, despite the soon-to-be quite sparse attendance in this House, it is important that Parliament satisfies Section 5 of the European Communities (Amendment) Act in relation to the report that we shall be giving to the European Union on Britain's economic performance. Despite the misapprehension that appeared to exist in another place about the debate on this measure, I should point out that this is not the point at which to discuss the single currency, but it is the point at which Parliament agrees the submission to the European Union under Section 5 of that Act.
Section 5 requires that Parliament approves the government report which is the basis of information that is sent to the Commission or the Council for the purposes of Articles 103 and 104c of the Maastricht Treaty. These articles relate to the broad economic guidelines and excessive deficit procedure respectively, not to the convergence criteria.
The text of Section 5 of the Maastricht Act specifies that the Government should report to Parliament for approval— that is what we are doing tonight. We shall be submitting to the European Union the Financial Statement and Budget Report, published in March, in order to fulfil that requirement. The report provides an appropriate assessment. It describes the Government's tax and spending plans and sets out a comprehensive set of policies which meet the broad social and
1334
environmental objectives, as well as the economic objectives, required by Section 5. Indeed, this year it goes further and for the first time it also includes a full environmental assessment of Budget measures.
Your Lordships will be familiar with the Government's central economic objective of high and stable levels of growth and employment. That was reflected in both the March Budget and the July Budget. The package of measures was designed to secure economic stability, reward work, encourage enterprise and create a fairer society. In line with the transfer of operational responsibility for setting interest rates to the Bank of England, the fiscal framework is being developed further to apply a similar approach to that for monetary policy. The Government are to legislate for a code for fiscal stability, which will set out the requirements for an open, transparent and accountable approach to managing the public finances. Along with the changes to monetary policy already announced, that will ensure that macro-economic policy is set in the context of a stable, long-term outlook.
By sending the information from the Financial Statement and Budget Report to the Commission and the Council, the Government will be participating fully in the multilateral surveillance of economic policies and performance across the European Union. That is sensible. Sharing information and discussing issues of common interest helps to promote the adoption of sound policies and forms the basis for a positive and constructive approach to economic policy across Europe. Moreover, there is nothing new in that. Full arrangements for economic surveillance at Community level have been in place for more than 20 years. The Government support elsewhere the principle of independent examination of our economic performance by bodies such as the OECD, IMF and G7. That will help us to strengthen the European economies. It will be particularly important at the beginning of the single currency. We shall secure Britain's influence in resolving the economic problems which Europe faces.
An excellent example of what can be achieved through a positive and co-operative approach is the Chancellor's "Getting Europe to Work" initiative which was broadly accepted by the Luxembourg jobs summit in the autumn. Member states are now preparing action plans to help to reduce unemployment by targeting employability, flexibility and entrepreneurship. By sharing best practice across Europe, we can learn best how to reduce the unacceptably high levels of European unemployment.
Approval of the Financial Statement and Budget Report allows us also to participate in multilateral surveillance, under which procedure the broad economic guidelines are drawn up each year. They can provide a basis from which economic developments in member states can be monitored.
The procedure under Section 5 also allows us to contribute to the excessive deficit procedure which allows us to bring pressure on member states to adopt sound public finances. Your Lordships will be aware that the UK was well within the 3 per cent. and the 60 per cent. reference values in 1997. The report clearly

1335
shows that the deficit reduction plan is ensuring the sustainability of public finances. The measures outlined in the report to promote stability and investment are designed to help to achieve stable and high levels of growth and employment.
When we were in opposition, we occasionally criticised earlier Financial Statements as giving insufficient detail on social and environmental objectives. The statements now give such information. The Budget announced a range of measures to make families better off. It announced the extension of the scope of the welfare-to-work package and in addition an extra £500 million for health and an extra £200 million for education, all of which is reflected in the economic objectives outlined in the report. As I have said, in terms of meeting our environmental objectives, an environmental assessment of the impact of the Budget was published for the first time. It included a range of measures to improve air quality and to reduce greenhouse gas emissions.
