Lords Sitting of 27 June 2000

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Southwark.

Driving Skills Tuition in Schools: Policy
Lord Montagu of Beaulieu Lord Montagu of Beaulieu asked Her Majesty's Government:
Whether they consider that, if lessons on vehicle driving and roadcraft were included in the appropriate schools curricula, it would improve driving skills for the young and reduce accidents.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, the Government's road safety strategy reflects the need to cut child road casualties by 50 per cent. and to address the problems of novice drivers. In the school curriculum, the personal, social and health education framework includes road safety and responsibility as road users. We are doubling the number of visits to schools and colleges by driving examiners to deliver messages about responsible attitudes to driving and we are encouraging higher driving standards, with improved arrangements for learning to drive and assessing hazard awareness in the theory test.
Lord Montagu of Beaulieu: My Lords, I thank the Minister for that reply. In view of the great success of such schemes in the United States, will he initiate discussions with driving schools about establishing pilot schemes to assess their feasibility in this country? Does the Minister also agree that good tuition could not only reduce casualties, but reduce the truancy rate in schools?
Lord Whitty: My Lords, I understand that that approach may have its attractions and its byproducts, but adopting driving lessons in schools, on school premises or arranged by schools for people who are under the driving age, is a serious issue. Some of the evidence from America suggests that that leads to increased illegal under-age driving on the roads. The problem with young drivers is not so much their technical skill as their attitude. Improving their technical skill would not necessarily improve their performance on the road and prevent casualties.
Lord Davies of Oldham: My Lords, I declare an interest as the president of the Royal Society for the Prevention of Accidents. Does my noble friend the Minister agree that, welcome though improving driving skills might be, given our appalling record on accidents involving children, which is one of the worst in Europe, it is much more important that the school
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curriculum addresses the broad issues of road safety? Children are more likely to be injured as pedestrians or cyclists rather than subsequently as car drivers.
Lord Whitty: My Lords, my noble friend is correct. Despite our generally good road safety record, we fare much worse than most European countries on child pedestrian casualties. It is important that the totality of road safety attitudes is inculcated in schools, rather than emphasising the pre-driving stage. Nevertheless, it is important that pupils understand what driving is about. That is why we encourage driving examiners and others to go into schools to give lectures and information, under the auspices of the Driving Standards Agency.
Lord Harrison: My Lords, will the Government also take note of the problem of the exorbitant insurance premiums placed on young people—typically £1,000 a year? That is an impediment to our young men and women who want to learn to drive and acquire roadcraft skills.
Lord Whitty: My Lords, I suspect that, regrettably, insurance company premiums for young drivers reflect knowledge and experience of the level of accidents and damage to vehicles and people when young drivers are involved. I am not sure that it is appropriate for the Government to intervene on that subject. There are other ways of improving the performance of novice drivers.
Baroness Thomas of Walliswood: My Lords, there are many suggestions around for improving the safety of our roads, ranging from teaching young children to behave better and to understand road safety through to reducing the speed at which people travel. We all have our favourites. Has any research been done on which are the most effective methods of reducing road accidents?
Lord Whitty: My Lords, there is a large body of road safety research, much of it funded by my department, as well as some international research. It shows that all the factors involved contribute—attitude, speed, road environment, density of traffic and the skill and behaviour of drivers. There is an indication of the relative importance of each factor, but to have a coherent road safety strategy we must address them all, as the Government's recently published road safety strategy does.
Baroness Blotch: My Lords, does the Minister accept that more could be done to encourage some schools that do not allow police officers on to the premises to carry out important crime prevention and road safety work? That situation is unfortunate. A school in Liverpool that I visited uses building a car engine and driving the car as a way of improving science and technology education and helping its young people to be safer than most, particularly those who do not enjoy secure home backgrounds.
Lord Whitty: My Lords, I am aware that a number of schools have engaged in engine maintenance and a

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policy generally of introducing children of 14 onwards to car technology and driving. In Northern Ireland, there is a GCSE based on road safety that includes such factors. That has proved of some benefit to pupils who take it, particularly those who come from a more deprived background. Police visits to schools with a road safety message are beneficial. I hope that schools take up that idea and that police authorities continue to provide it. The decision on the curriculum in this respect is a matter for the schools rather than the Government.

Private Health Insurance
2.42 p.m.
Lord Renton of Mount Harry Lord Renton of Mount Harry asked Her Majesty's Government:
What measures they intend to introduce to encourage the take-up of private health insurance.
Lord McIntosh of Haringey: My Lords, the Government have no plans to introduce any measures to encourage the take-up of private health insurance. We believe that the best way to provide for the healthcare needs of all British residents is to use the available resources to fund the NHS directly rather than to subsidise those who, for whatever reason, choose to make alternative arrangements.
Lord Renton of Mount Harry: Oh dear! My Lords, following the historic announcement yesterday about the decoding of the human genome, I was hoping for an Answer from the Minister that was a little more forward looking—given that that marvellous achievement was made by a coming together of private sector and public sector research, which is bound to continue. Does the Minister agree that there are now some 7 million people in Britain who have taken out private health insurance, but that we are still well below the EU average for the percentage of private healthcare as a percentage of total healthcare? Can the noble Lord try to persuade his colleagues that those 7 million people should be allowed to pay their insurance premiums without taxation? Every penny that goes into BUPA or PPP gives the NHS more scope to help others. If, as President Clinton said yesterday, we are all to live for another 25 years, will the NHS be able to cope with that alone? I doubt it.
Lord McIntosh of Haringey: My Lords, I admire the noble Lord for looking forward. However, he should also look a little backwards. The Conservative government introduced tax relief on private medical insurance in 1990, which we removed after the 1997 election. Experience shows that, over that period of time, the number of people over 60 covered by private health insurance increased from 500,000 to 550,000 only; in other words, the tax relief went almost entirely to those who were already taking out private medical insurance, not to the health service.
Lord Winston: My Lords, is my noble friend the Minister aware that the National Health Service undoubtedly benefits most considerably from the admission of private patients into its hospitals? Are the Government aware that one of the problems with some of the big private insurance companies is that, at present, they offer a monopolistic practice that actually prevents their insured patients going into teaching hospitals? I should declare an interest here, as I am an honorary consultant within the NHS.
Lord McIntosh of Haringey: My Lords, nothing in my answers has indicated a decision on the part of this Government to set up barriers between private healthcare and the NHS. Indeed, that was not the purport of the original Question. My noble friend must not draw the conclusion that we are proposing any further changes in private provision or in its funding.
Lord Clement-Jones: My Lords, the original Question seemed to assume that more private health insurance would have benefits for our national health services. Is the Minister aware of any evidence which shows that subsidising private health insurance in this way would bring such benefits?
Lord McIntosh of Haringey: My Lords, I believe that my response to the supplementary question of the noble Lord, Lord Renton of Mount Harry, made it clear that I agree with what the noble Lord, Lord Clement-Jones, has just said.
Lord Marsh: My Lords, does the noble Lord accept that many people will find what he says both deeply depressing and quite extraordinary? On virtually every count—whether it be fatalities in certain diseases, numbers of doctors or the proportion of GDP spent on healthcare—this country's health provision, regardless of which party is in power, is behind that of other countries; indeed, France is a classic example. Will the Minister agree that there is a benefit to be gained in trying to get more money spent on the National Health Service, and that the best way to do so is to encourage more people to contribute?
Lord McIntosh of Haringey: My Lords, I am glad to note that the noble Lord, Lord Marsh, is referring to the recent report of the World Health Organisation. However, the noble Lord should read that report with a little more care. Although it found that this country spends less of its GDP on health services in total, we stand at 18th in the world list, though that is not an ideal position to be in. We fall down badly—everyone agrees that this is right—on the responsiveness of our National Health Service to patients. That is a problem that we must certainly address. But it does not follow that the best way to improve our health services is to help to fund private medical services through our tax system. The real growth in NHS expenditure has been significant under this Government. We believe that that is the right way to move forward.
Lord Peyton of Yeovil: My Lords, I am searching for some crumb of comfort in the noble Lord's answers. I believe he said that it was no part of this Government's intention to create barriers between the public and the private sectors of the health service. I hope that the noble Lord will learn from that answer and practise it. The immense inhibitions from which the health service suffers as a result of the sort of proprietary, defensive attitudes of the Government cannot be exaggerated.
Lord McIntosh of Haringey: My Lords, that sounded to me like an assertion, not a question.
Lord Renton: My Lords, would it help the Government to reach a decision in this matter if I mentioned that the only reason why I am still alive is that, last year, BUPA spent 10 times more on my medical attention than I had paid for my premium?
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Renton, got good value and we continue to get good value from his continued presence.
Lord Walton of Detchant: My Lords, at a time when the National Health Service is gravely understaffed in terms of doctors, nurses and medical laboratory scientific officers, and is having to turn to the private sector for assistance in carrying out operations, is it not now possible that pragmatism can overcome idealism?
Lord McIntosh of Haringey: My Lords, the impact of what the noble Lord, Lord Renton of Mount Harry, proposes, and of what we understand the Conservative Member Dr Liam Fox proposes, would be a continued brain drain from the National Health Service to the private sector, which would benefit no one.
Lord Saatchi: My Lords, the Minister not only insists on taking responsibility for the fact that 97 per cent of the amount of money spent on health is spent by the Government—the world record for a government share—but is actually proud of that. However, is he also proud of the conclusions of the detailed report, to which the noble Lord, Lord Marsh, referred, which shows that we are in 18th position in terms of standards of healthcare? Does he take responsibility for the fact that we are lower in the world table than such countries as San Marino, Andorra, Malta, Greece and Iceland?
Lord McIntosh of Haringey: My Lords, I am delighted that the noble Lord, Lord Saatchi, has read the report rather more carefully than the noble Lord, Lord Marsh. I take pride in the fact that 97 per cent of our health expenditure is public health expenditure. If we move towards insurance funding of health services—the United States is the classic example of this—we shall have poorer health services at considerably higher cost.

European Single Currency
2.51 p.m.
Lord Blaker Lord Blaker asked Her Majesty's Government:
Whether the five economic tests proposed by the Chancellor of the Exchequer for joining the European single currency are closer to, or further from, being met than when they were first stated.
Lord McIntosh of Haringey: My Lords, the Chancellor of the Exchequer has said that we shall make another assessment of the five economic tests early in the next Parliament.
Lord Blaker: My Lords, I am grateful for that reply but does not the noble Lord agree that the economic tests are so amorphous, and the answers to them necessarily so subjective, that they are unlikely ever to provide the clear and unambiguous evidence of economic benefits for which the Prime Minister has called? Is not the real purpose of the economic tests to promote the idea that the economic problems are more important than the political questions and to provide a screen behind which the Government will be able to judge according to the state of the opinion polls when it is suitable to hold a referendum?
Lord McIntosh of Haringey: My Lords, I do not agree that the tests are amorphous and I do not agree that this is primarily a political decision rather than an economic one. As the Chancellor has always made clear, the economic tests apply to a successful single currency and to the circumstances under which the Government accept that there will be a pooling of sovereignty if we go into a single currency. But the tests of sustainable convergence, of flexibility, of investment, of financial services industry and of employment are by no means amorphous. They are capable of analysis and they have been subject to analysis, most recently by the International Monetary Fund.
Lord Shore of Stepney: My Lords, I am sorry that I cannot support my noble friend in what he has said. Seriously, there is only a flimsy intellectual case for joining on economic terms. It is a major political and constitutional issue. For the Government to go on ducking the issue and pretending that this is not the case is simply an exercise in dishonesty which gains us no respect on the Continent, where every other political leader accepts that the major purpose is to foster political union, is it not?
Lord McIntosh of Haringey: My Lords, I am not aware that my noble friend asked a question in any of that. I am sorry that he felt it necessary to use such language in an intervention.
Lord Taverne: My Lords, can the Government explain how they will avoid the euro becoming an issue at the next election? In particular, how can die Chancellor of the Exchequer argue, as he clearly

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intends to, that the Government should be re-elected because of his brilliant management of the economy and in the same breath state that he cannot possibly say that the state of the economy will be in a suitable condition for us to join the euro within a year or so of the next election? Is the Chancellor so blind that he cannot see that he is giving Mr Hague a superb opportunity to make him look foolish?
Lord McIntosh of Haringey: My Lords, I think that the noble Lord, Lord Taverne, has departed from the Liberal Democrat script in the final few words of his intervention. Certainly the Government intend to adduce the argument in the next election that the Chancellor has done a brilliant job of restoring the economy to health. We will do that because it is true. However, to say that we are trying to secure that there will be no reference to the single currency in the next election is quite unrealistic.
Lord Waddington: My Lords, surely the noble Lord must agree that a glance at the second test, which asks, "If problems emerge, is there sufficient flexibility to deal with them?", shows that these are not tests at all but matters of judgment, leaving the Prime Minister free to recommend abolition of the pound whenever he thinks that he can get away with it.
Lord McIntosh of Haringey: My Lords, the second test actually asks whether there is sufficient flexibility to cope with economic change. I see no difficulty in that.
Lord Peston: My Lords, I hope that I may break the rules and speak in favour of the European Community. I refer to the questioning that seems to take place all the time. It is a long time since I knew any economics, but the notion that any economic test could be exercised without judgment is rather farfetched. Does not my noble friend agree that the tests lay down some sensible criteria but that it is up to someone—in this case, the Chancellor—to interpret them and put forward a view? Does not my noble friend also agree that that view will be subject to the test of many other people expressing their views, and therefore there is no problem?
Lord McIntosh of Haringey: My Lords, my noble friend is absolutely right. This Government have always said that, early in the next Parliament, on the basis of those tests, the Treasury will make an assessment; the Government will make a decision on the basis of that assessment; they will put that decision to the House of Commons and then to the people of this country in a referendum.
Earl Russell: My Lords, before the Minister accuses my noble friend Lord Taverne of departing from the Liberal Democrat script, will he tell the House whether he heard my noble friend in so much as a syllable suggest that Mr Hague might take the opportunity he was being given?
Lord McIntosh of Haringey: My Lords, that is an ingenious let out for the noble Lord, Lord Taverne.
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The departure from the Liberal Democrat script comprised the suggestion that there might be some polemic gift to Mr Hague, but it certainly does not follow that he would be capable of taking it.
Lord Saatchi: My Lords, can the Minister give your Lordships' House the name of a single economist who will say that the five tests are objective? Is it not true that the tests are just a matter of opinion and that, as the Minister just said, the opinion will be the opinion of the Treasury and that, if asked to do so by Government Ministers, the Treasury would express the opinion that the earth was flat?
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Saatchi, has a gift for answering his own questions. Many economists take the view that these are objective tests. They are not precise tests. The noble Lord, Lord Peston, is a good example of a distinguished economist and there are many other distinguished economists on these Benches who take a comparable view. However, it is because we realise that ultimately we have to have a political as well as an economic judgment that we have continued to propose the process of assessment, decision and taking the view, first, of Parliament and the people of this country.

Austria
3 p.m.
Lord Trefgarne Lord Trefgarne asked Her Majesty's Government:
Whether the Government of Austria have fulfilled any of the criteria laid down by the European Union for the resumption of normal relations.
Baroness Ramsay of Cartvale: My Lords, the measures taken regarding Austria are not a European Union action; they have been implemented by Austria's European Union partners on an individual, bilateral basis. As my right honourable friend the Foreign Secretary and my noble friend Lady Scotland have made clear on many occasions, we continue to expect the Austrian Government to fulfil their commitments to European values and obligations, and to combat all forms of discrimination.
Lord Trefgarne: My Lords, I am grateful to the noble Baroness for that reply. Perhaps I may ask two supplementary questions. First, can she tell the House which other nation in the world has been subjected to the kind of measures that we, with our European allies, have taken against Austria? Secondly, does she not agree that, whatever one may think of the political situation in that country, it is a classic example of the disadvantages of PR?
Baroness Ramsay of Cartvale: My Lords, the relevance of what happens with the rest of the world is not apposite; we are talking about 15 countries which are members of the European Union. There is a

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difference between how we react to something that happens with one of those governments when compared to anywhere else in the world. As to the noble Lord's second point, no, I do not agree for one minute that this has anything to do with proportional representation.
Lord Janner of Braunstone: My Lords, can my noble friend give the House an assurance that the Government will maintain their present attitude towards the Austrian Government as long as a former right-hand person of Haider is their Vice-Chancellor and while they retain members of their very extremist Right-wing party in government?
Baroness Ramsay of Cartvale: Yes, my Lords. It is worth reminding the House that we are not talking about a party with Right-wing economic theories but about a party that was led by a man who, when addressing an army war veteran meeting in Austria—which included Waffen SS—described the Waffen SS as decent men of character; and who also, in a speech to the Carinthian Parliament, praised the orderly employment polices of the Third Reich. It is important to he clear about what caused such offence to the other members of the European Union.
Lord Wallace of Saltaire: My Lords, the Government were among the more reluctant assenters to these sanctions against Austria; after all, this is a very sharp domestic interference in the internal affairs of another state. If we are in favour of liberal democracy, we have to tolerate the choices of other democratic governments, even when they are not entirely what we would like. As to PR versus the coalition front, Austria suffered a grand coalition for too long. Jobs were divided among the Conservative and Socialist parties—and that seems a very bad thing in any democratic country. However, does the Minister accept that there has to come a point where these sanctions will be withdrawn? Does she agree that, provided the Austrian Government do not offend against any of the aspects of the Treaty of Rome—and they have not yet done so—the sanctions will, in time, have to be ended?
Baroness Ramsay of Cartvale: My Lords, the 14 European Union countries are united in their policy towards Austria. We have had, and continue to have, serious and intense discussions with the other 13 EU countries on a bilateral basis on this issue. Five months is too short a time to make a definitive judgment of the performance of the Austrian Government, but we are reflecting on a way forward.
Viscount Cranborne: My Lords, can the noble Baroness tell the House what assessment the Government have made of the impact of the policies of the 14 on public opinion in Austria? In the light of Hugo Young's column in the Guardian this morning, what proposals do the Government have for getting off the hook upon which they have impaled themselves?
Baroness Ramsay of Cartvale: My Lords, I have not read this morning's Guardian. I do not consider it unbriefed not to have read all the newspapers. I do not think for one minute that the Government have impaled themselves on a hook. As to the question of the impact on public opinion in Austria, as the noble Viscount knows, it is difficult to gauge public opinion anywhere. However, the fact remains that the Austrian Freedom Party is still in third place in the opinion polls. So it has not improved its position in any way, if that is the point that the noble Viscount is trying to make.
Lord Howell of Guildford: My Lords, following the intervention of my noble friend Lord Cranborne, is the noble Baroness aware that, if she had read the Guardian this morning, she would have seen that this whole saga is described as a spiralling diplomatic disaster? While we all regard the views of Mr Haider as repulsive, has not this whole saga shown up an enormous political ineptitude, and a bit of childishness to boot? Is not the sensible position for the Government now to tell their EU partners that this is leading to disaster; that the sanctions should be ended; and that Austria should be brought into the company of the EU again and dealt with as a mature nation that has done nothing wrong, and whose original repulsive leader has disappeared to Carinthia as a governor and left the party?
Baroness Ramsay of Cartvale: My Lords, I do not understand how the noble Lord, Lord Howell, can say that the whole House finds the views of Mr Haider so repulsive, and then go on to think that it was—
Lord Howell of Guildford: My Lords, I said that the whole House finds Mr Haider's views repulsive. I did not say that—
Baroness Ramsay of Cartvale: Exactly, my Lords. His "views" instead of his "opinions" repulsive. I do not understand how anyone can say that on the one hand and then, on the other, think that it was not important for the other members of the European Union to send the strongest possible signal to Austria about what they thought. As the noble Lord knows, the use of the word "sanctions" is not correct. Diplomatic measures were taken against Austria, which were well understood by that country as signalling the disapproval of the rest of the European Union. I think that was absolutely right and proper.

Business of the House
3.7 p.m.
Lord Carter: My Lords, it may be for the convenience of the House if I make a brief business statement in regard to the Summer Recess. Your Lordships will be aware that it is not usually possible to announce the dates of the Summer Recess until a week or 10 days before the House rises. This year, because of the co-operation of the Official Opposition

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and of the Liberal Democrat Chief Whip, I am able to make the announcement significantly earlier than usual.
The usual channels have agreed a programme which will allow all the necessary business to be completed by Friday, 28th July. Predicting business for a whole month ahead is difficult as there will be many uncertainties over the next month. However, I am aware that Members and staff alike—particularly those with young families—will find it helpful to have as much notice as possible of our Recess dates. Recess dates are always announced as being, "subject to the progress of business".
On this occasion, given the difficulty of predicting the progress of business so far in advance, there is a particular need for me to stress that if the programme agreed by the usual channels is not achieved and the necessary business is not completed by the end of July, it will be necessary to sit into August.
However, I am pleased to announce that, subject to business progressing as we hope it will, the House will rise for the Summer Recess on Friday, 28th July. We will sit at 11 a.m. that day. The House will return on Wednesday, 27th September.
I should like to take this opportunity to thank my colleagues in the usual channels for their constructive approach, which has made it possible to make this announcement much earlier than usual.
Lord Henley: My Lords, I thank the Government Chief Whip for giving the House the dates of the Summer Recess and for assuring us that this was as a result of co-operation with the usual channels. However, the undercurrent of what the noble Lord said was so much nonsense. Of course the Government could have made an announcement much earlier than they have done. I appreciate that on occasions in the past it has not been possible to do this, but on this occasion the Government could have done so. It is only through the co-operation of the usual channels that they are able to bring it forward now. I should like to ask for a commitment from the Government that in future years the announcement will be made somewhat earlier than in the past.
Not knowing when business is to be brought forward causes great inconvenience, not only for the Official Opposition but for all Members of the House. The Government have a large number of Bills still outstanding—far more than one normally expects at this stage. The Official Opposition have co-operated far more than is necessary. We have allowed far more Bills to go to the Moses Room than is usual. As a result of that the Government could have come forward and been slightly more helpful. It would be useful for the Government to offer some advice to all Members of the House as to when all the Bills are likely to come before us. When are we likely to see those?
We have now had the announcement that we are to rise at the end of July. As I said, that announcement could have been made much earlier. The problem is that the Government have far too much legislation.
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The Government should think about reducing the amount of legislation they bring before this House. I hope that in the next Session we shall see a slightly less heavy burden of legislation before us.
Lord Harris of Greenwich: My Lords, I, too, welcome what the Government Chief Whip has just said. As he will recall, all Oppositions complain about the immense size of any government's legislative programme. That will no doubt be true in the next Parliament, as in this, as well as it was in the last Parliament.
Perhaps I may pick up the point made by the noble Lord, Lord Henley. The Liberal Democrats would prefer to have more Bills considered in the Moses Room than is now the case. We would get on with our business far more effectively were we to do that.
Lord Carter: My Lords, I am grateful to both noble Lords and in particular to the Opposition Chief Whip for his—if I may say so—typically gracious response. I have checked and this is the earliest ever date that the date of the Summer Recess has been announced, certainly in recent years. I have all the figures for when it was announced by the noble Lord, Lord Strathclyde, when he was the Government Chief Whip. This is, as I say, the earliest ever date. Business has been agreed until the summer. The noble Lord knows the dates on which we will be bringing forward all the Bills, and, depending on their progress in the Commons, all the Bills we have to reach before the Summer Recess. I was asked to set out the business for the spill-over period. Frankly, I do not think that any Chief Government Whip could do that. I agree with the Liberal Democrat Chief Whip regarding the use of the Moses Room. The usual channels have to work by agreement. But that does not mean that the Official Opposition can have a veto over the Government's business.

Child Support, Pensions and Social Security Bill
3.12 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that the Bill be now further considered on Report.
Moved, That the Bill be further considered on Report.— (Baroness Hollis of Heigham.)
On Question, Motion agreed to.
Clause 38 [Preservation of rights in respect of additional pensions]:
Lord Rix Lord Rix moved Amendment No. 74:
Page 33, line 22, after ("provide,") insert ("subject to subsection (4C) below,").
The noble Lord said: My Lords, I understand that psychologists explain both ancient and modern Sisyphean insistence on pushing boulders up mountains, only to see them roll down again, by a deeply-rooted conviction that a little ground is gained each time and the labour has not been therefore wholly

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in vain. Like my noble friend Lady Greengross, who is to follow me, whose labours I support, I am pushing once more in the hope of again gaining a little ground with Amendments Nos. 74 and 76. I note that the noble Lord, Lord Higgins, is more ambitious and is offering the prospect of solving all our problems by a substantial reversal of the onus of proof.
There are essentially three views on the SERPS saga, assuming agreement that all has not been as it should have been. View one is that the halving of SERPS inheritance was simply wrong and should be cancelled in its entirety. That is a tenable view, but I think that the battle has been lost. View two is that in failing to advertise the change, and indeed in positively denying the change, the department lost the right to save on pension inheritance for the whole period of duff information and all the people who are potentially affected by that duff information. That view is also valid, although I fear it, too, represents a lost battle.
The third view is that at least we should give special treatment within a compensation scheme to those who have been particularly disadvantaged, preferably on the face of the Bill, but in regulations and through ministerial undertakings about the scope of those regulations, if this is the best we can do. It is this third view that I am continuing to pursue today. If the Minister is turning her face against the face of the Bill—I coin a phrase, as it were—and if we could see the regulations in draft during the summer as part of the consultation process, it would assure us that these regulations will allay fears about the way in which claims would be handled.
I have, very modestly, targeted just two groups to add to those who have given incorrect or incomplete information either by letter or by telephone. I confess that I would have liked to include a further group; namely, those who had retired before the department became a little more forthcoming with the facts. I sense that I am on a loosing wicket with this one, too; but, rather like the England Test team, at least I can blame the wicket rather than the batsman. Nevertheless, I hope those other batsmen who have already retired are given a second innings when the rules of the game are being rewritten.
My surviving two groups are those who relied on departmental leaflets which were clearly misleading, and those who, whatever they may or may not have relied on, are now, by virtue of disability, unable to defend their own interests in pursuing a compensation claim. My noble friend Lady Greengross is targeting a third group of people who asked questions and might reasonably have expected to receive the right answers, whereas what they actually received was misleading or incomplete.
I hope very much that the Minister will be able to offer today the assurances we are both seeking about justice being done. Were she minded to underpin justice by accepting the amendment of the noble Lord, Lord Higgins, so be it. I beg to move.
Lord Higgins: My Lords, I must begin by congratulating the noble Lord, Lord Rix, on the way in
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which over a considerable period of time he has pursued this issue. As a result of that there has been a greater clarification of the present position. This matter first came to light some considerable time ago. Indeed, we debated it at length in the course of the debates on the Welfare Reform and Pensions Bill in October 1999. Subsequently there have been statements by the Government, notably on 15th March of this year, saying what the Government intend to do about it.
However, I am concerned about the timing and the way in which this matter has developed. It has been a considerable time since the matter first came to light. In the course of the debates last year we were told that there was to be an ombudsman's report. That report was in due course produced. But it took one year to produce it when the ombudsman merely examined six illustrative cases. That was a very long time indeed to deal with six illustrative cases. It is also true, as pointed out on previous occasions, that the ombudsman's report was far from clear on precisely what its recommendations were, although the Government have said that they accept them.
That is really the basis of my amendment. I comment only briefly on Amendment No. 76 standing in the name of the noble Lord, Lord Rix. Paragraph (b) of the amendment deals with people who,
"have a serious mental disability and as a result they are incapable of establishing a claim and they are likely to remain incapable throughout the duration of the scheme".
Whatever else may happen, I certainly hope that when the Government come to produce their final scheme they will include provision for that category of person and others who may, in one way or another, be either physically or mentally incapable of dealing with the matter.
The earlier part of the noble Lord's amendment states that:
"A person shall he deemed to have received incomplete or incorrect information and to have relied on it if—
(a) they read one of the relevant Benefits Agency leaflets and took the incorrect or incomplete information contained in it into account",
when deciding what to do. Essentially, people who wish to receive compensation under the Government's proposals now face two hurdles, or at least that appears to be the case until eventually we discover what are the precise proposals. The first hurdle is that the person making the claim needs to demonstrate that he or she was misled or received incomplete information. The second hurdle is to prove that, as a result, he or she sustained a loss in one way or another.
Estimates of the amounts involved in terms of costs vary considerably, but there is little doubt that this sad saga is probably the most expensive administrative mistake of all time. I believe that the estimates vary between £2·5 billion up to £5·9 billion between 2000 and 2050. Of course, those costs will be spread over some 50 years. Nonetheless, this will be a major item of expenditure. We do not know how, in practice, the Government's proposals are going to work. We are still remarkably in the dark on this.

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In his opening remarks, the noble Lord, Lord Rix, said that my proposal covered the whole problem. However, it covers only half of the problem. My amendment states that,
"regulations shall be based on the presumption that claimants have received incorrect or incomplete information unless the Secretary of State provides proof that the information the claimant received was correct and complete".
My amendment, unlike that in the name of the noble Lord, Lord Rix, does not deal with the second leg of the argument; namely, whether people did or did not incur losses as a result of having been misled.
That brings me to the report of the ombudsman. I shall need to quote from it at some length at the point at which he discusses what happens when a department makes an administrative error. The ombudsman wrote to me in response to my inquiry, following an exchange on the Floor of the House in which the Minister said that if I wanted to know the opinion of the ombudsman, then I should write to ask him. I did so. This is part of his reply:
"It is reasonable in such circumstances to ask someone who claims to have been misled and to have suffered an injustice to prove his or her case. That is the normal requirement before the Department of Social Security will consider compensating someone who claims to have been misled or misdirected by the Department and as a consequence to have acted, or failed to act, in a way that has been to his or her disadvantage".
The ombudsman goes on to say:
"In the case of SERPS, the Department's leaflets were not accurate; and incomplete and misleading advice was given by staff of the Department and the Benefits Agency. The department has acknowledged that".
In the course of his investigations, he concludes:
"I suggested to the Department that the onus of proof was therefore reversed. It was for the Department to prove that someone would not have acted differently if they had not been misinformed. It seemed to me that the normal rules of the Department's non-statutory scheme of financial redress for maladministration would be inappropriate. The presumption had to be that anyone who could reasonably claim to have been misled and in consequence to have acted, or failed to act, to their detriment had a prima facie claim for redress".
My amendment therefore states that it is accepted by the Government and by Parliament that people were misled. The reason for that is twofold: either they received the leaflet, in which case there cannot be the slightest doubt that people were misled—especially when taking into account the report from the ombudsman; or alternatively, for one reason or another they did not receive the leaflet and, as a result, they will have assumed that the original situation remained the same—that their widows would have been entitled to the full amount of SERPS. For those reasons, all my amendment—which is modest—seeks to do is to ensure that the Government's position is set out very clearly on the face of the Bill. It is extremely important that that should be done at this stage.
In his report the ombudsman stated that the department,
"will also need to take account of the fact that most of those misled by DSS or BA are likely as a result to have decided no action on their part was needed, because they had been led to believe that a surviving spouse was secure in an entitlement to full inheritable SERPS".
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Thus, if my amendment is accepted, the overall effect would be to ensure that the individuals concerned will be told in the leaflets to be issued in due course by the department that they do not have to prove, unless the department can prove to the contrary, that they were misled. However, they will still have to prove that they suffered loss as a result. In that regard perhaps my amendment is a little more rigorous than that tabled by the noble Lord, Lord Rix.
At the beginning of my remarks I stated that I was worried about the length of time it has taken to reach a resolution on this issue. We still do not know precisely what are the Government's proposals. In his report, the ombudsman pointed out that he, too, did not know the details and therefore he was unable to comment at this stage. One might think that he could perhaps have reported a little more broadly. In any event, given that this matter has been under consideration quite literally for years, we cannot simply leave it until the regulations are published. We need to reach a point where, at least as regards the first hurdle, we know exactly where we stand. I hope that that point can be clarified this afternoon.
Surely the department has by now some idea of what is to be contained in the regulations. Perhaps, as she has done so often and so courteously in the past, the Minister could provide us with them at this stage so that they could be debated during the course of the passage of this Bill. If we wait then we shall not be able to discuss them and to put down amendments to the Bill which could cover any points that we did not like, given that the regulations themselves will not be subject to amendment. It will be too late for this House to take a view on what should be done. We shall remain in ignorance of the exact details here.
At least as far as concerns the first hurdle, I hope that, when the House considers Amendment No. 75, it will take the view that this point should be clarified beyond any doubt whatever.
Baroness Greengross: My Lords, on previous occasions I have expressed grave reservations about whether a protected rights scheme is the best way to address the awful problem of inherited SERPS. However, today I shall limit my comments to the amendments before the House, which look at who should be covered by the scheme.
I very much welcome the amendment tabled by my noble friend Lord Rix. It has my full support and I hope that it will receive the support of the Government. I also have a great deal of sympathy with the approach adopted by the noble Lord, Lord Higgins, in his amendment. His amendment accepts that there is an obligation, albeit a moral one, for people to be positively informed of changes.
Amendment No. 76A, standing in my name, is a modest attempt to explore the current view on the definition of "incomplete information". It attempts to highlight the position of some people who fall into the category of being, not misinformed, but only not informed. They have a particular reason to believe that they should have been told of any changes. This might

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include those who, prior to 1986, based their decisions to contribute to SERPS at least in part on information they had been given as regards the inheritance provisions. Those people may have sought information about their future pension rights, but may not have asked specifically about the situation as regards their spouses, because I think that they would have taken it for granted.
I wish to consider in particular those people who asked for a pension forecast in order to plan their retirement. They were given one, but one without any specific guidance as regards their spouses. A number of people who have contacted organisations such as Age Concern have found themselves in this position. They believe that the information they received was incomplete because, although they were given detailed information about their future pensions, no reference was made at the time to changes in the law. I appreciate that consultation is on-going and that there will be further opportunities to consider the regulations. However, I would very much welcome the Minister's assurance that in looking at the definition of "incorrect or incomplete information" careful consideration will be given to the issues I have outlined.
3.30 p.m.
Lord Goodhart: My Lords, on behalf of these Benches I support the spirit behind all these amendments. I pay particular tribute to the noble Lord, Lord Rix, who has fought the battle in this House extremely valiantly and with good effect. I hope that he will continue to have that effect. He is now supported on the Cross-Benches—he was not when the battle began some considerable time ago—by the noble Baroness, Lady Greengross. I also support the amendment spoken to by the noble Lord, Lord Higgins.
As the noble Lord pointed out, there has been a cock-up on a massive scale in which a great many people have suffered. It is not by any means easy to decide who has and who has not suffered. It is something about which we on these Benches have felt very strongly ever since the matter was first raised in Parliament, which I believe was towards the end of 1998 by my honourable friend Mr David Rendel in another place.
This is a case where justice has to be done to the many people who have suffered. I very much hope that the Minister will be able to reassure us that when the regulations are published, which cannot be too soon, they will take into account the points raised in these amendments and in the debates which have taken place on this and other occasions.
Lord Renton: My Lords, I agree with noble Lords and the noble Baroness, Lady Greengross, who have tabled amendments to Clause 38. There is no doubt that confusion could arise unless something is done. I say in passing that for reasons connected with the mentally handicapped, among others, the noble Lord, Lord Rix, and I have tried our best to help. But on this occasion I prefer Amendment No. 75 in the name of my noble friend Lord Higgins. I believe that this
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matter would be more forcefully and clearly dealt with if that were done in accordance with regulations to be drafted. For that reason, and if the matter comes to a Division, I would be obliged to support my noble friend.
Baroness Carnegy of Lour: My Lords, I was unable to be present when this matter was discussed in Committee. I had to catch an aeroplane. I have read the debate and I am filled with admiration for the clarity with which noble Lords on all sides of the House discussed the matter. The issues are perfectly plain as a result of that discussion, and that is very clever considering that it took place between 10.15 and 11 at night. That was wholly admirable. I pay tribute to noble Lords. My noble friend Lord Higgins, the noble Lord, Lord Rix, and the noble Baroness, Lady Greengross, have reiterated their concerns.
I speak in particular to Amendment No. 75 because it is all-embracing. It is a very important principle. The nub of the matter is that the ombudsman said that the burden of proof should be shifted and the onus should be on the department to prove that a person has not been misled, instead of a person having to prove that he had been. The Government have accepted that in a number of ways and they are on record as having done so.
The Government want to put that decision into action following consultation and by their own route through regulations. Although the noble Lord, Lord Goodhart, said from the Liberal Democrat Benches that he supported all the amendments, he seemed to believe that regulations would do. My noble friend makes the point that the principle should be enshrined on the face of the Bill. We have not seen the regulations and it does not appear that we shall until the Bill has become law. Unless something of that nature is put on the face of the Bill we cannot be sure that this clear principle will be included.
I hope that the House and the Minister will accept my noble friend's amendment. If she does not, she needs to give us a full assurance that a government amendment would make the point clear at Third Reading. I do not believe that the House should leave the matter to chance. Regulations are not a suitable method for implementing this matter in any case because the detail will count. Unless we are sure that the principle is there the regulations may easily escape. I support my noble friend's amendment, as my noble friend Lord Renton has done.
Lord Elton: My Lords, I rise to speak briefly only because the noble Baroness, Lady Greengross, in speaking to her amendment, said in her closing remarks that in some way a palliative might be applied to her wish to have an amendment involving a reduction and that there would be regulations which we could discuss. The frustration of this place is that we can discuss regulations but we cannot amend them. Almost never do we reject them. I cannot remember when regulations were rejected. Therefore, once we get to Third Reading and beyond, the rabbit is out of the hutch and there is nothing that can be done.

