HL Deb 01 February 1999 vol 596 cc1289-97

3.7 p.m.

Read a third time.

Lord Higgins moved Amendment No. 1: Before Clause 1, insert the following new clause—


(" .—(1) This Act (apart from this section) shall not come into force until the conditions set out in subsections (2) and (3) are satisfied.

(2) The first condition is that the Department of Social Security guidelines on compensation are revised to ensure that no loss is suffered by any individual claimant, who has made contributions, as a consequence of the breakdown of the Contributions Agency computer.

(3) The second condition is that all such compensation due has been paid.").

The noble Lord said: My Lords, this amendment results from a series of debates we had during the debate on the social security uprating orders and at Committee and Report stages of the Bill. On the latter occasion we discussed a series of concerns expressed on all sides of the House as regards the situation which has arisen as a result of problems in connection with the computer system which monitors social security contributions. A number of people have not received payments to which they are entitled on the dates those payments were due.

At Report stage the question arose of compensation. I pressed the Minister to clarify the position. It became apparent that the Government were proposing to compensate various people in the category I have just described and that various provisions had been made. However, it also emerged as a result of the debate that the compensation would be paid only on the basis of the existing departmental rules. In reply, the Minister said that, there is no intention at the moment of which I am aware to depart from them".—[Official Report, 25/1/99; col. 810.] That gave rise to considerable cause for concern in that people entitled to a large amount of the money which had not been paid would receive compensation under the rules, but poorer people who were entitled to smaller amounts would apparently receive no compensation whatever. The amendment is intended to enable the rules to be amended to deal with the problem. That being so, I could spell out in considerable detail the arguments in favour of the amendment. However, I have heard a rumour that conceivably the Government are persuaded by the arguments that I advanced previously. It is best perhaps if I do not prolong my remarks. I wish to hear whether the Minister has something helpful to say.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)

My Lords, with the leave of the House, as the noble Lord has invited me to speak to the issue now, that may be helpful rather than going through a long discussion and putting the government view at the end.

At Report stage we discussed compensation for those suffering delay through the problems with the NIRS2 system. Last week in another place the Public Accounts Committee also pressed the issue of compensation. I am now in a position to say how we intend to deal with this problem—a problem not of our making but one we inherited.

We fully accept that, whoever's fault the problem is, it was not caused by widows and pensioners. So we accept that they should suffer no loss. As I said on Report, we shall be paying arrears and, in that sense, there will be no loss. But we intend to go further. We intend to relax the current departmental guidelines which require a lengthy period of delay in payment and provide no compensation where the amount due is less than £10. Because of the one-off nature of the NIRS2 problem we propose a one-off solution. In any payment system there are inevitable delays, such as where details need checking or where an address has changed. But where people have suffered unreasonable delay they will receive a minimum £10 payment on top of the arrears. Those due larger amounts within the normal departmental guidelines will of course receive them. The compensation will be paid automatically where cases are reviewed. That will necessarily take time.

There are three reasons why I believe the House should reject the amendment proposed by the noble Lord in favour of the proposals I have just put forward. I am advised that the noble Lord's amendment is defective in two respects. First, the provision that his new clause makes for the commencement of the Bill is flatly inconsistent with the existing commencement provision in Clause 28, which your Lordships have already approved. Yet the noble Lord's amendment contains nothing to provide for the way in which the new clause is intended to work alongside Clause 28, or vice versa.

Secondly, the new clause is drafted in terms which are so vague that we doubt whether a court would be able to give effect to them in a way which would meet the noble Lord's objectives as he described them today. For instance, the whole provision is set in the context of an unspecific reference to "the contributions Agency computer", and it speaks in terms of a "breakdown". As I explained on Report, our present difficulties arise out of delayed introduction of a new system rather than any "breakdown". It is, moreover, unclear how the noble Lord's reference to a "loss" would be construed when there is no doubt that every customer will receive every penny of benefit to which they are entitled.

To put these deficiencies right we should need to amend the Bill in another place, so delaying the transfer. I am not trying to make a partisan point; often in opposition one moves a technically deficient amendment as one does not have the drafting skills that are available to government. That is merely by way of explanation.