Those are the terms of the report which we are intending to submit to the Commission and to the Council with the approval of this House. As I have said, when these provisions were debated in another place, the main attention appeared to be focused on the single currency. Clearly, the sharing of information and the co-ordination of economic policy and strategy are important in this period.
The Government's position as regards Britain's membership of the single currency has been stated clearly and is unchanged. The Government have stated that it is not in this country's interest to join the single currency on 1st January 1999. However, we have also said that British membership of the single currency would be beneficial when the economic benefits for jobs and industry are clear and unambiguous. With that in mind, the Government have made it clear that both government and business need now to prepare intensively, during this Parliament, in order to create a real and positive option of British membership of the single currency early in the next Parliament.
Our economic future is bound up with that of our European partners and we want the single currency to be a success. It will affect us drastically, whether or not we participate. It is in all our interests to make sure that the potential benefits can be realised. Sharing information in the way in which the report allows will help us to ensure that the single currency succeeds, as well as ensuring broader elements of economic co-operation across Europe.
By approving this Motion, Parliament will enable the UK to meet its treaty obligations. Full participation in the EU surveillance procedures must be one way in which we can influence the whole of Europe's economic agenda. I beg to move.
Moved, That this House take note with approval of the Government's assessment as set out in the Financial Statement and Budget Report 1998–99 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.—(Lord Whitty.)
8.28 p.m.
Lord Mackay of Ardbrecknish: My Lords, I thank the Minister for that brisk run round the field. I am slightly more used to doing his job on this particular piece of business than I am to carrying out the job of the Opposition spokesman. However, I hope to reassure him on one point. I shall not employ the tactic which the noble Lord, Lord Eatwell, employed when he spoke from this Bench, which was to go on at some length with a textual and analytical criticism of the Red Book. That included asking me a large number of questions to which not only did I sometimes not know the answer, but I did not even understand the question. On a number of occasions I chided the noble Lord, Lord Eatwell, about his lecturing techniques and said that I would not particularly have wanted to be one of his students given the way in which he threw questions at me. I shall not do that to the noble Lord, Lord Whitty. I had hoped that I might be able to get my revenge on the noble Lord, Lord Eatwell, but, for whatever reason, he is not a member of the Government—either he was not asked or he did not wish to join. I have not been able to get my own back but this evening I shall not make the Minister a proxy.
However, I intend to make some textual analysis of the Red Book. Does the Minister intend to send the Red Book as it was published at Budget time or with the various corrections that the Government have been forced to make since the Budget? I take one example to illustrate why I believe this to be a very important matter. I refer to the representation of tax revenues and receipts and how one scores tax credits, primarily the working family tax credits, as negative tax revenue. Frankly, the Government have indulged in a fairly shabby trick in order to massage downwards the tax burden. They did not even wait for the Office for National Statistics to arrive at a decision on whether or not income tax credits should be scored as negative income tax. Having made the decision, however, that tax credits should be scored in that way, it appears to diminish the tax burden on the British public, whereas it can be argued that these credits should have been put in as expenditure because they are part and parcel of the welfare and social security system, not the revenue system. That is a question well worth asking, but they decided to do it in the way set out in the Red Book. They did not even get their figures right in that regard.
I draw the attention of the Minister to tables B5, B8, B9 and B24. Rather than delay your Lordships by looking at every table, I take the most critical one, B8. In that table the second line down indicates income tax credits. Your Lordships will see the 1996–97 outturns right up to the estimates for 2002–03. In most cases the figure is minus 0.3 per cent. of GDP. In two years the figure is minus 0.2 per cent. I do not intend to dispute—although I believe that I could—the correctness of putting in an income tax credit as a figure that actually reduces the amount of tax taken by the Government.
