Lords Sitting of 20 July 1999

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

Lord Faulkner of Worcester
Richard Oliver Faulkner, Esquire, having been created Baron Faulkner of Worcester, of Wimbledon in the London Borough of Merton, for life—Was, in his robes, introduced between the Lord Cledwyn of Penrhos and the Lord Carter.
Lord Brett
William Henry Brett, Esquire, having been created Baron Brett, of Lydd in the County of Kent, for life—Was, in his robes, introduced between the Baroness Symons of Vernham Dean and the Lord Brooke of Alverthorpe.

Japanese Prisoners of War
2.47 p.m.
Lord Morris of Manchester Lord Morris of Manchester asked Her Majesty's Government:
What recent representations they have received for the award of ex gratia payments to former British prisoners of war of the Japanese during the Second World War, and what response they have made.
The Minister of State, Ministry of Defence (Lord Gilbert): My Lords, a number of representations have been received from former British prisoners of war of the Japanese and from bodies such as the Royal British Legion. Although we understand their views on this matter, we do not believe that ex gratia payments are the appropriate way to address the needs of former prisoners of war.
Lord Morris of Manchester: My Lords, as my noble friend the Minister may know, I have an interest to declare as Honorary Parliamentary Adviser for many years to the Royal British Legion. Is my noble friend aware that, while fully appreciating that money can never compensate for inhuman cruelties, the Canadian Government recently made substantial ex gratia payments to their prisoners Of the Japanese "to repay a debt of honour"? Cannot we do as much by repaying the same debt of honour to our prisoners of the Japanese? Moreover, is not the continuing failure to conclude this matter the principal impediment now to improving trade and diplomatic relations with Japan?
Lord Gilbert: My Lords, I begin by paying tribute to my noble friend's diligent commitment to the interests of the Royal British Legion and ex-servicemen
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generally; indeed, he has been extraordinarily diligent in that respect over the years. However. I cannot agree with my noble friend's last supplementary question because I do not think that we have any very serious difficulties in our trade and investment relations with the Japanese.
My noble friend prayed in aid the case of the Canadian Government who, as he rightly said, very recently agreed some ex gratia payments for their own former prisoners of war from Japanese camps. However, in point of fact, the scale of the problem faced by the Canadian Government was very much smaller than that faced by the British Government. The former Japanese prisoners of war in Canada comprise only about one in 10 of the proportion of the population with which the British Government would be faced. Unfortunately—I stress the word "unfortunately"—these matters were originally settled in the Japanese peace treaty of 1951 and the government in power in this country in 1955 accepted in an exchange of notes that the Japanese had no further duties in this respect.
Baroness Trumpington: My Lords, have Australia and New Zealand given ex gratia payments to their ex-prisoners of war?
Lord Gilbert: My Lords, I have inquired into that and I understand that they have not.
Lord Molloy: My Lords, is my noble friend aware that this issue is causing grave concern to our Royal British Legion? Would he be prepared to receive a deputation to discuss this matter when he has a moment at his disposal?
Lord Gilbert: My Lords, I try to operate an open-door policy in my office. I should be happy to meet representatives of the Royal British Legion. Unfortunately, the matters they wish to discuss do not fall on "my end of ship" in the Ministry of Defence. I know that my colleague, the Minister of State for the Armed Forces, has been deeply engaged in these matters and is shortly to make an announcement on this subject.
Lord Weatherill: My Lords, I have an interest to declare in that I participated in the Burma campaigns and in the subsequent invasion of Malaya. One of the first things we did was to go to the prisoner of war camps in order to see what we could do to help the unfortunate men and women who had suffered such privations. As the Minister said, it is perfectly true that our relations with Japan are good. I hope that I helped to some extent by presenting the sabre which I took at the surrender in Kuala Lumpur to the Yasukuni shrine to the Japanese war dead in Tokyo. However, that is no reason why we should not compensate these brave men who suffered such privations in the prison camps. Can the Minister say what it would cost?
Lord Gilbert: My Lords, there are various estimates of cost available, but on the basis of the same degree of ex gratia payment that the Canadian Government recently announced that they were giving—they are the

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only government of whom I know who are acting in this way with regard to former prisoners of war of the Japanese—the cost to Her Majesty's Government would be in the range of £100 million to £150 million.
Lord Barnett: My Lords, I rise to speak as I have a brother-in-law who was a prisoner of war in Japan. Is my noble friend aware that the compensation he has received is £75 paid in three instalments over three years? I hope that my noble friend considers that totally inadequate to compensate for the kind of treatment these people have received. I was rather disappointed with some of my noble friend's answers. He seemed to be saying that because we have more such ex-prisoners of war than the Canadians, the Government cannot pay them something, or at least obtain something from the Japanese. Surely if my noble friend agrees with me that the treatment these people received was outrageous—as we know—he should be making some representations to obtain rather better compensation than they have received so far.
Lord Gilbert: My Lords, I agree entirely with my noble friend that the suffering of some prisoners of war of the Japanese—not all of them—particularly those in camps in south-east Asia, was absolutely ghastly. It tears at anyone's heartstrings to read about that even to this day. I agree very much with my noble friend Lord Morris that no financial compensation is ever adequate to compensate anyone for such treatment. I agree also with my noble friend Lord Barnett that the compensation that was agreed back in the 1950s was absolutely pathetic. However, that is what happened. The view was taken at that time by the government of the day and by the subsequent government of 1955 that it was important then not to harass the Japanese in these matters—we have to remember that the Japanese economy then was nothing like as strong as it is now—because we wanted very much to keep the Japanese on our side and in the democratic camp. There is, of course, nothing whatever to stop the Royal British Legion making representations to the Japanese Government, but it sought to pursue the matter through the Japanese courts recently and I am afraid that it got nowhere.
Viscount Slim: My Lords, I declare an interest in that I am president of the Burma Star Association. That is a great privilege and honour. Is the noble Lord aware that the advice that I have given prisoners of war, both civilian and military, is that it is not the Japanese Government they should pursue but the many British governments who in my view are culpable of not looking after their prisoners of war who were involved in the battles of Asia? Other governments negotiated so much better deals for their prisoners of war than our very parsimonious British governments of the past of all parties. Is the noble Lord aware that among the veterans there is a strong feeling—I put this to the Government seriously—that in young, new Britain veterans do not count? What are this Government doing about that? I do not see many Ministers, and certainly few if any from
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another place, taking part in veterans' affairs, looking after them and giving them some dignity in their old age. We are here because of what these veterans did.
Lord Gilbert: My Lords, I entirely subscribe to the final remarks of the noble Viscount; namely, that we are here because of what these veterans did. Of course we all owe them an enormous debt of gratitude. Nothing would give me greater pleasure than to be able to stand at this Dispatch Box and say, "Of course they can have an ex gratia payment"; but unfortunately that is not the policy of this Government, nor of any previous government. However, I really must take issue with the noble Viscount when he says that Ministers have not taken part in veterans' affairs. Leaving aside any personal reference implied in that, all my ministerial colleagues take a great interest in veterans' affairs. I am sure that was true also of the previous government. This Government have for the first time set up a veterans' unit in the Ministry of Defence. That contradicts point blank what the noble Viscount claims.

Kosovo: Reconstruction Programme
2.57 p.m.
Lord Judd Lord Judd asked Her Majesty's Government:
What progress has been made in the reconstruction of Kosovo and what is their policy towards the reconstruction of Serb Yugoslavia.
Baroness Amos: My Lords, the UN is co-ordinating both the emergency reconstruction and long-term reconstruction of Kosovo. We are contributing to the emergency effort through our office in Pristina and working to ensure that the reconstruction effort—in which the EC and World Bank will play a leading role—is as effective as possible. For as long as Milosevic remains in power, our policy towards Serbia is to provide only essential humanitarian assistance.
Lord Judd: My Lords, does my noble friend agree that to secure the economic, social and democratic well-being of the people of Kosovo and indeed Serb Yugoslavia will demand every bit as much financial commitment as fighting the war itself, and that so far the sums of which we talk are small by comparison? Can my noble friend give the House a specific assurance that there will be no robbing of Peter to pay Paul and no cutting back on programmes to others in order to finance the reconstruction programmes in these two countries? So far as concerns Yugoslavia, does she agree that a great deal of subtlety will be necessary so that we encourage the positive and responsible elements within Yugoslavia's society who are crucial to its future, and do not throw all the country together in a negative attitude towards the rest of the world?
Baroness Amos: My Lords, we are concerned to ensure the economic, democratic and social well-being of the region. It is for that reason that various countries and international financial institutions have come together to talk about the importance of the long-term

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reconstruction of the region. However, it is far too soon to place a monetary element on that although of course it will be looked at in due course.
With respect to the specific assurance which my noble friend has sought as regards other DfID funded programmes, the reconstruction effort in the region will not impact on the other programmes in the DfID budget. The question of where the money will come from will be part of that long-term discussion. As to responding to positive and responsible elements within Yugoslavia, I entirely endorse my noble friend's comments.
Baroness Williams of Crosby: My Lords, having won the war, it is vital that we now win the peace. Perhaps I may press the Minister a little further. Earlier this week the Economic Secretary to the Treasury announced that 500 million ecus were to be set aside from the European budget for the reconstruction of Kosovo. Today in the Guardian newspaper it is announced that that sum will come from cutting EU development aid by 10 per cent and EU humanitarian aid—which is the only source from which Serbia can get any help—by 19 per cent. In other words, it sounds very like robbing Peter to pay Paul. Can the Minister say whether the Government will take the same view as the European Parliament, which is that the reconstruction of Kosovo is so important that new money must he found, in addition to what may be scraped from other parts of the European Union budget?
Baroness Amos: My Lords, there has been a very clear commitment by the Government that the money being spent through the DfID budget on development programmes across the world will continue. There have been on-going discussions about the European Union element of that budget and how that might be spent. I shall be happy to write to the noble Baroness to clarify exactly what decisions have been made in respect of that budget. We consider that it is important to carry out a needs assessment within the region before we get to the point of making decisions about how long-term money should be allocated. There is a commitment to look at the long-term reconstruction of the region and, in particular, to work with multilateral organisations to ensure that that reconstruction happens.
Lord Moynihan: My Lords, what assessment has the Minister made of the American decision to give preference in the distribution of humanitarian aid in Serbia to localities whose leaders are pursuing democratic policies? To what extent do the Government intend to encourage the democratic movement?
Baroness Amos: My Lords, it is important that we distinguish between immediate humanitarian relief to a region and the amount we identify for its long-term reconstruction. As part of our undertakings within DfID, we have always alluded to the importance of looking at governance structures within the countries with which we are dealing in terms of long-term development. Working towards ensuring openness, transparency of government and the establishment of democratic institutions is very important indeed. We have to isolate
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the difference between the immediate humanitarian needs that we will meet and our long-term programme, which will focus on different elements.
Lord Ewing of Kirkford: My Lords, amid this understandable clamour for the rebuilding of Serb Yugoslavia and Kosovo, perhaps I may ask the Minister a practical question. What safeguards are being built into the provisions for the rebuilding of Serb Yugoslavia and Kosovo to protect the Albanian minority in Kosovo against the emergence of a future Milosevic in 20 or 25 years time, repeating what has gone on recently and our having to start all over again?
Baroness Amos: My Lords, this is clearly a subject which will be part of the long-term discussions to ensure political stability in the region. I do not think that anyone would want to see a repeat of what has happened in the region in the past few years. We have made every effort to ensure that the Albanian minority in Kosovo is protected as much as possible. This of course will continue. It would be impossible for me to give my noble friend the kind of guarantee that he seek. We will continue to ensure that these matters will be taken on board in terms of the political, humanitarian and social development within the region.

Nutrition
3.16 p.m.
Baroness Gardner of Parkes Baroness Gardner of Parkes asked Her Majesty's Government:
What is their estimate of the level of malnutrition in the United Kingdom and what action they are taking to tackle it.
Lord Hunt of Kings Heath: My Lords, the Government's programme for monitoring nutritional status has shown that although most people are adequately nourished, there is a persistent rise in obesity. Eating a healthy and balanced diet and keeping physically active help people to maintain a healthy body weight. These messages are at the heart of the Government's health strategy.
Baroness Gardner of Parkes: My Lords, I thank the Minister for that reply. Is he aware that the Malnutrition Advisory Group of academics, hospital doctors, dieticians and members of primary care groups was set up last month because of concern that people are not aware of the nutritional status of the community? Some 15 per cent of children and up to 40 per cent of adults who are admitted to hospital are found to be suffering from malnutrition. In many cases it continues while they are in hospital and they then lose even more weight. Does the Minister think that the advisory group will influence people and make them aware of this problem?
Lord Hunt of Kings Heath: Yes, my Lords. I take the opportunity to welcome the formation of the group. I am sure that the Department of Health, in particular, will welcome continuing dialogue with that group,

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which is drawing attention to some very important issues. No doubt many challenges face hospitals in dealing with the problem of ensuring that people receive appropriate food in hospital. The Government are very concerned to make sure that that happens.
Baroness Masham of Ilton: My Lords, how much domestic science is taught in schools? Would not it be a good idea to encourage children to cook vegetables and to eat healthily so that they do not become overweight and develop diabetes in the future?
Lord Hunt of Kings Heath: My Lords, I am sure all parents would welcome that. I am glad to say that there is a programme of teaching children to cook and giving them advice about balanced and proper diets. We expect that by the end of this summer some 15,000 children will have been through that programme.
Lord Clement-Jones: My Lords, on the issue of malnutrition in hospitals, the Minister is no doubt aware of the Nuffield Trust report which showed that there were levels of malnutrition both on entry to hospital and on exit. Will the department ask the National Institute for Clinical Excellence to issue guidelines on nutrition for hospitals?
Lord Hunt of Kings Heath: My Lords, my understanding is that the National Institute for Clinical Excellence does not consider malnutrition to be within its remit. However, we are taking the report seriously and considering our response to it. It is quite clear that the boards of NHS trusts need to ensure that proper programmes are introduced, and that monitoring takes place, with regard to the way in which food is provided in hospitals. The Commission for Health Improvement will take hospital nutrition into account in its rolling programme of local reviews.
Lord Acton: My Lords, are there any national statistics on the number of cases of anorexia? If so, are these rising or falling?
Lord Hunt of Kings Heath: My Lords, the noble Lord raises a very important question. My understanding is that one to two young women per thousand develop anorexia. As noble Lords will know, this can cause long-term ill health and in some cases, regrettably, death. Although most mild eating disorders can be managed within primary care, people with severe disorders should be, and are, referred to specialist assessment areas, including for medical and psychiatric assessment. The broader question of young people being pre-occupied to an unhealthy extent with their weight needs to be tackled.
The Lord Bishop of Hereford: My Lords, the Minister has rightly drawn our attention to the importance of eating disorders and obesity. Is he aware that a significant cause of malnutrition in many parts of our society is poverty, particularly among the long-term unemployed? Are the Government aware of the work
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that is being done by the Zaccheus Trust to establish minimum levels of food in relation to income support levels? Is he conscious that there is a problem, and are the Government determined to address it? Work is being done by many organisations, but perhaps I may draw the Minister's attention in particular to the work that is being done by Reverend Professor Nicholas Sagovsky at Newcastle University.
Lord Hunt of Kings Heath: My Lords, the matter needs to be considered in the context of the Government's efforts to provide support to poor people generally. In regard to the issue raised by the right reverend Prelate, I should be interested to learn more details. I commend the Health Education Authority's food and low income database, which provides excellent examples of projects throughout the country which are designed to enable poor people to have access to a balanced diet at affordable prices.

Assisted Places Scheme
3.11 p.m.
Baroness Blatch Baroness Blatch asked Her Majesty's Government:
In the light of criticisms of the Prime Minister and the Secretary of State for Education and Employment made by Mr Justice Kay in the High Court on 12th July, whether they will reconsider their decision to deny pupils who had secured an assisted place the right to continue that placement to the end of their secondary education.
The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, the court found in favour of the Secretary of State on all counts. The court ruled that the Government's policy on the duration of assisted places for primary-aged pupils is lawful, and is being applied in a consistent and fair manner. We do not, therefore, intend to change our policy.
Baroness Blatch: My Lords, is the Minister aware that before the election, in November 1996, Mr Blair wrote in a letter to a parent,
"Any children already on the Assisted Places Scheme will continue to receive support until the end of their education".
and that after the election Mr. Blair wrote in a newspaper article,
"No child currently at private school under the scheme or who has already got a place has lost out. They will be able to continue their education"?
Does the Minister accept that, despite the judge being unable, in law, to overrule the Secretary of State, there is a moral obligation on the Prime Minister to honour his words by allowing children such as Heather Begbie to complete their education on the scheme?
Baroness Blackstone: No, my Lords. The article to which the noble Baroness refers was intended to be read in the context of a policy which had been very well aired and understood, and it was written long after the circular had been sent to schools with assisted places. It is a

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great pity that the Conservative Opposition do not give a little more attention to the 93 per cent of children who are in state schools. I do not accept that a child who has had an assisted place in a primary school and then transfers to a state secondary school will be worse off. There are many good state secondary schools. I only wish that the Conservative Opposition would understand that.
Lord Tope: My Lords, does the Minister recall an assurance that she gave me during the Report stage of the Bill dealing with assisted places that any parent who accepted for their child an assisted place running through to age 13 in a free-standing preparatory school would have that place honoured through the use of the discretionary power? In view of the somewhat confused picture of what exactly is a government commitment, will the Minister give an assurance that that particular commitment has been honoured in every case?
Baroness Blackstone: My Lords, I well recollect the noble Lord asking that question on Report. I can confirm that the Government have set up a discretionary scheme under which parents in that category may apply for the scheme to continue for their own child until the age of 13. In all cases, the Secretary of State has adhered to that commitment. Indeed, with respect to the operation of the discretionary scheme, the Government have examined some 350 applications and have agreed that a child may stay in the assisted places scheme in well over half those cases.
Lord Tebbit: My Lords, does the—
Lord Renfrew of Kaimsthorn: My Lords, is the Minister aware of the words of the judge in the particular case in question? I quote:
"It is a sorry state of affairs when a Secretary of State has to explain away his own letters as mistaken or unclear and a statement of the Prime Minster as an incorrect representation of policy, taken out of context".
Can the Minister disagree with the judge's words?
Baroness Blackstone: My Lords, the court did not rule that the Government had broken any promises whatsoever. The legal action taken in this case is a distraction designed to make political capital, and involves enormous expense in terms of court hearings. We should not play political games with children's lives.
Noble Lords: Hear, hear!
Baroness Blackstone: My Lords, the schools knew the position perfectly well, and parents had been well informed throughout the application of that policy.
Lord Ewing of Kirkford: My Lords, does my noble friend agree that it is the height of impertinence for an Opposition Front-Bencher to call in aid a court case in the judgment of which the Government were supported, when the noble Baroness who asks the Question was a member of a government who lost court case after court
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case, costing British taxpayers many millions of pounds because of their incompetence, money which could have been spent on the education of their children?
Baroness Blackstone: My Lords, I am grateful to my noble friend. He is absolutely right in what he says about the Conservative Opposition's appalling record in government in that respect. This policy was introduced to support lower class sizes in our primary schools. The Government have achieved those lower class sizes. We have seen them go down right across primary education, not merely in key stage one, for the first time in 10 years. That is something of which to be proud, unlike the record of noble Lords opposite who were in the previous government.
Lord Tebbit: My Lords—
Earl Russell: My Lords—
Noble Lords: Tebbit! Tebbit!
The Minister of State, Home Office (Lord Williams of Mostyn): My Lords, I really think it is the Liberals' turn.
Noble Lords: Oh!
Earl Russell: My Lords, is it the Prime Minister's position that he meant it how he meant it at the time?
Baroness Blackstone: My Lords, the Prime. Minister made it perfectly clear on a number of different occasions that the assisted places scheme was to be abolished. He made it absolutely clear that we would honour a commitment that children should be able to stay in their current education until they had completed that stage. That is what the Government are doing.

Business of the House: Finance Bill
3.17 p.m.
Lord Carter: My Lords, on behalf of my noble friend the Leader of House, I beg to move the Motion standing in her name on the Order Paper.
Moved, That Standing Order 44 (No two stages of a Bill to be taken on one day) be dispensed with on Friday next to allow the Finance Bill to be taken through its remaining stages that day.—(Baroness Jay of Paddington.)
Lord Shore of Stepney: My Lords, unusually, I wish to raise an objection to the Motion. The Finance Bill which will shortly come before this House contains a measure for tax allowances of 100 per cent in favour of small and medium business for firms in Northern Ireland. For the first time in the history of this country, the measure has been struck down by Brussels on the grounds that it infringes the tax harmonisation or fair taxation rules upon which it is insisting.

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That raises issues of fundamental importance, particularly in view of the guarantees that we have been given that taxation remains the preserve of national legislation and is not a matter that we would under any circumstances cede to Brussels. I ask the Government to take full account of that and to make time available so that we can thoroughly discuss this fundamental issue.
Lord Carter: My Lords, I am sure the House has taken careful note of what my noble friend said. He may not be aware that it is a long-standing convention of the House that the Finance Bill is always taken through all its stages on the day of Second Reading. That is usually, but not always, a Friday. The House never goes into Committee on money Bills so we will not be able to deal with it in the way the noble Lord suggests. This House has no effective power on money Bills. It has long been thought that the most convenient way for the House to deal with Finance Bills is in the way I described.
On Question, Motion agreed to.

Adoption (Intercountry Aspects) Bill
Read a third time, and passed.

Genetically Modified Crops Bill [H.L.]
3.20 p.m.
Read a third time.
Baroness Miller of Hendon: My Lords, I beg to move that the Bill do now pass. I do not intend to take much of your Lordships' time, but I begin by reminding noble Lords of two things I have said either at Second Reading or during the passage of the Bill. First, the Bill is not about genetically modified foods, nor food made with genetically modified products. These are already the subject of a regulatory regime which, so far as is known, works perfectly well.
What is significant in relation to the Bill is that the large food retailers and at least one of the major manufacturers of own label products, Northern Foods, are removing those ingredients from products for the time being at least. That is in response to public disquiet, however misinformed it may or may not be. It is said to be intended that that policy will continue until further positive scientific evidence is available to satisfy all but the most sceptical that there is no harm in the ingredients.
The second preliminary point I wish to make is a personal one. I am not opposed either to genetically modified crops or to the necessary testing of them. I hope that they will prove to be the boon to mankind that the developers of the products claim they will be and that the side effects in the form of the need for fewer pesticides and fewer artificial fertilisers will also be a bonus to the benefit of the environment.
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That is why, in common with. I imagine, the whole House, I condemn unequivocally the acts perpetrated by masked hooligans in Oxfordshire last Sunday when they destroyed an experimental crop. It is only by controlled and carefully monitored testing that we shall be able to find out whether these products are safe and beneficial—or not, as the case may be. What these self-appointed people who are answerable to no one are trying to say is that they are not interested in facts but simply in imposing their point of view by force.
Just as the major food distributors have now conceded that GM foods should be safe—and they say they are sure they are—so it is also necessary that they should be seen to be safe. The Government must adopt the same attitude before licensing the commercial planting of GM crops. That is all that the Bill demands.
The Bill has grown somewhat in length from the modest single sheet I first introduced some weeks back. This is due in part to the constructive suggestions of some of my noble friends and also to the considerable advice and lobbying I have received from various quarters. I believe that as a result of the amendments introduced in Committee and on Report, the Bill is greatly strengthened and more effective.
The Government's attitude, not just towards this Bill but to the whole debate, has been curious to say the least. I wanted to make that point as we reach the stage of the Bill do now pass. The Labour Party, in opposition and in government, has never lost an opportunity to jeer and sneer at the previous administration over the BSE crisis when what the last government did was to follow the scientific advice they received—incorrect as it turned out. Now that the Labour Party is in government, it panicked into an arbitrary ban on beef on the bone, not on the basis of firm advice founded on clear evidence but because their advisers, following the time-honoured practice of covering their rear, refused to say that there was absolutely and positively not the remotest danger.
In the case of GM crops, the Government have received the advice of a committee of your Lordships' House that the utmost caution should be exercised. They have received the advice from their own think-tank, English Nature, urging caution. They have received conflicting advice from various quarters, for and against, as I mentioned in previous debates and which I shall not repeat. Despite that, the Prime Minister has arbitrarily and publicly, both in the press and in the other place, dismissed all doubts, no matter from what eminent quarter they are voiced. The suggestion is that the doubters and those who advise caution are just a lot of Luddite cranks. Naturally, his Ministers, especially with a re-shuffle imminent, tamely follow the line of the master.
The simple question which I posed previously and to which I have never had an answer is, "What's the hurry?" I can understand the hurry of the agrochemical and biotechnical companies to market the products in the development of which they have invested millions and where perhaps they want to be first in the field ahead of their competitors. But that is of absolutely no interest to the public. Even in America, with its

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powerful farming lobby, it was only as recently as yesterday or the day before that people began waking up to the possible side-effects. They are discovering that one of their national symbols, the monarch butterfly, is being decimated by GM crops. Insect repellent products may sound very desirable, but what will the effect be on the honey bee? No one can yet say for sure.
Herbicide-resistant products may be very useful but will that help to propagate a new mutation of super weeds in the next field? No one can yet say for sure. More testing is the answer. But the Government's whole testing programme, the so-called farm-scale trials, has been thrown into disarray. That is because the number of farmers who were originally prepared to allow themselves to be used as guinea pigs and to involve their unwitting neighbours at the same time has been so reduced by desertions from the testing programme as to make it worthless from the point of view of scientific evaluation.
The noble Lord, Lord Carter, argued at one stage that my Bill was "unnecessary." He later said that it was "unnecessary and inappropriate." By the time we reached the Report stage, he said that it was "unnecessary, inappropriate and OTT". The grounds he advanced for this ever-escalating—
Lord Carter: My Lords, it was "otiose".
Baroness Miller of Hendon: There you are, my Lords, I did not hear it at Report stage. The grounds the noble Lord advanced for this escalating stream of adjectival descriptions of my Bill are that the Government already have the powers to do this, that and the other. There is, however, no automatic revocation of licences, no automatic destruction of crops, no sterilisation of land and no compensation, provided by my final amendment in face of the noble Lord's earlier objection on legal grounds to a short further period of evaluation.
I have to say to the noble Lord, Lord Carter, that, with the greatest possible respect, which I always use when I address him, I believe that he has missed the whole point of this Bill. The Government do indeed have the power to do some of the things I have proposed. But it is an enabling power. What the Bill does is to make it obligatory on the Government to take the action stipulated. Most of all, it obliges the Government to evaluate all the evidence, not just the self-serving evidence from parties with axes to grind. It obliges the Government to listen to representations from all appropriate interested parties and not simply to those which conform to the Government's own preconceived or preferred choices. It requires the Government to act quickly before irreversible damage is done and without waiting for the usual Whitehall ploy of setting up yet another committee and then claiming that there is no legislative time available or that there has to be the customary 40 days' delay before a statutory order can come into effect.
Finally, the Bill would oblige the Government to submit their evidence and justify their conclusions to Parliament. That is what the public want and expect. They do not want simply to be told by the Government, "We know what is good for you."
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I have taken rather longer than I intended. I am very surprised by the attitude of the Government. This is one of the most important issues to come before your Lordships' House in recent times. The Government wanted it dealt with quickly on the nod. I took it on myself to do what the public expect this House to do.
Moved, That the Bill do now pass.—(Baroness Miller of Hendon.)
Lord Carter: My Lords, as the noble Baroness said, I was the Minister who dealt with the Bill in Committee and on Report. Unfortunately, I could not be here for Second Reading and I am very grateful to her for making good that gap in my knowledge.
On Question, Bill passed, and sent to the Commons.

Welfare Reform and Pensions Bill
3.31 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Baroness Hollis of Heigham.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 60 [Abolition of severe disablement allowance]:
Lord Rix Lord Rix moved Amendment No. 124B:
Page 68, line 18, at end insert—
("() Those persons entitled to severe disablement allowance at the time this provision comes into force shall receive incapacity benefit in place of that allowance, and shall continue to receive incapacity benefit subject to the normal conditions other than contribution conditions.")
The noble Lord said: I am extremely grateful to the noble Baroness, Lady Miller of Hendon, for the fact that the mass exodus after Questions took place at the beginning of her Third Reading speech on the Genetically Modified Crops Bill rather than my speech on the first amendment.
The first time that I ever suffered the walking out of an audience was 56 years ago when I was with Sir Donald Wolfit on an ENSA tour of "Twelfth Night", which was singularly inappropriate at the time for the troops. We played in front of the first American soldiers over here in Tidworth. On the first night, no sooner had Orsino, the noble Duke of Illyria, spoken the opening lines,
"If music be the food of love, play on",
than there was a noisy mass exodus by the American troops from the body of the hall. Only the officers were left in the front row.
Sir Donald Wolfit was deeply hurt by this and complained to the commanding officer. The following night, the house was again packed when we started the show. We played to utter silence—no laughs, no applause—from beginning to end. During the interval we wanted to know how the audience had been kept quiet and in the their place. We discovered that the military police were parading up and down the aisles of the theatre with revolvers drawn out of their holsters and the hammers cocked. I do not recommend that to the Whips in your Lordships' House, but it is food for thought.
I am well aware that Amendment No. 124B lacks subtlety. To achieve the result for which I am arguing would require rather more complex provisions, but at least what I want to do is clear. I can live with the endorsement on the Minister's brief, "technically deficient"—or something stronger—and the admonition that we shall shortly be debating whether Clause 60 should stand part of the Bill.
I am seeking to transfer those receiving severe disablement allowance to incapacity benefit when SDA is abolished. Quite a lot of those concerned will have been receiving non-contributory invalidity pension or its SDA successor since well before the age of 20 or 25, and if early recognition of incapacity is to be the prime badge of respectability under the new dispensation, they wear that badge and have worn it for many, many years. It seems unfair that they should lose out on the beneficial change that those with a shorter benefit history enjoy.
For those who secured SDA later in life as a result of time spent looking for work, bringing up a family, doing voluntary work overseas, doing very low paid work or some other reason that prevented them from acquiring a contribution record, I would argue that there is also a good reason for not perpetuating a dead benefit, but instead making a once-for-all transfer to the new all-purpose benefit.
We are not talking about people pretending to be sick or disabled and unable to work. We are talking about people who have satisfied and continue to satisfy the adjudicating authorities that they are incapable of work. For many, more incapacity benefit will mean less income support, but I have never followed the logic of the argument that anything that reduces income support payments is not worth doing. With that argument, we would have nothing but means-tested benefits and we would retreat 93 years in the history of welfare reform. For some, including some married women, there will be a substantial net gain; and I do not share the view of sick and disabled married women as at best reluctant workers who ought to rely on the earnings of their wealthy husbands. As far as I am aware, the prevalence rate for wealthy husbands among the population of disabled married women is startlingly low.
The amendment seems to provide a neat way of rounding off an important chapter in our welfare history and I hope that it might find favour with a government anxious to tidy up and move on. I beg to move.
Lord Ashley of Stoke: I oppose the proposal that Clause 60 stand part of the Bill.
Lord Hunt of Kings Heath: I can tell my noble friend that we are not debating that at the moment.
Lord Campbell of Croy: Perhaps I could speak on the amendment. It refers to,
"Those persons entitled to severe disablement allowance".
I understand that Clause 60 will abolish severe disablement allowance, but only for new claimants. I hope that the Minister will be able to confirm that those who already receive it will continue to do so. I understand that the amendment applies to people who are entitled to SDA but have not yet claimed it.
Baroness Hollis of Heigham: I do not know whether the noble Lord, Lord Campbell of Croy, understands the intention of the amendment. My noble friend Lord Rix proposes that the entire current caseload of SDA should move over to IB. The Government's proposals are for those under the age of 20.
Lord Campbell of Croy: I was about to reach that point. The Government's proposal in Clause 60 is that SDA should disappear for new claimants. The noble Lord, Lord Rix, is suggesting a transfer. I understand that, but I wanted to be sure that I understood the Government's proposals. I find the amendment commendable and if it is accepted there would be a transfer.
The proposals would leave severely disabled people aged 25 and over who cannot work in a much worse position. Abolishing the allowance would have particularly bad effects on women, because 60 per cent or more of those who are eligible for it are women and many of them have not earned enough or been able to make sufficient national insurance contributions to be able to do without it and receive other benefits. I would be interested to hear what the Minister has to say about the amendment, which I support in principle.
Baroness Pitkeathley: I should like to make a specific point on the amendment. It is important to see the issue in the round. The changes proposed in the Bill must be viewed as part of the package of Government measures. The noble Lord, Lord Campbell of Croy, put particular emphasis on women. We must take into account all the other benefits for women that are being introduced. No doubt my noble friend the Minister will want to elaborate on them. Specifically, can the Minister assure us about the rules on IB which have been modified to include protection for former carers on invalid care allowance who are unable to pay

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contributions in the two tax years before their claim? Some of those will be affected by the abolition of SDA. We ask for the Minister's assurance on that.
Lord Higgins: We shall shortly discuss the question of whether the severe disablement allowance should be abolished when we reach the clause stand part debate. As I understand it, what the noble Lord is proposing in his amendment is that, in the same way as severe disablement allowance is a non-means-tested, non-contributory benefit, the same procedure should apply as for those who are entitled to it at the moment and they should receive incapacity benefit on the same basis as they receive severe disablement allowance at present. This is an ingenious amendment and we look forward with interest to the Minister's reply.
3.45 p.m.
Baroness Hollis of Heigham: The implication of the noble Lord's amendment, as I tried to suggest when the noble Lord, Lord Campbell of Croy, allowed me to intervene, is that all those people currently claiming and receiving SDA—and I presume by implication all those in the future; it would otherwise be unfair—should in fact be eligible for IB. In other words, the amendment would scrap the non-contributory SDA and replace it with a contributory IB at much higher cost.
There are three main reasons behind our wish to reform SDA. I hope that noble Lords will forgive me if I repeat myself on the clause stand part debate. Perhaps it would have been sensible to group these matters.
The first reason is that SDA is failing to provide people disabled early in life with the full financial support that they need. SDA was designed for those who could not build up a contributions record for what became incapacity benefit or the old invalidity benefit, so there were always two parallel modes of support: the non-contributory one (for those unable to support themselves but who had no access to the labour market to build up a contributions record) and the contributory one. For those who fell through even that safety net, there was of course always income support. SDA is failing to help those people adequately. It is not giving them the financial support they need.
Secondly, SDA is certainly not helping those in greatest need. The rate of SDA (which was originally designed to be 60 per cent of IB, or the old IVB) means that 70 per cent of recipients have to claim income support on top.
Thirdly, in 1974 SDA was originality designed—as I say, the equivalent was the non-contributory invalidity pension—for those who were out of the labour market and who could never build up a contributions record. It was never designed to cover married women. That was made very clear. The 1974 document states:
"The benefit will not be designed to cover married women living with or maintained by their husbands".
Married women were included in 1977. This point relates to the questions asked by the noble Lords, Lord Campbell of Croy and Lord Higgins, about the position of women. Since married women were included in what became SDA—they were never intended to be
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included but that happened a few years later—there have been significant changes in the situation of women which the benefit has not recognised.
The first was that one year later the married women's reduced stamp was abolished. That reduced stamp had disqualified even those married women in work from building up an entitlement to contributory benefits. Thereafter, newly married women were required, if they were in work, to provide for themselves through paying the full stamp.
Secondly, in 1992 changes were made to the lower rate of disability living allowances. We have also this year had the changes to the lower earnings limit which, together with the minimum wage, has brought a further quarter of a million women into the contributory system. There are now as many women in work as men. Seven out of 10 married women work; eight out of 10 married men work. In terms of opportunities in the labour market, there are at least as many opportunities for women as for men.
The number of women who are acquiring a right to incapacity benefit in their own right has increased from 84,000 just 20 years ago to over half a million now. SDA was originally designed in 1974 for those who could never provide for themselves because their disability had for the most part occurred earlier in life. Married women were included in 1997.
That situation seems to have changed out of all recognition. The support that we give through SDA (at 60 per cent of IB rates) for those disabled from an early age is no longer adequate because it has to be regularly topped up by income support. The situation for married women, who are the other cohort going into SDA, has changed, with the abolition of the reduced married women's stamp, the introduction of lower levels of DLA, the increase in the number of those qualifying in their own right for incapacity benefit through the minimum wage, and the changes to the lower earnings limit.
Given that, I think that SDA no longer fulfils the purpose that it was designed to fulfil in the 1970s. Our reforms restore the principles behind it and focus on the priority—young people. I believe that women are as competent as men to earn their own rights to contributory benefits. However, we now need to protect those disabled from an early age, whether men or women, who have had no access to the labour market. Therefore, our reforms phase out SDA and allow young people disabled early in life to become entitled to IB, thus providing a significantly increased benefit rate for this group. In future, they will get IB at the same rate as people who qualify through contributory conditions and, as a result, they will gain by up to £26.40 a week. People aged under 20 who are receiving SDA when the changes are introduced will also gain as they will receive the long-term rate of IB a year later. Young people will gain substantially from our reforms, and I am glad that this has been welcomed.
However, the amendment moved by the noble Lord, Lord Rix, would result in all SDA recipients being transferred on to IB irrespective of age. Unlike young disabled people, many older people now receiving SDA,

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including women, will have become disabled relatively late in life and they will have had the opportunity to work, the opportunity to contribute towards benefits, and the opportunity to insure themselves against those contingencies. In my view, awarding them all IB without requiring them to satisfy the contributory conditions is a serious breach of the contributory principle and is deeply unfair to those who have provided for themselves through the contributory condition and who are now in similar circumstances.
I should like to give the assurance for which I was asked by the noble Lord, Lord Campbell of Croy, that no one receiving SDA at the point of change will be worse off as a result of our reforms. We shall ensure that existing SDA recipients receive the benefit on the same basis as now. Of course, income support, HB and CTB will all continue to be available.
It would cost over £250 million to transfer all existing SDA cases on to IB and that is a cost which I do not believe we can justify. It would cost many more millions of pounds to transfer all future SDA cases on to IB. I believe that the time has come now to discriminate within the caseload of future claimants and to say that those who have an opportunity, as women now do in the same way as men, to build up a contributions record for themselves should come within the IB framework. If they are unable to do so, they can of course be eligible—this did not exist in 1977—for income support with a disability premium, if they have a financial need but no contributions record.
Earl Russell: I should be grateful if the Minister could clarify one figure she has just given us. She referred to an extra cost of £250 million. Is that over and above the present figure or is it the figure envisaged once this Bill has become law?
Baroness Hollis of Heigham: It is the additional cost—if we accepted the amendment moved by the noble Lord, Lord Rix—of moving the existing caseload fully over to IB.
As I say, we believe it is right to focus help on those who cannot come within the contributory system and who cannot have access to work by virtue of the fact that their disability was incurred before they were of working age. Those are the groups we feel we should be helping. We believe that other people—women as well as men, equally—who have access to the labour market and who can build up contributions should be expected to do so and that the right path for them is IB. If IB is not appropriate—possibly because of their responsibility as a lone parent for caring for children—they are eligible for income support with a disability premium which can be more generous than IB.
Lord Higgins: On the point just made by the noble Baroness, and following the point made by the noble Earl, does the £250 million figure include any adjustment for income support?
Baroness Hollis of Heigham: I am not sure that it does. I think it is a gross figure that we would need to net down for income support.
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My noble friend Lady Pitkeathley asked about carers. We recognise that people with caring responsibilities—people receiving ICA—might be unable to meet the new requirement, so carers who have been receiving ICA can use the credits that ICA brings to qualify for IB provided they have paid contributions at some point under the existing rules. Special provision will be made so that they can continue to qualify on this basis.
I hope the noble Lord, Lord Rix, will agree that the Government are focusing on meeting the financial needs of, and offering financial security to, those younger people who, because their disability was incurred at an early age, have never had access to the labour market. For the rest of the SDA cohort, we believe that the world has changed since 1974 when the non contributory invalidity benefit was introduced. We believe that, with all the changes I have enunciated, women are able to build up their own records. Therefore, while no one on the existing SDA will be affected, in future we expect them either to come through the IB network or, alternatively, in appropriate circumstances, through income support with disability premium, which is for the most part even more generous than IB, let alone IS itself. In the light of that, I hope that the noble Lord, Lord Rix, will feel able to withdraw the amendment.
Lord Rix: I am most grateful to the Minister for her very detailed response, which I shall read in tomorrow's Hansard. I am grateful to noble Lords who have asked questions or have supported me in this amendment. I should be very glad to receive an accurate net figure of the costs involved. I think that the same would apply to the noble Lord, Lord Higgins, and probably to the noble Lord, Lord Campbell of Croy. However, in view of the impending clause stand part debate on Clause 60, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 60 shall stand part of the Bill?
Lord Ashley of Stoke: It is a great shame that this debate has now become muddled and muddied. In some cases answers have been given by the Minister to points not yet raised, although we are grateful to her for the trouble she has taken in trying to respond.
The problem with Clause 60 is that it will abolish SDA, which is now available to all who are, or become, too incapacitated to work but are not entitled to incapacity benefit. It has been estimated that some 16,000 people a year—10,000 of them women—will be affected. There is no doubt whatever that severe disability allowance has been one of our most successful and innovative benefits. It stems from the marvellous work of Megan du Boisson, who initiated the housewives' non contributory benefit. That was the basis for this splendid benefit. Above all, it is a safety net. It recognises needs and human rights and human dignity and it provides an income without contributions to all those disabled people who are unable to work for a whole variety of reasons and have not been able to participate in the larger national scheme.

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A major group of SDA beneficiaries are those whose disability has always prevented them from working. I warmly welcome the Government's proposals to give those people disabled at birth or in childhood the higher rate of incapacity benefit and to extend the age limit to 24. I commend the Government on that. But many would have benefited from the SDA had it been continued. Under the Government's proposals they will get nothing in the future. The safety net will be whisked away. After the age of 24, no disabled person will receive the non-means tested benefit for incapacity unless he fulfils the contributory conditions. Other parts of the Bill now make that even more difficult.
This clause puts a black ball over several vulnerable groups of people. Who are they? Who are these losers? Who are the people who looked so hopefully to a newly elected Government supported by the massed ranks of women MPs in Parliament? As we have already heard from some speakers, the vast majority of potential SDA recipients are women. True to disgraceful tradition and history, women will suffer most—and this under a Government supported in another place by a record number of women.
Women who look after children and become disabled will suffer. There is no doubt about that. They may have worked in the past. But under the proposed new rules only if they have worked and paid national insurance contributions in one of the previous two years will they receive incapacity benefit. Frequently, the women will have worked, or be working, at low rates of pay. That is the real problem. Women make up 80 per cent of the 2.5 million employees who earn below the lower earning limit. Therefore, they cannot build a contribution record. Clearly, SDA is crucial to those on low pay. Why are they suffering?
Carers are another major group. I am glad that the noble Baroness, Lady Pitkeathley, has already taken part in the debate and has spoken so cogently, as she always does. Carers will suffer under these proposals.
Baroness Hollis of Heigham: Perhaps I may—
Lord Ashley of Stoke: My noble friend can reply to me in a moment. There is a welcome exemption for some carers who claim ICA. But my noble friend knows quite well that many women do not receive ICA. They are the people who will suffer. They are the last people whom this Government should be hitting.
Another major group that will lose out are severely disabled people who have an interrupted employment pattern and hence cannot meet the new contribution conditions for incapacity benefit. At present, all these vulnerable people can fall back on SDA. In future, they will be left without an income in their own right. The Government claim that people receiving SDA can top it up with income support, so why should not everyone be put through the means test as many will end up on the same level of benefit? In effect, the Government are saying that women who have been in low paid jobs or who have been carers can have their husband or their partner provide for them. That is what the Government's policy will generally mean. There is no IS if the family income is adequate and, if the husband or partner works,
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it generally will be. We are moving forward to an era where individual human rights are more recognised, but the Government are moving backwards towards a dependency status for disabled women. I cannot believe that my noble friend can justify that before the Committee.
This Committee stage presents us with the opportunity to explain our deep reservations. I am glad that my noble friend Lady Hollis is listening and will respond to the debate. We all respect and admire her, but the Government's policy is not infallible; nor is it set in stone. It needs to be responsive to the genuine problems of disabled people and to the views widely held in this House.
I do not propose to divide the Committee on this occasion as I want the Government to consider what has been said on all sides and to think again. But, as with earlier amendments, I shall table the same amendments at Report stage. If the Government are then unable to respond satisfactorily, I propose to divide the House.
4 p.m.
Lord Morris of Manchester: I am grateful to the noble Lord, Lord Higgins, and the noble Earl, Lord Russell, for making it possible for me to speak this early in the debate. They are aware that I am hosting this afternoon a reception in the House of Commons to mark the 25th anniversary of the Crossroads Care Attendant Scheme, which some 400 Members of Parliament and Peers are expected to attend. My noble friend Lady Hollis, with her customary understanding, also appreciates my difficulty of timing. If I have to leave the Chamber before the debate concludes I shall, of course, return as soon as possible.
When official rhetoric about it was in full flood, the boldest claim for this Bill was that, more than 50 years on, it revised and modernised Beveridge. But in truth, if Clause 60 remains in the Bill, we shall see a reversion to one of the worst features of Beveridge; namely, the denial to disabled married women, among others, of any entitlement to an income support benefit in their own right.
The fact is that Beveridge was revised and modernised by an historic decision of the last Labour government to provide a non-contributory income support benefit as of right for people who, because of severe disability, had never been able to work and pay national insurance contributions. Before that decision they were non-people in terms of statutory income support and it was the depth of public feeling about this—as my noble friend Lord Ashley recalled—that led the late Megan du Boisson and Befit Thornbury to found the Disablement Income Group in the 1960s.
In a letter, Sir Peter Large, who was DIG's parliamentary spokesman for many years, tells me today:
"Berit Thornbury is as appalled as I am by the Government's proposal in Clause 60 to abolish the Severe Disablement Allowance (SDA), which now incorporates the Housewives' Non-Contributory Invalidity Pension you introduced in 1977 when you were Minister for Disabled People".