The noble Lord's amendment is unworkable. It means that the transfer could not happen until the last pensioner—in hospital, for example, for a hip replacement operation, or perhaps spending a month or so on the Costa del Sol or travelling around the world (that is, even if they were well off)—had been paid. In those cases it could take months to make the payment, hinging on one last pensioner who had not yet been tracked down. In the meantime employers would face uncertainty that they neither want nor need. The amendment also means that every individual compensation payment to some 300,000 people would need to be separately calculated—at huge administrative cost.

The substantive reason—the reason why I hope the House and the noble Lord will respond positively to the Government's proposals—is that the proposals are more generous than those put forward by the noble Lord as well as being more certain.

It may be helpful if I illustrate this by way of a couple of examples. Let us take the example of a pensioner underpaid by £2.50 a week and a worst case scenario that it takes some 18 months to review the case. Under present departmental rules he or she would not receive any compensation. If we offered the 0.5 per cent. we are offering pension funds, as implied by the noble Lord's amendment, he or she would receive £8.45 after a complicated manual calculation. Our proposals would offer £10 after a very simple calculation. Another example would be that of a widow underpaid for nine months. Under the current rules she would receive nothing. Under the noble Lord's amendment she would receive £2.25. Under our proposals she will receive £10.

Our priority is now to catch up with as much of the outstanding work on NIRS2 as possible, particularly the remaining end-of-year returns from employers and contracted-out pension rebates, and to roll out the remaining areas of the system. Then we can start reviewing the backlog of cases affected. We shall be looking over the coming months at the detailed operation of the compensation arrangements so that we can get money to individuals as quickly and effectively as possible.

The proposals I have announced today mean that the claim repeated today by the noble Lord, Lord Higgins, that under our proposals the better-off are compensated but the less well off, because they are below a floor of compensation, are not, does not hold. The compensation we have announced today is more effective, more workable and more generous than that proposed in the noble Lord's amendment. Therefore, I hope that, given the spirit of this offer, the noble Lord will be able to withdraw his amendment and that the House will support the Government's proposal.

3.15 p.m.

Lord Goodhart

My Lords, before the Minister sits down, perhaps I may raise one point. What she said is most welcome. It is a considerable step forward. I am sorry to cavil on any aspect. However, this provision will be triggered only by "unreasonable delay". The noble Baroness gave no indication as to what "unreasonable delay" might be. Will she comment further?

Baroness Hollis of Heigham

My Lords, perhaps the House will consent to my replying to that point. My reference was to delay caused by the NIRS2 computer; namely, delay in calculating the contributions record in the previous year. We were trying to avoid a situation whereby, because someone failed, for example, to give accurate information and the payments were therefore five or seven days late, that person would automatically qualify for the £10 payment.

Lord Morris of Manchester

My Lords, before my noble friend sits down, she has announced an imaginative and eminently decent response which will be welcomed by disabled people, retirement pensioners and widows alike. Almost by custom, Ministers receive more brickbats than bouquets. Will she accept my congratulations as well as my thanks?

Lord Higgins

My Lords, I served my apprenticeship in the House of Commons under the late Iain Macleod. As I said previously, his remark when an amendment was accepted in principle was, "You don't shoot Santa Claus." By that, he meant that one does not go on at enormous length afterwards.

Nonetheless, there are one or two points that ought to be made. I do not feel gravely concerned about the technical deficiencies of my amendment. As the Minister has pointed out throughout our debates, this is a highly technical Bill—so much so that there are still two government amendments to come at this Third Reading stage. I appreciate the points made by the Minister.

We have been anxious throughout to ensure that this matter received rather more coverage and attention than it had previously received. Up to now, it has been very difficult indeed to get at the facts, although I pay tribute to the noble Baroness for the way in which she has responded. If I may say so without embarrassing her, her response has been much more satisfactory than was the response of the Secretary of State on the uprating Bill in the other place.

This matter presented a problem. I am still not clear on two points. Perhaps the Minister will say how many people will benefit from the concession that she has fortunately now announced. Secondly, what is the total cost likely to be?