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The Government always prefer to proceed by regulation for fairly obvious reasons. My noble friend has left them with the opportunity, but merely stated the principle on which the regulations should be based. I should have thought that we are all agreed on that. I hope that his amendment can be accepted.
Baroness Hollis of Heigham: My Lords, we have debated the issue of inherited SERPS on many occasions. Like your Lordships, I endorse the tenacity, good humour and degree of detailed information that the noble Lord, Lord Rix, has brought to this matter on numerous occasions. I admire some of those virtues more than others.
We shall debate the matter once again once the regulations for the inherited SERPS scheme are drafted. I know that noble Lords opposite are suddenly filled with distaste for regulations, but perhaps I may point out that for 18 happy years the government of that time were perfectly pleased to carry quite substantial items through regulations without their necessarily being in the affirmative. This sudden change of heart when in Opposition is rather churlish. We are rather more scrupulous about using the affirmative rather than the negative procedure compared with the previous government.
Baroness Carnegy of Lour: My Lords, does not the noble Baroness agree that the issue we are now talking about is of a magnitude unlike almost any other for so many people? To have to deal with that matter by regulations in this House seems churlish.
Baroness Hollis of Heigham: My Lords, on the contrary, we shall be bringing forward the structure of a scheme, but its details may involve quite specific levels of payment. They need to be uprated without having to return to primary legislation, otherwise we shall fall foul of the Henry VIII principle. It been well established in the field of social security that matters involving numbers normally have to be dealt with through regulations for uprating without involving primary legislation and all its consequences.
Baroness Warnock: My Lords, I am grateful to the noble Baroness for giving way. The point is not that the detail has to be on the face of the Bill, but the principle. If the principle is there we may be content for the detail to come through regulations. I also point out that it may be true that a great deal was done by the Conservative government through regulations, but that was not willingly accepted by many Members on the Cross-Benches.
Baroness Hollis of Heigham: My Lords, I do not mean to sound discourteous, but noble Lords who have a particular concern often wish to see matters on the face of the Bill which in other areas they would regard as inappropriate because they are either declaratory or, alternatively, far too detailed.
Noble Lords will know, particularly on the Benches opposite—I see a smile of recognition from the noble Lord, Lord Higgins—that parliamentary draftsmen
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are very anxious that legislation should be tight and fitted to the appropriate purpose and that it should not embody broad statements of principle on the one hand, which come through statements made at Second Reading, nor the kind of detail that comes through regulations. Obviously, if your Lordships feel that the wording of proposed legislation should be amended, it is in your Lordships' hands to do so. However, so far as I am aware, we are following the broad principle established by parliamentary counsel and accepted by this House over many years.
Consultation about regulations is under way and I am grateful for the constructive contributions that many noble Lords have already made to this exercise. This is a problem that we have inherited. I am particularly grateful to the noble Lord, Lord Rix, for his amendments because it gives me the opportunity to reassure the House about the way in which we envisage deciding claims to the inherited SERPS schemes. It also gives me an opportunity to say a little about how we propose to allow for the situation where a would-be applicant for redress is no longer able to provide evidence of what happened because of mental disability.
As your Lordships know, we undertook to consult widely, including the parliamentary ombudsman, the National Audit Office, the Social Security Advisory Committee, Age Concern, and other organisations, about the operation of the scheme. I am grateful to the noble Lord, Lord Rix, and to the noble Baroness, Lady Greengross, for their contributions.
Our consultations are still progressing and I should not want to prejudge the outcome. I hope noble Lords will also understand where I am coming from and that I cannot anticipate some of the detail on which noble Lords might reasonably seek assurance until those consultations are complete.
This debate has reflected concern about the hoops and hurdles that many fear we may put in the way of applicants for redress. We have accepted the Parliamentary Commissioner's report and we are designing the scheme in a way that provides ready access to redress for those who are entitled to it.
If I disagree with the noble Lord, Lord Rix, it is about the best way to put the provision into law. He prefers to add it to the face of the Bill. While I appreciate his intentions and largely share the aims of his amendment, I should not want to pre-empt the results of the consultation exercise. I therefore prefer that the Government use the greater flexibility that is provided by setting out the detail in regulations. The Bill sets the framework for the scheme, but we are not yet ready to define all the rules in detail and we need the maximum scope to respond to points such as those raised by the noble Lord, and other points that we have probably not yet anticipated.
Having said that, I am clear on the two issues raised by the noble Lord in his amendment. I shall now follow my script quite closely and my words may be made available for circulation to organisations in order to provide advice and at least giving the reassurances that the noble Lord seeks.

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The noble Lord's first point related to people who received one of the leaflets that provided incorrect or incomplete information about the rules on inheritance of SERPS additional pension. I am clear that anyone who read one of those leaflets and who took the information contained in the leaflet into account in ma king decisions about building up their pension satisfies the principal test. That would also include people who took into account information passed on to them by, for example, friends or relations who had read the relevant leaflets. I am happy to confirm that this includes the clients of organisations such as Age Concern and citizens advice bureaux who were given incorrect or incomplete advice obtained originally from the DSS.
When the time comes for people to make their claims, we envisage asking them a few questions about how and roughly when they saw a leaflet. I want to make it clear that we shall not expect them to produce the leaflet or to quote it verbatim. Their own account of what they did is likely in many cases to be enough to reach the decision that they are entitled to redress to have their rights preserved. We have not finally decided what the regulations will say, and I should not want to be prescriptive at this point about all the circumstances we expect to cover, but I am happy to tell your Lordships that we shall make that clear.
Lord Higgins: My Lords, I am grateful to the noble Baroness for giving way. Yes, of course, it is true that if people saw the leaflet or if they were wrongly advised by someone who had seen it, they were misled. But it is also true that people who did not see a leaflet for one reason or another thought that the situation was the same as they had originally thought; consequently they, too, have been misled. In other words, anyone who believed that he or she was entitled to widow's SERPS was misled, and that is what the amendment seeks to address.
3.45 p.m.
Baroness Hollis of Heigham: My Lords, the noble Lord refers to his own amendment. I am dealing with the amendment moved by the noble Lord, Lord Rix. If the noble Lord will do me the courtesy of waiting until I have finished responding to the noble Lord, Lord Rix, I shall be happy to engage in the debate on his amendment and perhaps address his point.
The second part of the amendment of the noble Lord, Lord Rix, deals with people who may have received incorrect or incomplete information but who are no longer able to make a claim for themselves for redress because they suffer a severe and continuing mental disability. That is an issue that the noble Lord helpfully raised as part of our consultations.
I am happy to confirm that we accept the spirit of the noble Lord's amendment and want to make sure that such people are covered in an appropriate way that is unambiguous. I am not in a position now to define precisely what the outcome will be. We have work to do on a definition of the people we should wish to include. We also have more to do to decide exactly how we should allow for people in that situation.
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But our intention is clear. People with a severe and continuing mental disability will not be disadvantaged in their ability to obtain redress. On that basis, I hope that the noble Lord, Lord Rix, will feel able to withdraw his amendment. I have done my best to give him the assurances that he sought in moving it.
I am grateful also to the noble Baroness, Lady Greengross, for her contributions on this subject. I know that she is concerned that the SERPS scheme should work as effectively as possible. The noble Baroness's amendment refers to circumstances in which a person could reasonably have been expected to be informed about the SERPS reduction and that such circumstances should be taken account of when considering whether or not a person satisfies the first test. As the noble Baroness said, she is concerned that those people who made inquiries about their pension entitlement. For example, they may have asked for a pensions forecast but did not specifically ask about widows entitlement—this overlaps with the concerns of the noble Lord, Lord Higgins—and who had a reasonable expectation to he informed about the widows changes.
The amendment as drafted could have a very wide application. I am not sure whether the noble Baroness is arguing the point, but we could not, for example, accept that her amendment embraced those who might argue that they should have been notified individually of the changes in the law. We went over this ground in Committee and I can only repeat that I do not believe that a special case should be made for inherited SERPS. This is only one of three significant changes made to state pensions in the Social Security Act 1986.
If the Government accepted that people had a reasonable expectation of being told about the change to inherited SERPS, would it not mean that the other changes introduced at that time should also not apply to them if they were not personally told about them? Of course, they were not. These changes included, for example, that entitlement based on the 20 best years was no longer to be the case but was to be based on the whole working life; and they included the difference in accrual rates. The provision with regard to widows is of lower financial significance than the 20 best years provision. People were expected to rely on the information in the leaflet, and there was never any suggestion that they should be individually notified about the changes or, if they were not individually notified, that they were entitled to be protected from their impact. The case of inherited SERPS and widows must therefore be aligned with the other changes that took place as a result of the 1986 Act.
I accept the point that inherited SERPS is an exceptional case in that the information was consistently omitted from departmental leaflets for 10 years. Even after it was included, many people were still given incorrect or incomplete information. There is no disagreement about that. I accept also that the noble Baroness seeks to ensure that the scheme operates fairly. But my comments in relation to the noble Baroness's amendment also apply here. We are still consulting. We have not finally decided on the regulations.

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What I am concerned to establish is that we should not accept, or appear to accept, the principle that everyone was entitled to individual notification. That has never been the way of government legislation. As we are still consulting, it would be premature to be prescriptive at this stage. However, we shall certainly take account of the views expressed to us on these points. On that basis, I believe that the noble Baroness's amendment is premature and I hope that she will feel able to withdraw it.
As to Amendment No. 75 in the name of the noble Lord, Lord Higgins, on 15th March I repeated the Government's statement about inherited SERPS. The noble Lord was quick to highlight the issue of where the burden of proof should lie in an application for redress under the scheme. He urged, as did the ombudsman, that it should lie with the department. The noble Lord, Lord Goodhart, quoted from the ombudsman's report and urged the Government to accept that the scheme should cater for people who took no action and would have difficulty demonstrating that they would have acted differently if correctly advised.
The words used in the Statement in another place and repeated by myself were:
"I intend to accept all the recommendations made by the NAO and the ombudsman".—[Official Report. 26/3/2000; col. 1609.]
Among other things, the Government accept that the burden of proof lies with the department. We accept also the ombudsman's point that the inherited SERPS scheme must be capable of a global solution that includes providing redress to persons who were misled and took no action.
Amendment No. 75 requires us to presume that all applicants under the scheme received incorrect or incomplete information unless they were specifically given the correct information. That goes much further than the amendment of the noble Baroness, Lady Greengross. It does not allow for the situation in which a person had neither received nor requested any information. The noble Baroness's amendment deals with persons who raised a query being expected to cast a wider net for information.
The noble Lord, Lord Higgins, was logically contradictory. He said that the first test was whether the person would have acted differently, to avoid financial detriment. If one accepts that a person did not know positively about the change—the amendment presumes they were misled—I do not see how the second test of suffering loss could be established, if the individual did not know there was any change that might produce the loss that followed.
On the basis of the noble Lord's case, anybody who did not know about the change would be entitled to compensation—provided they could show financial loss. But if they did not know—and did not know the action they might have taken if they had known—one cannot logically move on to the noble Lord's second step.
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The noble Lord is looking puzzled. There are two steps. First, it is expected that the person can show that they were misled. The burden of proof is on the department. If a person claims that they relied on the information to take action—or to decide not to take any action—with resulting financial consequences, they move on to the second step of financial detriment. The noble Lord seems to be saying that somebody who did not know— whether or not they were misled because they had no information at the time—could subsequently show that they suffered financial loss. We cannot know whether they suffered financial loss if they did not know at the time about the changes and the action they might have taken.
Lord Higgins: My Lords, either they were misinformed—that is common ground—or they thought the situation was as originally stated, which was that the wife would inherit the full SERPS. If they did not know about the change, they may not have made provision for their wives as they otherwise would have done.
Baroness Hollis of Heigham: My Lords, how could they know now what they would have done then, if they had known what they did not know? The noble Lord's second position cannot hold. If they did not know, they could not have known what they might have done if they had known. By definition, that has to be true. I will send the noble Lord a note to that effect.
The change to SERPS inheritance was only one of three significant changes in the Social Security Act 1986. The others were the 20 best years calculation, the reduction over 10 years from 25 per cent of earnings to 20 per cent, and the reduction in the survivor's pension from 100 per cent to 50 per cent. In 1995 there were further major changes. The link between SERPS and alternative pension provision was broken and the annualisation formula was introduced—matching a person's earnings to the years in which they were earned. Finally, there was the equalisation of state pension age, so that women would not be able to collect their SERPS until age 65—the same as men.
If the Government accepted that people had a reasonable expectation of being told about the change to inherited SERPS, would that not mean that the other changes that I have outlined would also not apply to people who were not personally told about them? Although the information was contained in the leaflets, the previous administration did not tell people personally about those changes. People who did not pick up the right leaflet would also have remained ignorant of the change to the 20 best years rule.
It has never been the Government's position that they are responsible for people's ignorance of changes to the law. We have here the much narrower situation in which the then government persistently gave misinformation in leaflets. Our changes are intended to redress that situation.
The Government have already publicly accepted the NAO and ombudsman's recommendations. We are consulting widely on how to put them into effect and will put the resulting regulations before the Social

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Security Advisory Committee, Public Administration Select Committee and the ombudsman. As a final stage, the recommendations will come before both Houses of Parliament and require your Lordships' approval.
The situation that we inherited was not that people did or did not know about the change but that some—we do not know how many—were misled as a result of the then government's continued propagation of misinformation. We are seeking to correct misinformation, not lack of information. That is the difference between the noble Lord's amendment and our position. The Government have never been responsible for correcting lack of information—only misinformation of which the Government were the author. The inherited SERPS scheme must provide redress to individuals and the regulations that establish it must satisfy various interested parties—including the ombudsman.
I hope that I have addressed the issues raised by the noble Lord, Lord Rix. I have gone as far as I can to meet the concerns of the noble Baroness, Lady Greengross, although they are still for discussion. The noble Lord, Lord Higgins, is asking us to take a step much farther—one that his government would not have contemplated in the 1985 and 1986 Acts—in saying that unless a person was notified by the Government, it must be assumed that they were misled. That has never been the Government's position. No government could adopt such a position. However, where government were the author of misinformation, they have a moral and, in my view, legal and financial obligation to correct the situation—which is what we propose in good faith. With that explanation, I hope that noble Lords will not press their amendments.
Lord Rix: My Lords, before the Minister sits down, did I hear her say that organisations will have the opportunity to see draft regulations before they are laid'?
Baroness Hollis of Heigham: My Lords, if we are asking organisations to take part in drawing up the regulations, I see no reason not to allow that. A different status applies, in terms of consultation, in respect of official organisations such as the Social Security Advisory Committee.
Lord Rix: My Lords, there has to be some logic in rolling boulders up hills. If one is persuaded that the chances of getting further are remote, the logic is to call a halt. The Minister has helpfully gone as far as the Government are prepared to go at the pre-regulation stage. I appreciate and welcome her assurances—particularly the opportunity to study and comment on the draft regulations before they are laid and past amending.
Like the actor I once was who wishes to believe his kind notices, then is surprised when the box office is disappointing—I am happy to say that I was rarely in that position—I wish to believe the Minister's kind
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words and will be most surprised if the regulations are disappointing. In light of the Minister's undertaking, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 75:
Page 33, line 36, at end insert—
(""(4B) The regulations shall be based on the presumption that claimants have received incorrect or incomplete information unless the Secretary of State provides proof that the information the claimant received was correct and complete."").
The noble Lord said: My Lords, I beg to move Amendment No. 75 and seek the opinion of the House.
4 p.m.
On Question, Whether the said amendment (No. 75) shall be agreed to?
Their Lordships divided: Contents, 166; Not-Contents, 135.

Division No. 1

CONTENTS

Ackner, L.

Elton, L.

Addington, L.

Ezra, L.

Alton of Liverpool, L.

Falkland, V.

Anelay of St Johns, B.

Fookes, B.

Astor, V.

Forsyth of Drumlean, L.

Astor of Hever, L.

Garel-Jones, L.

Attlee, E.

Geddes, L.

Avebury, L.

Geraint, L.

Beaumont of Whitley, L.

Glenarthur, L.

Belstead, L.

Glentoran, L.

Biffen, L.

Goodhart, L.

Blackwell, L.

Gray of Contin, L.

Blaker, L.

Greaves, L.

Blatch, B.

Hamwee, B.

Boardman, L.

Hanham, B.

Brabazon of Tara, L.

Hanson, L.

Bradshaw, L.

Harris of Greenwich, L.

Bridgeman, V.

Harris of Richmond, B.

Brittan of Spennithorne, L.

Haslam, L.

Brougham and Vaux, L.

Hayhoe, L.

Burnham, L.

Henley, L. [Teller]

Buscombe, B.

Higgins, L.

Butterworth, L.

Howe, E.

Byford, B.

Howe of Aberavon, L.

Caithness, E.

Howell of Guildford, L.

Campbell of Alloway, L.

Hurd of Westwell, L.

Campbell of Croy, L.

Hylton, L.

Carnegy of Lour, B.

Jacobs, L.

Chadlington, L.

James of Holland Park, B.

Chalker of Wallasey, B.

Jenkin of Roding, L.

Clark of Kempston, L.

Jopling, L.

Clement-Jones, L.

Kelvedon, L.

Coe, L.

Kimball, L.

Colwyn, L.

Kingsland, L.

Cope of Berkeley, L.

Laing of Dunphail, L.

Courtown, E.

Lamont of Lerwick, L.

Cowdrey of Tonbridge, L.

Lester of Herne Hill, L.

Cranborne, V.

Linklater of Butterstone, B

Crathorne, L.

Liverpool, E.

Crickhowell, L.

Ludford, B.

Cuckney, L.

Luke, L.

Dean of Harptree, L.

Lyell, L.

Denham, L.

McNally, L.

Dholakia, L.

Mar and Kellie, E.

Dundee, E.

Marlesford, L.

Eden of Winton, L.

Masham of Ilton, B.

Elliott of Morpeth, L.

Methuen, L.

783

Miller of Chilthorne Domer, B.

Selborne, E.

Miller of Hendon, B.

Selsdon, L.

Monro of Langholm, L.

Sharp of Guildford, B.

Monson, L.

Sharples, B.

Montrose, D.

Shaw of Northstead, L.

Mowbray and Stourton, L.

Shrewsbury, E.

Moynihan, L.

Shutt of Greetland, L.

Murton of Lindisfarne, L.

Simon of Glaisdale, L.

Naseby, L.

Skelmersdale, L.

Newby, L.

Smith of Clifton, L.

Nicholson of Winterbourne, B.

Stewartby, L.

Northbrook, L.

Stoddart of Swindon, L.

Northesk, E.

Strathclyde, L.

Northover, B.

Swinfen, L.

Norton of Louth, L.

Taverne, L.

Oppenheim-Barnes, B.

Tebbit, L.

Palmer, L.

Thatcher, B.

Peyton of Yeovil, L.

Thomas of Gwydir, L.

Phillips of Sudbury, L.

Thomas of Walliswood, B.

Pilkington of Oxenford, L.

Thomson of Monifieth, L.

Plummer of St. Marylebone, L.

Tordoff, L.

Rawlings, B.

Trefgarne, L.

Reay, L.

Trumpington, B.

Redesdale, L.

Vivian, L.

Rees, L.

Waddington, L.

Renfrew of Kaimsthorn, L.

Wallace of Saltaire, L.

Renton, L.

Walmsley, B.

Roberts of Conwy, L.

Walton of Detchant, L.

Rodgers of Quarry Bank, L.

Warnock, B.

Roper, L.

Watson of Richmond, L.

Russell, E. [Teller]

Wigoder, L.

Ryder of Wensum, L.

Wilcox, B.

Saatchi, L.

Williams of Crosby, B.

Saltoun of Abernethy, Ly.

Willoughby de Broke, L.

Scott of Needham Market, B.

Windlesham, L.

Seccombe, B.

Wolfson, L.

NOT-CONTENTS

Acton, L.

Falconer of Thoroton, L.

Ahmed, L

Farrington of Ribbleton, B.

Ali, L.

Faulkner of Worcester, L.

Amos, B.

Filkin, L.

Andrews, B.

Fyfe of Fairfield, L.

Archer of Sandwell, L.

Gale, B.

Ashley of Stoke, L.

Gavron, L.

Ashton of Upholland, B.

Gibson of Market Rasen, B

Bach, L.

Goldsmith, L.

Bassam of Brighton, L.

Gordon of Strathblane, L.

Berkeley, L.

Goudie, B.

Bernstein of Craigweil, L.

Gould of Potternewton, B.

Billingham, B.

Graham of Edmonton, L.

Blackstone, B.

Greengross, B.

Blease, L.

Gregson, L.

Borrie, L.

Grenfell, L.

Bragg, L.

Hardy of Wath, L.

Brennan, L.

Harrison, L.

Brooke of Alvcrthorpe, L.

Haskel, L.

Brookeborough, V.

Hayman, B.

Bruce of Donington, L.

Hilton of Eggardon, B.

Burlison, L.

Hogg of Cumbernauld, L.

Carter, L. [Teller]

Hollis of Heigham, B.

Chandos, V.

Howells of St. Davids, B.

Christopher, L.

Hughes of Woodside, L.

Clarke of Hampstead, L.

Hunt of Kings Heath, L.

Cledwyn of Penrhos, L.

Hylton-Foster, B.

Crawley, B.

Islwyn, L.

Davies of Coity, L.

Janner of Braunstone, L.

Davies of Oldham, L.

Jay of Paddington, B. (Lord Privy Seal)

Desai, L.

Diamond, L.

Jenkins of Putney, L.

Dormand of Easington, L.

Kennedy of The Shaws, B.

Dubs, L.

King of West Bromwich, L.

Elder, L.

Laird, L

Evans of Parkside, L.

Lea of Crondall, L.

Evans of Watford, L.

Levy, L.

784

Lipsey, L.

Rendell of Babergh, B.

Lockwood, B.

Richard, L.

Lofthouse of Pontefract, L.

Rix, L.

Longford, E.

Sainsbury of Turville, L.

Lovell-Davis, L.

Sawyer, L.

Macdonald of Tradeston, L.

Serota, B.

McIntosh of Haringey, L. [Teller]

Sewel, L.

Shepherd, L.

MacKenzie of Culkein, L.

Sheppard of Liverpool, L.

Mackenzie of Framwellgate, L.

Shore of Stepney, L.

Mallalieu, B.

Simon, V.

Marsh, L.

Smith of Leigh, L.

Mason of Barnsley, L.

Stern, B.

Massey of Darwen, B.

Stone of Blackheath, L.

Merlyn-Rees, L.

Strabolgi, L.

Milner of Leeds, L.

Symons of Vernham Dean, B

Taylor of Blackburn, L.

Mishcon, L.

Taylor of Gryfe, L.

Mitchell, L.

Tomlinson, L.

Molloy, L.

Uddin, B.

Molyneaux of Killead, L.

Varley, L.

Morris of Castle Morris, L.

Warner L.

Morris of Manchester, L.

Warwick of Undercliffe, B.

Nicol, B.

Wedderburn of Charlton, L.

Orme, L.

Whitaker, B.

Parekh, L.

Whitty, L.

Patel of Blackburn, L.

Wilkins, B.

Peston, L.

Williams of Mostyn, L.

Pitkeathley, B.

Williamson of Horton, L.

Plant of Highfield, L.

Winston, L.

Ramsay of Cartvale, B.

Woolmer of Leeds, L.

Randall of St. Budeaux, L.

Young of Old Scone, B.

Resolved in the affirmative, and amendment agreed to accordingly.
4.10 p.m.
[Amendments Nos. 76 and 76A not moved.]
Clause 39 [Home responsibilities protection]:
[Amendment No. 77 not moved.]
Baroness Fookes Baroness Fookes moved Amendment No. 78:
After Clause 42, insert the following new clause—

Child Support, Pensions and Social Security Bill

  CONSULTATION ON PENSION UPRATING: RESIDENCE OUTSIDE GREAT BRITAIN
  (" . The Secretary of State for Social Security shall consult the relevant Governments about a full or partial uprating of British state retirement pensions for British pensioners living overseas and report on his findings and recommendations within one year of this Act receiving Royal Assent.").
  The noble Baroness said: My Lords, in moving the amendment which stands also in the name of the noble Lord, Lord Goodhart, I speak also to Amendment No. 79.
  These amendments have previously been the subject of debate in this House. However, I make no apology for again raising the issue since they seek to redress a longstanding grievance. I go further than "grievance" and say a longstanding injustice. They relate to British pensioners living overseas who do not have annual upratings which pensioners living in this country receive.
  The fact that a grievance is old makes it no less vivid or unkind for those who are the victims. I know from discussions that individuals and organisations overseas feel very aggrieved by the failure of successive governments to do anything about the situation. It is

  785
  all the more remarkable when one bears in mind that the noble Lord, Lord Shore of Stepney, who was a member of the Cabinet which made the decision in the first place, spoke on the subject in recent months, explaining that the only reason upratings for overseas pensioners were not allowed was that there were severe exchange control difficulties at a time when tourists were allowed to take out only £50 in currency. He said that there is a clear moral case for uprating. That lends strength to my own views that it is high time that the grievance is redressed.
  I am, of course, aware of the cost. I know, for example, that there are some 190,000 British pensioners in Australia and many other parts of the world. But the grievance is compounded by the fact that there is a lottery depending on where one happens to live overseas. If one is within the European Union one is covered by its requirement that one is treated equally. If one goes to those countries where there is a reciprocal arrangement, all is well. If one happens to go to other countries, notably Australia and Canada, where there is no such agreement, one is stuck with the size of the pension when one left the country. Noble Lords can imagine the miserable pension for someone who may have been retired for 30 years. That is not impossible. Many people live in positive penury because of this arrangement. I bring this issue to your Lordships' House because those people are by definition elderly. They lack the pressure which people in this country can bring to bear. It behoves those of us who are here to speak firmly on their behalf.
  I know that the argument is always one of cost. Crudely encapsulated, the Government's view is, "This will cost a great deal of money. We have better things on which to spend it". It may be crude, but I believe that that sums up their argument. That will be dressed up by the Minister when she responds. Having heard the arguments previously, I believe that I could give a fair representation, if I chose to do so, of the arguments that the noble Baroness will deploy in due course. I believe that it is high time that we did something about the matter.
  Recognising that cost is an issue, I have sought to modify what I should like to see—a total uprating immediately, and backdated—on the line that politics is the art of the possible. It is a theme I first heard the noble Baroness, Lady Thatcher, declaim when she first came into Parliament many years ago. Given that politics is the art of the possible, I have suggested a compromise whereby the Secretary of State should consult with the other relevant governments as to whether there could be at least a partial uprating. There are several possibilities: that there should be no backdating but that the provision should come into effect only from the point when it comes into law; or that it should go only to the older pensioners over, let us say, 75, 80 or 85—those who are most likely to be in the direst need. There would be other possibilities with which I shall not bore your Lordships today.
  Having sought to make a move in this direction, I hope that the Minister will look more sympathetically on this case. I repeat: it is a longstanding injustice. It is compounded by the fact that it depends where one
  786
  lives as to whether one has an uprating. I believe that the time has now come to take definitive action. I beg to move.
  Lord Goodhart: My Lords, I have put my name also to the amendment. I believe that the provision that removes the right of overseas pensioners to an annual uprating in line with those who are resident in this country is one of the most mean-minded pieces of legislation that has ever been placed on the statute book. These are people who worked in this country; they paid their national insurance contributions in this country; and they paid tax on their earnings in this country. They are surely as entitled to a full state pension for the period while they worked in this country as anyone else.
  The fact that they now live abroad, and perhaps pay taxes abroad, is irrelevant. Indeed, if it has any relevance it can be said to strengthen the argument for giving them the full pensions to which they are entitled on the ground that by deciding to live abroad they have removed themselves from any obligation on t his country to provide care for them through the National Health Service or through the publicly-funded social services.
  I can see no justification in logic for saying that people who live overseas, and who are drawing pensions which they have earned by their contributions in this country, should see those pensions decline in real terms year by year. It is not as though the pensions were earnings linked in which case one might say that there is no logical reason why they should share in the increased prosperity of this country. But to remove their right to maintain their pension in real terms seems intolerable.
  If there is any logic in the decision, it lies solely in the fact that few of these pensioners have votes and the issue is, therefore, irrelevant to a future general election. I regard that as a wholly inadequate ground of objection. It is time that the pensions of overseas pensioners were restored; and, if not restored, at least restored to the extent proposed by the noble Baroness, Lady Fookes, so that at least in future they will receive the uprating along with anyone else who is entitled to it in this country.
  Lord Campbell of Alloway: My Lords, I support the amendment so reasonably and cogently argued by my noble friend Lady Fookes and the noble Lord, Lord Goodhart.
  All that is sought under Amendment No. 78 is that,
  "The Secretary of State for Social Security shall consult the relevant Governments".
  The Governments most relevant appear to be Australia and Canada. It is totally reasonable that such consultation should ensue albeit that there should be no retrospective effect, albeit that perhaps some compromise should be arrived at, and albeit that some special consideration should be made as regards age. Surely, this House should support an amendment that seeks only consultation on these matters. On that, in

  787
  view of the way in which this has been presented by both my noble friend and the noble Lord, I strongly support this amendment.
  Lord Renton: My Lords, I too support the amendment. I go a little further than my noble friend Lord Campbell of Alloway in hoping that Amendment No. 79 will be considered as linked very relevantly with Amendment No. 78 because, after all, Amendment No. 78 calls upon the Government to consult other governments. Amendment No. 79 would require—when consultation has been successful presumably—that the Act of 1992 should be amended in the way proposed.
  I hope that no Members of your Lordships' House will think that people who go to spend their retirement abroad should not have sympathy. Indeed, in my opinion they should have plenty of sympathy. They may be British citizens who have married people abroad. There may be those who have served in our Foreign Service for many years, whose service, perhaps for the last 20 years, kept them in one country and they may feel that is the country in which they would like to end their days. There are those who have been in business abroad and done great things for this country in that regard who have a house and home abroad and they want to remain there. Of course, there are those—and we are familiar with the situation—who, for health reasons, have been advised that they should live in a warmer climate than we have consistently here. There could be other reasons also. I hope that there will be no lack of sympathy on the part of the Government in this matter.
  There are two other things I should add. There are a good many foreigners living here in retirement, and we welcome them. Perhaps it is too vague a proposition to mention, but we should bear in mind that increasingly this is becoming one world.
  Lord Williamson of Horton: My Lords, I should like to support the amendments presented by the noble Baroness, Lady Fookes, and the noble Lord, Lord Goodhart. This is a question of equity, and quite a lot of people in this world look to the House of Lords to deal with questions of equity. This question has been on the table a very long time. We should at least launch the possibility of correcting the current situation.
  For myself, I find it hardly possible to defend a situation in which British pensioners living overseas are deprived of any uprating on their pension. It is not necessarily a world-wide problem because it does not arise in the European Union; it is mainly a problem in a certain number of major Commonwealth countries such as Australia and Canada. What we are talking about are people who have worked all their life in the United Kingdom, or a lot of it, and then decided that they wished to reside for the latter part of their life in those countries, perhaps because they had or have had family there.
  I agree with those noble Lords who said that Amendment No. 78 is extremely modest. If one cannot accept Amendment No. 78, I really wonder what one
  788
  can accept. The absolute minimum that should be done now is to launch a consultation with the governments of those countries. That would be a rather small first step, but at least it would be launching the process of creating a much fairer—I repeat "fairer"—situation for British pensioners resident overseas. I hope that the Government will be able to respond favourably to these amendments.
  Lord Selsdon: My Lords, I have found myself working around the world most of my life. This has been the issue that has been raised again and again by British nationals abroad. It is, in part, the money. Your Lordships may be aware that in some parts of the world even the Church is seeking to help impoverished British elderly gentlemen and women. They made a decision at a particular time in their lives, most of them with great patriotic feeling, where they had served either in the Commonwealth or in this country, as to where they would be safest and best for their twilight years. They had no knowledge of the economic incompetence of successive governments that would lead to the desperate devaluation of sterling, and they suffered there. They had no knowledge of the extra benefits that were beginning to accrue to the elderly.
  For example, this morning I received an extremely kind letter suggesting that, as I was approaching the age of 75, I might no longer have to pay for a television licence. I know that the average age of your Lordships' House is rising, but I am still just below the average age. I receive letters from airlines suggesting that, as I have reached a certain age, I might be able to travel free provided that I do not talk about it, or travel cheaply on certain airline flights.
  There are many countries that look after their elderly. Why should we, who have our elderly more widely spread than any other nation, desert them? It is true that we do not think about them. We do not care. It is communication that is of importance. Many of them are on the breadline. That feeling of poverty becomes worse when there is a happily married couple who have joined their children in a particular country and those children move on and one of the couple dies and the other is at a loss, still in a way in a strange land. We know the names, we know the addresses; they are easy to find. We should think of ourselves as a caring nation rather than uncaring one.
  Lord Higgins: My Lords, I intervene only briefly because my noble friend Lady Fookes has made the case so eloquently, as have other Members in other parts of the House. This is an issue that has been going for very many years; I feel bound to say, for as long as I can remember. The sense of injustice has not diminished and to some extent has been exacerbated by the extraordinarily random way in which uprating takes place. Out of something like 840,000 pensions paid, about 460,000 are not uprated. The division between the countries where they are uprated and those where they are not can only be described as bizarre. They include the European Economic Area countries; not the European Community countries. They include, quite arbitrarily, Norway, Iceland and