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He goes on to recall that prior to that date, if they had insufficient income to pay for help, husbands had to give up work to look after their disabled wives and any children they had. He predicts this will happen again if Clause 60 stays in the Bill—that a great many people will be forced from work on to welfare—and he adds:
I had thought the Government's aim was to provide work for those who can and security for those who cannot.
"You and I know what a financial disaster an accident or crippling disease can be for a family. Abolishing SDA will mean that the married woman and her husband and any children they have are reduced to poverty before the welfare state will help them.
It is a weird and cruel 'reform' that turns the clock back to 1977 and consigns disabled married women once again to being nonentities in the social security system".
Thus Sir Peter Large sees Clause 60 not as reform of Beveridge but a return to one of the ugliest features of the system that his report informed. I have seen no more withering criticism of this clause.
My noble friend Lady Hollis has spoken of those who will benefit from the changes this Bill proposes, as I too have done in previous debates. More especially I welcomed the help envisaged for 20 to 24 year-olds in full-time education. But what of the losers? Some 30 per cent of SDA claimants who are not eligible for income support will be the main losers. They include every severely disabled person whose partner works on average more than 24 hours a week.
If their partners work fewer than 24 hours, the first £15 of income will be disregarded. Any earnings above £15 will be deducted pound for pound. Also ineligible are severely disabled people if they and their partners have savings of more than £8,000. Anton Obholzer of the Citizens Advice Bureaux has been most helpful in documenting the effects of Clause 60 by reference to the cases of individual disabled people known to the CAB. I want briefly to mention just two.
A London bureau reports the case of a married woman suffering from Guillan Barrie Syndrome, multiple sclerosis and epilepsy. She is a wheelchair user and now receives £52.70 a week in severe disablement allowance. Her husband works 40 hours a week. She will thus not be entitled to income support when she loses her SDA. Nor, it appears, will she be able to claim earnings replacement benefit in her own right.
The second case, reported by a bureau in Kent, is that of a man in his early 40s who was made redundant after working and paying national insurance contributions since leaving school. To gain better qualifications he went to university for three years, took a degree and got a job. Tragically, before he could take up his appointment, he suffered severe head injuries in an accident. His years at university mean that he does not have a recent record of NI contributions. So under the proposals in the Bill he will be ineligible for incapacity benefit. Nor will he qualify for SDA because of his wife's hours of work. The CAB comments:
"The Government have stated that they want disabled people to lead a fulfilling life with dignity. The CAB believes that abolishing SDA moves away from rather than towards this goal".
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My right honourable friend Alistair Darling, Secretary of State for Social Security, said in his "moral crusade" speech at Newham two days ago:
"Failing to embrace radical reform would let down people who look to Labour to represent their needs".
But headlong retreat from the radical reform that created a non-contributory income benefit as of right for severely disabled housewives in the 1970s will be the consequence of keeping Clause 60 in this Bill.
What kind of radical reform is it that inflicts gratuitous and unmerited further hardship in the very sad cases drawn to my attention by the CAB? And what kind of moral crusade is it that hurts them at a time when so many more fortunate people in society have never had it so good?
I support the deletion from the Bill of Clause 60.
Lord Higgins: Perhaps I may intervene at this stage. It is appropriate to defer to the noble Lord, Lord Ashley, whose name appears at the top of the list of those noble Lords who oppose Clause 60 stand part, and also the noble Lord, Lord Morris, who, for the reasons he explained, will not be able to be here later in our proceedings today.
The effect of Clause 60 is to abolish the severe disablement allowance which is a non-means-tested and non-contributory benefit payable to people who are unable to work due to sickness or disability but who do not have the contributions necessary to claim incapacity benefit. Neither of the noble Lords to whom I have just referred is given to hyperbole, but when they use words like "disgraceful" or "weird and cruel reform" it is right that, given their record over the years in defending the interests of disabled people, we should take account of their views. However, even if that were not so, we on these Benches believe that what the Government propose here is a serious error of judgment. Indeed, it goes together with the two previous clauses which were debated very late at night the other day which restrict incapacity benefit to those who have made only recent, not long term, contributions and those who have not made their own pension provision.
It is difficult to avoid the conclusion that all three of these clauses are driven by the desire to reduce expenditure on social security. It is well known that both before and after the election the Prime Minister pointed out very clearly that it was the intention of the Government to reduce expenditure on social security. They have totally failed to do so. That expenditure is scheduled to rise by some £35 billion over the next three years.
The noble Baroness and the noble Lords who have also spoken in the debate have constantly stressed that it was only the intention to reduce the proportion spent on social security. That did not appear in the speeches made before the election and subsequently by the Prime Minister. But it is difficult to avoid the conclusion that these three clauses are effectively cost saving exercises. In reply, perhaps the Minister can tell us how much is expected to be saved from the social security bill if Clause 60 remains.

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I understand from the figures quoted—no doubt the Minister can confirm them—that about 16,000 people a year, 10,000 of whom will be women, will be excluded from benefit as a result of the abolition of SDA. The noble Lord, Lord Morris, gave a number of case examples provided by the CAB of the kind of people who will lose out. It will have a particularly harsh impact on severely disabled women because 61 per cent of SDA recipients are women; and that rises to 70 per cent for older women. A number of other groups will lose severely as a result of the proposed change. Instead of entitlement as at present to a non-means-tested benefit, they will be pushed on to a means-tested benefit. This has been a constant theme of the Government since they came to office, and certainly so far as concerns this Bill. There is a move more and more towards means-tested benefit. This clause is another move in that direction.
The proposals are opposed by a number of outside bodies which are concerned about the impact that they will have. I refer to MIND, MENCAP, the Disabled Benefits Consortium, the Disability Alliance, and so on. Such a change is not in line with the broad thrust of the way in which society is developing. it seems to us a mistake. I find the arguments put forward by the Minister unconvincing.
The Government may argue that these people can end up on income support. But we all know the problems of that. We have stressed a number of times that if an individual has capital of £3,000—it is a small amount—his benefits will be reduced; and they will be eliminated if he has capital of £6,000. So we do not consider that a good argument.
Alternatively, the Government may argue that such benefit may go to households which already have adequate resources. That does not seem a reasonable argument against the background of the people who are at present entitled to severe disablement allowance.
The argument is put forward that most women now go out to work; they will be eligible for IB instead. That does not prevent the people whom I have listed, on the scale which I have enumerated, from losing out as a result of the clause.
We believe that it is a bad clause. The noble Lord, Lord Ashley, is right to stress that it should not be in the Bill. It is a view that we share.
4.15 p.m.
Earl Russell: We on these Benches support the Motion of the noble Lord, Lord Ashley of Stoke, for deletion of this clause. The Minister precisely and correctly said that severe disablement allowance was a safety net. Those who propose the removal of safety nets are either optimists or sadists. The Minister is an optimist. I like optimists, but I do not always believe what they tell me.
I shall not speculate into which of those categories the Secretary of States falls. However, I confess that I found the Secretary of State's Newham speech in this context just a little curious. There seemed a painful disjunction between the Secretary of State's rhetoric and the measures he set out to defend. He produced, as
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government Ministers always do, a great deal of rhetoric about the creation of opportunity and getting people into work. I know that some disabled people can do all sorts of things that people would not have expected. But I do not think that the number of people on severe disablement allowance who will go into regular work is likely to be statistically significant. I shall be glad for those who do, but I doubt whether it is a principal motive of the clause.
I do not understand what opportunity is being created. especially since, as I understand it, the savings—I join with the noble Lord, Lord Higgins, in wanting to know the figure—are being ploughed back into the Treasury. The Secretary of State said a great deal about children growing up in poverty. Again, I do not see what help is given to children growing up in poverty by cutting severe disablement allowance. I cannot help suspecting that the Secretary of State is crusading up the wrong tree.
I turn to the Minister's optimism. We have here the same debate as we had between the Minister and her noble friend Lady Turner of Camden on the bereavement allowance. I am glad to see the Minister nod. I understand perfectly well the sort of pride which the Minister brings into her belief in equality. It does her a great deal of credit. But I also agree with the noble Baroness, Lady Turner of Camden, that the Minister overrates the extent to which the world has changed. She believes that the degree of equality between the two genders is greater than yet it is. I have occasionally expressed in particularly sanguine moments similar optimism in political debates inside my own party, and a great many women in the party, with very good experience behind them, have told me that it is not true yet. They convince me that that is so.
The Minister might also bear this point in mind. I regret to say that she very easily thinks in the category of "they". That is a deceptive category. People are not "they". They are a miscellaneous and utterly different collection of people. That is truer in this context than in almost any other. When we consider the use that women make of the opportunities put in front of them—and I think that men equally will make use of the choices that will be put in front of them as the pattern of division of work between the genders shifts—some seize opportunities with both hands, and some have a preference to remain the traditional wife and mother. Both are their right. It is not our business to lay down one as the normal pattern and apply "they" to it.
I shall not run through the traditional list of categories of those who are disadvantaged by the contributory principle. The noble Lord, Lord Ashley of Stoke, covered the ground pretty thoroughly. One should perhaps say a word about those who have several part-time jobs, each of them below the lower earnings limit. That creates a great deal of difficulty.
One should say something about how much Me Government's new proposals will disadvantage students. We on these Benches are extremely grateful for the change in the kick-in date from 20 10 25. It makes a lot of difference, but not enough. People are coming to university later and later because they need

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to save the necessary money to cover their maintenance, which their loans will not do, and in many cases to pay their tuition fees. So we quite regularly have people coming up to university without adequate contribution records at the age of 23. These 25 year-olds will not have the contribution records necessary to qualify for IB. There will be a good deal of hardship in this area. Some further thought on this is needed.
For those, and for a great many other reasons, we think that the noble Lord, Lord Ashley of Stoke, is right; and whenever it comes to the issue we shall be with him.
Lord Campbell of Croy: I am glad that the noble Lord, Lord Morris of Manchester, was able to make his speech earlier than some of us contrived to do, because he is now hosting a function for carers in another part of the building. I would have been one of those attending had it not been for this Committee stage. The noble Lord, Lord Ashley of Stoke, has made a good case and I support it in general. He went over the ground and I shall not go over it again, but I shall point to some of the main aspects of the argument.
SDA has been for people who have not been able to build up the required national insurance contribution record. Recipients are generally either people who have been disabled all their lives and have never been in the labour market or people who have become severely disabled later in life and do not have a recent national insurance contribution record. Those people, I understand, are mainly married women, and if such people were to claim in the future they would not be entitled to SDA.
Other provisions in the Bill tighten the contribution conditions for incapacity benefit—IB—so that in future severely disabled people who have been in and out of work or unemployed will be unable to qualify for IB. At present. people in that position can claim SDA, but in future SDA will not be available and that group will have only means-tested income support to fall back on, provided they do not have savings and their partner or spouse is not in work.
I am glad that the noble Lord, Lord Ashley of Stoke, mentioned Mrs Megan du Boisson. I referred to her in my Second Reading speech on this Bill. I helped her to create, in the mid 1960s, the organisation known as DIG—the Disablement Income Group—at a time when there were virtually no benefits for anybody except war disabled or those suffering industrial injuries. She was, until her untimely death, an inspiration, especially for this benefit. I am glad to be able to support the noble Lord, Lord Ashley of Stoke, in general and I hope that the Government will listen carefully to what has been said in this debate.
Lord Rix: Like the noble Lord, Lord Campbell of Croy, I shall not go over the ground covered so effectively by the noble Lord, Lord Ashley of Stoke, and other noble Lords. However, it is worth remembering that people who are over the age of 20 when they claim SDA have to demonstrate that they are 80 per cent disabled to qualify. It is difficult to prove that one is 80 per cent disabled and, as a rule, people do
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not slip through the net in a test of that kind. If the Government really believe that the best way to help the more severely disabled people is by abolishing the severe disablement allowance, something must replace it. That something should be more than means-tested income support.
Baroness Hollis of Heigham: This clause and Part IV of Schedule 13 phase out severe disablement allowance. That will mean that from the point of change, no new claims for SDA will be accepted.
I regret that the previous amendment and this clause stand part debate were not grouped together. We have already spent some time discussing our proposals for SDA, so I will not extend this debate unnecessarily. I simply want to remind the House that SDA has failed. It does not help the one group of people who cannot build up a national insurance entitlement because they become disabled before they can enter work. SDA does not protect those people properly. It does not help the poorest, it is out of date and it gives additional money to people who we no longer believe need it.
The Government propose to reform SDA. Nobody now receiving SDA will lose out, but in future younger people will gain through access to incapacity benefit—worth up to £26.40 a week more. Some 175,000 people will gain in the long term. Because of the points of concern expressed by the noble Earl, Lord Russell, we shall ensure—by raising the age cut-off point to 25 for young people who enter higher education or training—that we give them entitlement to the new IB. I hope that we have met his points, but if he feels that we have not I shall be happy to follow it up in correspondence. The disability pressure groups asked us to raise the cut-off age from 20 to 25 for that reason.
People with the lowest incomes who will no longer qualify for SDA will see no difference in their income because, as the House knows, SDA makes no difference to 70 per cent of recipients, because they have to top it up with income support. People who will be in that situation in future will also be eligible for income support.
We should also remember that our reform of SDA is part of our wider package for disabled people. We are introducing the disabled person's tax credit, which will be much more generous and accessible than disability working allowance; doubling the child premium in the working families tax credit for a disabled child; and creating the new disability income guarantee. worth at least £128 a week for most severely disabled people under 60 receiving income support.
Overall, we are spending £2 billion more by the end of this Parliament on benefits for disabled people. As the House saw in the debate last night, we are also building on our commitment to comprehensive civil rights with the disability rights commission. We are also doing more to help people into work—because all those currently on IB were once in a job. We are investing £195 million in the new deal for disabled people; investing a further £80m in the "one" pilots; and replacing the all work test with the new personal

831
capability assessment to end the assumption that everyone on incapacity benefit can do no work whatever their skills and their human capital.
All those reforms are an essential part of our approach, but if we want to do more for the people who need help most, we have to ask how best to use our resources. That is why we are modernising disability benefits—so that they provide more help for disabled people in greatest need, as well as providing help and opportunities for disabled people who 'want to work.
I was asked about the savings that the proposals would generate. We expect from Clause 60 that the savings by year three will be £5 million a year, rising in the long term to some £60 million a year. I am assured that in the £250 million figure I gave in response to the earlier amendment moved by the noble Lord, Lord Rix, income support was taken into account in the calculation of the cost of that amendment and, therefore, it was a net figure, not a gross figure.
Most of the Committee's concerns this evening have focused on the position of married women. Some 35 per cent of the existing SDA caseload are married women who were passported across from the old housewives' non-contributory invalidity benefit, introduced in 1977. The same cohort of people were taken across into SDA.
My noble friend Lord Ashley of Stoke said that we were whisking away the safety net from those married women in the future, but that is not true. A safety net will exist that did not exist in 1977 or in 1984, when SDA. was introduced. The addition in 1988 of the disability premium to income support is now the true safety net for people with relatively severe disability who are in financial need.
The noble Earl, Lord Russell, was right. It is a generational issue, and the same arguments came up in relation to widows' benefit, incapacity benefit and SDA. The world has changed since those benefits were shaped in the early 1970s.
I repeat that the housewife's contributory benefit was introduced one year before the abolition of the reduced stamp for married women. That meant that women such as me were allowed to coast through on a reduced stamp and never build up an entitlement to JIB. That has not been the case for the past 20-odd years.
In 1988, when income support replaced supplementary benefit, a new disability premium was introduced. Seventy per cent of those on SDA already receive income support. I pay tribute to the previous administration for introducing in 1992 new lower rates for disability living allowance.
In discussing married women with a disability who have no access to any income, the missing words are disability living allowance. Eighty per cent of people on SDA access and claim disability living allowance if they have extra costs of caring which need to be financed.
Furthermore, as a result of the changes to the minimum wage and LEA, approximately 90 per cent of women who work more than 16 hours a week and 60 to 70 per cent of women who work fewer than 16 hours a week will now qualify for incapacity benefit by building up their benefit entitlement.
832
I believe that the world has changed. Perhaps I may give an example of a woman I know. She is Australian by birth and is married. She has never worked in this country and therefore has never built up a contribution record. She has no extra cost needs by virtue of her disability and therefore is not receiving DLA. Her illness is one of fatigue rather than an extra-cost illness. Her husband is a highly paid local government officer. That woman has not contributed; she has no extra costs; and a generous household income is going into the family. Why is she receiving a benefit when the money could be more appropriately spent on helping young people? I refer to young people perhaps known to the noble Lord, Lord Rix, through Mencap who, by virtue of cerebral palsy, spina bifida or the like, will never have the chance to join a labour market, will always be poor and for whom most of these savings are being recycled to help lift them.
These are choices. If money were endless, all right. None the less, in seeking to determine who needs help most we are looking at a degree of disability matched by the financial capacity to cope. We believe that people who cannot cope are those unable to build up any means of a contributory benefit by access to the labour market and who have no access to other forms of capital. In future, that group will be passported from SDA to IB. I believe that that is the right focusing of the benefit—not continuing to give it to people who have chosen not to build up a contributory record, as in the case of some married women, or who do not need access to means-tested benefit because they have sufficient finances coming into the household. I do not believe that they have the prior claim on disability benefits over young people who were disabled in their childhood and have no such access. That is the reason for Clause 60. I realise that this is a generational matter, but I hope that in the light of my explanation Members of the Committee will be able to support the Government's position.
4.30 p.m.
Lord Higgins: The Minister said that the benefit would go to people who had chosen not to build up a contribution record. Is she saying that all the people who will lose out as a result of the clause chose not to build up a contribution record; that is to say, they had a choice?
More particularly, the Minister did not refer to a government estimate showing that 116,000 people, 10,000 of them women, would be excluded from benefit as a result of the abolition of SDA. Is she saying that all those 16,000 people will receive benefit in some other way, or not?
The Minister said that the Government believe that those people have adequate resources. What is their evidence that that is the case? Presumably, the evidence is based on a statistical foundation. That statement implies that no personal benefits shall be paid to anyone without a health or means test.
Baroness Hollis of Heigham: People such as myself chose to pay the reduced married women's stamp or we chose not to go to work. In some comfortably-off

833
families, the women chose not to work. That is their choice. However, if there is a choice not to work, and therefore not to build up a contribution record, unless there is financial need the state has no obligation to make good the choice from taxpayers' money. It is not necessarily right that taxpayers on a modest income of £10,000 or £12,000 a year should contribute to a non-means-tested benefit for someone whose household income may be four or five times that.
If a person has additional costs by virtue of his disability, yes, there is a commitment by society. That is precisely why 80 per cent of those on SDA are entitled to disability living allowance. However, as an income replacement—that is SDA—it is not necessarily right that society should replace an income where a household is comfortably off as opposed to the extra costs of disability, which is generated by DLA.
The point is that women have a choice now and they make good use of it. In fact, seven out of 10 married women and eight out of 10 married men work. More widows than widowers are in work. The number of women going into the labour market is the same as the number of men. Given that, if a woman chooses not to work and therefore not to build up entitlement to contributory benefit, presumably by reason of the relative affluence within the family, that is her choice. However, it is not necessary that other taxpayers on lower incomes should support that choice. If she has extra needs by virtue of her disability, DLA should meet it. Alternatively, if she is in financial need, there is income support with disability premium.
Lord Higgins: In seeking to understand the point that the Minister makes, perhaps I may put it precisely. Is she saying that all 16,000 people who are expected to be excluded from benefit will have the opportunity of building up a contribution record which will be adequate at the point where they would normally draw it and ensure that they are provided for?
Baroness Hollis of Heigham: In a way, that is a hypothetical question because everyone currently on benefit will be protected. I hope that one of the consequences of this and other changes will be to encourage women to build up their entitlement record. Most of them do. That is why the Chancellor, with the combination of the minimum wage and keeping the LEA floor low at £66 and beginning the contribution during the next two years at the personal tax rate of £88, is ensuring that low-paid women can continue to enjoy the kind of protection which contributory benefits offer.
The Government's policy is that, through work, people should be able to contribute to building up their national insurance record. If they cannot do that, if they cannot enter the labour market and if they have financial need, we are trying a non-means-tested benefit. However, if they have financial need and can join the labour market but are no longer so doing, they are entitled to income support with a disability premium which is at least as generous as IB.
Lord Higgins: I thought that I had put the question precisely. Let me try again. Is the Minister saying that
834
all 16,000 people—and perhaps she will confirm the figure—who will be excluded from benefit will have the choice of building up a contribution record? We understand that the benefit will not stop for people in receipt of SDA, but in future will those who are able to contribute build up an adequate contribution record in the time? Will they all have a choice, or is it the case that because of personal circumstances some people will not?
Baroness Hollis of Heigham: I do not know whom the noble Lord envisages. It is true that we expect that the 16,000 people who currently qualify for SDA would not, in future, so qualify. I hope that the statistics quoted by the noble Lord are correct. Everyone has the choice, as the noble Lord has had in the past, as I have had in the past and as every member of your Lordships' House has had in the past to build up contributions.
Those people who in the future will be disqualified from SDA will have had the same choice as others, no more and no less, to build up a contributions record. I misled the noble Lord. The figure is 14,000 rather than 16,000. None the less, we all have the choice to build up a contributions record.
However, I do not understand the point made by the noble Lord. That choice has remained. In the past some women have chosen not to take advantage of that choice. They have gone into work, or have not gone into work, but have not built up a contributions record and they have had a non-means-tested benefit at the expense of the rest of us. That is fine. That will continue for that cohort, but in future everyone will have the choice to build up a contributions record. If the noble Lord has some examples in mind, I may be able to help him, but at the moment I do not understand his question.
Lord Higgins: One example is a carers who is looking after someone. Will he or she have that choice?
Baroness Hollis of Heigham: Yes. I made it clear in answer to my noble friend that a carer who cares for more than 35 hours a week—for example, a full-time carer—and who would otherwise be passported from SDA, will be eligible for incapacity benefit on the existing conditions of IB. I gave that assurance to my noble friend in reply to the last question, as I am sure the noble Lord heard.
Lord Rix: Before the Minister sits down, in an earlier answer to a question from the noble Lord, Lord Higgins, she said that women with wealthy husbands should not be supported by people on incomes of £10,000 a year. I would have thought that income close to the minimum level of pay in this country. What amount of tax would a person on that low level of income pay that would eventually filter through to the wife of the wealthy husband?
Baroness Hollis of Heigham: I shall try to do the calculations. I do not believe it would be advisable for me to do so on my feet without knowing the circumstances of that particular family.

835
My point is this. If we were considering afresh, in today's society, how to build a structure of disability benefits, would the Committee advocate a benefit to be received by people who have chosen not to build up a contributions record—apart from those who have not had the opportunity to exercise a choice by virtue of the age at which the disability was incurred? Would noble Lords invent a benefit to be received by people who had chosen not to build up a contributions record and whose financial means were sufficiently generous within the family that they would not need a means-tested benefit? I am not sure that the Committee would consider that the first priority. I was seeking to establish that point.
Earl Russell: Perhaps I may seek to answer the Minister's question roughly in the terms in which she posed it. One needs to give a little background. First, I have much enjoyed listening to the Minister on the subject of equality. I do not mean only because she speaks extremely well, but also because her conviction that the world has changed is itself both evidence of change and a force for future change. So long as the Minister is expressing only a personal opinion, I am extremely happy to listen to her.
I become a little more uncomfortable when prescriptions are made for what will happen to other people. There are many possible choices. On the issue of choice the Minister and the noble Lord, Lord Higgins, are both right. They are talking about different points. The noble Lord, Lord Higgins, is concerned directly about people who are in no position to obtain any work from. which they can build up a contributions record. I agree with him on that.
However, the issue here concerns the situation where one person in a couple not necessarily the woman—chooses to stay at home and accepts the domestic responsibilities. One cannot get away from the fact—as I was rudely reminded when the water started coming through my ceiling at two o'clock this morning—that someone has to deal with the matter!
I do not believe it is the business of the state to decide how those responsibilities inside a family should be apportioned. The state does not have the knowledge; it does not have the competence; and it does not have the authority. I believe, with some passion, that diversity is itself a good. I agree with the remark that my honourable friend Mr Rendel once made to me that there is no one right way to live.
When the Minister asks whether the state should support that choice, I hear what she says. I understand the reasons for her doubt, but supporting the principle of diversity is of sufficient importance to justify an answer "yes" to the question of the Minister. That "yes" is of a great deal more importance to running a state in a free country than we often stop to consider.
Baroness Hollis of Heigham: In no sense do I dispute the virtues of pluralism, diversity or choice. If resources are Ii rite it is not necessarily right that taxpayers' money should be used to support that choice rather than making
836
life more comfortable and secure for people who have never been able to exercise choice because their disability was incurred at birth.
Earl Russell: I hear, understand and respect what the Minister says. However, if the power of the state, and especially its financial power, is exercised to discourage diversity, granted the fact that most of us are wrong most of the time, in all quarters of the Committee, that is the greater evil.
Lord Ashley of Stoke: I do not propose to press to a Division, the Question whether Clause 60 shall stand part although I may come to a different conclusion on Report. I am grateful to my noble friend for the enormous trouble that she has taken to answer all the points that have been made.
Clause 60 agreed to.
4.45 p.m.
Lord Higgins Lord Higgins moved Amendment No. 124C:
After Clause 60, insert the following new clause—

Welfare Reform and Pensions Bill

  ATTENDANCE ALLOWANCE AND DISABILITY LIVING ALLOWANCE: INFORMATION ABOUT ENTITLEMENT
  (" .—(1) The Secretary of State shall take such steps as appears to him appropriate for the purpose of securing that persons who may be entitled to attendance allowance or disability living allowance (as the case may be) become aware that they may be entitled to that benefit.
  (2) If it appears to the Secretary of State that, on the basis of information in his possession, a person who has not made a claim for attendance allowance or disability living allowance (as the case may be) may be entitled to that benefit, he shall forthwith inform him of that fact and invite him to make a claim for it.
  (3) Where the Secretary of State is in possession of information which should have alerted him to the fact that a person might be entitled to claim attendance allowance or disability living allowance (as the case may be) but he failed to discharge his duty under subsection (2) above and that person subsequently makes a claim for the benefit concerned which is determined in his favour, he shall be entitled to payment of the benefit from the time when the information came into the possession of the Secretary of State, provided that he would have been entitled from that time but for the requirement of paragraph (a) of subsection (1) of section 1 of the Social Security Administration Act 1992 (claim necessary for entitlement).")
  The noble Lord said: I normally try to make my amendments as brief as possible, but Amendment No. 124C is longer than some. Therefore, it is virtually self-explanatory. The amendment concerns the take-up of the disabled living allowance. It seeks to suggest that the Secretary of State shall take the necessary steps to ensure that people entitled to disability living allowance or attendance allowance become aware that they are entitled to that benefit.
  I believe that the noble Baroness will confirm that the take-up of such benefits is much lower than one would like. No doubt she has the figures. It is suggested that the Secretary of State shall take steps to ensure that those concerned receive such benefit, if they are entitled to do so, on the basis of other information that the department is likely to have. The final part of the amendment suggests that if there is a determination in favour of such a person, but they were not aware of the fact at the time, the benefit should be back-dated.
  As I say, the amendment is self-explanatory. I look forward to the reply from the Minister. I beg to move.
  Lord Addington: Any amendment accompanied by a guidance note to ensure that people know about their entitlements always attracts my attention. Many problems within the system concern a lack of knowledge. People do not know what they should do, so they struggle. I suggest that that is something that should be stressed to every single agency that deals with the general public.
  Baroness Hollis of Heigham: This new clause is intended to improve the take-up of disability living allowance and attendance allowance by making the DSS responsible for making people aware that they may be entitled to claim.
  I fully share the concern of the noble Lord. We know that there is a problem of low take-up with DLA and AA. That is confirmed by research. Of course, it is right that things are done to promote benefits when those entitled to them are not claiming them.
  The analysis suggests that a range of factors is involved, including, for example, lack of knowledge about the benefits and reluctance to claim. It is also the case that the rules of entitlement for these benefits are more difficult to understand than those for benefits like child benefit and retirement pension where take-up is nearly universal.
  Thus, we have a double problem. On the one hand, many prospective claimants misunderstand DLA and AA, resulting in as many as 40 per cent of claims being rejected. At the same time, the research available to us suggests that 40 per cent, or perhaps even more, of those potentially eligible for the benefits may not, for one reason or another, claim them. So it is important that we try to obtain a better balance.
  There is much that we do already to achieve this. In many cases the Benefits Agency staff already help people to find out about their benefits such as DLA. We particularly take steps to provide information in various formats to ensure that it is available and accessible. It is provided in a dozen languages with audio tapes, large print and Braille publications. We also provide advice for disabled people by telephone, including textphone services for people with speech or hearing problems, on several well-publicised numbers.
  We have also co-operated with other organisations whether within or outside Government, that provide benefit information and we shall continue to do so, including working closely with local authorities. Given that most local authorities have welfare rights offices, I have recently started discussions with local authority organisations to see how best we can help people to take up the benefits that they should take up as well as to encourage people to come forward and move on to the New Deal where they can. We believe it is right to seek to ensure that people know what they are entitled to claim. We believe that the "one" service, particularly for younger people, may also be a help. We are working on that.
  838
  None the less, the noble Lord asks us to shift responsibility on to the department to use the information that it holds to invite claims for benefit. That seems an attractive and obvious approach. That is more easily done, but even there we have had real difficulties in getting people on retirement pension to claim the income support to which they are entitled. We at least have a much better idea of whether they are entitled and eligible even though they are not claiming.
  The difficulty with DLA and AA, as I am sure the Committee knows, is that it is an extremely complex benefit. The DSS cannot determine in advance who may be eligible for it. Perhaps I may explain. The DLA and AA are based on a disabled person's diary and the day-to-day problems that they face in living. It is effectively self-reporting and not departmental. That is translated into the proxy of care need. Neither is there any automatic read-across from severity of disability to care need and therefore to the level of DLA. For example, a person's housing situation may mean that they cannot cope with night-time care needs. They may be living in a Victorian converted house with a downstairs toilet with the need to go up and downstairs. Someone living in a bungalow might not have such night care needs and therefore would not be entitled to the higher rate DLA but only to the middle rate.
  That is the kind of complexity with which we are dealing. We need to know a person's diary for the purposes of assessment and need. We have to turn that into a proxy for care. Only then can we assess their eligibility for entitlement. Although people may be encouraged by their GP, their local welfare rights service, or the "one" service to apply for DLA and AA, ultimately, because of the complexity of the benefit, there cannot be any automatic trawl by the Benefits Agency. It has to be initiated, so to speak, from the bottom up with our help and information.
  In the light of that explanation I hope that the noble Lord will accept that his target regarding the two benefits, DLA and AA, which have to be initiated by the disabled person, while doing our best to provide information to them, cannot be any automatic provision. They are complex benefits based on the individual's care need and therefore can only be dealt with in conjunction with the individual claimant. With that rather complicated explanation, I hope that the noble Lord will feel able to withdraw his amendment.
  Lord Higgins: We are grateful to the noble Baroness for that explanation. It is a Catch-22 situation. The fact that it is so complicated makes it all the more difficult to ensure that people take up the benefit. We recognise that. But it seemed worthwhile raising that particular point in the course of debates on the Bill simply because the take-up rate, compared with other benefits, seems to be extremely low. We realise the reasons for that. We hope that the department will do everything possible to ensure that there is adequate publicity by way of advertisements and so forth.

  839
  As the noble Baroness rightly pointed out, in other contexts local authorities manage to get around the problem. One hopes that that will be so in the future as regards this matter. In the light of the remarks of the noble Baroness I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 61 agreed to.
  [Amendment No. 125 had been withdrawn from the Marshalled List.]
  Lord Addington Lord Addington moved Amendment No. 125A:
  After Clause 61, insert the following new clause—

  INCOME SUPPORT FOR SEVERELY DISABLED PERSONS
  (" .—In section 135 of the Social Security Contributions and Benefits Act, there shall be inserted after subsection (1)—
  "(1A) The applicable amounts for income support for severely disabled persons shall be made by the Secretary of State following consultation with one or more organisations whom he regards as representative of severely disabled persons.
  (1B) The sums first certified by the Secretary of State under subsection (1A) above shall be. in the case of a severely disabled person who is aged not less than 16 but less than 60, set at a level at no less than the higher level for those aged over 25 together with the maximum disability premiums available.
  (1C) After sums have first been certified under subsection (1A) above, the sums certified in each subsequent year shall be not less than the total of the sums certified in the previous year together with the amount (if any) by which it appears to the Secretary of State that the general level of prices has increased in the course of the previous year.
  (1D) In subsections (1A) and (1B) above, "severely disabled persons" means persons who are in receipt of the care component of disability living allowance at the highest rate within subsection (4)(a) of section 72 above or in receipt of severe disablement allowance."").
  The noble Lord said: The amendment seeks to extend the stated weekly disability income guarantee of £128 to those under as well as those above the age of 25. The proposed new clause also seeks to redefine a severely disabled person to include not just those in receipt of the highest rate of care component for DLA, but those in receipt of the severe disability allowance.
  To be eligible for the disability income guarantee a person must be on income support, receiving the high rate of DLA care component and also be over 25 years of age. The problem is the age barrier. The Government estimate that 70 per cent. of those in receipt of SDA are also claiming means-tested income support. However, according to a reply given in Hansard in November last year, only 53,000 are getting the higher rate of care component of the DLA. Some of them will be under the age of 25. That means that there is a substantial number of severely disabled people without access to the disability income guarantee of £128 per week.
  Although Clause 59 allows the transfer of young, disabled people to a higher income incapacity benefit, about 95 per cent of current SDA claimants will not be transferred and will therefore be left on low incomes, most without access to the guaranteed disability income. Surely, this age barrier with an arbitrary line at the age of 2.5, is slightly ridiculous. I beg to move.
  Baroness Hollis of Heigham: The noble Lord, Lord Addington, has raised some important points.
  840
  I hope that I can reassure him that the amendment is not necessary. To begin with, we already consult organisations representing disabled people. When the Prime Minister launched our welfare reform programme he promised that there would be consultation and time for discussion at every stage and we have done so. I was involved in helping to set up the Disability Benefits Forum. Even though its work has now ended following the resignation of its members, detailed work with individual members of the forum continues. It has made an important contribution to our work.
  We are already making sure that we provide benefits at a level which provide real support for disabled people. The disability income guarantee will be introduced in April 2001 and will provide extra help and security for the poorest disabled people with the highest care needs. It will provide help through income-related benefits to severely disabled adults and families with disabled children who get the highest rate care component of DLA. At the April 1998 rate it will be worth an extra £5.75 for a single adult or child and £8.30 for a couple. I mentioned the New Deal earlier and the Disability Rights Commission. Together I hope that that reassures the noble Lord that we are indeed listening to the views of disabled people.
  The noble Lord referred to the age of 25 and pressed me on that. Amendment No. 125A is intended to provide a further enhancement of benefit to severely disabled people aged under 25 and to increase the level of personal allowance to those aged 25 and over.
  As the noble Lord knows, as with JSA, which is the fulcrum benefit, in general the reason the lower rate of benefit is paid to younger people is that the majority of them live in someone else's household or share a household with other young, single people and have fewer financial responsibilities. It would be wrong for benefit levels to offer an alternative to seeking work or to training or to be an incentive to leave home or to go into independent accommodation, for example, when they can perfectly well share. We do not believe that that is a sensible use of resources.
  The reforms of SDA which we have just been debating will mean that in future young people who become disabled early in life will gain because they qualify for IB. They will gain by approximately £26.40 per week, which will be a valuable enhancement.
  A further requirement of this amendment would be to uprate benefit levels in line with prices. I can reassure the Committee that although that requirement is not on the face of the Bill, it already happens in practice. In the light of those responses, I hope that the noble Lord will be able to withdraw his amendment.
  5 p.m.
  Lord Addington: The Minister gave two answers: one was technical and the other philosophical. Technical answers should always be taken away and read carefully. The philosophical answer concerned the age barrier. We received the arbitrary line of response that the Government's terminology was focusing. But when we focus strongly on something we al ways blur the edges; we always miss something.

  841
  I am not happy about the response, but at this time I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 62 [Disability living allowance]:
  [Amendment No. 125B had been withdrawn from the Marshalled List.]
  Lord Addington Lord Addington moved Amendment No. 126:
  Page 69, line 8, leave out ("5"") and insert ("3"")
  The noble Lord said: Again, with the leave of the Committee, I shall move an amendment in the name of my noble friend.
  Amendment No. 126 concerns a more straightforward issue. It seeks to make the test which is applied to decide the correct level of mobility payment available to children under the age of five because those who are less severely disabled also incur extra costs. Although the Government will probably say that those under that age are not usually regarded as living independently, if one has a four or five year-old who is deaf, it may be extremely difficult to take them, for instance, on a bus. If they cannot hear, they may run off the bus and into the road, so extra travel costs to keep them safe may be incurred.
  The provisions refer to a lower level of disability. I am always rather terrified of the idea of defining a "lower level" of disability. Extra costs may be incurred because of the necessity of using a car or a taxi because a hearing impaired child, for instance, cannot be controlled and easily given guidance. That is the nub of the matter. I beg to move.
  Baroness Hollis of Heigham: Amendment No. 126 seeks to replicate for the lower rate mobility component what the Government are proposing to do for the higher rate; that is, to bring it down from the age of five to three. I am sure that Members of the Committee will be aware that it is not that the lower rate mobility component is a lower financial level of mobility allowance for the same group of people; it is designed to help very different people.
  The higher rate of mobility component is for people who are virtually unable to walk. It is literally concerned with physical mobility; it is for people who cannot walk easily more than a few yards. It involves the "virtually unable to walk" test. The lower rate mobility component does not involve people who have a physical incapacity to walk, but those who, when they walk, need supervision by virtue of severe learning difficulties, behavioural problems, severe mental illness or the like. So these are not, as with the care elements, a step down in severity of need; they are two different groups of people, as I am sure the noble Lord, Lord Addington, will be aware.
  Lord Addington: I thank the noble Baroness for giving way. I was trying to point out that the problems implied in that assessment of the definition often do not fit the categories which all governments have to use.
  Baroness Hollis of Heigham: That is where I was going to dissent from the noble Lord, Lord Addington.
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  We recognise that with the higher rate MOB, where somebody is physically unable to walk—for example, a child who has had severe cerebral palsy from the age of four—they may still need pushchairs or, with a different form of illness, oxygen cylinders and so forth. That means that to obtain any mobility the family will need personal transport.
  In the past the child at the age of five may have needed that to go school, which is why the old, higher rate mobility component started at five. We are now reducing that to three because now that is when children go into playgroups or go through the national childcare strategy into nursery school. The same does not apply to those people on the lower rate mobility component. The lower rate mobility component is intended to help people who need extra guidance or supervision as a result of their disability.
  The vast majority of children under five need constant supervision when out walking, whether or not they are disabled. That is particularly true when children are in unfamiliar places. None of us would allow a three or four year-old to run in a busy street without constant supervision. That is the difference. If a child has a physical disability and needs heavy equipment, it cannot run in the street; it has to be carried. From the age of three or four onwards it may be physically too heavy to be carried and therefore access is needed to a mobility car.
  A child with a behavioural problem needs constant supervision, but that would apply whether or not the child had a behavioural problem. That is the basis of why we are unable to accept the amendment. The analogies are not similar. The needs in lower rate mobility component for an able-bodied child and a child with this level of disability do not engender any different needs for mobility, whereas they do if the child has a severe physical disability. In the light of that explanation I hope the noble Lord will not press his amendment.
  Lord Addington: There does not seem to be much between us when it comes to the types of problem involved; it is just that we believe that children who can respond to their own name can at least let the parent know where they are. They will be easier to keep an eye on, to control and communicate with. Thus it will be easier to travel with them on a bus; one will not need to have a hand on them all the time.
  This is an argument we could debate for a long time, quoting examples of cases where people have found the situation to be extremely difficult. However, the Minister indicated that she is not prepared to accept the amendment at this time. I shall take it away and consider whether it merits further attention. In the meantime, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 127 not moved.]
  Lord Rix Lord Rix moved Amendment No. 127A:
  Page 69, line 10, at end insert—
  ("(5) In determining entitlement to the mobility component of disability living allowance, no account shall be taken of where or by what agency a person is accommodated.")
  The noble Lord said: In moving Amendment No. 127A I shall speak also to Amendment No. 127E in the name of the noble Earl, Lord Russell, and others.
  Amendment No. 127A seeks to reverse the change made in 1996 which took away or reduced the DLA mobility component for those living in NHS accommodation. That was, of course, a change made by the previous administration. But the Minister will agree that it has not been a rule adopted by her administration that they should simply accept uncritically what was done by a previous administration. With reform in the air, it seemed to be a good opportunity to look at this again.
  The 1996 change was remarkable in a number of ways. It attracted one of the largest responses ever received by the Social Security Advisory Committee—almost every representation being firmly against the change. Unsurprisingly, it attracted the opposition of the advisory committee itself. It led to debates in Parliament in which hardly anyone other than government Ministers had a good word to say for the change. Finally, it was defended by the then Ministers with what must rank as quite the lamest collection of arguments ever dredged up to defend an indefensible policy.
  We were told that people in hospital were by definition in bed and could not conceivably benefit from a mobility benefit. We were told that the beneficiaries included detained mental patients whose mobility had been restricted by due process of law. We were told that health authorities were responsible for funding any mobility required by patients and that the mobility component constituted double funding. We were told that some NHS trusts had accumulated large sums of money for long-stay patients and paying benefits would simply add to the funds without adding to the welfare of the patients.
  Mencap and other disability bodies produced real cases involving the threat of real hardship to counter all this nonsense; but we argued in vain. I hope that on this occasion we shall not argue in vain. Should the Minister's brief not be as helpful to her as she would wish, I trust that at least it will contain evidence of the actual effects of the 1996 change which governments have so far failed to produce, having so far failed to ask for that evidence.
  I should like to earth my argument in a real situation. The people who suffered from the change three years ago are not people confined to bed and unable to benefit from mobility money. If they were, they would not be eligible for the mobility component since the basic eligibility criteria would exclude them. For the most part, they are not even in anything called a hospital. Fewer than 3,000 people with learning disabilities now live in units on hospital sites; around 5,000 live in NHS community homes.
  Mary lives at No. 1 in a home staffed by an NHS trust but leased to a housing association. She gets her mobility component in full, and getting it means that she can get out and about, with someone to accompany her, doing the things she wants to do—meeting the people she wants to meet and visiting the places she wants to visit, Jean lives at No. 2, in a home not yet leased to a housing association. She gets one-third of what her next-door neighbour gets, because of the 1996 change,
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  and, effectively, as the household budget does not fill the gap, gets one-third of the opportunities enjoyed by her next-door neighbour, although her disability and her needs are almost identical.
  Had these same people lived, for example, in a Mencap home, as well they might, their entitlement to the mobility component and their enhanced quality of life as a result of it would never have been in question.
  When mobility allowance was introduced, those living in any form of residential setting were deliberately included because of the overwhelming evidence that they needed it at least as much as, and probably more than, those living in the community. When DLA mobility component replaced mobility allowance, the same logic was followed. But. in 1996, some misguided person decided that here was a soft target for savings, perhaps because as many as 60 per cent of those affected had no actively involved relatives to defend them, and many were not well able to speak for themselves to defend their own interests. I hope that we may see justice restored today. I beg to move.
  Lord Addington: The noble Lord, Lord Rix, has done a very thorough job on his amendment. We are at least trying to do the same thing with our Amendment No. 127E. I hope that the Government will listen to what has been said and that the Minister will have something positive to say. It does not matter where you happen to be, you are still entitled to have some basic movement; indeed, freedom of movement is something of a human right. I believe it has been argued that you could be confined to a bed. I do not remember such arguments being used. However, if they were, I agree with the noble Lord that they are pretty lame.
  Baroness Hollis of Heigham: The effect of this amendment and Amendment No. 127E is that the mobility element of DLA should continue to be paid to people admitted into hospital, or resident in other similar institutions. However, I should make it clear that, as drafted, Amendment No. 127A would not alter the current entitlement conditions for the mobility element of DLA. Entitlement to the mobility component of DLA, is not affected by a person's accommodation but, once entitlement is established, payment is suspended after four weeks of free in-patient treatment. Nevertheless, in speaking to the amendment, the noble Lord made clear his intention that the current legislation withdrawing payment of the mobility component of DLA from hospital in-patients should be revoked.
  Withdrawal of the mobility component from hospital in-patients reflects the Government's policy of targeting help on those people with the greatest need, DLA is paid to help people meet the extra costs of disability. However, most of the needs of people in hospital, including care and basic mobility needs—I am not now talking about people who are necessarily confined to bed—are funded by the NHS, which has that responsibility. It cannot be considered best use of scarce resources to overlap with the help already available. The NHS pays for it and, in addition, people have their own personal mobility component.

