HL Deb 11 October 1999 vol 605 cc26-33


.—(1) The Secretary of State shall by regulations make provision for one or more of the following—

  1. (a) to substitute, in any provision of the Contributions and Benefits Act which relates to additional pension for widows or widowers, for any sum payable by way of such pension as is derived from the contributions of a deceased spouse, such higher sum as may be prescribed;
  2. 27
  3. (b) to substitute, in any such provision, for any prescribed reference to the year 2000, a reference to such later year as may be prescribed;
  4. (c) to establish a scheme to compensate persons who are widowed after 5th April 2000 and who suffered loss as a result of any action or failure to act in reliance on incorrect information received from a Government department with respect to the reduction in the additional pension payable to them as a result of the enactment of the former section 19 of the Social Security Act 1986.

(2) If regulations under subsection (1) are not in force on 5th April 2000, then until such time as such regulations are in force, the provisions of the Contributions and Benefits Act to which paragraph (a) of that subsection apply shall continue to have effect as in force on that date.

(3) No regulations shall be made under subsection (1) unless a draft of the regulations has been laid before, and approved by a resolution of, each House of Parliament.").

The noble Lord said: My Lords, I shall also refer to Amendments Nos. 49, 101, 102 and 103.

A number of your Lordships are by now familiar with the issues, but I need to explain the emergence at this late stage of a new clause which brings together the previous alternative amendments on additional inherited pensions for widows and widowers. I shall be brief since the principles are simple, albeit the issues are complex once one tackles the detail.

From April next year, people who had relied on inheriting a 100 per cent pension from their spouse—because that is what the law originally provided and that is what they had consistently been told—will find that 100 per cent inheritance reduced to 50 per cent unless this Bill makes provision to the contrary. There is not likely to be another legislative opportunity to make amends before next April.

The mischief goes back to cost-cutting legislation in 1986. That legislation was proposed by the government of the time and approved, not without protest, by the Parliament of the time. Whether from shame or negligence, nobody told the intended victims that they were to lose the rights already acquired before the 1986 legislation and that they were accruing rights at half the expected rate thereafter.

Since they were ignorant of the position, contributors lost the opportunity to make alternative provision for their spouse. This Government have, to their credit, accepted that something needs to be done. Findings of maladministration or illegality, or both, may just be round the corner. The something that might need to be done could be very expensive and I am aware that hard thinking is going on in Whitehall. We might not have a firm statement today on what is to be done, but I did not want your Lordships to move on with no provision made and each of the three amendments standing in the names of, respectively, the noble Lord, Lord Higgins, the noble Earl, Lord Russell, and myself rejected by the Government.

I have therefore tabled a multi-purpose amendment offering a choice of one or other of our respective solutions or some combination of them. The core requirement is that the Government must, before next April, increase the reduced pensions, delay the reduction or compensate those who have lost as a result of the reduction, or some combinations of those.

If the Government have not done so, they must freeze the rules as they are at present until such time as they come forward with a solution. The Government's proposals will require approval in both Houses. I hope that the Minister will accept the amendment. I rather suspect that, like Martin Luther in other circumstances, she can do no other. I beg to move.

Lord Higgins

My Lords, this is a matter which your Lordships debated in Committee and therefore much of the background is before you. However, there are two essential points at issue. First, in 1986 legislation was passed which reduced the widows pension under SERPS by half. It was true to say that at that time Ministers said that this would preserve their rights for the remainder of this century. So there was a very long period between the announcement of the reduction and the time when it came to be implemented, which is soon.

On the substance of the issue, I do not want to dissent from the view taken by the previous government, and, as I understand it, the present Government, with regard to the long-term implications. Our grave concern—reflected in Amendment No. 49—is that the matter was not brought to the attention of those affected. That is not at all a party issue because, alas, the governments of both the main parties have been at fault. That was the case under the previous government and it has been so until quite recently under the present Government.