It is of interest that on 27th March this year there appeared in Hansard of another place a Written Question put by Mr. Timms. Whether he had spotted a

1337
problem or had been invited to table a Question I know not. I suspect that it was the latter. Mrs. Dawn Primarolo answered the Question by saying:
"There were some minor errors in these tables. Corrected versions are printed in the following tables. A corrected copy of Chart B2 has been placed in the Libraries of the House".—[Offical Report, Commons, 27/3/98; col. WA 348.]
Noble Lords will be glad to hear that I am not very interested in chart B2. However, tables B5, B8, B9 and B24 were then printed in Hansard with major alterations in them. Referring to B8, your Lordships will recall that I said that income tax credits in the past two years, this year and in future years ran at minus 0.3 and minus 0.2 of GDP. The corrected table has the following line: minus 0.3, minus 0.4 and minus 0.2. Those are the same because they are the past and estimated outturns for this year. Then, instead of the figures being fairly level as the original table in the Red Book demonstrated, they begin to go up: minus 0.4, minus 0.7, minus 0.8 and minus 0.8. Your Lordships may think that a difference of minus 0.5 per cent. is a minor error. I do not believe that it is the kind of minor error that your Lordships would like their banks to make when dealing with their personal bank accounts. The minor errors add up to £1 billion next year, £3 billion the year after and £5 billion in each of the two years after that; in other words, a cumulative error in that and the other tables of £15 billion during the period covered by the Red Book. If Mrs. Dawn Primarolo believes that to be a minor error I hate to think what is a major error. Certainly, her bank can rest in peace if it makes any error in her account of any magnitude because clearly it will be able to treat it as a minor error. Therefore, it is an amazing minor error.
I should like to have an assurance from the Minister that the Red Book, with the corrections clearly attached and the proper table, not the false table, will be sent to the Commission. Perhaps an explanation can be sent to the Commission as to how the figures have been massaged by the Government to reduce the tax take. I do not believe that that is a straightforward or correct way of dealing with matters. I suspect that if any company tried to carry out the same kind of operation in its accounts its accountants would quickly tell it that it must not do it.
The Red Book also shows, as it must—even if it is pretty well buried—the increases in taxation that have been suffered since 1st May of last year. On 8th January 1997 Mr. Tony Blair, then Leader of the Opposition, said in response to a question, which clearly irritated him:
"Look, I am not going into the election with anybody saying [that] there is a hidden agenda anywhere. There are no tax increases implied by the programme".
Yet the Red Book makes perfectly clear, for example on page 152, that considerable tax increases have fallen very heavily on business. The Red Book makes quite clear in the eighth line of table C1 on page 152 that business will be paying an extra £1.6 billion in 1999, £2 billion in 2000 and £3.1 billion in 2001. The total is £6.8 billion in this Parliament. If we add to that the abolition of ACT credits the total is about £18.5 billion over the lifetime of this Parliament.
1338
The most damaging and least understandable of these tax increases—the noble Lord will be aware that I have expressed this view a number of times—is the £5 billion a year Maxwell-type raid on pension funds. The one thing that I thought we had agreed on all sides of the House when I was pensions Minister in the previous government was the importance of people accumulating their own pensions and that everything in our power should be done to encourage them to do so. To take £5 billion in additional taxation every year out of pension funds is a funny way to encourage people. The Government began by refusing to accept that there were any serious consequences for SERPS but, by jove, they soon had to recalculate SERPS when the Government Actuary's number crunchers got at it. Therefore, there were serious consequences for SERPS.
As I warned the Minister, and as my right honourable and honourable friends in the other place warned Ministers, there have been serious consequences for the minimum funding requirements (MFRs) which are the protections put in following the actions of Robert Maxwell. At the time these were brushed aside. I invite the Minister to ask anyone involved in the world of pensions how he is evaluating the MFR in the light of the £5 billion pension raid by the Government. I believe that this is a most serious matter and that the Government will deeply regret it in the longer term. They have put pensions and all savings in an awkward position by moving from TESSAs and PEPs—presumably because they did not like them as Tory Party policy—to ISAs. They intended to put ceilings upon them but had to review that. However, they are still not as attractive as TESSAs and PEPs. I remain puzzled as to what additional attractions they will provide to people to put their savings into pensions as opposed to TESSAs and PEPs. I make this part of my speech with deep regret. I thought we had all agreed on the huge importance of encouraging people to put as much of their savings as they possibly can into pension provision.
