HL Deb 08 November 1999 vol 606 cc1155-61

.—(1) The Secretary of State may by regulations make such provision as is authorised by one or more of subsections (2) to (4).

(2) The regulations may provide for any prescribed provision of Part II of the Contributions and Benefits Act (contributory benefits) which relates to additional pension for widows or widowers to have effect, in relation to persons of any prescribed description, with such modifications as may be prescribed for securing—

  1. (a) that any such additional pension, or
  2. (b) in the case of any provision of Schedule 5 to that Act (increase of pension where entitlement is deferred), that any constituent element of an increase provided for by that Schedule,
is increased by such percentage as may be prescribed (which may be 100 per cent.).

(3) The regulations may amend (or further amend) any prescribed provision of Part II of the Contributions and Benefits Act falling within subsection (2) by substituting for any reference to the year 2000 (or any year previously substituted by virtue of this subsection) a reference to such later year as may be prescribed.

(4) The regulations may make provision for and in connection with—

  1. (a) the establishment, for a prescribed period, of a scheme for dealing with claims made by persons on the grounds that, in reliance on any incorrect or incomplete information provided by a government department with respect to the SERPS reduction (however that information came to their knowledge), they
    1. (i) failed to take any, or any particular, relevant steps which they would have taken, or
    2. (ii) took any steps which they would not have taken,
  2. (b) securing that, where persons have made successful claims under the scheme, surviving spouses of those persons (or, as the case may be, those persons themselves) will not be affected by the SERPS reduction.

(5) In subsection (4) "relevant steps", in relation to a person, means steps towards safeguarding the financial position of that person's spouse in the event of the spouse becoming that person's surviving spouse or (as the case may be) towards safeguarding that person's own financial position in the event of that person becoming a surviving spouse (whether or not, in either case, that person was at any material time already married); and "the SERPS reduction" means—

  1. (a) (in the context of subsection (4)(a)) the operation of any of—
    1. (i) the provisions of section 19 of the Social Security Act 1986, or
    2. (ii) the provisions of Part II of the Contributions and Benefits Act reproducing the effect of those provisions.
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  2. (b) (in the context of subsection (4)(b)) the operation of any of the provisions of the Contributions and Benefits Act mentioned in paragraph (a)(ii) above or of section 39C(4) or 48BB(7) of that Act.

(6) Regulations under subsection (4) may, in particular, make provision—

  1. (a) with respect to the time within which, and the manner in which, claims under the scheme are to be made;
  2. (b) for requiring claimants—
    1. (i) to supply such information in connection with their claims as may be prescribed or reasonably requested by any person for the purpose of dealing with their claims,
    2. (ii) to attend interviews at such time and place as may be reasonably specified by any person for that purpose;
  3. (c) for a claim to be disallowed where the claimant fails to comply with a requirement imposed by virtue of paragraph (a) or (b) above and does not show within the prescribed period that he had good cause for that failure;
  4. (d) prescribing—
    1. (i) matters which are or are not to he taken into account in determining whether a person does or does not have good cause for any failure to comply with any such requirement, or
    2. (ii) circumstances in which a person is or is not to be regarded as having or not having good cause for any such failure;
  5. (e) prescribing the conditions which must be satisfied in relation to any claim in order for it to be a successful claim under the scheme;
  6. (f) with respect to—
    1. (i) the manner in which decisions under the scheme are to be made (which may include authorising decisions of any prescribed description to be made by a computer), and
    2. (ii) the time within which, and the manner in which, such decisions are to be notified to claimants;
  7. (g) for provisions of Chapter II of Part I of the Social Security Act 1998 (social security decisions and appeals) to apply in relation to decisions under the scheme with such modifications as may be prescribed;
  8. (h) for provisions of Part II of the Contributions and Benefits Act to apply in relation to—
    1. (i) surviving spouses of persons who have made successful claims under the scheme, or
    2. (ii) persons who have themselves made such claims.
with such modifications as may be prescribed.