It has been said—and I do not dissent from it—that those who did not know of the proposed change had suffered as a result of having been misinformed. Consequently, they found that they might have taken action to ameliorate the effect of the change, but did not do so because they were either not informed at all, or in many cases were actually given wrong information. In previous debates, the noble Lord, Lord Rix, suggested that he had quite clear written evidence that that was so. Indeed, wrong information was also given in telephone conversations. Therefore, the question was what should be done to compensate those who may have lost as a result of that lack of information or misinformation. Mr Stephen Timms in another place said that compensation will be paid to anyone, who can establish that he or she received advice that did not reflect the change from April 2000 and, as a result, acted to their detriment".—[Official Report, 8/3/99; col. 5.] There is no question at all that the Government have clearly said that they believe that it is right that compensation should be paid. That is certainly a view which we on this side of the House believe to be the case. The Minister's immediate response was to say that she was taking legal advice on the matter. We have not yet heard what that legal advice is. Perhaps it would be helpful if this afternoon the noble Baroness were to tell the House.

The other development was that a case was put to the Parliamentary Ombudsman to look into the question of whether there has been maladministration. The ombudsman has said that he will report in good time before 6th April 2000. Neither the noble Lord, Lord Rix, nor I are very familiar with the practice at Labour Party conferences. I suppose that the amendment before us might reasonably be described as "composite". It does indeed cover a number of different aspects of the problem. In particular, it gives the Government extremely wide discretion. It suggests that the Secretary of State shall have powers by regulation to, make provision for one or more of the following". So he does not have to make that provision for all of them; he can do it for any one of them. As I have already indicated, I would not be in favour of him doing that as far as regards the substantive underlying issue. I make that absolutely clear.

On the other hand, I am greatly in favour of him doing so to ensure that action is taken regarding the proposals for compensation before April 2000. As I understand it, the noble Lord's amendment effectively provides some sanction in that respect; namely, that if the Government do not produce the compensation scheme by then, the status quo shall prevail. In line with my amendment, the noble Lord's amendment would encourage the Government to make such a regulation and to ensure that the scheme is operative by then. He is effectively putting a deadline on the whole operation. I believe that it is right that we should do that; the matter has been going on for quite a considerable time. The Minister's statement to which I referred was as long ago as last March. Presumably, the ombudsman is long advanced in his preparations. I therefore hope that in the light of that the Minister is able to accept the amendment.

Earl Russell

My Lords, I congratulate the noble Lord, Lord Rix, on the persistence and determination with which he has pursued the issue. I congratulate him also on the remarkable ingenuity of his present amendment, and on its elegance. It gives the Government a degree of flexibility that normally exists only in Whitehall's daydreams. I also offer congratulations to my honourable friend Mr Rendel, who first raised the issue in another place and discovered what I believe is still the latest example of misinformation known to us, which is as recent as April of this year.

That example illustrates that this is not a party matter. We have here not a failing of any political party, but of government. It is therefore proper for government to answer that failure. A great many people have either taken actions or failed to take actions which they would otherwise have taken as a consequence of that inaccurate information. The equitable case for some form of compensation is very strong indeed. We have hitherto been arguing about exactly what form that should take. The noble Lord does not mind which method the Government use, but they must use one of them. I shall go along with that.

We have had a lot of argument in the past about the difficulty of discovering exactly who has been misinformed. I understand that difficulty, but if the Government were to be too impressed by that argument, or if they did not wish to accept the amendment of the noble Lord, Lord Rix, they might find that they were left with my Amendment No. 102, which is in this group. It has the merit of great simplicity. It simply postpones the introduction of the change by 10 years to allow people to make the necessary provision. However, I believe that the Minister would find that extremely expensive. I do not know what she is going to do in respect of the amendment in the name of the noble Lord, Lord Rix, but if she has been making her financial calculations, she would be well advised to accept it: Always keep a-hold of Nurse For fear of finding something worse".