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  Indeed, the principle of preventing duplication of public spending has always been a key factor in social security legislation. For this reason, most social security benefits are withdrawn or reduced after a period, commonly six weeks, following a person's admission into hospital. This has been a fundamental principle of the benefits system since 1948. Attendance allowance and the care component of DLA have always been withdrawn after a period in hospital. Given this fact, it is clearly difficult to justify the continuing payment of the mobility component to people, many of whom are physically immobile, or virtually so, and all of whom are receiving basic mobility costs from the NHS. Therefore, we do not think it right to restore the previous situation at an additional cost of £30 million a year, much of which would duplicate existing provision. We do not believe that that is a priority in the disability field.
  However, while the situation in respect of hospitals and other places traditionally run by the NHS is clear, the broader picture is not as straightforward as it used to be. In my view, the noble Lord, Lord Rix, was entirely correct in the description he gave. There is now a wider range of care options available through the care in the community programme than was the case even when the relevant legislation on mobility and hospitals took effect in 1996, let alone in 1948 when the concept of "half-way houses" was not part of our landscape. This has led to many people being transferred from hospital and into other accommodation in the community but still being maintained by the NHS—for example, in so-called "half-way houses" and other sheltered and residential care settings.
  The noble Lord, Lord Rix, is correct. There are gaps in our knowledge about the needs of disabled people in such settings and about how the mobility component of DLA is spent, where it is payable in these circumstances. We think that this is an area which may well be appropriate for research, and we are examining options for what might be done, and when.
  The noble Lord asked me to outline whatever evidence we may have of the effect of the 1995–96 changes. Following representations from the disability lobby, as I said, we shall be considering commissioning research to look at the whole issue of residential care, local authority-funded care and NHS-funded establishments, including the way in which people's mobility needs are met. The noble Lord identified a range of anomalies. Because we are caring for people in the community and the legislation has not fully reflected this, we shall be examining options for research. But I must emphasise that our position on hospitals is clear in our traditional understanding of that concept. We believe it right that people in hospital settings, having all their basic needs met in line with the free provision of care and other services, the key feature of the NHS since its inception, should not retain an extra costs benefit. On this basis, I hope that noble Lords will not pursue their amendments today.
  5.15 p.m.
  Lord Rix: I am extremely grateful to the Minister for that most sympathetic response. Clearly, I would like to
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  consult my colleagues between now and the Report stage. However, on the understanding of what I now believe to be the future position and bearing in mind the fact that the Government are seeking evidence, and so on, to back up their current findings, I am happy to beg leave to withdraw my amendment.
  Amendment, by leave, withdrawn.
  Clause 62 agreed to.
  Lord Higgins Lord Higgins moved Amendment No. 127B:
  After Clause 62, insert the following new clause—

  INCREASE OF UPPER AGE LIMIT FOR DISABILITY LIVING ALLOWANCE
  (" . In section 75(1) of the Contributions and Benefits Act, for "65" substitute "70".")
  The noble Lord said: Currently, in order to start to receive disability living allowance, a person must satisfy the disability conditions for the allowance and make a claim before his or her 65th birthday. Those over the age of 65 can claim attendance allowance, but this does not have the mobility component and does not have a level equivalent to the lower level of care component. The amendment suggests that older disabled persons should have equal access to DLA and that there should be no upper age limit. Therefore, increasing the limit from 65 to 70 would be an important step in this direction.
  Replying to earlier debates, the Minister has stressed time and again the way in which adjustments to our social security system need to be made in the light of changing circumstances. As I have just mentioned, this particular aspect of the DLA arrangements, which the noble Baroness rightly says are very complicated, dates back as far as 1992. As far as concerns age in this context, we must take account of the transformation that has taken place since the time of Beveridge. I believe it was suggested in earlier debates that, on average, a man retiring at what was then the retirement age was likely to draw his pension for about two years or so whereas the period now would be anything up to 15 or 20 years.
  Therefore, in that context and against that background, it seems to me entirely sensible that the figure specified in this clause should be raised from 65 to 70. Indeed, on reflection, I have rather come to the view that this is altogether too modest an amendment. I am glad that I have the support of noble Lords in that respect—
  Baroness Hollis of Heigham: It might be better if the noble Lord does not "wing" his amendments and then seek to expand them. Indeed, he may well then commit his party to considerable future expenditure.
  Lord Higgins: I always have the Treasury aspects in mind, much as I try to deny my past. None the less I think that against the present background that is a fair point. As I understand the present position, DLA and attendance allowance are benefits to help with the extra cost of disability. That is not surprising. DLA has a care component of, I think, three different rates and a mobility component of two rates. To qualify, someone has to satisfy the disability conditions and make a claim before his or her 65th birthday. Those over 65 can claim

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  attendance allowance but in that case they do not receive help towards mobility or receive the lower care component level.
  A person who is already receiving DLA when he or she reaches the age of 65 continues to receive the benefit after that age. but someone who does not claim before the age of 65, even though he satisfies the conditions, cannot start to receive the allowance. This seems to me—coming to it rather afresh—a quite extraordinary situation. I am not the least bit clear why if someone has claimed before 65 he or she should receive these benefits, but if they do not claim before 65 they should not do so.
  I believe that the implications of the current rules are considerable in terms of financial benefit. This is the other side of the coin to the point which the noble Baroness made a moment or two ago in her intervention. I understand that someone aged over 65 with higher mobility needs and lower care needs could be over £50 a week worse off than someone with exactly the same health problems who happens to become disabled before 65. I understand the other side of that coin which the noble Baroness has mentioned; namely, that if we were suddenly to include everyone over 65 that would involve a considerable expense in aggregate. No doubt the noble Baroness will tell us exactly what sum is involved. However, I believe that people are rather appalled to find that they miss out on an allowance to help with disability costs simply because they do not manage to claim before they are 65. Indeed I suppose that anyone under 65 who has the slightest problems with disability should put in a claim as rapidly as possible.
  What I am really saying here is that there seems to be a substantial anomaly. That anomaly is made worse by the fact that people are living longer. Therefore I hope very much that the noble Baroness can give a sympathetic response. If the costs of the measure would be substantial, no doubt we shall have to consider how that problem might be overcome. However, the continuance of this anomaly simply on grounds of cost seems strange. The noble Baroness shakes her head. It looks as if she will be unsympathetic to the amendment but there seems to me to be a strong case for it. I beg to move.
  Baroness Darcy de Knayth: I support this amendment. As the noble Lord, Lord Higgins, said, I expect that the noble Baroness will say that it would be expensive. I can see that it may be expensive and difficult to extend to people who are gradually losing their mobility through increasing age. But surely there is a case to be made for giving mobility assistance to people from 65 to 70 in some circumstances; for example, people who suffer a traumatic injury or amputation at that age. Will the noble Baroness consider certain circumstances in which she might be able to allow it?
  Baroness Pitkeathley: I wonder whether the Minister would agree with me that one of the main concerns that many of us have about DLA and attendance allowance is the complexity of claiming and the fact that so many
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  claims are turned down first time round. Of course this also has an impact on carers whose benefit is passported on the benefits we are discussing. Does the Minister agree that more emphasis needs to be given to encouraging people to claim before they are 65 and to making the claiming process simpler or to providing help with the claiming process? I believe that 40 per cent of claims are turned down first time round. We all know that having been rejected once, many people would be too anxious or nervous to claim again.
  Baroness Hollis of Heigham: I shall deal with the final point first. On a previous amendment we discussed the very real difficulty of seeking to encourage people to increase their claims for DLA/AA. Its complexity lies in the fact that it is based on a diary of their immobility or a diary of their need for care. It has to be, so to speak, bottom up in terms of coming into the system. We are working with local authorities on this matter. As we have said before, we want people to claim the benefits to which they are entitled. If they need those benefits, they should receive them.
  I return to the amendment which would increase the upper age limit for DLA to 70 from the current age of 65, or would effectively add the mobility component to attendance allowance. I am a little puzzled by the remarks of the noble Lord, Lord Higgins. He should perhaps tell the Committee why his party has changed its mind on this issue. During the passage of the Disability Living Allowance and the Disability Working Allowance Bill in 1991—which I took part in, along, I think, with the noble Earl, Lord Russell—when we probed the then government's intentions on precisely this matter, the noble Lord, Lord Henley, stated that DLA was intended to direct help towards younger disabled people of working age and under who had had little or no opportunity to work and save. He said that he would not consider extending it to people over 65 as the cost would be considerable and that that was a relevant consideration in his party's eyes. Therefore I am slightly puzzled at some of the somersaults of the noble Lord as regards the position taken by the previous government a few years back.
  Lord Higgins: 1991!
  Baroness Hollis of Heigham: That was the position adopted by the previous administration and these points were probed at the time. The position of the then government was made clear.
  It might be useful if I relate some of the background to this matter. The higher rate mobility component has its origins in the old invalid vehicle scheme, which was introduced in 1948, although even that replaced a yet earlier scheme for disabled veterans of the Great War. One of the conditions for receipt of an invalid vehicle in 1948 was that the person should be "socially useful". By that definition those who were "socially useless" were those over retirement age. I suspect that, like me, many Members of the Committee are close to being socially useless, or are already socially useless, and would certainly not qualify for a trike.

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  However, the term "socially useful" highlights a fundamental principle about the mobility component of DLA, which is still as relevant today as in 1948; namely, that it was always intended to help people disabled during their working life. We believe that our priority remains to ensure that help goes to those who need it most, particularly those who have finite resources because they were disabled early in life. Extending the upper age limit for claiming DLA, as this new clause proposes, would cost almost £300 million a year extra, rising to £650 million in the long term. The reason, as the Committee will recognise, is that the vast majority of us will have mobility restrictions as we get older. It is worth reminding ourselves that 49 per cent of all disabled people are over 65. The frailties and restrictions of old age are among the factors that we all make provision for in retirement.
  By contrast, many people disabled early in life will face a lifetime of struggle to overcome limited opportunities—and will not have had a lifetime of working to build up savings—and it is at this group that the DLA/mobility component was primarily targeted. In the words of the Royal Commission on Long-Term Care,
  "The experience of disablement will have a different impact on different age groups. For the great majority of older people it is an episode, albeit a painful one, at the end of life, when family ties, employment and other life events have been experienced. Younger people must try to negotiate their lives while disabled and when the vast majority of their peers, who set the standards of normal behaviour, are able-bodied".
  Therefore it is right that a degree of priority in allocating scarce resources through extra-costs disability benefits, untaxed and paid regardless of means, should go to younger people with severe disabilities, which is why we are reducing the age from five down to three. However, that does not mean that we do not seek to help elderly people. As I say, half of all disabled people are pensioners, or, to put it another way, as pensioners grow older almost all of them have care and mobility needs. That is why we have taken immediate steps to help pensioners share in the rising prosperity of the nation with the minimum income guarantee and the winter fuel payments, on top of reducing VAT on fuel and scrapping eye test charges. That is why we also make provision for severely disabled people over the age of 65 to acquire attendance allowance, which is paid to 1.3 million people at a cost of £2.7 billion a year.
  We are also working with disabled people and their representatives to see whether we can improve on the current structure and gateways for DLA and AA. In particular, we are looking at the possibility of a system based not on care need in the kind of broad brush structure that we have at the moment but on a range of activities of managing life. This work is in its early stages but if it progresses then issues such as those raised by the noble Lord, Lord Higgins, will certainly be taken on board.
  I believe that we have made significant progress in the two years since coming to power to ensure that people have financial security in retirement. But to extend DLA in the way proposed by the Opposition—
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  whatever they may have said when they were in government—does not seem to be sensible against the long-standing policy of targeting help towards those who have the greatest need over the longest period of time. In view of this, I hope that the noble Lord will withdraw his amendment.
  5.30 p.m.
  Lord Higgins: I am somewhat astonished by the noble Baroness's reply. I have some difficulty in understanding what winter fuel payments have to do with whether someone of the age of 66, for example, is or is not entitled to a benefit which someone of the age of 63 receives.
  Baroness Hollis of Heigham: As I said. 49 per cent of all disabled people are over pensionable age and disability increases with age. A very high proportion of pensioners over the age of 75 are disabled; that is associated with their age. Given that generality, we believe the right way to help them is to make sure that they have access to the other benefits I talked about: winter fuel allowance to help with their heating; the minimum income guarantee to help with their diet, and the like. That is the point I was seeking to establish.
  Lord Higgins: I will not pursue that point except to say that the extraordinary thing about the winter fuel payment is that it is in contrast to almost everything else the Government are doing; it is not means tested. I understand that some people have been fortunate enough to receive their winter fuel payment last week. If the noble Baroness had checked up, perhaps she would have realised that it is not a good moment to mention winter fuel payment in the middle of July.
  Be that as it may, the noble Baroness suggested that our view has changed since 1991. That may be so but, as I pointed out, the whole flow of the argument has been that people are living longer and, therefore, there is some case for raising the age limits. As to what was said in 1991—for which I was not responsible—I am probably totally inconsistent in proposing this in comparison with Mr Disraeli's views on the subject. But we should not go back too far with regard to what previous governments may have done. We would do better to look to the future.
  Baroness Hollis of Heigham: How far back will the noble Lord take responsibility for the previous government's actions?
  Lord Higgins: I think we must look forward, not backwards.
  Baroness Hollis of Heigham: That seems charmless of the noble Lord, given the present Government's position.
  Lord Higgins: Given some of the critical remarks made by the Treasury and Civil Service Committee for some 14 years under my chairmanship about what the previous government were doing, I, personally, feel reasonably content with all that. Be that as it may, I was slightly unnerved by the fact that the quotation from

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  1991 came from the noble Lord, Lord Henley. I am not quite sure whether or not his views have changed. Perhaps one should call a Division and see what happens. In his present role he may still have views on the subject.
  I heard what the noble Baroness said, particularly about the cost; £300 million is a substantial sum. I am not quite clear how that will rise to £650 million; presumably it will happen as more and more people live longer. Having said that, the situation seems to be extraordinarily anomalous. People who claim before the age of 65 will get these benefits ad infinitum, if that is the right expression; on the other hand, someone over 65, who perhaps by mistake has not claimed—we all agree it is difficult to understand DLA—will not. In particular, people who are over 65 find that they will not receive any of these benefits.
  I found the argument put forward by the noble Baroness very strange in this context. It appeared that if one was below 65, then one was in some sense more useful and should receive the benefits in order that one goes on being useful. However, if one is over 65 one does not receive the benefits unless one has claimed them before one was 65. The more I look at this matter—which I brought forward originally in the context of a rather simple, straightforward amendment—the more puzzled I become. Apart from the question of cost and to what extent one should give this priority, I become more and more puzzled as to why this particular anomaly has been allowed to continue.
  Baroness Hollis of Heigham: Perhaps the noble Lord will agree that there is a difference between these two situations. On the one hand, we have the situation where people become disabled in their thirties and have not yet had the income to be able to afford to run a car; they are in work but, because of their disability, the only way they can continue to work is if they receive a mobility allowance that they can then translate into a Motability car; that allows them to continue to work. On the other hand, we have the situation where if a man becomes disabled at 68 or 70, he will, if he is a car driver, already have acquired his car during his working life when he was not disabled. He has acquired the car and been able to run it; he continues to run the car. I do not deny that there are always problems at the 64/65 margin, or wherever one draws the line. But there is a basic distinction between someone who has not had an opportunity to acquire a car—and without a car has to drop out of the labour market—and someone who is likely to have a car—and, thank you very much, would like some financial contribution towards it—and would continue to run the car in any case once he has passed the age of 65. That has been the basic approach.
  Lord Higgins: We are venturing into the technical area of how long cars last and whether it is better to replace them and so on. Again, I find this rather a strange debating point. It may well be that the person over 65 finds that his car has worn out or is uneconomical.
  The noble Baroness raises yet another point: whether the whole purpose of the allowance is simply to allow people to work. If I understand her correctly—she may
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  have been making it up as she went along—the allowance is to enable people to work until 65. If that is her argument, it stops dead at the point where the allowance goes on being provided after the age of 65. Perhaps we should be clear whether, in her view, the purpose of the mobility allowance is purely to enable people to work.
  Baroness Hollis of Heigham: That is not what I said. I was trying to explain why someone who was in work would have to drop out of the labour market without mobility allowance. If that person then continues to use the car, he may carry on working for a number of years. He may drop out of work in his fifties, or whatever, and continue to use the car. On the noble Lord's argument, we would then extract that car from him at the age of 66 because he has crossed the threshold of 65 and yet has no alternative resources, whereas somebody who becomes disabled after 65 is much more likely to have built up the resources enabling him to provide for the increasingly reduced—if I can use that phrase—mobility needs that come with old age. That is all I was saying.
  Lord Higgins: I am not at all sure that one's mobility problems decrease with old age, which is what the noble Baroness said a second ago. Perhaps that is not what she meant to say.
  Baroness Hollis of Heigham: No.
  Lord Higgins: Clearly one's mobility gets worse with age rather than better. I am not arguing—nor does the amendment argue—that one should stop people below the age of 65 being entitled to this allowance; nor are we arguing that they should not continue to receive it after 65 if they claim it before 65. All we are saying is that there is a very clear anomaly here in that people over 65, or those who failed to claim while they were under 65, will not receive the kind of benefits that those under 65 receive.
  I may have misunderstood the noble Baroness but she seemed to be saying that the purpose of this allowance is to enable people to work. Clearly the question of mobility is much broader than that; people over 65 also need to be mobile, whether or not they are working. Of course, nowadays some may well indeed be working over the age of 65.
  Baroness Darcy de Knayth: Before the noble Lord decides what to do with the amendment, as it is Committee, perhaps I may intervene. The noble Baroness did not answer my question. I may not have phrased it very well. I can see the difficulties if a vast number of people, because of old age, have increasing mobility problems, but what about the person over 65 who has an amputation or becomes paraplegic or whatever? Is there not a case for ensuring that such people are mobile? I am thinking, for example, of the socially useful granny who suddenly becomes an amputee. As the noble Baroness said, someone who was socially useless would not qualify for the trike any more. But a large number of 65 year-olds are extremely useful socially. Even if they do not work, they are useful to

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  their families and in other ways. Does the noble Baroness think that there is a case for helping someone who has a traumatic injury and becomes disabled after 65?
  Lord Higgins: As we are in Committee and I do not wish to be out of order, I had better sit down at this stage and let the noble Baroness reply.
  Baroness Hollis of Heigham: I apologise to the noble Baroness if I did not answer her point. I am sure that there is a case for helping such people, as in the examples given by the noble Lord. However, the noble Baroness gave an example of someone with a traumatic injury. What happens if someone has, for example, increasingly severe arthritis? What is the trigger point in terms of how we discriminate and distinguish between cases?
  The point about DLA, with its lower, middle and higher rate, is that we apply the idea of the care proxy. That is simple. For mobility, the higher rate mobility component has been based on the "virtually unable to walk test", which is much broader than that used by the noble Baroness. While I sympathise with the point she makes, it would be very hard to restrict decisions or to hold any such line as she has suggested. I do not deny that such a disablement would be traumatic and would totally turn someone's life over; it would be horrendous for the person. But that is equally true of the growing problems of osteo-arthritis and the like. It would be difficult to make a distinction.
  Returning to the noble Lord's point about "socially useful", it is not something that I am now endorsing. I merely thought that it would amuse your Lordships. That was the point about 1948. Clearly, the joke fell flat, because noble Lords are confident that they are so socially useful that the descriptions of 1948 do not apply any more. The point that I attempted to establish was that the original designation was that people who become disabled early in life are likely to have fewer opportunities to work. It therefore makes it far harder for them to make provision for later life. What we are talking about is a non-means-tested benefit which contributes towards the extra costs of disability.
  The noble Lord would have a point if his intention were to make the benefit means tested. But it is not. Where disability has occurred over the age of 65, the presumption is that the person will have had a normal working life, built up resources, acquired a car and some savings and be much better able to make provision for his or her mobility needs, irrespective of age, than someone who is disabled early in life, whether in work or working but not for a wage—as a carer, for example—and where help is needed to help to allow that person to meet the mobility needs for a full and socially inclusive life.
  Lord Higgins: I understand what the noble Baroness is saying. But taking the debate as a whole, her reply was unpersuasive—except in one context; namely, such provision would cost £300 million initially, and apparently £650 million later. That is always a rather
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  persuasive argument. Other than that, it was difficult to find any argument at all to suggest that this anomaly is not a serious one and ought to be looked at again. I shall look carefully at the noble Baroness's arguments. I may wish to return to the matter at a later stage. Subject to that, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higgins Lord Higgins moved Amendment 127C:
  After Clause 62, insert the following new clause—

  QUALIFYING CONDITIONS FOR THE LOWER RATE CARE COMPONENT OF DISABILITY LIVING ALLOWANCE
  (" . In section 72(1) of the Contributions and Benefits Act, at the end of paragraph (a) there is added—

  "(iii) he is a deaf person who has difficulty communicating with strangers, or is unable to communicate with other people without prescribed technical aids and equipment, or

  (iv) he requires a special diet as may be prescribed in regulations, or

  (v) he suffers from frequent incontinence, or".").

  The noble Lord said: This is an amendment of a rather different kind. It seeks to extend the DLA lower rate care component to three groups of people who have substantial extra disability related costs but who do not need "attention" from another person in order to cope with the disability. It effectively covers three groups: deaf people with speech and lip-reading skills who do not need a substantial communication support but may need to rely on expensive technology—a growing area of help to such people; secondly, a very different group, those who need a special diet but will incur extra costs as a result; and thirdly, those who suffer from frequent incontinence and have difficulty in coping—a subject that has been debated on many previous occasions, not least in the context of value added tax. There is some case for examining whether the present scope of Section 72(1) of the Social Security Contributions and Benefits Act is appropriate and whether it should be extended to people in that particular group. I beg to move.
  5.45 p.m.
  Earl Russell: I hope that the Minister will listen with care to the case for this amendment. These are all quite expensive conditions. The first is expensive because of the necessity of equipment. In the second case, the cost of a special diet, especially for acute sufferers from AIDS, can be considerable. Allowance is made for it at rates which were generous but have not always been uprated sufficiently rapidly for inflation. I remember once speaking to a brief on this subject which, as the result of a misprint, said that the rates were set at 1896 prices. I remember wondering whether it was perhaps not a misprint after all. I regret to say that the Official Report changed the phrase immediately to "1986 prices". The assumption was that I must have meant to say that even if I did not. Thirdly, people do not have the option of not buying incontinence pads. I am glad that the noble Lord, Lord Higgins, mentioned that. It is a context in which the concept of "value added" seems to have a peculiar

  855
  incongruity. I hope that the Chancellor of the Exchequer will think again about the addition of VAT to the cost of incontinence pads. In the absence of that, which is wide of the amendment, I hope the Minister will consider the amendment seriously.
  Baroness Hollis of Heigham: Amendment No. 127C would introduce specific disabilities into the conditions for entitlement to DLA. I can understand the noble Lord's motives in moving the amendment. However, I hope to persuade him that this is not the right approach: namely, to revert back essentially to a shopping list.
  Entitlement to DLA is based on a person's needs, not on their medical condition. In the case of the care component, it is based upon their care needs. That means, therefore, that two people with identical medical conditions may none the less have very different care needs according to their circumstances in terms of their home life and therefore the DLA for which they are eligible. That was the approach taken by the previous government when they created DLA. We did not dissent front it. It is a simple and effective way of giving people the help they need. A single medical condition can give rise to a whole range of possible care needs depending on the severity of the condition and the support services that are available. We want to make sure that we give people the right help based on their needs, not their condition. I return to an earlier debate: there is no easy read-across as the amendment would suggest.
  The approach taken in this amendment is different. It says essentially that a condition automatically equates with a certain rate of benefit regardless of the range of different needs that might arise from that condition. It is as though DLA had not been invented. It harks back to the days of supplementary benefit which had a multiplicity of different additions, a shopping list, in an attempt to help with extra costs in different areas. The Opposition's own assessment when in government was that that failed; and we agreed with that.
  I now turn to the conditions mentioned in the amendment, the first of which is deafness. Noble Lords will recall the judgments in the Mallinson and Halliday cases, which extended DLA to people with communication difficulties. We believe that the system provides appropriate help in such cases and we have no plans to change it. We believe that it would be wrong to give blanket entitlement to a group of people when they will all have different abilities or needs.
  Secondly, I am sure that Members of the Committee will agree that many people who have a special diet do not necessarily—although they may—have extra costs, nor would they be considered to be severely disabled. Provision is made by the NHS for certain foods to be available on prescription; for example, for gluten-free and low-protein diets. Does someone who needs a gluten-free diet come within the context of DLA? Provision is also made for certain infant feeding formulae if there is intolerance to cow's milk or for metabolic disorders. The amendment would take us back to the days of a complicated, inadequate supplementary benefit system consisting of a shopping list of particular needs to be ticked off.
  856
  Thirdly, there is incontinence. I should make it clear that this is already taken into account when assessing care needs. The Disability Handbook, which all adjudication officers use, has a specific section on dealing with the needs of people who suffer incontinence. In addition, services to help to meet the extra costs of incontinence are provided free by the NHS and include advice, treatment, supplies and equipment, laundry services and disposal of waste.
  Those who do not get DLA can get help with extra costs from other parts of the benefit system, above all from the disability premium in income-related benefits worth £21·90 a week for single people and at least £31·25 for couples. For those in work, the disabled person's tax credit and the working families' tax credit also provide extra help.
  However, I do not want to suggest that we think the DLA is perfectly designed or that we have a closed mind on where it should go. We believe that there may be ways of improving entitlement to both those benefits, including take-up, and we are looking at the possibility of using a set of activities undertaken by disabled people in managing their lives as a better means of assessing need: for example, in communicating, managing money, eating and the level of assistance required to carry out those tasks.
  Research will help to establish whether this kind of approach would be fairer and easier for people to understand and could be administered with greater consistency. We would not wish to make major changes to the conditions of entitlement to DLA without clear evidence that it would lead to a better system and until their impact on disabled people had been thoroughly tested and discussed with organisations of and for disabled people. But if we were to go down that path, we would seek to produce a system based on a wide-ranging assessment of the needs of disabled people, not one built up by complex piecemeal accretions in the way that this amendment would seek to do.
  In the light of that, I hope that the noble Lord will not pursue the amendment.
  Lord Higgins: I am grateful to the noble Baroness for her reply. I had a little difficulty in reconciling what she said with her evidence to the Social Security Select Committee. She said:
  "What DLA is about is not actually compensation for their disability—"
  and that is so—
  "it is about a meeting of the costs for which care and mobility serves as a proxy to enable them to manage their disability".
  That seemed to me consistent with the amendment. If not, perhaps the noble Baroness could explain exactly what the concept is that she has in mind.
  Baroness Hollis of Heigham: I hoped that the noble Lord would carry on reading the Select Committee report where I sought to explain that. It was in terms of the discussion on BIP and entitlement and how errors creep into the system. I was explaining that in conjunction with disability organisations, the then government introduced the 1992 DLA. It used the need for intermittent care during the day which brought people into the lowest rate of DLA care. For example,

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  if someone needed help with preparing a simple meal and they were unable to do it by themselves, it was one test of need. A second was continuous care, either day or night. That qualified for the middle rate. The third rate, which is the highest, is continuous care or supervision both day and night. Those bands were chosen because if someone needed care at the lowest rate, for example, help to provide a meal, it also suggested that they had problems with locomotion, dexterity or problems with sight and hearing. There might be problems of learning or similar difficulties. It was suggested that that test was a suitable proxy for those needs. It was the same with the middle rate and higher rate care.
  That was the concept of DLA. So far it has worked fairly well. As I tried to hint, if we were to move away from that, we would have to think about a landscape approach not that different from the all-work test. We looked at movement, dexterity, visual impairment and communication ability. We added up the points and came up with a broad-brush approach. Whether that is preferable to what we now have requires discussion, research and elaborate work with the disability organisations.
  However, we do not want the broad-brush approach—which has the merits of a simple formula of assessment of care needs as a proxy for the condition of the person and their capacity to manage it—to be complicated by an add-on shopping list, which is what the amendment seeks. That seems to me the worst of all worlds.
  Lord Higgins: I am grateful to the noble Baroness. Again, we shall study what she said with care because her suggestions make a great deal of sense in the context of the basic concept; that is, unless we start afresh and enumerate everything in sight as to the reasons for a particular benefit to be received. In that context, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Ashley of Stoke Lord Ashley of Stoke moved Amendment No. 127D:
  After Clause 62, insert the following new clause—

  DEAFBLIND LINK SCHEME
  (". After section 76 of the Contributions and Benefits Act there is inserted—
  "Deafblind link scheme
  Deafblind link scheme.
  76A.—(1) A person who has a combined sight and hearing impediment which is such as to make him unable to communicate or receive information, or virtually unable to do so, without assistance is entitled to receive deafblind link vouchers.
  (2) A person is within subsection (1) if he is—

  (a) both blind and deaf,

  (b) partially blind and deaf,

  (c) partially deaf and blind, or

  (d) partially deaf and partially blind,

  and he satisfies such other conditions as may be prescribed.
  (3) A weekly rate of deafblind link vouchers shall be prescribed which is redeemable at a value at least equivalent to the highest rate of the care component of a disability living allowance.
  (4) Regulations shall provide for deafblind link vouchers—

  (a) to be issued to a person entitled to receive them at such periods as may be prescribed, and

  (b) to be redeemable by a registered provider.

  in respect of the supply of prescribed services.
  (5) In this section—
  "registered provider" means a person who provides services to persons within subsection (1) to enable them to communicate or receive information and who is for the time being listed on a register maintained by or under the direction of the Secretary of State, and
  "prescribed services" is to be construed accordingly."").
  The noble Lord said: I move this amendment in the hope that the Government will make essential provision for some of the most disabled people in our society. It is virtually impossible to visualise the effects of the combined disability of deafness and blindness. I hope my noble friend and noble Lords will make an effort so that we can address and discuss this fundamental issue.
  When I lost my hearing completely, some 30 years ago, I found that my sight naturally compensated for it. I have no doubt that similarly David Blunkett, who entered the place when he was totally blind, finds that his hearing compensates to some extent for that. But deafblind people have no compensation whatever. They are without sight and hearing, they live in a world of silence and darkness. They undoubtedly need skilled specialist assistance.
  In a survey by the organisations for deafblind people, Sense, and Deafblind United Kingdom, it was found that 77 per cent of deafblind people did not have specialist one-to-one support services. That is what they need. Forty-two per cent were virtual prisoners in their own homes.
  At present the provision is wholly inadequate. It is certainly not given as it should be, as a right to that kind of support. The aim of the amendment is to ensure that right and the beginning of proper provision for deafblind people. It is not a lot to ask and I hope my noble friend will be able to help. What we really need is a right enshrined in law to specialist one-to-one service support, and properly funded.
  The essential objective of the amendment is to provide a link scheme which is modelled on a highly successful scheme in Norway. Deafblind people would apply for vouchers worth the equivalent of the highest rate of the care component of the disability living allowance. At present that rate is £52·95, which would buy six hours of support from a specialist deafblind link worker. It is not a lot to ask, but it is the beginning of something which I hope will grow and develop in Parliament.
  There are various specialists to be employed in the link scheme who are skilled in hands-on signing, finger spelling, the deafblind manual alphabet, Braille, as well as lip-reading and clear speech. Communicator-guides visit deafblind people in their homes, helping them with telephone calls or reading them the mail or newspapers. They help with interpreting television and radio programmes, doing the shopping and helping them to take exercise, sort out bills and do voluntary work.

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  The second group are interpreters who transmit spoken and visual information to deafblind people in formal meetings or situations such as medical or legal consultations. They also guide deafblind people to and from those meetings and during them.
  The third group are called intervenors. What they do is to encourage children and adults who were born deafblind to access and learn about their environment and make decisions and choices.
  This is the way it would work; it is quite simple. The deafblind person could use vouchers to book support from registered service providers who would then recoup the cost from the Benefits Agency. That agency would be responsible for the financing of the scheme. The provision of such specialists would obviously relieve the isolation and depression and enable deafblind people to socialise to some extent, to learn new skills and to enjoy contact with other people.
  I must tell my noble friend that I make no bones about the fact that this is the mere beginning of a campaign to make proper provision for deafblind people. We are not asking for the millennium or the moon this afternoon, but we will be shortly.
  Those worst affected will need more than six hours a week. I hope that local authorities would supplement that minimum for those in greatest need and would seek out and identify deafblind people, register them and ensure that community care assessments included checking that they had guides, interpreters and interveners. Those requirements could be defined in regulations made under the Bill.
  The deafblind link scheme is not intended to replace other benefits or services. It is necessary to supplement disability living allowance because a deafblind person would use a link scheme to book one-to-one support for activities of their choice. That would include many things that are not normally included for the purposes of the assessment of the care component of DLA, such as help with domestic tasks, social and other activities.
  I am sure that my noble friend the Minister will consider my points carefully and will help if she possibly can. I do not pretend that the wording of the amendment is air tight and I have no doubt that some difficulties will emerge. Nevertheless, the aim of the amendment is clear. I hope that the Government will find some way of helping. I beg to move.
  6 p.m.
  Lord Addington: I have a small apology to make to the noble Lord, Lord Ashley of Stoke. When we were talking about the single gateway, I suggested that advocates and people to support would be required, particularly for the deafblind. I had not seen the noble Lord's amendment at the time and I said that I did not know whether there was an amendment down.
  We use hearing and sight to help us to communicate. A very learned man once told me that that is one reason why mankind dominates the planet. We co-operate with each other; we are a social animal and we communicate. The deafblind have those two normal means of communication removed from them, That implies terrifying isolation. Anyone who has not tried to take
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  that on board will go a little cold the first time they think about it. There is no more profoundly cut-off person than someone who cannot see and cannot hear. It is probably the most frightening disability that we have to deal with.
  Even if the amendment is not accepted, I hope that the Minister will give a strong guarantee that the deafblind will be provided with a minimum level of assistance in basic communication to allow them to become part of the rest of the species.
  Baroness Darcy de Knayth: I strongly support the amendment. There is no need to add to the graphic picture given by the noble Lords, Lord Ashley of Stoke and Lord Addington, of the problems facing deafblind people. Deafblind people have missed out and I hope that the Minister will respond positively, or at least promise to go away and look at the issue.
  Baroness Hollis of Heigham: The amendment, so movingly introduced by my noble friend Lord Ashley of Stoke and spoken to by others, would introduce special help for one specific group of disabled people in the form of vouchers redeemable for services. The rate of provision would be equivalent to at least the higher rate care component of disability living allowance.
  I understand my noble friend's concern. I agree that deafblind people need specialist help to access information, interact with others and improve their quality of life. Being both deaf and blind denies all other sources of communication. There are problems of definition, because we are talking about the disability caused by blindness or deafness. People who are visually impaired or have partial loss of hearing can be registered blind or deaf but manage adequately with communication. However, that is not the issue.
  There are several reasons why it would not be right for the Government to accept the amendment. It would not be consistent with the aim of disability living allowance, which is a cash benefit designed to provide a contribution towards the extra costs of disability and managing that disability. It for the individual to decide how the money is used. That gives dignity and choice to disabled people. We are not keen on the shopping list that the noble Lord, Lord Higgins, mentioned on the previous amendment or on a voucher scheme.
  There is also an important issue of fairness. If the vouchers were payable to people already in receipt of DLA, it would effectively double or more than double the provision available to one small group of disabled people. I recognise they have very severe disabilities, but others, such as those who are bedridden, who have no communication skills and who require round the clock care and attention, also have lives that are unimaginable for most of us. We should bear in mind the issue of equity across groups.
  A voucher scheme is not necessary because we already make deeming provisions for deafblind people to receive the higher rate mobility component of DLA. The higher rate care component is also available to help towards the extra costs of their disability. I have already referred to the Mallinson and Halliday cases, which

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  extended DLA to people with communication difficulties. We shall be helping deafblind children by lowering the age limit for the higher rate mobility component.
  I am aware that some disability organisations are concerned about the effectiveness of the higher rate mobility component in targeting the most severely disabled deafblind people. My noble friend Lord Ashley of Stoke was right to make that point. The statistics are shocking. Very few deafblind people are getting the help they are entitled to. We have heard from Sense that about 3,000 deafblind people need communicator guides, yet only 362—barely more than 10 per cent—receive the higher rate mobility component of DLA through the deafblind criteria.
  That problem clearly needs to be addressed. We have commissioned the disability living allowance advisory board to look at what can be done. It has identified a number of issues, including objective evidence gathering and, importantly, a review of training for adjudication officers and medical advisers. The board is aware of the interlocking nature of the two disabilities. The findings have been fed into the Benefits Agency modernisation programme. We will be monitoring the programme closely to ensure that claims for DLA by deafblind people are dealt with as fairly and efficiently as possible.
  As my noble friend said, the benefits system is not the only source of help for deafblind people. Support is also arranged by local authority social services. Local authorities have a duty to assess people whom they think may require community care services and decide what services should be provided. In addition, hearing and low vision aids are available on prescription or free loan from the NHS.
  The Government are determined to ensure that social services provide better support for all those with long-term care needs, including deafblind people. My right honourable friend the Secretary of State for Health published his plans to improve social services in last year's White Paper, Modernising Social Services. The White Paper sets out our view that the promotion of independence should lie at the heart of all services. It describes the major reforms in hand to ensure that there is more consistency and fairness in social care and that services are more convenient and user-centred.
  I agree entirely with my noble friend that local authorities should identify all the people who need their services. In particular, they should actively seek out and contact those such as deafblind people who may find it particularly difficult to access services that they greatly need. If we can ensure that local authorities have sought out the deafblind people in their area and are providing appropriate and sufficiently generous care packages and if the Department of Social Security ensures that its adjudication officers are well trained so that they can ensure that deafblind people who apply go on to the higher rate of DLA if so entitled and it is appropriate, I hope that it may be possible to bring many more of them within the framework of the independent living fund.
  862
  Bringing someone within the framework of the independent living fund would mean that, if they were getting a care package from their local authority valued at £200, the ILF, if they were on the higher rate DLA, would then be able to add, if appropriate, a further £300 which would be very much more generous than the voucher system that my noble friend has suggested. That is one possibility that I am anxious to explore in conjunction with my noble friend to provide appropriate packages for people who are severely deafblind.
  As I say, the Government are consulting on proposals for a charter for long-term care, "You and Your Services". This charter is intended to ensure that services meet the standards that users want and expect. Later this year, we will consult on draft guidance on fair access to care services and we will certainly consider my noble friend's comments in that context. I would also urge him to encourage the voluntary organisations with which he works— the two leading ones are, I understand, Sense and Deafblind UK—to play a full part in those consultation exercises and particularly to work with local authorities to ensure that deafblind people are brought within the ambit of their services.
  I hope that what I have said has convinced my noble friend that there is no need for this amendment. We do recognise that many deafblind people are not getting the help they are entitled to, either from local authorities or through DLA. We are taking steps to address that problem. We are also taking action to improve the support that is available from social services for people who need long-term care, but I do not myself believe that a voucher scheme is the right way forward. I hope that, in the light of my reply, my noble friend will withdraw this amendment.
  Lord Ashley of Stoke: I do recognise the practical difficulties outlined by my noble friend. I must say that it is extremely rare for a Minister to offer something better than that offered by someone who has proposed an amendment to a Bill. I appreciate my noble friend's suggestions for investigating and bringing it within the ILF. That would indeed be marvellous if it worked. I look forward to working with my noble friend and discussing this suggestion which will be of enormous value to thousands of deafblind people. I am very grateful. I am absolutely delighted. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 127E not moved.]
  Clause 63 [Certain overpayments of benefit not to be recoverable]:
  [Amendment No. 127F not moved.]
  Baroness Buscombe Baroness Buscombe moved Amendment No. 127G:
  Page 70, line 10. leave out paragraph (a)
  The noble Baroness said: In moving this amendment, we are seeking clarification from the Minister of the