I turn to table B18. The noble Lord may be thinking to himself, given the fact that I had promised I would not do a textual analysis of the Red Book, that I am making a pretty good fist of it to date. I have to tell him that if he reads any of the speeches of the noble Lord, Lord Eatwell, he will realise that I am but a boy when it comes to textual analysis of the Red Book.
Table B18 shows the control totals by department. I want to lift out only one control total by department because it coincides with an exchange we had in the House yesterday when the noble Lord, Lord Clinton-Davis, was answering for the Government on the various objective 1, 2, 3, 4, 5 statuses around the country and whether we were going to lose some of them.
If we look at the line on the European Communities and what we pay net. I presume it is net. That is my first question. I know it must be net because we actually pay gross a great deal more than that, but then we get back, first, a tranche of money through various schemes, through agriculture and so on, and then another tranche through the Fontainebleau Agreement negotiated by my noble friend Lady Thatcher.

1339
The noble Lord, Lord Clinton-Davis, yesterday warned us of two things which I fear might impinge in the future on that line. He warned us, first, about the loss of some of the assisted area status positions under the European Community. I did not get the opportunity to ask but I did idly wonder if the loss of, say, objective 1status to the Highlands and Islands of Scotland could be taken as a measure of the huge economic improvement the last government achieved in the Highlands and Islands and therefore they lost their status because they no longer required it, or if it was more an indication of the failure of the present Government to carry any clout with Brussels when it came to negotiating these matters. But I did not get the opportunity; some of my noble friends were asking even better questions than that.
If we lose some of these advantages, that will mean that we will have to pay in some more money net, unless the Fontainebleau Agreement comes in. I am pretty certain that with the extension of the Community to the east, which was the other point the noble Lord, Lord Clinton-Davis, was rightly making, a lot of money will be needed for Poland, Hungary or whoever joins in order to help them to come up to the economic standards and so on of the rest of the Community. I fully understand that. But all of it seems to mean that some more money will be needed. I wonder to what extent the Government would be prepared to defend the Fontainebleau Agreement? How well will they defend that agreement?
Before I leave the Red Book, I noticed in the Minister's speech that he pointed to a number of additional issues that the Government were submitting to Brussels, environmental assessments and so on, but also an assessment of what was happening to families. I notice that the Minister did not actually tell us what was happening to families. I am not surprised because the Library have said, and their figures have not been contradicted, that a typical family in Britain, on a typical family budget, is actually £1,000 worse off as we come up to this 1st May than they were on 1st May last year. So they are paying a price for the election of the party opposite—£1,000 a year for the typical family.
We are sending this document and this work to Brussels because it is part and parcel of the Maastricht Treaty. It involves the collection of information on convergence and moves towards the single currency. I should like to say a few words about that before I sit down.
We are also approaching decision day on a number of important issues. For example, who will be the governor of the new European central bank? Will those responsible for the decision ever be able to make up their minds who it is going to be? That is not something we can wash our hands of. We chair the Council of Ministers at the present time, so we are responsible for making sure that a sensible decision is arrived at in proper time to get the European central bank show on the road. I hope that the Government will do a slightly better job in the second half of their presidency than they have managed to do in this field in the first half.
1340
The other matter that intrigues me is the way that the Government, chairing the Council of Ministers and chairing ECOFIN, have just waved through some of our colleague countries who are nowhere near meeting the criteria set down for the single currency.
The Chancellor of the Exchequer, on the "Today" programme of 10th December 1996, said:
"There can be no fudging of criteria".