Lord Davies of Coity

My Lords, I support the main and overwhelming thrust of the Bill because it is intended to reform the welfare and pensions provisions. However, it is intended to do not only that; it is intended to reform those provisions to ensure a greater degree of fairness, and to enable those people who most need help to receive it. I agree that the noble Lord, Lord Rix, has drawn attention to a particular anomaly which will undoubtedly display discrimination. Whether we like it or not, that discrimination was brought about as a result of what was done by the previous administration in 1986. The time bomb was set ticking then and will explode in April next year unless it is corrected. That means that one widow will receive the full entitlement and another widow will receive half the entitlement, depending on which day the husband dies. That is how close it is.

Given the opposition presented by the Labour Opposition in the House of Commons in 1986, I believe that the Government should seriously consider removing that discrimination. They are not responsible for what happened in 1986, but they can correct it now. I certainly hope that the Minister will give us some relief on that matter.

Lord Renton

My Lords, I have been a widower for the past 13½ years. I am now in my 90s. When one's wife died, one noticed and felt keenly that one became a one-man band. One had to do a lot of things which one had never contemplated doing before. Fortunately, thanks to the pension arrangements and my own savings, that did not hurt me financially. But I can imagine that it would hurt a good many people financially, husbands as well as wives.

Therefore, although I broadly support this amendment, I think that perhaps some kind of means test is desirable. Generally speaking I do not like means tests, but obviously if one spouse dies, the other spouse may not be left with sufficient funds to keep things going. He or she may then become dependent upon employing somebody who was not employed before or who must be employed to a greater extent. That is so in my case—our housekeeper now has to do far more than she used to do. So I believe there is a case of substance here and that it is a matter which applies as much to widowers as to widows.

4.30 p.m.

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

My Lords, the new clause proposed by the noble Lord, Lord Rix, requires the Secretary of State to introduce regulations which have to be approved by both Houses of Parliament to alter the amount of SERPS payable to widows and widowers or either to put off the changes to SERPS for widows and widowers or to compensate those affected by the change. If no regulations were made, the new clause proposed by the noble Lord, Lord Rix, to which I refer at the moment, envisages that the current rules, whereby widows and widowers may inherit all their spouse's SERPS, continue to apply.

The noble Lord, Lord Rix, has also tabled a second amendment which would introduce a phased method of compensation. That proposal was debated in Committee. It would introduce a complex formula to provide compensation on a sliding scale for people who had paid contributions over the affected time period. The rate of compensation payable would depend upon the length of time for which contributions had been paid, with those who had paid contributions between 1978 and 1986 receiving full compensation and those thereafter a reduced sum. There are consequences to this amendment; for example, that the same amount of SERPS might be in payment but, if Mr A had built it up over a longer time than Mr B, Mr A's widow's pension would be that much higher. Therefore there are difficulties with that amendment although it seeks to engage with a very difficult issue: that those closest to that decision are those least likely to be able to adjust their financial circumstances.

The amendments proposed by the noble Lord, Lord Higgins, and other noble Lords would prevent implementation of the change unless the Government had introduced by 5th April 2000 a scheme to compensate those people who had not been able to make alternative provision because they had received inadequate or misleading information from the department. As I explained in Committee, to reverse the change or introduce an open-ended compensation scheme would have the same early and very costly effect but would also carry with it a bill for future expenditure which would continue to increase.

The Liberal Democrat amendment moved by the noble Earl, Lord Russell, would delay the change until 2010. The cumulative cost of that is, I believe, well known. It would be more than £5.5 billion by 2010 with a continuing cost of £1 billion a year for some time after that. We may well be talking about £10 billion or £11 billion or more in total—huge sums of money.

These proposals were debated in Committee and, as I made clear then, the Government recognise that the situation they have inherited is intolerable. The previous government enacted the changes to inherited SERPS 13 years ago. The implementation date was set for April 2000 so that 14 years' notice was given to allow people who might be affected plenty of time to alter their financial arrangements. That government promised wide publicity of the changes yet they did nothing. Not only did they not publicise those changes as they had a duty to do, but they effectively denied that any change would happen in terms of the misleading advice that people continued to receive. Misleading information that no change would take place even as the change had already happened in law continued to be given to people under the previous administration for 14 years.