  789
  Liechtenstein. I am not clear whether those countries also have reciprocal arrangements. Perhaps the noble Baroness can tell us whether Liechtenstein has a reciprocal arrangement. There are also a number of other countries which have genuinely reciprocal arrangements, ranging from the Philippines to Turkey and Cyprus to Yugoslavia, including the former republic apparently. People in those countries are all uprated and many people in other countries are not.
  Having said that, I know that it has been a longstanding problem and I fear that I cannot, keen though I would be to do so, commit myself to Amendment No. 79.
  Amendment No 78 has a great deal to be said for it, not least because the arrangement which has been standing for 46 years with Australia appears to have been terminated or is about to be terminated. The noble Baroness shakes her head, in which case no doubt she can clarify the position since the time when she made an announcement back in April. If there has been a change, I imagine that the House will welcome it.
  At all events, if my noble friend Lady Fookes does not press the amendment to a Division today, I hope she will consider very carefully bringing back Amendment No. 78 at a later stage, because there seems to be a considerable argument for consulting rather more broadly on this issue with countries of such varied natures that are either included or excluded.
  4.30 p.m.
  Baroness Hollis of Heigham: My Lords, given the noble Lord's "on the one hand" and "on the other hand", I was trying to work out where he was standing. However, I am happy to give him the information he requested about Liechtenstein. It is true that we have a reciprocal obligation with that country and, as far as I know, it affects all of 10 citizens. Therefore, it is not such that it would swamp our finances.
  New Clauses 78 and 79 have a familiar purpose. They attempt to redress the situation where more than half of UK pensioners who live overseas do not receive annual cost of living increases in their retirement pensions. We have discussed the issue on many occasions. I am aware that many of your Lordships have strong views on the subject and that there is strong feeling among many UK pensioners overseas. The noble Baroness, Lady Fookes, said that she could make my speech for me—I am sure that she could make it better than I can—but I anticipated the arguments which she would bring before the House.
  Amendment No. 78, which commits the Government to consultation, is not, as the noble Lord, Lord Williamson, seemed to suggest, a modest one. I believe that it is shrewd and clever and subtle and ingenious, but it is not a compromise or first step. As the noble Baroness will know, on all occasions the relevant governments—in particular Canada, Australia, New Zealand and South Africa where most people with frozen pensions live—have been pressing
  790
  us to take this step and I believe that I know what the outcome of the consultation may be. I will tell your Lordships why—
  Lord Campbell of Alloway: My Lords, I am obliged to the Minister for giving way. The proposal is neither ingenious nor clever. It is a step towards a humane compromise and that is all.
  Baroness Hollis of Heigham: My Lords, I was about to say why I do not believe it is a compromise. At any reception I attend when the relevant ambassador or high commissioner is present, I am pressed on the point. I do not want to say that consultation is a waste of time, but the facts are what they are. There is no equivalence between the position of the governments of Australia or Canada and our own.
  Perhaps I may remind your Lordships of the figures. I know that Members on the Liberal Democrat Front Bench are well aware of them because we have exchanged them previously. As far as we know. 17,000 Australian pensioners live in this country while 214,000 UK pensioners live in Australia. In other words, it is hugely to the financial advantage of the Australian Government and hugely to the financial disadvantage of the British Government to move even in the direction suggested by the noble Baroness. The inequity of population applies also to Canada. As far as we know, 9,500 Canadian pensioners live in the UK while 138,000 UK pensioners live in Canada. The same inequity is true of New Zealand; 7,500 live here while 34,000 live there. Alas, I do not have the figures for South Africa.
  That shows that disproportionately and overwhelmingly the flow of money would not be equal. The money going from this country to our pensioners in other countries and the money coming from other countries to their pensioners here would not be equal. Overwhelmingly, the flow would be from this country to Australia, New Zealand, Canada and South Africa. Therefore, if I sound critical of the concept of consultation it is because I believe that we can anticipate the result. The points have been made to me in person by the relevant high commissioners or senior government officials when I have visited those countries.
  Earl Russell: My Lords, is the Minister telling us that it is wrong to do an injustice to a few people but quite all right to do an injustice to a lot of people?
  Baroness Hollis of Heigham: My Lords, no, I am saying that at the end of the day it is a question of where your financial priorities lie. I shall make the point more fully in a moment. The noble Earl would ask us to equalise the benefits as between those under 25 and those over 25. He would regard that inequality as an injustice and I understand his point of view; he has argued it over many years. Is he about to say to me, "You should do that and somebody has to find the money for it"? We could go down a shopping list; indeed, the noble Earl has tabled amendments on the

  791
  single-room rent. Does he regard that also as an injustice? I can see where he is coming from, given the research and the views he has expressed in the past.
  Nevertheless, it is not enough to say that there is an injustice or an anomaly. One must also say how one rates the reparation of that in terms of the financial contours of the Budget. The noble Earl must say how his proposal will be financed and the Official Opposition Benches must say where they are going to make cuts in order to fund their proposal.
  When we last debated the Bill in your Lordships' House, the noble Earl was distressed that changes in some of the pension arrangements were to be funded by cutting half of the Social Fund. It was proposed that £90 million would be taken out of the fund and the noble Earl, Lord Russell—and I was cheering him on—wanted to know from where else the noble Lord, Lord Higgins, would fund his proposed change.
  The change to complete unfreezing would cost about £300 million; a partial unfreezing, say, for those over 75, which the noble Baroness suggested would be a compromise, could cost half of that sum. Those are substantial amounts and the changes must be funded at the expense of other priorities.
  Perhaps I may remind your Lordships that UK pensioners are paid anywhere in the world and we pay some 870,000 pensioners in more than 150 countries. In 1999, the UK paid more than £1 billion in retirement pensions to pensioners living abroad. Some 470,000 of those pensioners have what is commonly referred to as a "frozen" pension. That means that the pension remains fixed at the rate payable when the person chose to leave the country. The pension remains permanently at that rate or at the rate initially awarded on retirement if a person is already resident abroad.
  There are two broad grounds for uprating. They are paid within the European Economic Area, in the Channel Islands and the Isle of Man and in about a dozen other countries where certain long-standing social security agreements, mostly dating back to the 1950s, exist. Apart from a case in which the agreement was made earlier and not implemented until later—I believe it was in the Dominican Republic—I am not aware of any change made throughout 18 years of the previous administration in order to advance the general cause or to renegotiate any new bilateral agreements.
  The policy has been followed by successive governments ever since retirement pensions and widows benefits became payable world-wide in 1955. I am sorry, but it is not a priority for this Government to reconsider. When the Social Security Select Committee considered the matter in 1996, it recognised that priorities for public expenditure would inevitably be taken into account in considering the issue. We know that that cost is likely to be £300 million a year and I believe that if the noble Lord, Lord Higgins, proposes to support the amendment in a Division tonight he is under an obligation to tell us how it is to be funded. I could point out to him that
  792
  there is still another £90 million in the Social Fund and I suppose that he could raid the last of it, but he has to say from where the funding will come.
  In 1995, a Member of Parliament said:
  "I hope that the House will remember that any increase in spending commitments involving sending money to people overseas will of course mean corresponding reductions in our expenditure here at home. Members should bear that in mind".
  That was not said by me and not even by the noble Lord, Lord Mackay, although I have many quotations showing his position. It was said by a then fairly junior member of government, Mr William Hague. Only five years ago, the now Leader of the Official Opposition said that he did not regard this as a priority and that if it was to be supported by his government other reductions in expenditure would have to be found. If the precedent is the Social Fund or abolishing the New Deal for lone parents or the working families' tax credit, I would ask your Lordships to consider where your priorities lie. The change has to be funded from somewhere.
  With regard to the Australian point, I was not shaking my head and saying that the situation had moved on since the matter was raised in the House in April. I meant merely that people seem to believe erroneously that Australia uprates British pensions. It does not. It allows British national insurance contributions to count for the Australian means-tested pension in the same way as we allow Australian national insurance contributions to count against eligibility for our non-means-tested pensions. If Australia decides to move away from that agreement, perversely the British Government will save money because more Australians benefit from the arrangement in this country than do our British people in Australia. It affects only 3,000 people; not the 200,000-odd people who are resident there.
  Therefore, I am afraid that our policy is clear. We do not consider unfreezing to be a priority call on resources. We want and need to focus help on pensioners in the UK and we want to do most for those who need it most. I do not need to talk about winter fuel payments, TV licences or the minimum income guarantee. I do not even need to talk about our proposals for the introduction of the new pensioner credit to reward thrift on which we hope to go out to consultation in due course.
  I recognise that people feel strongly about this matter. However, my first point is that people chose to leave this country in the knowledge that their pensions would be frozen. Secondly, if we were to uprate, as has been suggested, or even to go for consultation, what would the outcome be with regard to the position of other governments? It would cost £300 million, and that would have to be found from somewhere. We believe that our priorities lie elsewhere. Therefore, the Government do not plan to unfreeze UK pensions paid abroad, and I hope that noble Lords will not pursue these amendments.
  Lord Selsdon: My Lords, before the noble Baroness sits down, I take some of the points that she made in her charming way. However, a problem exists which is

  793
  not purely monetary; it is one of understanding. Perhaps her department could produce a small leaflet to be sent to pensioners explaining the position. They would at least then feel that someone had cared for them in some way, whatever the outcome.
  Baroness Hollis of Heigham: My Lords, I am happy to ask officials to look at the literature that we give to people at the point at which they make their decision in order to ensure that they are as fully informed as possible. I believe that that is an entirely reasonable point to make and I shall certainly follow it up. Of course, if anyone writes to us from overseas—indeed, I receive letters regularly on this subject—I shall be happy to send the type of information to which the noble Lord referred.
  Lord Monson: My Lords, before the noble Baroness sits down for the second time, when she says that pensioners left this country in the full knowledge that their pensions would be frozen, does she agree that they could not have had knowledge of the way in which inflation would totally destroy the value of those pensions?
  Baroness Hollis of Heigham: My Lords, that may be true but, equally, although I am not sure that many overseas pensioners with a right to vote will have voted for the present Government, they will be pleased to see that under this Government inflation is now below 2 per cent. Whatever arrangements one makes with regard to pensions, one tries to predict what will happen, whether it be in relation to annuity rates or whatever. None the less, when pensioners left this country —and many will have left during periods of high inflation—they knew what the situation was likely to be regarding their state pensions. The literature is quite unambiguous. I have read the leaflets myself and they are clear. People knew what they were doing and chose to make that decision.
  One must consider the cost. Arrangements could not be made with only one country; I suspect that there would need to be open consultation with all the big countries. The cost would be £300 million a year and rising; more so if inflation were to return. That represents a significant part of the budget and that is why the noble Lord, Lord Mackay, regularly resisted the proposal in this House against the wishes of his own Back-Benchers. It is why Mr Hague made the points at least as forcibly in 1995 as I have tried to do today.
  Baroness Fookes: My Lords, I had anticipated what the noble Baroness would say and particularly that she would call in aid the record of previous Conservative governments. However, I had a small hope that new Labour might bring forth a new policy. Clearly, it is in the same mould as the old government. That said, I am disappointed that what I considered to be a more modest compromise has not been accepted by the noble Baroness. I do not believe that my modest suggestion is worth going to the stake for; indeed, I
  794
  should prefer to bring forward a somewhat bolder, more full-blooded clause at a later stage. Therefore, at this point, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 79 to 81 not moved.]
  Clause 43 [Member-nominated trustees]:
  4.45 p.m.
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 82:
  Page 37, line 42, at end insert—
  ("( ) After subsection (3)(a) there shall be inserted—
  "(aa) that the employer shall have no part in the selection of member-nominated trustees, and".")
  The noble Baroness said: My Lords, we have now reached a group of amendments which deal with the matter of trustees and governance by trustees. In Committee I moved an amendment designed to ensure that employers played no part in the selection of member trustees. It was not accepted by the Government and today I come back with a slightly different wording which makes the intention absolutely clear.
  Under the trustee route, which allows significant flexibility but which is not to be subject to prior consultation with members, the present trustees, who in many cases will not include member trustees, can propose selection by a panel where the employer representatives participate so long as they are in a minority position. It is not clear how the member representatives on the panel will be derived, and it is often the case that senior managers and directors are members of the scheme and their inclusion could shift an employer minority to a majority on the panel.
  Managers will be able to make a lot of fuss about competence and experience that may or may not be justified, particularly if there is proper training for trustees, in order to select the management candidates whom they want rather than those who might take an independent view. Candidates may also be deterred from applying if they conceive the panel to be employer-nominated.
  Of course, some employers basically oppose the involvement of employee trustees. The present arrangements leave a loophole through which they can exercise undue influence. The amendment seeks to establish that the law requires not only member-nominated trustees but member-selected trustees. Employers have to be told that they must accept representatives of members on the trust board and that they should not attempt to control who those members are.
  In putting forward this amendment, I wish to declare an interest as a member of my union, MSF. My union feels strongly about this issue, which is why I return to it on Report. It is very necessary that employees have confidence in their pension scheme, and that is one of the objectives of my amendment. I beg to move.
  Baroness Hollis of Heigham: My Lords, Amendment No. 82 would prevent employers taking

  795
  part in the selection of member-nominated trustees. It applies equally to arrangements under Section 16, the trustee route, and Section 18A, the employer route. We discussed briefly a similar amendment in Committee. In that case, the amendment was presented somewhat differently in that it provided that only members or member representatives would be involved in the selection of member-nominated trustees. This amendment approaches the same issue from another direction by seeking to exclude employers from any involvement in the selection of member-nominated trustees.
  As I explained in Committee, the trustee route will provide that, where there are more nominations than vacancies, the final selection will be made either by means of a ballot of the members or by a selection panel. We shall consult on the details of regulations in due course. However, the intention is that, if selection panels are used, they must comprise a majority of scheme members or their representatives. On the other hand, the amendment would exclude the employer from sitting on a selection panel alongside members or member representatives. We see no reason to be quite so restrictive.
  One of the key objectives of the proposals is to avoid disrupting existing arrangements wherever possible. The effect of the amendment would be to force changes on a number of schemes with long-standing nomination and selection arrangements where the final selection is made by a panel that includes a representative of the employer. I believe that that would be a shame and we should ask ourselves whether it is really necessary.
  Under the employer route, employers will have the right to propose bespoke nomination and selection arrangements for their scheme. The proposal must provide for a minimum of one-third member-nominated trustees. However, the provisions are more flexible and for that reason must be approved by the members. There will be more scope for the employer to determine the selection arrangements under this route. That is undeniable. However, the final choice will be from individuals who have been nominated by scheme members; and, most importantly, the proposal will be adopted only if the members agree to it.
  Although the amendment would have much the same effect as our proposals, it would force many schemes to change their arrangements for no good reason. I understand fears that employers may use their position to try to secure their preferred candidate. We have very good relationships with OPRA, which my noble friend served with such distinction for many years, and with the many representative bodies in the pensions industry. If there were evidence that the involvement of the employer was having undesirable effects, they would be quick to let us know.
  The way the legislation is drafted in the Bill would allow us to respond quickly to any changes by changing regulations. Our new provisions provide the opportunity for schemes to meet the new requirements with the minimum of disruption. They allow for flexibility without undermining the key aim of getting
  796
  member trustees on to trustee boards. I would remind your Lordships that these proposals have the full support of all the key organisations in the pensions industry and I would be sorry if we were to lose that support now. In the end, the decision firmly remains with members and I hope that in the light of this explanation my noble friend will feel able to withdraw her amendment.
  Baroness Turner of Camden: My Lords, I thank my noble friend for her explanation of government policy on this issue, and I am not at all surprised at what she has said. Of course part of the argument is that it is not desirable to disrupt existing arrangements, and one would agree with that if they are satisfactory.
  The reason for my bringing forward this amendment again in a different form is that it has been apparent to me that a number of unions are not happy that the existing arrangements actually operate effectively. However, I understand that there is to be consultation on the regulations and no doubt there will be an opportunity for some input at that time, particularly if (as seems likely) there is some dissatisfaction with existing arrangements in some quarters. In the meantime, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 83:
  Page 38, line 41, at end insert—
  ("(10) The Secretary of State shall make regulations providing that all trustees should be required to have attended an approved training course explaining the role and responsibilities of trustees within six months of being either elected as a member-nominated trustee or appointed as a trustee by the scheme's sponsoring employer.
  (11) These regulations shall also prescribe the content of such an approved training course.
  (12) The failure of a trustee to attend such a course within six months of being either elected or appointed as a trustee shall nullify the trustee's election or appointment.").
  The noble Baroness said: My Lords, this amendment deals with the training of trustees. In Committee I moved an amendment designed to make mandatory the training of trustees. There was general agreement at that time that it was very necessary that pension fund trustees should be trained. As we all know, the duties are now quite onerous and the expectations of scheme members are substantial. The scandals of the past, notably that of the Maxwell affair, have to some extent undermined confidence in occupational pensions, despite their success during the past 20 years in providing benefits to former employees.
  I recall saying in Committee in response to my noble friend the Minister that we had scored a small victory the last time around, because she agreed with much that had been said and had undertaken that there would be consultation with the industry to see what could be devised. I understand that she has been as good as her word. The consultations have taken place.

  797
  One of the reasons for the amendment therefore is to ask her to tell the House what the Government's view is following those consultations.
  Of course the organisations consulted have also written to me, and I am sure they will also have written to a number of your Lordships. So I have some idea of the reactions to the proposals. I believe the Engineering Employers Federation, which was responsible for briefing me at Committee stage in support of compulsory training, is still of the same view although the CBI, while supporting the principle of trustee training, is concerned about the cost of policing a statutory requirement and about the administrative and financial burdens generally that it might impose. It favours legislation for a requirement for training to be made available to trustees at employers' expense. Others favour "best practice" guidelines and disclosure requirements so that in annual reports to members those in charge of schemes would be required to state their policies on trustee training and say which trustees had undergone training, together with the nature of that training.
  I still favour some form of compulsion, but I appreciate that it is necessary to secure the willing cooperation of the pensions industry and of pension schemes to bring this about. I am glad that our amendment in Committee prompted an examination and discussion of this very important topic. I therefore wait 'with interest to hear from the Minister what the Government's response has been both to the debate that we had in Committee and to the consultations which I know have taken place since then. I beg to move.
  Lord Higgins: My Lords, we on these Benches agree with the noble Baroness, Lady Turner, that all trustees and not just member-nominated trustees should receive training as regards their role and responsibilities. However, we do acknowledge that inevitably there are some practical difficulties with introducing legislation to make trustee training compulsory and in ensuring that it is enforced.
  Like the noble Baroness, Lady Turner, we have been contacted by a number of bodies since these amendments were tabled. We have taken their observations on board and accept that making trustee training compulsory at this stage is not appropriate. We are aware of the administrative and financial burdens that a statutory training regime would entail. The cost of policing a statutory requirement and of accrediting training would be very high and the costs could well outweigh the benefits.
  As the noble Baroness has just said, at Committee stage the noble Baroness the Minister promised that she would take this issue away and consult further with the pensions industry. I therefore look forward to hearing what suggestions the Minister has for promoting and encouraging trustee training as right and normal, without direct government intervention.
  Lord Goodhart: My Lords, I rise to say that I have received a briefing paper from the National Association of Pension Funds, which opposes the idea
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  of compulsory training, for reasons which appear to me to be quite persuasive. It seems to me that we are in a situation where employers are not obliged to provide pension funds for their employees. It is good practice for them to do so, and a large number do, but there is a risk of over-regulation here and I think that this increases the risk that employers might be persuaded to abandon pension funds because of the complications involved.
  It is clearly good practice that the trustees who need it—not all of them do—should receive training, but I hope that will be dealt with as a matter of good practice and perhaps as a matter to be shown in the annual report of the pension fund rather than as a matter of compulsion.
  Baroness Hollis of Heigham: My Lords, Amendment No. 83 would require that all trustees are required to undertake an approved training course explaining the role and responsibilities of trustees, and that regulations would prescribe the content of the, training. Anyone not receiving such training within six months of becoming a trustee would have their appointment revoked.
  We debated the subject of trustee training in Committee. It was clear to me then that there is a great deal of support in the House for the principle of compulsory trustee training. Trustees have overall responsibility for the proper running of a pension scheme under the rules of the scheme and in accordance with the Pensions Act. It is vital, therefore, that they have a full knowledge and understanding of their role and responsibilities.
  I said in Committee, as your Lordships have acknowledged, that I would like to go away and talk to the pensions industry to see how they felt about the idea of compulsion. My officials have been talking to representatives of various organisations, including the Occupational Pension Schemes Joint Working Group, the TUC, OPRA, the CBI, the Pensions Management Institute and the Association of Corporate Trustees. I should say that the Occupational Pension Schemes Joint Working Group comprises representatives of the National Association of Pension Funds, the Association of Pension Lawyers, the Association of British Insurers, the Society of Pensions Consultants and the Association of Consulting Actuaries. In effect I believe that the officials have spoken to all the major organisations in the pensions industry. I think they have done a very thorough job since the Committee stage and I am grateful to all of them for taking the time to consider and respond at such short notice. I am also grateful to the organisations involved.
  All the groups we consulted recognise the importance of trustee training and I am pleased that the Government, the Opposition and the pensions industry can all speak from a common position on this. However, of all the people we spoke to, only the TUC actively supports the idea of making training for trustees compulsory. Given that we all agree that trustee training is a good thing, perhaps it would be helpful to set out the reasons why the Government are not in favour of making it compulsory.

  799
  First, there was a general concern that it would add to the regulatory pressures on occupational pension schemes. I believe that the noble Lord, Lord Goodhart, touched on this: as ever, we have to find the right balance between placing regulatory burdens on business and protecting the interests of scheme members. We cannot justify imposing extra costs and burdens without firm evidence that there is a problem which needs fixing.
  There are also genuine concerns about practicality and cost. What seems like a simple idea could be difficult to implement. For example, many trustees come with very different backgrounds and experiences and the schemes themselves are also varied. There are obvious differences between defined benefit schemes and defined contribution schemes. Back in the winter of 1994–95, when I knew nothing about pensions, my noble friend Lady Turner patiently and painstakingly took me through the elementary building blocks of pension provision, explaining the differences between various schemes and the issues of employer holidays. There are also much more detailed differences in the roles that trustees are required to play in individual schemes.
  There is not a one-size-fits-all solution. The amendment would require only that trustees were trained in the role and responsibilities of trustees. Oddly, that might not go far enough, resulting in a levelling down of standards.
  There is also the question of policing and enforcing any new requirements. We would have to create obligations on the trustees to provide the prescribed training and on the individual trustee to attend. OPRA has already said that investigating complaints and enforcing such a provision would be difficult.
  Another strong argument is that we would have to think about issues such as whether trustees should be required to show that they had reached a certain level of knowledge or competency at the end of the training, how such knowledge could be kept up to date and how one would offset the training and experience that individual trustees could bring to the job. Then, of course, there is the issue of who would pay for the cost of the training and of setting up an approval system.
  I could go on. The concept of compulsory trustee training sounds simple, but its execution is anything but. We agree with the majority view of the pensions industry that it would be premature to take such a major step. The joint working group has said:
  "We do not believe compulsion in this area is workable, nor do we believe that it is needed given the generally high standards of scheme governance reported by JWG bodies."
  However, that does not mean we should do nothing. The joint working group has suggested that trustees should be required to disclose information about trustee training in their scheme's annual report. That might involve a statement of the trustees' policy on training or details of any training that had taken place in the period covered by the report. That idea has great merit, because it would ensure trustee boards addressed the matter of training by putting the
  800
  spotlight on it in their annual report. We can do that in regulations. The idea has the support of the industry and offers the most practical way forward. We therefore propose to pursue that suggestion.
  My noble friend has secured a scheme that, although admittedly voluntary, will go a long way towards securing her objective of ensuring that all concerned— employers and newly nominated trustees—recognise the need for training and that a section of the annual report should address issues such as the extent to which trustees have been trained and the need for such training. It will also allow the Government, OPRA and the National Association of Pension Funds to highlight best practice and use it to encourage other schemes.
  I congratulate my noble friend on causing the House to put pressure on the Government to conduct further consultation and to show that we have listened and moved. We have come forward with a useful and positive suggestion that will highlight the importance of training and encourage those who have not already addressed the matter to do so. The proposals have wide support in the House and outside. My noble friend has done jolly well and I hope that she will feel able to withdraw the amendment.
  5 p.m.
  Baroness Turner of Camden: I thank my noble friend for that comprehensive response. I am glad that there was such a broad consultation process. I take it that the Government favour the joint working group's recommendation. Of course the group is in favour of training as well, but its suggestion is that the annual report should say which trustees have had training and specify how much training has been done. That is a good idea and moves strongly in the direction that I have argued for.
  The CBI suggested that training should be available to trustees at employers' expense. That could be looked at for the future, but in the meantime I thank the Minister for her response. This has been a satisfactory exercise, even though it has not achieved exactly what some of us wanted. The TUC still stands for compulsory training and I think that my union does, too. Nevertheless, this is a sizeable step in the right direction, so I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 84 not moved.]
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 85:
  After Clause 46, insert the following new clause—

  STATEMENT OF GOVERNANCE OF OCCUPATIONAL PENSION SCHEMES
  (".—(1) The Secretary of State shall make regulations providing for the trustees or managers of an occupational pension scheme to provide a written statement about the governance of the scheme.
  (2) The statement must cover, among other things—

  (a) the trustees' or managers' confirmation that they have undertaken a review of the governance arrangements and procedures of the scheme, and

  (b) their policy about keeping such arrangements and procedures under regular review.

  (3) The regulations shall also prescribe the circumstances when the Occupational Pensions Regulatory Authority ("the Authority") may require such a statement, the time period for providing the statement and the sanctions if a statement is not provided to the Authority within the time limits prescribed.").
  The noble Baroness said: This is another amendment about trustees and scheme governance. Well structured best practice guidelines can be helpful to all pension schemes, but in practice it is usually only in a smaller number of cases where the standards are already being met. The history of pensions shows that without at least the possibility of sanctions, standards may not improve as we all want.
  Ultimately, the running of a pension scheme is the responsibility of the trustees, even if someone else carries out the task for them. After all, it is they, rather than the advisers, who would face penalties from OPRA.
  In the case of corporate governance, there is a requirement for listed companies to keep under review the effectiveness of all internal controls. In 1999, these requirements were supplemented by the Turnbull report, which requires companies to identify the effectiveness of the related internal controls.
  The amendment is relevant, because pension scheme trustees also have an important stewardship role. Irrespective of the type of scheme, it is essential that a comprehensive and workable scheme governance policy is in existence and working. Trustees must be directly involved in setting the objectives, which must also be fully supported by the sponsoring employer.
  Modern pensions governance embraces policy, people and practice. It should ensure that the scheme has a written policy on procedures or guidelines so that trustees operate within the regulatory framework and the requirements of the trust deed and rules, and that the procedures or guidelines are understood by the trustees and have been incorporated into identifiable working practices.
  A governance review, as proposed in the amendment, could be a useful reminder of the issues in which compliance must be satisfied, as well as illustrating the range of issues that are the features of good pension governance. Something of the sort is necessary to ensure that employees have confidence in their schemes. Unfortunately, the lack of confidence arising from the Maxwell affair was partly responsible for the pensions mis-selling under the previous government, when employees opted out of good occupational schemes into personal pensions much to their disadvantage.
  Confidence in the good governance of schemes will ensure the maintenance and development of occupational schemes. I still believe that a good occupational scheme is the best way for employees to provide for their retirement. I hope that the
  802
  Government accept that that is the aim of the amendment and will be prepared to support it. I beg to move.
  Baroness Hollis of Heigham: My Lords, Amendment No. 85 would require the trustees and managers of occupational pension schemes to produce a statement at prescribed intervals saying that they had undertaken a review of the governance arrangements of the scheme and setting out their policy for keeping those arrangements under review. It would also provide for the statement to be sent to OPRA in prescribed circumstances and for OPRA to be able to impose a sanction if it was not provided.
  In the context of occupational pension schemes, "governance" refers to the internal controls and procedures put in place by the trustees or managers to ensure that the scheme is run in the most cost-effective and efficient way possible, ensuring the security of the scheme assets.
  Trustees are required to step back and look at how the scheme is being run. That includes ensuring that everyone involved in the administration of the scheme has clear lines of reporting and accountability and is sufficiently knowledgeable about what they are doing. It also includes checks to combat internal fraud, controls to ensure direct and prompt receipt of contributions from employers, scrutiny of claims made on the scheme to determine bona fides and effective monitoring of activities relating to the investment of the scheme's assets. In effect, it involves looking at every area of activity within the pension scheme administration and making sure that adequate controls are in place for each one.
  I recognise that requiring trustees to produce a statement about governance arrangements in their schemes is a good way of focusing their attention on their roles and responsibilities in relation to the running of the scheme. I also agree that the principles of good governance are an essential ingredient for the proper running of any business or organisation, including pension schemes. However, whether we should actually make this a regulatory requirement is another matter. The Pensions Act 1995 already makes it quite clear that the trustees are responsible for the proper running of their scheme. The Act provides a wide regulatory framework to support that message. If trustees do not comply, the scheme auditor and the scheme actuary are under a duty to report any irregularities to OPRA.
  It would be difficult, if not impossible, for trustees to fulfil their role under the pensions Act and trust law without some form of internal arrangements for ensuring the proper management of the scheme. As noble Lords are aware, there is a wide variation of type and size of pension scheme. Any system of internal controls must take account of the characteristics of individual schemes and allow for those differences.

  803
  Any legislative requirement in this area would need, for the sake of clarity and consistency, to spell out exactly what is meant by governance and how it would apply to particular schemes. That would give rise to further lengthy and complicated sets of regulations containing an exhaustive list of controls that trustees and managers would be required to put in place, the circumstances where they must do so and the circumstances in which statements would have to be sent to OPRA. It would impose a heavy burden on the scheme and an even heavier burden on OPRA. Any statement produced under these arrangements would also require verification by, for example, an auditor, if the requirement was to be effective.
  At present, trustees are required to obtain an auditor's opinion on the financial transactions of the scheme and, if he or she detects a flaw in the scheme's control system, this would be brought to the trustees' attention. However, auditors do not, as a matter of course, carry out a detailed check of a scheme's systems of internal controls. To require such a check would involve schemes in extra costs and we have to consider whether that can be justified. We do not believe that it can. The department is currently working with the industry in a joint working group to consider ways in which we can offer practical help to schemes in areas where we are keen to provide a clear lead and guidance but where it is not appropriate to regulate. Good governance is one such area.
  I recognise the intentions behind this amendment; indeed, I support them. However, I hope that what I have said about the complexity and costs associated with such a requirement has convinced my noble friend that it would be inappropriate to legislate and that, therefore, such matters are better left to guidance. In that way, trustees can determine appropriate controls according to the circumstances of their schemes. In the light of my remarks, I hope that my noble friend will feel able to withdraw her amendment.
  Baroness Turner of Camden: My Lords, again, I thank my noble friend the Minister for her explanation of the Government's policy in relation to the amendment. I am also very glad that she at least supports the principles behind the amendment, as well as the principles of good governance. The gist of my noble friend's remarks is that my amendment would, as I understand it, impose too heavy a burden upon trustees and, indeed, upon OPRA. I shall have to consider most carefully what my noble friend said. I am pleased that we have note of her reactions to the amendment because good governance of schemes is of paramount importance as far as concerns confidence in scheme provision. Having gained those commitments from the Government to the whole idea of good governance, it is good to have them on the record. I am grateful to my noble friend for her comments. I accept what she said about the burdens that the actual wording of my amendment could impose on those concerned. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  5.15 p.m.
  Clause 47 [Information to be given to the Authority]:
  Lord Astor of Hever Lord Astor of Hever moved Amendment No. 86:
  Page 45, leave out line 19 and insert—
  ("(e) a provider of insurance or investment services to the scheme;").
  The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendment No. 94. These amendments would extend the list of persons exempted from the definition of those involved in the administration of a scheme to include providers of insurance or investment services to the scheme. As presently drafted, the exemption is confined to fund managers. In our view, it is inconsistent to exempt fund managers and not to exempt insurance companies, which provide death-in-service benefits. The amendments would, therefore, broaden the exempt categories. I beg to move.
  Baroness Hollis of Heigham: My Lords, Amendment No. 86 would do two things. First, it would remove fund managers from those excluded from the requirement in Clause 47 to notify OPRA on the insolvency of the sponsoring employer where the scheme has no independent trustee (in cases where it is meant to have one), and where there is no other trustee. It would also remove fund managers from those excluded from the requirement to tell OPRA where there is no requirement for an independent trustee, the insolvent employer is the sole trustee and he has not confirmed to the authority that he is still able to act as trustee. Secondly, it would exclude those providing insurance or investment services from the same requirements. While at first glance it might appear that there is very little difference between the two, in reality the difference is significant.
  Clause 47 is part of a package of measures aimed at speeding up the time taken for schemes to wind up. That time can vary enormously from a relatively short period of time to 20 years in an extreme case. Scheme rules will generally set out the circumstances that trigger the winding up of an occupational pension scheme. Under some scheme rules, the insolvency of the sponsoring employer will trigger the winding up of the pension scheme, in others it will trigger the closure of the scheme and leave the trustees to decide whether the scheme should be wound up. It is important that there is a trustee in place following the employer's insolvency so that decisions can be made about the future of the pension scheme, including whether it should be wound up and whether to make decisions, for example, about investment strategy.
  Difficulties may also arise in money purchase schemes, which do not need an independent trustee, where an insolvent employer is the sole trustee. In those cases, the employer may no longer be able to act as a trustee. It is important that OPRA is notified about these cases quickly so that it can use its existing powers to appoint a trustee if necessary.
  Clause 47 applies where the sponsoring employer of an occupational pension scheme becomes insolvent and will require trustees, or if there is no trustee, a

  805
  person involved in the administration of the scheme, to notify OPRA that the scheme has no independent trustee, or no trustees at all (in cases where it is meant to have an independent trustee), or that the insolvent employer was the sole trustee and is no longer able to act as trustee.
  There is currently no requirement for OPRA to be notified where an employer is insolvent and there is no trustee. Schemes can be left in limbo until either the insolvency practitioner or OPRA becomes aware of the situation and takes action. Therefore, this clause aims to ensure that schemes do have a trustee in place following the insolvency of the employer, so as to make sure that members' interests are protected and that prompt decisions can be made about the future of the scheme. OPRA will be able to make enquiries about the position and, if appropriate, arrange for a trustee to be put in place. Because it is important that OPRA is told quickly, we want the obligation to fall on those who are likely to become aware of the insolvency of the employer fairly soon after that event happens.
  Where there is a trustee, the obligation to notify OPRA that the scheme has no independent trustee will fall on that person. But where there is no trustee, those persons involved in the administration of the scheme will have to tell OPRA. We realise that not everyone involved in the administration of the scheme will be aware of what has happened to the employer in sufficient time to allow OPRA to take prompt action. That is why it is right to limit the requirement to those persons involved in the day-to-day administration of the scheme who are best placed to notify OPRA promptly.
  A number of people can be involved in what could broadly be considered as administrative functions in relation to a scheme, but on whom it may not be appropriate to impose the requirements introduced by this clause. Fund managers are just one example of those who clearly should be excluded—they are unlikely to be aware of what has happened to the employer, and that there is no trustee, in sufficient time to allow OPRA to take prompt action.
  Amendment No. 94 seeks to add persons providing insurance or investment services to the list of persons not included in the definition of persons involved in the administration of the scheme. That would exclude them from OPRA's powers in Clause 50 to issue directions, not only for them to take action and provide information but also for them to be provided with information, which should not be overlooked.
  Sometimes the winding-up process can stagnate. It may be because those winding up the scheme are having difficulty in obtaining information or are waiting for action to be taken before they can continue. It may also be that those carrying out the winding-up process are not taking action as quickly as they could. Clause 50 gives OPRA power to direct action during the winding up of the scheme where it feels that the process is unduly protracted. It will introduce accountability into the winding-up process and provide members with reassurance that the scheme is being properly wound up.
  806
  It is important that those winding up the scheme should get support when they are experiencing difficulties during the process. OPRA will be able to direct that action is taken or that information should be provided. That includes the provision of information by and the provision of information to the trustees or managers and those involved in the administration of the scheme.
  A number of people can be involved in what could broadly be considered as administrative functions in relation to a scheme but on whom it may not be appropriate to impose the requirements introduced by these provisions. I understand the reasons for the noble Lord's amendments. However, some insurance companies can and do provide day-to-day administrative services to schemes, as well as insurance services. We need to be careful that any exemptions do not go wider than we intend.
  Those which provide administrative services for the trustees of the scheme are arguably in the best position to provide OPRA with information following the employer's insolvency. Furthermore, where they are carrying out some of the work needed to wind up the scheme they may need OPRA's help in getting that work done.
  These new requirements and regulations will allow us to add to those persons who should not be treated as involved in the administration of the scheme. We shall, of course, take into account any representations we receive and, if appropriate, use the regulation making powers to add further to the list of persons already set out. In that light, I hope that the noble Lord will withdraw the amendment.
  Lord Astor of Hever: My Lords, I am grateful to the Minister for that full reply which we shall need to read carefully in Hansard. In the meantime, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 48 [Modification of scheme to secure winding-up]:
  [Amendment No. 87 not moved.]
  Clause 49 [Reports about winding-up]:
  [Amendments Nos. 88 to 92 not moved.]
  Clause 50 [Directions for facilitating winding-up]:
  [Amendments Nos. 93 to 96 not moved.]
  Lord Higgins Lord Higgins moved Amendment No. 97:
  After Clause 51, insert the following new clause—

  REMOVAL OF RESTRICTION ON PENSION ANNUITIES
  (" . There shall be no requirement for a holder of a stakeholder, personal, occupational or other defined contributory pension to take the pension in the form of an annuity by a specified age.").
  The noble Lord said: My Lords, this amendment concerns the age restriction on taking a pension annuity. This matter will be familiar to your Lordships. Only last year on the welfare legislation a similar amendment, but one that was restricted to