(7) If no regulations under this section are in force on 6th April 2000, then until such time as any such regulations come into force—

  1. (a) any provisions of Part II of the Contributions and Benefits Act which (whether alone or together with other provisions) would otherwise result in a reduction of one-half in the amount payable by way of additional pension in cases where a person's spouse dies after 5th April 2000 shall be taken—
    1. (i) as not applying, or
    2. (ii) as providing for the full amount to be payable by way of additional pension,
  2. (b) in Schedule 5 to that Act—
    1. (i) any provision which is expressed to apply in relation to deaths occurring after that date shall not apply, and
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    2. (ii) any provision which (with or without any other limitation) is expressed to apply in relation to deaths occurring before 6th April 2000 shall be taken as applying also in relation to deaths occurring on or after that date.

(8) No regulations shall be made under this section unless a draft of the regulations has been laid before, and approved by a resolution of, each House of Parliament.

(9) In this section "prescribed" means prescribed by regulations under subsection (2), (3) or (4), as the case may be."). 1B Clause 83, page 86, line 26, after ("sections") insert ("(Preservation of rights in respect of additional pensions),").

Baroness Hollis of Heigham

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1A and 1B which substitute a new clause in lieu of the clause which your Lordships inserted at Report. The new clause essentially builds on the clause introduced by the noble Lord, Lord Rix. I am sure that the entire House would like to pay tribute to the noble Lord for his amendment.

As I said at Report when I accepted his proposal, the Government agree that this Bill must make some provision for dealing with the inherited problem of SERPS for widows and widowers. We simply needed to make some further amendments to the clause to ensure: first, a legislative base for the solution on which we finally decide, and secondly to provide protection in the meantime for all those who may be affected.

The clause provides the power to introduce regulations which allow the Commons to do one or more, that is a "mix or match", of the following: to vary the percentage of inherited SERPS for some or all widows; to postpone the 50 per cent change to a specified later date, or to run a protected rights scheme—the new clause sets out, in effect, the ground rules for such a scheme.

Noble Lords can rest assured that legislation will be securely in place to enable those problems to be addressed. The regulations will be subject to the affirmative procedure so there will be opportunity to scrutinise and debate them in full.

I emphasise once more that, whatever happens, no one will see their 100 per cent SERPS entitlement reduced before arrangements are in place to protect those who were misadvised. My right honourable friend the Minister of State said in another place that we will not leave people in a situation where regulations come in overnight; there will be reasonable warning of changes which will be phased in.

As noble Lords are aware, I had hoped to be able to announce our decision as to our way forward on this matter before the Bill completed its passage through Parliament. However, I cannot yet do that. We are determined to get it right. We still need to do further work on this. We will make a further announcement soon. In the meantime, the clause as amended gives us all the powers the Government and the House might need to introduce a satisfactory solution to the problem based on the amendment tabled by the noble Lord, Lord Rix. I beg to move.

Moved, That the House do not insist on their Amendment No. 1 to which the Commons have disagreed and do agree with the Commons in their Amendments Nos. 1A and 1B in lieu thereof.—(Baroness Hollis of Heigham.)

Lord Rix

My Lords, I am delighted that the other place has seen fit to approve of the amendment which I moved in your Lordships' House. I am grateful to the Minister for her kind words.

I express only two regrets. I refer to the fact that the other place chose to turn my half page amendment into two-and-a-half pages, which perhaps shows verbosity. At the same time I am rather sad that I have been removed from star billing at Clause 1 to Clause 48. However, with those two regrets I am happy to accept the amendments from another place.

I have a final word for the Secretary of State. I would ask that when reviewing the possibilities of compensation and probably taking into account the views of the Ombudsman, he will pay particular attention to the needs of those who paid into SERPS from 1978 to 1986 when it was the law of the land.

Lord Higgins

My Lords, the House will be grateful to the noble Lord, Lord Rix, for his initiative in promoting the original amendment which, as he rightly points out, has been increased in size and verbosity by the Government.