I do not know what his definition of "fudging" was then but it does not accord with my definition of fudging. There has been a lot of fudging, to such an extent that the French Interior Minister, M. Jean-Pierre Chevenement, has told a German newspaper, only the week before last, that the EMU project is "charging full steam towards the pack ice. By the time we see the iceberg, perhaps it will be too late." It is remarkable that it is the French who have signed up to the EMU who are raising concerns while the British Government, in the chair of the Council of Ministers, are happily waving through countries without any regard to the fact that at least some of them not just fail the test but fail it by a long way. The net result is that the markets see the euro as potentially a soft currency. That is one of the reasons why the value of the pound is currently so strong against European currencies. It is not just because we have high interest here, the Chancellor of the Exchequer having washed his hands of any responsibility by handing interest rates to the Monetary Policy Committee of the Bank of England. I notice that the Bank of England Bill, which we discussed only a few hours ago, has now received Royal Assent so I assume the Government decided to do it quickly in case the Liberals had another change of mind on whether there should be a Scot on the Monetary Policy Committee. But that is, perhaps, another matter.
Mr. Eddie George, for example, when he talked to the Treasury Select Committee, compared the decision to press ahead with EMU without first addressing the problems of the high level of unemployment as putting the cart before the horse. "I would have preferred to put the horse before the cart", he said. "I would feel much more comfortable if the problem of structural unemployment had been addressed." In a recent report on convergence in the European Union the Bundesbank was heavily critical of the failure of many member states to reduce their debts and deficits to the levels required by the convergence criteria. The Bundesbank says of Belgium, Greece and Italy—for although Greece is not seeking membership at the moment, Belgium and Italy are and, as I understand it, have been waved through—
"In those member states considerable government surpluses would have to be generated each year for a prolonged period for the reference value to be achieved within 10 years".
I do not deny that our European friends, and indeed ourselves, have worked very hard in each of our countries to get the deficit ratios below the Maastricht level of 3 per cent. and the debt ratios below the level of 60 per cent. They have worked very hard and taken some difficult decisions, very difficult and sometimes just quite difficult decisions. In some cases they have just taken one-off decisions which solve the problem for a year but do not seem to have a long-term consequence. The European Monetary Institute has said that

1341
adjustments of recent years need not only continue but need to be taken very much further. I pinpoint that. remembering that 60 per cent. was the criteria. Belgium has a debt percentage of GDP of 118.1 per cent. That is nowhere near 60 per cent. Italy has 118.1 as well. Even the poorest mathematician knows that that is nowhere near 60 per cent. Many other countries are much nearer, some just under 60 per cent. and some just over. The United Kingdom, for example, is at 52.3. and we are well down the league. We have done very well in that regard thanks to the golden legacy of the last Conservative government, a golden legacy on which I fear the sun is beginning to set as problems begin to rear their heads.
I worry greatly about the fact that we appear to have decided that whoever wants to join can join and that the convergence criteria can be wished away. The dangers of that are twofold. First, the euro will be looked upon as weak. Secondly, the important stability pact, which is critical to the long-term success of the EMU, will not begin in a good condition, given some of the problems of some of our European friends. There are huge dangers for us all in Europe if the convergence criteria and the stability pact are not rigorously adhered to.
I agree entirely with the Chancellor of the Exchequer that there should be no fudging. Unfortunately, he appears to have forgotten what he said and a great deal of fudging has gone on. I hope that we and our European colleagues do not live to regret that.
With that tiny bit of textual analysis of the Red Book and a look at the wider picture of which this forms a part, I shall not attempt to prevent the Motion passing tonight.
8.51 p.m.
Lord Wallace of Saltaire: My Lords, I hesitate to follow the example of the noble Lord, Lord Mackay of Ardbrecknish, in giving a basic economics lecture to this crowded House, tempting as that is. Indeed, I feel more warmly to the noble Lord since discovering that as a young man he was an active supporter of the then David Steel in the Roxburgh, Selkirk and Peebles by-election. I look forward to swapping old campaigning stories with him on a later occasion.