  863
  interpretation of the word "review" in the Bill. On 28th January 1997, the Secretary of State said in another place:
  "The review process will involve gathering information by postal inquiry and home visits".—[Official Report, Commons, 28/1/99; col. WA321.]
  We have a number of questions on this matter. Can the Government confirm that the reviews they have in mind are very similar in kind to reviews carried out at home by administrative personnel from the Benefits Agency or by postal inquiry? If the reviews are going to be of a different kind, we would like to know what procedures the Government have in mind. In addition, Clause 63 refers specifically to the disability living allowance, incapacity benefit and severe disablement allowance. But what about disability working allowance, industrial injuries disability benefit or the disability premiums in income support?
  Furthermore, what will happen if someone still owes money from a previous review? Will there be an attempt to reclaim that money? Will DLA claims be dealt with on the same terms and subject to the same regime as beneficiaries of incapacity benefit or severe disablement allowance? What will be the financial consequences and will that depend entirely on the outcome of the reviews?
  In essence, we would like reassurance that the review process will be a positive one, such that it will not alienate people while ensuring that it achieves the right objective, which is to make sure that entitlement is fair. We want to safeguard the integrity and effectiveness of the review process. This is a probing amendment and I beg to move.
  6.15 p.m.
  Baroness Hollis of Heigham: Amendment No. 127G has the effect of removing that part of the clause that defines the word "review". Debates in another place have made it clear that the word "review" can be interpreted in many ways, so I am happy, in response to the probing amendment of the noble Baroness, to make clear the meaning attached to the use of the word in this clause. It was helpful of the noble Baroness to put the amendment in this way.
  The provisions of the clause are all about overpayments. It is well established that a recoverable overpayment of benefit can only arise after someone's benefit has been altered to a lower rate, or their benefit has been stopped. The legal mechanism for doing this is a review by an adjudication officer. Awards of benefit are made by adjudication officers and only an adjudication officer, following the proper procedures, can alter such an award by conducting a review.
  The Social Security Administration Act 1992 sets out the precise circumstances when an adjudication officer can conduct a "review" and alter someone's benefit. This provision applies whether benefit is being increased or reduced. The definition in Clause 63(5)(a) which this amendment seeks to remove simply lists those provisions that allow someone's benefit to be altered.
  There is nothing sinister about this. These provisions allow benefit to be reviewed as a result of a change in someone's circumstances, or the correction of a
  864
  misunderstanding of the facts of the case or because the law was applied incorrectly. Obviously it would be wrong for benefit to continue unaltered in any of those situations.
  Such a review could follow from any situation where an award was found to be no longer correct. The term "review" is not linked in any way to any particular initiative such as the benefit integrity project that may have been lurking in the mind of the noble Baroness.
  I hope I have explained that, as it stands, the subsection does nothing more than refer to the relevant provisions under which an award for benefit can be changed. The same provisions apply whenever an award is changed, for whatever reason. I urge the noble Baroness to withdraw her amendment.
  Baroness Buscombe: I thank the Minister for her very clear explanation of the position and I think she understands the spirit in which my questions have been asked, given the debates that took place in another place. I agree there is nothing sinister about it. We merely wanted to seek clarification as to the proper meaning in this context. I thank the Minister and beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 63 agreed to.
  Clauses 64 and 65 agreed to.
  Schedule 8 agreed to.
  Clause 65 [Welfare benefits: miscellaneous amendments]:
  Earl Russell Earl Russell moved Amendment No. 128:
  After Clause 65, insert the following new clause—

  INCOME-RELATED BENEFITS: HABITUAL RESIDENCE TEST
  (" . In section 137(2)(a) of the Contributions and Benefits Act, at the end insert "so however that regulations may not treat a person who is in Great Britain and who has the right to live in Great Britain for the time being without immigration leave as not being in Great Britain irrespective of where he is habitually or ordinarily resident."")
  The noble Earl said: This amendment seeks to abolish the habitual residence test instead of merely modifying it in response to the judgment of the European Court of Justice in the Swaddling case that it is illegal. The habitual residence test since 1994 has been supported by the Court and Treasury Party and opposed by the Country Party, no matter which type of political clothing those parties might wear for the time being. I do not intend to make anything of that but it is my contention, and has always been my contention, that, on this particular point, the Court and Treasury Party happens to be mistaken.
  The habitual residence test was introduced as a centrepiece for a party conference speech in order to deal with the dangers of what is described as benefit tourism. If benefit tourism is a term of art, it is very definitely a term of modern art. It has a distinctly abstract quality. I remember the Minister at the time outlining the case in the form of a long series of quotations from an article in Time Out. I asked whether that was still the policy of the Department of Social Security, that it did not base its policy on anecdotal

  865
  evidence. I have as yet received no answer to that question and I would tonight like to repeat it because no other evidence has yet been put before us on this allegedly mischievous phenomenon. As with other sins, we do not know exactly what it is, but we all know that we are against it.
  Anyone who was in the House at midnight last night dealing with the Immigration and Asylum Bill will know that getting through our immigration laws is not particularly easy. Anyone who has dealt with debates on the actively seeking work rules will also know that the application of those can be extremely stringent. Where we have one test for entry and another test for life after entry, I have never been convinced that there is any need for a further test.
  The test says that you should not receive means-tested benefits if you are not habitually resident in this country. If benefit tourism is a term of modern art, habitual residence is not a term of art or even of law; it is a term of literature. It has no precise legal meaning. That is why, throughout the history of the test, there has been a great deal of difficulty in defining it. It is why the rates of failure in the test, with almost identical pools of applicants, have sometimes been as high as 80 per cent in one place and 20 per cent next door dealing with very similar applicants. Where the test is that wide open, where the legal concepts are that undeveloped, the scope for subjective judgment is very high indeed, which shows up both on the particularly high rate of success in appeals and in the fact that a very high proportion of those who have failed the habitual residence test have been from ethnic minorities.
  All our information on this is from sources such as the National Association of Citizens Advice Bureaux. Governments have been particularly careful not to compile statistics on institutional discrimination within the administration of the habitual residence test. But after the Lawrence case, we should think carefully about this, especially since one of the places where the test bites most severely, which in my understanding is not addressed by the new changes in the guidelines, is in extended families from the British Asian community. In cases where an arranged marriage is in prospect, very often there is an extended visit—of many months in some cases—to the family of the prospective in-laws. People regularly return from such visits and are told that they are not habitually resident, which sets a great many marriages off on the wrong foot. I do not think that that does any good.
  The lack of a precise legal definition is one of the problems. It was that hurdle over which the Government fell in the case in the European Court of Justice. The court held that the Government had altogether misdefined "habitual residence". The Government—I welcome what they have done as far as it goes—have changed the test in response to the European Court of Justice in order to say that anyone who has lived in this country and anyone who was born in this country and has a continuing connection should be treated with favour. That does not go all the way. Someone who is taken out of the country as a young child and comes back a number of years later may be held not to
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  be habitually resident. That answer was given by Mr Timms to my honourable friend Mr Rendell. I see that the Minister shakes her head. When two Ministers disagree, I venture to doubt. I hope that that is not improper.
  I declare an interest in this case because many years ago it happened to be my own. I have therefore always felt particularly strongly about it. Because the legal concept is so uncertain and because there are so many minefields, what the Government have done will not be enough to keep them out of further legal trouble. I am glad that people who are clearly British, including the niece of a former Leader of the House who was caught by the test, will now be able to pass it. That is a very necessary mercy and I welcome it. On the other hand, this must increase the risk that what is done may discriminate between British and other European Union nationals and may therefore fall foul of the Treaty of Rome. There is also the risk that it might be held to discriminate on grounds of race, which is equally illegal in this country. In any case, if people have passed our immigration requirements, and if they actively seek work, do we really need another test? At present it saves the Government only £18 million. Is it really worth all the hardship, all the aggravation and all the legal confusion and danger which it causes? I beg to move.
  Baroness Hollis of Heigham: This amendment seeks to remove the need for people to meet a residence requirement in order to receive income-related benefits. It may be helpful if I explain that the purpose of the habitual residence test and ordinarily resident test is to ensure that income-related benefits—we are not talking about contributory benefits: the right to reside, the right to work and the right to build up contributory benefits are not affected by the habitual residence test—are paid to people with reasonably close ties to the UK and an intention to settle here. Its underlying principle is that UK taxpayers should not have to subsidise through income related benefits people with a very tenuous link, if any, with the UK. What they earn in their own right through work and contributions is a different matter.
  In considering whether a person is habitually resident or ordinarily resident, the adjudicating authorities consider a number of factors, including the claimant's attachment to the UK, the reasons for coming to the UK, his employment record and the length and continuity of residence in another country. In most cases it is easy to determine whether someone is habitually resident. In practice, only a small proportion of people need a full examination to establish whether they are habitually resident. The majority of those are able to confirm that they are. That is shown by the figures: 84 per cent of those who take the test pass it; 88 per cent of all UK nationals taking the test pass it.
  However, we understood and shared the concerns that have been expressed about the way the test worked in the past. That is why we decided to review it. We, too, had particular concerns about the impact of the test on returning UK nationals—the classic example being the missionary working abroad and coming home. To date, the majority of all people adversely affected by the test have been UK nationals.

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  On 14th June we announced our plans for reforming the habitual residence test. UK and other nationals returning to this country from any country overseas who are re-establishing their ties here can now be accepted as habitually resident immediately upon their return. The period in which habitual residence inquiries are made will be reduced from five years to two years. Legislation will be introduced automatically to treat as habitually resident in the UK people brought here from an area of civil unrest or deported to the UK, and improvements will be made to the administrative process. Typical examples would include UK nationals working abroad—the Swaddling case that went to the European Court. It would help UK nationals with overseas links; notably people from black and ethnic minority communities.
  I should add that we have advised staff to extend the effect of the Swaddling judgment so that it applies to people returning to the UK from outside Europe. People from ethnic minority backgrounds who travel overseas—for example, to maintain family and cultural links, as referred to by the noble Earl—will therefore immediately be able to re-establish habitual residence upon their return. I hope that that will allay the noble Earl's anxieties. United Kingdom nationals returning due to misfortune, marital breakdown or ill health will be helped by this judgment and UK nationals taken abroad as children.
  I am not sure about the noble Earl's reference to the response of Mr Timms. However, my honourable friend made the following statement:
  "The tricky task is to ensure that such abuse is excluded through regulation, without preventing those who should have access to the benefits system from having such access".—[Official Report, Commons, Standing Committee D, 27/4/99; col. 1037.]
  I am not sure that specific reference was made to children, but I may be wrong.
  Although these cases are not always clear cut, UK nationals taken abroad as children would normally be covered by the judgment. Taken together, we believe that our reforms strike the right balance between allowing ready access to income-related benefits to those with genuine links with the UK and protecting the social security system from possible abuse by those who do not so qualify. I hope that in my reply I have addressed the concerns of the noble Earl and that, as a result, he will feel able to withdraw his amendment.
  6.30 p.m.
  Earl Russell: Before the Minister sits down, perhaps I may ask her one question that I should have asked in my speech. It arises from a Written Answer by the Minister:
  "We also propose to legislate to add to the categories of people who are to be treated as habitually resident those people who are brought here from an area of civil unrest or who are deported to the UK".
  Is such legislation in prospect either in this Bill or in the Immigration and Asylum Bill which is also before this House?
  Baroness Hollis of Heigham: I do not know when the legislation is in prospect. I shall write to the noble Earl and let him know. We propose automatically to treat as habitually resident in the UK people who are brought here from an area of civil unrest or who are deported to the UK. It may be that this can be done through secondary legislation since primary legislation is not specified. I shall check and write to the noble Earl, but certainly what I have said is the Government's stated intent.
  Earl Russell: I am grateful to the Minister. I apologise for the rather ham-handed way in which I raised the matter. Should the information reach the Minister I shall be extremely happy to give way.
  Baroness Hollis of Heigham: I am glad to confirm that we expect to table regulations—as I said, primary legislation is not required—early next year. Therefore, they are not part of either this Bill or any other Bill.
  Earl Russell: I am most grateful to the Minister. I shall look at those regulations with very great interest.
  I said earlier this afternoon that the Minister was an optimist. She has been so again. She said that the concept of habitual residence was easy to apply. If it were so it would not be applied with such different success rates in such different places. When referring to the definition of habitual residence, the Minister described a number of different tests. I accept that those are the tests, but I am sure that equally she accepts that they may give different answers, one from the other, when all are applied to the same person.
  I am also aware that when the previous government were pressed for roughly the concession that the present Government announced on 14th June they regularly replied that under European law they were unable to discriminate between British nationals and others in this way because Article 7 of the Treaty of Rome forbade it. If that was the advice given to the previous government I presume that the legal advice given to the present Government has been different. I would be very interested to know in what respect it is different, or on what ground. Where there are two different sets of legal advice I remain in doubt as to which is correct. I still remain suspicious that perhaps the advice given to the previous government on this subject was correct, and therefore the Government may face another hostile judgment in the European Court of Justice. I warned them that the last one was coming and received the reply, "The Government are confident". They always are. I look forward to the next instalment. Meanwhile, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 128YA and 128ZA not moved.]
  Clause 66 [Sharing of functions as regards claims and information]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 128A:
  Page 72, leave out line 37 and insert ("the Child Support Act 1991 for a maintenance assessment)")
  The noble Baroness said: This is a drafting amendment. However, it may be helpful if I first explain the purpose of this clause. It provides an important step towards modernising the social security system, and it is about providing a streamlined service. The powers in this clause pave the way for an integrated claims service and provide new functions for local authorities. Our aim is that claimants should be able to access the system at any point and transact a range of business at that single point. As the Committee may be aware, at present local authorities may deal only with claims for housing benefit and council tax benefit. This clause enables them to handle claims and information relating to a wider range of social security benefits, as well as war pensions and applications for child support. It also provides for other partners in joint working arrangements to provide the same customer service in respect of claims for HB and CTB.
  The Committee will understand that the provisions in this clause, therefore, support the introduction of the "one" service—the single work-focused gateway to the benefit system—that we have already discussed. We have given local authorities the power to do what we have already discussed fairly fully in this Chamber. We intend that regulations made under this clause should specify the social security benefits to which the new integrated service will apply. There will be provision for dealing with claims and the collection of supporting evidence, as well as the handling of more routine social security business that claimants wish to transact, such as reporting changes in circumstances.
  Local authorities will be full partners in delivering the customer-focused, integrated service that we envisage. Part of that service will include dealing with child support applications. For example, we have already successfully introduced changes in the way that lone parents' claims for income support are handled. The Benefits Agency now helps customers to complete an application for maintenance at the time they first claim benefit. We want those who approach their local authority to make a claim to be offered the same level of service.
  However, the reference in this clause to applications under the Child Support Act is currently too narrow to achieve that aim. It relates only to what are called "private cases", or applications from lone parents who are not claiming benefits. This amendment puts matters right and underpins what we are doing with the "one" service and makes it possible to extend the service offered to people who are non-private cases within the CSA. As a result, we hope that the Committee will accept the amendment.
  Lord Higgins: The noble Baroness said that this was a drafting amendment. A number of years ago I read out exactly those words on a ministerial brief only to
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  discover some weeks later that I had made a large number of people criminals retrospectively. I always view such remarks with the slightest suspicion. None the less, I believe that the noble Baroness is correct in saying that this is a drafting amendment. The original draft appeared to stop earlier than it should have; a few crucial words were not added on the end.
  Having said that—I shall resist the temptation to deal with the Child Support Agency more generally—as I understand it, this amendment is concerned with the sharing of functions as regards claims and information. Am I wrong in thinking that the effect of this wording is to enable local authorities to share information with the Child Support Agency? If so, the noble Baroness will not be surprised to hear me ask, yet again: at what level will that information be shared? But perhaps I have totally misunderstood the amendment.
  Baroness Hollis of Heigham: The amendment is required because the current clause defines a claim in relation to child support as an application for maintenance assessment under Section 4 of the Child Support Act. Section 4 relates only to private cases, and the amendment ensures that all child support applications are covered. That is the reason for the amendment. Under the "one" system that we discussed recently, if someone comes out of a relationship and becomes effectively a lone parent with a child, he or she goes to the "one" service in order to claim his or her income support. The "one" service will simultaneously deal with income support, housing benefit and, in the case of a lone parent, automatically encourages him or her to put in a claim for maintenance.
  As was clear when we discussed the "one" service, fully trained staff—I refer to 300-plus hours of training—in local authorities (in the pilot schemes) will be able to handle that claim. But in order to do that, and to share the information, we have to legitimise local authorities' roles. That is the point of the amendment.
  Lord Higgins: I understand that. However, am I right in thinking that the local authority will suggest that he or she should make a claim for maintenance, but will it then receive that information in the light of the Child Support Agency transaction? If so, is there a substantial increase in the extent to which information is transferred between one government agency and local authorities?
  Baroness Hollis of Heigham: Yes, but not long ago the noble Lord pressed me for shared information on a common basis between public authorities so that the claimant was not forced to put in several complicated applications which, if there were one minor error in one, might trigger a fraud inquiry.
  With due respect, the noble Lord cannot have it both ways. He cannot want common sharing of information to obviate fraud and to make life easier for the claimant, and then object if we seek to introduce that. That is indeed the path down which we are going: that where we deal with benefits we seek an integrated service, an integrated approach. That requires in the long term a common spine of information based on sound, robust

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  information technology—I touch wood—in which case we should be able to provide a more efficient and effective service for our claimants.
  Lord Higgins: The Minister is light to say that I suggested that only a few days ago, I think at Question Time. At that time, the noble Baroness rightly pointed out that that would involve transfer. Will that be done at very low levels in local authorities?
  Baroness Hollis of Heigham: I could not swear to the grade. The local authority will take the information. The CSA will continue as now to sort out the claim. That is done by the appropriately trained staff. But from my experience in the local authority world, there are not appropriate grades to make an analogy with Civil Service grades. The decision makers would be the equivalent of EOs. Any such staff—they tend to be senior clerical officers and the like—would have been fully trained through the "one" training process, which is the most elaborate investment in training of which I am aware.
  I cannot help the noble Lord because every local authority has different grading structures and different staff. The important thing is that staff will be empowered to do this work only if they have gone through the training process and will therefore be of an appropriate and suitable skill and calibre.
  On Question, amendment agreed to.
  Clause 66, as amended, agreed to.
  Clause 67 agreed to.
  Lord Morris of Manchester Lord Morris of Manchester moved Amendment No. 128B:
  After Clause 67, insert the following new clause—

  SECRETARY OF STATE TO HAVE REGARD TO INCOME NECESSARY FOR GOOD HEALTH
  ('" .—(1) When determining levels of social security benefits and pensions, the Secretary of State shall have regard to the minimum level of income necessary to maintain good health and cover essential needs.
  (2) In considering the minimum level of income in subsection (1) above. the Secretary of State shall take into consideration the need to—

  (a) combat social exclusion,

  (b) maintain satisfactory standards of child development, and

  (c) ensure respect for human dignity.")

  The noble Lord said: I tabled this amendment in consultation with the Zacchaeus 2000 Trust and perhaps I should explain very briefly how it came about. I did not volunteer to table the amendment they were seeking. It would be closer to the truth, the whole truth and nothing but the truth to say that my very dear and noble friend Lady Castle volunteered for me. She suggested that I should be asked to help and I am very glad she did so.
  The Reverend Paul Nicolson, who chairs the Zacchaeus 2000 Trust, has been unfailingly helpful to me in preparing my submission on the amendment and I hope that he and his colleagues will feel that our debate this evening is worthy of their humane concern for the achievement of its purpose. With them I deeply regret that, sadly but unavoidably, the noble and most reverend
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  Lord, Lord Runcie, as a patron of the trust, cannot be here for a debate which I know he most warmly welcomes. I was extremely sorry also to hear from my noble friend Lady Castle this morning that she, too, would be unable to join us this afternoon.
  My amendment is about the importance of providing Britain's poorest people with the means to cover their essential needs and of urgent action by the Department of Social Security to set minimum income standards. The Commons Health Select Committee reported as long ago as 1992 that the DSS could not,
  "comment with authority on the adequacy of income support rates in the absence of research to support their view".
  No dietician and nutritionist is involved when the department decides the level of pensions and benefits. Yet the British Medical Association reported on 1st July that poor families in Britain include some of the unhealthiest children in the developed world. Only Albania has a similar proportion of dangerously underweight babies. And the United Nations today sees Britain as one of the most unequal industrialised countries in the field of child health. The BMA report attributes this to poor nutrition, low educational standards and lack of priority for healthcare. Others will blame underspending on benefits for our most vulnerable citizens and point to Britain's unenviable place near the bottom of the league of the OECD's 21 member states for the proportion of GDP spent on health, education and social security.
  In November last year the Independent Inquiry into Inequalities in Health, chaired by Sir Donald Acheson, reported that empirical evidence from research demonstrates that people whose incomes consist entirely of state benefits have,
  "insufficient money to buy items and services necessary for good health".
  It reported also:
  "The generally agreed 'healthy diet' in pregnancy may have long-term benefits in reducing the baby's later risk of cardiovascular disease … Mothers reliant on state benefits may not be able to afford a healthy diet, and may go short of food in order to feed their children".
  The first clear implication is that, when a pregnant woman is unable to afford a healthy diet, the consequences can be disastrous for the child. The foetus is underfed, leading to sickness in childhood and low life expectancy. And the second implication of Sir Donald Acheson's report, just as clear, is that satisfactory standards of child development are impossible to achieve on current levels of benefit in the UK.
  In the United States guaranteeing a minimum income to pregnant women has been shown to increase birth weight and life expectancy. But the UK is today equal 18th in the international league table for infant deaths. Japan, Germany, France, Spain and the Scandinavian countries, among many others, all have lower rates.
  My noble friend Lady Hollis will recall that the Commission on Social Justice—chaired with such distinction by my noble friend Lord Botrie—showed that the poor in Britain were dying younger in 1991 than in 1981. The reasons given were stress, inadequate healthcare and malnutrition. But the rich are living

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  longer. The British Medical Journal reported in February 1998 that professional workers could expect to live over five years longer than unskilled manual workers. Their life expectancy has fallen.
  In February 1998, the Department of Health published a graph showing that the life expectancy of semi-skilled and unskilled workers began to diminish in the mid-eighties, while the life expectancy of everyone else continued to increase. Nick Davies writes in his book Dark Heart:
  "Poverty kills with subtlety and skill. This is not the clumsy tyranny of the Third World dictator, leaving his subjects in pieces by the road side".
  But the effect of poverty on health in Britain can be stated without subtlety: it is the same in total as a plane crashing and killing 115 passengers every day of the year.
  The National Consumer Council reported in 1992 that it is primarily lack of money that causes families to go without food or to have to depend on an inadequate diet in Britain. In 1995 the council urged the Government to sponsor or undertake budget studies to find out what standard of living is implicit in social security benefit levels. But shamefully the DSS replied that it could not,
  "contribute to deliberations on the practical aspects of living on a low income".
  In answer to a recent Parliamentary Question tabled in another place, asking what assessment had been made of the ability of families and individuals living on income support to afford a healthy diet, the Minister replied:
  "A wide range of foodstuffs is available at affordable prices and a healthy diet is obtainable within the means of anyone receiving income support".
  Yet the report of the low income project team of the Government's nutrition task force makes it plain that a healthy diet is beyond the means of a great many people.
  There is no published research by the DSS to disprove the widespread evidence of malnutrition in Britain. For its research into living standards it relies mostly on expenditure data, but this does not convince the low income projects team that people on low incomes can afford a healthy diet. Expenditure by the poor is no guide to human need. They have to live with the reality that food, heating, clothing, transport and poverty-related debt must compete with one another for a share of inadequate benefits and low earnings.
  One and a half million people in Britain have no access to normal financial services. A further four million have no more than very limited access. They often have to rely on door-to-door moneylenders who charge exorbitant interest rates. Their participation in normal social life is minimal with very serious consequences for their communities and British society as a whole.
  An important distinction has to be made between poverty and social exclusion. While poverty is caused by lack of money, social exclusion also has to do with way of life and the environment in which people live. For example, poorer children are more prone to accident and injury. This is because they often have nowhere to play but the street. They live on estates where there is broken glass, used needles and other dangerous objects. Between 1981 and 1991 death by
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  fire among affluent children dropped by 28 per cent. Among poor children it rose by 39 per cent. These statistics shout the case for this amendment.
  Lack of money can lead to children being excluded from school outings and holidays and to going without adequate clothing, Christmas and birthday presents and many other things which are generally considered normal, not extravagant, by other children. Adam Smith wrote:
  "by necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people even of the lowest order to be without".
  Britain is one of the few developed countries which has made no effort to set governmental minimum income standards as distinct from relying on contestable academic measures of expenditure. We still fail to implement the European Commission's recommendation to member states of 24th June 1992,
  "to combat social exclusion [by] fixing the amount of resources considered sufficient to cover essential needs with regard to human dignity".
  This year public expenditure on income maintenance will cost approximately £150 billion, of which some £100 billion will go on social security benefits, student grants, training allowances and other transfer payments and the balance on income tax allowances and income tax reliefs. This spending dominates the national budget, yet it is made without any scientifically based estimates of the needs and living costs either of claimants or taxpayers. As the Guardian argued in a leading article yesterday:
  "Labour needs to set out the most fundamental welfare principle of all: what is an adequate income. This is not a technical but a political issue. No British government has ever set out a minimum acceptable standard of living, but six western nations have already done so in the last decade. The inadequacy of our current benefits can no longer be ducked".
  As of now, while it is aimed to eliminate poverty in 20 years, there is no estimate available of the minimum incomes required for essential needs and to promote good health among pregnant women, children, disabled people, unskilled manual workers or frail elderly pensioners living alone. The 20-year time scale understates both the urgency and seriousness of the problem. But the methodology to provide the DSS with the information needed for it to set standards is available. It was pioneered by the Family Budget Unit at the Department of Dietetics and Nutrition at King's College London.
  Nor has there been any estimate of how much it would save the Exchequer to be rid of poverty-related crime, court and prison costs, preventable ill-health, violence, stress, low educational achievement, divorce and other poverty-related costs. Yet the BMA estimates that every £1 spent on improving a child's health ultimately saves £8 in health care.
  This is why the Zacchaeus 2000 Trust is calling for clear undertakings from my noble friend the Minister this evening to,
  "implement the European Commission's recommendation of 24 June 1992 on combating social exclusion; secondly, to assess all policies, old and new—not, in the words of the White Paper, only 'major new policies'— for their impact on health; thirdly, to commission independent research into the weekly costs of essential

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  needs for the appropriate categories of people; and, fourthly, to publish the reasons, and all the supporting evidence, on which the levels of minimum incomes for the appropriate categories of people have been determined".
  This is a necessary amendment to the Bill, which has the backing of Age Concern England, Barnardos, the Low Pay Unit, the Maternity Alliance, NCH Action for Children and the UK Public Health Association, among many other admirable organisations to which the Government should listen not just with attention but the utmost respect. Acceptance of the amendment would require government to arm itself with information essential to combating social exclusion and promoting both respect for human dignity and the building of a just society. I beg to move.
  Earl Russell: I am happy to support the amendment moved by the noble Lord, Lord Morris of Manchester, to which I have put my name. I was not volunteered for this amendment and the Minister will know that I have spoken on roughly similar themes for as long as she has been in the House and, I think, rather longer. I shall say exactly what the effect of the amendment would be. It demands that the Government have regard to the minimum level of income necessary to maintain good health and cover essential needs.
  It has always been the Government's position hitherto that, at least inside the Department of Social Security, they did not know what the amount necessary to maintain good health was. They said that it was a matter for choice and that they were not concerned with how people spent their benefits. I have had many exchanges with my noble kinsman Lord Henley who said that it is not a matter on which the department possesses any information.
  I understand why the Government may resist the amendment. If I may borrow words used in another context by the noble and learned Lord, Lord Goff of Chieveley, caution—otherwise known as the Treasury—would never allow it. But caution takes more than one form and, as the BMA continually reminds us, ill-health caused by lack of adequate income may cause other costs of many different sorts whose size may be great enough to interfere with the Treasury's calculations.
  I shall mention briefly some of the work that has been done on the issue. For example, NCH Action for Children surveyed a sample of people in which one in five parents turned out to have gone hungry in the preceding month and one in 10 children under five had gone without food in the same period. No parent or child was eating a healthy diet.
  I should also mention the National Consumer Council survey Your Food: Whose Choice? It makes the vital point that all survey information is based on the standard supermarket price. If you live, say, in rural Wales, or if you are unable to get to the supermarket because like many people on benefit you cannot afford to run a car, you may well end up paying 20 per cent over the standard price. That means that in many areas of the country all the survey information is understating the problem by up to 20 per cent.
  The issue has been put fairly and squarely back on the agenda by the Acheson Report. It states, bluntly, that income from benefits is insufficient to maintain good
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  health. That is a stark and striking finding and it must call for action. I am sure that all of us have Treasury teams which tell us that we cannot solve the problem instantly. However, we can set out to move in the right direction. If we are not doing so, we are storing up greater problems for the future.
  I also have with me extracts from the newly-published book by the BMA, Growing Up in Britain. The BMA reports that children in social class B5 have more than twice the rate of long-standing illness, are smaller at birth, shorter in height and have a markedly poor diet. It also reports that we have become a country of rapidly increasing inequality, which means that the extent of these problems is likely to spread.
  The effect extends into health. The Minister will be familiar with the work of the Medical Research Council on low birth weight. It also makes the point that the effect of low birth weight is to diminish apparent intelligence and therefore to diminish educational performance. It states:
  "Inadequate nutrition can impair cognitive development and is associated with educational failure among impoverished children Nutrition early in life has a big impact on the development of the brain.".
  Therefore, a small increase in benefit levels might do more to improve educational performance than 10,000 Woodheads; if, indeed, 10,000 Woodheads would do anything to improve educational performance! I pass over that because it is wide of our present purpose.
  The document illustrates that the costs of not providing an adequate level of benefit may be far more various and manifold that anyone has taken into account. The effect of the amendment is extremely modest. It does not call for any immediate spending; it simply calls on the Department of Social Security to try to discover the size of the problem. In any political decision we take, we must count costs. In any decision about spending money, we must also count the costs of not spending it. That need has become urgent and if we do not address it we cannot claim that we are doing anything serious to try to fight poverty. I am most happy to support the amendment.
  7 p.m.
  Lord Murray of Epping Forest: The aim of the amendment is to begin the process of putting flesh on the bones of the Prime Minister's determination to end within a generation the scandal and tragedy of child poverty. He has declared his interest, which will be shared throughout the Chamber. I, too, declare an interest as vice-chairman of one of the charities referred to by my noble friend—NCH Action for Children. He powerfully described the relationship between poverty and ill health. As the noble Earl said, the situation is deteriorating.
  The report issued today by the Institute of Fiscal Studies demonstrates that the number of children in households with incomes below half the national average climbed from 1.4 million—one in 10 children—in 1968 to 4.3 million—one in three children—in 1995–96. Half today's poor children live in households where no one works. Of course the Government are

  877
  right to work towards providing work for those who do not have it. I share their aim. Indeed, the idea of work for maintenance was written on the banners of the trade union movement in the 19th century. However successful the Government's policy may be, some will not be able to work and will need support if their families are to be maintained in anything like decent living circumstances and children maintained in decent health.
  It is not inconsistent enthusiastically to support the Government's efforts to tackle social exclusion and to draw attention to the need to provide a reasonable safety net to the people who continue to need it. That is the only and laudable purpose of the amendment.
  Lord Goodhart: The amendment raises not only issues of domestic law, raised by my noble friend Lord Russell and introduced most effectively and powerfully by the noble Lord, Lord Morris of Manchester, but issues of international human rights law. There are twin United Nations conventions to which the United Kingdom is a party. The first is the international covenant on civil and political rights, which is very well known to lawyers. The second, much less well known than it should be, is the international covenant on economic, social and cultural rights.
  Economic and social rights under the covenant include rights to, for example, education, healthcare, housing and social security. In the past, it was assumed that those rights in the covenant were mere statements of intention and in no way legally binding. But there is an increasing recognition among organisations and individuals concerned with human rights that economic and social rights should be legally enforceable rights. Those rights and their enforcement must be subject to a government's ability to meet them. We cannot expect poor countries to provide a level of education, social security or health equivalent to that appropriate to a richer country. But countries should do what they can and should aim to improve what they do as they grow richer. For example, the Republic of South Africa, a poor country, recognises a number of economic and social rights in its constitution and makes them justiciable within the limits of its ability to afford them. If South Africa can do that, surely a rich country like the United Kingdom can do the same. That is what the amendment does and that is an additional reason why I support it.
  The Lord Bishop of Hereford: I warmly support the amendment. I thank the noble Lord, Lord Morris, for moving it and I thank other Members of the Committee for supporting it. We have just heard a contribution from a lawyer and it is important that a voice is heard from these Benches in support of the amendment.
  It raises profound moral issues. The noble Lord, Lord Morris, said that this is not a technical matter; it is a political matter. It is technical and political, but above all it is moral. The unequal distribution of wealth, the need for social justice, are matters on which we ought all to be deeply concerned. It is imperative to comment on issues of social justice in the light of the Christian
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  tradition to work for a society which is more socially inclusive and less unjust. Our ideas of social justice are all derived from the teachings of the Judaeo/Christian tradition and to permit or collude with the exclusion of the poor, to accept that in a wealthy society some, and in particular children, should have to go without the necessities of healthy living, is to be guilty before one another and before God. That was the message of the prophets of Israel, the message of Jesus and of Christian teachers and reformers across the centuries: Thomas Aquinas, John Wesley, William Wilberforce, Josephine Butler, R.H. Tawney and William Temple.
  My postgraduate research was concerned with social thought and action of the Churches in the 1920s and 1930s. I carried out the work in the early 1960s at a time of relative prosperity, of high levels of employment, of hope and of confidence. I was hardly able to believe how the caring society in the 1920s and 1930s had tolerated such gross inequalities of wealth and poverty and such appalling conditions of housing and unemployment as accompanied the Jarrow marches and so on.
  The concern for adequate and therefore just provision for the poor has been taken up in more recent years by the Christian Churches. I refer to the work of the Church of England in calling for the Government to commission independent research which could lead to publicly recognised, minimum income standards based on need. That was a message of the Archbishop of Canterbury's Commission on Urban Priority Areas. In 1985, Archbishop Runcie, as he then was, in the report entitled Faith in The City, called for,
  "an assessment of need rather than what can be afforded".
  The report continued:
  "The basic question 'what are benefits supposed to cover?' has not been answered since the system was introduced in 1948".
  Benefits have been uprated a little most years, but even in 1948 the levels were based on figures constructed by Beveridge 10 years earlier and insufficiently uprated. Since 1948 no attempt has been made to set the rates according to an agreed standard of what they could and should cover. The rates for children have never been costed. For that reason I welcome the report which asks for that work to be carried out.
  The report of the Council of Churches of Britain and Ireland inquiry into unemployment and the future of work, published two years ago, focused on the debilitating effects of unemployment and the human need for good work. The report was based on a mass of research carried out by people who lived with and talked to people living in the poorest areas of this country. It was not simply Civil Service statistics; it was the real experience of people who discovered what life was actually like for such people.
  The report highlights the role to be played by the state in combating unemployment, especially long-term unemployment, and the role of the Churches in supporting good work for all. Since then the Government have taken impressive steps in the direction of combating long-term unemployment. We believe that

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  the transfer of the Benefits Agency into what is fairly described as a user-friendly unemployment advisory service is welcome indeed.
  Many people, despite the best efforts of government and employers, remain in long-term unemployment and I fear many will continue to do so. The CCBI report comments that levels of income from benefits were never intended to support those in long-term unemployment. So there are particular difficulties for such people who live on benefits today. The report makes it abundantly clear that income support levels are too low to maintain a minimum standard of living as commonly understood in Britain today.
  My support for the amendment is framed within the concept of justice, derived from an understanding of the Hebrew scriptures, the New Testament and the Christian tradition of reflection on these vital issues. Perhaps there is no better text than the famous words from the prophet Micah:
  "What does the Lord require of you? To do justice, to love mercy and to walk humbly with your God".
  That tradition sees wealth enjoyed by humans as ultimately the gift of God in creation. It affirms that wealth is to be used for the meeting of human need, according to the will of God, which is a will for justice. The amendment intends to bring about the commissioning by the Government of proper independent research into the weekly cost of essential needs, good health, social inclusion, the maintenance of satisfactory standards of child development and the setting of minimum income standards which will meet those needs in an economical, low cost, but acceptable manner.
  I am delighted that the Minister has in her possession at this moment the report which sets out the case so cogently. I look forward to hearing her positive and enthusiastic response to the amendment.
  Lord Patel: I support the amendment put forward by the noble Lord, Lord Morris of Manchester. Research carried out by my colleagues and I has clearly demonstrated the strong link between low birth weight and the low socio-economic group of the mother.
  The Royal College of Obstetricians and Gynaecologists presented evidence of the association of poor nutrition of the mother with low birth weight to Sir Donald Acheson's committee. The work of Professor Eva Alberman, a renowned epidemiologist, has clearly demonstrated the reduction in childhood mortality and morbidity that would result from improvements in birth weight of babies born at less than 2,503 grams through improved nutrition of the mother. The relationship between low birth weight and adult diseases such as hypertension, heart disease and diabetes has already been referred to as evidence produced by the Medical Research Council in its research.
  Many gains are to be had by improving the nutrition of pregnant women through improving income support of women in poverty. I support the amendment.
  7.15 p.m.
  Lord Higgins: The amendment moved by the noble Lord, Lord Morris of Manchester, raises both emotional and important analytical issues. The debate has reflected the personal experience of the kind of problems that he outlined and reference has been made to various academic studies.
  The noble Lord began by referring to the work of Adam Smith. Welfare economics has moved on since his time. Perhaps my experience of lecturing on the subject at Yale University where most of my students had names like Rockefeller III and Henry Ford IV may have been in a rather strange environment.
  The research is important and it is right to refer to it. One distinction which economists tend to make and which is also crucial to the issue is the distinction between fundamental poverty and comparative poverty and secondary poverty. In a country like Chad, there is a level of absolute poverty which to those in this country is quite horrifying, and to a large extent the situation here is one of comparative poverty. Even since the time of Beveridge, the standard of living in this country generally has risen so much that our view of what is comparative poverty now is rather different from what it would have been in 1948.
  The question of comparative poverty is important. I refer to the subject with great diffidence. The noble Lord, Lord Murray, with his experience in charitable work, and the right reverend Prelate the Bishop of Hereford, no doubt with his own experience, speak with far greater authority.
  The noble Lord, Lord Morris, referred to the work of the Zacchaeus 2000 Trust. I have studied with interest the points made in that study. In particular it refers to the consequences of inadequate income in ill health which leads to diminishing life expectancy. One set of figures was produced with regard to the fact that life expectancy of semi-skilled and unskilled workers began to decline in the 1980s, which I find somewhat puzzling. The study does not suggest why that should be so.
  The study also refers to people of an earlier period The noble Lord, Lord Morris, referred to the life expectancy and the nutritional situation with regard to the mother. One has to go back some years before one sees that reflected in the statistics for life expectancy at: the end of the generation rather than at the beginning of it. It is undoubtedly true that the nutrition level is important in that context. Reference has been made to the Acheson report and to various other BMA reports., all of which are important.
  I turn to the point I made a moment ago about secondary poverty. When I was governor of the then Institute for Policy Studies a report was produced on that subject particularly concerning smoking. It is not just a question of establishing the income level. The amendment suggests that the Government should introduce a level of income which will produce sufficient nutritional value.
  But there is still a high degree of choice for those receiving that level of income. One aspect that I found utterly horrifying was the extent to which people on income support who, presumably, are living at the

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  lowest level of income which is acceptable, spend a very high percentage of their income on cigarettes. Indeed, the amount of money returned to the Treasury from the tax on cigarettes was quite a high percentage of the total amount being received on average by this particular group on the lowest acceptable level of income.
  As regards the complaint made by the noble Earl, Lord Russell, about the use of standard supermarket prices in assessing the minimum level of income, if there are people in this group who are unable to get to a supermarket, it may well be that they gain rather than lose because some studies seem to support the view concerning secondary poverty that people in that lowest income group tend to spend a great deal of money on convenience and junk food which may be even more expensive—for example, if one is buying frozen sprouts—than buying fresh sprouts and so forth.
  These are not simple issues. One has to consider very carefully whether the establishment of a level of income which will produce the degree of nutritional benefit we should all like to see can be defined in such simple terms. Having said that, both from personal experience and the various reports that have been referred to, they provide important yardsticks against which we can judge the amendment, which has given rise to an extremely interesting and valuable debate.
  Lord Haskel: I do not believe that anyone can disagree with the amendment tabled by my noble friend. No one can disagree that we want to combat social exclusion or that we want to maintain satisfactory standards of child development. No one can disagree that we need information on these matters and that we need to ensure respect for human dignity.
  However, I believe that in this debate speakers have been a little unfair to the Treasury. The noble Earl, Lord Russell, said that the Treasury would not allow the proposed measures. I believe he has been a little unfair. The Treasury has taken the initiative in trying to eliminate poverty and with the working family tax credit in order to try to get people out of dependency. Surely, the key to improving nutrition is to get people away from dependency. The Treasury is to be congratulated on taking these initiatives. It has committed itself to removing nearly 1 million children from poverty. It has produced the highest ever rise in child benefit. We are promised a new children's tax credit.
  It seems to me that we are moving in the right direction. The noble Earl, Lord Russell, said that perhaps we would just like to hear that the Government are moving in the right direction. I believe that the Government are doing so with the actions that I have mentioned. In addition, the work that they are doing to provide skills which are necessary to facilitate employment is a very important aspect of the programme. I say this because it adds a little balance to the debate.
  Baroness Hollis of Heigham: As the noble Lord, Lord Higgins, said, we have had a very interesting debate. In a way I wish it had been in the form of an Unstarred Question drawing attention to this issue rather
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  than it arising at this rather late hour in the passage of the Bill. But I welcome the opportunity provided to describe the Government's approach to the fundamental and crucial issues raised this afternoon.
  Our commitment is to create a fairer Britain. Our reform of the welfare state is an integral part of that. Perhaps I may explain why we believe that our strategy is the best way to achieve that aim and why this amendment is not necessary.
  It seeks to address the problems of poverty and social exclusion through social security benefits. Certainly, benefits have a role to play and when setting the rates for benefits and pensions we bear in mind the whole range of research that looks at adequacy. For example, we recently raised the income support rates for families with younger children and our decision was influenced by the recent research report Small Fortunes, which has been quoted by noble Lords in the past.
  However, as Members of the Committee will appreciate, the question as to which level of income is adequate for all types of family has no simple answer. Different research methods provide different answers. We shall continue to review all the research, but setting a single minimum level of income would not do justice to the range and complexity of the work in that area.
  As I am sure Members of the Committee will agree—this is the important matter—the problems of poverty and social exclusion go much wider than benefits. If we are to wage a serious assault on poverty and social exclusion in Britain we need to tackle the causes. They are multi-faceted. The Committee concentrated in particular on children. One child in three in this country is poor; one in five children lives in a family where the parents do not work; thousands leave school without even basic skills; 3 million people have been out of work and dependent on benefits for over two years.
  As the Secretary of State, Alistair Darling, said, children are born in poverty, live in poverty and die in poverty, especially if they come from a workless and fractured family where the mother does not work and the father does not support the child. In that case they are doubly disadvantaged.
  The face of poverty in this country is not the face of a pensioner, a widow or a disabled person, it is the face of a child. We know that disadvantage passes from generation to generation. We are determined that that cycle should not continue. That is why the Prime Minister made his historic pledge that we aim to eradicate child poverty within a generation. That is an outstandingly bold pledge.
  How do we propose to do that? We are investing in our children's future by tackling the causes of poverty and by raising standards in health and education. Why do people come to live on benefits rather than the level of benefits it is necessary for them to have? Subsection (2) of the new clause would require to have taken into account child development needs in setting benefit levels. I agree that providing children with opportunities to develop and flourish are essential. We are introducing a range of measures, first, in tackling health inequalities raised by the Acheson report. We are including £320 million to cut waiting lists; £49 million for health

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  action zones; £266 million to improve primary health care. We have just published our health White Paper Saving Lives which sets out tough and challenging targets to reduce mortality rates in key areas with the potential to save over 300,000 lives over the next 10 years with all the implications for the low birth rate which the noble Lord, Lord Patel, mentioned.
  We are also seeking to introduce a range of measures to increase the incomes of families with children including the improvement of nearly £5 per week on the rate of income support and the working families tax credit from October this year. There will be an additional £1,000 per year also for disabled children in low WFTC families. There will be a further record increase in child benefit from April next year. There will be a new children's tax credit of £426 per year from April 2001.
  As my noble friend said, the passion of this Chancellor is to tackle child poverty. So far every Budget has been shaped above all with that end in view. I cannot believe that Members of the Committee do not accept that everything he has done with the WFTC, child benefit and all the other changes in income support and the rest, are designed to help families with children and motivate him in holding that office.
  As a result of the last two Budgets and the national minimum wage, the poorest fifth of families with children will be over £1,000 a year better off; and, if they have a disabled child, £2,000 a year better off. But providing financial help is not enough. We need to be much more ambitious. One of my complaints is the poverty of the horizons of tonight's debate, which assumes that the issue is about increasing the benefit levels of people who, even if we increased them by £20, would not lead the generosity of life that everyone in this Chamber believes necessary for social inclusion.
  Earl Russell: I am grateful to the Minister for giving way. Does she accept that if poverty leads to ill health, that makes it much harder to get off benefit into a more rewarding form of life?
  Baroness Hollis of Heigham: Of course. Poverty creates ill health; ill health creates poverty. I entirely accept that. I do not want to sound like a previous Minister, but the noble Lord, Lord Higgins, in quoting some of the research on poverty, health and smoking by Richard Dorset and Alan Marsh, referred to the need for a welfare into health programme as well as a welfare into work programme. That shows that real problems exist. Around one child in four of lone parents has some form of illness or disability; 75 per cent of that is related to respiratory problems and associated with the mother smoking. So I absolutely accept that there is a problem which we must redress through access to therapies. I believe that people do not have the energy to cope with those sorts of problems. Unless we can help them acquire that energy through offering them opportunities, we will not get the virtuous cycle we all wish to see.
  As I say, financial help is not enough. We need to be much more ambitious than saying, "Can we raise the benefit here by a little and raise it there by a little?" And we are. We are investing £540 million in the new Sure
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  Start scheme, which will ensure that children who are potentially the most deprived and damaged no longer vote with their feet and fall behind children of their age group the day they join school. We are investing £19 billion to drive up standards in education so that we invest in human capital for the future. And of course children's chances are largely shaped by their parents' opportunities. That is why we are taking steps to help more people into work and why we need to reform the Child Support Agency—something dear to my heart—so that women on income support receive the first £10 of maintenance and if they are on working families' tax credit, will keep every penny of maintenance, thus allowing them a possible extra £30 a week.
  So we are doing all of that. But above all, a child in a poor family will only no longer wear that badge of poverty if he is living in a family where someone is in work and where, therefore, either maintenance is being paid or his parent is helping to support him in that way. Helping people into work is at the heart of our welfare agenda. We cannot live a comfortable life on benefit; I know of no country in Europe where that is possible. We need to improve the skills and training of cur workforce and to reconnect people who have become detached from the labour market.
  That is why I was concerned about the "poverty of aspiration" behind so much of today's debate; the assumption of the passivity of those on benefit; that all that is required is slightly to increase their benefit cheque. That will not do. That is why we are launching our New Deals and the new "one" service. As well as helping people into work, we need to make sure that work pays. That is why we embarked on a radical overhaul of the tax and benefits system.
  For the majority, work is the best way of avoiding poverty and we know that lone parents who go on to the New Deal springboard into being £50 or more better off. If we can get their maintenance flowing, they receive another £30 on top of that. An £80 increase on a benefit level of £80 is worth having and really transforms a child's life, as opposed to the piecemeal incremental addition to benefits.
  For the majority, work is the best way of avoiding poverty and social exclusion. But we recognise that for some people that is not a realistic option and we need to provide them with the support they need so that they have the opportunity to enjoy active and fulfilling lives. We are taking steps to make that a reality. So for disabled people we are tackling discrimination. We are making sure people have access to high quality services—the health service, education and the law. And for those who are unable to generate a living income themselves through work, we are providing help through a modernised and effective social security system.
  We are investing £195 million in the New Deal for disabled people. We are introducing the disabled person's tax credit; doubling the child premium and working families' tax credit for a disabled child: creating the new disability income guarantee, worth at least £128 a week for the most severely disabled people under 60 in receipt of income support.