Earlier on, the Minister stated that she hoped to let us know the final decision before the matter passed into legislative form at the conclusion of our debates. She has now said that she is unable to do so. We understand; this is a highly complex matter. It is more important to get the matter right than for it to be done in a hurry.

On the other hand, the original amendment moved by the noble Lord, Lord Rix, and that which we now have before us from the Government, effectively set a deadline on these deliberations. We hope that that deadline is not broken and that the many people who have problems in this area will know, at any rate by next April, what the Government now propose.

I believe that the Minister, in a slip of the tongue, referred to the "inherited problem of SERPS" rather than "the problem of inherited SERPS". Both are perhaps true. We have inherited a problem due to the action of both Governments. However, there is also the problem of people who, as widows, inherit their SERPS. The Government have now made clear that they go along with the decision of the former Government—which they previously strongly opposed—to make changes in this respect.

Perhaps I may pick up some of the points made in the debate in another place last week by Mr Rooker. I have great respect for him. he is clearly suffering considerably in dealing with these problems. However, from what he said it seems clear that the Government now accept that there is a legal liability to the extent that people were misled on the matter.

In that context, perhaps the Minister can tell us whether she understands that that legal liability, or the ability of people to bring action against the Government, will be wholly superseded by the legislation now proposed by the Government or whether those who feel they should take legal action will still be able to do so, even after the Government's proposals are made.

Could she also tell us the present state of play as to when she anticipates that the Ombudsman's report is likely to become available? This is not her immediate responsibility but presumably she has some information on the subject. In particular, could she tell us whether we are likely to have such report before the Government make a final decision on the matter or whether their decision may be made in advance of us knowing the view taken by the Ombudsman?

The clauses now before us give the Government power to make regulations with regard to this problem. In another place, on 3rd November, at col. 367 of Commons Hansard, Mr Rooker set out various options. One was to vary the rate of inherited SERPS for some or all widows—I presume under the new legislation, now widowers also. A second was to postpone indefinitely the change to cut widows' benefits to 50 per cent. As has been pointed out, that would involve an extremely large sum of money—something over £5 billion.

The third choice—the alternative now being considered— is a "protected rights scheme". The Minister referred to that and the clause is before us in that respect. But I must confess, looking at the amendment as it now stands, that I am not at all clear what form that protected rights scheme might take, and in particular whether there would be problems with regard to the standard of proof which might be required from those claiming such protected rights. In short, this was something that came up last week in the other place and we did not discuss the alternative.

As your Lordships will eventually need to take a view on whatever the Government come up with, because the matters are to be under the affirmative resolution procedure, it would be helpful, by way of a trailer, if the Minister could tell us what kind of protected rights scheme the Government now envisage. In particular, could the Minister deal with the problem of proof as to whether someone was misled and as a result did not make provision for their widow which they might otherwise have done?

Finally, I come to the question of who pays. The Minister in the other place seemed to indicate that whatever the costs of putting right this problem, none the less they would be borne by people in the SERPS scheme. One would have thought, as the noble Earl, Lord Russell, has pointed out previously, that as this was a failing by government, the cost would come from the general exchequer rather than from any alteration in the amount of money in the SERF'S scheme at the moment; for example, the surplus in the National Insurance Fund.

Clearly before this Bill becomes law we will not know what the Government are going to do. But it would be extremely helpful, in anticipation of whatever decision they eventually make, if the noble Baroness could elucidate some of the points I have just made.

Earl Russell

My Lords, I shall not detain the House more than a moment beyond when I first see the noble Baroness, Lady Strange, in her place.

I should like, first, to thank the noble Lord, Lord Rix, for his persistence in this subject. I am delighted to see it rewarded. It is a good illustration of Aristotle's maxim that it is important that legislators should be subject to the laws which they themselves make. As a guarantee of good legislation, it is vital.