I understand that the purpose of the Motion is to discuss the convergence criteria and not to go into detailed technical analysis of the Red Book. However, I am grateful for the opportunity to study the various tables with the noble Lord, Lord Mackay, as my guide and mentor. Clearly, we need multilateral surveillance of the European Community. We have an increasingly integrated European economy and therefore there must be consultation, co-ordination and economic debate. One of the concerns which I and many of my party colleagues have about the current structure of monetary union is that there is not sufficient counter-balance for a co-ordination of economic strategy at the European level. We are a little concerned about the extent to which the new Labour Government are approaching the whole issue of economic co-ordination. When I hear the presentation of the third wave being that the Anglo-Saxons have got it right and that we must explain
1342
to our benighted continental colleagues what it is that one needs to do I begin to be a little cautious about whether we will succeed in persuading them, even when they are wrong, that they have to change their views.
There are many views across the Channel. The noble Lord quoted Jean-Pierre Chevenement. I do not know whether he is aware that Jean-Pierre Chevenement has for years been the Peter Shore of the French Socialist Party and the most strong anti-German member of the government. Therefore, it is not unnatural that he in particular should express those views.
Perhaps I may briefly discuss the convergence, not wishing to detain your Lordships too long. The convergence criteria set out in the Maastricht Treaty were imposed at the determination of the Germans. I regret that they were incomplete and did not include criteria which also required the liberalisation of labour laws and the building of more flexible labour markets with which all three parties in this House would agree. Today, I debated with one of the German economic professors who is most opposed to allowing the Italians into the single currency. He seemed unwilling to accept the extent to which the Italian Government have made remarkable strides towards shifting the basis of fiscal and monetary policy within Italy and have been totally unwilling to accept that the Germans need to undertake a number of economic policy and labour market reforms in order to address themselves for the single currency.
My nervousness about the single currency relates more towards French and German policy than towards Italian policy. French policy is the most worrying. The French Government are all too willing to give in to manifestations on the streets rather than face up to some of the major structural changes that they need to carry out within France.
As regards sterling and the fiscal mix in this country, the worry which Members of this House and another place should have about the Government's convergence strategy is the extent to which, by holding down consumption only by the use of monetary policy and not by altering the fiscal mix, they have allowed the pound to rise to a point where it is clearly hurting the British economy and is putting our economic cycle further out of line with the economic cycle on the Continent. As a result, we are in some ways diverging rather than converging with our partners on the Continent.
My party believes that we would do much better to announce a definite date soon for joining the exchange rate mechanism and that we will be moving down towards £2.80 to the deutschmark or below and should make it clear that we see that as a first step towards joining the single currency. There are severe problems for this country and our national economy in staying out for too long because that threatens that our economy will diverge rather than converge. Britain needs to be in the middle of the European debate on economic strategy, not at the edge. We risk being left at the edge until we have made clear that we intend at a particular date to join the single currency. I look forward to the Minister's reply to what I hope is not too long a debate.
I make a final reference to the current debate on the Amsterdam treaty; that is, the European Communities (Amendment) Bill now going through the House to

1343
which there are a large number of amendments which require the Government, before they do this, that and the other, to submit reports to one House or the other. The size of this House at the moment suggests that it may be a little risky for Oppositions to wish to attach too many such conditions to Bills amending the treaty as they go through the House.
8.57 p.m.
Lord Whitty: My Lords, I cannot tell your Lordships how grateful I am that the noble Lord, Lord Mackay, did not follow my noble friend's erudition on these matters and has left me with a relatively limited and statistical rather than theoretical analysis of the Red Book. Nevertheless, he raised a number of valid points which require an explanation. Whether he will find the explanation entirely satisfactory I doubt because we have had a number of debates on these matters in this House. I am not about to announce changes in government macro-economic strategy here on a Thursday night.