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  Through this Bill we are providing a secure income for disabled people who have never had the opportunity to work and therefore they will gain by almost £30 a week. We are modernising incapacity benefit to ensure that it reflects modern society and to restore the original purpose of the benefit. The Bill also takes forward our agenda to help tomorrow's pensions. The new stakeholder pensions and the provisions for pension sharing on divorce; our proposals for the state second pension and the promise of a new minimum income guarantee which will be uprooted by earnings; in all those ways we are saying that the best way to help children out of poverty is to ensure that they are members of a family where there is a parent in work. But if that is not possible—if the parent is severely disabled or alternatively they are a pensioner without an adequate occupational pension, then that is where we target our help.
  I recognise the concern in this Chamber that all citizens should have the opportunity to share in the prosperity of the nation; it is a concern that I share. I hope that I have persuaded my noble friend Lord Morris who moved the amendment so movingly, that the actions we are taking to tackle poverty and social exclusion are the best way to achieve that end, and that we intend to take account of the whole range of available research.
  However, I do not believe that we need this clause. We are a government prepared to be judged by results. That is why we will publish and are publishing an annual report which will include a range of indicators against which we chart our progress in tackling poverty. The annual report will examine our success in tackling poverty and social exclusion across the board, measured by indicators. It will provide a reliable and comprehensive guide to our performance and will, I hope, encourage my noble friend Lord Morris to withdraw his amendment tonight.
  Lord Morris of Manchester: With many others here and beyond this Chamber I shall be studying the reply of my noble friend the Parliamentary Under-Secretary with due care and all my customary charity. At this stage I shall not press the amendment, but strongly urge her to reflect again on the case for achieving its humane and important purpose. Meanwhile, I am grateful to all noble Lords who took part in the debate. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord McIntosh of Haringey: I beg to move that the House be now resumed. In moving this Motion, I suggest that the Committee stage on this Bill be resumed not before 8.37 p.m.
  Moved accordingly, and, on Question, Motion agreed to.
  House resumed.

Meat Hygiene Service
7.37 p.m.
Lord Stoddart of Swindon Lord Stoddart of Swindon rose to ask Her Majesty's Government whether they are satisfied with the performance and effectiveness of the Meat Hygiene Service.
The noble Lord said: My Lords, I thank in advance all those who put their names down to speak, all of whom can speak from knowledge and experience, and I thank my noble friend the Minister.
This is the first time that the House has debated the Meat Hygiene Service since 1995, when the statutory instrument setting it up went through the House of Lords—there never was discussion in another place. We were told then that the Meat Hygiene Service, which replaced the well-tried and respected local authority meat inspection regime, would be accountable to Parliament through Ministers. In the light of that, I was surprised and concerned to see at col. 121 of the report for 9th July a Written Answer by the Minister to my noble friend Lady Gould which was critical of those who were asking Questions about the Meat Hygiene Service. Indeed, my noble friend was complaining of the cost and trouble to Ministers and officials caused by those Questions. My noble friend must be aware that Parliament is here to hold Ministers to account by means of Questions, debates and so forth. I hope that he will reconsider his attitude and never give a reply like that again.
During the 1995 debate, my noble friend Lord Carter—speaking then from the Opposition Front Bench—was highly critical of the Meat Hygiene Service, its costs and mode of operation. He ended his speech with a quotation from a United States judge, Mr. Louis Brandeis, who said,
"The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding".—[Official Report, 18/4/95; col. 412.]
That just about sums up the Meat Hygiene Service. Indeed, the service has become an expensive, incompetent organisation, which has imposed high costs, inconvenience and disruption on abattoirs without, apparently, delivering any better or safer service than the local authorities. At the same time, it has built up an atmosphere of resentment and fear among abattoir operators, especially small ones, many of whom have been driven out of business by the high costs and red tape.
In 1995, Her Majesty's Government promised that charges would not be raised unduly. However, my information is that that promise has not been kept. Even at the present time, I understand that yet another increase imposed in April is shortly to be implemented. In my own view, charges should not have been imposed on operators at all, as the system of self-financing authorities is unfair and leads to inefficiency and, possibly, corruption. Clearly, the charges should now be dropped, following the decision after representation by tens of thousands of businesses, especially small and medium-sized ones, to scrap charges for the new food safety authority. The Government quite clearly took

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notice of a mass opposition, and I think that they ought to take notice of the abattoir operators, who have been hard done by.
Indeed, it would be quite inequitable and scandalous to retain charges for the Meat Hygiene Service in the face of scrapping charges for another food safety inspectorate. What is sauce for the food safety goose is also sauce for the MHS gander; or it ought to be. But it seems that inspection charges are higher than they need be because the number of inspections has increased needlessly without giving the public any greater protection. There is evidence to show that there is more cross-contamination in the larger abattoirs and that the necessarily high throughput needed to make businesses solvent after meeting the high charges actually increases the risk to the general public. That certainly was not the intention of the European directive and the MHS when it was established.
Then there is the difficulty of recruiting. We have all heard about the difficulty of recruiting British vets to do this job. Indeed, none of them seems to want to do it. Of course, we have also heard a great deal about their training, or lack of it. Because British vets are not attracted to the job, a large number of foreign vets—not just a few—have had to be employed. From Answers by Her Majesty's Government, it appears that there are at present 130 foreign vets employed and I understand that 300 more are to be recruited. Perhaps my noble friend will take those figures on board and let me know if we are in fact going to recruit another 300 foreign vets.
These people are not really suited to British conditions. In many cases, they do not understand the system or the working culture. They are often officious and rude to abattoir staff. This is perhaps understandable, as they are given one week's training—I repeat: one week's training! It is really not sufficient, especially bearing in mind that they are, in effect, law enforcement officers. Police officers in this country receive 22 weeks' training before they are allowed to enforce the law. Yet here we are, giving only one week's training to other people who are doing the same sort of job.
Moreover, what makes things worse is the fact that the existing appeals system is to the Meat Hygiene Service itself. This means that the agency is prosecutor, judge and jury in its own cause. That simply cannot be right. I hope that my noble friend the Minister will think about that and bring forward some changes which will give abattoir operators confidence in the scheme and reduce their fear of victimisation if they make any complaints.
I know that there is much more to be said on this subject. I feel sure that the speakers who will follow me will say it and say it well. However, I want to ask, finally, whether there is a case for the Meat Hygiene Service to continue at all. The Written Questions so disliked by my noble friend seem to show that the whole system is based on outdated and imprecise scientific assumptions and that the employment of full-time veterinary coverage is not really necessary. When I was the leader of a local authority—a county borough council, which had its own health authority—I had some
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experience of employing meat inspectors. They did the job extremely well; they did it efficiently and they did it at very low cost. I never have understood why we had to change from a system that was working well—except, of course, for the ridiculous EU directive.
I hope that my noble friend will undertake to carry out an investigation into the principle upon which the Meat Hygiene Service operates. I believe he will find that the scientific assumptions have been disproved. If that is so, he should seek to renegotiate the EC Directive 91/497 to achieve a much more satisfactory and less expensive meat service. Such action by him would help to restore the confidence of operators both in him and in the Government; and he would be a very popular Minister indeed.
7.47 p.m.
Lord Willoughby de Broke: My Lords I am sure that all the small abattoir operators will be very grateful to the noble Lord, Lord Stoddart of Swindon, for introducing this evening's debate. The Meat Hygiene Service was introduced in 1995. I am very sorry to say that it was introduced by a Conservative government. It was then described as,
"a costly, Stalinist, centralised and bureaucratic organisation".
Those are not my words—indeed, I wish they had been—but those of the noble Lord, Lord Carter, who is now the Government Chief Whip. Of course, so it has proved. The MHS, unreformed, looks like being a total disaster for the rural economy. It is driving perfectly good and viable businesses, which provide a much-needed service, into insolvency.
Perhaps I may give your Lordships just two examples. My own local slaughterhouse is run by its owner, who is also a farmer. It has been run by him for 35 years and has a completely unblemished record—no complaints, no hygiene bad scores, no food safety fears, no black marks, no E.coli; indeed, no problems. He remains in business, but for how long? He is a vital part of the local economy, linking farmers, butchers and consumers. However, at present, his veterinary inspection costs and his meat inspection costs total about £300 a week. Those costs are quite high, but they are bearable for a small business. But these will increase dramatically and so steeply by about 400 per cent when an attempt is made to recoup the full charges of the MHS—so much so that his business will become completely unviable, and he will have to close.
Perhaps I may cite another case in this respect. I refer to John Coles who has a small slaughterhouse in Devon. He was telephoned last week by his principal OVS arid told to carry out a water test at a cost of £500. I should add that he has never had any problems at all with water quality. As a rider, the OVS finished the conversation by saying, "Do you think it is still worth running a small abattoir?" He was due to be inspected this week under the HAS scheme. As the noble Lord, Lord Stoddart, pointed out, some of these vets have received little training. The Spanish vet had only been in this country for six weeks. Mr Coles rang me this evening just before the debate to say that the vet could not understand the forms, had had only three or four hours' training and

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had marked Mr Coles' abattoir down from 85 to 66, which is just one point above the danger level for closure.
Is this really right? Are the Government really intent on driving these small businesses into liquidation, not because they are unsuccessful, or because they pose a threat to public health, but because they do not fit the MHS charging structure, they do not fit the mould? Why are the Government doing this? The Minister for the Cabinet Office has promised a new approach to regulation, and so has the Regulatory Impact Unit. It is supposed to,
"ensure that we implement regulations in such a way to minimise the individual and cumulative burden"
—of regulations—
"particularly on small businesses".
But it is small businesses that are being driven to the wall by the monolith of the MHS. Whatever happened to joined-up government?
I understand that the Government have written to the Commission to ask for clarification of Directive 91/497 and its derogations for LTAs which, incidentally, are quite clearly contained in Article 4 of the directive which I have here. I do not see why they need to be reinterpreted either by the Commission or by the legal department of MAFF. Will the Minister say whether the Government have had a reply to their letter to the Commission and, if so, what was the impact of that reply? Is there any truth in the rumour that the Commission said that there are derogations for LTAs in the directive, but that that advice has been contradicted by government lawyers? I would like some answer on that. I also ask the Minister to ensure that a copy of that correspondence is placed in the Library so that we can see for ourselves exactly what has gone on between the ministry and the Commission in this case.
I really believe that the Government must show a little more backbone on this whole issue. They must decide who calls the shots. Is it the Government or is it the bureaucrats? They must not let hundreds of small, perfectly good businesses go to the wall which have done nothing wrong at all except be small. The Government must not allow Europe to dictate the pace on this. They cannot simply lie back and think of Europe. I hope that they will think more of the small businesses that form such a vital part of the rural economy.
7.52 p.m.
The Lord Bishop of Hereford: My Lords, I also wish to thank the noble Lord, Lord Stoddart of Swindon, for raising this enormously important subject. Small abattoirs do not sound very exciting but there is no subject in my diocese, which depends considerably on small-scale livestock farming, which causes more anger, more resentment and more fear. It is not simply the abattoirs themselves which are under threat, but all the jobs that flow from them. It is an enormously significant threat to people who live in Herefordshire and Shropshire, and obviously in similar areas throughout the country.
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Every small abattoir is faced with closure because of the enormous charges which are being levied on them. I think that there is perhaps some scope for re-interpreting a European Union directive—I shall come back to that in a moment—but I just want to emphasise the enormous impact which these charges are having. Small abattoirs play an absolutely strategic role in food production. They fill business needs that large factory slaughterhouses cannot. Small orders, speciality cuts, meat from rare breeds and organic meat all form the high quality end of the market that produces the good will and the innovation that the meat industry needs, particularly at this time when livestock farmers face such critical difficulties. They enable the small livestock farmer to add value close to home. Often it is possible for the animals to be slaughtered at a nearby small abattoir and then the joints or the sausages can be sold at the farm shop. That enables a small farmer to add value, instead of the value being added miles down the line by someone else, which of course is another cause of enormous resentment among small farmers. Farmers' markets, farm shops and village shops will lose their local supplies of meat and the fine food sector will simply not be able to obtain the high quality meat which makes its business possible. Thousands of jobs are at risk all over the country.
The question has to be asked: why do we have to have these enormously high charges? There is of course enormous gratitude that the Government have deferred the charges for enforcing the control measures for specified risk materials for one year, but that is only one year's grace as far as we know. There is no promise that those charges will not be levied again after the year's remission. The Government are charging for meat hygiene inspectors and official veterinary surgeons, MHIs and OVSs. The OVSs' inspection time has increased from 25 per cent to 50 per cent of slaughtering times and the threat is that it will be increased again to 100 per cent. We have already heard about the enormous costs that have to be paid.
There is the question of whether the European Union has been misinterpreted. I understand that it is in this country alone that this particular interpretation is placed on the directive; namely, that we have to have fully qualified veterinary surgeons as supervisors on top of the traditional meat hygiene inspectors. This, I think, centres round the interpretation of the words in the directive, "vétérinaire ordinaire". Does this actually mean a veterinary surgeon? I believe that it does not mean that, but unfortunately that is the interpretation that has been put on that particular phrase in this country. We have already heard about the scandal of vets from overseas who speak little English and who cannot understand the system, and whose judgments may be critically important and critically destructive for the welfare of small abattoirs. The track record of small abattoirs is good. Their hygiene levels on the whole are higher than those of large abattoirs.
This is a matter which is causing deep concern. I hope very much that the Minister will be able to give us some significant assurances that the Government understand the gravity of the problem; that he will be able to clarify this interpretation of the directive; that he will give us

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assurances that the real value of small abattoirs to rural communities is fully understood by the Government; and that the Government are absolutely committed to ensuring their survival. So much is at stake that this debate, though a brief debate and not well attended by your Lordships is, I hope, something which will make a significant difference. I hope that I shall be able to go back to my farming friends in the diocese at the end of this debate and say that we have been given some real assurances of real value from the Minister. I note, sadly, that I speak before the noble Countess, Lady Mar, because I know that she has a great deal of expertise on this topic and I would have dearly loved to hear what she said before I had to make my own amateurish contribution. However, I do it with passion because I know how many people's livelihoods hang on the right answer to this problem.
7.57 p.m.
The Countess of Mar: My Lords, I would say to the right reverend Prelate that his contribution is as valuable as any other in this House because he speaks of the people who are being damaged by the legislation.
First, I would like to say "thank you" to the noble Lord, Lord Stoddart, for asking this Question. Secondly, I ex press my heartfelt thanks to the Minister for so kindly arranging a meeting for Dr North, Mr Chadwick and myself with the chief executive and officials of the Meat Hygiene Service last Thursday.
I am delighted to report that the meeting, to put it mildly, developed into a lively exchange of views and we parted with an agreement for co-operation. Last evening I received a letter from Mr Johnston McNeill, chief executive, enclosing a copy of a letter from Mr Peter Soul, director of operations at the Meat Hygiene Service, to all principal official veterinary officers and area resource managers. I am aware of the huge cultural changes that are needed to enable a government department to become a publicly oriented business. I am also sensitive to the feelings of staff who work for an organisation that is a public "knocking block". I worked for British Telecom for 13 years. This enables me to say that I am pleasantly surprised at the contents of the two letters. They indicate a determination at senior level that what is known as the "canteen culture", where the customer is always wrong, should not prevail. If the members of the Official Veterinary Service conduct their business with abattoir owners and operators upon the lines suggested in the letter of Mr Soul, much of the antagonism that has built up should evaporate.
While the management problems have been addressed, there are other areas which require attention. I was shown a copy of the timetable for the conversion course for veterinary surgeons. We were told that it was in fact a refresher course and that veterinary surgeons are taught law and litigation in their basic training. The course lasts for one week. I was finally able to establish—the noble Lord, Lord Stoddart, might be interested in this—that the time devoted to legislation is a mere 5¼ hours, regardless of whether the vet is UK or EU trained and regardless of an individual's grasp of idiomatic English. Again I find myself in sympathy with
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a young Spanish vet, straight out of university, ill-equipped to cope with the far from genteel atmosphere of an abattoir and with a poor command of our language. I am no longer surprised at the reports my colleagues and I have been receiving. Perhaps I may ask the Minister to look to a review of the training procedure and, in particular, to the training offered to non-UK trained vets. At the very least it is unkind to throw them in at the deep end in this manner. This is a management problem that must be tackled.
The Minister must have noticed the number of questions about the science upon which many of the hygiene requirements and recommendations are based. I understand that Directive 64/433/EEC and its amendments form the basis of the Fresh Meat (Hygiene and Inspection) Regulations 1995. While the directive has been amended, the 1950s science upon which it was based has not been updated. There is up-to-date evidence that shows that our grandparents were often right in the way they handled food, and meat in particular, although at the time they did not understand the science.
I understand that there is a current review of all the EU hygiene directives. How can we ensure that subjects such as temperature and humidity control, frequency of hand washing and the relative safety of clean wooden chopping boards are considered on a hard scientific basis?
There is a great deal of criticism about the Hygiene Assessment Scheme 99. We heard from the noble Lord, Lord Willoughby, about that. It appears to operate unfairly for smaller abattoirs in that their ability to obtain a score of more than 70 points is dependent upon the production of policy documents. I have been assured that any operator experiencing difficulty with this will be assisted by his OVS and I am pleased to see that Mr Soul's letter contains an instruction to this effect. I am sorry that the letter did not reach the veterinary surgeon of Mr Cole.
Mr Soul has also included the caveat that operators should be advised of requirements that have a statutory basis and those that are "best practice." I understand that the operation of the scheme is to be reviewed after three months. I hope that the wrinkles will have been ironed out by then.
Can the Minister say why MAFF has not seen fit to adopt the Food Safety Act 1990, Section 40, code of practice on the lines of that issued to local government officials? This includes a number of points which must be considered before litigation is resorted to. I understand that currently the MHS applies only the rather vague and limited criterion of the "public interest" when deciding whether to prosecute. Additionally, do ex-police officers have specific training and the expertise to conduct investigations into meat hygiene offences? There is considerable disquiet in this area and I would be grateful if the prosecution policy could be addressed.
I was alarmed to find that the audit is not independent and does not include the competence of enforcement officials and the quality of enforcement, as well as the level of achievement of standards by plant operators.

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Performance standards are set by MAFF and compliance is audited by MAFF officials. In order to achieve independence, transparency and objectivity, will the Minister look into the possibility of introducing individuals from several disciplines into the audit teams?
Time precludes my dealing with the charging implications—other noble Lords have spoken about them at length—but I know that the Minister and his honourable friends in another place are actively considering them at the moment. I look forward to an early outcome to their deliberations. Uncertainty does not assist the industry.
8.3 p.m.
Lord Pearson of Rannoch: My Lords, I shall be brief because the case for the prosecution of the Meat Hygiene Service has already been well put and because I feel sure that the Minister will welcome an extra minute or two to deal with the serious questions that have been put to him.
I have two questions to put to the Minister, both of a general nature. First, is he absolutely sure that the basic science which lies behind the creation and operation of the Meat Hygiene Service is sound? I ask this because I remember attending a conference a few years ago on the marketing of wild venison and being fascinated to hear the senior environmental health officer for the Tayside region say a most surprising thing. He said that food poisoning from meat had actually gone up by 47 per cent in Tayside since the meat hygiene regulations had been introduced. In his view, this was because the basic science of cleanliness which inspired the regulations was misguided.
I am not a scientist and I hope that your Lordships will forgive me if I express his reasons in somewhat simple terms. These were that over hundreds of thousands of years, at least, our tummies had got used to absorbing the bugs which inhabit meat processed in a fairly traditional manner; for instance, he mentioned wooden chopping boards and naturally ventilated larders. But the modern process of storing, cutting up and distributing our meat requires stainless steel, plastic, air conditioning and goodness knows what else. The result is that the bugs which survive, and even thrive, in this new synthetic environment are not the ones with which our tummies are familiar. Hence the increase in food poisoning.
I put this point more than once to the previous Government without getting an answer. I would be truly grateful if the Minister could do his best tonight. I would merely add that if there is anything in this theory, then we are probably already caught in a downward spiral of ever greater, ever more misguided regulation. As food poisoning continues, or even rises, the bureaucratic mind will introduce ever cleaner, more spotless, more expensive and more useless regimes, with increasingly opposite results to those intended.
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That brings me to my second question, which is even briefer but perhaps a little deeper. Can the Minister convince the House that he and his department are not guilty, in Mr Christopher Booker's immortal expression, of taking a sledgehammer to miss a nut?
From all that has been said tonight, I would have thought that we are faced with one of the clearest examples of the bureaucracy senselessly destroying the livelihoods of many thousands of people. It is also causing massive and unnecessary suffering to millions of animals because they have to travel many extra miles to slaughter. Perhaps those animals are not quite so dumb as we think.
Worst of all, this kind of crazy officialdom is devouring our freedom, our trust in the way we are governed and, therefore, our democracy itself. After all, how can such a benign and intelligent man as the Minister preside over such madness? I look forward to his answer with great anticipation.
8.7 p.m.
Viscount Thurso: My Lords, I, too, am extremely grateful to the noble Lord, Lord Stoddart of Swindon, for having raised this important question. It is also clear that, up to this point, the debate has been peopled by experts in the subject. I am grateful to them for the knowledge that they have imparted. I became my party's food spokesman only a relatively short time ago, I think largely based on the fact that I was born on a farm and that I have worked in a restaurant. Indeed, one of my noble friends has described me as the last "F' in "MAFF".
I have had to learn a great deal extremely quickly. I have done so largely by ringing up as many organisations as I could lay my hands on and finding out what they thought. So I apologise if my contribution is less erudite than those which have gone before.
The Government have made abundantly clear—quite rightly—their determination to put the consumer first in matters of food hygiene and food production and that they will not tolerate any lapse in standards in the production of food. Clearly it would be wrong simply to accept an argument that the regulations should be clarified and made less onerous just because there is an added expense on the food industry. However, we on these Benches support the Government on that aspect and welcome generally the Bill to introduce the food standards agency. In pursuing that objective, there is a duty on the Government that they do so in a way that is clear, fair and perhaps even wise.
It is clear that there must be a proper regard for the relationship between risk and reward. Any set of regulations which achieve 100 per cent in any area are bound to be impossibly unworkable. One therefore has to find the correct balance between the rewards that one seeks to achieve and the risks that one leaves in place.
Two areas of grave concern have emerged in the debate. The first relates to the area of small abattoirs. It is interesting to note that the first sentence of the brief provided for me by the National Farmers' Union states that the NFU supports the Meat Hygiene Service. It then goes on to detail all the aspects that it feels are

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absolutely wrong with the service, but the brief begins with that expression of support. I therefore think that the charges that are sometimes levied against the industry of simply not wishing to achieve the Government's objectives are not correct.
As many speakers have made clear, the costs that have been imposed on the industry, particularly on the small producer, are extremely onerous. I do not necessarily accept the principle that every time a new agency is created or new regulations are put in place, they should be self-financing. Frankly, there are times when the Government must shoulder the responsibility. If they wish to achieve certain objectives, they must be prepared to pay for them. That largely holds true in this area.
The problem is that all the costs fall on the producers: it is not simply those who run small abattoirs but also the farmers, who will shortly pay a £7 a head passport for beef, plus the £1 slaughtering charge. So there will be £8 of new costs coming in. As all my farming friends tell me, that the fact that costs go up does not, as in most other business, mean that the producer can simply charge more, because there is a market to go through. The market dictates the price that a producer will receive, irrespective to a large extent of the costs. We have seen that clearly in the prices recently achieved throughout the country. Farming is under great pressure at present, as are all aspects of rural life. Therefore, to impose unilaterally on the producer costs which cannot be passed on to the consumer is a very unfair way forward.
The second area of concern that has emerged clearly relates to the severity with which EU regulations are imposed. I have no particular knowledge of how they are imposed in this area. However, as chairman of Scrabster Harbour, I know that the trustees have just spent £150,000 creating a border inspection post so that we can continue to import fish. We have imported fish for a very long time and have had a happy system of dealing with it by means of a cold room, with which the vet was perfectly happy. However, EU regulations state that we must have a border inspection post, so we have built one. It has sat there for some three months now, completely unused, and the prediction is that it will go on being unused. If these regulations have the same kind of effect, clearly there is much to be done.
I believe that this Government are genuinely a listening Government. Not long ago, I appeared on a television programme with the Minister who has responsibility for food safety. I asked him whether he would remove the proposed levies for the food standards agency. Not surprisingly, at that time he said that he would not. However, other people have asked the same question; the Government have listened, and have decided not to charge. So I have confidence that the Government will listen to good representation. I know that my honourable friend Paul Tyler and others have made representations to the Government and that the Minister has listened to them. There is a review going on at this very moment. Perhaps the Minister, in replying, will give some indication of how that is going forward.
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I hope very much that the representations that are being made to the Government will be listened to, and that they will once again demonstrate that they are a good government: that they listen to what people want and give it to them.
8.13 p.m.
Baroness Byford: My Lords, it is good of the noble Lord, Lord Stoddart, to give us a chance to join in this important debate. The topics covered have ranged widely. There have been references to costs, bureaucracy, science base, qualified vets and derogation, and from the right reverend Prelate we have heard comments on our rural way of life.
The Meat Hygiene Service performance targets are set by the Minister, monitored by MAFF's audit consultancy and management services division, audited operationally by the vet and meat hygiene advisers, and investigated by the National Audit Office. Performance outcomes are published in the Meat Hygiene Enforcement Report and in the BSE Enforcement Bulletin. My goodness, there are a fair few to start with!
Despite all of that, in a Question for Written Answer on 1st July by the noble Lord, Lord Phillips of Sudbury, it was stated that the Meat Hygiene Service charges have risen astronomically since responsibility for the service was removed from local authorities. Indeed, I have proof of the noble Lord's contention in the shape of a copy invoice from the Meat Hygiene Service to Robinson's butchers of Wingate, County Durham, in the Prime Minister's constituency. That small slaughterer produces joints for sale in its local farm shops. From 26th April this year to 30th May, the MHS has invoiced it for £980.82 for a grand total of 14 cattle, 23 pigs and 26 sheep. To be fair, £68.98 is an EU charge levied in ecus and converted at an unexplained exchange rate. The remaining £911.84 is for inspectors at £14.53 an hour, travel at £14.53, overtime at £19.55 and a vet's bill of £37.53. No wonder there is confusion.
The noble Lord, Lord Stoddart, referred to charges. Part of that grotesque charge reflects the MHS policy of charging for a minimum three hours per visit regardless of whether it takes half an hour or three hours. Another small slaughterer, John Chadwick, of Standish, near Wigan, has calculated that eight staff slaughtering on half a day a week cost him £210. At present, the Meat Hygiene Service charges a further £100 or so. But when the deferred EU charges are fully implemented, that will rise to £310.
Does the Minister therefore agree that the level of charging on small slaughterhouses is the very opposite of efficient? Will he start whatever process is necessary to change the basis of the charge from a flat rate to a headage payment, so that small firms are placed on a level playing field with larger companies and our European competitors? If not, will he admit that the Government have a hidden agenda to drive the small slaughterhouses out of business?
The Meat Hygiene Service has set up 10 performance targets for 1999–2000, not one of which relates to complaints—of which there have been plenty. I was also glad, thanks to my noble friend Lady Mar. to see the

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letter from Peter Soul to his staff on how to deal with complaints. I was encouraged by its contents. However, will the Minister act quickly to set up a proper appeals procedure?
There are those who say that there has been too great a concentration in this House on the subject of the Meat Hygiene Service. Many Questions have been tabled by noble Lords on all sides. I hope that the figures that I have given and the examples given by other noble Lords will emphasise how seriously we view the situation. It is of great concern, particularly to small abattoirs.
The Government have established regional development agencies to improve the rural economy. I understand from a recent radio report that West Midlands RDA has placed agriculture at the top of its list of priorities, which I am sure the right reverend Prelate will be pleased to see. It recognises the importance of agriculture. Small rural slaughterhouses play a vital part in the continued viability of agriculture and in the provision of choice to the consumer. The right reverend Prelate spoke of innovation, niche markets, fine food markets, like those that I visited recently at the Royal Agricultural Show, and their ability to diversify and add value to their product, which is an aspect that the Government have encouraged.
I return to the Question posed by the noble Lord, Lord Stoddart; namely, whether the Government are satisfied with the performance and effectiveness of the Meat Hygiene Service. I must question the effectiveness of a system that costs so much and charges so unfairly, placing greater burdens on the smaller operator rather than the larger, and is set to apply additional charges when the full EU directive is levied. When that happens, where will Robinson's in Wingate and Chadwick's in Standish be and how will they cope? Will they find it possible to remain effective themselves?
I have highlighted only two slaughterers, but there are 113 others in England, Scotland and Wales. As the small abattoir federation stated,
"if the proposed charges are introduced then all low throughput abattoirs will no longer be able to afford to operate and will be forced to close".
This is a serious challenge that the Government have to face. I look forward to hearing the Minister's response.
8.19 p.m.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, first, I thank my noble friend for raising the issue which is of widespread concern to many in the industry and in the countryside. I also thank the noble Countess for her kind and constructive words.
We have heard a great many criticisms of the Meat Hygiene Service tonight, some justified, some perhaps unjustified. Before dealing with the main issues and questions raised, at the beginning of my speech it may be worth recalling why the Meat Hygiene Service was set up in the first place; the nature and importance of the job it performs and the achievements it has secured over the past four-and-a-half years, not forgetting some
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of the constraints under which it operates. I shall try at the end to deal with particular issues facing us as a government in trying to protect small abattoirs within the system we have inherited and operate.
As noble Lords know, the Meat Hygiene Service was launched on 1st April 1995 as an executive agency of MAFF to provide a meat inspection service to all licensed fresh meat plants in Great Britain. Prior to that time, day-to-day enforcement of meat hygiene legislation was in the hands of some 300 local authorities. There appears to be a growing romantic aura around the system that operated then, but I remind noble Lords that under the previous system the meat industry suffered severely from inconsistency of enforcement and variability of costs between individual local authorities. The House will recall that the decision by the then government to put in place a centralised system to provide a consistent quality service across the country received widespread support from the industry which recognised the benefits to industry and consumers of a single national enforcement agency.
I also remind the House of what the Meat Hygiene Service does. It is responsible not only for providing a meat inspection service, but also for ensuring that the high standards required by law are maintained in the hygiene of meat production and in the welfare of animals and birds at slaughter. Moreover, it ensures that the specified risk material controls are rigorously enforced.
The MHS works with industry to enforce inspection, hygiene and welfare regulations, thereby providing public assurance and protecting public health. It ensures that the controls are in place to satisfy those countries that import meat from us—including in the near future, I am pleased to say, beef.
Despite what we have heard tonight, I believe that the MHS has a number of significant achievements to its credit which should not be ignored. As already mentioned, it has brought together the disparate local authority enforcement activities into a consistent and high quality service. It has also secured a significant improvement in the hygienic operations of our meat plants and in the safety of the meat produced in this country.
It has also coped with the BSE crisis—something which would have been considerably more difficult or even impossible under the previous arrangements. Each year it has been set and has achieved stringent performance targets by Ministers. I am pleased that the most recent targets, including those for the HAS scores, along with others set for last year, have all been met.
We must also remember the constraints under which it operates in providing the kind of service everyone wants to see. First and foremost is the European Union meat hygiene legislation. Many of our problems seem to derive from the prescriptive nature of the European meat hygiene directives. The original directives are over 30 years old and I am pleased that the Commission and the member states are starting on a review. Discussions are beginning on the texts of the consolidated food hygiene regulations which will incorporate meat hygiene rules. We hope that the opportunity will be

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taken to review the effectiveness of the current meat hygiene directives. Ministers are on record as supporting a more HACCP-based approach—that is hazard analysis and critical control point, as noble Lords know—to meat hygiene where the operator is expected to identify and monitor the critical control points in his plant and operate in a hygienic manner.
We know that the Commission and some member states support a more flexible approach. However, discussions are only just beginning and the views of all those concerned are not yet known. We must admit that it will be some years before we will have completed negotiations on the consolidated food hygiene regulations. The final shape of those regulations is uncertain. In the meantime, we have no option but to continue to apply the existing controls.
Another significant constraint on the ability of the MHS is its obligation to provide a service as and when demanded by plant operators 24 hours a day, seven days a week, 365 days a year. This presents certain logistical and resource problems which are exacerbated by the shortage of veterinarians in this country willing to undertake meat hygiene work. That is why the Meat Hygiene Service has had to look to other European Union member states and even further afield to find the veterinary resources it requires.
I add, in relation to specific questions asked by my noble friend and the noble Countess, that the Meat Hygiene Service is recruiting up to 300 non-British veterinarians to undertake the increased inspection work in abattoirs, cutting plants and cold stores. That is simply because there are not enough British vets who wish to undertake the work.
All vets so recruited must register with the Royal College and must also pass a test to show that they are proficient in English. They then receive OVS training. The department is satisfied that non-British vets used by the Meat Hygiene Service are fully capable of carrying out their duties. I assure the noble Countess that we will look closely to ensure that the foreign vets meet our needs.
A reassurance is the system of checks on Meat Hygiene Service performance, of which I will remind noble Lords. The service is already subject to intensive scrutiny. An essential part of the service's work is ensuring compliance with the specified risk material controls. Those are vitally important measures to protect public health from the risk of BSE. Each month, the State Veterinary Service independently audits compliance with these controls in all abattoirs. The consistent finding of this audit over the past three years is that almost 100 per cent of plants are fully compliant. The Government are therefore confident that the Meat Hygiene Service is providing a highly effective service in this area.
In addition, the Veterinary Public Health Unit and the European Commission make regular inspections of Meat Hygiene Service control systems, the most recent of which has led to the lifting of the beef export ban.
I should also like to say a little about openness and accountability in the Meat Hygiene Service. If individual operators have a problem with the service that
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they receive, there are mechanisms in place to enable them to take their concerns up with the service management. Earlier this year the MHS introduced an enhanced complaints procedure to deal effectively and quickly with customer complaints. It was devised in accordance with the best practice principles used in public services throughout Britain.
The procedure has a two-tier approach. Since its launch in April 1995, it has operated a formal appeals procedure enabling its customers to seek redress if they have a complaint about a major aspect of MHS operations. Copies of the procedure were sent to all plant operators at the time.
In addition and complementary to that, the MHS set up a customer complaints procedure in March 1999 to enable complaints relating to the day-to-day aspects of the agency's operations to be dealt with more quickly than under the appeals procedure at the point of service delivery or by senior management. A simple guide to that procedure has been sent to all MHS customers and a copy is also available in the Library of the House.
The procedures meet the latest best practice principles as promoted by the Service First unit of the Cabinet Office and are part of the MHS quality management system which was registered by the British Standards Institute to international standards. That shows that the MHS is committed to continual improvement in delivering quality services and is willing to listen to ideas for improvement. It will also keep under review the effectiveness of the complaints mechanisms. If noble Lords have comments, suggestions or complaints about the procedure, they should put them forward.
Money and costs are central issues. Two of the principal objectives of the Meat Hygiene Service are to deliver value for money in the provision of efficient and high-quality services and to achieve the financial and performance targets set by Ministers.
As everyone who has contributed to the debate has said, operators are having to pay more than they did under the previous system. That results from the consistent application across the country of common standards. The achievement of those standards is not cost-free. I am assured that there is clear evidence that under the previous system some local authorities had been subsidising their costs in some way or had not provided the appropriate level of supervision.
On charging policy, the Meat Hygiene Service follows the guidance in the fees and charges guide produced by the Treasury. Meat Hygiene Service charging methodology is fully specified in UK legislation and is the subject of full consultation with industry and other interested parties. The service has limited flexibility to vary its charging procedures without clear parliamentary authority and already follows the standard practices expected of any government agency.
The Government recognise the deep concerns about the prospects of increased MHS charges for veterinary inspections in abattoirs, particularly for smaller operators. It is not our intention to force plants to close. I recognise the great importance of the local abattoir to the local community. The availability of a local abattoir can reduce journey times for animals, which has implications for

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animals as well as for costs. The local abattoir can often handle one or two animals or particular species such as goats, whereas a large abattoir will want to concentrate on the longer runs of a single species. I recognise that the disappearance of the small local abattoir would cause an undesirable degree of dislocation to many rural communities. The Government greatly wish to avoid that.
That is why we have deferred the introduction of charges for specified risk material inspection for a year and have undertaken an examination of the impact of all charges on the slaughtering industry and the primary producers who supply it. That will ensure that charges are as low as possible, consistent with public safety and European Union legislation. However, the Government remain of the view that it is right in principle to recover the cost of inspection from industry. Public health and consumer interest come first in our priorities.
The impact of charges is being reviewed and any changes in the level of Meat Hygiene Service inspection charges to apply in 1999–2000 have yet to be decided. Any revised rates will be subject to full consultation with all plant operators.
Lord Pearson of Rannoch: My Lords, there is one minute left on the clock and the Minister is already four minutes over his time. Is he going to answer the question from the right reverend Prelate the Bishop of Hereford on the interpretation of vet ordinaire? Why should a vin ordinaire be a vin ordinaire and why should a vet ordinaire be so extraordinarily expensive? We would like an answer on that. Secondly, apart from all the wonderful procedures that the service is following, does the Minister have any evidence that the incidence of food poisoning has gone down?
Lord Donoughue: My Lords, I had it in mind to answer the many questions that were asked, but I note that the clock is firmly against me. Perhaps we were not given enough time. I was particularly intent on answering the right reverend Prelate on the interpretation of the European directives, because that is at the heart of our problems and differences. There is an apparent inflexibility built into the system. We have been legally advised on that inflexibility, but as we have said before, we have asked the Commission whether the interpretation is correct on derogation, level of charges, low-throughput abattoirs and definitions of vets and veterinarians. We have received a reply and Ministers are currently considering it and the response to our consultation on the impact of charges. We hope to respond on that very soon.
The right reverend Prelate was correct to say that that has been at the centre of the problem for Ministers who want to help small abattoirs. We have been looking for ways to help and we do not want to be so rigidly constrained. We shall make announcements in due course. I am sorry that I do not have time to reply to the other questions, but I shall write to everyone.

Welfare Reform and Pensions Bill
8.39 p.m.
House again in Committee.
Clause 68 [New threshold for primary Class 1 contributions]:
On Question, whether Clause 68 shall stand part of the Bill?
Lord Higgins: We now turn to a different section of the Bill from the more emotional areas that we were dealing with a moment or two before the Committee broke for the previous proceedings. I understand that we are to have a change of cast for the Government response to this particular clause, which in a sense is rather sad because it has history going back to the Social Security Bill of last year.
It would be convenient for us to debate Clause 69 with Clause 68, which effectively does for Northern Ireland the same, if I understand it correctly, as Clause 68. Related to this is the enormous Schedule 9, which effectively provides that there should be a new threshold for primary Class 1 contributions.
When this matter first arose in the Government's Budget of last year, the Chancellor of the Exchequer was wrong in saying, in the course of his Budget speech, that further changes would be made of the kind that we are now debating. Apparently he intended to say "future changes", and indeed these have now arrived, although strangely the figures for this measure, which he announced in last year's Budget, did not appear in the Red Book last year. A considerable controversy arose as a result and the matter was discussed by your Lordships and an amendment was passed which went to the other place in effect seeking to implement what the Chancellor of the Exchequer had then said.
Effectively, this particular set of clauses brings the structure with regard to national insurance contributions in line with the changes to the situation with regard to employers that the Chancellor announced last year.
One of the crucial points—and this is really what I want to concentrate upon this evening—which arose in the course of the debates last year was not only the one I have just mentioned but also what was to happen in the case of individuals who would no longer be paying national insurance contributions. Indeed, this was referred to, for example, in the debates which took place in your Lordships' House on 18th May (at col. 1285 of Hansard).
Crucially, the Government were not prepared to implement immediately what the Chancellor had proposed because they had not yet thought how to protect the position of those with incomes between £64 and £81 a week. The Chancellor mentioned this particularly in his Budget speech. If I can put it in rather more simple terms, the situation was that particular individuals falling between those two amounts—I will not go into the technicalities of how it actually appears in the drafting—were no longer going to be contributing and, as a result, they would not be entitled to contributory benefits. Therefore, the matter was put on ice for a year.