Secondly, I pay tribute to my honourable friend Mr. Rendel who was first responsible for spotting this issue and who has also had a great deal to do with putting it on our agenda. In addition, I thank the Minister for providing us with a real model of how business should be conducted. If that model had been followed on other issues, we might not have such a contentious afternoon before us as we probably do.

This amendment, as it stands, is an old friend of my late noble friend Lady Seear because, "the Secretary of State may do whatever he likes". It is one of the greatest conferments of flexibility in any parliamentary provision that I can remember seeing for a long time. I understand, with the time-scale before us, why the Secretary of State wanted to claim the flexibility. But now he has been given his declaration of indulgence to say he can do whatever he likes, I should like to know what he would like to do. Presumably he will have to take a decision before 5th April next. Other people will need to react to that decision and make whatever provision is necessary to accommodate it.

The Secretary of State has given himself the options of a higher rate, individual compensation and deferment of the introduction of the provision. The Minister spent a great deal of time in the course of our proceedings dwelling on the difficulties of any scheme of individual compensation. I understand what she said. The problem of proof, especially when dealing with compensation arising out of telephone conversations, is considerable. If that standard of proof were applied strictly, many people may fail to obtain the compensation they deserve. If it were applied loosely, it could be open-ended to the point of some alarm. So the preference of these Benches would still be for deferment. I understand that the Minister is not willing to consider the 10 years for which this party pressed. But if she were willing to go so far as considering five years, that may help the situation considerably. With thanks to all those who have taken part in this, I await the Minister's reply.

3.15 p.m.

Baroness Hollis of Heigham

My Lords, I should like to answer the points raised, but I may need to follow this up in correspondence because it is important that the wording of my replies is accurate.

In response to the query raised by the noble Lord, Lord Higgins, the basis on which legal action could be taken is if someone suffered financial loss having been misled. The noble Earl, Lord Russell, is right when he says that the degree of financial loss suffered would be difficult to establish on an individual basis. The options on the table therefore include the possibility of deferral—whether five or 10 years is still up for discussion; of individual compensation with all the problems that go with it; or protected rights.

The noble Lord, Lord Higgins, asked what "protected rights" means as to some extent it is a new phrase coming into the agenda. It means that those who demonstrate that they were misadvised and therefore acted to their detriment will have their national insurance record amended to ensure that a surviving spouse will inherit 100 per cent of their SERPS. The difference between that and compensation is that it is not a question of how much actual loss was suffered, but that their position would continue to be the same as though the 1988 changes had not come into effect. That is what is meant by "protected rights".

However, I repeat that no decision on which system, or any mix or match of these strategies, has yet been taken. Your Lordships will be aware that it is technically complicated in terms of trying to assess the degree of loss that people may have suffered. It is also extremely expensive, running between £5 billion and £10 billion. I was grateful for the recognition of that by the noble Lord, Lord Higgins. It is important to get it right. Clearly, until we have got it right, the situation that exists pre-April 2000 continues. That was the point of the amendment of the noble Lord, Lord Rix.

The noble Lord, Lord Higgins, also asked who will pay. The cost comes from the National Insurance Fund. Of course, the Government stand behind that fund. I assure the noble Earl, Lord Russell, that no decision has been made on whether deferment will be five or 10 years; whether it will be protected rights, individual compensation or any mix or match. We are trying to establish a scheme which both properly addresses the problems facing those who would otherwise have made different arrangements and who have suffered a financial loss as a result, and being prudent in our role to protect taxpayers' interests. That is what we are seeking to do.

Finally, like others, I thank the noble Lord, Lord Rix. This point was first picked up in 1995 when my noble friend Lady Gould tabled an amendment to the Pensions Bill of that year. It was flagged up by the Box, but then was quickly forgotten until it was resurrected recently. Given that fact, I hope that your Lordships will be content when I ask the House not to insist on Amendment No. 1, to which the Commons have disagreed, but to agree with the Commons in their Amendments Nos. 1A and 1B in lieu thereof.

On Question, Motion agreed to.