The noble Lord asked in particular whether the corrected versions of the tables would be submitted to the European authorities. Clearly, where there is a mistake in the figures, as in table B8 and some consequential tables, we will submit the corrected versions. I am assured that the correction was required due to printing errors and not to sleight of hand, although the noble Lord appeared to imply that we were changing the convention of the way in which we represent tax credits. Clearly, that is not the case as he will see from the notes in the Red Book. We are treating the new form of tax credit in the same way as tax reliefs have been treated in the past, in particular, the MIRAS tax relief.
The noble Lord also suggested that we had broken our election promises and subsequent promises in regard to the level of taxation. I dispute that.
We said that there would be no increase in income tax rates and there has not been. We said that there would be no extension of VAT and there has not been. But we have also cut taxes for low income families. We have cut national insurance contributions. We have cut capital gains tax on long-term investment and we have cut corporation tax twice so that it is now at its lowest level ever.
The noble Lord referred to the figures relating to the tax burden on the corporate sector and in particular the abolition of advance corporation tax. I remind him that the corporate sector—the CBI—welcomed the abolition of ACT. It brought Britain into line with other countries, and after a transitional period—and I admit that there is a cash flow implication here—companies will benefit significantly from those changes.
The long phase-in period will ease the cash flow impact of the transition. After the transition, companies will gain £1.6 billion per year from those changes and the benefit to companies in terms of the net present value will be about £9 million or 8 per cent. at discount rates. That is surely a major investment incentive for companies.
1344
At the same time as improving the long-term taxation position for the corporate sector, we have improved the taxation system for families. The tables within the Red Book and related documents indicate that we have done so in—and some of my colleagues may hesitate to use these terms—a progressive and redistributive way in that the poorest 20 per cent. of households with children will benefit by 4.4 per cent. from the effects of the changes in the last Budget. The richest 20 per cent. of families with children will also benefit to a more limited degree of 0.3 per cent. Therefore, families have been looked after in the Budget and have been looked after in the general strategy in relation to social security and taxation which is being pursued by the Government. That is reflected in this report.
As regards the point raised by the noble Lord, Lord Wallace, in relation to sterling, clearly, as the Government and the Chancellor have recognised, there are serious concerns, particularly among manufacturers and exporters, about the current level of sterling. However, we are committed to taking a long-term view. We need a stable situation as regards the exchange rate. The last thing that manufacturers and exporters want is a return to the stop-go policies of the past. We regard it as a key factor to deliver a stable long-term, economic framework. As I say, we do not wish to return to the boom-bust period which cost us nearly 1 million manufacturing jobs between 1989 and 1993.
I shall not pursue the suggestion of the noble Lord, Lord Wallace, to name the desirable ultimate level of exchange rate for sterling. Despite the fact that the world's financial press does not seem to be overwhelmingly present here tonight, it would be unwise for anybody purporting to speak for the Government to do any such thing. Nor shall I embellish the statements already made by the Chancellor with regard to entry to EMU. The Government's position is clear and I reiterated it earlier in my remarks.
Two other dimensions were raised. The first was raised by the noble Lord, Lord Mackay, in relation to the European budget and trying to relate it to the figures given by my noble friend Lord Clinton-Davis, yesterday. The figures in this document relate to the relatively short-term position; that is, the position for this year and the expected position for next year. Since these documents were published, further details have been released by my honourable friend the Economic Secretary. But that relates to the short term. My noble friend Lord Clinton-Davis was addressing the position under the Agenda 2000 proposals which relate to the period from 1999 to 2006. Some very serious negotiations are required in relation to the structural funds mentioned by the noble Lord, the common agricultural policy, and in relation to providing resources in order to ease the position of the applicant countries in the enlargement period.
The 15 current members of the EU are agreed that those must be contained within the 1.27 per cent. of GDP limit in the period from 1999 to 2006. That does not necessarily imply a cut in expenditure in total as from now because we have not yet reached that 1.27 per cent. ceiling. We shall also be negotiating substantial changes in the distribution both of the CAP

1345
and the structural and regional funds. In the very detailed negotiations which will be required on the European budget and the future financing of the EU in the period which covers enlargement, we are extremely anxious that the cost of enlargement should not be borne unfairly by British regions, British business and British citizens generally.