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We imagined, given that they were delaying these matters, that the Government would come up with some splendid method whereby the position of those individuals would be protected. In the event, that is not at all what has happened or, more accurately, their position has certainly been protected but the Government have achieved this, not by some sophisticated method which might have given rise to considerable thought on their part, but by the simple process of saying that people who are not now contributing should get the contributory benefits and effectively deeming that these people, in the words of the Bill, should get contributory benefits, even though they have not contributed.
This does seem to us a serious development because we debated at great length—the noble Lord, Lord Goodhart, and I particularly—the whole question of the contributory principle. We are all agreed that it is not an insurance principle. Effectively, it is an understanding that you do a deal with the Government and it is only if you have met the contribution conditions that you will actually get the whole series of benefits which are subject to that requirement. The Government now say that the individuals between these groups of income which I have mentioned, although they have not contributed, get the contributory benefit, and that seems to us a serious undermining of the contributory principle.
It also raises two other related issues: one is, what about the people far below the first threshold? Are they not to gain any advantage? More particularly, what is the position going to be of the people who have a deficient contributory record?
I am sure the noble Lord who is in the Chair at the moment will remember long debates on this particular subject, and one knows only too well from one's former constituency experience that many people thought they were going to get, for example, a national insurance pension and then found that they were getting less than the full amount because they had not met the contribution requirements. If we are to go along the road which the Government now suggest and people are to get, for example, if I understand it correctly, a national insurance pension even though they have not contributed to it, or at any rate not contributed the full amount, and be placed in a privileged position compared with those who perhaps have contributed for many years but not sufficient years to give them the full entitlement to the national insurance pension, that is not a satisfactory arrangement. Certainly the Government have failed totally to come up with any solution, as they suggested last year they were going to do, to meet this particular problem. I would appreciate the Minister's comments on that issue.
Lord Goodhart: We are quite unable to go along with the noble Lord, Lord Higgins, on this issue. For a long time our party policy on these Benches has been that the contributory principle is a sham and that it is time that that sham was exposed to public view and it was made clear that national insurance contributions are in reality a tax and not contributions towards the pension right. That has certainly been the case, at the very least,
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since the time when there was de-linking of the amount of the contributions from the amount of the pensions, contributions being earnings linked while the pensions were flat rate. We have no objection to this in so far as it represents a move towards treating national insurance contributions as being a tax. Indeed, it is obviously logical to make the starting point for national insurance contributions the same as that for income tax and also to protect the position of those whose earnings are somewhat less than that threshold in respect of their rights to pension. Certainly the fact that they do not pay contributions or tax is no reason why they should not get a state pension if they have contributed through their work in the economy.
I should also say that it would be wholly illogical not to recognise that, for a very long time now, it has been accepted that contributions can be credited to people who have not actually paid them. For instance, those who are unemployed or those who have caring responsibilities. It certainly seems to us to make no difference whatever in principle that that right to be credited with contributions that you have not in fact paid should be extended to those whose earnings are below the lower earnings limit.
Lord McIntosh of Haringey: I shall not follow the noble Lord, Lord Higgins, in his historical foray; I am not capable of doing so anyway. I think the Committee would prefer me to deal with the situation as it is. I am a little surprised that Clauses 68 and 69, which were grouped with the schedules which actually contain the meat, have been taken out of this group because Clauses 68 and 69 contain nothing in themselves, they are simply paving clauses for the schedules. However, we shall be discussing the amendments to Schedule 9 in due course. It may be as well if, in advance of that, I set out what we are trying to do here.
The measures are the next step in our reforms of national insurance contributions, which were, as the noble Lord said, announced by the Chancellor of the Exchequer in his Budget last year. Changes were introduced last year—welcome changes. For employers, the level at which contributions were first paid was raised from April 1999 to the level of the single person's tax allowance. We did away with the complicated tax structure they faced. There is now a simple single rate. That has saved employers some half a billion pounds. For employees, the unfair entry charge of 2 per cent on all earnings below the lower limit for contributions was removed, so that they pay £69 a year less—a reform that will particularly help the lower paid. I do not see my noble friend Lord Morris of Manchester present to hear that. We promised then that we would seek to raise the level at which employees started to pay their contributions, but without any loss of benefit entitlement.
The measures in the Bill deliver on that commitment. They raise the starting point for employee contributions from the lower earnings limit—currently £66 a week—to a new primary threshold: the primary threshold for primary contributions, which are paid by employees This will be set by regulations at £76 in 2000/2001 and, in 2001/2002, raised to the level of the single person's

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tax allowance, which is expected to be around £87 a week. That will bring the starting points for employee and employer NICs into line.
More important is that, as a result of this change—a rise of more than 25 per cent in the point for starting to pay NICs—nearly 1 million employees will no longer have to pay contributions. The majority of all earners—16 million people—will pay less, by around £90 a year. Even the minority who pay more will be paying a maximum in 2001/2002 of £3.70 a week. Combined with the introduction of the working families' tax credit, this is a key further step in our policy of making sure that work pays.
But, if this reform were introduced alone, people who earn at low levels would lose their entitlement to benefit. That concern was particularly highlighted by Martin Taylor in his report on the tax and benefit system. Such a move would deprive these vulnerable people of their ability to contribute and would undermine our determination to make work pay. For that reason, the Government made a commitment that we would protect their rights while maintaining the link between work and entitlement to benefit. Schedule 9 therefore introduces a new Section 6A, which provides the protection necessary. That is the section on which Members have focused. Indeed, they are proposing a series of amendments which would virtually take it out, apart from a few words that are spared. New Section 6A ensures that earners who would have paid contributions on their income between the lower earnings limit and the new primary threshold maintain their contributions record and their ability to build up benefit entitlement. It does so by providing that the earnings within this band will be treated as though the employee had actually paid them. As the noble Lord, Lord Goodhart, made clear, that has always been the case. There has always been protection by the award of credits when people are unable to pay contributions due to circumstances beyond their control, such as when they are unemployed or when they are carers. It is right that their contribution record should be kept, even though they no longer actually contribute.
I really do resist the noble Lord's argument that this is a wicked departure from the contributory principle. The important principle which is maintained is the relationship between work and benefits. That is not changed in any way in what is proposed here. Credits are not sufficient by themselves to give total entitlement to social security contributory benefits. It is necessary for some contributions to have been paid during the relevant tax years on which a benefit claim is based. That was the case before and that is the case now. So I find the noble Lord's objections to the policy wholly misconceived.
The noble Lord has not referred to this, but I do want to refer to an important point which arises from the later amendments. If I get it off my chest now, I shall not have to repeat it. We are maintaining the link between the level at which people start to pay contributions and the level at which they stop. The current level of contributions is set each year by regulation at a level that must be between 6½ and 7½ times the retirement
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pension rate. This year it is set at £500 a week, which is slightly less than 7½ times the rate of the basic pension. The retirement pension rate also sets the lower earnings limit. The two limits are therefore held in line with each other. We are now increasing the lower earnings limit to the primary threshold by £10 a week in the first instance and far more than the standard re-rating would have achieved and we are setting the upper limit at 6½ to 7 times the new primary threshold to keep the relationship as it was.
Lord Higgins: The noble Lord is reading extremely quickly. It was very difficult indeed to follow the last two paragraphs. I do not know whether he would care to read them again. I had a great deal of trouble in following the relationship between the contributions and the national insurance pension.
Lord McIntosh of Haringey: I am sorry about that. We will do a words per minute count. I did not think that I was reading particularly fast. My noble friend Lord Dormand understood it perfectly well. I was very content with the way I described it and Hansard will no doubt record it. If the noble Lord has any problems, when we come to the amendments, I shall certainly deal with any points raised.
I want to go on to the point he raised about people below the lower earnings limit. It is right to recognise an earnings level for contributory benefits. If the lower earnings limit were to be reduced or abolished, it would be possible for people who paid very small amounts of national insurance contributions to gain entitlement to pensions greater than their normal earnings from work. The cost of those pensions would be additional administrative and non-wage costs for employers. We are not changing the current position for those people, which is exactly the same principle as that which was adopted by the previous government. I hope that the noble Lord will be reassured on that basis.
Our reforms simplify the structure of national insurance. They help to bring it into line with the tax system. They reduce the contributions burden paid by three quarters of the workforce—around 16 million people. They give particular help to low earners who are currently liable for national insurance contributions. We are ensuring that no one will lose benefit rights while we are still maintaining the clear link between work and entitlement. I hope that the noble Lord will not persist in his opposition to Clause 68.
Lord Higgins: These are complex issues. I was seeking to follow what the noble Lord said. It would have been helpful if he had repeated what he said in his own form of words. When one has Treasury briefs on these subjects, it is frequently the case that they are over-concentrated. I am inclined to agree with the noble Lord that, on reflection, it would have been as well to have taken the clauses and the schedule together. Perhaps I may ask him one simple question and then we can come back to the other points on the next set of amendments. Why could not the Chancellor say last year when he made his Budget speech and when the noble Baroness was discussing the matter at great length

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on the Floor of the House during proceedings on the Social Security Bill that he was going to protect the position of the people between the two bands by a simple process of providing that there would be a notional payment?
9 p.m.
Baroness Hollis of Heigham: At the time I anticipated that this might be proposed but it had not yet been finally determined. Therefore, it would have been imprudent of me to suggest to the House that that was intended. Until the Chancellor of the Exchequer had clearly determined his policy on this matter, to indicate my own views on how the situation might be resolved would have misled the House.
Lord Higgins: That comment brings out two points which have run throughout our debates: first, that the department is being taken over by the Treasury; and, secondly, that it is extremely difficult to get decisions out of the Government—this may also be true in respect of other matters—because the department cannot say what the position is until the Chancellor has expressed a view. That is not unusual. Surely, at the time that we debated this matter last year the Chancellor should have known that he did not have a sophisticated solution—which was the impression given at the time—and we would simply end up with what is now in the schedule; namely, notional payments of contributions. It would have saved a great deal of time last year if, instead of constantly saying that there was no need to worry because there would be a splendid solution to sort out the problem, the Government had simply said that there was no solution but they would ensure that people got the benefits anyway.
Lord McIntosh of Haringey: It would save a lot of time this year if we concentrated on the legislation before us rather than delved into past history.
Clause 68 agreed to.
Clause 69 agreed to.
Schedule 9 [New threshold for primary Class 1 contributions]:
The Deputy Chairman of Committees (Lord Dean of Harptree): If Amendment No. 129 is agreed to I cannot call Amendments Nos. 130 to 136.
Lord Higgins Lord Higgins moved Amendment No. 129:
Page 128, line 43, leave out paragraph 3
The noble Lord said: We have tabled a number of specific amendments. However, as the noble Lord pointed out in the previous debate, effectively this amendment knocks out the crucial point in the schedule. Therefore, it is appropriate to debate it in that way. This part of the schedule proposes that there should be notional payments of primary Class 1 contributions where earnings are less than the lower earnings limit. Perhaps we may return to the point made by the noble Lord a moment or two ago about the relationship between that level of contribution and, if I heard him
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correctly, the national insurance pension. I was not aware that there was such a relationship. It would assist if he could spell out that point.
The noble Lord has said that a contributions record will be kept for those who have not contributed. That is a situation which has not existed before. Effectively, people will receive contributory benefits even though they have made only a notional payment of contributions. How does that square with the basic problems which arise in regard to national insurance pensions as far as concern those people with deficient records? There are people who over the years have made contributions to the national insurance system and have some entitlement, for example to a national insurance pension, but none the less do not receive the full amount. I am not clear why they should) not receive the full amount whereas in future people who do not contribute, but who are deemed to have made, a payment, should get that benefit. It seems that there is unfairness between the two groups of people. Many people are deeply concerned that they do not have a full pension because they have not contributed, but it is now said that others are to get it. I beg to move.
Lord McIntosh of Haringey: I am grateful that the noble Lord has not sought to defend his amendments. If one considers them together, they take away the benefit entitlement of nearly 1 million vulnerable people on low incomes. They remove all elements of the new Section 6A which protects the benefit entitlement of low earners. Amendment No. 129 would take out the entire section, whereas Amendments Nos. 130 to 136 would remove different provisions within it.
To remove Section 6A as suggested by Amendment No. 129 would penalise nearly 1 million people who currently pay contributions but who earn below the level of the new threshold that we are to introduce. I am sure the Committee agrees that it would be wrong to increase the take-home pay of those lower paid employees while excluding them from contributory benefits. That would reduce the incentive for people to take up work at all. On the basis of what has been said perhaps I can be forgiven for not going into the detail of the effects of Amendments Nos. 130 to 136.
I find it extremely difficult to understand the argument of the noble Lord. He referred more than once to "national insurance pension" which is not a phrase with which I am familiar. If he means the state contributory pension I understand that, but "national insurance pension" is not a phrase that means anything to me. What we are doing is incredibly simple. I find it difficult to know where to start with the amendment moved by the noble Lord. To encourage people to go into work we propose that the lower level of national insurance contributions should be the same as the lower level of income tax. That is to be done over two years because it is an expensive proposal, and it is also complicated. However, it can be done, and we are doing it. As a result, 1 million people on low incomes will be substantially better off in their take-home pay, and a very considerable number of people who are not now in

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work will no longer suffer the tax and national insurance contribution disbenefits of going into work. Everything that we do is with that in mind.
The Government also say, simply, that if that happens they do not want people to lose out on contributory benefits. Therefore, we are doing what we have done with the stakeholder pension; namely, if people have not paid in, as would be the case if they were unemployed or were carers, they are deemed to have paid in. I do not understand the difficulty of the noble Lord. Where is the unfairness? Everybody is better off under that proposal.
Lord Higgins: The noble Lord apparently says that people who are not contributing will now receive what were previously contributory pensions. At that point the concept of contributory pensions seems to fail. These people will receive what I referred to as the national insurance pension—I think that it is clear I meant the basic state pension—even though they have not contributed. I ask him again: how is that fair on the people who did not contribute previously and are now told that they have a deficient contributory record?
In the noble Lord's earlier remarks he seemed to indicate that there was some relationship between the level of contribution and the national insurance pension—or state pension. I was not clear what he was saying at that point.
Lord McIntosh of Haringey: Is the noble Lord suggesting the issue of a relationship between the lower earnings level and the pension?
The point I seek to make is that we are maintaining the link between the level at which people start to pay contributions and the level at which they stop. The lower earnings level has always been linked to the level of the basic retirement pension on the principle that someone who contributes at the lower earnings level should have their income maintained at the same level in retirement. Surely that is fair.
I wish to correct something I said a moment ago. I talked about the stakeholder pension with reference to the £9,000 when I meant the state second pension. I did not mean the stakeholder pension.
The noble Lord and I will have to thrash out this issue in private between now and Report stage. I am sure that it is my fault but I do not think that there is a meeting of minds here.
Lord Higgins: I am by no means sure that it is the noble Lord's fault. It may equally be mine. I agree with him. The right course to adopt is to read carefully what he said, if necessary seek further clarification, and return to the matter on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 130 to 136 not moved.]
Schedule 9 agreed to.
Schedule 10 agreed to.
Clause 70 [Earnings of workers supplied by service companies etc.]:
Lord Higgins Lord Higgins moved Amendment No. 137:
Page 74, line 36, leave out from ("worker")") to ("and") in line 40 and insert ("would have been an employed earner of a business carried on by another person to which he provides services ("the client") had he contracted direct with the client,")
The noble Lord said: At Second Reading, I pointed out that the Bill was four or five Bills included under a single piece of legislation. Consequently it was difficult to deal in any depth at Second Reading with the component parts. One of the component parts now appears as Clause 70. I think that it would be appropriate, and probably easier at this stage rather than later to cover some of the points which one would normally have raised had their been a proper Second Reading opportunity as regards this clause.
Clause 70 appears as a result of a statement made by the Chancellor in the Budget. A press release on 9th March 1999 is headed,
"Countering avoidance in the provision of personal services".
It states:
"The Chancellor today announced that changes are to be introduced to counter avoidance in the area of personal service provision. This move underlines the Government's commitment to achieving a tax system under which everyone pays his fair share".
We are entirely in favour of everyone paying their fair share. It would be wrong to suppose for one moment that we are in favour of unjustified tax avoidance. That is not the situation. However, it has become very clear that the way in which the Government propose to introduce the proposals has widespread repercussions. Clause 70 is included in this Bill whereas in our view there is a strong case for it to be in the Finance Bill.
In that context, one is bound to refer to what happened at Report stage in another place. Because the Government sought to time proceedings on amendments, which we discussed earlier, where there was likely to be a government Back-Bench rebellion, this clause appears to have been slotted in at that stage for that purpose. In the event, the move was completely unsuccessful and the rebellion achieved the appropriate publicity. It is also the case—one of the following amendments points it out—that the clause seems to have been inserted at an inappropriate point in the Bill. We have suggested changes in the order of clauses in that respect.
One can debate this issue at several different levels. The first is the straightforward, party-political level including the operation of spin doctors and the Whips, to which I referred earlier. The more important issue is whether the measure will receive adequate scrutiny. I pose a simple question to the Minister. Why were these clauses introduced at Report stage in another place and not in Committee? One of the problems with this House being a revising Chamber is that we could knock out this clause, but the Bill would go back to the other place where it would be debated on the Floor of the House under a tight time schedule. Indeed, the original Bill was guillotined in the other place and there was no adequate opportunity to table a series of amendments that would

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have improved the Bill, as could have been done if the measures were being considered in Committee upstairs in the other place.
Secondly, there is a series of issues in relation to the effects that these measures will have on the economy. Widespread representations have been made by many outside bodies that suggest that the effect on the economy is likely to be bad and may affect our competitive position. Alternatively, those affected by the clauses will go abroad to be able to operate efficiently.
Thirdly, there is the question of the relationship between the Treasury, especially the Inland Revenue department, and the Department of Social Security. As I suggested earlier, there is a strong case for these clauses to appear not in this Bill but in a Finance Bill. Of course, it can be argued that traditionally national insurance matters are a matter for the DSS, but we have only recently moved the whole of the Contributions Agency front the DSS to the Treasury. So that argument seems very thin, to put it mildly. Now that the Contributions Agency has been taken over by the Treasury there is no reason why the legislation should not follow. There are related issues as to where the proceeds should go—to the Consolidated Fund or to the National Insurance Fund—but those are not difficult to deal with.
The next set of issues arises from the process of consultation. The other place was not able to consider a full regulatory assessment—certainly not in Committee, for the reasons that I have mentioned—before the Bill left there. We now have in front of us a regulatory assessment that deals with some of the points, but the reality is that there have been inadequate consultations on these proposals. The clauses were rushed through at the last minute in the other place and I have been inundated with complaints about their adverse effects on a range of British interests.
Finally, there are many arguments to be made about the effects that the clause will have on the definition of who is an employee. I understand that there is considerable case law on that point. The Bill may make much of that case law obsolete and much of the uncertainty that was removed by the evolution of that case law may be resuscitated.
I understand that the Government propose to introduce a so-called control test to determine whether a person is an employee or a genuine limited company. That test will turn on whether the client has a right of supervision, direction or control over the tasks that are being undertaken by the person. That test sounds nice and simple, but in reality it will be very difficult to administer. In contrast, the existing law—the leading case is Market Investigation Limited v. Ministry of Social Security, 1969—suggests that the more accurate definition of "employee" should be used.
The amendment seeks to make the previous definition applicable, in particular that of an employed earner. Perhaps I may spend a moment on a simple-minded example. The problem with the idea of control, supervision and so forth is not realistic. Let us suppose that I employ a plumber who is a limited company.
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I may give him clear instructions as to what he should do. I want to supervise his work as regards ensuring that he does not wreck the furniture, the extent to which he should continue and the extent to which I can control him. The fact that I do so does not make him my employee. I am employing a limited company and to that extent the definition which the Revenue seeks to use is inadequate and dangerous.
A more relevant point is that the Chancellor of the Exchequer complained that an individual could work for, say, a bank on a Friday and suddenly reappear on a Monday as a limited company consultant, thereby hoping to benefit by avoiding national insurance, contributions and so forth. The crucial issue is how many clients the individual has. If in those circumstances he has only one client, one may reasonably say that we should not approve of such, a device. However, many of the representations we have received have suggested that when changing to a limited company the benefits in tax and national insurance contributions are a great deal less than the Chancellor appears to suppose.
More generally, one has received complaints from the London Chamber of Commerce and Industry, the British Chamber of Commerce, the CBI, the Institute of Directors, the National Association of Pension Funds Ltd, the Law Society and, on technicalities, from the tax faculty of the Institute of Chartered Accountants. All those bodies have provided strong arguments against the Government's proposals. None of them is concerned to promote tax avoidance, but they are extremely worried about the effect that the measure will have. Therefore, we hope that the Government will rethink the issue and put forward a more sensible solution. Their present proposal is likely to be damaging to the economy. The amendment seems to us to solve some of the problems identified by the bodies I have mentioned. I beg to move.
Lord Jenkin of Roding: I added my name to the amendment almost with a sense of déjà vu. Twenty years ago, when I was Secretary of State for Health and Social Services, my officials came to me with a proposal that there should be imposed a new control test to determine whether an independent contractor was an employee. The institutions they chose in order to test that out were the major London orchestras and professional choirs. That caused a good deal of disquiet in the arts establishment.
The matter was brought to my attention by a relation of mine, who is one such musician—I declare an interest, if such interest has to be declared—and I was warned that there might be serious problems. When my officials arrived, they sought to justify the argument that the musicians, who were instrumentalists or singers, were engaged in a contracted service with the organisation for which they were performing, because, they said, the musician has to obey every wave of the baton of the conductor.
I promise that this is true. They said, therefore, that, by the normal test of whether someone is an independent contractor or an employee, such singers, violinists, trumpeters and bassoon players were all

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employees, in which case the orchestra should pay employers' national insurance contributions and the employees should pay Class I contributions.
I said that that was totally unrealistic and that it was to fail to recognise the nature of that kind of professional occupation. After all, such a musician may be playing at a session of a recording company in the morning, may be singing at a memorial service in St Margaret's Church at lunch time, may be rehearsing for a concert all afternoon and performing that concert in the Barbican or the Albert Hall in the evening. In the course of the day, that musician would be working certainly for three and maybe for four different conductors. Is it to be argued that in the course of one day such a musician should have four separate employments?
I asked, "Do you really expect me to go to the House of Commons and advance such an argument? I shall not because I know that it is totally unrealistic as a member of my family is one such musician". They said, "We shall have to report this to the Chancellor of the Exchequer", who at that time was my noble and learned friend Lord Howe of Aberavon. I answered, "I don't think that will get you very far because he too has a daughter who does exactly the same thing".
That was almost the last I heard of the matter. The final word came from my private secretary, who, having ushered the posse of officials out of my room, returned to me and said, "Well, Secretary of State, that was the unacceptable face of bureaucracy"!
I am not surprised that this matter has surfaced again in a slightly different guise, but with the same fallacious argument about control. My anxiety about the clause centres on the fact that it takes this test of control as the guideline as to whether or not, when the contract is made through an intermediary, the client controls the work. To my mind, that is wholly misconceived.
A great many people, such as the musicians I have described, will meticulously obey the requirements of the client because that is the nature of the work that is being performed, but that does not change the status of the worker from being a self-employed professional person who has contracts with a range of people. Some contracts may be arranged directly and some may be arranged through intermediaries. There is a profession known as fixing. Fixers are firms that undertake to find musicians to perform particular pieces of work for conductors.
I understand that later amendments refer to information technology, but there are many other walks of life where this kind of relationship has built up because it is the most convenient and effective way of conducting business. It provides complete flexibility for the client—I shall continue to call him that because it is what the Inland Revenue calls him—to call up the particular services that he needs for as long as he needs them. He can them terminate the arrangement in accordance with the contract. The individuals who do the work then work for other clients. That, as it were, is the hallmark of the individual who is self-employed.
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It has been the policy of successive governments to help people into precisely that kind of activity. The present Government are no exception. They have introduced measures to encourage unemployed people to become independent and, in many cases, to set up in business. Out of small acorns great oaks can grow. There are examples in recent years.
I find the clause totally misconceived. By saying that the relationship was one which, if there were no intermediary, would create the status of employed worker, the Government's purpose would be met. Like my noble friend Lord Higgins, I am not seeking to defend tax avoidance. What I am very concerned about is that the method that the Government have chosen is sweeping into their net tens of thousands, or perhaps even hundreds of thousands, of individuals who by no stretch of the imagination are engaged in tax avoidance. They are conducting their affairs in a thoroughly efficient, commercial and effective way in a modern, flexible economy. Whether it is the unacceptable face of bureaucracy or a misconceived zeal to try to find tax avoidance where there is none, I find the clause very unsatisfactory.
The Inland Revenue has been kind enough to provide a number of examples of cases that might be within and outside the clause. There are several pages of them. Perhaps I may read just one. I hope that it will perhaps illustrate the folly that I have been trying to describe. It is the Inland Revenue discussion document, 18th May, page 6. It states:
"A vet in partnership spends every Monday working at the local zoo attending various animals as required by their keepers, and undertaking other duties (e.g. performing post-mortems, preparing animals for transit, supervising inseminations and providing training on various animals health matters) as directed by the head keeper. The zoo pays the partnership an annual fee for the vets attendance each Monday. This engagement should be caught by the new rules. However, members of the partnership are sometimes requested to attend animals at other times, for example, when one injures itself in the middle of the night. Such visits are outside the terms of the annual contract and a fee is charged appropriate to the work done. On these occasions the zoo has no right of direction or control over what is done or how it is done".
Except, I add in parenthesis, to say, "Look, there is a sick animal, go and do something about it." Presumably, the zoo owner does that.
"The zoo may reject the advice given or refuse the treatment recommended but that would not amount to a right of direction or control. In these cases the new rules would not apply".
For a moment let us consider the folly that that would cause. Let us consider the position of a partnership. This case concerns a vet in partnership with others like the firm with which we all became so familiar and learnt to love in the series "All Creatures Great and Small." Let us just imagine Robert Hardy, the actor who played the senior partner, having to treat himself as an employee for half of Monday each week and then being his self-employed professional self for the rest of the week. How on earth does a partnership expect to operate in those terms? Why should he be regarded as an employee, simply because of the way this clause is introduced, through an intermediary?

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I find the clause totally unacceptable. As was said in The Times the other day about the Chancellor:
"Does he really think that it makes sense for a free-lance television producer who may work for a dozen different companies during the course of a year, to have to be treated by each as an employee? Or the IT consultant, who moves from project to project, to be forced to give up his independent status and join the company payroll, no matter how brief his stay with the new employer may be?".
I have a sheaf of similar press cuttings but at this hour of the night I shall not weary the Committee with them.
This clause is misconceived in the form in which it comes before us. As my noble friend from the Front Bench said, the Government undertook to consult. But they introduced the clause in the other place before they even started consultation. I dare say that the noble Lord, Lord McIntosh, will have something to tell us about the process of consultation, and perhaps the progress. But I hope that the Government have begun to get the message that the clause cannot be allowed to go through as it stands.
It is not sufficient to say that the consultation will be about the regulations, because the heart of the new system is in this clause. The detail will be in the regulations. It is the new clause itself which is misconceived.
Lord Goodhart: I am all too conscious that it is relatively late at night, and also that I am the third speaker in this debate. Nevertheless, Clause 70 presents problems which are extremely difficult and complex and in order to do justice to it I fear that I shall have to take a little more time than I would wish and no doubt than the Committee would like.
It is essential to understand the background to this matter. The background is a distinction between the status of an employee who works under what lawyers call a "contract of service" and a self-employed, independent contractor who works under what a lawyer would call a "contract for services." For the worker there are some tax advantages in being self-employed. A self-employed person is taxed under Schedule D; an employee under Schedule E. Schedule D presents some advantages in tax flow—you pay tax only twice yearly instead of week by week under PAYE—and some business expenses are deductible under Schedule D which are not deductible under Schedule E. But a much more important difference is national insurance contributions.
A self-employed person receives almost the same benefits as an employee—everything except jobseeker's allowance and SERPS. But the contributions paid by a self-employed person are far smaller than those by or on behalf of an employee. The client of a self-employed worker pays nothing in NICs. An employer of an employee pays 12.2 per cent in NICs on everything above £83 a week. A self-employed person pays in most cases less than the employee by way of NICs, let alone the combined liability of the employee and the employer.
There are, of course, some drawbacks for the self-employed person. They do not receive employment protection rights, statutory sick pay, a right to paid
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holidays and so forth. But the distinction between self-employment and employment is well established by law. As already pointed out, there is a great deal of case law.
Let us assume that an expert in information technology is hired by a company to do a job, and let us assume that the terms on which he is hired are such as to make the expert under established law, prima facie, an employee of the client. But in this case there is no contract between the expert and the client. Instead, there is a contract between the client and the expert's personal company; all the shares are owned by the expert. The client pays a fee to the expert's company. The company pays part of that to the expert, perhaps a bit to the expert's wife, and the company then pays the rest to the expert as a dividend. But under the present law the expert cannot be treated as an employee of the client because there is no contract between them. This arrangement gives enormous NIC advantages because, if there were a direct contract, the client would have to pay the employer's NICs on the whole of the wages above £83 at, as I said, 12.2 per cent.
Dividends are not liable to NICs. Therefore, the expert and his company can limit their NICs to whatever the company actually pays in wages. That is plain tax avoidance or, more accurately. NIC avoidance. It is worth pointing out—and this has not been concentrated on enough—that the main beneficiary is not the expert, but the client who employs the expert without paying a penny in NICs. That point has been ignored by the very high-pressure lobbying campaign we have had. Indeed, to some extent, I believe that the use of personal service companies is being forced upon workers, especially in the information technology world, by companies which are not prepared to take workers on as employees because the NIC consequences and the consequences for employment rights are something they prefer to avoid. Where that occurs, I believe that workers with personal service companies are the victims, not the beneficiaries, of this arrangement, although I suspect that they do not often realise it themselves.
I do not think that the use of one-person companies for avoidance purposes is acceptable. It is an abuse of the NIC system and should be stopped. So why riot accept Clause 70 as it stands? We have had a very highly organised lobbying campaign on this matter. I do not accept all of the points made by the lobby. It argues that any change in the law would damage entrepreneurship and force many owners of personal service companies to emigrate. I find myself quite sceptical about that argument. I certainly do not accept that IT workers are in a special category. Therefore, I shall not be able to support Amendments Nos. 140ZA or 140A.
The critics of Clause 70, as it stands, include many very reputable organisations who are not part of the lobby. They include the Institute of Chartered Accountants in England and Wales and the Tax Law Review Committee of the Institute for Fiscal Studies, of which I am a member. The real problem is not the Government's objective but their proposed method. As it stands, Clause 70 will add to the complexity and uncertainty of the law because it gives power to the

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Treasury to decide who is, and who is not, to be treated as an employee of the client. Such power may be used to treat as an employee someone who would not be treated as an employee if he were providing services under a direct contract with the client. That is the Government's intention. The discussion paper says that they intend to apply a control test to determine who is to be treated as an employee. But under the existing law, control is merely one of the tests of the nature of the relationship, not a conclusive test.
There are other factors which can be taken into account. They include whether the worker supplies his own equipment; whether the worker is entitled to substitute others to do the work; and the degree of financial risk assumed by the individual worker. It will therefore follow that we will have two entirely separate tests—one in contracts to which Clause 70 applies and the other in straightforward contracts. I am afraid that the noble Lord, Lord Higgins, was wrong in saying that this will make the existing case law obsolete. It will not. The existing case law will continue to apply whenever there is a contract direct between the client and the expert or the worker. What we will have is a quite separate test in the special cases where there is an intervening company, and there alone. So that will increase the complexity of the law.
In summary, I cannot do better than quote from a letter sent by the Tax Law Review Committee to the Inland Revenue last month. It says:
"The complexity of the classification issue is increasing as work patterns change and flexible forms of working become more common … the test of supervision, direction and control proposed by the Inland Revenue for use in the context of personal service companies is no longer of primary importance in the case law, having been rejected many years ago as being unsuited to modern economic conditions. It may be one of a number of relevant factors now but will not be applied in isolation. One consequence of using an over-simplistic control test in the proposed personal services company legislation would be, therefore, that a worker who did display what the courts have defined as essential characteristics of self-employment could nevertheless be treated for tax and NI purposes as an employee under the new rules".
9.45 p.m.
Lord Higgins: I hope that I may interrupt the noble Lord for a moment to pursue the point he made a second ago. He is saying—quite rightly, I think—that the existing case law continues but we are going to have a further definition of what constitutes an employee. As far as that group is concerned, the existing case law, as I understand it, becomes obsolete.
Lord Goodhart: The noble Lord, Lord Higgins, is quite right. The point I was making is that we are now to have two quite different and quite distinct tests depending on whether or not there is an intermediate company. I shall read one last sentence of the letter,
"At the same time a simple direction and control test might be insufficient to catch some of those it is intended to cover".
These difficulties could be greatly reduced, if not eliminated, by accepting Amendment No. 137. This amendment was drafted by the tax faculty of the Institute of Chartered Accountants. It means that the use
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of personal services companies will be ineffective to save NICs where there is disguised employment, and nowhere else. It makes the law much simpler. It applies a test which has long been refined by the existing law. It reduces the power of the Revenue to impose tax by regulations—something which has always been regarded as a highly undesirable power. It hits the intended target and that target alone.
If this amendment is accepted or passed, we shall support Clause 70. Without it, or something like it, we are unable to support Clause 70. I hope that the Government will respond to the pressure coming from well beyond the lobby groups and those who are directly affected.
Lord Campbell of Croy: This clause was added to the Bill at Report stage in another place. It appeared to be an afterthought. That meant that it had little consideration in the other place. There was little time for it. In my opinion it would be more appropriate, or a version of it—because I do not agree with the present wording and intention—in a future Finance Bill.
I must make it clear that any avoidance of national insurance should be investigated and tackled. But this is a clumsy, blanket way of proceeding which would damage many businesses which should not be targets because they are not trying to avoid national insurance or disguise direct employment. It appears that there was no consultation with the sectors of business most concerned before the clause was introduced in the other place. The clause would allow the Inland Revenue to treat self-employed people working on contract as if they were employees of the companies for which they undertake the work. This would be particularly hard in its impact on the information technology industry.
The clause would apparently allow the Inland Revenue to deem any activity to be employment and to tax a company accordingly. The Government have been reported themselves as admitting that about 60,000 small businesses may have to close down. They no doubt announced that on the basis that all those employees would find work elsewhere. However, many will be in the IT sector. The Government have posed as champions and promoters of information technology in Britain to improve efficiency and to excel in competition abroad. Now there is this sudden blow to the IT sector.
I am reminded of the 1960s when I was in another place. The Prime Minister, Mr Harold Wilson, whom I knew well and admired, spoke about the "white heat of the technological revolution." However, about a year and a half later, the government, without any warning, introduced the selective employment tax, SET, which was of course subsequently abolished to general acclamation. Nothing could have been more counter to the spirit of the white heat of the technological revolution.
Now New Labour has given the impression that it understands that the United Kingdom's economic health and success depend upon industry and business thriving—"modernising", to use a favourite word of the Government—and exporting competitively. Over the past 20 years a considerable market has developed for

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the provision of skilled, temporary workers on contract. This is now common practice throughout the engineering industry. The advantages to the client are flexibility and the ability to find engineers with the right skills and experience for the duration of a project—and for no longer than that. This is particularly important in the IT sector where the work often relates to projects lasting between six and 24 months. Under those circumstances it is not practicable or desirable to take on full-time staff.
If it goes through in its present form, I believe that this proposal would have a devastating effect on small firms and an upsetting upheaval for the present framework and organisation of IT consultancies.
Lord McIntosh of Haringey: This has been really a debate on Clause 70 stand part and I must respond to it in that way. The noble Lord, Lord Campbell of Croy, was speaking specifically to a later amendment which we are not at present debating. Apart from that, before I respond to the specific points that have been made, it is necessary for me to set out our position on Clause 70.
Clause 70 provides an enabling power to make regulations which will prevent significant avoidance of national insurance contributions. The Chancellor announced his intention of doing so in the Budget. More than £200 million a year is being lost to the National Insurance Fund because of this avoidance. It would not be fair to other contributors if we were to allow it to continue.
The problem can be explained quite simply. A worker will normally pay a different amount of tax and national insurance contributions depending on whether he or she is an employee or self-employed. But some people who, if this distinction was applied to their circumstances, would count as employees, manage to avoid many of the consequences of employee status by setting up or acquiring an "off-the-shelf' limited company. That means that the engager, the client, who would otherwise be their employer, contracts instead with the company for the supply of their services. That engager then does not have to operate PAYE or pay employer's national insurance contributions.
The worker is then free to decide how to take the money out of his company. He can take it out in the form of dividends, which are not subject to national insurance contributions. Let me give an example of how this actually works. An individual with an income in the year of around £30,000 to £35,000, paid through a service company, might pay company taxes and running costs and expenses such as travel, subsistence and pension contributions of about £7,000; take out just over £3,000 as salary, just enough to qualify for state benefits; take out dividends of £11,000; and distribute £11,000 of dividends to his wife. By doing so, he would achieve a saving of £6,000 in tax and national insurance contributions when compared to the amount of tax and national insurance contributions he would pay if engaged directly as an employee of the client to whom he is selling his services. It is a very big saving.
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In his speech today and at Second Reading, the noble Lord, Lord Goodhart, made it clear that he recognised that there was a problem. He said:
"I recognise that there is a tax abuse which needs to he stopped. A one-man company, where a shareholder simply hires out his or her own services and takes payment by way of dividend from the company rather than by way of salary is undoubtedly serious tax avoidance. It needs to be blocked".—[Official Report, 10/6/99; col. 1637.]
That is an excellent summary of what we heard from many business representatives.
It is not a new form of avoidance. As far hack as 1981, the National Audit Office reported that avoidance and evasion by agency workers operating through service companies was generating a tax loss in the region of £40 million a year. But it is certainly growing. Anyone who looks at the advertisement; in the freesheets will see very clear incitements to that sort of tax avoidance. One sees, for example,
"Calling all Kiwis! Temping in London? Earning more than £4 per hour? Then we can help you MAXIMISE your EARNINGS by working through your own limited company".
That applies also to accountants, secretaries, PAs, doctors, nurses, teachers, IT consultants, and even labourers. They are invited to set up a company for a small quarterly fee of £103 plus VAT.
The issue is older than that. I ran a market research company for 30 years. A market research company employs part-time interviewers to carry out the fieldwork. It is a business that was, and still is, successful. We had 100 to 150 interviewers at any one time. In 1969 a case was brought, Market Investigations Ltd v Minister of Social Security. Market Investigations Limited was a competitor of ours. The judgment ruled that, because of the degree of control exercised by Market Investigations Limited over its interviewers, and because the interviewers could not be said to be performing their services as persons in business on their own account, the interviewers were employed earners. My interviewers were told whom they had to interview, they had to follow an interview schedule, a questionnaire, and if we did not like what they did, we did not pay them. They were definitely controlled.
So, as a result of that case, I set up a system for nearly all of my interviewers whereby we kept a separate payroll for interviewers; we paid national insurance contributions and PAYE. As far as I know, all of my competitors in the market research business did the same. That long pre-dates the attempt, when the noble Lord, Lord Jenkin was Secretary of State, of his officials to persuade him to introduce a control test.
But there was one defect in what happened when I was running that company. A number of my interviewers were already smart. They set up limited companies of their own and I did not pay national insurance contributions for them or deduct PAYE. They were undoubtedly the precursors of the kind of avoidance that we are trying to deal with in this clause.
As a result, I can assure the Committee that I have been familiar with the problem for a very long time indeed. Although I shall answer the particular criticisms that have been made of the clause, fundamentally I am unsympathetic. I am adamant about the need to get rid

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of phoney service companies intervening, as the noble Lord, Lord Goodhart, said, between the worker and the person who should be described as the employer.
Perhaps I may now turn to the points made by the noble Lord, Lord Higgins, and other noble Lords. First, the noble Lord asked why the matter was not raised in Committee in another place. He suggested that we were trying to avoid debate. The announcement was made by the Chancellor of the Exchequer in his Budget, when Committee stage was already halfway through. The provision was introduced on Report in May, two months after the Budget. There was not a great deal of delay, and certainly we did not avoid debate in this House.
The noble Lord then criticised us for not including the provision in the Finance Bill rather than this legislation. The first effect of including it in the Finance Bill would have been no detailed debate in this House. So again, it cannot be claimed that we are avoiding debate. But in any case, the convention that exists as regards Finance Bills is that they are concerned with moneys that go into the Consolidated Fund, and this is money which goes into the National Insurance Fund. Therefore, whether the Inland Revenue is doing it has nothing to do with the case. The convention in Parliament is that this should not be in the Finance Bill. The noble Lord went on to ask about consultation.
Lord Higgins: If I understand the position correctly, there are to be more clauses about the issue in the next Finance Bill. If this clause goes through, they will have the power to alter anything in Clause 70 which we are debating this evening.
Lord McIntosh of Haringey: If there are clauses which deal with the National Insurance Fund, they will have to be dealt with by other primary legislation than the Finance Bill. It is the convention of Parliament that they should not be in the Finance Bill.
The noble Lord, Lord Higgins, went on to criticise the lack of consultation, but he gave evidence of the degree to which there has been a huge amount of consultation and publicity and, as the noble Lord, Lord Goodhart, said, a huge amount of lobbying. The consultation has been extremely serious. I shall gladly write to the noble Lord about its details and not weary the Committee with it now. I undertake that the consultation will be fully published well in advance of the Report stage. We will report to noble Lords and the public about the issues raised in the consultation process.
Lord Higgins: If the noble Lord will allow me to intervene, we will come to it on a starred amendment concerned with Clause 70(9) on page 77 of the Bill. The subsection states:
"If, on any modification of the statutory provisions relating to income tax, it appears to the Treasury to be expedient to modify any of the preceding provisions of this section for the purpose of assimilating the law relating to income tax and the law relating to contributions … the Treasury may with the concurrence of the Secretary of State by order make such modifications".
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It seems that the point the noble Lord was making earlier is not valid. If I understand it correctly, it would be possible in the next Finance Bill to alter the clauses in this Bill.
Lord McIntosh of Haringey: No, there is a distinction between what goes into a Finance Bill and what is dealt with by the Treasury. The matter is being dealt with by the Treasury now in a non-Finance Bill which is being discussed in full by your Lordships' House. The Treasury is involved in all kinds of legislation other than Finance Bills. I can assure the noble Lord that I have not been at the Dispatch Box answering for the Treasury for the past two years only on issues of the taxation which goes into the Consolidated Fund. That is not the distinction. The distinction is whether it goes into the Consolidated Fund or, as in this case, the National Insurance Fund.
The issue of the control test raised by the noble Lord, Lord Higgins, is far more serious. It was also mentioned by the noble Lords, Lord Jenkin and Lord Goodhart, and in a specific case by the noble Lord, Lord Campbell of Croy. In seeking to have a control test, we attempt to do two things first to simplify the complex case law which exists as between Schedule D and Schedule E; and, secondly, to put the responsibility for making a decision on the client, in other words the putative employer rather than on the individual himself or herself. Although the control test worked perfectly well in the market research business, I recognise that there are cases—the noble Lord, Lord Jenkin read out one—where it may not work so well. I shall not attempt to engage with him as to the way in which orchestras work. He and I are both patrons of the New London Orchestra which is a scratch orchestra. It raises exactly the kind of case to which he referred.
Nevertheless, there is no doubt that the issue of whether we can impose this obligation on the client and force the client to make the deductions from the worker is important in the consultation, and it will be taken account of in our response to the consultation.
Then there is the issue in the consultation about the certification system for agencies. The legislation proposes that the certification system should be voluntary; nevertheless, that is an issue which has gained currency in the consultation and we shall have to respond. We shall do so before the Report stage.
Rebadging has also been referred to, with employees leaving on a Friday and coming back as consultants the following Monday. That happens in the public sector as well as in private industry. The issue has been raised in consultation and we shall have to address it in our response. Your Lordships will have to know about it before we come back to the issue on Report.
There are many important issues, particularly those identified by the noble Lord, Lord Goodhart, on which we have a great responsibility to respond to consultation and to report that response to the House before we come back on Report. I am not making any promises, but there may be modifications to Clause 70 as a result. However, we shall not retreat from the position that the intervening service company is an abuse of tax and