  807
  stakeholder pensions, was accepted by your Lordships' House although it was subsequently rejected in another place.
  The House will know, therefore, that there is considerable concern about the imposition of the 75 years of age rule. There are several reasons for this. First, on average, people are living much longer. As I think has already been said on a previous occasion, at the time of the Beveridge report the average life expectancy beyond retirement age was about two years, whereas now it is much longer. Therefore, the age limit of 75 is extremely restrictive.
  Secondly, previously annuity rates seemed to be relatively stable but now they fluctuate considerably. Over the past 10 years they have plummeted from a level of some 16 per cent to about 8 per cent. In other words, the pension which is drawn at any given moment is about half previous levels. Therefore, there is a considerable argument for greater flexibility in this matter. In the light of President Clinton's announcement yesterday about the human genome project we may look forward to even more dramatic changes in the future. The situation is changing dramatically and therefore we believe that an adjustment is necessary.
  Successive governments have relaxed the rules to some extent; for example, in regard to income drawdown schemes. However, those can be risky unless people have considerable back-up in the form of higher income. For people on lower incomes the income drawdown scheme can be risky. There have also been changes to the rules on additional voluntary contributions. The limit was recently raised to the age of 75 with regard to defined contribution pension schemes. Overall, there are strong arguments in favour of the Government reconsidering the matter.
  A press report produced in April stated that the Government proposed to raise the age limit to 80. Mr David Davis said that he thought that raising the limit was a good idea but that the Government would wait until half the relevant people had died before they did anything! I believe that there is some truth in that. We have understood for a considerable period that the Government intended to do something in this regard, but nothing happens. It would be helpful to be given an indication of the Government's thinking on the matter. At all events, it is important that the matter should be considered by noble Lords and that some change should be made. I beg to move.
  Lord Goodhart: My Lords, when this matter was raised in Committee I said that I could not support the amendment moved by the noble Lord, Lord Higgins. The situation has not changed since then. We feel that the tax relief that is given on contributions to pension funds is given for a specific purpose; namely, to provide for pensions income at retirement age when people give up their business or profession. We do not feel that this is an appropriate vehicle to use simply to build up a fund which can then be passed down in a tax efficient way to future generations. There are other tax favourable methods of saving such as ISAs. We think,
  808
  therefore, that to allow pension funds to be held free from any obligation at any point in time to buy an annuity is inappropriate and defeats the purpose for which the relief is granted.
  We recognise the desirability of drawdown schemes in deferring the date at which an annuity is drawn. I should confess that I have a drawdown arrangement myself. However, that is an entirely different matter. We are unable to support the amendment.
  Baroness Hollis of Heigham: My Lords, as we have heard, this amendment seeks to remove the current requirement for tax-approved defined contribution pension funds to be used to purchase an annuity by the time the member reaches the age of 75. We debated this issue in Committee.
  As I tried to suggest, pension annuities are the only product available that converts a capital sum in a pension fund into a guaranteed income for the remainder of the annuitant's life. That guarantee is paramount to the financial security of pensioners.
  There is already some flexibility to defer annuity purchase by using the income drawdown facility, as the noble Lord, Lord Goodhart, said. However, it carries the risk of high administrative charges and a reduced capital fund if investments do not perform well. All the advice from the industry is that it should be taken up only by people with substantial funds; for example, a fund of at least £200,000. In practice, the majority of people are best advised to convert their pension fund to an annuity as soon as they retire because their funds are of more modest size.
  We believe that requiring that an annuity be purchased by age 75 strikes a fair balance between flexibility over the timing of buying an annuity, while guarding against the risk that the fund becomes seriously depleted when someone may need to return to income related benefits.
  Noble Lords will appreciate that tax-approved pension funds attract generous tax relief as an encouragement for people to save for their retirement. It is right that such pension savings should be used to provide a regular income throughout retirement. As the noble Lord, Lord Goodhart, has rightly said, other vehicles such as ISAs, which attract tax relief, are available to those wishing to save for other purposes, such as to provide an inheritance for their children.
  I know that there has been sustained criticism that annuities do not provide value for money because the rates today do not compare favourably with the rates which were offered a decade ago. I believe that the noble Lord, Lord Higgins, made that point tonight.
  However, as I have said before, I do not think that a simple comparison of annuity rates tells the whole story. Many people have benefited from substantial investment growth since annuity rates peaked and are now retiring onto considerably higher pensions in real terms than their predecessors who retired in the 1980s. For example, in 1990 someone on average earnings—and, given certain assumptions, producing a pension pot of £31,000—would have an income of £92 a week, or £119 in today's prices. In 1998, although annuity

  809
  rates had fallen from 15 per cent to 9 per cent, that fund would not have been £31,000 but £97,000. The income would have been £175 a week, with inflation of only two per cent, compared with the £119 a week of the person retiring in 1990.
  Annuity rates have fallen by a third or a half, according to the timescale one follows. As I say, annuity rates have fallen from 15 per cent in 1990 to 9 per cent in 1998 on a pot that has trebled in value to face inflation that is a sixth of what it was. That therefore generates a 50 per cent increase in income in real terms compared with what someone would have got in 1990 with those same three variables in play. Too often people want high annuity rates, high capital growth and low inflation all at the same time. That, of course, is not reasonable.
  There is already flexibility and a reasonable degree of choice for those with pension savings. There are a number of annuity products on offer which cater for different needs. Because the pension annuity business is an expanding market, new products are being launched to offer even greater choice to purchasers. In recent weeks, two new investment-linked products have been launched. I believe that something like 10 companies now provide investment-linked annuity products which obviously track, follow or are related to growth in the markets.
  It is clear from recent developments that the pension industry can and does innovate to provide greater flexibility for annuitants. There has been a noticeable increase in the number of companies offering investment-linked annuity products, giving greater choice for people to shop around for competitive annuity rates and the products that meet their needs.
  It is worth reminding noble Lords that the Government keep the current arrangements under review, but we need to be absolutely sure that if a change were to be made it would represent a definite improvement over the present position.
  I should also re-emphasise that the annuity purchase rules are laid down in the Income and Corporation Taxes Act 1988. Amendments to that legislation do not come within the scope of the Bill, so the proposed new clause would not have the intended effect. I hope that in the light of what I have said and what the noble Lord, Lord Goodhart, said, the noble Lord will feel able to withdraw his amendment.
  Lord Higgins: My Lords, I thank the Minister for that thoughtful reply. The problem is the inflexibility of the arrangement as far as individuals are concerned. It may well be that they feel able to defer drawing their pension; that they prefer to see it accumulate in the way described by the noble Baroness and to draw a larger pension at a later date. It is true, of course, as the noble Baroness said, that the insurance industry, to some extent, has begun very recently—perhaps belatedly—to produce products related to the stock market rather than to the gilt market. None the less, this is a comparatively late development.
  810
  As we have seen in the past, some of the problems arise from disappointed expectations. It is perhaps true that, given the general history of these matters, people expected to see their funds grow at a reasonable rate and faster than inflation, but none the less based their expectations on the annuity rates which had prevailed for a considerable time. One can recall a period not so long ago—perhaps two-and-a-half to three years ago—where the lack of flexibility forced people who had reached 75 but who had not previously drawn their pension to do so at a moment when the stock market was in a very bad way.
  This proves something which I still find surprising—namely, that the Government intend in their general pensions policy to forecast what pension people are likely to receive. The reality is that there are very wide fluctuations in the markets. A degree of flexibility is something from which people would benefit, rather than being forced at a specific date—provided they have not taken a pension previously—to invest in an annuity.
  The Minister has made a number of interesting points. I do not find them wholly convincing and I shall seek the opinion of the House.
  5.34 p.m.
  On Question, Whether the said amendment (No. 97) shall be agreed to?
  Their Lordships divided: Contents, 129; Not-Contents, 186.

  Division No. 2

  CONTENTS

  Alexander of Weedon, L.

  Cranborne, V.

  Allenby of Megiddo, V.

  Crathorne, L.

  Anelay of St Johns, B.

  Crickhowell, L.

  Astor, V.

  Cuckney, L.

  Astor of Hever, L.

  Dean of Harptree, L.

  Attlee, E.

  Dundee, E.

  Belstead, L.

  Eames, L

  Biffen, L.

  Eccles of Moulton, B.

  Blackwell, L.

  Eden of Winton, L.

  Blaker, L.

  Elliott of Morpeth, L.

  Blatch, B.

  Elton, L.

  Boardman, L.

  Feldman, L.

  Brabazon of Tara, L.

  Fookes, B.

  Bridgeman, V.

  Forsyth of Drumlean, L.

  Brougham and Vaux, L.

  Glentoran, L.

  Burnham, L. [Teller]

  Goschen, V.

  Buscombe, B.

  Gray of Contin, L.

  Butterworth, L.

  Hanham, B.

  Byford, B.

  Hayhoe, L.

  Caithness, E.

  Henley, L. [Teller]

  Campbell of Alloway, L.

  Higgins, L.

  Campbell of Croy, L.

  Howe, E.

  Carlisle of Bucklow, L.

  Howell of Guildford, L.

  Carnegy of Lour, B.

  Hylton, L.

  Chadlington, L.

  James of Holland Park, B.

  Clark of Kempston, L.

  Jenkin of Roding, L.

  Coe, L.

  Jopling, L.

  Colwyn, L.

  Kelvedon, L.

  Cope of Berkeley, L.

  Kimball, L.

  Courtown, E.

  Kingsland, L.

  Cowdrey of Tonbridge, L.

  Laird, L.

  Craig of Radley, L.

  Lamont of Lerwick, L.

  Craigavon, V.

  Lincoln, Bp.

  811

  Liverpool, E.

  Rees, L.

  Luke, L.

  Renfrew of Kaimsthorn, L.

  Lyell, L.

  Renton, L.

  McConnell, L.

  Roberts of Conwy, L.

  Mancroft, L.

  Ryder of Wensum, L.

  Marlesford, L.

  Saatchi, L.

  Marsh, L.

  Saltoun of Abernethy, Ly.

  Masham of Ilton, B.

  Seccombe, B.

  Miller of Hendon, B.

  Selborne, E.

  Molyneaux of Killead, L.

  Selsdon, L.

  Monro of Langholm, L.

  Sharples, B.

  Monson, L.

  Shaw of Northstead, L.

  Montagu of Beaulieu, L.

  Shrewsbury, E.

  Mowbray and Stourton, L.

  Skelmersdale, L.

  Moynihan, L.

  Stewartby, L.

  Murton of Lindisfarne, L.

  Stodart of Leaston, L.

  Naseby, L.

  Strathclyde, L.

  Northbrook, L.

  Swinfen, L.

  Taylor of Warwick, L.

  Northesk, E.

  Tebbit, L.

  Norton of Louth, L.

  Thatcher, B.

  Onslow, E.

  Thomas of Gwydir, L.

  Onslow of Woking, L.

  Trefgarne, L.

  Oppenheim-Barnes, B.

  Vivian, L.

  Palmer, L.

  Waddington, L.

  Park of Monmouth, B.

  Wakeham, L.

  Peyton of Yeovil, L.

  Weatherill, L.

  Pilkington of Oxenford, L.

  Wilcox, B.

  Platt of Writtle, B.

  Willoughby de Broke, L.

  Plummer of St. Marylebone, L.

  Windlesham, L.

  Rawlings, B.

  Wolfson, L.

  Reay, L.

  Young, B.

  NOT-CONTENTS

  Acton, L.

  Desai, L.

  Addington, L.

  Dholakia, L.

  Ahmed, L.

  Diamond, L.

  Alli, L.

  Donoughue, L.

  Alton of Liverpool, L.

  Dormand of Easington, L.

  Amos, B.

  Dubs, L.

  Andrews, B.

  Eatwell, L.

  Archer of Sandwell, L.

  Elder, L.

  Ashley of Stoke, L.

  Evans of Parkside, L.

  Ashton of Upholland, B.

  Evans of Watford, L.

  Avebury, L.

  Ezra, L.

  Bach, L.

  Falconer of Thoroton, L.

  Bassam of Brighton, L.

  Falkland, V.

  Beaumont of Whitley, L.

  Farrington of Ribbleton, B.

  Berkeley, L.

  Faulkner of Worcester, L.

  Billingham, B.

  Filkin, L.

  Blackburn, Bp.

  Fyfe of Fairfield, L.

  Blackstone, B.

  Gale, B.

  Blease, L.

  Gavron, L.

  Borrie, L.

  Geraint, L.

  Bradshaw, L.

  Gibson of Market Rasen, B

  Bragg, L.

  Goldsmith, L.

  Brennan, L.

  Goodhart, L.

  Brooke of Alverthorpe, L.

  Gordon of Strathblane, L.

  Brooks of Tremorfa, L.

  Goudie, B.

  Burlison, L.

  Gould of Potternewton, B.

  Carlile of Berriew, L.

  Graham of Edmonton, L.

  Carter, L, [Teller]

  Greaves, L.

  Chandos, V.

  Grenfell, L.

  Christopher, L.

  Hamwee, B.

  Clarke of Hampstead, L.

  Hardy of Wath, L.

  Cledwyn of Penrhos, L.

  Harris of Greenwich, L.

  Clement-Jones, L.

  Harris of Richmond, B.

  Cocks of Hartcliffe, L.

  Harrison, L.

  Crawley, B.

  Haskel, L.

  Currie of Marylebone, L.

  Hayman, B.

  Dahrendorf, L.

  Hilton of Eggardon, B.

  David, B.

  Hogg of Cumbernauld, L.

  Davies of Coity, L.

  Hollis of Heigham, B.

  Davies of Oldham, L.

  Hooson, L.

  Dean of Thornton-le-Fylde, B.

  Howells of St. Davids, B.

  812

  Howie of Troon, L.

  Phillips of Sudbury, L.

  Hoyle, L.

  Pitkeathley, B.

  Hughes of Woodside, L.

  Plant of Highfield, L.

  Hunt of Chesterton, L.

  Prys-Davies, L.

  Hunt of Kings Heath, L.

  Ramsay of Cartvale, B.

  Irvine of Lairg, L. (Lord Chancellor)

  Randall of St. Budeaux, L.

  Razzall, L.

  Islwyn, L.

  Rea, L.

  Jacobs, L.

  Redesdale, L.

  Janner of Braunstone, L.

  Rendell of Babergh, B.

  Jay of Paddington, B. (Lord Privy Seat)

  Rodgers of Quarry Bank, L.

  Russell, E.

  Jenkins of Putney, L.

  Sainsbury of Turville, L.

  Kennedy of The Shaws, B.

  Sawyer, L.

  King of West Bromwich, L.

  Scott of Needham Market, B.

  Layard, L.

  Serota, B.

  Lea of Crondall, L.

  Sewel, L.

  Lester of Herne Hill, L.

  Sharman, L.

  Linklater of Butterstone, B.

  Sharp of Guildford, B.

  Lipsey, L.

  Sheppard of Liverpool, L.

  Lockwood, B.

  Shore of Stepney, L.

  Shutt of Greetland, L.

  Lofthouse of Pontefract, L.

  Simon, V.

  Lovell-Davis, L.

  Smith of Clifton, L.

  Ludford, B.

  Smith of Leigh, L.

  Macdonald of Tradeston, L.

  Stoddart of Swindon, L.

  McIntosh of Haringey, L. [Teller]

  Stone of Blackheath, L.

  Strabolgi, L.

  MacKenzie of Culkein, L.

  Symons of Vernham Dean, B.

  Mackenzie of Framwellgate, L.

  Taverne, L.

  Mackie of Benshie, L.

  Taylor of Blackburn, L.

  McNally, L.

  Taylor of Gryfe, L.

  Maddock, B.

  Thomas of Walliswood, B.

  Mallalieu, B.

  Thomson of Monifieth, L.

  Mar and Kellie, E.

  Thornton, B.

  Mason of Barnsley, L.

  Tomlinson, L.

  Massey of Darwen, B.

  Tordoff, L.

  Merlyn-Rees, L.

  Uddin, B.

  Methuen, L.

  Varley, L.

  Miller of Chilthorne Domer, B.

  Walker of Doncaster, L.

  Mitchell, L.

  Wallace of Saltaire, L.

  Molloy, L.

  Walmsley, B.

  Morris of Castle Morris, L.

  Warner, L.

  Morris of Manchester, L.

  Warwick of Undercliffe, B.

  Newby, L.

  Watson of Richmond, L.

  Nicholson of Winterbourne, B.

  Wedderburn of Charlton, L.

  Nicol, B.

  Whitaker, B.

  Northover, B.

  Whitty, L.

  Orme, L.

  Wilkins, B.

  Parekh, L.

  Williams of Crosby, B.

  Patel of Blackburn, L.

  Williams of Mostyn, L.

  Patel, L.

  Williamson of Horton, L.

  Perry of Walton, L.

  Woolmer of Leeds, L.

  Peston, L.

  Young of Old Scone, B.

  Resolved in the negative, and amendment disagreed to accordingly.
  5.45 p.m.
  Clause 53 [Jurisdiction of the Pensions Ombudsman]:
  [Amendment No. 98 not moved.]
  Clause 54 [Investigations by the Pensions Ombudsman]:
  [Amendment Nos. 99 and 100 not moved.]
  Schedule 5 [Pensions: miscellaneous amendments and alternative to anti-franking rules]:
  [Amendment Nos. 101 to 104 not moved.]
  Clause 57 [Rights of appeal]:
  [Amendment No. 105 not moved.]
  Clause 58 [Time limit for appeals]:
  Lord Astor of Hever Lord Astor of Hever moved Amendment No. 106:
  Leave out Clause 58.
  The noble Lord said: My Lords, this amendment seeks to delete Clause 58 from the Bill. On these Benches we seek to ensure that the present time limit in relation to an appeal will remain at 12 months. In Committee the Minister accepted that there had been some concern that six months did not provide vulnerable, and perhaps grieving people, with sufficient time in which to bring an appeal. The Minister also said that advice the Government had received from some ex-servicemen's organisations indicated that they were comfortable with the proposals.
  I am not sure which organisations the Minister's department contacted to enable that statement to be made because those organisations that deal directly with war pensions and the agency itself and have most knowledge of representation at tribunals are decidedly uncomfortable with the proposals. Indeed, they are most concerned. Among those which have contacted me a re SSAFA, the RAF Association, the RAF Widows Association, the War Widows Association, St Dunstan's (For Service War Blinded), BLESMA, Combat Stress (Ex-Services Mental welfare Society) and the RBL. I declare an interest as president of the Earl Haig branch of the Royal British Legion. They are all united in their advice that anything that shortens the length of time that people have in which to lodge an appeal is quite wrong. Their advice is not to be disregarded lightly.
  The Government are giving the impression that they are out to limit claims and deny servicemen and women their rightful financial support by shortening the appeal period. Why should our forces be limited to six months when the Americans, our close partners in many war zones, get 12 months? Are our troops any different? Are their illnesses different? Surely not. All possible help must be given to those who are wounded or killed for us. Accordingly, the 12-month period should remain. I hope that the Minister will think again. I beg to move.
  Lord Ashley of Stoke: My Lords, perhaps I may rise on a point of information. War pensioners are injured in public service. The same point applies to vaccine-damaged children. I was informed that there was to be a very important Statement in the House of Commons this afternoon regarding vaccine-damaged children and the payment scheme for them. I should be very surprised indeed if the Government did not see fit to allow Members of this House to question and interrogate Ministers and scrutinise that Statement in the same way as in the House of Commons.
  Can my noble friend enlighten us? I believe that Members of this House are entitled, first, to put questions to the Minister and, secondly, to be given some information as regards the Statement.
  Baroness Carnegy of Lour: My Lords, before the noble Baroness replies, I should like to support my
  814
  noble friend. The list of organisations he mentioned when speaking to his amendment are concerned about the time limit not because they are groups seeking to make a political point; they comprise pragmatic people who think that it will be difficult for pensioners to appeal in such a short time. I hope that the Minister will listen carefully to the arguments in favour of the amendment. It is not a political point, but one driven by matters of practicality. A little sympathy would be most desirable here.
  Baroness Hollis of Heigham: My Lords, the noble Lord, Lord Astor, raised a point about the time limit on appeals for war pensions. My noble friend Lord Ashley drew the analogy that someone who is a war pensioner incurred their injuries essentially in the course of public service; namely, that those injuries were received while fighting for their country. He went on to ask, when considering vaccine-damaged children who received vaccinations for the sake of public health and the safety of other children, why the Statement was not repeated in this House. Both groups have suffered in the name of the public good.
  Today the Government made an extremely important announcement which will affect the lives of many of the most vulnerable and disabled children in our society. My noble friend has asked why the Government did not see fit to come to your Lordships' House, as though only Members of the House of Commons would be interested in developments as regards vaccine-damaged children. Could it be that noble Lords decided that more important matters needed to be discussed, such as annuity rates at the age of 75? Should such matters take precedence over the interests and well-being of vaccine-damaged children?
  I take the reproof. The Government offered the Statement to this House. Because for some time I personally have been involved with organisations representing vaccine-damaged children, I wanted to be able to tell noble Lords what the Government are doing in this area. I would have positively welcomed the opportunity to repeat the Statement to the House. My noble friend would have been able to interrogate me on the details and noble Lords would have been informed on a matter that is a major social security issue and which could quite easily have been debated as an amendment to the Bill before us had it not been agreed by mutual consent that the Government's own review should first come to its conclusion.
  Although I offered to repeat the Statement, understand—I hope that I am not putting words into anyone's mouth at this point—that Members of the Official Opposition rejected the Statement and did not want it to be repeated in the House this afternoon, even though this matter affects the well-being of some of our most vulnerable children. However, when it suits the Official Opposition, it will pursue questions on these matters with the Government.
  Given that, I am happy to tell my noble friend that, at present, the parents of a vaccine-damaged child arc eligible for an allowance in the form of a capital sum which is intended to offset part of the additional costs of bringing up that child. The maximum award is

  815
  £40,000. In the late 1970s the figure was set at £10,000. It was raised to £30,000 until a few months ago when the Government raised the figure to £40,000. At the time my noble friend pointed out forcefully that that sum was insufficient and that from his point of view it was an unacceptable award. I believe that it was for that reason that my noble friend tabled an Unstarred Question for tomorrow evening.
  I am happy to be able to report that in the Statement made in another place today, the Government announced that they are not raising the award of £40,000 for vaccine-damaged children to £50,000 or even £60,000, but to £100,000. That means that those who have already received moneys will have their allowances upgraded to a real-terms equivalent of £100,000. The upgrading will be speedily enforced in regulations.
  Furthermore, we shall widen the scope of the scheme so that it will offer generous compensation to those not presently included in the scheme. At present the scheme operates only for those children with 80 per cent disability. From now on all children with greater than 60 per cent disability will be included. The present rules require a claim to be made within six years of the vaccination. That period is to be increased to 21 years, so that some young people whose symptoms manifest themselves only during adolescence and at puberty will now be brought within the scope of the scheme.
  I am pleased that I have been able to give the House details of the scheme. This is a social security matter and one of important public interest. For families bringing up vaccine-damaged children, this measure will bring about a major improvement in their lot. Although I do not wish to suggest that because the Statement contained good news it was not taken up by the Official Opposition, I hope that my noble friend and others will agree that the Government have taken a decent, generous and compassionate step as regards vaccine-damaged children. I am delighted to have been given the opportunity to share this information with the House. I thank my noble friend.
  Perhaps I may now turn to war pension appeals. In Committee I went to some length to explain our reasons for bringing forward this measure. I shall not burden the House by repeating those points. I had hoped that, in the light of those explanations, noble Lords would have accepted that this provision is reasonable and necessary for the smooth, efficient and speedy delivery of just and fair decisions.
  The current arrangements mean that some appeals are not subject to any time limit but, where one exists, it is often extended indefinitely by tribunals. That can work against the interests of appellants, against the effective administration of appeals and against a fair and just outcome. That is not a recipe for success.
  To ask tribunal members to consider decisions made decades ago is to place them in an invidious, time-consuming and frustrating position, one where they are expected to reach decisions based on the appellant's circumstances, the medical understanding
  816
  and the law as it stood at the time. That is an unsatisfactory arrangement and falls short of the wider expectations of a modern-day appeals system.
  New time limits will ensure that appeals are heard nearer to when decisions are made; that is, the time limit applies not to the original claim, but on hearing appeals against the decision. Thus an appeal cannot be lodged 20 years after a decision, because most of the evidence will have been lost in the system. Facts are clearer when appeals are lodged close to the time that the decision is made and their relevance is more readily apparent. The time limits will largely negate the need to rely on assumptions about conditions that existed in the distant past. How can a satisfactory appeal be held on a decision that may have been reached 20 years previously when the medical and other knowledge on which that decision was based may have changed quite dramatically?
  We propose that interim assessment decisions should retain their current three-month appeal time limit, but that in all other instances appeals should be submitted within a longer six-month time limit, starting from the date that the decision is notified. Elsewhere, most other appeal time limits do not exceed three months. We feel, therefore, that six months is relatively generous. In proposing this longer time-scale, we are paying due recognition to the unique status of war pensioners, the complexity of the war pensions scheme and the fact that these decisions have not previously been time limited.
  We are also making provision for late appeals to be admitted within the 12 months following the end of the six-month appeal time limit. Affirmative regulations will be brought forward prescribing the circumstances in which late appeals will be accepted. We intend that such circumstances will be broadly similar to those contained within present social security provisions.
  I think that it would also be pertinent to reiterate a point I made in Committee that noble Lords may have overlooked. Furthermore, it should go some way towards alleviating certain concerns that may possibly be based on a degree of misunderstanding in this area.
  These provisions have no knock-on effect on claims for war pensions. War disablement pensioners and war widows may continue to make claims at any time—10, 15 or even 25 years after the incident or accident occurred. If a claimant incurred an injury at the age of 23, he may still bring in a claim at the age of 60. All we are saying is that the appeal against the ultimate decision should be made within a six-month time frame so that the appeal relates directly to the circumstances under which the decision was made—not 10 or 20 years further down the line. Efforts to be just and fair under those circumstances cannot be effective. The six-month appeal time limit will not start until after a claim for a war pension has been made, the necessary information provided and a decision notified.
  The appeal clock will start to tick only from the date that a decision is finally notified by the War Pensions Agency. Even then, a dissatisfied claimant need only lodge an appeal within the six-month time limit. The

  817
  fact that a claimant may not be able to obtain all the evidence before the expiry of the time limit is no bar to the lodging of an appeal. He or she need only inform the War Pensions Agency that further information will follow. If the claimant needs assistance, the agency will make every effort to help, for example, through the War Pensioners' Welfare Service.
  Once the appeal has been lodged, the agency will begin its preparation of the papers for an appeal hearing. When that is done, it will send the appellant full details of the case. At this stage, the claimant will be given a further 28 days in which to write in again with further information. Even that is not the end of the line. When the hearing date arrives, the claimant or his or her representative still has an opportunity to produce any additional evidence that is relevant to the outcome and that may previously have been overlooked. Therefore, there are several stages beyond the initial lodging of an appeal at which a claimant may provide any additional evidence. I do not believe that the six-month time limit is unreasonable.
  I have also explained previously that decisions made before the new time limit is commenced will have transitional protection. Those affected by this provision, but who receive a decision before its commencement, will have at least a year from the notification of the decision in which to bring an appeal. The new appeal time limit will apply only to those for whom decisions are made on or after the commencement date.
  Finally, as I explained in Committee, if at any future date we need to vary the time limit in the light of the workings of the proposal, I shall be happy to come back with affirmative regulations which will be subject to the agreement of both Houses. Given the fact that the original request for the war pension can be brought at any time is unaffected, what we are seeking to do, which is entirely reasonable, is to say that the appeal against that should be made within a decent period after the original decision being taken—in this case six months—together with transitional protection. That six-month period can be extended if additional information comes through and the war pensioner needs further time to collect that information. To have the current system in which one can have a decision taken 20 years after the injury and an appeal a further 20 years after the decision cannot be sensible or fair to people in similar circumstances and cannot produce a right and proper decision. Therefore, in the light of what I have said I hope that the noble Lord, Lord Astor, will agree that the clause in the Bill is acceptable to the House.
  6 p.m.
  Lord Astor of Hever: My Lords, I thank the noble Baroness for that reply which ranged wider than the amendment we were considering. As regards the question raised by the noble Lord, Lord Ashley, I understand that there is a Unstarred Question for the dinner break tomorrow on the vaccine damage payment scheme. Therefore, this House, unlike the other place, will have the opportunity to consider the matter.
  818
  I turn to the amendment. I thank my noble friend Lady Carnegy for her support. I agree with her that it is not a political point but a practical one. I accept that the Minister considered the amendment in great detail in Committee, but, despite what the Minister has said, a great many of the service charities are very unhappy. I shall consider Hansard in great detail and discuss the matter with those charities. In the meantime I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 60 [Constitution and procedure of Pensions Appeal Tribunals]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 107:
  Page 62, line 14, after ("qualified") insert (" , persons with knowledge or experience of service in Her Majesty's naval, military or air forces").
  The noble Baroness said: My Lords, in Committee your Lordships expressed concern that Clause 60 could have the effect of denying those with knowledge or experience of service life the opportunity to serve on pensions appeal tribunals. Noble Lords felt that this could be detrimental to tribunal hearings. I explained that my noble and learned friend the Lord Chancellor has always intended to continue to appoint people with knowledge or experience of service life to the pool of tribunal members.
  However, the Government are alert to concerns raised in this House and I agreed to bring forward a government amendment to place a duty on the Lord Chancellor to appoint service people to a pool of tribunal members. I also undertook to write to the three presidents of the pensions appeal tribunals.
  Government Amendments Nos. 107, 109 and 111 place a duty on the Lord Chancellor to appoint,
  "persons with knowledge or experience of service in Her Majesty's naval, military or air forces",
  to the pool of tribunal members. It will also provide for people with "other" experience to be appointed. That will ensure that the presidents of the pension appeal tribunals at all times are able to select members of individual appeal tribunals from a pool that must include persons with legal qualifications, those with medical qualifications and persons with knowledge or experience in Her Majesty's Armed Forces.
  I have also written to the presidents of the pensions appeal tribunals explaining the Government's purpose in bringing these changes and drawing to their attention the points raised by your Lordships during the debate.
  The Government recognise the expertise that service people can bring to a tribunal in a similar way that legal and medical expertise is helpful. The Government have noted the concerns of this House and have laid amendments that will ensure that there are people with knowledge and experience of many of the services appointed to the pool of tribunal members and available to hear appeals. I hope that your Lordships will accept these amendments. I beg to move.
  On Question, amendment agreed to.
  Lord Astor of Hever: My Lords, I thank the noble Baroness for moving these amendments. As regards Amendment No. 107, she promised at Committee stage that she would come back at Report with this amendment: it is a real break through. On behalf of the service charities and the veterans' groups, I thank the noble Baroness for her help in this matter.
  On Question, amendment agreed to.
  [Amendment No. 108 not moved.]
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 109:
  Page 62, line 27, leave out from ("2") to ("it") in line 28.
  On Question, amendment agreed to.
  [Amendment No. 110 not moved.]
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 111:
  Page 62, leave out lines 31 and 32.
  On Question, amendment agreed to.
  [Amendment No. 112 not moved.]
  Clause 61 [Composition of central advisory committee]:
  [Amendments Nos. 113 and 114 not moved.]
  Clause 63 [Loss of benefit for breach of community order]:
  Lord Windlesham Lord Windlesham moved Amendment No. 114A:
  Page 65, line 11, leave out from beginning to ("that") and insert ("a court makes a determination").
  The noble Lord said: My Lords, in moving this amendment I wish to speak also to Amendments Nos. 114B to 114H, Amendments Nos. 115A to 115D and Amendments Nos. 116A to 116G. By the time we have finished this debate we should have made substantial progress through the long list of amendments on the Marshalled List.
  Baroness Hollis of Heigham: That is very thoughtful of the noble Lord.
  Lord Windlesham: It is a moment of amity which will shortly be shattered by what I have to say to the Government Front Bench.
  This is the third time that arguments have been rehearsed against the inclusion in a social security measure of a pecuniary sanction when an offender who is subject to a community order is alleged to have failed to comply with the conditions of that order. Amendments Nos. 115 to 117, 119 and 120 would leave out the relevant clauses completely, whereas the remaining amendments concentrate on a single procedural change. It is on those that I shall concentrate in my remarks in opening this debate.
  There is no need to repeat the full catalogue of objections which have been raised by practitioners outside Parliament as well as inside this House to the wholly misguided idea of withdrawing or reducing social security benefits from offenders for up to 26
  820
  weeks in the period between a reported breach—I put emphasis on the word "reported"—by the probation officer and a court hearing.
  In some cases the breach will be contested when it reaches court. It may not be proved. In others, the court may decide to continue a probation or community service order, either with no penalty or with a fine, or to substitute some other form of punishment. Often the order is revoked and the offender is sentenced to custody or to other penalties. The number of unexecuted arrest warrants is also an uncomfortable reminder of just how many offenders are no longer in touch.
  All these outcomes result from court hearings. They are decided according to the circumstances of each individual case. But no such variety of disposal is allowed for by this Bill in the automatic sanction to be imposed by the benefits office once a breach has been reported by a probation officer.
  Those of your Lordships who have not followed this issue closely will be surprised to hear that an alleged breach is enough to be treated as evidence that a condition of benefit has been abused, and the withdrawal of that benefit should therefore follow as a sanction. All that Ministers can offer by way of justification is that typically a person who abuses a community penalty is a chronic menace to a local community, terrorising or vandalising housing estates, and generally making the lives of the residents a misery. Anyone who read Hugo Young's polemic in last week's Guardian would have seen that reasoning brilliantly demolished. If indeed this is the rationale for the legislative response, it is not only rooted in deep ignorance—I use the word deliberately—of deviant behaviour and the most effective ways of countering it, but is a complete caricature of a contractual relationship.
  Since there seems to be some misconception, let me spell it out. A contract must be between parties who know that they are entering into a relationship with one another. It is a species of agreement whereby an obligation is created by the parties to it, and not by the declaration of one party in the ignorance of the other. The adoption of what may seem to some members of the Government or their advisers as little more than a convenient rhetorical device, is in fact a debasement of language, as well as undermining the habits of legality. It is for those reasons that Amendment No. 114A, which is the key amendment, and the long list of amendments grouped with it, concentrates on what is in many ways the most important of several flaws in this part of the Bill.
  If there is to be an administrative sanction attached, not to a condition of eligibility according to need but to the breach of a legal obligation in the shape of a community order, then it must be for the court, not for a government official, however conscientious, however fair-minded, to decide on whether or not an additional penalty is deserved, alongside those which are already at its disposal. This, and the consequential amendments, delay the implementation of the loss of benefit sanction until after the court has made a