I started by saying that this debate is not about the single currency. However, I must make a few matters clear. The noble Lord, Lord Mackay, asked when we are going to make decisions on all this. It is clear when we are going to make the decisions, including the decision in relation to the chair of the central bank. The key decisions will be made on 1st May; that is, ECOFIN's decisions, the European Parliament's opinion on ECOFIN's decisions and the heads of state and government confirming those decisions. On 2nd and 3rd May there will be a further ECOFIN meeting to fix the conversion rates for currencies which are entering the first phase of the EMU. Therefore, those decisions are imminent and it is vital that the United Kingdom's presidency of the European Union conducts those negotiations from the chair in a way which will maintain stability and will ensure that the single currency is launched in the best possible way.
We have done so hitherto despite our position that we should not immediately wish to join a single currency. In the non-partisan spirit in which this debate has been conducted, I pay tribute to the previous government who also, through the efforts of the former Chancellor and the officials of the Treasury and the Bank of England, have helped greatly to ensure that the technical side of those discussions has gone smoothly. It is in that area that British expertise will be of greatest benefit to the successful launch of the single currency.
The noble Lord also referred to what he called the "fudging" of these criteria. We have the Commission's view and that of the European Monetary Institute on such matters. Much of the allegation in relation to fudging relates to words that were in the original Maastricht Treaty. Some of the criteria are pretty clear and those countries which are deemed to have achieved them have met those criteria or virtually met them. Others of those criteria, in particular those in relation to historic debt, are less clear. So far as concerns the clear ones, it is apparent that, in 1990 when the Maastricht Treaty was being negotiated, the EU average deficit was 6.3 per cent. of GDP. It rose after that to 5 per cent. in 1995, but now stands at 2.4 per cent. Those countries which are deemed to have qualified have made major progress on that front as they have on the interest rate and on the inflation front.
1346
As regards the debt criterion, the Maastricht criteria require that debts should not exceed 60 per cent. of GDP, as the noble Lord said, unless the ratio is diminishing sufficiently in approaching the reference value at a satisfactory pace. That is clearly a less than absolute criterion, to which the previous government signed up, albeit indicating at the same time at the Maastricht conference that they did not wish to participate . Given the fact that that was the criterion, clearly there is a political as well as a technical judgment to be made as to whether "sufficiently diminishing" and "approaching the reference value" applies to those countries, especially Belgium and Italy where their historic debt is clearly still well above the 60 per cent. figure.
Nevertheless, the general economic management of Italy, for example, over the past five years has been astoundingly good. For those who always point the finger at Italy as being the potential weak underbelly of the European single currency, I should point out that the turnaround in the economic management of that country has been truly amazing. I hesitate to mention this, but it has of course been under a centre-left government when it has achieved most of those changes. Indeed, it has been a major achievement of that government. It is also true to say that the historic debt criterion is the least important in the eyes of most economists in terms of how one judges the current and prospective performance of the government.
Our view is that member states have made substantial progress in reducing their deficits and the reports of the EMI and of the Commission make that clear. We have not issued a definitive British Government or, indeed, a presidency view, because that information will be made available at the May Day weekend in those very important meetings, which will be conducted under the presidency of my right honourable friend the Chancellor of the Exchequer.
To that extent at least, I believe that the single currency is in safe hands. The British economy, as reflected in the Red Book which we are debating tonight, is also in safe hands. I hope that the contribution we are making to the sharing of information and expertise in economic management will both benefit the launch of the single currency and the economic prosperity of Europe. On that basis, I trust that the House will be prepared to accept that we submit this assessment to the European authorities. I commend it to the House.
On Question, Motion agreed to.
House adjourned at ten minutes past nine o'clock.