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national insurance legislation. We have to find some way of dealing with that. That is the point of the clause and that is our sticking point.
Lord Jenkin of Roding: Before the Minister sits down, I quoted from an Inland Revenue document on the case about the vets. The document makes it clear that the Government are not going to attempt to ban the intermediate personal services company. How does that square with what the Minister has just said?
Lord McIntosh of Haringey: There have always been personal services companies. The question is whether the company is inviting an abuse of the tax and national insurance system. Reading from a press statement, the noble Lord, Lord Campbell of Croy, said that 60,000 small businesses were at risk. That is not the case. There are many thousands of genuine one-person companies—maybe the plumber of the noble Lord, Lord Higgins, is one of them—that have a large number of clients and need the protection of limited liability status. They will not be threatened. Our target is the intervening company that is set up to avoid tax and national insurance.
Lord Campbell of Croy: I was saying that the press were reporting that the Government had admitted that 60,000 small businesses would go out of business. I am glad that the Minister has said that that was incorrect.
Lord McIntosh of Haringey: It is indeed incorrect.
Lord Higgins: The Minister has suggested that there should be extensive consultation between now and Report stage. We welcome that because we have been inundated with representations from many interested parties. As the noble Lord, Lord Goodhart, rightly stressed, they were from highly reputable bodies with no individual interest in the issue. They are simply concerned about the repercussions of the Government's proposals.
It is all very well to hold consultations at this stage. That should clearly have happened some time ago. In the light of what the Minister said, I shall not press the amendment, although I should like him to clarify his objection to Amendment No. 137, which, as the noble Lord, Lord Goodhart, and I have pointed out, would seem to get over the dangers created by introducing a new and different definition of an employee. Experience and case law suggest that the definition is not adequate. It would be helpful in trying to reach a better conclusion if the Minister could make clear the Government's attitude to the amendment.
Lord McIntosh of Haringey: The noble Lord did not speak to his amendment in his original speech and that is why I did not reply to it. The record will show whether I am right or wrong. If the client controls how the task is to be undertaken or how it is to be completed, he would be considered to be liable to pay national insurance contributions on the worker's earnings; that is the way the clause is drafted. If the worker is engaged for a specific task and has complete freedom as to how
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it is to be completed, the clause would not be applicable. Our thinking is that a simple one element test would provide certainty and ease of operation for both parties and that is what is now in question as a result of the consultation process.
I heard what the noble Lord said, I have taken into account all of the considerations that have been raised in this debate and it is on that basis, rather than a specific critique of either this amendment or of Amendment No. 141B in the name of the noble Lord, Lord Goodhart, that I invite your Lordships to await the response which I have undertaken to make.
Lord Goodhart: As it is obvious that if there is a direct contract between the client and the worker, the existing test of whether it is self-employment or employment will apply, what is the justification for applying a different test simply because of the existence of the intermediate company? Would it not be simpler just to ignore the intermediate company and apply the same test to both workers?
Lord McIntosh of Haringey: The noble Lord answered that himself in his earlier speech when he said that there is not a single existing test as between Schedule D and Schedule E. The point is that it is a multi-dimensional test. Control is certainly one of the issues but, as he said, others might be whether there is a degree of risk or whether the worker is using his own. tools. I do not welcome the idea of going back to the old Schedule D/Schedule E tests because I prefer simplicity as the officials of the noble Lord, Lord Jenkin, preferred simplicity, but if it cannot be done, then it cannot be done.
Lord Jenkin of Roding: The Minister insists in dealing with this case as between one client and one worker. That is what the whole focus of the clause and indeed of the Minister's speech has been. Can he give us an undertaking that, in the course of his consultations, he will have regard to the nature of the independent contractors' total activity because it is that which makes the person self-employed and, even though he may be working for one client at a time because of the nature of the work that he does, in fact, over a period of a year, he may have several clients. It seems to me that you have to take account of that in determining the relationship between the worker and any particular client.
Lord McIntosh of Haringey: That is certainly one of the many tests in the Schedule D/Schedule E issue. My interviewers were not employed only by: me, they were employed by a number of different market research companies and I still paid national insurance contributions and deducted PAYE for them and I have no doubt their other employers did the same. This is not a new issue, it is one that has been going for a very long time. However, the noble Lord is right, it is of course one of the issues which has to be taken into account.
Lord Higgins: When the noble Lord reads Hansard tomorrow, he will find that, while covering what I said

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was effectively a Second Reading speech because the issue needed that, I referred specifically to Amendment No. 137, and the noble Lord, Lord Goodhart, did as well. We remain puzzled by exactly what the attitude of the noble Lord is to this amendment. He says that this will be covered in consultation in the course of the following months. None the less, it seems to us that the Government must have some view on whether this amendment meets the case. What they do not appear to have done at the moment is to make any argument in favour of having an additional definition of "employee" other than that which already exists.
Lord McIntosh of Haringey: I thought it was clear from what I was saying that I was acknowledging with reluctance the difficulty of a uni-dimensional test—the test only of control. Everything I have said has acknowledged that difficulty. Amendment No. 137 adds another dimension. Our response to the consultation process is considering not just this additional dimension but the other dimensions referred to in debate. We have to remove the avoidance. But the mechanics of how we remove the avoidance are not set in stone. If there is an alternative approach which business believes is more sympathetic and yet delivers our policy, we will consider it favourably. That is my response to Amendment No. 137 and indeed it is my response to all of the amendments to Clause 70.
Lord Higgins: We shall return to these matters on subsequent amendments and no doubt again at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
10.15 p.m.
Lord Higgins Lord Higgins moved Amendment No. 138:
Page 75, line 9, at end insert—
("() Regulations shall not be made under this section until the Secretary of State, following full consultation with all interested parties, has laid before Parliament a regulatory impact assessment which, amongst other matters, assesses the implications of the proposed regulations for economic activity within the United Kingdom.")
The noble Lord said: This amendment suggests that regulations shall not be made until the Secretary of State, in full consultation with all interested parties, has laid before Parliament a regulatory impact assessment, which, among other matters, assesses the implications of the proposed regulations for economic activity with the United Kingdom.
In reply to the previous amendment, the noble Lord said that there will be full consultation. We appreciate that. However, having said that, we turn to the question of the regulatory assessment. While the other place did not have the benefit of that, we have had it. But it is narrowly defined in terms of the impact on individual companies and so on. Many of the representations that we have received from a vast range of interests—interests which have only an abstract concern rather than an individual company financial interest—suggest that the effect on the UK economy may well be serious, not least in areas where the greatest initiative is shown; for
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example, the IT industry. Therefore, I hope that the Minister can accept the amendment so that we shall have a supplementary regulatory assessment which, in the light of the discussions mentioned by the Minister, will spell out all the concerns expressed by the various outside bodies. In one of the noble Lord's several winding up speeches on the previous debate he said—
Lord McIntosh of Haringey: I had to make more than one winding up speech because more than one noble Lord intervened.
Lord Higgins: At this time of night there is always the danger that it becomes a conversation rather than a debate. I was not criticising the noble Lord for the fact that he made about five winding up speeches, but in one of the earlier ones, if I may put it that way, he made it clear that the Government are determined to deal with the problem of tax avoidance in that area. We can understand that. But he seemed to imply that they had to deal with the problem of service companies. I hope he will accept that many service companies are entirely legitimate, they fulfil an important and useful function and give to the economic market a degree of flexibility which it would not otherwise have. Having said that, we will need to go into the matter in considerable detail later on. I hope that the noble Lord can accept the amendment. I beg to move.
Lord Jenkin of Roding: I shall be extremely brief. At the Report stage in another place on 17th May the Minister, Mr Timms, said:
"A regulatory impact assessment will be issued in due course, once the details of the practical application of the new rules have been finalised".—[Official Report, Commons, 17/5/99; col. 756.]
That is exactly what our amendment says. I look forward to hearing that the Minister will accept it.
Lord McIntosh of Haringey: At least the noble Lord, Lord Higgins, recognised that the regulatory impact assessment had been published. I am sorry that it has not come to the attention of the noble Lord, Lord Jenkin, but I am sure that we can send him a copy.
In direct response to the noble Lord, Lord Higgins, I do not accept his criticisms of appendix 6 of the regulatory impact assessment. It goes into the details of the costs of operating individual service companies and complying with new legislation on a micro-basis, but it also makes assessments of the macro-costs and talks about the estimated extra NICs revenue which arises from a change of this kind. It estimates the number of service companies, some but not all of which may well be genuine service companies, in the past and their growth in recent years. I thought that I had already made it clear in one of my winding-up speeches that the Government recognise that there are genuine service companies.
From what I have said about our response to the consultation and the representations that have been made, it is quite clear that we are considering the possibility—I shall not go further than that—of making changes to the provisions of Clause 70. If that is the case, then clearly a regulatory impact assessment will

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be a necessary part of our response. Rather than introduce an amendment at this stage, I ask the noble Lord to accept my assurance that any changes will be accompanied by an appropriate regulatory impact assessment.
Lord Higgins: The noble Lord accepts that there are genuine service companies which are not tax avoidance vehicles and fulfil a useful function. Does he also accept that implementation of Clause 70 as it is now may well wipe out some of those perfectly reasonable companies?
Lord McIntosh of Haringey: I am not prepared to say that. I believe that Clause 70 properly addresses those service companies which are designed primarily for tax avoidance purposes. Clearly, there could be difficulties at the margin if the uni-dimensional control criterion did not apply effectively, but it is not right to say that Clause 70 as drafted would affect genuine service companies. Certainly, that is not the intention.
Lord Higgins: One well understands that that is not the intention. I pose the question again: is it the case that Clause 70 as now drafted may well adversely affect, if not eliminate, perfectly legitimate service companies that have no connection with tax avoidance?
Lord McIntosh of Haringey: I have no reason to believe that that is the case. The objections to Clause 70 that have been raised in the consultation have not been concerned with that specific point.
Lord Higgins: I find that response rather extraordinary. The whole of the agitation on the part of individual companies and all the bodies concerned, none of which is in favour of tax avoidance, is that the shotgun approach adopted by the Government in Clause 70 will adversely affect perfectly legitimate companies. Therefore, I find the reply very strange. Nevertheless, I seek leave to withdraw the amendment. No doubt we can return to these matters.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 139:
Page 75, line 9, at end insert—
("() Regulations under this section shall not apply to any circumstances where the worker is entitled to delegate the whole performance of the services to another person. or where the third party is entitled to nominate someone other than the worker to perform the whole of the services.")
The noble Lord said: Amendment No. 139 in my name and those of my noble friends, including my noble friend Lord Jenkin of Roding, proposes that,
"Regulations under this section shall not apply to any circumstances where the worker"—
that is a term of art in this context—
"is entitled to delegate the whole performance of the services to another person, or where the third party is entitled to nominate someone other than the worker to perform the whole of the services".
The amendment seeks to ensure that regulations do not affect companies where the individual concerned is clearly a company and not a personal employee of the
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client, or where the client is entitled to say that someone other than the worker performed the service. We hope that the provision is helpful and that the noble Lord can accept the amendment in seeking to avoid some of the shotgun effect to which we have just referred. I beg to move.
Lord Jenkin of Roding: The amendment has the merit of being already reflected in existing employment law. As long ago as 1978, the Privy Council, in the case of Australian Mutual Provident Society v. Chaplin ruled that,
"In the present case there appears to be nothing in the written agreement to prevent the respondent from delegating the whole performance of his work to one or more sub-agents. In the opinion of their lordships, this power of unlimited delegation is almost conclusive against the contract being a contract of service".
In the much more recent case of Express and Echo Publications v. Tanton, quoted in The Times as recently as 7th April of this year, the agreement provided that, if the individual contractor was unable or unwilling to perform services personally, he should arrange at his own expense for another suitable person to perform the services. In that case the Court of Appeal held that,
"A contract of employment involve[s] mutual mist and confidence … It [is] established that where a person who worked for another was not required to provide their services personally, it could not be right as a matter of law that the relationship between the worker and the person for whom he works was that a employee and employer.
"[A clause not requiring the worker to perform any services personally] was a provision wholly inconsistent with the contract being a contract of service".
It seems to me that the substitution test is now well regarded and well established by existing law. I hope that the Minister can give an undertaking that that will be one of the matters to be taken into account in the. consultation.
Lord McIntosh of Haringey: I can certainly give that undertaking. In saying that, we are reconsidering the multi-dimensional tests which at present exist through case law in the distinction between Schedule D and Schedule E, I mentioned a number of points, tools, risk and so on, which will be taken into account. The power to delegate clearly is another appropriate consideration. I can give an undertaking that that will be taken into account in our response to the consultation. I would rather do it that way than accept the amendment on the face of the Bill now.
Lord Higgins: If the Government take the view which the Minister has expressed, and it is accepted in another place, it seems better to accept the Minister's undertaking on the point. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No 140:
Page 76, leave out lines 13 to 23
The noble Lord said: This amendment suggests that lines 13 to 23 on page 76 should be omitted. This is

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effectively subsection (5) of Clause 70. It relates to regulations which may be made by reference to,
"any certification procedure which may be established by the Treasury for the purposes of that provision, or … such certification procedure … as may be specified",
in the regulations, and so on.
The amendment seeks to establish what the Government have in mind so far as concerns certification proceedings. There are other areas of tax law, in particular as regards self employed people in the construction industry, and so on, which provide for a degree of certification. But is it envisaged that the Government will decide whether or not to certify the 60,000 companies involved as not being an anti-avoidance device?
In advance of the consultations, it would be helpful to know what the Government have in mind with regard to the provision which the amendment seeks to eliminate. I beg to move.
Lord Jenkin of Roding: My noble friend Lord Higgins has mentioned the construction industry and has referred to what were originally called the 714 certificates. As the Financial Secretary, I introduced those certificates and the system worked well. I made a speech about self-employed hod carriers as an example of the abuse. If the worker could establish that he had a good relationship with the Revenue, that he paid his taxes and his national insurance, he could get a certificate and the sub-contractor could be paid gross. Without such a certificate, the sub-contractor had to deduct tax. That is a well tried system and I hope that the Minister will indicate that the Government have learned from that experience.
10.30 p.m.
Lord McIntosh of Haringey: I do not need to reply, because the noble Lord, Lord Jenkin of Roding, has already replied for me!
Certification will make a service company or agency liable to pay class 1 NICs, and operate PAYE, on substantially all the money they receive in respect of contracts to which the new rules apply. This will mean that they cannot avoid NICs by paying dividends. As a consequence, clients who engage a worker through a certified agency will not be required to deduct tax and NICs from the payment that they make to the certified agency or service company in respect of the worker.
The provision will enable registered service companies to continue to provide their labour to clients as they do at present but without the scope for tax or NICs avoidance that exists currently.
Amendment No. 140 would remove the legislative power to introduce a certification scheme. As the noble Lord, Lord Jenkin, made clear, we are talking about a voluntary certification scheme that is only adopted when it is to the advantage of one or both sides. Removing the certification provision would remove the ability for clients to make gross payments to service companies, even where those service companies are willing to account for the full amount of tax and NICs themselves.
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We have consulted extensively on these proposals. There have been specific representations on the proposed certification scheme. We are looking again at whether we can achieve our aims in a way which is effective against avoidance without the need for such a scheme. We do not want to have all the trouble of a certification scheme if it does nobody any good and does not achieve our objectives. I can assure the noble Lord, Lord Higgins, that we take very seriously the need to minimise burdens on businesses.
We will set out in regulations the detail of how the provision will be developed. Full account will be taken of the feedback we have received, including the debate this evening. I have already undertaken that we will provide a full response before the Report Stage of the Bill, and the certification scheme will be included in that response.
If I may add another point of clarification. I wish to make it clear that the certification scheme will simply enable service companies to register that they take a responsibility for PAYE and NICs. It is not a question of identifying good or bad companies. If any contributor fails to discharge its liability, it will be pursued.
Lord Higgins: I had forgotten that my noble friend Lord Jenkin of Roding had some initiative in the area that he mentioned. Since he dealt with direct taxation and I dealt with indirect taxation, we tended to take a break at the appropriate spot and I might have been out of the Chamber at the time. Be that as it may, I still have some doubts about the certification procedure. I have listened to the Minister's remarks and will wish to return to the subject later. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 140ZA:
Page 76, line 48, at end insert—
("() Regulations made under this section shall not apply where a person provides services that relate to the production, storage or communication of information using computers or micro-electronics.")
The noble Lord said: At this hour of the night and in the light of what the Minister has said, I shall be brief. In particular, I can reassure the noble Lord, Lord Goodhart, that I will not be seeking a specific exemption for the IT industry. The amendment was tabled because the IT industry would, if the clause were to be accepted and the regulations made as envisaged when it was introduced, be particularly hard hit by the changes. The industry is special and unique and is expanding at an exponential rate.
There are considerable peaks and troughs in activity. At present there is a high peak with a number of firms dealing with the millennium bug. The industry is essentially project driven. They may be short, lasting a few weeks, or they may last one or even two years. There must be flexibility for both the clients and the experts to be able to deploy their services as effectively and flexibly as possible.
I hope that in discussions the Minister will take particular account of the needs of the IT industry. The other evening I attended a meeting of the Parliamentary and Scientific Committee addressed by the noble Lord, Lord Sainsbury of Turville. He made a most impressive speech about the huge importance to the economy of our knowledge-based industry. No industry is more knowledge based than the IT industry. One's reaction on reading this clause and the original justification for speeches of Mr Timms in another place was that the Government were talking with two voices. On the one hand, the Minister for Science, sometimes supported by the Prime Minister, appears to be saying that they really want everyone to succeed, for small businesses to flourish and to have the flexibility and enthusiasm of a knowledge-based industry; and then along comes the Treasury and the Inland Revenue and say, "We shall clobber them if they do". That cannot be right. The IT industry is a case in point and that is why I tabled the amendment. I beg to move.
Lord Higgins: I support my noble friend's amendment. Indeed, I have tabled a similar amendment. Neither of us wish to enter the process of enumeration of companies which are all right and those which are not. Our experience on the selective employment tax, which together we abolished, suggests that such enumeration is not a good way of tackling the problems.
It is clear from one's enormous mailbag that particular industries will be badly hit by the Government's proposals. To the extent to which the Minister is successful in his search for a solution which does not damage companies which are not tax avoidance companies, but legitimate and no doubt entrepreneurial enterprises, we hope that that matter can be clarified. We must ensure that we remain competitive and that people are not driven overseas in the IT industry, and that people are comparatively mobile.
Time Earl of Kintore: If the amendment is accepted another body of people—that is, the highly-skilled work force searching for oil in the North Sea—would ask for similar treatment. I shall speak about them at some length during the debate on Clause 70. Surely, what is suggested in the amendment is a last gasp solution and we should be trying to resolve the problem.
Lord McIntosh of Haringey: I can give the assurance which the noble Lord, Lord Jenkin, seeks; that we shall pay particular attention to the representations made about the information technology industry. However, I have two qualifications to make. I am not sure that the phrasing of the amendment is an adequate definition of what is meant by "information technology industry". On that basis alone, I could not accept the amendment as being part of the Bill.
Secondly, although I recognise that there are considerable numbers of people who install and service domestic PCs on a one person basis—I have employed such persons, if "employed" is the correct word—much of the talk about the IT industry is about small service companies with several employees. Such companies will
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need several employees if they are to provide an effective service to business. They will have to pay national insurance contributions and deduct PAYE.
I have a feeling that some of the representations have been somewhat exaggerated or over-played. If the noble Lord is seeking an assurance that we shall pay particular attention to the needs of the IT industry he can certainly have that assurance.
Lord Jenkin of Roding: With that assurance, I seek leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 140A not moved.]
Lord Higgins Lord Higgins moved Amendment No. 140B:
Page 77, leave out lines 3 to 11
The noble Lord said: I apologise for the late arrival of this starred amendment on the Order Paper. I had not spotted subsection (9) on page 77 which gives me some cause for concern. I referred to it in debates on earlier amendments.
The subsection raises the broad issue that we discussed earlier as to the exact relationship in such matters between the Treasury, the Chancellor of the Exchequer and the Inland Revenue on the one hand, and the Department of Social Security on the other. As the noble Lord said, had these matters been put in a Finance Bill the Committee would not have had the opportunity of debating them in detail as we have done this evening.
I would like clarification of whether it is envisaged that there will be a further set of clauses related to these matters in a subsequent Finance Bill. I had received the impression—I know not how—that that is to be the case. If that is not the case, it will remain true that the other place has not had a chance for detailed examination of these proposals. None the less, I believe that it is right that they should have a further opportunity. 'We shall need to take into account the results of the consultation that the noble Lord, Lord McIntosh of Haringey, has mentioned.
Secondly, I seek to clarify the point that the noble Lord has made about whether the proceeds will go into the Consolidated Fund or into the National Insurance Fund. I have already stressed that as the Contributions Agency has moved to the Treasury, it is not clear why the Treasury should not take a lead in such matters rather than the Department of Social Security. Clause 70 says that:
"the Treasury may with the concurrence of the Secretary of State by order make such modifications of the preceding provisions of this section as the Treasury think appropriate for that purpose".
If I understand the matter correctly, the Treasury—the noble Lord rightly distinguished between the Inland Revenue and the Treasury—in the guise of the Chancellor of the Exchequer, can make an order which will alter the provisions in the clause that we He now debating. That seems to me to be a rather extraordinary situation. If that were to be the case, one would have expected there to be a Treasury provision in the first place. Certainly priority is given to the Treasury, with the concurrence of the Secretary of State, rather than the other way around.
In regard to where the money goes, if I understand correctly, the noble Lord is saying that as national insurance contributions are being avoided, the money should end up in the National Insurance Fund. But this is purely a book-keeping operation. The National Insurance Fund does not exist in any particular sense. It is true that some of its revenue comes from national insurance contributions, but a large chunk comes, and has always come, from other sources of revenue. I remain puzzled as to why the noble Lord believes it important that money should go into one fund rather than another. It would be helpful if he could clarify exactly what the division of responsibility is between the Treasury and the Department of Social Security.
10.45 p.m.
Lord Jenkin of Roding: I would like to raise a slightly different point. As stated by the Select Committee on Delegated Powers and Deregulation in its 17th Report in the current Session, at paragraph 9,
"Subsection (9) of the new Section 4A is a Henry VIII power allowing the modifying of the section to assimilate the law relating to income tax and the law relating to contributions. An order under this subsection is subject to negative procedure".
As I read the report of the Select Committee, on balance—the wording is quite significantly gentle, it is not very definite—it considers the negative procedure appropriate. It is right to look at the language. It says,
"As we understand it, this power can be considered to be consequential on the provisions which Parliament will consider when the Finance Bill is introduced and we understand that that Bill could not be used to bring about this assimilation".
Pausing there for a moment, I believe that is the point that the Minister was making in an earlier debate: one cannot put social security legislation into a Finance Bill. Is that not the point? Is the Minister shaking his head?
Lord McIntosh of Haringey: The Finance Bill cannot be concerned with national insurance contributions which go into the National Insurance Fund. It really does not matter whether it is social security or Treasury, the point is whether it is the Consolidated Fund or the National Insurance Fund. I shall respond to that in more detail in a moment.
Lord Jenkin of Roding: The Select Committee goes on to say,
"Moreover, the power is for a limited purpose and is not capable of being used for a wider purpose".
I question whether in these circumstances the negative procedure is right. I normally have the greatest respect for the Select Committee on Delegated Powers and Deregulation, but on this matter it is possible that it has missed a trick. This is quite an important point and it should be properly debated by Parliament. I shall listen with interest to the Minister's reply.
Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Jenkin, for quoting from the report of the Select Committee on Delegated Powers and Deregulation. But he quoted from it in little chunks with interventions. He used either his own words or those in
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quotation which did not fully represent the position. The only safe thing for me to do is to quote from paragraph 9 of the report:
"Subsection 9 of the new section 4A is a Henry VIII power allowing the modifying of the section to assimilate the law relating to income tax and the law relating to contributions. An order under this subsection is subject to negative procedure. As we understand it. this power can be considered to be consequential on the provisions which Parliament will consider when the Finance Bill is introduced and we understand that that Bill could not be used to bring out this assimilation. Moreover, the power is for a limited purpose and is not capable of being used for a wider purpose. The Committee therefore considers the negative procedure appropriate".
The noble Lord, Lord Jenkin, used the words "on balance" as though the committee was using them. It does not. It understands the position to the best of its ability and it is satisfied with the powers which are being given. We in government get into terrible trouble if we try to go against that committee. We get torn apart, but here we are agreeing with it and the noble Lord does not like that. He had better get himself nominated to the committee and stiffen up its act if that is what he feels is appropriate. I shall rest on the approval of the committee so ably chaired by the noble Lord, Lord Alexander of Weedon.
Amendment No. 140B would remove subsection (9) of Clause 70 which provides a power to enable the clause to be adapted by order if the parallel tax provisions introduced in next year's Finance Bill differ from what is envisaged by the clause. I can assure the Committee that there is no sinister purpose behind the inclusion of subsection (9) in Clause 70; it is simply a necessary provision to ensure that the powers in the clause operate effectively.
There are two reasons why the subsection is needed. First, NICs are not as flexible as tax about when a provision comes into force. NICs' liability is geared to a worker's pay period, be it weekly or monthly; any NICs legislation must be introduced prior to the start of the tax year. The Welfare Reform and Pensions Bill allows for such a timetable to be met. But the provision for tax in the Finance Bill next year—2000—will not be ready for this timetable. It is therefore important for us to be able to amend the detail of the NICs provisions to take into account any detailed changes in the tax rules. I am sure that Members of the Committee understand the need for business to operate to one set of rules rather than two.
Secondly, the subsection gives flexibility to keep the NICs measures in line with the tax rules. The annual Finance Bill means that changes to the tax legislation can occur every year subject to parliamentary approval, but there is no equivalent annual legislation automatically available for the national insurance legislation. So without the subsection it would be difficult to amend the contributions and benefits Act to mirror any necessary changes in the Finance Bill.
The noble Lord, Lord Higgins, again raised the question as to why NICs legislation cannot be included in Finance Bills. As I said before and can only repeat, it is a convention of Parliament that Finance Bills are restricted to tax provision. Tax revenue is paid into the Consolidated Fund. Contributions are not a tax and are paid into the National Insurance Fund. It seemed to be

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suggested that somehow this is a polite fiction. The National Insurance Fund is necessary to pay benefits. At the moment it is broadly in balance, but there were a number of years under the noble Lord's government when it was not in balance. There was a deficit in the National Insurance Fund. We have corrected that situation. The National Insurance Fund is now a proper fund which does what it is supposed to do. It is still the position that the tax provisions of Clause 70 will be introduced through the Finance Bill because they are in the Consolidated Fund, but the NICs provisions will not. That is why we have to have this secondary power provided by subsection (9) of Clause 70.
Lord Goodhart: Before the noble Lord sits down, perhaps I can ask him this. Obviously what will happen is that the Finance Bill will be enacted in July 2000 and will take effect retrospectively to 6th April. The modifications to the NIC rules under subsection (9) therefore cannot be made until after 6th April because there will not be anything to align with at that stage. Is the Minister satisfied that subsection (9) gives power to the Treasury to make regulations having retrospective effect?
Lord McIntosh of Haringey: That was my understanding, but if I am wrong I shall write to the noble Lord.
Lord Goodhart: It will be necessary for them to have retrospective effect.
Lord Higgins: I expected the noble Lord, Lord Goodhart, to dispute the point made by the Minister as to whether or not the contributions were a tax since it is a clear policy of the Liberal Democrats to say that they are. However, I am grateful to the Minister for clarifying the situation. As I understand it, there will be a corresponding set of clauses related to the tax aspect of this matter in the Finance Bill next year.
Having said that, the reality is that the Treasury has taken over the Contributions Agency and the provisions the Minister mentioned now seem somewhat anachronistic in this context in as much as the Treasury seems to be taking over more and more of the department. However, in the light of what he said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 70 shall stand part of the Bill?
Lord Higgins: This has been a helpful, if at times rather technical. debate. The Minister has taken a conciliatory attitude. In particular, he has given us an assurance that we will return to the matter on Report in the light of discussions which are taking place with the various interest parties. It is quite difficult to discuss this kind of issue in Committee. The preparatory work which the noble Lord has suggested will certainly be welcomed, albeit it is taking place rather late in the day.
It is clearly the Government's intention that such provisions should not adversely affect legitimate service companies, which are not designed for tax avoidance.
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Indeed, if that is not so, the danger is that yet another so-called "stealth tax" will be imposed, which will have an adverse effect on business. That will be in addition to the very considerable burdens which administration of such a situation is likely to create if the Government do not succeed in narrowing down the definition of companies which are clearly avoidance vehicles in the way that all of us on all sides of the Committee would wish to see. We welcome the Minister's assurances and look forward to debating the matter further on Report in the light of those discussions.
Lord McIntosh of Haringey: If it would be helpful, I should like to suggest that, as soon as we have our response to the consultation ready and even if it is during the Summer Recess—in other words, before the House returns in October—we could seek a meeting with everyone who has expressed an interest in this subject to see whether we can find a mutually convenient time when we can all sit down together and have a seminar. If noble Lords would find it helpful, I would certainly be willing to return to the House when it is not sitting for that purpose.
Lord Higgins: That seems to me to be an extremely helpful suggestion because the matter is of considerable importance to industry. It is important that we should get it right. We may, of course, be under some time constraints when we return as regards the spill-over. Therefore, if we can be clear in advance about what are the outstanding issues between us, if any, that would be helpful. Speaking for myself, I would be happy to co-operate with what the Minister has suggested.
Clause 70 agreed to.
[Amendments Nos. 141 not moved.]
Clause 71 [Earnings of workers supplied by service companies etc: Northern Ireland]:
[Amendment No. 141A had been withdrawn from the Marshalled List.]
[Amendment No. 141B not moved.]
Lord Higgins Lord Higgins moved Amendment No. 142:
Transpose Clause 71 to after Clause 73
The noble Lord said: This is the transpose clause. Unfortunately, I was not quick enough a few moments ago. I said "not moved" when Amendment No. 141 was called. Quite clearly, in the light of the speed with which Clauses 70 and 71 were introduced, it seemed to us that they ended up in the wrong place. In fact, Chapter II of Part V of the Bill starts with Clause 68, which deals with new thresholds for primary Class 1 contributions and Clause 69, which deals with the same thing for Northern Ireland. We then have the two clauses that we have just discussed, followed by Clauses 72 and 73 relating to Class 1B contributions both here and in Northern Ireland.
Therefore, it seems to us that Clauses 70 and 71 were put in the wrong place and that they really ought to have been placed at the end of the chapter. However, having said that, I hesitate slightly to move such amendments and press them because Clause 70 is now such a

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notorious clause that, if we renumbered it, we might cause great confusion outside. So I do not propose to move this amendment—
Lord McIntosh of Haringey: If the noble Lord does not mind, I would prefer him to move the amendment so that I may say a few words in response.
Lord Higgins: I understand that the Minister wishes to respond. In that case, perhaps we may delay the proceedings for a few moments to allow him to do so. I beg to move.
11 p.m.
Lord McIntosh of Haringey: I can be brief. The placing of the clause in the Bill is done on the advice of parliamentary counsel. I certainly never had the courage to question parliamentary counsel's judgment on these matters. No doubt the noble Lord did so constantly when he was in office. Clauses 72 and 73 are minor clauses. It is appropriate that they should come last in this chapter.
Lord Higgins: I fully accept that. My recollection mostly is that parliamentary counsel—we may have had a heavier legislative programme—were paid vastly more than us but had more frequent nervous breakdowns. But be that as it may, I accept the point that the noble Lord has made. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 72 and 73 agreed to.
Clause 74 [Measures to reduce under-occupation by housing benefit claimants]:
Baroness Buscombe Baroness Buscombe moved Amendment No. 143:
Page 80. line 29, at end insert—
("(d) for ensuring that, in relation to a housing benefit claimant who is disabled, due account is taken of his need for additional space, including an extra bedroom for a carer.")
The noble Baroness said: This amendment is intended to protect the interests of those individuals who are in receipt of housing benefit, who are disabled and who require the support of a carer in their home. Clause 74 will enable the Government to make regulations that will establish a pilot scheme under which tenants in the social rented sector who are under-occupying their homes and who receive housing benefit will receive a financial incentive to move to smaller and cheaper accommodation.
The financial incentive will involve those tenants being rewarded with a lump sum payment equivalent to half the difference between their old and new weekly rent, multiplied by 156. While broadly supporting this proposal, in moving this amendment we look to the Government for reassurance that they will take adequate account of individual circumstances, and in particular circumstances whereby a claimant has need of a carer, in which case additional space is assured for that carer, including an extra bedroom for that carer.
A carer's role is recognised through the invalid care allowance. In many situations where claimants are in receipt of that allowance it is necessary for the carer effectively to live in. We believe that it is tremendously
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important to protect the ability of that carer to be able to live in in a separate room and to be able to rest and recuperate as and when relief from the caring allows. I believe that the wording of the amendment speaks for itself. I beg to move.
Baroness Hollis of Heigham: I recognise that this amendment aims to protect disabled people by ensuring that their needs are taken into account in the under-occupation scheme. I should mention that the same amendment was debated in the other place and my honourable friend Mr Hugh Bayley reassured honourable Members that the amendment was not necessary, whereupon Mr Quentin Davies withdrew his amendment on the grounds that the Minister had given,
"the clear assurance that we wanted".
Therefore I am a little surprised that the amendment was retabled as all I can do is to give the same assurance as has already been given by the Minister in the other place. Therefore I do not think that this amendment is necessary.
However, I am happy to repeat the speech of my honourable friend Mr Hugh Bayley, who said that some disabled people have a requirement for additional space arising from, for example, a carer who resides with them and that the scheme will take that into account, including the needs of other people who may need additional rooms, such as parents with children who come home at weekends. People will gain from the scheme even where they require additional space as long as the overall size of their new home is smaller than their old. For example, a single disabled person living in a four-bedroom house could move to a two or even a three-bedroom house and still be entitled to a payment under the scheme. He or she would not be required to move to a one-bedroom flat.
I hope that in the light of that reply the noble Baroness will appreciate that her amendment is unnecessary. The scheme is also, of course, entirely voluntary. No one will be forced to take part and no one will receive less benefit if they do not move. It is up to them. I hope that the noble Baroness will agree that the amendment is unnecessary and will withdraw it.
Baroness Buscombe: I stress that we have had continuing representations from a number of organisations and individuals in relation to this clause. Therefore we felt it appropriate to bring forward this amendment at this stage. I thank the Minister for her reaffirmation of what was said in the other place. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 143ZA:
Page 80, line 39, leave out subsection (5) and inser—
("() A person aggrieved by a determination of any prescribed description made under regulations under this section may appeal to such court or tribunal as may be prescribed; and the regulations may make provision as to the procedure to be followed in connection with appeals under this subsection.")
The noble Baroness said: I am delighted to move the amendment. It fulfils a commitment made to the Select Committee on Delegated Powers and Deregulation following its very helpful report on the delegated powers in the Bill.
As I mentioned when we discussed the last amendment, Clause 74 enables us to set up a housing under-occupation scheme. The scheme—which, of Course, will be entirely voluntary—will offer people incentives to move to smaller and more suitable accommodation by allowing them to keep part of any saving in HB.
It was always our intention that there should be a right of appeal under the scheme. The current drafting of the clause allows for this appeals mechanism to be established through regulations, as the Explanatory Notes make clear. The Select Committee on Delegated Powers and Deregulation suggested that it would be useful to bring that provision onto the face of the Bill. I am delighted to be able to support that recommendation, which is why we have brought forward the amendment. It confirms that people involved in the under-occupation scheme will have a right of appeal to a court or tribunal.
This is of course a pilot scheme, which we intend to trial in three local authorities. Much of the detail may need to he refined and adapted in the light of developing experience. Therefore the amendment provides for the actual appeals process to be defined in regulations. For example, regulations will identify the appropriate avenue for appeals, the decisions which will be appealable and the time and manner for making appeals. This is consistent with the approach taken for the scheme as a whole, which allows the full workings of the scheme to be set out in regulations, building on the basic framework the clause itself provides. This seemed to us the best balance between the appropriate suggestions of the Select Committee on Delegated Powers and Deregulation—which, as my noble friend said, we take very seriously—and the need to be able to loop in from our experience in the pilot areas. I am confident that noble Lords will welcome the amendment. I urge the Committee to support it.
Earl Russell: The Minister's confidence is well founded. I welcome the amendment and I thank the Minister very warmly for it.
Baroness Buscombe: I, too, welcome the amendment and rise to support it.
On Question, amendment agreed to.
Clause 74, as amended, agreed to.
[Amendment Nos. 143AA to 143AC not moved.]
Clause 75 agreed to.
Schedule 11 [Contributions and pensions administration]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 143AD:
Page 138. line 32, at end insert—
("10A. In section 172 (Assembly, etc. control of regulations and orders)., in subsection (2)(c) for ", 153(2) or" there is substituted "or 153(2)".")
The noble Baroness said: The group of government amendments before us now is extremely technical and deals mainly with some corrections to legislation passed earlier in the year. It may help the Committee if I explain a little more of the background to Clause 76 and Schedule 11, to which these amendments relate.
A number of noble Lords here today were involved last winter in the debates on the Social Security Contributions (Transfer of Functions, etc.)—I hope that the noble Lord, Lord Higgins, recognises the word "etcetera"—Act 1999. That Act transferred the functions of the Contributions Agency to the Inland Revenue and responsibility for NIC policy to the Treasury and the Revenue.
In the course of the passage of that Act we Identified a small number of technical errors and omissions. I regret that the noble Lord, Lord Goodhart, is not here because normally we rely on him to spot technical errors and omissions. For once his farsightedness has slightly failed us. We normally regard him as the backstop for government slippage. Even so, these were minor matters that were not material to the effect of the Bill hut we decided to take the earliest possible opportunity to clarify them. So the Government brought forward in another place amendments to the Bill to correct the se errors and omissions. They are now set out in Schedule 11.
Schedule 11 is there largely to ensure that the references and numbering are correct, that the transferred functions are treated consistently and that all consequential changes are picked up. None of these corrections affect the exercise of the functions as at 1st April.
As the Committee is well aware, social security legislation generally extends to Great Britain only. So the Social Security Contributions (Transfer of Functions, etc.) Act allowed an Order in Council to make parallel provision in Northern Ireland. That w as the snappily titled Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999. Since that was laid before Parliament, we have identified a number of extremely minor and technical errors in or related to that order and found a further minor omission from the Social Security Contributions (Transfer of Functions, etc.) Act itself. The amendments before us now put right those matters.
The amendments do such things as ensure grammatical consistency in an amended list, remove a passage of rogue text and pick up a number of consequential amendments. None of them affects the effective operation of the legislation in Northern Ireland.
Some of the amendments in this group have a retroactive effect; that is, they are deemed to have taken effect in April or October, in place of the provisions which contain the errors. That is partly for simplicity, and partly to remove any doubt about whether the previously unclear legislation should have been applied.
I do not intend to take up any more of the Committee's time on the detail of the amendments, although I am happy to take any questions that Members

941
may have. I ask the Committee to support the amendments in the assurance that they are technical and tidy up the drafting. I beg to move.
Earl Russell: I thank the Minister for her kind words about my noble friend Lord Goodhart. I am quite pleased to find that he joins the company of Homer and is found among those who are capable of nodding.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 143AE to 143AH:
Page 139, line 6, at end insert—
("15A.—(1) In section 116 (supply of information held by tax authorities for fraud prevention and verification), for subsection (1) there is substituted—
"(1) This section applies—

(a) to information which is held—

(i) by the Inland Revenue, or

(ii) by a person providing services to the Inland Revenue, in connection with the provision of those services,

but is not information to which section 115D above applies, and

(b) to information which is held—

(i) by the Commissioners of Customs and Excise, or

(ii) by a person providing services to the Commissioners of Customs and Excise, in connection with the provision of those services."

(2) This amendment shall be deemed to have come into force on 1st April 1999 in place of that made by paragraph 2(2) of Schedule 5 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999.
15B.—(1) In section 145 (adjustments between the Northern Ireland National Insurance Fund and the Consolidated Fund of Northern Ireland)—

(a) in subsection (1)(a), sub-paragraphs (i) and (ii) are omitted: and

(b) in subsection (3)(a), for "subsection (1)(a) and (b)" there is substituted "subsection (1)(b)".

(2) These amendments shall be deemed to have come into force on 5th October 1999 in place of those made by paragraph 34 of Schedule 2 to the Tax Credits Act 1999.
15C.—(1) In section 165 (regulations and orders - general), in subsection (9)(c), for "142(7), I45(4)" there is substituted "145(4)(a)".
(2) This amendment shall be deemed to have come into force on 1st April 1999 in place of that made by paragraph 49(3) of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999.")
Page 139, line 26, at end insert—
("20A.—(1) In section 154 (disclosure of information between government departments, etc.), in subsection (5) after "Subsections (1) and (IA)" there is inserted "extend".
(2) This amendment shall be deemed to have come into force on 1st April 1999.")
Page 139, line 38, at end insert—
("21A.—(1) In section 177 (orders and regulations—general provisions), for subsection (7) there is substituted—
"(7) Any power conferred on the Secretary of State to make regulations or orders (other than an order under section 162) is exercisable by statutory instrument, and subsections (2) to (4) and
942
section 178(1) apply to regulations or orders made in exercise of any such power of the Secretary of State as they apply to regulations made by the Department."
(2) This amendment shall be deemed to have come into force on 1st April 1999 in place of those made by paragraph 75(3) of Schedule I to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999.")
Page 140, line 17, leave out ("paragraph 66(3) (which has not come into force) is omitted") and insert ("the following provisions are omitted, namely—

(a) paragraph 4(6) (which was superseded by paragraph 4 of Schedule I to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999), and

(b) paragraph 66(3) (which has not come into force).")