As regards the point made by the noble Lord, Lord Goodhart, am I right in thinking that all those who have suffered as a result of the delay in payments because of the computer problem will receive the minimum amount which the noble Baroness mentioned and, if they are entitled to more, will receive that under the normal rules? I have a vague feeling that one of the conditions normally applied is that the delay has to be for a certain period of time. It would be wrong in these circumstances to set a deadline of that kind. I presume that it will apply to all those whose payments have been delayed and have not received on time the benefit to which they are entitled.

The next point which I should be grateful if the noble Baroness would clarify is the position with regard to SERPS. What will the compensation arrangements be and how will they differ from the arrangements for those whose payments of national insurance pensions or other contributory benefits have been delayed?

Finally, a number of people affected are those who applied for payment of a pension to be deferred and paid on a certain date in order to obtain a higher rate of pension in perpetuity than they would otherwise have received. Presumably when such people are eventually paid their pension they will receive the full amount, the compensation which the noble Baroness mentioned and the recent uprating covered by the uprating orders. What I am not clear about is whether such people would have the option to receive either £10 or—which is likely to be a much more valuable amount—the amount which they would have received if they had deferred the payment of their pension not to the date they originally suggested but to the date when it will, because of the Government's mistake, eventually be paid.

Having said all that, I hope that those who have suffered because of this problem will feel that they have benefited as a result of our debates, the attention focused on this issue and the understanding which the noble Baroness has shown. What is important is how the Government have responded, not the origin of the computer problem itself.

Baroness Pitkeathley

My Lords, perhaps I too may express my congratulations to the Government on dealing with this matter with such despatch. It is perhaps not easy for those of us with an adequate income or maybe an understanding bank manager to understand how difficult it can be for people who are completely dependent on benefits when there is a delay in payment of them. The speed with which this matter has been concluded is a matter for congratulation.

Baroness Hollis of Heigham

My Lords, I am grateful for the warm response from all sides of the House. I am delighted that my right honourable friend the Secretary of State felt able to respond to a matter which has been a concern for some time but which was highlighted at the Public Accounts Committee, as well as in debates in your Lordships' House. I am particularly grateful for the kind words of my noble friends and for the welcome from the noble Lord, Lord Goodhart.

Perhaps I may seek to answer some of the points raised by the noble Lord, Lord Higgins. The total numbers we are talking about are as follows. In the case of retirement pensioners, the figure is around 178,000. Many pensioners will already be receiving their full amount because it has been manually calculated or because they already have sufficient contributions, even without the last year, to float them off the need for that additional information. There are 163,000 people in SERPS affected, and they will be dealt with and paid in exactly the same way as those on RPs. In the case of widow's benefit, there are something like 27,000 people affected. Up to about 27,000 people on incapacity benefit are affected. I say "up to" in all these cases because some people have already received their sums and some have been topped up by income support, which they will not necessarily now have to repay, and so on. Our best estimate of the total sum involved is between about £3 million and £4 million.

The noble Lord pressed me about the point concerning a "reasonable" delay. The details of the scheme will be made more widely available next week and in the forthcoming weeks. The point of using that word was to draw a distinction between what I would call a casual delay, such as when someone delays giving information or is away for a few days, or possibly even when some benefits are paid a fortnight in arrears, and the unreasonable and unacceptable delay which has been caused by the NIRS 2 computer. It is meant to be a decent and generous scheme and not a weasel-like way to protect ourselves against that kind of situation.

The noble Lord asked what the situation would be when someone chose to defer drawing down their state pension in order to gain from the additional 7.5 per cent. extra per year paid for each year of deferment in drawing down the old age pension, that being how the annuity rates balance out. In all fairness, I do not think that someone who was 66, say, could ask for their pension to be paid in November 1998 and, because of the delay, receive arrears and compensation, and then, having done a "best buy" calculation, say: "Thank you very much, but please ignore my request for it to be paid in November; I will have it paid as of August 1999 and as a result receive a higher annuity rate in perpetuity". The point at which a person says they wish to draw down their pension will be taken as evidence of their stated intention and the ordinary arrears and compensation payments will kick in as a result. I hope that that makes the situation clear.