  821
  determination that an offender has failed to comply with the requirements of the appropriate order. I beg to move.
  6.15 p.m.
  Earl Russell: My Lords, when one goes into Committee to debate a matter with all guns blazing, very occasionally one conies out wondering whether the case was as strong as one thought. Sometimes, one comes out thinking that it was as strong as one thought but one can understand why people thought otherwise. Usually, one comes out thinking very much what one did when one went in. What is really unusual is to go into a debate in Committee with all guns blazing and come out thinking that the business that one is debating is very much worse than one originally believed.
  A number of Cross-Benchers asked me what was our case on this issue. I told them: "Read the Minister's speech. You will find what concerns us much more clearly set out than we could do it ourselves". What we found was not merely an unjust procedure, not merely an unjustifiable measure, but a major realignment of the terms on which benefits are to be received, and what I fear may be a major agenda for the Government's second term if they should be fortunate enough to get one. That is quite a collection of mischiefs.
  Perhaps I may deal first with the point about the procedure, which is the subject of the amendments. The amendments put forward in effect a single proposal and they are necessarily contingent on each other. The procedure is that if a person misses two probation appointments, he or she must be reported. It is the court's job, not that of probation officers, to decide whether the absence was justified. A person is deemed to have missed an appointment if he or she is 20 minutes late. I wonder how many of your Lordships have never been 20 minutes late for an appointment through no fault of your own. I suggest that it is only those who could justifiably support the proposition that the Government are putting forward.
  As recently as this morning, as I was coming to the House, I might very easily have been 20 minutes late, because the favourite gremlins of the noble Lord, Lord Peyton of Yeovil, had taken up residence digging holes in a place in the road where no holes had been yesterday. A great many of us have been 20 minutes late because of signal failure on the London Underground. If we are to miss all visible legal means of support for a period which is an average of 41 days, and may on occasion be as long as 314 days, because of one signal failure on the London Underground, that will lead to a degree of animus against London Underground which may lead to vandalism and a great deal of delay to other people. That could be unfortunate.
  I said in Committee that I had never known the case put as well as in the Minister's speeches against precisely this principle of loss of benefit before appeal in the Jobseekers Act 1995. I said that they were some of the most brilliant speeches that I had ever heard in
  822
  this Chamber. I took the opportunity this morning to read some of them. The Minister said then that there was,
  "merely a doubt … and one does not know whether an offence has or has not been committed … the individual is being fined in advance of that doubt being established as valid. We still believe that that is monstrously perverse".—[Official Report, 27/4/95; col. 1107.]
  She was concerned about the consequences. She said:
  "the vulnerable will continue on hardship and … young, single people, childless couples and those perhaps with less easily diagnosed mental health problems will have no income at all … the noble Baroness, Lady Williams of Crosby, said the other night, they will not starve peaceably—at least I hope that they will not. They will beg, steal, become prostitutes and sell drugs. In the process they will become entirely unemployable ever again".— [Official Report, 25/4/95; col. 870.]
  The message is clear. This is a thoroughly unfortunate series of procedures. We shall support the amendments.
  Equally, we on these Benches are deeply concerned about the principle of the clause itself. The Minister is, of course, right in saying that it is not new to set conditions for benefits. But this represents, by her own confession in Committee, an entirely new type of condition. There have always been conditions for means-tested benefits related to sufficiency of means. There is no argument about that. Increasingly, since 1986, there has been a pile of conditions for means-tested benefits related to the claimant's attempts to avoid being in need. One might parallel them to intentional homelessness. These are the availability conditions and all that go with them. Those conditions are relevant in principle to the purpose of benefit. Our position on these Benches is that we believe that, before deciding whether such withdrawals of benefit are justified, we need to know what the effect will he—and we do not.
  I have said enough on this point. It is not what we are dealing with; we are dealing now with an entirely different matter. The Minister's words in Committee were:
  "They are conditions associated with good citizenship, not simply with needs and entitlements".—[Official Report, 22/5/00; col. 542.]
  That is an entirely new principle. What is more, it is one that the Government intend to apply again. The Minister said:
  "I would not on principle rule out further extensions, but it would be for Parliament to debate whether particular behaviour is sufficiently undesirable and to be so strongly discouraged that it merits the withdrawal of state support via the benefit system".—[Col. 543.]
  Constitutionally, it is a perfectly correct answer: the vires are limited. But the principle that is stated is not limited. I take that to be the Minister's announcement that she is setting herself up as the Young Lady of Spain—she intends to do it again, and again, and again.
  I really must press the Minister. What are the limits of this theoretical principle that she now claims? It will undoubtedly be an issue at the next general election. If the Minister cannot spell out any limits, she cannot

  823
  blame me for saying that something might fall within them. If the noble Baroness states any limit, I will observe it.
  The noble Baroness, Lady Massey stated:
  "Surely, it is fair that benefit systems should be seen to be applied to those who merit them".—[Official Report, 22/5/2000; col. 525.]
  I ask her to consider what that principle might mean in the hands of the noble Baroness, Lady Young. Equally, as I am not making a party point but drawing attention to the fact that we disagree about "deserving", I ask the noble Baroness, Lady Young, to consider what it might mean in the hands of the noble Baroness, Lady Massey. We do not always agree on what is deserving. The threat to withdraw benefits from those who are not deserving could produce many unexpected consequences—most of them serious.
  The noble Lord, Lord Windlesham, said that one cannot have a contract made by one party. I do not know when I consented to the alleged contract. The Government are correct when they say that there is a relationship between rights and responsibilities but it is not one that they have properly understood. There are rights and responsibilities on both sides. When there is disagreement over whether a citizen has defaulted, the courts, not the Executive, are the proper judge. Magna Carta is often wrongly invoked but that is its central principle and one in which I believe.
  The chief responsibility of the state is to protect its subjects. Since the Poor Law and before, it has been recognised that that responsibility includes protecting people against starvation. If people are put outside that protection, one turns them into outlaws.
  I have just one more quotation from the noble Baroness, in 1995:
  "If we outlaw, from benefit some of our fellow citizens, assuredly we outlaw them from the law itself. Even the Victorians in their most penal and policing authoritarian mode—the classical economists—never did that. They always had available either outdoor or indoor relief. Why did the most severe and judgmental of Victorian moralists continue poor relief on the rates? They recognised that if they refused money for bread, those people would break the bakers' windows".—[Official Report, 25/4/1995; col. 870.]
  The Government are offering a proposal to increase crime. I do not want that.
  The Lord Bishop of Lincoln: My Lords, I speak as the bishop to prisons. Although this is not particularly a prisons matter, since my appointment some years ago I have taken a keen interest in a wide range of penal affairs.
  I have continuously and consistently supported the noble Lord, Lord Windlesham, in his amendment and do so today because the Bill allows the diktat of the Department of Social Security to replace the court after a probation officer has reported an alleged breach. That cannot be right for the reasons that the noble Earl, Lord Russell, stated.
  The principle of punishment before conviction is being too easily and smoothly promoted. I ask your Lordships to support the amendments, to restore the
  824
  proper authority of the court, rather than allow administrative decision to override the proper judicial process.
  Lord Carlisle of Bucklow: My Lords, in Committee I expressed my total opposition to the clause and do not renege from that. Its effect is to impose the removal of benefit on an allegation of breach, rather than on the finding of the court—which principle is novel and unacceptable.
  I read with great care the Minister's reply in Committee but remain unconvinced by her arguments. She said that the Government are merely adding another condition to a benefit, rather than imposing a penalty. I suggest that people on probation in Manchester and Liverpool who find their benefits withdrawn on an allegation of breach of probation will certainly believe that is a penalty.
  The noble Baroness said that the measure would only be imposed in pilot areas for four weeks. Recent information from the Association of Chief Officers of Probation suggests that the normal period between an allegation of breach and a court hearing is longer than four weeks. The individual will have his benefit removed during that time, even if he is later found not in breach—which would be totally and completely wrong. There is no answer to the argument that introducing the removal of benefit that way will be a temptation and pressure for those given community service to get involved again in crime, which they otherwise might not do.
  Lord Sheppard of Liverpool: My Lords, I listened carefully to the debate in Committee and to the noble Lord, Lord Windlesham, and others today. Several noble Lords whom I admire greatly support the amendment and I have thought long and hard before deciding to disagree and support the Government's proposal.
  My noble friend the Minister was correct to place the debate in the context of reform of the system, which is a wide and major issue that we should not consider in isolation from the far-reaching debate on benefits. My noble friend said that the measure was about rights and responsibilities in relation to benefits, so it is properly a DSS matter. I agree.
  Many who support the amendment are rightly concerned for people struggling with poverty. The noble Baroness, Lady Stern—with her unrivalled experience—gave an example of a young offender failing to report for community service because of pressures at home over which he or she has little or no control. The probation officer would report such extreme circumstances to the decision maker, who would surely take them into account.
  The Commission on Social Justice, chaired with distinction by my noble friend Lord Borrie, said that the best way out of poverty is to obtain a job. The Government have adopted that as a central plank in their strategy to get rid of poverty. I am aware of many outer estates and inner city areas where there has been a no-work culture for three generations. For example,

  825
  three years ago in the borough of Knowsley some 45 per cent of children were growing up in homes where no one was in work—not very different from the situation in the whole of Liverpool. In areas like that, benefits have been taken for granted as rights.
  During the inquiry that I chaired on behalf of all the Churches into unemployment and the future of work, I was persuaded that full employment was possible. I had not believed it before. It is not quite as simple as saying that there are 1 million people and 1 million jobs to which they can go. But I was heartened to receive a ministerial reply at Question Time last month that in the 15 new employment zones established in April the Government would support the introduction of intermediate labour markets aimed specifically at those furthest from employment. Intermediate labour markets are a serious step in job creation and offer 12 months' work with the rate of pay for the job.
  Freeing people from the no-work culture is a major task. The Government are right to believe that there must be a stick as well as a carrot. I have not lightly come to that view. The prize of getting people into real work is a major one for every individual concerned and for the community as a whole. I dare to say that some of my allies and best friends who are involved with those on benefits have themselves become locked into the no-work culture, by which I mean that they hardly believe that for those whom they serve anything other than reliance on benefits is possible.
  If we believe that finding a proper job is the best way out of poverty, the nation has an obligation, as its part of the contract, to ensure that real jobs are available. For that reason, I mention the importance of intermediate labour markets. That is taking people seriously as having gifts that are needed and valued. Shifting the philosophy of benefit in that way means acknowledging that each citizen has a contract with the state. It also means that one treats people as responsible adults.
  6.30 p.m.
  Earl Russell: My Lords, can the noble Lord rebut the proposition that the withdrawal of benefits risks making people unemployable thereafter?
  Lord Sheppard of Liverpool: My Lords, it is impossible to rebut that proposition because one is trying to guess the future. In turn, I ask the noble Earl whether he can rebut the suggestion that a little pressure will help to play a part in moving people—for whom I pray every Monday of my life—out of the no-work culture and into jobs.
  Earl Russell: My Lords, I am grateful to the noble Lord for giving way. Neither of us can do this until there is serious research about the effects of disentitlement to benefit. We on these Benches have been asking for that for a great many years. We do not have it.
  Baroness Hollis of Heigham: My Lords, the noble Earl and other noble Lords may be assisted in this
  826
  debate if I make the following points. First, research into what happens after disentitlement to JSA was published in 1998. Secondly, the noble Earl will be aware that what we propose today are pilots. Those pilots will be evaluated to see whether a four-week loss of benefit as a sanction for failing to observe a community sentence has the effect that the noble Earl fears. That is the whole point of the pilots.
  Lord Sheppard of Liverpool: My Lords, I am not sure all noble Lords are aware that we are talking about the introduction of pilot schemes which seek to discover just that. I always expect to learn something valuable when the noble Earl speaks; indeed. I usually discover a little piece of history of which I was hitherto unaware. I was surprised, however, when the noble Earl said in Committee that the removal of benefit as provided for under the Bill was,
  "based simply on the fact that the Secretary of State happens to disapprove of the activity in question".—[Official Report, 22/5/00; col. 517.]
  That does not seem to me to be the case. A community service order is made by the court and the court expects that order to be completed.
  I recently discussed all this with a very experienced probation officer, who took the view that community service orders needed to be given firm support. Fie feared that if their authority was diminished we would be hearing more about the necessity of sending a greater number of offenders to prison. I do not want to see that. I believe that community service orders can be more effective than prison in persuading people to change their ways. They deal with offenders while they are still living in the context in which they must work out the rest of their lives. If someone is sent to prison, his or her benefit is of course removed. To break an order of the court is to break the contract between the offender and his or her nation. I believe that to withdraw some benefit is a proper step. Just as moving into a job is the best way out of poverty, so the completion of a community service order is the best way out of a life of crime.
  Baroness Carnegy of Lour: My Lords, I believe that the noble Lord spoke to Amendment No. 115, which proposes that that Clause 63 be deleted. The noble Lord has every right to do so. However, I believe that the previous debate dealt with a point which the noble Lord did not pursue; namely, the injustice of the removal of part of a person's benefit before the court has decided that he or she has breached the order.
  In the context of Amendment No. 115, I should like to speak also about the general proposition underlying the clause. During debate in Committee as to whether the clause should stand part of the Bill I asked several questions about how the withdrawal of benefit would operate in Scotland. The Minister very kindly said that she would write to me, and she did. I received an extremely full and helpful letter. She and her advisers had taken a good deal of trouble over it, for which I am most grateful. The noble Baroness clarified most of the issues about which I had inquired. However, one matter was not satisfactory.

  827
  The noble Baroness has just told the House that the whole issue will be decided by the pilots. The noble Baroness confirmed in her letter that no pilot would be run in Scotland, the reason being that the Government wished to avoid any confusion because of the different systems and that it would be,
  "easier to identify behavioural effects, and best practice, if the pilots are conducted within a single criminal justice system".
  The noble Baroness went on to say:
  "In the light of the outcomes of the pilots, we will decide on the extension of the measure nationally, or on further pilots, as appropriate. The general lessons to be learnt from the pilots—both behavioural and operational—will be applied in Scotland";
  that is, pilots in England will be used as evidence as to how the system works in Scotland.
  The noble Baroness knows well that the system in Scotland is completely different. The courts operate in a different way. There are no probation officers; the social work departments do their job. I suspect that the problem is one of devolution awkwardness, but it can be overcome. It would be impossible for the Government to mount pilots in Scotland because the criminal justice system is devolved. At least one of the sanctions that can be applied—the grounds on which benefit may be refused—is devolved in Scotland. But, surely, the Scottish Executive can be asked by the Government to run a pilot in Scotland to discover whether the system works. The behaviour of people whose benefit may be withdrawn if they breach an order may be more or less the same north and south of the Border, but the system is different.
  The Government must face up to these devolution difficulties. I can see no reason why the Scottish Parliament should not be asked to run a pilot scheme in Scotland. I hope that the Minister will listen. It will not be good news when it comes out in the Scottish Parliament; and it will do so.
  Lord Dholakia: My Lords, I support the amendment of the noble Lord, Lord Windlesham. It is difficult to see what could have possessed a Government so strongly committed to crime reduction to introduce a measure which will inevitably increase crime. It is equally difficult to understand what could have made a Government so committed to tackling social exclusion bring forward a measure which will further worsen the exclusion from society of many vulnerable people. But it is nothing short of astonishing that a Government so committed to promoting racial equality should introduce a measure which will so disproportionately disadvantage black offenders, further alienating them from law abiding citizenship.
  Let us take three examples of what the changes proposed by Government will mean in practice. First, let us consider a jobseekers' allowance recipient aged 25 with no dependant or housing costs who would normally be entitled to £51.40 a week. If he or she were referred to court for breaching a community sentence the full amount of £51.40 would be withdrawn for four weeks. Depending on the individual circumstances, after two weeks the individual might be able to gain hardship payment of £30.85 a week, or £41.15 a week
  828
  if someone in his or her family were seriously ill or pregnant. Those with responsibility for a child could apply for a hardship payment from the beginning of the period, but even here the payment would be less than the claimant's normal entitlement.
  A second example is a lone parent on income support with one child under 11 who would have his or her benefit entitlement reduced by 40 per cent of the single adult rate, a reduction of £22.55 at current rates. This would mean that weekly benefit of £71.50 would be payable instead of the full rate of £92.05.
  A third example is of a young single person participating in the voluntary sector option of the New Deal who currently receives an allowance consisting of a basic element of £40.70 plus top-up of £ 15.38. In that case the £40.70 would not be paid for four weeks, although the £15.38 would continue to be paid if the young person continued to participate in the New Deal.
  During the pilots those sharp reductions in income for people who are already in real poverty will last for four weeks; and when the measure goes nation-wide, the Bill allows the Secretary of State to authorise these reductions for anything up to six months. Anyone who has worked with offenders can see that pushing poor people into greater poverty in this way must increase their temptation to steal, shoplift, burgle, solicit for prostitution or sell drugs.
  The Probation Service national standards now require that an offender must be returned to court for breach of an order on a second failure to comply, and this could mean being 20 minutes to half an hour late for a probation or community service appointment on two occasions. The degree of hardship involved in the removal or reduction of benefit will often be wholly disproportionate to the seriousness of the offence, especially as it will be in addition to whatever punishment the court decides is appropriate for the breach.
  There is no doubt that this measure will have a particularly adverse effect on offenders from minority ethnic groups for the simple reason that black males have a higher rate of unemployment than white males. They will therefore be over-represented in the group of offenders who will have its benefits withdrawn. How is this indirect discrimination supposed to increase respect for the law among young black men or minority ethnic communities generally? It can only undermine the strenuous efforts of all of us who are working to increase the respect for the law and to combat racism and discrimination in the legal process.
  I have no doubt that this misguided measure will deter some probation officers from taking people back to court. I believe strongly that probation officers should be rigorous in returning people to court for persistence as regards probation and community service orders. But if probation officers know that there will be unjust and draconian results, there must be a temptation for them not to record failures to comply in order to avoid these consequences. This measure will tend to undermine the admirable and

  829
  increasingly successful work which the Association of Chief Officers of Probation has spearheaded to improve the enforcement of community sentences.
  The change is taking place at a time when in another piece of legislation, the Criminal Justice and Court Services Bill, the Government are centralising the Probation Service into a new national probation service. If the Government persist with the misguided measure before us today, it will sound a warning note about their plans to increase central control of Probation Service policy. Many of us would be far more resistant to moving in such a direction if we thought that it was likely to be dominated by approaches like this one which sound tough but in reality can only damage the fight against crime.
  About 58,000 community service orders are made in a given year. Everyone is a potential victim if such a policy is pursued. In sentencing options a community service order is often an alternative to a custodial sentence. The Government's proposed action abolishes that distinction: it leads those without receipt of funds to commit further crimes. My noble friend Lord Russell points out that a number of arguments have been advanced about the pilot schemes. For those noble Lords who wish to refer to his views, they are well reported in Hansard.
  6.45 p.m.
  Baroness Kennedy of The Shaws: My Lords, I have spoken previously on withdrawing benefits from those in breach of probation and community service orders. On reading those debates in Hansard I noted a number of failures of understanding about what we are dealing with by some noble Lords. There were repeated references to persistent long-term "refusers"—people not turning up time and again. We are here talking about individuals who do not attend on two occasions. They miss two appointments. Another misconception was that the provision was a remedy for dealing with all those young offenders on estates. But we are not talking only about young offenders on estates but many other kinds of offenders too. The broad brush of trying to tackle particular kinds of offending in this way will not he successful.
  Like my noble friend Lord Sheppard I, too, believe strongly in the need for reform of welfare. I also believe that the best way out of poverty is through work. Like the noble Lord, I chaired an inquiry on expanding opportunities in education and widening participation. How does one draw the socially excluded—those who missed out the first time round—into education? One of our proposals was that learning became a central plank in any welfare reform: that one of the best ways back into work was via learning and training.
  However, for many on community service orders the chaos of their lives, the multiple social problems they face, mean that there is a step to be taken even before that. It is about restoring some degree of order with the help of the professionals within the Probation Service. That takes time and hard work. People are willing. It is often not wilfulness which results in their not turning up; it is sometimes for other reasons.
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  Like other noble Lords, I believe that it is right that the courts should be strict about those who cock a snook at the system, and do not turn up for appointments. Community service orders must be strengthened, but this measure is not the way to do it. First, it is an attack on the poor because it is the creation of a discriminatory punishment which does not apply to other offenders but only to the underprivileged. Secondly, it is an extraordinary departure constitutionally because it gives to the department of state dealing with social security a punishment to dole out in addition to that doled out by the courts. Thirdly, these proposals are an affront to the new and wonderful philosophy of human rights which has been introduced by this Government because it is contrary to natural justice to produce punishment in advance of conviction. What we will have is precisely that because if one does not have a hearing in front of people in a proper way—an adjudication as to whether there has been a breach—then surely we are not dealing properly with the question of breached.
  As others have said, it is a sure fire way of returning people into the arms of crime. I have spent a large part of my life representing women, and for whom I have argued that there should be properly designed community service orders that could work for there, particularly if they had children, because so often community service orders did not particularly suit women who had children.
  What we know now is that for those women—if they are in breach because of the chaos that their lives are often in at the beginning—to be driven back into the arms of crime would really impact not just on them but on their children.
  We have just seen a very shaming international report that shows that child poverty is still a serious problem here in Britain, even greater than in other European countries. Reducing the benefits of a parent will undoubtedly impact on children who are not offenders or people cocking a snook at the criminal justice system.
  I wrote to the Ministers involved, suggesting that these provisions might not apply to the primary carers of children; men and women who might be caring for children. I am disappointed that that exemption has not been considered.
  The reason why this amendment has been proposed by the noble Lord, Lord Windlesham, the noble Earl, Lord Russell, the right reverend Prelate the Bishop of Lincoln and myself is that although we all have principled objections to this whole proposal, we are seeking a compromise. That is why we have placed this amendment before the House. If benefits are going to be removed there should be at least a proper cowl decision that a breach has, indeed, taken place. It is not a lot to ask.
  There is always an assumption that the public want to be excessively punitive. From what organisations such as Payback, an organisation working on community crimes and community punishment, tells us this is not reflected in the research. Legislation like this is not what the public want because the public

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  understand that it does not actually lead to a reduction in crime. The public have a more sophisticated grasp of the complexities of crime than that for which they are generally given credit. They recognise that family influences are more important than sentencing practice and they want real solutions.
  The Government created a social exclusion unit because of concern about the marginalising of the poor. If anything is likely to harden disaffection and exclusion, it is this proposal. For that reason we have sought that at least this amendment be passed because it means that the matter will go back before the court and a proper process will take place in deciding whether a breach had taken place at all.
  Baroness Stern: My Lords, I rise also to support the amendments proposed by the noble Lord, Lord Windlesham, It was suggested in Committee that those who opposed this clause were unaware of the crime situation on some disadvantaged housing estates and insensitive to the plight of the victims of crime. I think many of us who did oppose it felt that this was a very unfair way of looking at our opposition.
  Unless new information has become available since the Minister spoke on 22nd May, we have to assume that it is still not known whether these measures will reduce crime and give added protection to victims. Certainly, all the evidence on crime reduction gives no grounds for the Minister's optimism. To my knowledge there are no research results showing that making people poorer reduces their propensity to commit crime.
  I, too, studied the Minister's speech very carefully. It was certainly worth studying. The idea of benefits being conditional on individual's recognising their obligations to society is, of course, right. But it is very selective. We all have many benefits from society. As the noble Lord, Lord Higgins, said in Committee, we seem to have got into the philosophical mode of saying that there is a contract between the community and the state but that it applies only to people who are on benefit. So the only people whose benefits from society will be threatened are those who need them most; that is, the poor. It is not proposed that employed or non-benefit drawing defaulters will have an administrative punishment as well as a criminal one. The only people to receive two punishments will be the poor.
  There was some discussion in Committee as to whether this was a punishment or an administrative measure. That is an academic question. To lose £205.60 a month if you are a male offender on job seeker's allowance, or to lose £82.20 if you are a lone parent with one child is a punishment if you are very poor. It is a fine that misses out the process of going to court. Of course, fines are used less and less by the courts. The percentage of offenders who are fined has fallen from 54 per cent in 1978 to 32 per cent in 1998. That is because more people were too poor to pay. The courts always argued that they could not fine offenders on benefit because to take even £5 a week from the small sums people were receiving would put them into
  832
  unacceptable poverty. Here we are proposing to take even more, and without due process. I support the amendments.
  The Earl of Onslow: My Lords, this morning I missed my dentist appointment through a combination of incompetence, misreading my diary and somebody putting it in the wrong place—or cowardice, as somebody said. I was also late for something last week. To fine the poor 100 per cent of their income because of that sort of level of incompetence is really vicious behaviour.
  There are two questions that the Minister has never answered. First, why should the poor be fined 100 per cent of their income without judicial process? Secondly, can the Minister explain to the House on what they are going to live? I suggest that their only answer is flogging their bodies, flogging cocaine or crack, or doing something equally nasty from which we want to wean them. We do not want them to do that. We want to try to reform them. If one pushes them back into that way, of course it is going to become worse.
  I was reminded at luncheon today of this piece of literature:
  "'Then the words don't fit you,' said the King looking round the court with a smile. There was a dead silence.
  'It's a pun!' the King added in an angry tone, and everyone laughed. 'Let the jury consider their verdict,' the King said, for about the twentieth time that day.
  'No, no!' said the Queen. 'Sentence first—verdict afterwards.'
  `Stuff and nonsense!' said Alice loudly. 'The idea of having the sentence first!'
  'Hold your tongue!' said the Queen, turning purple.
  'I won't!' said Alice.
  'Off with her head!' the Queen shouted at the top of her voice. Nobody moved'".
  I am afraid that the Red Queen seems to be occupying the Government Front Bench with that attitude of mind.
  7 p.m.
  Lord Mackenzie of Framwellgate: My Lords, not for the first time do I find myself speaking in this Chamber in what I sense to be a minority. However, I disagree with the noble Baroness, Lady Kennedy, that my comments do not represent the majority. I believe that they represent the majority outside this House, but no doubt we shall see. In any civilised society, or indeed in a family, if people are prepared to live in harmony, they have rights. But accompanying those rights are commensurate responsibilities. I believe that that is what the debate is all about.
  I often hear noble Lords legitimately argue that prison simply makes criminals worse and that more use should be made of community service orders. However, if a straw poll of public opinion were taken, prison would probably come first again. It would come well ahead of community service.
  I believe that community service has a right and proper place in the armoury of the courts, but only if it is enforceable. We see too many examples of people

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  demanding rights in society but not accepting the obligations. It is a two-way street. Surely, the purpose of the taxation system is to ensure that those in society who are unable, without fault on their part, to work, or who fall ill, are supported by the many. People are quite happy—perhaps "happy" is the wrong word—to contribute towards those who fall through the net.
  Those who commit crime and are sent to prison forfeit the right to receive benefit, although their families will be catered for. It must be wrong, therefore, if those who are given a community service order which they will then wilfully ignore can lie in bed and still expect other hardworking members of the community to featherbed them. The noble Lord, Lord Sheppard, was right in saying that in some areas there is a no-work culture. But there is also a criminal culture which needs to be tackled.
  Perhaps I take the old-fashioned view that the work ethic is worth encouraging. We have lost some of the discipline in society. The pillars of authority are no longer respected: the vicar, the doctor or the policeman. Some might believe that that is proper, but as a policeman for more than 30 years I can say that once a wrongdoer knew that you were bluffing and that there was no effective sanction, he would—and it was usually "he"—exploit it to the full. That would often be true of juvenile offenders, who knew the age of criminal responsibility and would often taunt police officers with that fact. I mention that as an example.
  It was true of a professional burglar who knew that you had nothing on him. During the interrogation, he would watch carefully for any hint that you did not really know whether it was him. And, rightly, he would exploit that! One would expect nothing else.
  Therefore, it seems to me that if an offender is given a community sentence and knows that he can wilfully ignore it with impunity and still pick up his benefits, we are playing right into his hands—
  Lord Alexander of Weedon: My Lords, I am grateful to the noble Lord for giving way. He has twice suggested that the offender wilfully ignores the community service order. Who is to be the judge of whether he wilfully ignores it? Is it not to be the court, and should we not respect the court in that way?
  Lord Mackenzie of Framwellgate: My Lords, I take the noble Lord's point, but I certainly do not agree with it. I hear what the noble Lord says, but I believe that it can be an administrative decision and that it is a real sanction against those who wilfully ignore the community service order imposed by the court.
  We are trying to achieve the opposite. We are trying to persuade the offender that this is not a somethingfor-nothing society. Surely, we are trying to create good citizens. This Government support the police and do not just talk about doing so.
  Earl Russell: My Lords, does the noble Lord believe that a parent who misses a community service appointment because she is taking a sick child to casualty is behaving irresponsibly?
  Baroness Hollis of Heigham: My Lords, a recent circular from the Home Office, 24/00, makes it clear
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  that probation officers are to take into account exactly such circumstances and not regard them as a basis for a referral to court. Therefore, the noble Earl should withdraw that suggestion.
  Lord Mackenzie of Framwellgate: My Lords, that is right. The problem is that we are assuming that people have no discretion in this matter. Clearly, people do have a discretion when enforcing the measure and I believe that it would be enforced against those people who are abusing the system. That is the way in which sensible people operate and your Lordships are being a little extreme to suggest otherwise.
  Baroness Kennedy of The Shaws: My Lords, I am sorry to interrupt the noble Lord, but 1 want to point out that there is little discretion. The Minister is right in saying that the Home Office circular, sent out in April, made it clear that:
  "All absences should be regarded as unacceptable unless proved otherwise. Acceptable absences would include medical appointments notified in advance with appointment cards shown for verification".
  It is clear that there are limited circumstances in which an excuse can be acceptable.
  It is right that carers' responsibilities can be taken into account; that possible appointments should be made with their obligations in mind; and that an emergency relating to a child will be taken into account. But little discretion is left.
  Lord Mackenzie of Framwellgate: My Lords, I still believe that we can rely on the good common sense of probation officers. I know that police officers welcome the provisions. Only this afternoon I talked to the Association of Chief Police Officers, which certainly supports the provision. Its officers are close to the problem of dealing with people who abuse community service orders.
  People are simply being asked to do that which the court has ordered. Any sanction which gives them any kind of grief for failing in that regard will be seen as eminently sensible by the vast majority of people outside the Chamber.
  I recently saw a letter from a chief inspector in charge of operations in Staffordshire. It was dated 7th June, which is about three weeks ago. It was a plea for further legal help to deal with those few people in communities who acted in an anti-social manner. The anti-social behaviour order was brought in for that very purpose. Those who did not accept the social norms in communities could be dealt with by new powers ordering them to comply. Yet that could happen if they were sentenced to a community service order.
  We are talking about offenders making reparation to society for their breach of contract—it is a contract—in committing crime. In court, the offender agrees to accept the community service order. If he adds insult to injury by wilfully continuing to break his community service contract—and I am sure that the Probation Service will carefully examine the circumstances—it is right and sensible for society to

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  review the contract and, if necessary, review his benefit. He will understand that and in my view it will be more likely to make him compliant.
  Viscount Tenby: My Lords, in contrast, I rise to support Amendment No. 114A and I want to approach the matter from the point of view of the magistracy. I have been in touch with the Magistrates' Association and as recently as this morning I discussed the matter with the current and former chairmen of my bench. I am sure that they are alongside me in what I have to say.
  As a magistrate of many years, I yield to no one—absolutely no one—in my desire to see rigorous enforcement of community orders. After all, for those of us who believe that they present a much more attractive prospect than wholesale imprisonment, it is essential that the criminal fraternity is made to take them seriously. The system absolutely depends on that.
  However, it is one thing to take that view and quite another to seek to prejudge the decision of a legally appointed court as to whether an infringement has taken place by imposing, as we have been told, what amounts to a double punishment beforehand. Furthermore, inevitably it will be unfair in that, as we have also heard, one class—the unemployed—will suffer what is in effect a double punishment for the same offence. That simply is not right, whichever way one looks at it and however emotive the arguments. I understand fully and sympathise with what has been said about so-called sink estates and threats to local communities by the likes of such offenders.
  In addition, in Committee many speakers referred to the dubious logic of removing the little financial support available from, say, a man and his family as a means of concentrating that person's mind on the importance of complying with a court order. Anyone who has ever had anything to do with courts, however fleetingly, will confirm that the often inadequate and nearly always disorganised offenders about whom we are talking this evening simply do not respond to that kind of threat. Indeed, in many cases I fear that it will lead only to a resumption of criminal activity in order to meet family needs.
  Supporters of the Government's position—and, as we have heard, there are some on the Benches behind the Ministers—are entitled to ask opponents of the measure what they would do. Fair enough. In many interesting and thoughtful contributions from all sides of the House in Committee, I believe that the key point was made by the noble Lord, Lord Christopher. I hope that I am not embarrassing him by referring to him by name. He described the delay between the reporting of the breach of an order and the subsequent court appearance—often six weeks and sometimes even more—as "utterly ridiculous". I believe that that was the very phrase that he used. I agree wholeheartedly. Unless the matter is dealt with promptly, both the order and the sanction are diminished in the eyes of offenders. Accordingly, it is to the legal system that we should look to sort out the matter.
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  In the meantime, we must not mix the executive and the law. To begin to do so now is to start on the slippery slope with potentially dangerous and unpredictable consequences. Accordingly, I urge noble Lords to support the amendment.
  Lord Davies of Coity: My Lords—
  Baroness Massey of Darwen: My Lords—
  Lord Bach: My Lords, this is an important debate and I hope that there will be plenty of time for both my noble friends to speak. I wonder whether one would speak now and the other a little later.
  Baroness Massey of Darwen: My Lords, I thank the noble Earl, Lord Russell, for his customary courtesy in informing me beforehand that he would bring up the issue of merit, which I raised in Committee, and its connotations. Perhaps I may say that I checked what I said in Committee and I agree with myself! I do not wish to indulge in a battle of semantics with the noble Earl or with the noble Baroness, Lady Young, who was mentioned earlier. The noble Earl will recall that Thomas Carlyle queried: what is merit? He answered that it was the opinion that one man entertains of another. To me, merit is about being entitled to or deserving something. I stick by that definition in relation to this Bill.
  At the root of benefit systems is the need to comply with rules which are set down and explained in advance. I agree that people should know their rights. They should also appreciate that responsibilities go alongside rights. Earlier, we heard reference to "fairness" and "choice" and about informing people of their rights in order to respect them. I agree with that. Approximately 130,000 community sentences are given out each year in England and Wales. In some 30,000 of those cases offenders are referred back to court because of lack of compliance. Thirty thousand people choose—I emphasise that word—community sentences and then betray trust. I do not believe in and would not want a society which is based on punishment and lack of sympathy. As a former teacher and a current parent, I believe in being positive, in respecting dignity and in protecting the vulnerable.
  Community sentences can be positive. They can encourage people—often young people—to learn self-discipline, how to be responsible towards others and how to keep a commitment. Young people need frameworks, boundaries and examples. If they agree to a community sentence and break the commitment, surely some sanction must be applied. How many of us have not, as parents, applied sanctions in order to encourage children or young people to adapt their behaviour? Parents should be encouraged to be committed to their children and be seen to be committed. That is one way to tackle child poverty.