On Question, amendments agreed to.
Schedule 11, as amended, agreed to.
On Question, Whether Clause 77 shall stand part of the Bill?
Earl Russell: I think I owe an apology to several people for raising what is properly a matter for the privileges of another place. But I do so at the request of my honourable friend, Mr Kirkwood. As a result of the operation of the guillotine in another place, this clause was never debated there.
The purpose of the clause is to make easier the authorisation of preliminary expenditure for a purpose which may be in the pipeline for the future. On such matters as IT preparation, a great deal of expenditure arises early on, before the legislation is tabled.
Some noble Lords may remember the paving Bill for theworking families' tax credit, which contained one of the most colossal Henry VIII clauses that I have ever seen. I understand the need for this kind of thing, but there is a real problem here. Without preliminary expenditure, a large number of policy changes cannot even be contemplated. So I understand why the Government want to be able to proceed by statutory instrument rather than needing an Act of Parliament to authorise each particular piece of expenditure.
However, the principle which is here—I shall not say breached, but possibly weakened—is one of very great importance historically and in another place it is guarded very jealously indeed. I understand that a certain amount of concern has been raised among fairly senior figures in another place about the possible effect of the clause. They would like the matter raised here in order that something can be written into the record about it.
I should like to know what safeguards will be in the way of this exercise of power. Under what circumstances is it likely to be exercised? What are the limits on the vires? What scrutiny will there be of the decision to table statutory instruments to authorise such preliminary expenditure? In particular, will it be possible for a Select Committee in another place—and several Select Committees are interested in the matter—to examine the statutory instrument in draft before it is tabled.
The principle of parliamentary control of expenditure and the principle of the efficient conduct of business are both important. If we can find, through the working of

943
this clause, a way of reconciling them, that, I hope, will be for the good of all parties. I oppose the Question that Clause 77 shall stand part of the Bill.
Baroness Hollis of Heigham: This clause creates a power to incur expenditure on work undertaken in preparation for changes to the social security system.
Without the clause, expenditure could not be incurred on much of the work needed to prepare for a change in social security until after Royal Assent for the substantive legislation introducing the change. As the social security system is large, complex and increasingly dependent on computers—heaven help us—there are long lead in times for making changes. Having to wait for Royal Assent, therefore, means that much needed welfare reform is delayed or implementation is rushed with resulting higher costs and possible loss of quality.
So the clause is intended to give a specific and time-limited power to incur expenditure on making preparations for future change of the social security system. The power covers two types of preparatory work: first, work in support of changes arising from decisions on social security policy, such as the introduction of a new benefit or for major changes to existing policies which will require primary legislation; and, secondly, work in support of changes to the social security system needed as a consequence of other government policies. For example, as the Prime Minister made clear in his statement on 23rd February, the power could be used to allow work in preparation for the country joining the European Monetary Union. I was pressed on that question in your Lordships' House. I said that unless one spent the money in advance there would be no choice for people to make in a possible referendum. If we wish to have the option of joining, we must prepare for it and the scale and complexity of the DSS computer systems make advance preparation critical. At the time I believe I had the support of the noble Earl and his colleagues.
There would be firm additional parliamentary controls on this expenditure. They are set out in the clause itself and are additional to the normal processes of estimates and supply. First, only preparatory work could be subject to this procedure. Substantive expenditure on the new service—for example, payments of a new benefit—could not be approved in this way. Secondly, a report detailing the nature and amount of intended expenditure would need to be laid in the House of Commons before expenditure could be approved. Thirdly, that approval would have to be by affirmative resolution. Fourthly, any such approval would be limited to a time period of two years. There is no question of indefinite and continuing expenditure.
In addition to those provisions on the face of the Bill, my honourable friend the Minister of State, Mr Timms, assured the chairman of the Social Security Select Committee—the noble Earl's honourable friend Mr Kirkwood—and the chairman of the Public Accounts Committee, at col. 1338 of Hansard for 20th May 1999, that arrangements could be made so that in normal circumstances those committees could examine the report before the House of Commons takes a decision.
944
I was pressed on that point by the noble Earl. The mechanism for it will be further discussed with the Select Committees concerned.
The Committee may wonder why there is no role for this Chamber in these parliamentary controls. It is because, as the noble Earl, Lord Russell, acknowledged, it is purely financial and is therefore subject to Commons privilege. However, the House of Lords will have its usual role in commenting upon and influencing the substantive legislation as it passes through the parliamentary process. There may well be other opportunities to discuss the underlying policy.
I hope that in the light of the assurances I have been able to give the noble Earl, he will feel that the concerns of his honourable friends in the other place have been addressed.
Earl Russell: I am grateful to the Minister for that reply. I understand the force of all the points she makes. I conceded from the outset that the clause meets a real need. I am satisfied by the safeguards which she offers which are carefully thought out and well considered.
I have a slight uneasy sense that people in the past have conceded such things for good reasons and with good safeguards. They have found that they have got on the slope which leads on downhill. But if that happens, I am fully satisfied it will not be by any intention of this Government who, I believe, have done their best. I am grateful for the assurance about the Select Committees. I only hope that the normal circumstances will be normal. So do we all. I withdraw my opposition to Clause 77.
Clause 77 agreed to.
11.15 p.m.
Clause 78 [Regulations and orders]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 143B:
Page 83, line 22, at end insert—
("() A statutory instrument containing an order under section 23(3) shall be subject to annulment in pursuance of a resolution of either House of Parliament.")
On Question, amendment agreed to.
Clause 78, as amended, agreed to.
Clause 79 agreed to.
Schedule 12 [Consequential amendments]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 144 to 152:
Page 142, leave out lines 14 to 16
Page 142, line 27, leave out from beginning to ("and") in line 30 and insert—
("(a) make any one or more of the orders which it could make under Part II of the 1973 Act if a decree of divorce, a decree of nullity of marriage or a decree of judicial separation in respect of the marriage had been granted in England and Wales, that is to say—

(i) any order mentioned in section 23(1) of the 1973 Act (financial provision orders);

(ii) any order mentioned in section 24(1) of that Act (property adjustment orders);")

Page 142, line 37, leave out ("24C(5) and (6)") and insert ("24B(3) to (5)")
Page 142, line 38, at end insert ("and nullity);")
Page 142, leave out lines 39 and 40
Page 142, line 41, leave out ("section 24F") and insert ("section 24C")
Page 142, line 42, leave out ("section 24G") and insert ("section 24D")
Page 142, line 42, at end insert (", and
(c) at the end there is inserted—

"(1) section 40A (appeals relating to pension sharing orders which have taken effect)."").

Page 151, line 19, at end insert—
("Family Law Act 1996 (c. 27)
62A. The Family Law Act 1996 has effect subject to the following amendments.
62B.—(1) Schedule 2 is amended as follows.
(2) In paragraph 2, for "section 21" there is substituted "sections 21 and 21A".
(3) In the section set out in that paragraph, for the sidenote there is substituted "Financial provision orders, property adjustment orders and pension sharing orders."
(4) In that section, in paragraphs (c) and (d) of subsection (2), there is inserted at the end ", other than one in the form of a pension arrangement (within the meaning of section 25D below)".
(5) In that section, after subsection (2) there is inserted—
"(3) For the purposes of this Act, a pension sharing order is an order which—

(a) provides that one party's—

(i) shareable rights under a specified pension arrangement, or

(ii) shareable state scheme rights,

be subject to pension sharing for the benefit of the other party, and

(b) specifies the percentage value to be transferred."

(6) In that section, subsections (3), (4) and (5) become (4), (5) and (6).
(7) In that section, after subsection (6) (new numbering) there is inserted—
"(7) In subsection (3)—

(a) the reference to shareable rights under a pension arrangement is to rights in relation to which pension sharing is available under Chapter I of Part IV of the Welfare Reform and Pensions Act 1999, or under corresponding Northern Ireland legislation, and

(b) the reference to shareable state scheme rights is to rights in relation to which pension sharing is available under Chapter II of Part IV of the Welfare Reform and Pensions Act 1999, or under corresponding Northern Ireland legislation."

(8) In that section, subsection (6) becomes subsection (8).
(9) After paragraph 6 there is inserted—
"Pension sharing orders: divorce and nullity
6A. For section 24B substitute—
"Pension sharing orders: divorce
24B.—(1) On an application made under this section, the court may at the appropriate time make one or more pension sharing orders.
(2) The "appropriate time" is any time—

(a) after a statement of marital breakdown has been received by the court and before any application for a divorce order or for a separation order is made to the court by reference to that statement;

(b) when an application for a divorce order has been made under section 3 of the 1996 Act and has not been withdrawn;

(c) when an application for a divorce order has been made under section 4 of the 1996 Act and has not been withdrawn;

(d) after a divorce order has been made.

(3) The court shall exercise its powers under this section, so far as is practicable, by making on one occasion all such provision as can be made by way of one or more pension sharing orders in relation to the marriage as it thinks fit.
(4) This section is to be read subject to any restrictions imposed by this Act and to section 19 of the 1996 Act.
Restrictions affecting section 24B.
24BA.—(1) No pension sharing order may be made under section 24B above so as to take effect before the making of a divorce order in relation to the marriage.
(2) The court may not make a pension sharing order under section 24B above at any time while the period for reflection and consideration is interrupted under section 7(8) of the 1996 Act.
(3) No pension sharing order may be made under section 24B above by virtue of a statement of marital breakdown if, by virtue of section 5(3) or 7(9) of the 1996 Act (lapse of divorce process), it has ceased to be possible—

(a) for an application to be made by reference to that statement; or

(b) for an order to be made on such an application.

(4) No pension sharing order may be made under section 24B above after a divorce order has been made, except—

(a) in response to an application made before the divorce order was made: or

(b) on a subsequent application made with the leave of the court.

(5) A pension sharing order under section 24B above may not be made in relation to a pension arrangement which—

(a) is the subject of a pension sharing order in relation to the marriage, or

(b) has been the subject of pension sharing between the parties to the marriage.

(6) A pension sharing order under section 24B above may not be made in relation to shareable state scheme rights if—

(a) such rights are the subject of a pension sharing order in relation to the marriage, or

(b) such rights have been the subject of pension sharing between the parties to the marriage.

(7) A pension sharing order under section 24B above may not be made in relation to the rights of a person under a pension arrangement if there is in force a requirement imposed by virtue of section 25B or 25C below which relates to benefits or future benefits to which he is entitled under the pension arrangement.
(8) In this section, "period for reflection and consideration" means the period fixed by section 7 of the 1996 Act.
Pension sharing orders: nullity of marriage.
24BB.—(1) On or after granting a decree of nullity of marriage (whether before or after the decree is made absolute), the court may, on an application made under this section, make one or more pension sharing orders in relation to the marriage.
(2) The court shall exercise its powers under this section, so far as is practicable, by making on one occasion all such provision as can be made by way of one or more pension sharing orders in relation to the marriage as it thinks fit.
(3) Where a pension sharing order is made under this section on or after the granting of a decree of nullity of marriage, the order is not to take effect unless the decree has been made absolute.
(4) This section is to he read subject to any restrictions imposed by this Act.
Restrictions affecting section 24BB.
24BC.—(1) A pension sharing order under section 24BB above may not be made in relation to a pension arrangement which—

(a) is the subject of a pension sharing order in relation to the marriage, or

(b) has been the subject of pension sharing between the parties to the marriage.

(2) A pension sharing order under section 24BB above may not be made in relation to shareable state scheme rights if—

(a) such rights are the subject of a pension sharing order in relation to the marriage, or

(b) such rights have been the subject of pension sharing between the parties to the marriage.

(3) A pension sharing order under section 24BB above may not be made in relation to the rights of a person under a pension arrangement if there is in force a requirement imposed by virtue of section 25B or 25C below which relates to benefits or future benefits to which he is entitled under the pension arrangement."
62C.—(1) Schedule 8 is amended as follows.
(2) In paragraph 9—

(a) in sub-paragraph (2)—

(i) for "or 24A" there is substituted ", 24A or 24B", and

(ii) for "to 24A" there is substituted "to 24BB", and

(b) in sub-paragraph (3), after paragraph (a) there is inserted—

"(aa) for "or 24B" substitute ", 24B or 24BB";".
(3) In paragraph 10, in sub-paragraph (2), for "24A" there is substituted "24BB".
(4) For paragraph 11 there is substituted—
"11. In each of sections 25B(3) and 25C(1) and (3), for "section 23" substitute "section 22A or 23".
11A. In section 25D—

(a) in each of subsections (1)(a), (2)(a) and (ab) and (2C)(c)(i), for "section 23" substitute "section 22A or 23", and

(b) in subsection (3), in the definition of "shareable state scheme rights", for "section 21A(1)" substitute "section 21(3)"."

(5) In paragraph 16, in sub-paragraph (2), at the end there is inserted—
"(f) after paragraph (f) there is inserted—
"(fa) a pension sharing order under section 24B which is made at a time when no divorce order has been made, and no separation order is in force, in relation to the marriage;"
(g) in paragraph (g), for "24B" substitute "24BB"."
(6) In that paragraph, after sub-paragraph (3) there is inserted—
"(3A) In subsection (4A), after "paragraph" insert "(de), (ea), (fa) or"."
(7) In that paragraph, in sub-paragraph (4), for the words from "subsection (4)" to the end of the first of the inserted subsections there is substituted "subsection (4A) insert-", the second of the inserted subsections is renumbered "(4AA)" and after that subsection there is inserted—
"(4AB) No variation of a pension sharing order under section 24B above shall be made so as to take effect before the making of a divorce order in relation to the marriage."
(8) In that paragraph, after sub-paragraph (4) there is inserted—
"(4A) In subsection (4B), after "order" insert "under section 24BB above"."
(9) In that paragraph, after sub-paragraph (7) there is inserted—
"(8) After subsection (7F) insert—
"(7FA) Section 24B(3) above applies where the court makes a pension sharing order under subsection (7B) above as it applies where the court makes such an order under section 24B above."
(9) In subsection (7G)—

(a) for "Subsections (3) to (5) of section 24B" substitute "Section 24BA(5) to (7)", and

(b) for "that section" substitute "section 24B above"."

(10) After that paragraph there is inserted—
"16A. After section 31A insert—
"Discharge of pension sharing orders on making of separation order.
31B. Where, after the making of a pension sharing order under section 24B above in relation to a marriage, a separation order is made in relation to the marriage, the pension sharing order is discharged.""
(11) In paragraph 19, in sub-paragraph (3)—

(a) after "24A" there is inserted ", 24B", and

(b) after "property adjustment order," there is inserted "any pension sharing order,".

(12) In paragraph 21—

(a) after "24,", in the first place, there is inserted "24B,", and

(b) for "24,", in the second place, there is substituted "24BB,".

(13) After paragraph 25 there is inserted—
"25A. In section 52(2)(aa), for "section 21A" substitute "section 21"."
(14) In paragraph 32, in sub-paragraph (2), for the words from "the words" to the end there is substituted "paragraph (a) substitute—
"(a) make one or more orders each of which would, within the meaning of Part II of the 1973 Act, be a financial provision order in favour of a party to the marriage or a child of the family or a property adjustment order in relation to the marriage.".
(15) In that paragraph, in sub-paragraph (3), for "21(a)" there is substituted "21(1)(a)".
(16) In that paragraph, after sub-paragraph (3) there is inserted—"
(3A) For section 21(1)(ba) substitute—
"(ba) sections 24BA(5) to (7) (provisions about pension sharing orders in relation to divorce);
(baa) section 24BC(1) to (3) (provisions about pension sharing orders in relation to nullity);".
(3B) In section 21(3), for "section 23" substitute "section 22A or 23."").
On Question, amendments agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No 152A:
Page 151, line 21, at end insert—
("Bankruptcy (Scotland) Act 1985 (c. 66)
62D. The Bankruptcy (Scotland) Act 1985 has effect subject to the following amendments.
62E. In section 35(1), in paragraph (a) for "under the said section 8(2) for the transfer of property by him" substitute "a court has, under the said section 8(2), made an order for the transfer of property by him or made a pension sharing order".
62F. After section 36C there is inserted—
"Recovery of excessive contributions in pension-sharing cases.
36D.—(1) For the purposes of section 34 of this Act, a pension-sharing transaction shall be taken—

(a) to be a transaction, entered into by the transferor with the transferee, by which the appropriate amount is transferred by the transferor to the transferee; and

(b) to be capable of being an alienation challengeable under that section only so far as it is a transfer of so much of the appropriate amount as represents excessive contributions.

(2) For the purposes of section 35 of this Act, a pension-sharing transaction shall be taken—

(a) to be a pension sharing order made by the court under section 8(2) of the Family Law (Scotland) Act 1985; and

(b) to be an order capable of being recalled under that section only so far as it is a payment or transfer of so much of the appropriate amount as represents excessive contributions.

(3) For the purposes of section 36 of this Act, a pension-sharing transaction shall be taken—

(a) to be something (namely a transfer of the appropriate amount to the transferee) done by the transferor; and

(b) to be capable of being an unfair preference given to the transferee only so far as it is a transfer of so much of the appropriate amount as represents excessive contributions.

(4) Where—

(a) an alienation is challenged under section 34;

(b) an application is made under section 35 for the recall of an order made in divorce proceedings; or

(c) a transaction is challenged under section 36,

if any question arises as to whether, or the extent to which, the appropriate amount in the case of a pension-sharing transaction
950
represents excessive contributions, the question shall be determined in accordance with subsections (5) to (9).
(5) The court shall first determine the extent (if any) to which the transferor's rights under the shared arrangement at the time of the transaction appear to have been (whether directly or indirectly) the fruits of contributions ("personal contributions")—

(a) which the transferor has at any time made on his own behalf, or

(b) which have at any time been made on the transferor's behalf,

to the shared arrangement or any other pension arrangement.
(6) Where it appears that those rights were to any extent the fruits of personal contributions, the court shall then determine the extent (if any) to which those rights appear to have been the fruits of personal contributions whose making has unfairly prejudiced the transferor's creditors ("unfair contributions").
(7) If it appears to the court that the extent to which those rights were the fruits of unfair contributions is such that the transfer of the appropriate amount could have been made out of rights under the shared arrangement which were not the fruits of unfair contributions, then the appropriate amount does not represent excessive contributions.
(8) If it appears to the court that the transfer could not have been wholly so made, then the appropriate amount represents excessive contributions to the extent to which it appears to the court that the transfer could not have been so made.
(9) In making the determination mentioned in subsection (6) the court shall consider in particular—

(a) whether any of the personal contributions were made for the purpose of putting assets beyond the reach of the transferor's creditors or any of them; and

(b) whether the total amount of any personal contributions represented, at the time the pension sharing arrangement was made, by rights under pension arrangements is an amount which is excessive in view of the transferor's circumstances when those contributions were made.

(10) In this section and sections 36E and 36F—
"appropriate amount", in relation to a pension-sharing transaction, means the appropriate amount in relation to that transaction for the purposes of section 25(1) of the Welfare Reform and Pensions Act 1999 (creation of pension credits and debits);
"excessive contributions" shall be construed in accordance with subsection (2)(b) of section 36A of this Act;
"pension-sharing transaction" means an order or provision falling within section 24(1) of the Welfare Reform and Pensions Act 1999 (orders and agreements which activate pension-sharing);
"shared arrangement", in relation to a pension-sharing transaction, means the pension arrangement to which the transaction relates;
"transferee", in relation to a pension-sharing transaction, means the person for whose benefit the transaction is made;
"transferor", in relation to a pension-sharing transaction, means the person to whose rights the transaction relates.
Recovery orders.
36E.—(1) In this section and section 36F of this Act, "recovery order" means—

(a) a decree granted under section 34(4) of this Act;

(b) an order made under section 35(2) of this Act;

(c) a decree granted under section 36(5) of this Act,

in any proceedings to which section 36D of this Act applies.
(2) Without prejudice to the generality of section 34(4), 35(2) or 36(5) a recovery order may include provision—

(a) requiring the person responsible for a pension arrangement in which the transferee has acquired rights derived directly or indirectly from the pension-sharing transaction to pay an amount to the permanent trustee on the debtor's estate,

(b) adjusting the liabilities of the pension arrangement in respect of the debtor,

(c) adjusting any liabilities of the pension arrangement in respect of any other person that derive, directly or indirectly, from rights of the debtor under the arrangement,

(d) for the recovery by the person responsible for the pension arrangement (whether by deduction from any amount which that person is ordered to pay or otherwise) of costs incurred by that person in complying in the debtor's case with any requirement under section 36C(1) or in giving effect to the order.

(3) In subsection (2), references to adjusting the liabilities of a pension arrangement in respect of a person include (in particular) reducing the amount of any benefit or future benefit to which that person is entitled under the arrangement.
(4) The maximum amount which the person responsible for an arrangement may be required to pay by a recovery order is the lesser of—

(a) so much of the appropriate amount as, in accordance with section 36D of this Act, represents the excessive contributions, and

(b) the value of the debtor's rights under the arrangement acquired by the transferee as a consequence of the transfer of the appropriate amount.

(5) A recovery order which requires the person responsible for an arrangement to pay an amount ("the restoration amount") to the permanent trustee on the debtor's estate must provide for the liabilities of the arrangement to be correspondingly reduced.
(6) For the purposes of subsection (5), liabilities are correspondingly reduced if the difference between—

(a) the amount of the liabilities immediately before the reduction, and

(b) the amount of the liabilities immediately after the reduction,

is equal to the restoration amount.
(7) A recovery order in respect of an arrangement—

(a) shall be binding on the person responsible for the arrangement, and

(b) overrides provisions of the arrangement to the extent that they conflict with the provisions of the order.

Recovery orders: supplementary.
36F.—(1) The person responsible for a pension arrangement under which the transferee has, at any time, acquired rights by virtue of the transfer of the appropriate amount shall, on the permanent trustee of the debtor's estate making a written request, provide the trustee with such information about the arrangement and the rights under it of the transferor and transferee as the permanent trustee may reasonably require for, or in connection with, the making of an application for a recovery order.
(2) Nothing in—

(a) any provision of section 159 of the Pension Schemes Act 1993 or section 91 of the Pensions Act 1995 (which prevent assignation and the making of orders which restrain a person from receiving anything which he is prevented from assigning),

(b) any provision of any enactment (whether passed or made before or after the passing of the Welfare Reform and Pensions Act 1999) corresponding to any of the provisions mentioned in paragraph (a), or

(c) any provision of the arrangement in question corresponding to any of those provisions,

applies to a court exercising its power to make a recovery order.
(3) Regulations may, for the purposes of the recovery provisions, make provision about the calculation and verification of—

(a) any such value as is mentioned in section 36E(4)(b);

(b) any such amounts as are mentioned in section 36E(6)(a) and (b).

(4) The power conferred by subsection (3) includes power to provide for calculation or verification—

(a) in such manner as may, in the particular case, be approved by a prescribed person; or

(b) in accordance with guidance—

(i) from time to time prepared by a prescribed person, and

(ii) approved by the Secretary of State.

(5) References in the recovery provisions to the person responsible for a pension arrangement are to—

(a) the trustees, managers or provider of the arrangement, or

(b) the person having functions in relation to the arrangement corresponding to those of a trustee, manager or provider.

(6) In this section—
"prescribed" means prescribed by regulations;
"the recovery provisions" means this section and sections 34, 35, 36 and 36E of this Act;
"regulations" means regulations made by the Secretary of State.
(7) Regulations under the recovery provisions may—

(a) make different provision for different cases;

(b) contain such incidental, supplemental and transitional provisions as appear to the Secretary of State necessary or expedient.

(8) Regulations under the recovery provisions shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament." ").
The noble Lord said: Amendments Nos. 152A, 152B, 152C and 152D make further necessary additions to our measures on the protection of pensions on bankruptcy. All the provisions apply to cases in which the court has ordered recovery of excessive contributions from a bankrupt's pension rights, but where some of the rights have been split on divorce. They supplement the provisions in Clauses 15 and 16.
The purpose is twofold. The first is to make it clear in the provisions covering England and Wales that the procedures that apply when recovering excessive contributions from a bankrupt's pension will also apply when recovery is being made from the arrangement in which a former spouse's pension share rights are held. The second is to introduce equivalent provisions for Scotland. They are technical amendments that clarify existing provisions in the Bill and introduce equivalent provisions in Scotland and I commend them to the House. I beg to move.
Lord Astor of Hever: The House will be grateful to the Minister for explaining the Government's thinking behind the amendments. We shall not oppose them because we see merit in protecting creditors from gratuitous alienations and unfair preferences that may be made through the pension-sharing provisions.
However, we have concerns about potential devolution issues and the drafting of a number of terms in the amendments. Part II of Schedule 5 to the Scotland Act 1998 stipulates in Sections C2 and F3 that insolvency and occupational and personal pension matters are reserved to the Westminster Parliament. However, the amendments relate directly to the Family Law (Scotland) Act 1985. Family law is a devolved competence.
The First Minister made a statement to the Scottish Parliament on the subject on 9 June, but he will not give the Scottish Parliament the opportunity to debate the issues, which are fully within its competence. Is it not ironic that the Government, who introduced devolution with such great enthusiasm, are failing to allow the Scottish Parliament to exercise its full powers for fear that they will not have a majority? Do the Government accept that they should proceed with great caution until interested parties in Scotland have had an opportunity to debate the issue? Surely the views of the Scottish Parliament should be sought before action is taken.
There may be a good reason in this case, but what about the future, when the Government want to make legislative changes for Scotland in which devolved and reserved matters are inextricably linked? How will that be done? Will the Scottish Parliament always be consulted, and if so, how? What if the Parliament refuses to make the change? Will Westminster overrule it, as the Scotland Act permits? Those are important questions, but I do not expect an answer from the Minister tonight. However, I should be grateful if he would write to me.
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The phrase "fruits of contributions" is used in Section 36D(5) and (6) in Amendment No. 152A in conjunction with the words "directly" or "indirectly". I should be grateful if the Minister could clarify those terms.
It is not apparent at what stage the Government envisage that contributions will be so far removed from the original excessive contribution as to be exempt from the terms of this provision. Could the Government clarify whether, for example, interest paid on the fund and accruals to the capital will come within the ambit of this clause.
This problem is also apparent in new Section 36E(2)(a) which refers to rights which a transferee can acquire directly or indirectly from the pension sharing transaction. New Section 36D(5) also makes reference to contributions which have at any time been made on the transferor's behalf. Could the Minister confirm if the Government are referring in this clause to contributions made by an employer on an employee's behalf and whether this would also cover a windfall situation?
Reference is made in new Sections 36F(4) and 342F(7) to a prescribed person. New Sections 36F(6) and 342F(9) both state that prescribed means "prescribed by regulations". The prescribed person will have an important role in the calculation or verification of the amount to be paid under a recovery order. It is imperative therefore that the qualifications of such a person are stipulated in statute and not left to secondary legislation to be further described. We believe that a precise definition of who the Government envisage fulfilling the task of the prescribed person should be set out in the Bill. I would be grateful if the Minister could comment on this point.
Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Astor, for the consideration he has given to these amendments. He certainly raises some important points. I may be able to respond to some of them but, as he so kindly offered, I will certainly write to him about those which I am not able to cover.
On the first question about devolution, he suggested that, since it amends Scottish law—the Family Law Act—it should be for the Scottish Parliament to legislate. We have considered the matter very carefully with the Scottish Office and have concluded that because these clauses are about insolvency and occupational and personal pensions rather than about family law, although they go into the Family Law Act, they are reserved matters under Section 29(4) of the Scotland Act, and therefore they would not be for the Scottish Parliament. It is important, if we are providing a level playing field in the treatment of pensions north and south of the Border. to make the provisions in this Bill.
The noble Lord asked about what was meant by the fruits of contributions, both directly or indirectly. Direct or indirect contributions mean contributions made by the individual or on his behalf out of moneys due to him. The fruits of these contributions are the benefits which accrue—for example, the investment growth or the returns. It is right that there should be no benefit to the

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bankrupt from attempting to keep assets out of the hands of creditors, so it is made by the individual on his behalf. I shall have to write to him about employer's contributions.
He asked me about prescribed persons and ensuring that the prescribed person had a suitable qualification. The valuation of pension rights is usually undertaken by an actuary using guidance provided by the Faculty and Institute of Actuaries and approved by the Secretary of State. This is the approach which we have taken in these provisions. As with previous legislation, it would not be appropriate to set this out on the face of the Bill. However, the noble Lord can be assured that the appropriate qualifications will be available to prescribed persons and the regulations will be written in that sense.
I appreciate that there are other points, but I will write to the noble Lord about them. I beg to move.
Earl Russell: I am most grateful to the Minister for the care with which he gave that answer which is extremely reassuring. Anomalies do not worry me; lack of consultation would do so. I am extremely glad that the Government have taken care to satisfy themselves that these are not in fact devolved matters. What I would be glad to hear, and what I will assume to be the case unless I am told that it is not, is that that view is shared by Scottish Ministers and officers of the Scottish Parliament. The key maxim in this situation must continue to be "only connect." So long as these matters are discussed privately before they reach this Chamber, I think that we will get on all right.
Lord McIntosh of Haringey: I have to remind the noble Earl that E. M. Forster was English, not Scots. The noble Lord, Lord Astor, quoted the First Minister as saying that these matters would not be considered by the Scottish Parliament. If that is not satisfactory for the noble Earl, I shall consider writing to him about it.
On Question, amendment agreed to.
11.30 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendments Nos. 152B to 152D:
Page 152, line 24, leave out ("the matters specified in paragraphs (a) and (b) of section 342A(6)") and insert—
("(a) whether any of the personal contributions were made for the purpose of putting assets beyond the reach of the transferor's creditors or any of them, and
(b) whether the total amount of any personal contributions represented, at the time the pension-sharing transaction was made, by rights under pension arrangements is an amount which is excessive in view of the transferor's circumstances when those contributions were made.")
Page 152, line 26, at end insert ("and sections 342E and 342F")
Page 152, line 44, at end insert—
("Orders under section 339 or 340 in respect of pension-sharing transactions.
342E.—(1) This section and section 342F apply if the court is making an order under section 339 or 340 in a case where—

(a) the transaction or preference is, or is any part of, a pension-sharing transaction, and

(b) the transferee has rights under a pension arrangement ("the destination arrangement", which may be the
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shared arrangement or any other pension arrangement) that are derived, directly or indirectly, from the pension-sharing transaction.

(2) Without prejudice to the generality of section 339(2) or 340(2), or of section 342, the order may include provision—

(a) requiring the person responsible for the destination arrangement to pay an amount to the transferor's trustee in bankruptcy,

(b) adjusting the liabilities of the destination arrangement in respect of the transferee,

(c) adjusting any liabilities of the destination arrangement in respect of any other person that derive, directly or indirectly, from rights of the transferee under the destination arrangement,

(d) for the recovery by the person responsible for the destination arrangement (whether by deduction from any amount which that person is ordered to pay or otherwise) of costs incurred by that person in complying in the transferor's case with any requirement under section 342F(1) or in giving effect to the order,

(e) for the recovery, from the transferor's trustee in bankruptcy, by the person responsible for a pension arrangement, of costs incurred by that person in complying in the transferor's case with any requirement under section 342F(2) or (3).

(3) In subsection (2), references to adjusting the liabilities of the destination arrangement in respect of a person include (in particular) reducing the amount of any benefit or future benefit to which that person is entitled under the arrangement.
(4) The maximum amount which the person responsible for the destination arrangement may be required to pay by the order is the lesser of—

(a) so much of the appropriate amount as, in accordance with section 342D, represents excessive contributions, and

(b) the value of the transferee's rights under the destination arrangement so far as they are derived, directly or indirectly, from the pension-sharing transaction.

(5) If the order requires the person responsible for the destination arrangement to pay an amount ("the restoration amount") to the transferor's trustee in bankruptcy it must provide for the liabilities of the arrangement to be correspondingly reduced.
(6) For the purposes of subsection (5), liabilities are correspondingly reduced if the difference between—

(a) the amount of the liabilities immediately before the reduction, and

(b) the amount of the liabilities immediately after the reduction,

is equal to the restoration amount.
(7) The order—

(a) shall be binding on the person responsible for the destination arrangement, and

(b) overrides provisions of the destination arrangement to the extent that they conflict with the provisions of the order.

Orders under section 339 or 340 in pension-sharing cases: supplementary.
342F.—(1) On the transferor's trustee in bankruptcy making a written request to the person responsible for the destination arrangement, that person shall provide the trustee with such information about—

(a) the arrangement,

(b) the transferee's rights under it, and

(c) where the destination arrangement is the shared arrangement, the transferor's rights under it,

as the trustee may reasonably require for, or in connection with, the making of applications under sections 339 and 340.
(2) Where the shared arrangement is not the destination arrangement, the person responsible for the shared arrangement shall, on the transferor's trustee in bankruptcy making a written request to that person, provide the trustee with such information about—

(a) the arrangement, and

(b) the transferor's rights under it,

as the trustee may reasonably require for, or in connection with, the making of applications under sections 339 and 340.
(3) On the transferor's trustee in bankruptcy making a written request to the person responsible for any intermediate arrangement, that person shall provide the trustee with such information about—

(a) the arrangement, and

(b) the transferee's rights under it,

as the trustee may reasonably require for, or in connection with, the making of applications under sections 339 and 340.
(4) In subsection (3) "intermediate arrangement" means a pension arrangement, other than the shared arrangement or the destination arrangement, in relation to which the following conditions are fulfilled—

(a) there was a time when the transferee had rights under the arrangement that were derived (directly or indirectly) from the pension-sharing transaction, and

(b) the transferee's rights under the destination arrangement (so far as derived from the pension-sharing transaction) are to any extent derived (directly or indirectly) from the rights mentioned in paragraph (a).

(5) Nothing in—

(a) any provision of section 159 of the Pension Schemes Act 1993 or section 91 of the Pensions Act 1995 (which prevent assignment and the making of orders which restrain a person from receiving anything which he is prevented from assigning),

(b) any provision of any enactment (whether passed or made before or after the passing of the Welfare Reform and Pensions Act 1999) corresponding to any of the provisions mentioned in paragraph (a), or

(c) any provision of the destination arrangement corresponding to any of those provisions,

applies to a court exercising its powers under section 339 or 340.
(6) Regulations may, for the purposes of sections 339 to 342, sections 342D and 342E and this section, make provision about the calculation and verification of—

(a) any such value as is mentioned in section 342E(4)(b);

(b) any such amounts as are mentioned in section 342E(6)(a) and (b).

(7) The power conferred by subsection (6) includes power to provide for calculation or verification—

(a) in such manner as may, in the particular case, be approved by a prescribed person; or

(b) in accordance with guidance—

(i) from time to time prepared by a prescribed person, and

(ii) approved by the Secretary of State.

(8) In section 342E and this section, references to the person responsible for a pension arrangement are to—

(a) the trustees, managers or provider of the arrangement, or

(b) the person having functions in relation to the arrangement corresponding to those of a trustee, manager or provider.

(9) In this section—

"prescribed" means prescribed by regulations;

"regulations" means regulations made by the Secretary of State.

(10) Regulations under this section may—

(a) make different provision for different cases;

(b) contain such incidental, supplemental and transitional provisions as appear to the Secretary of State necessary or expedient.

(11) Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament." ").
On Question, amendments agreed to.
Schedule 12, as amended, agreed to.
Clause 80 [Transitional provisions]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 153 to 155:
Page 85, line 4, leave out subsections (3) to (5)
Page 85, line 17, leave out ("24D") and insert ("24B")
Page 85, line 18, leave out ("of nullity")
On Question, amendments agreed to.
Lord Goodhart Lord Goodhart had given notice of his intention to move Amendment No. 156:
Page 85, line 19, leave out from ("before") to end of line 20 and insert ("1st January 2000.")
The noble Lord said: I am fairly certain that this amendment has not been debated. In view of the lateness of the hour and the fact that no doubt the Minister will not have been briefed on the amendment, I shall not move it tonight. However, it is likely that I shall raise the matter at Report stage.
[Amendment No. 156 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 157 to 159:
Page 85, line 21, leave out subsection (7)
Page 85, line 24, leave out subsection (8) and insert—
("(8) Paragraph 3 of Schedule 3 does not have effect if the proceedings in which the decree is granted were begun before the day on which section 19 comes into force.")
Page 85, line 43, leave out subsection (12)
On Question, amendments agreed to.
Clause 80, as amended, agreed to.
Clauses 81 and 82 agreed to.
Schedule 13 [Repeals]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendments Nos. 159A to 159H:
Page 159, line 28, column 3, at beginning insert—

("In section 8(3), the words ", subject to section 21(4) below,".")

Page 159, line 41, column 3, at end insert ("4(6),")
Page 160, line 10, column 3, at end insert—

("Section 145(1)(a)(i) and (ii).")

Page 160, line 22, column 3, at beginning insert—

("In Article 9(3), the words ", subject to Article 21(4),".")

Page 160, line 29, column 3, leave out ("and 24(3)") and insert (", 24(3), 33(5) and 75(3)")
Page 160, line 31, column 3, leave out ("and 38(4) and (5)") and insert (", 38(4) and (5) and 49(3)")
Page 160, line 31, column 3, at end insert—

("In Schedule 5, paragraph 2(2).")

Page 160, line 33, at end insert—

("1999 c. 10.

Tax Credits 1999 Act

In Schedule 2, paragraph 34.

In Schedule 6, the entry relating to the Social Security Administration (Northern Ireland) Act 1992.")

The noble Lord said: These amendments were spoken to with Amendment No. 143AD. I beg to move.
On Question, amendments agreed to.
Schedule 13, as amended, agreed to.
Clause 83 [Commencement]:
[Amendment No. 160 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 161 and 162:
Page 86, line 18, after ("5") insert ("and 62A to 62C")
Page 86, leave out line 19 and insert—
("(c) section 80(6) and (8); and")
On Question, amendments agreed to.
Lord Goodhart Lord Goodhart moved Amendment. No. 162YA:
Page 86, line 23, at end insert—
("() Sections 68 to 73 shall not come into effect until such day (not earlier than 6th April 2000) as the Treasury may by order appoint.")
The noble Lord said: This is an example of my wish always to be of help to the Government in the drafting of their legislation. It seems to me odd that Clauses 68 to 73 are Treasury clauses. There are powers to make regulations under them which are made by the Treasury. However, as far as concerns the commencement power, the power to make a commencement order is given to the Secretary of State by Clause 83. It seems to me that a commencement order in respect of these clauses should be made by the Treasury. I beg to move.
Lord McIntosh of Haringey: I suspect that the noble Lord has identified a technical issue relating to the drafting of Clause 83, which contains no specific provision to bring the NICs measures into effect. Therefore, by default it is taken to be the responsibility of the Secretary of State for Social Security to make the necessary commencement order. However, as the noble Lord made clear, responsibility for national insurance policy was transferred to the Treasury and Inland Revenue in April by the Social Security Contributions (Transfer of Functions, Etc) Act 1999. I had better take this matter away for further consideration. If an amendment is necessary, we shall table it at a later stage. Any such amendment would have to be drafted by parliamentary counsel.
Lord Goodhart: In that case, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 162ZA:
Page 86, line 25, at end insert—
("() sections 49, 50(1), 50(2) (except for sections 39B(3) and 39B(4)(b) of the Contributions and Benefits Act contained therein) and section 51;")
The noble Lord said: It is perhaps a shame that we mentioned the previous matter. I deal with Amendment No. 162ZA briefly but it is a not unimportant point. I am aware that the Child Poverty Action Group in particular is concerned about this matter. The wording of the amendment is rather obscure. Effectively, it seeks to bring forward the date when widowers receive the new pension which the Government have conceded in the light of the case before the European Court of Human Rights. We propose that those people whose cases have been upheld by that Court should not have to wait until 2001 before they receive assistance. Various cases have been brought to my attention in which people may suffer hardship as a result of delay.
I understand that one of the reasons for the delay is problems with computers. The more I hear about the department's computers, the more concerned I become. Only this morning, representations were made to me that people who had deferred their entitlement to the state pension had been told that the Government hoped to pay them by next November. Perhaps we should have a debate soon about the department's computers, which

961
are giving grave cause for concern. At all events, one would have thought that in the context of this amendment payments could be made manually. We hope that such payments will be made. I beg to move.
Baroness Hollis of Heigham: This amendment would bring forward implementation of the new bereavement benefit scheme to the date when the Act was passed but delay one element of it; namely, the 26-week time limit for the payment of bereavement allowance. I am a little surprised that the noble Lord tables this amendment now, given the very thorough discussions held earlier. However, I sympathise with his intention that, because the current scheme of widows' benefits discriminates against men, it should be changed as soon as possible.
On the other hand, it would not be possible for the Benefits Agency to implement any part of the new scheme before April 2001. Once the parliamentary process is completed, the changes require extensive modifications to our computer systems, as the noble Lord so shrewdly—and, I fear, the second House repeatedly—anticipated. We are not able to begin spending money on the development of these computer systems until the Act receives Royal Assent. The Benefits Agency will also need time to ensure that staff are fully trained. This means that inevitably there will be a time lag between Royal Assent and implementation of the proposals.
I do not believe that I need go into the details of the proposals. Given that it is simply not possible to introduce the new scheme, or some parts of it, as soon as the Bill receives Royal Assent, I hope that the noble Lord will withdraw his amendment. I could describe what we are doing, but I am sure that the noble Lord does not want me to describe again the policy intention; certainly, the Opposition Chief Whip urges me not to do so. In the light of that, I ask the noble Lord to withdraw the amendment. We cannot do it even if we wanted to. Therefore, the amendment is not appropriate.
Lord Higgins: The noble Baroness said that the preparatory work to make provision for the computers in relation to this proposal, which we would like to see accelerated, could not be undertaken until the Bill received Royal Assent. Am I wrong in thinking that this kind of preparatory expenditure would be appropriately authorised once the Bill had a Second Reading in another place?
Baroness Hollis of Heigham: Perhaps I should write to the noble Lord. I understand that some preparatory expenditure can follow Second Reading but the bulk that the noble Lord seeks cannot. It has to await Royal Assent to the Bill.
Lord Higgins: Perhaps the Minister will write to me. We are all interested in getting the matter moving. Subject to that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 162A to 163A not moved.]
Lord Astor of Hever Lord Astor of Hever moved Amendment No. 163B:
Page 86, line 33, at end insert—
("() Part IV shall not come into force until a period of no less than one year after regulations to be made under that Part have been published in draft by the Secretary of State for consultation.")
The noble Lord said: In moving the amendment, I shall speak also to Amendment No. 163C.
Two weeks ago we debated Amendment No. 70A. We on these Benches and the insurance industry accept that the Government have made the provisions in Part IV of the Bill overriding in some cases. However, the Minister confirmed that Part IV will not on the whole be overriding. In this context, it is vital for the insurance industry to have clarification of the point encompassed by the amendment, which is intended to ensure that if the legislation is not wholly overriding trustees of pension schemes will need to be given adequate time to implement the detailed changes to be included in regulations.
The insurance industry is hoping that at least a year must be allowed between draft regulations being made available and the provisions of Part IV coming into force. The provisions on pension sharing contained in Clauses 23 to 47 are technically complicated. It will fall to pension scheme trustees to ensure that all the necessary changes are made to their schemes. Life insurance companies must be given sufficient time to make the substantial computer system and administrative changes which will be needed. This is a considerable burden. Trustees could be placed in the unenviable position of not being able to implement pension sharing orders because they have not had time to amend the scheme rules permitted, but facing a possible penalty from OPRA if they do not.
As the provisions will not be made wholly overriding, the insurance industry estimates that it will take at least one year, and perhaps realistically 18 months, from regulations being made assuming that it had had a few months prior to that to see proposals in draft to implement the necessary changes.
Will the Minister confirm that the insurance industry will be given at least a year in which to implement the detailed changes? I beg to move.
Baroness Hollis of Heigham: I am happy that the noble Lord puts forward this probing amendment so that we can make our position clear to the industry.
The amendments are concerned with the timing of the introduction of the pension sharing Bill. The Government's thinking is very much in line with the spirit of the amendment, which I assume is essentially a probing amendment about the implementation date for pension sharing. I entirely agree with the noble Lord that it is extremely important to give the pensions industry and family lawyers adequate time to prepare for implementation. In fact we aim to give everyone about a year to prepare from the date on which the regulations—there will probably be over 100 of them: so it is a complicated matter—are laid. So assuming implementation by the end of the year 2000, we shall aim to consult on draft regulations this autumn and lay the regulations around the end of the year.

963
That is our aim. It represents a challenging timetable. We recognise that it is important to allow practitioners adequate time to prepare for implementation. Before we make the final decisions on the precise start date for pension sharing we need to be aware of all the factors involved. On that basis, we believe that it would be unnecessarily restrictive to insert the proposed amendment into primary legislation.
I do not believe that there is a case for delaying the introduction of pension sharing. On the contrary, people outside are pressing us to speed the matter up. We are determined to see the project through. I am sure we shall have the support of the whole House in doing so. I hope that we shall have the implementation during the lifetime of this Parliament. Our aim certainly is to implement it by around the end of 2000 which would give the industry the year's approach that the noble Lord requested. In the light of what I have said, I hope that he will feel able to withdraw the amendment.
11.45 p.m.
Lord Astor of Hever: I thank the Minister for that reply. She is right that the amendment is a probing
964
amendment. In the light of what she has said about the industry having at least a year, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 163C and 164 not moved.]
Clause 83, as amended, agreed to.
Clause 84 [Extent]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 165 to 170:
Page 87, line 3, after ("5") insert (", 62A to 62C")
Page 87, leave out line 5 and insert—
("(e) section 80(6) and (8).")
Page 87, line 10, after ("13") insert ("and 62D to 62F")
Page 87, line 25, leave out ("26,") and insert ("26(b),")
Page 87, line 38, after ("25") insert ("and 26(a)")
Page 88, line 5, leave out ("15,") and insert ("15C,")
On Question, amendments agreed to.
Clause 84, as amended, agreed to.
Clause 85 agreed to.
House resumed: Bill reported with amendments.
House adjourned at thirteen minutes before midnight.