Finally, I again thank the House for its warm welcome. I am delighted that the Government recognise that, as a result of this, many elderly people, widows and people on incapacity benefit will have suffered not only stress but worry and distress. We are offering a helpline: we can give details of that to people who wish to make enquiries. I am delighted that the Government felt able to recognise this problem, even though it was not a problem of the Government's making but one that they inherited. The response has, in my view, been a decent and generous one.

Lord Higgins

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 [Appeals against decisions of Board]:

Baroness Hollis of Heigham moved Amendment No. 2:

Page 6, line 3, leave out ("10(1)(b)") and insert ("10(1)(b) or (c)").

The noble Baroness said: This is a technical amendment. Noble Lords will recall that at Report stage we inserted a new paragraph (c) in Clause 10(1) so that a decision which had been confirmed or varied on appeal might be superseded in limited circumstances. This amendment now adds a reference in Clause 11(1) to that new paragraph (c) to make good the assurance I gave on Report (at col. 821 of Hansard) that a superseded decision would itself carry a right of appeal to the tax appeal commissioners. I beg to move.

On Question, amendment agreed to.

Schedule 3 [Transfer of other functions to Treasury or Board]:

Baroness Hollis of Heigham moved Amendment No. 3:

Page 31, line 37, leave out from ("regulations"") to end of line 39.

The noble Baroness said: My Lords, this amendment simply removes from paragraph 12 of Schedule 3 some words which become redundant as a result of changes made to the text just before the Bill's introduction but which were unfortunately not noticed and taken out. I beg to move this technical amendment.

On Question, amendment agreed to.

Schedule 9 [Further consequential amendments]:

Baroness Hollis of Heigham moved Amendment No. 4:

Page 56, line 5, leave out ("5(4)(f)(v)") and insert ("5(4)(f)(iv)").

The noble Baroness said: In moving Amendment No. 4, I shall speak also to Amendment No. 5. These are two technical amendments, both concerned with adjustments made by the Bill in the Debtors (Scotland) Act 1987—with which I am sure the entire House is familiar! The first amendment puts right an incorrect reference to a sub-paragraph in Section 5(4)(f) of that Act. The second averts the unintended repeal of two provisions in the Social Security Act 1998 which made consequential amendments to the 1987 Act. I beg to move.

On Question, amendment agreed to.

Schedule 10 [Repeals and Revocations]:

Baroness Hollis of Heigham moved Amendment No. 5:

Page 59, line 20, column 3, leave out ("12, 14,").

On Question, amendment agreed to.

Am amendment (privilege) made.

Baroness Hollis of Heigham

My Lords, I beg to move that the Bill do now pass. Today's debate brings us to the conclusion of our scrutiny of the Bill. We have had some very wide-ranging debates, covering subjects as diverse as the direction of social security reform, the Contributions Agency's computer systems and some of the more esoteric regulations which underpin the social security system. I do not wish to take any more of your Lordships' time in rounding off those discussions.

Let me begin by reminding the House of the purpose of this Bill. This Bill will transfer the Contributions Agency to the Inland Revenue. This will enable businesses and individuals to sort out their tax and contributions questions through a single government department. The two organisations will be able to combine their expertise and resources on customer service and compliance.

The Bill will also transfer responsibility for policy on national insurance contributions from the Department of Social Security to the Treasury and the Inland Revenue, along with control and management of the National Insurance Fund. It will also provide a single focus for discussion of improved legislation guidance and procedures. Over time, it will make it easier to achieve a gradual alignment of the tax and NIC rules.

As we have discussed, the Bill also provides for appeals on national insurance contributions matters to be heard by general and special tax appeal commissioners. As I have said, this is largely in response to points raised by the noble Lord, Lord Goodhart, during the passage of the Social Security Act 1998.