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  The Bill contains a commitment to evaluate the system of community sentences before ruling it out. The pilot scheme will allow for hardship payments, even if the jobseeker's allowance and training allowance are withdrawn. As the Minister and other noble Lords have said, evaluation of the system will give us valuable insights.
  I believe that people can be competent in running their lives without becoming criminals if we explain systems and the consequences of contravening systems and if we introduce deterrents as well as support. I cannot see that anything will be learned by not having sanctions for the breaking of laws. I am aware, as has been said, that some people in our society have many problems. I am aware that some people are brought up in chaotic circumstances. I have taught in deprived areas of London. I agree that some people in society need support. However, I feel that providing support without a belief that people can appreciate the notion of civil rights together with civil responsibilities is almost an insult to the deprived. I believe that if we treat people as helpless, they will learn helplessness.
  7.15 p.m.
  Lord Elton: My Lords, perhaps the noble Baroness would allow me to ask a question. Surely the debate has been focused by my noble friend not on the removal of Clauses 63 to 67 but on their amendment. Therefore, the question is not whether there should be sanctions but by whom they should be administered. Should it be by the court or by the state?
  Baroness Hollis of Heigham: My Lords, there has been no indication tonight that the other amendments will not he moved. Unless there is such an indication, my understanding—as is perhaps that of my noble friend—is that we were discussing the full range of amendments that are grouped. No effort has been made to ungroup them and no effort has been made to say that they will not be moved. Therefore, my noble friend is entirely right to speak to the broad issue.
  Lord Windlesham: My Lords, perhaps I may interject and say to the noble Baroness, who, I trust, will shortly wind up the debate, that the further amendments will not be moved. Amendment No. 114A, the compromise amendment, is the only one on which we shall ask for the opinion of the House.
  Baroness Massey of Darwen: My Lords, perhaps I may continue. I am not a lawyer. I read the amendments as a complete group and I address those amendments.
  As I said, I believe that if we treat people as helpless, they become helpless. That is bad education and bad social policy. It is neither just nor humane. The Bill as a whole seeks to instil responsibilities along with rights and should he commended for doing so.
  Lord Goodhart: My Lords, in Committee there was a disagreement between the noble Lord, Lord Goldsmith, and myself as to whether Clause 63, as it is now, offends against the Human Rights Act. I shall
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  confine myself to that issue, not because I disagree with what has been said on the wider issue but because it has been put extremely powerfully by each of the four Members of your Lordships' House who put their names to this amendment and by others as well.
  I have reconsidered the matter but I have not changed my view that Clause 63 does offend. As I said on the previous occasion, a reduction of benefits as a punishment for misbehaviour probably does not in itself breach any convention right under the Human Rights Act if a proper trial has taken place.
  A trial in a form which satisfies Article 6 of the convention is normally required before a criminal penalty can be imposed. However, the case law of the European Court of Human Rights plainly recognises that a decision may be taken to impose a penalty for an administrative offence or for professional misconduct in proceedings which do not comply with Article 6, provided there is a right to have a subsequent review of that decision on the merits by a proper court. "Administrative offence" covers such matters as minor traffic offences.
  One important factor in deciding whether a case falls within the class of administrative offences is the seriousness of the penalty. I have to say that in this case a penalty of the loss of part or all of your benefits seems to me to be a very serious penalty for those who suffer it, and it is therefore quite possible that the seriousness of the penalty alone takes this into the class where reliance on a review by a court subsequently is not in any case enough.
  However, I believe that there are two grounds on which this clause quite plainly impinges on convention rights under the Human Rights Act. First, at least where the penalty causes immediate and significant hardship it should either be imposed after the hearing by a proper court, or its operation should be suspended until the court can review the original decision. Secondly, all European Court of Human Rights cases where a subsequent review by a court has been held sufficient have involved a prior decision by some person or body authorised to impose a penalty. The problem here is that the penalty is imposed automatically as soon as the information is laid.
  No one here has taken a decision at all. Certainly there has been no decision by the Secretary of State. The probation officer, as we have heard, is limited by very rigid rules. It is quite plainly a case, as the noble Earl, Lord Onslow, said, of punishment first and conviction later. That, I believe, is wholly unacceptable. If Amendments Nos. 114A to 114H a re not accepted, this clause will be held to be in breach of convention rights as soon as it gets to court.
  I should like finally to add that it is not just a matter of the Human Rights Act. What is proposed here is, I believe, a breach of the concept of justice as we have understood it in this country at least since the events at Runnymede nearly 800 years ago.
  Lord Davies of Coity: My Lords, I rise in support of the Government's measures on this issue, and in doing so I immediately acknowledge the sincerity with which

  839
  all noble Lords have advanced their arguments, whatever the arguments have been. However, I believe that there has been a measure of exaggeration in some of the statements that have been made attacking the Government's measures. We have heard about the question of contract. I believe that has been put at a level far in excess of its significance. We have heard reference to the starving and the poor. I understand that it is often wise to exaggerate a point in order to drive it home, but it seems to me that we should really understand the circumstances.
  For example, the vast majority of people on benefit do not offend. A lot of people who do offend then do not breach their probation or their community service orders. So what we have here is what you might call the end of the line. Why are the Government proposing it? They are doing so because the community service orders are not working. The alternative is more prison, and we do not want to send people to prison. So this administrative withdrawal of benefit is for the purpose of reinforcing the community service order so as to avoid sending more people to prison.
  It does not seem to me to be a very serious measure, because, when all is said and done, it is a measure which is being applied to people who have had penalties imposed upon them by a magistrate's court and have failed to fulfil their obligations. The answer lies with them, because, when this measure goes through, if magistrates' courts impose community service orders they will be warning those offenders that if they breach that community service order they will lose some benefit. They will be given advance notice of that. I think we ought to keep our feet well and truly on the ground and recognise that what the Government are doing is for the benefit of the system in the long term.
  Baroness Masham of Ilton: My Lords, I should like to ask a quick question, and my vote will depend on the answer. Many of the people we are talking about live chaotic lives, as we have already heard. How can the Government get people into employment if they are unemployable? When they are in prison they get three meals a day, they are clothed and looked after; but when they are in the community what are they going to live on if they have no benefit?
  Lord Goldsmith: My Lords, on the face of the Bill is a statement by my noble friend the Minister that in her view the provisions of the Bill are compatible with the European Convention on Human Rights. She has told your Lordships both on Second Reading and in Committee that the declaration was not one she made lightly but one made after repeated advice that the provisions of the Bill, particularly those being considered now, are compatible.
  I ventured to say in Committee that though there was, as there so often is, scope for argument, in my view the Government were justified in taking that position. Nothing said by the noble Lord, Lord Goodhart, whose views and statements I always regard with considerable respect, has caused me to change that view.
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  I do not want to weary your Lordships with the reasons, but I will just summarise them in this way. First, the issue at stake, from the statistics given by my noble friend at Committee stage, concerns no more than 400 cases out of 30,000 where the magistrates do not uphold the view of the probation officer that there has been a breach. That is a very small number, and it indicates how very few cases there are which would result in an overturning of the decision—
  Lord Goodhart: My Lords, is the noble Lord suggesting that 400 cases of injustice would be all right?
  Lord Goldsmith: My Lords, it is a question of whether or not, in accordance with the case law of the European Court, which the noble Lord, Lord Goodhart, and I agree exists, the European Court of Human Rights would say that in these circumstances there is a breach. That case law says clearly, even assuming—as I have been prepared to do for the purposes of this debate—that this is a punishment and therefore the full rigour of Article 6 of the convention applies. It says that it is not essential for there to be a decision of a court before the punishment is imposed.
  It says that there are cases where, so long as there is a review by an independent and impartial court which the magistrates' court is of course—which is what would happen in these cases, that may be compliant. I ventured to suggest that there are four reasons why this fell on that side of the line. These are: the fact that there is built in a safeguard of the magistrates' courts; the fact that we are talking of a relatively finite period of time of four weeks; and the fact that all benefit is not removed. In respect of income support, the proposal is that 20 per cent or 40 per cent may be removed and jobseekers will still be able to claim hardship allowance.
  Finally there is the important fact, which was brought out so clearly by my noble friend the Minister in her winding up speech, that a decision taken by an officer at the moment of failure to meet a particular requirement is entirely consistent with the long history and principle in this field. I refer your Lordships to what she said then. This is not something which has been invented for this Bill. It has been the case time and again that a decision is made and is subsequently subject to review.
  With great respect to the noble Lord, Lord Goodhart, I have not changed my opinion. Like him, I have nothing further to say about the other issues. I wanted to deal with that point.
  7.30 p.m.
  Lord Higgins: My Lords, we have had many fine speeches in this debate and only with considerable diffidence can one intervene in it. We also had a fine debate on the issue in Committee, when profound concerns were expressed on two issues: first, that benefit would be removed by executive action rather than by the court and secondly that that action would be likely to increase crime rather than reduce it.

  841
  In the light of that debate, my noble friend Lord Windlesham has tabled a set of amendments that meet both those concerns. The noble Lord, Lord Sheppard, suggested that we had to use both a stick and a carrot, but he did not address the subject of the amendments— that, if a stick is to be applied, it ought to be applied by the courts rather than by administrative action. That is of considerable importance.
  At a similar stage in the Committee debate, the Minister pointed out that we are dealing with pilot measures. If I may mix my metaphors, the pilots are the thin end of the wedge. This is the direction in which the Government intend to go. For all the reasons that have been put forward so cogently this evening, I believe it is the wrong direction.
  Like last time, some reference has been made to the European Convention on Human Rights. We have opposing views on that. I had an exchange with the noble Lord, Lord Goldsmith on the severity of the penalty. If the matter goes back to the courts, as proposed in the amendments, they can decide what is an adequate and sensible penalty. That would avoid the possibility of problems with the European Court of Human Rights. The courts could also ensure that there was a fair trial, removing the doubts that have been expressed. The courts can take into account whether the issue is compatible with the European Convention on Human Rights. On that point, the amendments would make the situation a great deal safer.
  I have a sense that the House is anxious to come to a decision. Long experience suggests to me that, in those circumstances, one should not make the most brilliant speech that one could ever make. On the contrary, it is right to come to a conclusion.
  This is a matter of profound importance. I believe very strongly in all the recommendations that have been made by outside bodies that are at the front end of these affairs. In Committee, we referred to organisations such as the Magistrates' Association, the Justices' Clerks' Society, the National Association of Citizens Advice Bureaux, the National Association of Probation Officers and the Penal Affairs Consortium, all of which believed that acting in this way without going back to the courts was likely to be counter-productive. Penalising people to the point of likely destitution will exacerbate the tendency of those who are already not among the most law-abiding to commit yet further crimes.
  We believe that it is right to uphold the role of the courts and resist the movement towards administrative action. For that reason, I hope that my noble friends will join me in the lobby this evening in support of the amendment.
  I have only one thing to add. I have always taken the view that, if one gets the amendments that one wishes, it is not appropriate to oppose the clause stand part. I very much hope that the House will realise the importance of the issue and support the amendments.
  Baroness Hollis of Heigham: My Lords, this has been an interesting and, if I may say so, good debate. Although I know that your Lordships opposite wish us to confine our remarks to the particular amendments—although not everybody has—they are grouped and it is right on an issue of such importance and significance that I should remind your Lordships of the reasons for the Government's policy.
  We believe that it is wrong for the state to support those who do not honour their obligations to society. We want their rights to be matched by responsibilities. It is unreasonable to expect you, me and, above all, the many people whose lives are made a misery by repeated crime in the neighbourhood to support financially those who continue to disregard society's legitimate expectations. Many people would find it extraordinary that we continue to finance people through the benefit system while they continue to disregard the law.
  We believe that benefit sanctions will encourage people to comply with their sentences rather than being tempted into reoffending that could have been avoided. When someone takes on a community sentence as an alternative to a fine or imprisonment, he or she accepts the obligations that go with that. That means observing the sentence. If they fail to honour that contract, benefit sanctions will come into play. We will not suddenly leave people without money. They will know about it in advance. They will have been warned by the court and by the probation officer and it will be on their benefit form. There will be ample opportunity to comply, but, if they then choose to break the conditions of their community sentence, society's obligation to provide them with their benefit has in turn been broken.
  My noble friend Lady Kennedy and many others have said that such people's lives are so chaotic that the sanction will not work. I do not accept that. If they had not filled in forms, signed on, attended interviews, looked for work, been available for work and energetically sought it, they would not have had benefit in the first place. We have heard a lot about fecklessness tonight. It is a curious form of fecklessness that someone can meet the benefit conditions by signing on in person but cannot be expected to meet the community service conditions by attending interviews in person. If such a young offender manages to attend benefit interviews because he values the benefit and takes the signing on seriously, there is all the more reason to link his benefit to his observance of the community sentence so as to get him to take that seriously, too. As my noble friend Lord. Sheppard said, getting someone to take his community sentence seriously, and ultimately getting him into work, has to be in his best interests.
  The Earl of Onslow: My Lords, what is he going to live on if he has no money?
  Baroness Hollis of Heigham: My Lords, does the noble Earl know for how long this benefit sanction applies compared with the sanctions on all other infringements of benefits? I wonder why he did not

  843
  raise that question when the previous administration introduced benefit sanctions on the jobseeker's allowance, Child Support Agency, income support and disability benefits. He was silent on that issue until tonight.
  Why are we doing it this way? We are not proposing a criminal punishment but a benefit sanction, exactly as we do across the whole social security system. My noble friend Lord Goldsmith was right. I suspect that many of your Lordships who have spoken tonight do not know how the social security system and its benefits and sanctions work. Obviously, many of those who have been involved in previous debates on the subject do, but, listening to your Lordships, it has sounded as though there are no other benefits to which a sanction is attached that operates in this way. A benefit sanction is not a matter for the courts. The court hearing provides an opportunity for a review of the facts, but the initial decision is based on behaviour that is sufficiently serious to merit referral back to court.
  These measures are designed as a benefit sanction. All benefits have conditions attached to them. If those conditions are breached, then part or all of the benefit is withdrawn. However, there is a hardship arrangement available for those with dependants, or those who are vulnerable; for example, through reasons of health.
  Some noble Lords talked about an "alleged breach". All infractions of benefit conditions are alleged but the benefit sanction still applies, whether such cases are reported by an employer to the agency—alleged—by a doctor to the agency—alleged—by another Benefits Agency official—alleged—or by a probation officer. All such infractions are alleged. That is entirely consistent with how the whole of the social security structure operates.
  Perhaps I may give the House some examples. Let us take a potentially "good news" case—that is, someone on DLA who has a periodic review. The doctor says that that person is now much better. He reports that to the decision-making officials who withdraw the benefit. That person may take the matter to appeal or to a tribunal to argue that he is not as well as that, but it is never suggested that the withdrawal of the benefit should await the outcome of the tribunal, which is the equivalent of the court. It is an administrative decision; it is a condition of the benefit and is attached to it. It will be reinstated if the tribunal finds otherwise, as often happens in many cases.
  Another example would be the lone parent, the widow or the disabled person who fails to attend a "ONE" interview without good reason. That person would be sanctioned on his or her benefit. The latter would only be reinstated if the matter goes to appeal and the case is won. We could also take the example of someone leaving work "voluntarily", according to the employer. The employee says that it was constructive dismissal, which is highly contestable. However, no benefit will be awarded to him unless the tribunal finds in his favour. An even more difficult case would be where she, the lone parent, is refusing to co- operate
  844
  with the CSA and name the father of the child. Her benefit may be sanctioned, not for four weeks as is suggested here but indefinitely while she fails to comply.
  So the whole of the social security system is underpinned by conditionality. Decisions as to whether the conditions of benefit have been breached are made, in all cases, as an administrative decision by quite junior officials in the DSS and usually in far more complicated situations with far less reliable professional evidence and with far more severe penalties attached to them than is the case here. By the criteria used by noble Lords this evening, this is infinitely more robust than almost any other benefit sanctions that the DSS imposes. We impose this straightaway and, if someone wishes to take the matter to appeal, he can do so.
  People may say that we are trespassing across boundaries. That is already the case with the Sure Start maternity grant and your Lordships agreed on Thursday night that it should apply to driving licences and CSA rates. What matters is what brings the young offender to respect his community service.
  Some noble Lords have implied that the Probation Service staff are hard-line and have no discretion as regards referring cases to court. In fact, the opposite has been the case; indeed, that is one of the reasons why the Home Office is having to tighten up the system. However, as my noble friend Lord Mackenzie said, these changes in procedure do not remove discretion, which still remains a part of deciding what constitutes an unacceptable absence.
  My noble friend Lady Kennedy quoted from the Home Office circular 24/00, but she failed to quote paragraph 12 of the document which quite clearly says that, as of March:
  "There may be exceptional circumstances where it is acceptable for an appointment to be rearranged after it has been due to take place and where advanced notification of inability to keep an appointment was not given. It is expected that such instances will be rare and are most likely to occur in cases, such as medical, childcare or other emergencies".
  What the changes mean is that once an absence has been regarded as unacceptable, the probation officer will act and act consistently on that decision. But the probation officer has clear discretion to decide after the event, so to speak, that that was an acceptable good cause for missing the appointment or interview.
  Much of tonight's discussion has focused on Amendment No. 114A; namely, that no such sanction should be applied by the benefits officer until the courts have heard the case. That is entirely at odds with the rest of the social security system where the decision to suspend benefit, or to reduce it, and bring that person on to a hardship scheme is determined by the DSS. Here, uniquely, the matter must first go before the courts.
  If we were to follow the amendment of the noble Lord, Lord Windlesham, it would indeed represent double punishment. The offender would see this as a direct consequence of the court judgment when in fact it is a benefit decision. He will see it as double punishment par excellence and the effectiveness of the

  845
  sanction, both in emphasising the responsibilities that go with benefit receipt and encouraging compliance, will be undermined—particularly when one considers the delays that may occur between the original unacceptable absence and the eventual court hearing. That applies especially where the offender goes missing and fails to turn up in court.
  If the benefit sanction is to be effective, it must be implemented quickly and with certainty, as happens across the rest of the social security system, so that people clearly understand that their rights to benefit are conditional. If they are on JSA, they must understand that they have to be available for and actively seeking work; if they are lone parents, they must understand that if they wish to receive benefit they must name the father of the child so that he makes a proper contribution to the child's upbringing; and, if they are in receipt of a community sentence, they must understand that they have to observe that sentence. It is a condition that society wants people to meet if they are to receive society's financial support.
  I shall deal with just a few of the points raised by your Lordships, because there are too many of them for me to answer this evening. The noble Viscount, Lord Tenby, and other speakers said that this provision was discriminatory against those who might be in work; in other words, someone in work would get away with it and would not have his benefit sanctioned because he would not be receiving it, and only the poor would be damaged. It is quite simple. If an individual is in work, he is not seeking society's financial support, he as earning his passage: if someone is receiving benefit, he is not. He is receiving a benefit from society and, in return, society has a right to attach conditions to it. It is no more discriminatory against the poor than saying that the state will not pay benefit to people who are already high earners. It is neither more nor less discriminatory than that.
  Equally, we were told tonight that this provision is discriminatory against black people—a point made by the noble Lord, Lord Dholakia. I do not believe that to be true. It is true that more black people are serving community sentences as a percentage of their population than is the case with other communities—something like 5 per cent of those between the ages of 16 and 44 are serving probation sentences, although they represent just 2 per cent of the country's population. But, in a way, that is because they are not going to prison. Moreover, although that is true for black offenders, the reverse is true for other ethnic minority communities; for example, only 2 per cent of the Indian, Pakistani and Bangladeshi communities, which represent 3.2 per cent of the country's population, are serving community sentences. If I may be so impertinent as to say it, I do not think that we do the ethnic minorities any kindness in assuming that they need special treatment when it comes to the law and expecting them to observe community punishments.
  Similarly, I do not believe that that also applies to women. Again, I am trying to emphasis that there is discretion where unforeseen emergencies arise; for example, in the case of carers. On average, fewer
  846
  women receive community sentences and, indeed, fewer women break them. I have no reason to think that this provision will be discriminatory in their regard.
  The noble Baroness, Lady Stern, and others, challenged my noble friend Lord Sheppard. They said that this is a new direction for benefit policy and that we are uncertain about its overall effects. Judging by today's debate, one would have thought that this provision was going to be imposed tomorrow across the whole of the country—with a question-mark over Scotland, courtesy of the noble Baroness, Lady Carnegy. That is not true. We propose to pilot this measure and assess it to see whether your Lordships' fears that it will increase crime, or our belief that it will bring greater respect for the observation of community sentences, is correct. Indeed, after listening to tonight's debate, I am not sure whether noble Lords would be more upset if the pilots show that the scheme is working than if they do not.
  However, we shall be evaluating these pilot schemes before taking the decision to roll out the programme nationally. Independent researchers will be looking at the evidence. The final report will be published, with a copy being placed in the Libraries of both Houses. The Government will not extend their policy nation-wide until that evaluation has been assessed. We shall be considering breach rates, crimes committed, financial effects on offenders, hardship payments as well as seeking offenders' views.
  I wish to conclude. We believe that—
  Noble Lords: Oh!
  Baroness Hollis of Heigham: My Lords, it has been a long debate. Noble Lords are the first to complain that their question has not been answered while they hope to heaven that I shall not answer everyone else's questions.
  We believe that members of society as taxpayers and as victims of crime have a legitimate interest in how and whether the state should support those people who flout their responsibilities to society by failing to meet the requirements of their community sentence.
  We have heard four voices, mostly from the Benches opposite, arraigned against the Government. The first—which I believe was best expressed by the noble Lord, Lord Goodhart—was that of the human rights lawyers who argue that this measure contravenes the ECHR and therefore will not stick. My noble friend Lord Goldsmith dealt with that matter brilliantly in Committee and again tonight. It is an argument that I think the Opposition Benches cannot sustain.
  The second voice we have heard tonight against the Government's measure is that of the "domestic" lawyers—if I may so call them—who say that it is a double punishment. It is not a double punishment; it is a condition of benefit. If one leaves work voluntarily but fails to obtain benefit, one could argue that that is a double punishment in that one has lost one's job and one's benefit. However, if one had kept the job there

  847
  would not be a problem. It is a matter of choice. The same applies to community offenders. If they observe the sentence there is no problem. It is their choice.
  The third voice arraigned against the Government tonight is that of those who state—this was spoken to powerfully by the right reverend Prelate the Bishop of Lincoln—that to take away benefit means that those on community sentences who are affected become poorer and commit more rather than less crime. Someone on a community sentence has already broken the law. In that sense he or she has already committed a crime by failing to observe the community sentence. That is a matter of choice. There is an alternative. First, they can observe the community sentence or, secondly, they can take a job and earn their income rather than thieve it. I refer to the notion that we should not make a sanction bite on people who have broken the law and persist in breaking the law as they may become poorer as a result. We should not respond to that situation by not imposing the sanction but rather we should ensure that they obey the law.
  The Opposition Front Bench in another place, led by the Conservative Member, Mr Pickles, urged the Government to punish offenders if the pilot reveals that the sanction did not bite severely enough. The Conservative Benches in the other place have a decent respect for being tough on criminality. That is a voice that we have not heard tonight. Mr Pickles asked whether the Government could assure him that if the pilots produced evidence that those who breach orders and lose benefit are tempted into further crime the Government would not abandon the powers but would seek to ensure that such people were vigorously punished. That is a voice that we have not heard tonight.
  The fourth, and final, voice arraigned against the Government is that of those—I associate it with the Liberal Democrat Bench—who believe that benefit is in some sense inalienable to which sanctions should not be attached. However, I believe that benefit constitutes a contract. I do not believe that someone has the moral right deliberately to be a freeloader and to rely on the conscience and cash of others to protect him from the consequences of his failure to act without conscience and with impunity.
  Against those four voices—strong, powerful, eloquent voices which have been expressed tonight by bishops, barristers, lawyers and Liberal Democrats—
  Noble Lords: Oh!
  Baroness Hollis of Heigham: My Lords, at that point my alliteration ran out! Against those four voices there is a voice that has not been heard; it is the voice of terrified neighbours. I represented a poor council estate for 25 years. After the lack of repairs, which my electors were impatient about, and the lack of transfers to other housing, which they bore with resignation, their main concern was with anti-social behaviour which frightened them. I remember trying to persuade terrified pensioners to give evidence in court against thugs when they knew that if they did so members of
  848
  the thugs' extended family would probably either beat them up or take the glass out of their windows the following day.
  The voice that has not been heard tonight is that of the man whose car has been vandalised and cannot get to work. It is the voice of the small Asian shopkeeper whose shop has been done over yet again. It is the voice of the pensioner whose windows have been broken and that of the parents who are worried that their 12 year-old is being tempted into drugs by the drug pushers who operate on the council estates. It is the voice of young women who have been assaulted by men who think that it is all right to knock them around after a few drinks. It is the voice of people whose everyday life is a misery due to the anti-social behaviour of a minority. However, unlike most of us, they do not have the money to buy peace, privacy and seclusion from that anti-social behaviour. Who is speaking for them tonight because I have not heard that voice?
  I hope that I have responded to noble Lords' concerns. The question that noble Lords have to address is whether they can justify removing the measures from the Bill, or, alternatively, supporting the amendment of the noble Lord, Lord Windlesham, rather than listening to the voice of those who have to tolerate anti-social behaviour day in and day out because one of the few sanctions that might bite—the removal of benefit—has been denied the Government by this House. Your Lordships' House has a reputation for listening not just to the voices of lawyers, bishops and others, but also to those outside who have not been heard; those who suffer anti-social behaviour day in and day out. Those are the people the Government seek to protect tonight. I hope that on that basis noble Lords will think at least twice, if not four times, in favour of not supporting the amendment tonight and will instead support the Government.
  Lord Windlesham: My Lords, this has been a fine debate on an issue that has attracted relatively little public attention. It is exactly the type of questionable government proposal which should be subjected to expert scrutiny. I believe we can all agree that this is a prime function of your Lordships' semi-reformed House.
  I express my thanks not only to those who have taken part in the debate, but also to the large numbers who have listened patiently throughout the lengthy debate, not least my distinguished neighbour on this Bench. Most noble Lords who spoke in the debate contributed on the basis of their own expertise, and some brought eloquence to the debate, too. That is the true spirit of Parliament. I say no more now on the merits which have been so exhaustively discussed. I ask noble Lords to decide the matter and wish to test the opinion of the House on Amendment No. 114A.
  7.57 p.m.
  On Question, Whether the said amendment (No. 114A) shall be agreed to?
  Their Lordships divided: Contents, 170; Not-Contents, 116.

  Division No. 3

  CONTENTS

  Ackner, L.

  Inglewood, L.

  Addington, L.

  Jacobs, L.

  Alderdice, L.

  James of Holland Park, B.

  Alexander of Weedon, L.

  Jenkin of Roding, L.

  Allenby of Megiddo, V.

  Kennedy of The Shaws, B.

  Alton of Liverpool, L.

  Kimball, L.

  Anelay of St Johns, B.

  Laird, L.

  Astor of Hever, L.

  Lester of Herne Hill, L.

  Astor, V.

  Lincoln, Bp.

  Attlee, E.

  Linklater of Butterstone, B.

  Avebury, L.

  Liverpool, E.

  Belstead, L.

  Lucas, L.

  Blackwell, L.

  Ludford, B.

  Blaker, L.

  Luke, L.

  Blatch, B.

  Mackie of Benshie, L.

  Boardman, L.

  McNally, L.

  Bowness, L.

  Maddock, B.

  Brabazon of Tara, L.

  Mancroft, L.

  Bradshaw, L.

  Mar and Kellie, E.

  Bridgeman, V.

  Masham of Ilton, B.

  Burnham, L.

  Methuen, L.

  Buscombe, B.

  Miller of Chilthorne Domer, B

  Byford, B.

  Miller of Hendon, B.

  Campbell of Croy, L.

  Molyneaux of Killead, L.

  Carlileof Berriew, L.

  Monro of Langholm, L.

  Carlisle of Bucklow, L.

  Moynihan, L.

  Carnegy of Lour, B.

  Murton of Lindisfarne, L.

  Carr of Hadley, L.

  Newby, L.

  Chadlington, L.

  Nicholson of Winterbourne, B.

  Clark of Kempston, L.

  Northbrook, L.

  Clement-Jones, L.

  Northesk, E.

  Cope of Berkeley, L.

  Northover, B.

  Cowdrey of Tonbridge, L.

  Norton of Louth, L.

  Craigavon, V.

  Oakeshott of Seagrove Bay, L.

  Cranborne, V.

  Onslow of Woking, L.

  Crathorne, L.

  Onslow, E.

  Dahrendorf, L.

  Oppenheim-Barnes, B.

  Dean of Harptree, L.

  Park of Monmouth, B.

  Denham, L.

  Patten, L.

  Dholakia, L.

  Pearson of Rannoch, L.

  Dundee, E.

  Perry of Walton, L.

  Eccles of Moulton, B.

  Peyton of Yeovil, L.

  Eden of Winton, L.

  Phillips of Sudbury, L.

  Elliott of Morpeth, L.

  Plummer of St. Marylebone, L.

  Elton, L.

  Rawlings, B.

  Ezra, L.

  Razzall, L.

  Falkland, V.

  Reay, L.

  Ferrers, E.

  Redesdale, L.

  Fookes, B.

  Rees-Mogg, L.

  Freeman, L.

  Renfrew of Kaimsthorn, L.

  Frcyberg, L.

  Rennard, L.

  Geddes, L.

  Renton, L.

  Geraint, L.

  Renton of Mount Harry, L.

  Gilmour of Craigmillar, L.

  Roberts of Conwy, L.

  Glentoran, L.

  Rodgers of Quarry Bank, L.

  Goodhart, L.

  Roper, L.

  Goschen, V.

  Rosslyn, E.

  Gray of Contin, L.

  Russell, E.

  Greaves, L.

  Sandwich, E.

  Greenway, L.

  Scott of Needham Market, B.

  Hamwee, B.

  Seccombe, B.

  Hanham, B.

  Selborne, E.

  Harris of Greenwich, L. [Teller]

  Sharman, L.

  Harris of Richmond, B.

  Sharp of Guildford, B.

  Hayhoe, L.

  Sharples, B.

  Henley, L. [Teller]

  Shaw of Northstead, L.

  Higgins, L.

  Shrewsbury, E.

  Hooper, B.

  Shutt of Greetland, L.

  Hooson, L.

  Skelmersdale, L.

  Howe of Aberavon, L.

  Smith of Clifton, L.

  Howell of Guildford, L

  Southwark, Bp.

  Hylton, L.

  Stern, B.

  850

  Stodart of Leaston, L.

  Trefgarne, L.

  Stoddart of Swindon, L.

  Vivian, L.

  Strathclyde, L.

  Waddington, L.

  Taverne, L.

  Wade of Chorlton, L.

  Tebbit, L.

  Wallace of Saltaire, L.

  Tenby, V.

  Walmsley, B.

  Thatcher, B.

  Watson of Richmond, L

  Thomas of Gresford, L.

  Wigoder, L.

  Thomas of Gwydir, L.

  Williams of Crosby, B.

  Thomas of Walliswood, B.

  Willoughby de Broke, L.

  Thomson of Monifieth, L.

  Windlesham, L.

  Tope, L.

  Wolfson, L.

  Tordoff, L.

  Young, B.

  NOT-CONTENTS

  Ahmed, L.

  Janner of Braunstone, L.

  Amos, B.

  Jenkins of Putney, L.

  Andrews, B.

  King of West Bromwich, L.

  Archer of Sandwell, L.

  Layard, L.

  Ashton of Upholland, B.

  Lea of Crondall, L.

  Bach, L.

  Lipsey, L.

  Barnett, L.

  Lockwood, B.

  Bassam of Brighton, L.

  Lofthouse of Pontefract, L.

  Bernstein of Craigweil, L.

  Macdonald of Tradeston, L.

  Billingham, B. [Teller]

  McIntosh of Haringey, L.

  Blackstone, B.

  Blease, L.

  McIntosh of Hudnall, B.

  Borrie, L.

  MacKenzie of Culkein, L.

  Brennan, L.

  Mackenzie of Framwellgate, L

  Brooks of Tremorfa, L.

  Mason of Barnsley, L.

  Burlison, L.

  Massey of Darwen, B.

  Carter, L. [Teller]

  Mitchell, L.

  Chandos, V.

  Molloy, L.

  Clarke of Hampstead, L.

  Morris of Castle Morris, L.

  Cledwyn of Penrhos, L.

  Nicol, B.

  Cocks of Hartcliffe, L.

  Parekh, L.

  Crawley, B.

  Patel of Blackburn, L.

  Currie of Marylebone, L.

  Pitkeathley, B.

  David, B.

  Plant of Highfield, L.

  Davies of Coity, L.

  Powell of Bayswater, L.

  Dean of Thornton-le-Fylde, B.

  Prys-Davies, L.

  Desai, L.

  Puttnam, L.

  Donoughue, L.

  Ramsay of Cartvale, B.

  Dormand of Easington, L.

  Rendell of Babergh, B.

  Elder, L.

  Renwick of Clifton, L.

  Evans of Parkside, L.

  Richard, L.

  Falconer of Thoroton, L.

  Sainsbury of Turville, L.

  Farrington of Ribbleton, B.

  Sawyer, L.

  Faulkner of Worcester, L.

  Sewel, L.

  Filkin, L.

  Sheppard of Liverpool, L.

  Fitt, L.

  Simon, V.

  Gale, B.

  Smith of Gilmorehill, B.

  Gavron, L.

  Smith of Leigh, L.

  Gibson of Market Rasen, B.

  Strabolgi, L.

  Gilbert, L.

  Symons of Vernham Dean, B.

  Goldsmith, L.

  Taylor of Blackburn, L.

  Gordon of Strathblane, L.

  Taylor of Gryfe, L.

  Goudie, B.

  Thornton, B.

  Gould of Potternewton, B.

  Tomlinson, L.

  Graham of Edmonton, L.

  Turner of Camden, B.

  Greengross, B.

  Uddin, B.

  Grenfell, L.

  Varley, L.

  Hardy of Wath, L.

  Harrison, L.

  Walker of Doncaster, L.

  Haskel, L.

  Warner, L.

  Hayman, B.

  Warwick of Undercliffe, B.

  Hogg of Cumbernauld, L.

  Wedderburn of Charlton, L.

  Hollis of Heigham, B.

  Whitty, L.

  Howells of St. Davids, B.

  Wilkins, B.

  Howie of Troon, L.

  Williams of Mostyn, L.

  Hoyle, L.

  Williamson of Horton, L.

  Hughes of Woodside, L.

  Winston, L.

  Hunt of Chesterton, L.

  Woolmer of Leeds, L.

  Hunt of Kings Heath, L.

  Young of Old Scone, B.

  Resolved in the affirmative, and amendment agreed to accordingly.
  8.7 p.m.
  Lord Windlesham Lord Windlesham moved Amendments Nos. 114B to 114H:
  Page 65, line 15, leave out ("that the information has been laid") and insert ("of the determination").
  Page 65, line 43, leave out subsection (6).
  Page 66, line 13, leave out ("laying of the information") and insert ("determination of the court").
  Page 67, line 3, leave out sub-paragraph (i).
  Page 67, line 8, leave out ("that the proceedings have been commenced") and insert ("of the determination").
  Page 67, line 10, leave out paragraphs (b) and (c).
  Page 67, leave out lines 38 to 42.
  The noble Lord said: My Lords, these amendments are consequential to Amendment No. 114A. I beg to move.
  On Question, amendments agreed to.
  [Amendment No. 115 not moved.]
  Clause 64 [Loss of joint-claim jobseeker's allowance]:
  Lord Windlesham Lord Windlesham moved Amendments Nos. 115A to 115D:
  Page 68, line 19, leave out ("information in question has been laid") and insert ("court has made a determination").
  Page 68, line 36, leave out subsection (6).
  Page 68, line 45, leave out ("laying of the information") and insert ("determination of the court").
  Page 68, line 47, leave out subsection (9).
  The noble Lord said: My Lords, these amendments were spoken to with Amendment No. 114A. I beg to move.
  On Question, amendments agreed to.
  [Amendment No. 116 not moved.]
  Clause 65 [Information provision]:
  Lord Windlesham Lord Windlesham moved Amendments Nos. 116A to 116G:
  Page 69, line 20, leave out from ("of) to ("as") in line 21 and insert ("any such determination").
  Page 69, line 25, leave out paragraph (c).
  Page 69, line 28, leave out from ("any") to second ("to") in line 29 and insert ("determination of a failure to comply with a relevant community order has been made").
  Page 69, line 32, leave out ("commencement of the proceedings") and insert ("determination").
  Page 69, line 34, leave out paragraph (c).
  Page 69, line 38, leave out ("laying of an information") and insert ("determination").
  Page 69, line 44, leave out ("laying of an information") and insert ("determination").
  The noble Lord said: My Lords, these amendments were spoken to with Amendment No. 114A. I beg to move.
  On Question, amendments agreed to.
  [Amendment No. 117 not moved.]
  Baroness Ramsay of Cartvale: My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion may I suggest that the Report stage begin again not before 9.10 p.m.
  Moved accordingly, and, on Question, Motion agreed to.