When this Government came into office, they knew nothing of the problem and found out about it only at the end of last year. Since then they have been exploring the problem and all the options for putting the matter right. As noble Lords have said and as the noble Lord, Lord Rix, expressed so eloquently, there is widespread concern about this matter, as he argued in Committee. Many people are deeply worried and they want to know what the Government are proposing to do to put it right. As I have said, there is no easy answer. It is a multi-billion pound problem. Should the Government delay or phase in the change, it would cost £5.5 billion by 2010 with a continuing cost of around £1 billion a year, taking it up to £10 billion or more in total.

We cannot accept the amendment in the name of the noble Lord, Lord Higgins. It attempts to compensate individuals who have received incorrect information and subsequently acted to their detriment or failed to act to their benefit. That could result in paying out less but could result in a big bill for administration. It would also take time to set up. Questions of proof of misinformation, etc, as I think the House acknowledges, would be very complex. Letters or relevant records have probably been scrapped by now; phone calls have probably not been recorded; and there is probably no evidence of counter inquiries.

The noble Lord, Lord Higgins, said that it was not a party matter. I agree that seeking to resolve the problem is not a party matter. It is, however, a party matter which we inherited and it is a mess with which we are trying to deal.

As I believe the noble Lord, Lord Rix, is acknowledging with his proposed new clause, it is important to get the decision right. It is complex; it is expensive. The problem has taken 12 years to emerge. We have not yet had 12 months to resolve it, and we are talking about billions and billions of pounds.

Proposals put forward by the noble Lords, Lord Higgins and Lord Goodhart, would force the Government into introducing a compensation scheme or deferring the change. In contrast, the noble Lord, Lord Rix, with his new clause, is seeking to provide a legislative base for a range of decisions although he has made clear his favourite option in Amendments Nos. 101 and 103. Therefore, the new clause would enable the Government to act in time because legislation in the next parliamentary Session could be too late for some of these options without pre-empting the final decisions.

I can tell the House that the Government will announce the way forward on this exceptionally difficult issue before this Bill completes its passage. Since that is the case and given that the amendment of the noble Lord, Lord Rix, does not prejudge the outcome of our deliberations, I am extremely happy to accept it today.

Noble Lords

Hear, hear!

Baroness Hollis of Heigham

My Lords, this does not imply acceptance of any specific proposal but it means that in due course the Government will propose further amendments. They accept the fact that this Bill should make some provision for dealing with the problem which we inherited. As the noble Lord, Lord Rix, again very eloquently said in Committee, it will allow us to address the issue. The public should know that we are taking on board their concerns; that we are addressing the problem; and to that degree seek to reduce some of their anxiety that the clock is ticking and nothing will be done. I cannot as a result accept the subsequent and specific amendments in this group. However, the noble Lord, Lord Rix, has offered in his new clause a truly statesmanlike way forward in the true spirit of a Cross-Bencher. I am glad he felt able to do so and it is very clear today that he was speaking for the entire House. Therefore, on behalf of the Government, I have great pleasure in accepting his first amendment.

Noble Lords

Hear, hear!

Lord Rix

My Lords, I am certain I speak for all parts of your Lordships' House when I say how delighted—indeed staggered, but certainly delighted—I am that the Minister and the Government have seen fit to accept my amendment. I assure the Minister that many, many elderly husbands and wives, putative widows and widowers all, will sleep more easily in their beds tonight knowing that their spouses will be better protected when bereavement eventually strikes. I am of course an interested party in this matter. Therefore, on behalf of my wife and myself and tens of thousands of other husbands and wives: thank you.

On Question, amendment agreed to.

Baroness Castle of Blackburn moved Amendment No. 2: Before Clause 1, insert the following new clause—