In our consideration of this Bill we have had some useful and at times highly technical debates. I am grateful for the constructive spirit—reflected again today—with which noble Lords have approached these. This has been one of the first Bills where new style explanatory notes have been published alongside the Bill. I am pleased that noble Lords have said that they found them helpful in assisting their preparation for these debates.

In comparison with some social security debates relatively few noble Lords have spoken but I like to think that we have made up in quality what we lacked in quantity. The noble Lord, Lord Higgins, has brought his considerable Treasury experience to bear in both his questioning and his knowledge of tax and pensions matters. The noble Baroness, Lady Anelay, has similarly brought her experience of social security to these debates with good effect.

It has been extremely valuable—if sometimes a little embarrassing—to have the experience of the noble Lord, Lord Goodhart, particularly on Part II of this Bill. I am sure he will be remembered—certainly within the department—for some time for his triumph in spotting a missing consequential amendment. He pointed out the matter to us in Committee when he was on his feet, and we rectified it at Report. The noble Earl, Lord Russell, has been unusually, though not totally, quiet in our debates—but I am sure that his vow of silence will not last for long in social security matters. I have been grateful to the noble Lord, Lord Skelmersdale, for his tireless attention to detail and pursuit of clarity, particularly on Schedule 2 to the Bill. Finally, I would like to thank the noble Baroness, Lady Amos, for her continual assistance and support at my side—even if at times she thought she was running a marathon between here and the Box as the technical questions flowed.

I said in my speech at Second Reading that this was a technical and largely mechanical Bill. I am sure that noble Lords would agree with me that that assessment was correct. But as the noble Lord, Lord Higgins, said at Second Reading, it is precisely the technical Bills that need detailed scrutiny. I believe this House has given this Bill that scrutiny and that it can go to another place for consideration in better shape. I thank noble Lords who have helped in this work.

Lord Higgins

My Lords, I shall speak only briefly. First, I thank my noble friends Lady Anelay of St. Johns and Lord Astor of Hever for their support on the Front Bench. I also thank the noble Lord, Lord Skelmersdale, who certainly raised some extremely important points. As always, I have enjoyed the points raised by the noble Lord, Lord Goodhart, particularly his legal points, which certainly surpassed any expertise that I will ever have. I thank also the Minister for her great expertise. It may be that the noble Baroness, Lady Amos, has spent a lot of time running back and forth to clarify particular points—I hope she is not doing so now—but the reality is that the House has benefited greatly from the Minister's expertise in these areas.

I make only one point on that. The Minister tends to refer rather disparagingly to one's Treasury experience. At the end of the day, however technical the Bill—as has been demonstrated in the debate earlier this afternoon—we are dealing with real people and real problems, and it is the technical expertise which one brings to these matters that helps us to alleviate those problems and to improve the social security system.

I am most grateful to all noble Lords who have spoken. Certainly the Bill goes to the Commons in a much better state than it was when it arrived here. For that, we must all be grateful.

Lord Goodhart

My Lords, I rise also briefly. First, I congratulate the noble Baroness on showing her usual mastery of the complex details of this highly technical Bill. I have been impressed by the way in which she has not merely relied on information that has been fed to her but has thrown into this Bill her own understanding and command of the details involved.

The House should be grateful to the noble Lord, Lord Higgins, for pressing the issue of compensation for those who have suffered from the defects in the NIRS2 scheme—which was perhaps only rather incidentally involved in the Bill but was nevertheless of great importance. We should all be grateful to him. Indeed, we should all be grateful to the Government for their very rapid and effective response to those problems.

Finally, I am grateful for the suggestion that the Bill is to some extent instigated from points that I raised on the Social Security Bill; but this is something that was raised some time ago by the Tax Law Review Committee. An obviously correct move has been made, and I am glad that the Government have made it. I warmly welcome the fact that the Bill has now reached the end of its passage through your Lordships' House.

On Question, Bill passed, and sent to the Commons.

Baroness Amos

My Lords, before we move to the Statement on Kosovo, I would like to take this opportunity to remind the House that the Companion indicates that discussion on a Statement should be confined to brief comments and questions for clarification. Peers who speak at length do so at the expense of other noble Lords.

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