Zimbabwe Pensioners
8.10 p.m.
Lord Waddington Lord Waddington rose to ask Her Majesty's Government what is their policy regarding Zimbabwe public service pensioners living in Britain.
The noble Lord said: My Lords, in speaking to this Unstarred Question, perhaps I may declare an interest. I have the honour to be honorary president of the Overseas Service Pensioners Association. The association represents a large number of former servants of the Crown who served overseas and widows of such officers.
Back in 1979–1980, at the time of the negotiations to bring Rhodesia to lawful independence, there was concern among British persons employed in the public service in Rhodesia about the security of their pension rights. When other British colonies became independent, the practice was for the British Government to make what was called a Public Officers Agreement, or POA, with the emerging government to ensure that pensions would be paid by the new government on the same terms as before, and would be remitted to those who had come back home or gone to live elsewhere abroad, at the rate of exchange prevailing at the time of independence.
However, in the case of Zimbabwe, the British Government refused to consider making a POA on the grounds that the Rhodesia public service was never a part of our colonial service because Southern Rhodesia had always been an internally self-governing colony with its own government, responsible for the recruitment and terms and conditions of employment of its civil servants.
Now of course I recognise that governments often draw lines in order to contain public expenditure. But such decisions do not always involve issues of principle; and, clearly, no principle was involved here. The civil servants in question were recruited by Rhodesia, but they were recruited for the most part by Rhodesia House here in London and the people recruited regarded themselves as going out to a colony as expatriates, just like those going out to serve in any other colony.
But the unfortunate fact of the matter is that successive governments have cited the refusal of the British Government to make a POA with Zimbabwe in 1980 as absolving them from any responsibility for persons who were undoubtedly Crown servants—yes, Crown servants—and Crown servants, I might say, of a territory for which we as a country were so

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determined to assert our responsibility, we were prepared to resist to the utmost Mr Smith's unilateral declaration of independence.
So the position today is that, while in the case of all other former colonies the British Government have taken over responsibility for the pensions of former expatriate public officers under the powers in the Overseas Pensions Act 1973—and those powers are wide enough to allow them to do the same in the case of Zimbabwe—they decline to give any help at all to these Crown servants.
On 13th November 1979, during the course of the proceedings on the Southern Rhodesia Bill, the late Lord Gridley, who was then president of OSPA—the association of which I am now president—moved (at col. 1221 of the Official Report) an amendment calling on the Government to ensure that the new government of Zimbabwe did do right by their public service pensioners. My noble friend Lord Trefgarne, replying on behalf of our government, said (at col. 1226) that the independence constitution agreed at Lancaster House specifically preserved public service pension rights. He said that the British Government could not undertake to underwrite that liability which the Zimbabwe Government had undertaken, but he went on to say that prospective pensioners could take comfort from the fact that,
"a constitutional settlement and the lifting of sanctions will lead to a large inflow of commercial investment into Rhodesia".— [Official Report, 13/11/79; col. 1226.]
By inference, he was saying that economic growth and prosperity would see that the pensioners were all right.
My noble friend Lord Trefgarne said that he would write to Lord Gridley about one particular matter. I need not describe what that matter was. That letter is a very important one. It is dated 20th December 1979. In it, my noble friend Lord Trefgarne, on behalf of the government of the day, gave an assurance that the Zimbabwe independence constitution would contain,
"full safeguards for public service pensions and their remittability".
That sounds clear enough. But, in spite of it being such a clear statement, it is now argued—in particular by Mr Foulkes, Parliamentary Under-Secretary of State at DfID, in a letter to Mr Michael Ancram MP dated 6th December 1999—that a person's pension has been fully safeguarded and preserved, and, in the words of the Zimbabwe Constitution,
"its payment fully guaranteed to former public servants wherever they reside",
even though that pension has been rendered almost completely valueless as a result of the collapse of the currency. I have to say that I consider that argument absolutely shameful.
The Minister then went on to assert in the same letter that, while the British Government have always acknowledged that they have a special responsibility to protect the pensions of officers employed in the public services of our former dependent territories, the responsibility extends only to those officers who were members of the colonial service appointed by the
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Secretary of State for the Colonies and defined in the various POAs concluded between HMG and incoming governments at independence. But it is an argument which has no validity at all, Her Majesty's Government having in fact accepted liability for at least four groups of officers not covered by POAs. They are: first, the "non-designated officers" of Asian origin recruited by the local colonial government or administration to serve in Tanganyika, the East Africa High Commission or Somaliland on terms which included overseas leave and passages; secondly, some locally recruited officers who served in Aden and Zanzibar; thirdly, expatriate officers who served in Aden; and, fourthly, the "quasi-government" officers who had served in West African territories on assignments not clearly part of the central government, but who were accepted by HMG in 1973 as qualifying for pensions takeover under the Overseas Pensions Act.
Recently another argument has been advanced which is so disingenuous that I wondered whether I should really trouble your Lordships with it, but it was raised by the Minister in a letter to the chairman of OSPA dated 17th November last year, and I can hardly ignore it now. What is said in that letter is that up and down the globe there are many thousands of pensioners of colonial governments who were employed on local terms and Zimbabwe pensioners cannot be preferred over them. But what the Minister was conveniently ignoring is that many of the Zimbabwe pensioners were in fact recruited here, on what were expatriate-type terms broadly similar to those of HMOCS officers in other dependent territories. Their passages were paid out to the territory, they took their leave entitlement back here and now, at the end of their service, they have retired here. It really is disingenuous to pretend that local people recruited locally in the colonies are in like case. Clearly they are not.
An even stranger argument has been advanced. It is said that, if our Government do not look out, we might finish up having to pay for the pensions of people who worked in Zimbabwe for the post office, the railways, the university and local government. But the claims of these last people are entirely irrelevant to this debate for the simple reason that even they do not claim that they were public service officers within the meaning of the Zimbabwe constitution, who are defined in that constitution as persons holding a paid office in the service of the state. Their pensions, therefore, unlike the pensions of the Crown servants I am talking about, are clearly not guaranteed by the Zimbabwe constitution. To refer to those cases is the greatest irrelevance that could possibly be launched into this debate.
So this is the position that we have reached. Successive governments have moved to assist and make top-up payments to help pensioners from other colonies, using the powers in the Overseas Pensions Act 1973 but, although they know the parlous state the Zimbabwe pensioners are in, the Government flatly refuse to help them.
Perhaps I may remind your Lordships of what has happened to these unfortunate people. It is a major tragedy which I do not believe the wildest optimist thinks is likely to be alleviated by any political change in Zimbabwe over the coming months, or even years. The Zimbabwe dollar, which was originally worth 50p, is now worth rather less than 1½p. The pensions received by British people recruited here and now retired here have become as good as useless. These people, acknowledged by this and preceding governments to be Crown servants, are reduced to penury.
I should like to set down a few figures. A pensioner living in retirement in Britain, receiving £300 a month in 1980, now, after a doubling of prices in the intervening years, receives £28 a month—just £7 a week. There is every possibility of an even further worsening of the situation following the general election last weekend. It has been rumoured that, if payments continue at all—and I should remind the House that in the new constitution submitted by President Mugabe to a national referendum, there was no repeat of the undertakings set out in the 1979 constitution to pay public service pensions at all—they will continue only after a devaluation of the Zimbabwe dollar to around 100 dollars to the pound. One can anticipate only a worsening of the situation rather than an improvement.
It is a shameful state of affairs and the arguments advanced by the British Government are shameful. After insisting that UDI had to be resisted, not least because Rhodesia was a colony for which Britain alone was responsible and to which Britain alone could grant independence, the British Government now say, in order to avoid their financial responsibilities, that Rhodesia was not really a colony like any other colony. It was a self-governing colony and that allows our Government to deny to these British Crown servants help which is readily afforded to other Crown servants in like case.
I am told that in 1998 there were a total of around 1,200 Rhodesia/Zimbabwe pensioners. Of those, around 800 were recruited in England through Rhodesia House. To do something for them, to pay pensions at the historic rate of two dollars to the pound, would cost under £7 million—5 per cent of the present total overseas pensions bill.
There has been a long correspondence with the Government about this matter. Recently we have been urged to draw a line under the issue; in other words, to accept defeat. We shall not, because right is on our side and something has got to be done for these people.
Perhaps I may therefore ask the Minister one final question. If the Government balk at the possibility of extending the provisions of the Overseas Pensions Act to Zimbabwe pensioners because that requires the formal agreement of the Zimbabwe Government, will the Government please consider doing what the government did in the case of Aden and Somalia, where, for other reasons, it was not possible to make a POA with the emerging government, and where a
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"loan advance" scheme was set up which protected the pensioners for as long as necessary? But it is not our job to tell the Government how help should be given. Our job is to shout from the house-tops that something has to be done.
8.25 p.m.
Lord Thomson of Monifieth: My Lords, I apologise to the Minister for rising in the gap to say a brief word in the debate on the Unstarred Question tabled by the noble Lord, Lord Waddington. I do so for two reasons.
First, I was the last person to hold the separate office of Secretary of State for Commonwealth Affairs. I did so at the time of UDI. For that reason, I should like to associate myself with what I felt to be the formidable case advanced by the noble Lord, Lord Waddington, on the plight of the Zimbabwe pensioners recruited in this country as Crown servants to serve in the special circumstances of Rhodesia. I should like to lend my support to everything that the noble Lord has said.
I was also provoked into speaking because I have been in correspondence with the present Secretary of State and with the Parliamentary Under-Secretary of State, Mr George Foulkes, about a particular case. I do not wish to set out the detail at this stage, but suffice to say that it is similar to some of the matters raised by the noble Lord, Lord Waddington. The case relates to a distinguished retired Professor of Medicine, Professor Douglas Thompson, who went out from Scotland to Rhodesia on the eve of UDI. He claims that he went only because he was encouraged to do so by the United Kingdom Inter-university Council. He was assured that, by going, he was doing so in Britain's best interests. For that reason, his case does not fit directly into the category of Crown servant addressed by the noble Lord, Lord Waddington. However, Professor Thompson served at the University of Rhodesia, which was of course a state university, having been recruited in this country and told that, by going, he was serving British interests.
He is now living in this country once more, in advancing years, and existing on a positively pitiful pension of the kind described by the noble Lord, Lord Waddington. I have argued that there is at least a moral obligation on the part of Her Majesty's Government to deal with this matter in a sympathetic manner. So far I have received nothing but dusty and negative answers.
I wished briefly to make a personal point about an individual whose case I have raised with the Department for International Development. However, above all, I speak from the point of view of my rather ancient former role as the last separate Commonwealth Secretary in support of the strong and weighty case made by the noble Lord, Lord Waddington.
8.28 p.m.
Lord Dholakia: My Lords, I, too, have a great deal of sympathy with the issue raised by the noble Lord, Lord Waddington, about former Zimbabwe public

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servants who find that their pensions are diminishing in value as the Zimbabwe dollar continues to depreciate against sterling. I am told that, at current exchange rates, such pensions are now typically worth between 5 and 10 per cent of their original sterling purchasing power. Perhaps the Minister, the noble Baroness, Lady Amos, could confirm this.
The noble Lord, Lord Waddington, told the House with considerable force of the issues surrounding Zimbabwe pensioners. I suspect that unless the economy of Zimbabwe improves, these figures will soon be outdated and no doubt many recipients will suffer severe hardship. With continuing uncertainty about the political process and the power structure there, it is right that the issue of pensions is highlighted.
Perhaps I may give an analogy. My father worked for Tanganyika Railways, which later became East African Railways. He retired on a very modest pension and went to live in India. In the 1960s and 1970s the Tanzanian economy was in the grip of massive inflation. The national debt was mounting and the time came when the East African Railway Authority could not meet its obligations to its pensioners. My family went without pensions for a considerable time until the British Government, through the Crown Agents, accepted responsibility and the pensions resumed. I am not sure about the technical arrangements at that time. I was too young to understand the issues. It may be that the noble Baroness may want to see if there is a precedent here and if it would help with the present situation in Zimbabwe.
However, there is another point. Inflation was so rampant that the Tanzanian shilling was literally worthless. In fact, I recall visiting the country at that time and discovering that those who had retired before the collapse of the economy found that their pensions of about 1,000 shillings or less were worth no more than 10 bottles of Coca-Cola. Perhaps I may add that since then the economy of Tanzania has improved. I hale to think what would happen to the economy of Zimbabwe if the present political uncertainty continues.
However, this is not a debate about the political process, but about the plight of individuals caught in this process because of inflation and the uncertainty of the government there to meet their obligations. Let us hope that even at this late stage politicians will see their way to ensure stability which is the cornerstone of a sound economy.
Expressing sympathy alone is not helpful. We ought to be aware that compassion between members of the public service in Southern Rhodesia who were employed directly by that government in a self-governing colony and those who were employed on expatriate terms in the central government of a colony, may not necessarily be very helpful. There are two separate categories of employment and separate conditions obviously applied. However, it would be very helpful if the Minister were to give some idea of
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the financial consequences of assisting overseas pensioners from Zimbabwe now living in the United Kingdom.
I also ask the Minister whether it is possible to safeguard the pension rights of both retired and serving Zimbabwe public servants which were negotiated under the Zimbabwe constitution during the Lancaster House negotiations. I raise this point because of the political uncertainty there. Would the Minister ensure that the Foreign Office takes the first opportunity to discuss with the government of the day there the obligation that they entered into during the independence negotiations so that we do not have to face the kind of consequences that the people of Tanzania suffered at one time?
The Overseas Pensioners Association is delighted to know of the very sound case put forward by the noble Lord, Lord Waddington. It has made separate representations for the 800 or so Zimbabwe pensioners originally recruited through Rhodesia House and who are currently resident in the United Kingdom. What has been the outcome of those representations?
My final point is to ask the Minister whether she would make available the present criteria for pension protection and explain whether it would be in breach of these criteria if the Government were to provide any assistance. That would help all of us to understand the issue from the legal perspective.
8.33 p.m.
Baroness Rawlings: My Lords, I, too, am grateful to my noble friend Lord Waddington for initiating this important debate on a subject that has troubled governments since the Lancaster House agreement. However, it is even more important that we should be talking about the plight of these pensioners today at a time when there are so many question marks hanging over Zimbabwe after its election results.
I have read with great interest all the briefing papers and previous debates in both Houses. It is not a record to be proud of. I find it difficult to understand several of Mr. Foulkes' comments. First, he said that,
"Her Majesty's Government was not involved in defining the terms and conditions of service under which these local staff were employed".
As I understand it, at the Lancaster House independence negotiations, Her Majesty's Government insisted that there should be certain constitutional provisions to protect the rights and interests of serving officers and public service pensioners. Secondly, Mr Foulkes added that the pension rights were "preserved" under the Zimbabwe constitution and that the constitution,
"guarantees the continued payment of pensions",
as we heard from my noble friend Lord Waddington.
Pensioners' groups have argued that some sort of moral obligation is owed to these individuals since the Crown did retain responsibility for Southern Rhodesia until 1979 and the officers in question were in some sense serving the Crown.

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It could be said by the pensioners that the "preserving" of rights and the "guarantee" of continued payment are meaningless without protection of the value of the pension. As my noble friend Lord Waddington stated, the value of the Zimbabwe dollar had originally been 10 shillings. It even reached 68p at its peak, but now it is worth a mere 1.5p.
We are talking only of about 1,200 pensioners. The cost would be minimal to the Government. It would cost, as mentioned by my noble friend Lord Waddington, under £7 million, which is less than 5 per cent of the present total overseas pension bill, as the noble Lord, Lord Dholakia said. That is a mere drop in the ocean, especially if we consider the near £800 million that was spent on the Dome.
We are also told that if an exception were to be made for these pensioners overnight there would be a flood of others claiming pensions. But as former Crown servants, serving what were in essence expatriate type terms, which can be distinguished clearly from other groups that may submit their own claims, this is a particular situation as the other former colonies have been cared for.
I turn to the problem of the small print, the finer details, the enigmatic statements that can easily be misinterpreted. But if this Government stand by the Foreign Secretary's ethical foreign policy, they surely have a moral duty in this case to try to end happily this sorry tale. I urge the noble Baroness to look sympathetically, in the light of the changed circumstances, at the situation of these disadvantaged people in the twilight of their lives.
8.37 p.m.
Baroness Amos: My Lords, I begin by thanking the noble Lord, Lord Waddington, for initiating this debate. I believe that it would be helpful to the House if I explain the Government's position on Zimbabwe public service pensions. I shall then come to the specific questions raised by noble Lords this evening. It is a subject that has drawn many representations in recent years, both to this Government and their predecessor. The detail of colonial pensions can be a very complex business, but I shall try to make my explanation as straightforward as possible.
All Zimbabwe public service pensions, including those paid to British nationals living in the United Kingdom, are the responsibility of the Zimbabwe government. That has always been the case. At independence the pension rights of both retired and serving Zimbabwe public servants were preserved under the Zimbabwe constitution which was formulated during the Lancaster House negotiations. The constitution guaranteed that existing pension entitlements would not be adversely affected by any changes in law which came into effect after independence, and that pensions paid externally would not be subject to any deductions. The constitution also guarantees to continue payment of pensions to former Zimbabwe public servants wherever they reside.
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The Government of Zimbabwe have always met their responsibilities for paying these pensions under the constitution. On occasions, when foreign exchange has been in short supply, as at present, pensioners living in Britain have experienced delays in receiving their monthly pension payments. On these occasions the British Government have always reminded the Zimbabwe Government of their responsibilities. But it is important to recognise that the Government of Zimbabwe have never reneged on their obligations in respect of these pensioners.
The real problem, as the noble Lord, Lord Waddington, and the noble Baroness, Lady Rawlings, pointed out, has been that the sterling value of these pensions has gradually diminished as the Zimbabwe dollar has fallen against the pound. There is no provision in the Zimbabwe constitution to protect externally paid pensions against adverse exchange rate movements and the pensions increases awarded by Zimbabwe have not been sufficient to compensate for the shortfall.
This situation, as the noble Lord, Lord Waddington, pointed out, has led to repeated representations from the Overseas Service Pensioners Association and indeed from Members in another place on behalf of former Zimbabwe public servants. They have asked the British Government to intervene and extend to Zimbabwe pensioners the pension protection arrangements afforded to overseas public servants for whom the British Government accept a special responsibility. Successive governments have declined to do this because the circumstances of Zimbabwe public service pensioners clearly do not meet the criteria for inclusion in our pension protection arrangements.
The noble Lord, Lord Dholakia, asked me to say something specifically about the criteria. The British Government acknowledge that they have a special responsibility to protect the pensions of certain officers who were employed in the public services of our former dependent territories, but this responsibility extends only to those who were appointed by, or on behalf of, the Secretary of State for the Colonies to serve overseas on expatriate terms in the central government of a colony.
The noble Lord asked whether it would be possible to safeguard the pension rights of both retired and serving Zimbabwe public servants which were negotiated during the Lancaster House negotiations. At the time of the Lancaster House negotiations, Southern Rhodesia's public servants sought similar protection. However, this was refused on the grounds that staff recruited to the public service in Southern Rhodesia were not appointed by or on behalf of the Secretary of State and all served on local, as opposed to expatriate, terms of service.
Perhaps I may explain what that means. Southern Rhodesia was a self-governing colony from 1923 and was directly responsible for recruiting its own public servants, including those who were recruited directly from Britain. The British Government were not involved with the recruitment process or the

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formulation of terms and conditions of service for any Southern Rhodesia public service staff. It is quite clear that Zimbabwe public service pensioners fall outside the scope of our pension support arrangements. I know that that is not what noble Lords want to hear, but it is the case.
It has been suggested on occasions that the Government should accept responsibility for individual groups of Zimbabwe pensioners. The Overseas Service Pensioners Association, of which the noble Lord, Lord Waddington, is honorary president, recently proposed that the Government should accept responsibility for that group of Zimbabwe pensioners who were originally recruited through Rhodesia House in London to serve in the central government of Southern Rhodesia and who are currently resident in Britain.
We took the view that we could not reasonably do this, as it would be difficult to see how this group could be isolated for pension protection purposes from other groups who were recruited from the UK by other means to work in the colony or those who served in para-statal organisations. We considered the matter carefully.
Indeed, after examining the whole issue many times in recent years, it is not possible to see how we could limit assistance to expatriates recruited from Britain. Many Zimbabwe public servants were recruited locally or from neighbouring territories. Attempting to ring-fence a particular group of expatriates would rightly invite accusations of discrimination if in a multi-racial and fully integrated public service pension protection appeared to depend on ethnic origin, residence or citizenship. The British Government's policy on protecting colonial pensions has always been based on employment status. Such considerations as ethnic origin, nationality or where people reside do not have a bearing in determining eligibility for inclusion in our pension protection arrangements.
I now turn specifically to some of the questions raised during the course of the debate. The noble Lord, Lord Waddington, asked about Rhodesia House recruits and whether they could be regarded as Colonial Service officers. The answer is no. Rhodesia House has never been acknowledged as a formal recruitment channel for any staff serving under the auspices of the British Government. It always operated under the jurisdiction of the Southern Rhodesian government, who were responsible for their own recruitment, selection and staffing policies. Indeed, it seems that many Rhodesia House recruits received free passages to Southern Rhodesia but, significantly, they did not receive free return passages.
The noble Lord, Lord Waddington, also made reference to the correspondence of the noble Lord, Lord Trefgarne. The pensioners' associations—and the noble Lord, Lord Waddington, in this debate—accused Her Majesty's Government of not honouring a pledge to safeguard fully Zimbabwe public service pensions at independence, including an undertaking to underwrite the costs of a sterling safeguard to maintain the value of pensions. The Government gave no such
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undertaking. We insisted on certain safeguards being included in the independence constitution for the continued payment of pensions. But there was never any statement or suggestion that these assurances should include Britain underwriting a sterling safeguard.
The noble Lord, Lord Waddington, referred also to the special arrangements that Her Majesty's Government have made for certain groups of overseas pensioners who served in East Africa, Aden, Zanzibar and India. The East African Asians were expatriate officers working in services which were the clear responsibility of the Secretary of State; and the Colonial Service White Paper of 1954 stated specifically that their pension interests would be protected.
The British Government pay certain local Aden and Zanzibar pensions in the form of loan advances. However, unlike Southern Rhodesia, the public service in Aden was the responsibility of the Secretary of State during the colonial era. In addition, it should be noted that local Aden loan advances reflect only pre-independence service and do not attract increases.
In 1955, the Government agreed to take over from India the central administration and payment of all sterling pensions, including a small number of non-Secretary of State appointees. But the Indian Government paid over an actuarially assessed sum to cover the future costs of all these pensions.
The noble Lord, Lord Dholakia, raised the question of Tanzania and whether there was a precedent. The Tanzania Government were responsible for paying pensions to employees of the East African Railways Authority, but they defaulted on payment in 1968. Because the pensioners involved had been appointed by and on behalf of the Secretary of State and were employed on expatriate terms of service, the British Government felt obliged to intervene and to pay the pensions. These were subsequently formally taken over by the British Government in the 1970s. Southern Rhodesian pensioners do not enjoy this special status. They were not recruited by or on behalf of the Secretary of State, nor were they employed on expatriate terms of service.
The noble Lord, Lord Dholakia, and the noble Baroness, Lady Rawlings, asked about the financial consequences of assisting all overseas pensioners. We do not know exactly how many Zimbabwe public service pensioners reside in Britain, but in any case we could not consider intervention to protect that group alone—a point I made earlier.
In 1998 the Department for International Development calculated an intervention cost of some £52 million a year but that figure covered only an estimated 6,000 pensioners who joined the Southern Rhodesia public service direct from the UK. The latest information from Crown Agents is that the value of all Zimbabwe pensions paid outside the country is about £4 million a year at the current rate of exchange. If all those pensions were paid at the original exchange rate of two Zimbabwe dollars to the pound, annual expenditure would be in the region of £114 million.

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The noble Lord, Lord Dholakia, asked about the outcome of representations. My honourable Friend the Under-Secretary of State for International Development wrote to the chairman of OSPA on 30th June 1998, explaining that the Government felt unable to extend pension protection rights to the group in question. The noble Lord, Lord Thomson of Monifeith, has a great deal more experience than me in these matters. I am unable to comment on the particular issue he raised but I will examine the correspondence again.
While we acknowledge and sympathise with the problems faced by Zimbabwe pensioners living in Britain, to provide assistance we would have fundamentally to breach the present protection arrangements. It would not be defensible to limit extending support to any particular group of Zimbabwe public service pensioners, nor to limit such support to Zimbabwe, when many thousands of former local employees of other colonial public services face exactly the same difficulty of diminishing pension values. The financial consequences of extending pension protection to all would be prohibitive.
Lord Burlison: My Lords, I beg to move that the House do adjourn during pleasure until 9.10 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.52 to 9.10 p.m.]

Child Support, Pensions and Social Security Bill
Further consideration of amendments on Report resumed.
Clause 66 [Loss of benefit regulations]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 118:
Page 70, line 39, at end insert—
("( ) a provision prescribing the manner in which the applicable amount is to be reduced for the purposes of section 63(3),
( ) a provision prescribing the manner in which an amount of joint-claim jobseekers allowance is to be reduced for the purposes of section 64(3)(a),
( ) a provision the making of which is authorised by section 63(4) or 64(4),").
The noble Baroness said: My Lords, Amendment No. 118 introduces measures to make the powers in Clause 63(3) and (4)—loss of benefit provisions—that specify the level of benefit reduction for income support and hardship payments for jobseeker's allowance subject to the affirmative resolution procedure as specified in Clause 66(4). This is in response to the recommendation of the Delegated Powers and Deregulation Committee, which I am happy to accept.
In addition, the amendment provides that regulations to be made under Clause 64(3)(a) and (3A)—reduced rate payments of JSA and hardship
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payments which may operate when the sanction applies to couples who claim JSA jointly—should also be subject to the affirmative resolution procedure. Although not covered by the report of the Delegated Powers and Deregulation Committee, these are to be included in the list of powers subject to the affirmative procedure to ensure consistency.
This is a measure concerned with conditions attached to benefits which we believe is right in principle. But, principled as we are, we have no wish to extend this policy widely without understanding its effects. That is why we are testing it first through pilots which will be thoroughly evaluated. We shall not extend the pilots nation-wide before considering carefully the findings of the evaluation and making them public. I urge your Lordships to accept this entirely beneficial government amendment which extends the affirmative resolution procedure to those parts of the clauses that deal with rates of reduction and hardship payments. I beg to move.
Lord Goodhart: My Lords, wearing my hat as a member of the Delegated Powers and Deregulation Committee, I am happy to welcome the amendment. It appeared to us that the issues raised were important and that the regulations should be considered first by your Lordships' House before being implemented.
On Question, amendment agreed to.
[Amendment No. 119 not moved.]
Clause 67 [Appeals relating to loss of benefit]:
[Amendment No. 120 not moved.]
Earl Russell Earl Russell moved Amendment No. 121:
After Clause 67, insert the following new clause—

Child Support, Pensions and Social Security Bill
  Payment of benefit

    MANNER OF PAYMENT OF BENEFIT NOT RESTRICTED TO AUTOMATED CREDIT TRANSFER
    . In section 5(1) of the Social Security Administration Act 1992, at the end of paragraph (i) there is inserted ", but the regulations may not require automated credit transfer to be the only manner of paying a benefit.".").
    The noble Earl said: My Lords, last March on the way back from my party's conference in Plymouth I stopped off at Chippenham to visit my mother-in-law and father-in-law, both of whom have recently cleared 90. My father-in-law came to the station to see me off and I chatted to him about the conference as we waited for the train. I told him about a motion that we had debated, to some profit, about the need to defend post offices. I noticed that a woman who was sitting next to us on the bench was particularly interested. She asked, as I wound down, whether my party was committed to fighting to defend rural post offices. I said that it was. She said, "In that case, your party has my firm and undying support. By the way, which is your party?" There we have the paradigm voter of the 21st century who has no brand loyalty and believes that the consumer is king. We also have a reason why there has been a good deal of emulation between the two Opposition parties about which of us is in front on this cause.
    However, in this Chamber we manage these matters rather better. I have had nothing but kindness, courtesy and co-operation from the Official Opposition. I should like particularly to thank the noble Lord, Lord Higgins, and the noble Baroness, Lady Byford—who comes in promptly on cue and appears to be the unofficial postmaster general on the Opposition Benches!
    At present, nothing but regulation prevents the Government from departing from the existing legal situation, according to which people in receipt of benefit have a choice whether they receive benefit through the post office or go over to ATC. We all know that it is painfully easy to alter regulations. Although we remember an occasion as recently as last February when a regulation was voted down in this House, it was on the understanding that it will not be a usual occurrence. We on these Benches believe that there is a need for greater security. We need to create a situation where the Government must change primary legislation if they want to cease payment of benefit through post offices.
    That is the purpose of the amendment. It is fairly clear that there is official influence—I was going to say "pressure" but influence is perhaps a more just word—to encourage new benefit claimants to receive their benefits through ATC. I have the leaflet AC1 issued to new pensioners. An enormous headline states:
    "Have your pension paid straight to your account".
    It is a little more than subliminal. The message that this is the preferred option is very clear indeed. The trouble is that benefits are a crucial part of the income not only of the post office but most particularly of the sub-postmaster. Without the network of sub-post offices as well as that of Crown post offices we would not have a Post Office service worth the name.
    The matter is generally regarded as a rural issue, as very largely it is. In any normal village the post office is usually the shop, the meeting point and the social centre of the village. But it is also an urban problem. I must declare an interest. My post office, Brondesbury post office in NW6, was closed through fire quite a long time ago. There is no sign that the Post Office is doing anything towards reopening it. It makes me even more grateful for the Post Office services of this House. It has taken over from car parking as the second most valuable privilege of membership of this House. I must have a thought for those who do not enjoy that privilege.
    Post office closures have been taking place for some time. They are accelerating. They have increased to as many as 500 in the current year. That is a considerable number of closures. I appreciate that the Government say—the Minister will doubtless repeat it—that they intend that everyone will retain the right to claim benefit at a post office. Yes, they do so if they can find a post office. But if closures are running at 500 a year, the right to go to a post office may be a little like the right which everyone has of having tea at the Ritz: it is fine if one can do so, but the fact that one has the right does not necessarily prove that one can exercise it.
    Something has to be done to shore up the post office network especially since the DSS's planned saving of £400 million will be achieved only if almost all benefit claimants do switch to ATC. Many are reluctant to do so. Not all claimants have great confidence in banks. Not all of them are in a position where they would be well advised to do so. Banks were once described by one of my American colleagues as impenetrable except to bank robbers. I recall the economic recovery conference in 1991 organised by the Independent. After we had debated bank charges for half an hour I asked for a show of hands by all those who understood the system of bank charges they were paying. There was a moment of horrified immobility; and then one solitary hand crept up. It belonged to Andrew Buxton of Barclays. A number of hands followed then but they were, I think, all his employees.
    If one has a minimal income and is budgeting down to the last 10 pence each week, unpredictable bank charges are not what one wants.
    I know that the Government are putting forward all kinds of possibilities about things they might do. We have an amendment to the Post Office Bill that I have in front of me. It provides that the Secretary of State "may" by order make the scheme for the making of payments. It provides that he "may" do something, but it does not state what he may do or how he may do it. Those are three very big questions to leave open. Since the key thing is that money must come into the system and that money must be from a guaranteed and recurring source, a provision saying that the Secretary of State "may" is not good enough.
    I know that the Minister will also refer to the report of the PIU. I understand that publication is due later this week, but I have heard conflicting reports as to the day. It is not coming apparently in time for this debate. There is at least one report in today's newspapers which suggests that it might not be able to offer to guarantee more than half the Post Office network existing at present. If that were true it would be a disaster. I do not believe everything I read in the newspapers. The report may well be untrue, and if the Minister can tell us I will accept her assurance with great gratitude. If I see a report about something not yet available I quote it in the hope, very often, of hearing a refutation. I have seen one, and I look forward to hearing it.
    It is unfortunate that that report was not due in time for this debate. That is no fault of ours. The date of the publication of the report and the date of this debate were both under government control; they are two bits of government that do not seem to have joined up. I do not see that either of the two opposition parties need take responsibility for that.
    I can think of two possible explanations—either the Government do not believe that the report is likely to satisfy us or they have lost control of their own timetable. I shall leave them to tell us which is true. I beg to move.
    Baroness Byford: My Lords, I rise to support the comments made by the noble Earl, Lord Russell.

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    I know that the Minister will be truly relieved that I am not going to go through my 19 and 20 points that I have been working through on this Bill and the Post Office Bill at the same time.
    Baroness Hollis of Heigham: My Lords, I sent a written reply to the noble Baroness, and to the noble Lord, Lord Higgins, and also the noble Earl, Lord Russell.
    Baroness Byford: I thank the Minister for that reply which arrived today. It helps, but I have questions as a result of it.
    In supporting the noble Earl, Lord Russell, I refer to waiting for the PIU report. My latest information is that it will be available as soon as tomorrow. If that is true, I am sure that the Minister and I will be delighted. On Thursday this week we have amendments down for the Postal Services Bill. It would be enormously helpful to have the PIU report beforehand.
    I am sure that I followed the Minister's argument that the Government, in trying to persuade people to have their benefits paid through banks, will save the DSS some £500 million. However, when I realise that this year, for the first time, the Post Office made a loss because it had to spend money on upgrading its Horizon facility in post offices, I wonder whether or not we are in danger of taking money from Peter to pay Paul. That would not be wise.
    My questions to the Minister tonight will be fewer than previously and I am sure that she will appreciate that. First, following on from what was said by the noble Earl, Lord Russell, it has previously been the responsibility of a person to opt into having benefits paid through the Post Office. I would rather see people being able automatically to collect benefits from the Post Office rather than see them having to opt into another system. However, the Minister may not agree.
    Secondly, if more post offices disappear as a result of the change in the system, and if more banks close—many banks have withdrawn their facilities from rural areas and those on the edges of inner cities are seeing the closure of local banks—it will be as difficult to collect benefits from banks as it will from post offices. Fewer post offices will mean that many people will have a problem in collecting their benefits.
    As I said during previous stages, 40 per cent of the income of sub-postmasters comes from handling the payment of welfare benefits. In Committee, we argued long and hard about what might happen when the present system ends, whether a smart card might be introduced and what that would cost. I do not want to repeat those arguments because the Minister has answered many of the questions I asked and I am grateful her. However, although I have queries about one or two of her answers, rather than press her tonight, I want to wait until publication of the PIU report tomorrow or on Thursday.
    It may be that there is information in the report which the Minister cannot announce tonight because it is not yet published. Perhaps the Government can go
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    some way towards helping the sub-postmasters as regards the service they provide to people who receive benefits. I understand that the Government want to prevent money being wasted in fraud and all noble Lords would support that. However, many people who have bank accounts and other facilities still choose to collect their benefits from their local post offices. I am not pushing hard tonight, but because we have not received the PIU report we remain in limbo over one or two issues.
    Finally, although the Minister answered my many questions, I still do not know what the cost of the smart card will be. We talked about the transactions costing as little as 1p, but, if the Government intend to do away with the book which identifies the claimant, a smart card must be introduced and that must have a cost implication. The Minister suggested that it would not cost much and I should be delighted to hear that. It would be brilliant news. However, ongoing costs will be involved and I should like to know who will pay them.
    I shall not take any more of your Lordships' time tonight. I thank the Minister for her contribution in answering my many questions. I shall not go through them all now, but questions still remain to which we need answers. I suspect that the Minister may have inside information and may be able to share a little of that with us. Certainly, I should be grateful if she could tell us a little more about where the Government are going and answer the crucial point as to whether the report will hit our desks tomorrow morning or whether we shall have to wait for some time to come.
    9.30 p.m.
    Baroness Gale: My Lords, each year many people choose to receive payments by ACT. That is their preferred method of payment. For example, 50 per cent of all new pensioners choose to use that system, as do 54 per cent of new claimants of child benefit. Of course, some people still want to be paid in cash at the Post Office, but that trend is moving towards payment by ACT, with 500,000 people each year now moving to that system. Over 80 per cent of claimants already have a bank account. However, the Government have made it absolutely clear that the choice of receiving payment in cash will remain available. The Prime Minister said in another place that no one will be prevented from continuing to receive benefits in cash at the Post Office if that is what he or she wants; and not only monthly but weekly, if that is what they choose.
    In Committee, the Minister said that three possible routes were available for payment in cash. The first was network banking with the Horizon system, which could offer potential for the Post Office to extend its arrangements with high street banks. Those arrangements appear to have worked well in areas where banks have disappeared. The second method was via cash machines. The Post Office will install 3,000 cash machines by the year 2001, many in rural post offices. The third option was the development of a universal bank, which could be available in all 18,000 post offices. In effect, it would be a Post Office bank. The Minister said that a switch-type card or banking

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    card could be used to access money at the Post Office universal bank. People would be able to access their money at any post office in the country at any time. Therefore, I believe that there is a clear commitment for cash payments to remain for those who choose and want their payments in cash at the Post Office.
    Lord Boardman: My Lords, I strongly support the amendment proposed by the noble Earl, Lord Russell. I have a slight reservation, in that, if the Government should be wise enough to accept the amendment, undoubtedly they would recover a substantial number of votes that they would otherwise lose in the next general election, and that would be a pity.
    The Government seem unconscious of what is happening in the countryside as regards the effect on the local post office and its impact on village and rural life. The fact that they wish to destroy the local post office and not to support the amendment moved by the noble Earl seems to indicate that they are unaware that the post office is a centre of so much that affects country life.
    Those who are aware of rural life will know that the local post office is the focal point of the local community. Unfortunately, rather than the church which provided the focal point for so many centuries, it is now the post office where people meet and chat, draw their pensions, buy their local bread and so on. And, by God, it is essential that the local post offices are kept alive if the nucleus of local communities is to be kept going. Therefore, I plead with the noble Baroness to give consideration to this amendment and to recognise that failure to pass it inevitably will mean the elimination of an extremely important part of local life.
    Baroness Pitkeathley: My Lords, perhaps I may declare an interest. I may sit on the Government Benches hut, as the past chair and current president of a rural community council, I declare a strong interest and support for rural post offices. However, I have more faith than the noble Lord in the ability of rural post offices to adapt to changing situations. I fully support what he says about their being a meeting place and so on, but how much more is a rural post office going to be a meeting place when it becomes a sort of Internet café so that people actually use that rural post office in that particular way? So I declare that one interest.
    The other interest I have to declare is that of being a social worker. As to the issue of fraud, of lost books, of books being taken by somebody else, of books not arriving in time and so on, as the Minister said in her reply during a Committee debate, if we had wanted an efficient system we would not have started from here.
    I do believe that we have to think about consumer choice. The fact is that whether we like it or not consumers are increasingly choosing to have their benefits paid by automatic credit transfer. I personally have a great deal of faith in the ability of the post offices to respond to those changes.
    Lord Hylton: My Lords, I should like to say how much I agree with the remarks of the noble Lord, Lord
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    Boardman. He put rather better than I could the kinds of points I was trying to make at the last stage of this Bill.
    It so happens that I recently received a copy of the annual report of the Royal Mail. The thing that no doubt everybody noticed was that in this last year it made a large loss, after having made consistent profits over a number of years. It might be imagined that that loss was due to some kind of inefficiency. I would argue very strongly to the contrary: that it was due to making large capital write-offs all in one single year. One notices that the turnover of the Post Office and Royal Mail does in fact increase year by year.
    The second point that emerged from the report was the very high proportion of the network of sub-post offices which depend on social security benefit payments passing through those sub-post offices. I stand open to correction, but I think the proportion is something like 30 per cent of the total. That alerts us to a very real danger. The network has been severely damaged already, and I would ask that we do everything possible to preserve it as it now stands for the benefit of future generations. Time will be required for sub-post offices to develop alternative sources of income, and that was the point so well made by the noble Baroness, Lady Pitkeathley.
    On those grounds I am strongly in support of this amendment, or of its alternative, No. 122, whichever the Government would look upon more favourably.
    Lord Warner: My Lords, perhaps I may just intervene to refresh the memory of the House on some of the history of this subject. In 1979 I was a jobbing civil servant and the previous administration, led by the now Baroness, Lady Thatcher, and with a Secretary of State who is now the noble Lord. Lord Jenkin of Roding, asked me to undertake a study in this area.
    As a historian, the noble Earl, Lord Russell, might care to go back into the archives and look at the report that we produced in 1980, which I believe is still in the public domain. He will see that this subject has been around for a very long time: about 21 years. The arguments have not changed all that much. He will also see that the implications for the sub-postmasters' network was brought out very clearly in the report.
    It was the previous administration who were reasonably enthusiastic about these changes and who tried immensely hard to press on with many of them. However, there were a series of problems. One was that people had become very attached to a system of paying benefits that is extraordinary in the 21st century. It involves large numbers of antiquated machines in Newcastle central office cranking out books with tissue paper in them that are exchanged for money in post offices.
    I suggest that it may be possible to help the rural sub-postmasters network without preserving that system. It is high time that we provided people with more choice in how their benefits are paid. The issue has been around for 20 or 21 years and the arguments have not changed much. They are still about how best

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    to give encouragement, support and perhaps a little subsidy to rural sub-postmasters to keep those community facilities going. Keeping foil systems of paying benefits is probably the least effective way of doing that. We should be prepared to move on and not freeze the system of paying benefit.
    Lord Higgins: My Lords, I shall speak to the amendment of the noble Earl, Lord Russell, rather than mine, which is somewhat different. I thank the Minister for the copy of the letter that she wrote to my noble friend, Lady Byford, which covered a number of the points that were of interest to us. My noble friend has made a considerable study of the issue—an issue as regards which he has great expertise and enthusiasm.
    There are three separate groups with an interest in the issue: the benefit recipients, those who own or work in the post offices and the communities that they serve. Each group is very important.
    The same statistics tend to get recycled rather rapidly from one speech to the next in debates such as this. I have some doubts about some of the figures. In her letter, the Minister said that 80 to 85 per cent. of benefit recipients already have a bank or building society account suitable for receiving ACT payments. I find that a surprisingly high figure. For years, many people insisted on being paid in cash. That gave rise to problems such as the possibility of robberies as the cash was transmitted to their workplace.
    We all recognise that a lot of people prefer to be paid in cash. That leaves open the question of how the payment is made. So far, the Government's response has been rather opaque. I have been told not to worry because everything will be all right and people will be able to continue drawing benefits in cash, but I confess that I remain puzzled as to exactly how that is to be done. No doubt the Minster can enlighten us this evening.
    Baroness Hollis of Heigham: My Lords, I spent 10 minutes in Committee explaining that.
    Lord Higgins: My Lords, after 10 minutes in Committee, I still did not understand what the Minister was saying. Perhaps it would be better if she could explain the issue in one minute.
    One cannot doubt for a moment that a number of people believe that they are entitled to receive their benefit payments in cash. That brings me to the second point—the position of the post offices. It is generally recognized—this is one of the statistics that I do not doubt—that they have been closing at a rate of about 200 a year. That is a matter of concern. If the changes that the Government appear to be envisaging come about, post offices are likely to suffer considerably, because many of them gain anything from 20 and 80 per cent. of their income from these payments and 40 per cent. of them get 40 per cent. of their income in that way. Clearly, this is a very dramatic change in the profitability of post offices, especially small ones. The worry here is that they will go out of business.
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    When we previously debated this matter, I asked the noble Baroness whether the Government have some view as to the extent to which they wish to preserve the post office system, both in rural areas and in cities. But, again, we are not very clear as to the exact nature of the Government's policy in this respect. It is of considerable importance to those operating post offices, many of whom have invested their savings in the business. They may well feel that they are in danger of losing their capital—in the same way as if you increased the number of taxi-driver licences, existing taxi-drivers would get very upset about the value of their plate. It is that sort of small entrepreneur situation. Moreover, if someone simply comes into the post office, sticks a card into, say, a machine and then walks out again, there is some cause for concern as regards the business that post offices currently attract from a rather more social sort of environment. Indeed, as my noble friend Lord Boardman said, in many cases the post office represents a social centre.
    There is one further relevant point here; namely, the question of the cost per transaction. Again, the cost of 1 p per transaction has been bandied around. As a former and very successful chairman of the National Westminster Bank, I was rather hopeful that my noble friend Lord Boardman would give us some idea as to whether he thought that that was a credible figure. It seems remarkably small to me. At the same time, if there are that many people with hank accounts, one has to ask: what are they paying at present in terms of charges and, more particularly, what will be the charges to people who, apparently, will only have this one bank account (operated through the post office) and only use it for the one purpose?
    These are very difficult questions and it is right that the House should express concern. However, as has been pointed out, we do so in something of a limbo. We are told that the PIU report is about to arrive, though somewhat late after a number of delays. Obviously that may be relevant to the final conclusion that we reach on the issue. In the meantime, it is only right that the Minister should make clear what is her reaction to the noble Earl's amendment which says that the system and,
    "the regulations may not require automated credit transfer to be the only manner of paying a benefit".
    9.45 p.m.
    Baroness Hollis of Heigham: My Lords, I have to say that there is a faint air of unreality about this debate. Indeed, we have been through this discussion over and over again. I do not know where the problem lies. However, before I go into the main part of my text and try to deal with the detail, perhaps I may point out that people seem to be confusing the method of getting the money to the post office and the method employed by the benefit claimant in getting the money out of the post office. I am absolutely baffled by the failure to comprehend the situation. Frankly, it does not matter tuppence whether the money comes through ACT, through Securicor vans drawing up at the post office, and so on, as long as the person in the village or the

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    small community goes to the post office with some form of identification—in this case, the card—and draws the money out. That is what will happen.
    People will draw their money in cash; it will be paid to them by the post office in cash. How it gets to the post office, which is the mode of ACT, or, alternatively, to a bank account held at the post office, does not matter. That is irrelevant from the point of view of the recipient. I cannot comprehend why we seem to be at cross-purposes here. Instead of having an order book in their pocket when they go to the post office—the equivalent of a ration book—people will have their card. When they go to the post office counter, they will decide how much they wish to withdraw and that will be the money they receive. All that will happen is that instead of an order book there will be a card. I am baffled and genuinely cannot comprehend—if I may be so rude as to say this—why noble Lords are making such heavy weather of this.
    Baroness Byford: My Lords, I am grateful to the noble Baroness for giving way. I am trying not to labour the point, but I hope that if the noble Baroness can answer one or two of the questions that we have asked we can then move on. I have no argument with the prospect of people being able to draw benefit in cash. However, there are two critical matters. First, will the post offices still exist for them to be able to draw the cash? I think the Minister will accept that 40 per cent of the income of many sub-postmasters is gained from handling benefits. If they lose that 40 per cent of their income, unless another payment is made, those post offices are likely to close. The noble Baroness has not responded to that point. That is why I mentioned the PRI report.
    The noble Baroness said that it did not matter whether a card or a book was used for the purpose we are discussing. However, a book or a smartcard will still constitute a cost. Whatever form of identification is used will still constitute a cost. I accept the Minister's assurance that claimants will be able to draw cash from the post office. However, unless the postmasters are compensated for the 40 per cent of their income that they will lose under the system that is proposed, I repeat that the post offices are likely to close.
    Baroness Hollis of Heigham: My Lords, the noble Lord, Lord Higgins, mentioned the issues in terms of the position of recipients, post offices and communities. I hope that we are now all agreed that, provided post offices continue to exist, recipients face not only no disadvantages from the system that is proposed but many additional advantages. They will be able to have part payment of benefit and they will have greater security against fraud. I understand that they will be able to use their card at any post office in the country, rather than just at their local one. Therefore, when they go to visit their mum, their daughter, their niece or their nephew they will have that convenience. Therefore, in my view, customers have everything to gain—they will gain far more advantages than they currently have—from a card system.
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    The noble Baroness asked about the cost implications of a card as opposed to a book. I cannot give a precise figure. However, the card is not a smartcard. My understanding of a smartcard is one that has information encoded on it. That is done through expensive technology. However, I am talking simply about an ID card like a storecard. I am talking about the kind of card one gets at Tesco or Boots. I cannot say whether the costs of such a card are less or more than those of an existing giro book, but I have no reason to think that they are extensive.
    Lord Boardman: My Lords, does the noble Baroness believe that sub-postmasters, who have studied these proposals in great depth, do not feel that they will damage their small, rural businesses?
    Baroness Hollis of Heigham: My Lords, I am trying to deal with the points in order. I was discussing the position of the recipients and whether they will be able to draw their benefit in cash. That will be the case. The card will not constitute a charge on them. They will not face any charges for using the card. However, they will have additional service facilities. They will have greater protection against fraud. They will have greater convenience of use, including out of hours use and the use of cash machines. I hope that I have dealt with that bundle of concerns.
    Whether one refers to post offices or banks and whether one says that people draw their money from a post office which also offers banking services, or whether one wants to call it a universal post office bank does not matter provided that people can obtain the amount of money they want at a time and in a way that is convenient to them and which offers greater security.
    Lord Higgins: My Lords, has the noble Baroness tried putting a cashcard into the cash machine downstairs? Has the machine issued a notice saying that she may be charged for that transaction? How much does the noble Baroness think that she will be charged? That is much the same point as we are now discussing.
    Baroness Hollis of Heigham: My Lords, I have used the cash machine and I do not get charged. As my noble friend Lady Gale rightly said, people will have a choice. Some people may use cash machines, of which we understand there will be about 3,000 in the 18,000 existing post offices. However, that figure may increase. They may have access to their existing bank for which the post office acts as an agent in the post office branch. That would be exactly the same situation as now. Already a large proportion of banks have made arrangements, including Barclays, Lloyds, the TSB, the Alliance & Leicester and so on.
    The third proposed method is for a universal bank—a Post Office bank, if you like—in which, whether you call it a bank or a holding account, the post office will hold the account. You will not be able to write cheques on it; you will simply draw your benefits out. The only difference customers will notice

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    is that they will go in with their card rather than their order book—and it will be a darn sight safer as a result. Whichever method the customer chooses, he or she will have those options within a post office.
    That was the first point made; I hope that I have addressed it. We seem to be making extraordinarily heavy weather of something that most of us do two or three times a week when we go into stores and so on.
    The second point concerned the position of the post office and the owner. The noble Baroness is absolutely right: we are expecting the PIU report very imminently. As of 21st or 22nd June, the Prime Minister said it would be within the next few days; it is very imminent indeed. I should feel more comfortable discussing the possible future of the network of post offices in the context of that report. I hope and believe that that, taken together with the commitments given in the Postal Services Bill, will address the noble Baroness's point. I shall have to ask her to wait for that, I am afraid—otherwise I should be in severe danger of contempt, if you like, of the other House.
    The third point was raised by the noble Lord, Lord Higgins—it was also raised by the noble Lord, Lord Boardman—and concerned the position of rural communities and what was happening to them. It is true that in the past 10 years something like 10 per cent of the rural post office network has been lost; about 25 per cent of the banking network has been lost; and about 30 per cent of rural community petrol stations have been lost. For various reasons, people are choosing to go elsewhere.
    But it still remains the case that in the UK something like 70 per cent of all communities with more than 500 people have a post office; 30 per cent of communities with populations of 100 to 500 have a post office; and, in terms of density of post offices compared to France, Germany and the rest of the world, we have a greater density of post offices than almost anywhere else. Some 90 per cent of people live within a mile of a post office. So in that sense we have a very good network.
    The question is whether what we are doing is likely to enhance and strengthen the network or likely to see it slide. As I said, some of these questions must await the publication of the PIU report. I hope that your Lordships will not pursue this matter tonight but will wait for the report and come back at Third Reading if you are dissatisfied. That is the only way we can have a fair debate without putting me in the impossible position of being asked to divulge information that is not yet in the public domain.
    At the end of the day, the point made by my noble friend Lord Warner is absolutely right: post offices cannot stand still. If nothing happened to benefit books, post offices would continue to close at an accelerating rate because people increasingly find that the order book/ration book system is not a convenient way of getting their money. They are choosing to vote with their feet and to leave the post office behind. That leaves as a result the footfall, if I may use that phrase,
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    of the quarter or so of moneys which comes out of the post office and is immediately recycled into the local community.
    If post offices are to survive, they have got to stop the leakage of customers. Some 500,000 customers a year are choosing to stop using a post office and to go to a bank because they find it more convenient. How will post offices do that? By offering the same facilities, and, as a result, being able to recycle that quarter or third of moneys into other facilities—the local shop and so on—that often run in parallel with the post office. If they do not do that, the Post Office will shrink and shrink and shrink. People are not prepared any longer to live with the ration book service—the long queues, the inconvenient hours, the lunchtime closing, the half-day closing, the Saturday afternoon closing and so on. They want a more generous and expanded service. That can be achieved through machines, through a universal bank, through bank accounts being held at post offices and so on.
    I am confident that, at the end of the day, post offices will survive because their communities support them. The Government have given broad undertakings on their position in regard to subsidy. That will be looked at again in terms of the PIU report and succeeding debates. But your Lordships will know that we are not expecting to move to the new system until 2003 and that there will be a two-year transition after that. Some of the fine detail—about which post office, what access criteria, what level of subsidiarity and so on—is quite commercially sensitive to be discussed between government and POCL and POCL and the sub-postmasters. Noble Lords will understand that.
    I return to the basic questions of the noble Lord, Lord Higgins. As regards the recipients, I am confident that they will see an enhanced service and they will wonder why anyone ever argued the virtue of order books and giros. The more I learn about this, and the more I read the draft copies of the PIU report and so on, the more confident I am about it. With regard to the position of post offices, they will survive only if they meet their communities' needs and as a result get the footfall of that money circulating. We believe that this way of doing it is the better way forward for them to do so.
    As for the communities, at the end of the day post offices will survive because people choose to support them, in the same way as pubs, village halls and schools survive. I ask your Lordships to defer any decision or vote on this issue until the PIU report has been published. I guarantee that the PIU report will be out before we come to Third Reading. There will be ample time. In the light of that, some of the concerns, which in all good faith I cannot address today for reasons noble Lords will understand, will I think be met.
    I hope I have satisfied noble Lords on the point about the recipients. On the point about post offices and their communities, I suggest that noble Lords await the PIU report. If they are dissatisfied following

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    that, they can return to the matter at Third Reading. Therefore, I hope that noble Lords will not seek to press their amendments.
    10 p.m.
    Earl Russell: My Lords, I am extremely sorry to have baffled the Minister. I think the Minister has forgotten quite how reluctant noble Lords on the Opposition Benches are to accept government assurances.
    Baroness Hollis of Heigham: My Lords, surely not with New Labour!
    Earl Russell: My Lords, while the Minister was speaking I recalled the days when the noble Lord, Lord Peston, was in Opposition, observing that the Government's basic policy was, "It'll be all right on the night". There is a great deal about government which does not change with a change of party.
    Of course, I understand the distinction that the Minister is making between how the money reaches the post office and how it reaches the claimant. But I think the Minister also understands the point made by the noble Baroness, Lady Byford, about the income of the sub-postmaster. At present I do not understand how a saving of £400 million is compatible with a continuing secure income for a sub-postmaster. It is perfectly possible that that question may have an answer. It is perfectly possible—
    Baroness Hollis of Heigham: My Lords, I should have thought that my noble friend Lord Sainsbury gave the noble Earl and other noble Lords that answer during discussion on the Postal Services Bill about the capacity of the Secretary of State to devise a subsidy where he and POCL thought it was appropriate.
    Earl Russell: My Lords, I touched on that point in moving my amendment. The words are "the Secretary of State may". It does not say he will; it does not say what he may do. The Minister is asking us to take a good deal on trust. I appreciate that before the publication of the PIU report she may have no other option. But it is not that long since she was in Opposition. She cannot have completely forgotten what it felt like. If, in the meantime, we do feel a desire for belt and braces, or, if she prefers it, for elastic and safety pins, I do not think that she should be too surprised.
    I heard the points made by the noble Lord, Lord Warner. Those were serious points and I listened to them carefully. I appreciate the force of what he says. But what concerns us is that we should not be too far embarked on the new method of doing that before a secure method of making the post offices work has been worked out. We have come very close to that already. We on these Benches have no wish to come any closer.
    It may be that by the time we come back again there will be no need to return to this matter. We will read with an open mind what the Government have to say
    878
    in the PIU report. In the meantime, I shall withdraw my amendment. But should I be justified in the suspicions I see of the fullness of the Benches opposite, we are quite ready to stretch our legs if the Government wish us to. I beg leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    [Amendment No. 122 not moved.]
    Schedule 7 [Housing benefit and council tax benefit: revisions and appeals]:
    Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 123:
    Page 144, line 37, leave out ("(4)") and insert ("(3)").
    The noble Baroness said: My Lords, in moving Amendment No. 123, perhaps I may speak also to Amendments Nos. 124 to 126. These are minor and technical amendments to Schedule 7.
    I apologise for trying the patience of the House with further amendments, but I can assure noble Lords that these amendments, although minor and technical in nature, effect a necessary correction to an oversight in the current draft. They ensure that standard parliamentary procedure is followed in respect of all regulations made under Schedule 7 and clarify the scope of those regulations. I therefore ask noble Lords to accept the amendment. I beg to move.
    On Question, amendment agreed to.
    Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 124 to 126:
    Page 144, line 39, leave out ("of the Secretary of State").
    Page 144, line 40, leave out ("his powers") and insert ("any power").
    Page 144, line 48, leave out ("by the Secretary of State").
    On Question, amendments agreed to.
    [Amendments Nos. 127 and 128 not moved.]
    Clause 75 [Contributions in respect of benefits in kind: Great Britain]:
    [Amendments Nos. 129 to 132 not moved.]
    Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 133:
    Page 76, line 40, at end insert—
    ("( ) In paragraph 8(1)(ia) of that Schedule (power to provide by regulations for repayment in prescribed cases of the whole or a part of a Class 1B contribution), after "part" there shall be inserted "of a Class 1A or.").
    The noble Baroness said: My Lords, in speaking to Amendment No. 133, perhaps I may speak also to Amendments Nos. 139 and 142 to 145. This group puts into effect a technical, consequentiail amendment which was unfortunately missed when the legislation was drafted. The purpose is to allow refunds of Class 1A national insurance contributions to continue to be made where relevant information reaches the employer late and leads to him overpaying Clause 1A NICs through no fault of his own.
    Paragraph 8(1)(i) of Schedule 1 to the Contributions and Benefits Act confers powers on the Treasury to provide by regulations for the refund of Class 1A

    879
    NICs, in particular where an employer is told relevant information about his employee's business mileage which affects the valuation of a car benefit after he has paid his Clause 1A NICs. The change in valuation for tax in turn affects the liability for Class 1A NICs so, where appropriate, a refund is made.
    I could go into further detail on what I promise noble Lords are technical amendments, but perhaps I may ask that the amendment be accepted. I beg to move.
    On Question, amendment agreed to.
    Lord Goodhart Lord Goodhart moved Amendment No. 134:
    After Clause 75, insert the following new clause—

  PAYMENTS TREATED AS REMUNERATION OR EARNINGS
  (" .—(1) For paragraph (a) of subsection (4) of section 4 of the Social Security Contributions and Benefits Act 1992 there shall be substituted—
  "(a) the value, at the date when it is obtained, of a right to acquire shares in a body corporate obtained by the earner as a director or employee of that or any other body corporate,".
  (2) After that subsection there shall be inserted—
  "(4A) The value referred to in subsection (4)(a) shall be taken to be the difference between the amount that a person might reasonably expect to obtain from a sale of the right in the open market immediately after it was obtained and the amount or value of the consideration (other than the performance of any duties in or in connection with the office or employment by reason of which the right was granted) given for the grant of the right.
  (4B) Subsection (4)(a) shall apply to rights obtained after 5 April 1999 if and in so far as those rights have not been exercised or released before 19 May 2000."
  (3) Where subsection (4)(a) of that section (as substituted) applies to any rights obtained after 5 April 1999 but before this section came into force, the contributions in respect of those rights become due on the date on which this section comes into force but shall be treated as bearing interest from the date on which the contributions would have become due if this section had been in force on the date when the rights were obtained.").
  The noble Lord said: My Lords, I apologise for raising a technical and complicated issue late at night. However, I suppose that I would need also to apologise for raising it earlier in the day when even more Members would be bored by it.
  This amendment, along with Amendment No. 135, concerns national insurance contributions paid on share options granted to employees as a part of their remuneration packages. As I am sure noble Lords know, this is a common practice among the staff of e-commerce dot.com companies and other businesses involved in the IT world. Indeed, I believe that the practice is pretty much universal among the more senior employees. Perhaps I should declare an indirect interest here. I have a son-in-law who works for an IT company and receives share options as a part of his remuneration package.
  Until 6th April 1999, no NICs were payable on share options forming part of a remuneration package even though they were, particularly in high-tech businesses, an important part of that package. I believe that the Government rightly regarded that as a loophole which
  880
  needed to be closed. They went about it in a way that has subsequently raised a number of problems. For options granted on or after 6th April 1999 the Government imposed Part I NICs on gains from the exercise of the share options except where they were exercised as part of an Inland Revenue approved scheme. That meant that not only did an employee have to pay the primary contributions for NICs—in many cases that was probably not an important factor because many of the employees had earnings in cash above the upper earnings limit and therefore had nothing extra to pay—but also that the employer had to pay secondary Class I contributions on which there is no upper earnings limit.
  If one imposes NICs on an option when it is exercised, at the date of the grant the employer is going to be very uncertain indeed both about the date at which he will have to pay the secondary contribution and the amount to be paid. But under accountancy rules he has to make provision for future liability to pay NICs on the options. The accountants insist on what might be called a gloomy view of the liability being undertaken.
  A company called QXL, which provides auctions on the Internet, had to make provision in its last year accounts for future liabilities for secondary NICs on options of £11.6 million. This was on a total turnover for that year—not profits—of £6.9 million. The consequences for the ability of a company in that position to raise money from the market is very obvious indeed.
  In Clause 78 the Government have taken some steps to deal with the problem. They did so by introducing at Committee stage an extremely complicated amendment. The identical Clause 82 deals separately with the same situation for Northern Ireland businesses. The Government introduced these amendments at very short notice.
  The main purpose of these amendments is to allow employers, by agreement with their employees, to transfer the liability for secondary contributions on the share option gained to the employees so that they pay both the primary and secondary contributions. That applied to agreements entered into after 19th May. One can see, in that situation where the employee is offered the choice between paying the secondary contribution himself or getting no option at all, that it is going to be pretty easy to reach agreement.
  At Committee stage I did not object to the amendment, but I said that if there were going to be problems I would expect to hear from those who were concerned about the government amendments. Indeed, that is exactly what happened. I was approached by QXL and also by a well known public relations firm representing a number of major clients in the e-commerce world. I saw them and I was persuaded that they had a case which required discussion and which was a proper matter to raise in your Lordships' House. I should say that the amendment was drafted by me and has not been discussed with the businesses concerned.
  It is, I think, agreed by firms in the e-commerce world that the government amendments in Clauses 78 and 82 are an improvement on the status quo. But there are two serious complaints. First, the amendments provide no relief from the unexpectedly large liabilities for secondary contributions incurred by those granting options since 6th April 1999. Those liabilities are unexpectedly large as a result of the enormous increase in the value of e-commerce shares and, therefore, the value of options which have occurred after April 1999; and although it has declined from its peak earlier this year, it is still a long way above what it was in April 1999.
  The second complaint by those companies was that the effect of the transfer of liabilities for secondary contributions from employers to employees is to create an effective tax rate of 47 per cent on gains, even taking into account the fact that, for tax purposes, the secondary contributions will be allowed as expenses against tax before the tax liability is computed. So there is an effective tax rate of 47 per cent, taking income tax and NICs together. In the view of those companies, that is likely to discourage the mobile and very expert workforce required in businesses of that kind from taking jobs in the United Kingdom, and it may lead some of the companies to move their operations abroad. The companies are highly mobile. They can, of course, set up in virtually any part of the world that they choose.
  The amendment seeks to deal with both those problems. It proposes that the NIC liabilities are to be charged on the value of the option rights when the option is granted and not when it is exercised. That will leave the liability for secondary contributions with the employer, but on a much smaller amount and on a more easily ascertainable basis, not on an open-ended basis as to the ultimate liability.
  The amendment proposes, secondly, that the new basis of calculation will be made retrospective, subject to a liability to pay interest. It seems in principle fair to charge the NICs on the option value at the date of the grant because that is the value of the remuneration package when it is paid, and it seems that it is perfectly legitimate to treat the subsequent increase in value of an option as something in the nature of a capital gain, on which NICs are not charged. It is obvious that an option has a value, even if the option is to buy shares at a price at, or even above, the level at which those shares stand at the date when the option is granted. It is a one-way bet: if it is not in your interest to exercise the option, you do not have to; if it is, you can exercise it. The amendment also preserves the liability for secondary contributions on the employer, which seems to us to be the place where it belongs.
  I have to say that I was subsequently approached by another company, NTL, which is also in the IT business and which prefers the Government's formula to the formula in my amendment. So it is clear that there is no consensus in the world of high-tech. It may be that the issue could be solved by giving a right to elect to pay either on the value of the option at the date of the grant or to transfer the liability to the employee and base i1 on the gain on the exercise of the option.
  I think that everyone in this world is agreed that it is desirable that this extremely high, unforeseen liability which has arisen as a result of the great increase in the value of Internet shares over the past 14 months should be brought back to more manageable levels because of the serious effect that these outstanding and wholly unpredictable liabilities will have on the financial situation of high-tech companies.
  I would normally have tabled the amendment in Committee but had no opportunity to do so, so I have brought it forward for discussion now. Have the Government considered charging NICs on the value of the option at the date of the grant? If so, why was that option rejected in favour of the alternative that they have adopted? Are the Government prepared to give some relief to companies that have incurred high and unpredictable liabilities for future NICs that they would not have done, had they granted options under the formula that will take effect from 19th May? I beg to move.
  Lord Higgins: My Lords, the House will have felt a sense of déjà vu when the noble Lord moved his amendment because in the previous welfare Bill we encountered considerable problems regarding the IT industry, the danger of people going abroad and so forth.
  Like the noble Lord, I have also had correspondence from qxl.com and NTL.
  Baroness Hollis of Heigham: My Lords, they cancel each other out.
  Lord Higgins: As the noble Baroness says; we will have to consider which end of the argument we favour. Perhaps the quickest way for the Minister to reply would be to say she agrees or disagrees with qxl.com or NTL. Having said that, there is considerable overlap and concern.
  There may be implications, as last year, for the international mobility of companies. The evidence seems a little conflicting because there may be problems with the American accountancy system as well as of taxation in this country. It is unfortunate that this issue has arisen late in the day, although that is in no sense the Government's fault. We will see what arrives in our e-mail—no doubt in droves—between now and Third Reading.
  There is concern that the Government's proposals do nothing to address historical liabilities on existing share options, which need to be taken into account. One of the companies says that it is illogical and unfair that employers will have to pay national insurance on the price of the shares they grant when they will only benefit from an increase in the value of the shares; and that employees will face an unfunded tax liability, which would be particularly regressive for employees new to share ownership. Similarly, employers who have yet to move into profit will face unfunded tax burdens. Clearly, when share prices go up and down this is a very difficult situation overall. The noble Lord, Lord Goodhart, was inclined to refer to share prices going up but they can also go down. At the

  883
  moment prices are going up and down like a yo-yo. The exact moment when the tax charge hits may be of considerable significance. The charge may arise at a time when the price goes up but the individual may have to pay it at a time when the price has reduced. This is a simple matter, and I hope that the noble Baroness is able to explain it in words of one syllable.
  Baroness Hollis of Heigham: My Lords, I want to be very careful in what I say. Obviously, one is considering certain liabilities, quite apart from jokes about company representations cancelling out each other. Having given a reasonably full reply—this is a matter of concern which noble Lords were unable to debate at Committee stage—I am happy to repeat the offer, if it is of assistance, of a further meeting before Third Reading between officials and the noble Lords, Lord Goodhart and Lord Higgins, to pursue the matter in a way that we cannot on the Floor of the House. Because the amendments were tabled rather late noble Lords were unable to debate the matter fully in Committee.
  I start by explaining briefly the purpose of the Government's position. I shall then explain why I recommend that the House reject the amendment moved this evening. Some background may be helpful. Noble Lords will be aware that my honourable friend the Financial Secretary has been consulting employers with a view to finding a technical solution to a problem that has arisen in relation to national insurance contributions on share option gains. Since 6th April 1999 gains made by employees when they exercise unapproved share options granted after 5th April 1999 are subject to Class 1 NICs. This means that the NICs charge is now on the same basis as income tax through PAYE.
  This has caused a number of problems for employers. Companies have informed us that, while they can plan for NICs on regular pay, it is more difficult for them to plan on share option gains, particularly where the share price behaves like a yo-yo, as the noble Lord, Lord Higgins, suggested, as in the high-tech sector of the economy. Employers are required to make a provision in their profit and loss accounts for the accruing NIC liability, based on the market value of the shares at the relevant accounting date. The need to make this provision can make some companies technically insolvent. Exposure to an unpredictable NICs liability can also mean that some companies miss their performance targets. When that happens the market response can be devastating.
  Class 1 national insurance contributions consist of a primary contribution which is payable by the employee and a secondary contribution which is payable by the secondary contributor, who in most circumstances is the employer. Current social security legislation provides a statutory bar to prevent employers from recovering any part of their secondary Class 1 liability from the employee. The government amendment introduced in Committee strengthens that
  884
  protection for the employee, but at the same time introduces an exception for NICs arising on share option gains.
  The government amendment does three things. First, it allows employers and employees to reach an agreement that a secondary contributor (usually the employer) may recover from the employee some or all of the secondary NICs in respect of rights to acquire shares. I emphasise that it is the employer and that it is voluntary. Secondly, as an alternative, the employer may make an application for approval of an election to the Board of Inland Revenue. If approval is obtained, the employer and employee can jointly elect to transfer all or some of the liability to pay the secondary NICs on the share option gain to the employee. Elections can be made only after the Inland Revenue has given its approval to the form of the election and the accompanying arrangements for securing that the NICs liability transferred to the employee is paid.
  The ability to transfer the liability has been proposed as a direct response to representations made to the Financial Secretary during the consultation exercise. We have worked with several high growth companies to introduce a solution which will overcome accounting difficulties for companies that report in the United States that would otherwise arise if the employer simply recovered the NICs.
  Thirdly, our amendment strengthens the existing statutory bar that prevents the employer recovering any part of the secondary NIC in respect of all forms of earnings (subject to the new exception for share options). It extends protection to the employee by ensuring that the person liable to pay the Class 1A NICs (on benefits in kind) or Class 1B (on PAYE settlement agreements) cannot recover his liability from the employee. I emphasise that the amendment that the Government introduced at Committee puts in place a solution that a number of companies have requested, and we are meeting those requests. The Government have consulted widely on this solution, and it is clear that many companies to whom we have spoken are eager to set up such arrangements.
  The merit of this solution to companies is that it can eliminate or neutralise the need to make a provision for the accruing NIC liability in their accounts. It can remove the difficulties on the employer's cash flow caused by the need to pay NIC based on an unpredictable share price and the uncertainty caused by not knowing when the employee will exercise the option. The Government's proposal will allow the NIC liability to be moved to the employee who has control over when the option is exercised and who will have funds or shares which can be sold to meet the liability.
  Noble Lords asked in Committee whether an employee who agreed to take on the responsibility for the secondary NIC would still be required to do so if the option had gone "underwater". I can confirm that the employee would not be required to pay NIC on the exercise of such an option as the employee would not make a gain in the circumstances where he has to pay

  885
  more for the shares than he could buy them for on the open market. Indeed most employees would not exercise the option in such circumstances.
  The amendment we introduced in Committee will help to attract business and jobs to the UK and help UK companies compete in the global market. It goes towards meeting the Government's aim of a fairer NI system by ensuring that NICs are paid on share options and not treated more favourably than other forms of remuneration. It is also cost neutral on the National Insurance Fund.
  10.30 p.m.
  Lord Higgins: My Lords, perhaps the noble Baroness could slow down just a little.
  Baroness Hollis of Heigham: My Lords, I thank the noble Lord. I deal now with the amendment tabled by the noble Lord, Lord Goodhart, and the noble Earl, Lord Russell. As I mentioned to the House earlier, social security legislation currently provides a statutory bar to prevent employers from recovering any part of their Class 1 liability from the employee. The first effect of this amendment would be to ensure that Class 1A (NICs liability on benefits in kind) and Class 1B (NICs liability on PAYE voluntary settlement agreements) would remain excluded from this statutory bar. I am sure that I can count on support from all sides of the House in suggesting that we do not want to leave the employee exposed in this manner.
  The second effect of this amendment would be to move the NICs charge from the exercise of unapproved options to the "intrinsic" value of the options at the date of grant. This would mean that employees and employers would have to pay NICs regardless of whether the options are eventually exercised or if the value of the shares were to fall. So NICs would have to be paid purely on the expectation of a realisation of value and not a tangible gain in value; the NICs payable would not reflect the gain that the employee actually made.
  M any high growth companies have told us that they grant share options because they are unable to offer competitive cash salaries, particularly when they start up in business. This amendment would mean that these companies would face an NICs charge when they grant: options to employees—at the time when they are least likely to be able to pay. We see a number of difficulties with the noble Lord's proposals. First, employees would be required to pay NICs at the time they receive the option. This could mean that they have to pay at a time when they have insufficient cash to meet their liabilities. Currently, employees can sell some of their shares when they exercise their options to meet their liabilities.
  Secondly, we would go back to the position that existed for NICs pre 6th April 1999, and so take the NICs charge back out of alignment with the income tax charge through PAYE. This will mean that PAYE and NICs will have to operate on two different figures. Employers said at the time that this caused considerable administrative problems.
  886
  Thirdly, the amendment will increase administrative costs for employers and the Inland Revenue, due to the added complexity of accurately valuing options over shares at the time of grant—and there is considerable difficulty in identifying a method that would allow this to be done accurately. Employers would be required I o operate a valuation model such as that provided in the Black Scholes Model. These models do not always easily apply themselves to high growth and unquoted companies. It will mean that options will have to be valued at grant for NICs purposes and again at exercise for income tax purposes—in other words, what happens when one disjoins them. Currently a valuation for income tax through PAYE is also acceptable for NICs.
  Fourthly, the position that existed prior to 6th April 1999 will re-open an avoidance route that was used by companies, particularly in the City, to pay large bonuses to directors, and other highly paid employees, free of NICs. Any proposal to scale back the current NICs charge and charge it at grant brings with it the opportunity for new forms of avoidance.
  Fifthly, the effect of this amendment would be that employees and employers who are paid in cash would pay more NICs than employees and employers where share options form an integral part of the remuneration package. The Government believe that that is unfair. I thought the noble Lord, Lord Goodhart, too, felt this was unfair, given his remarks at Committee stage.
  Sixthly, the effect of this amendment would reduce income to the National Insurance Fund. The amount is difficult to predict because it is based on the volatility of the share price, but our provisional estimate is that it is likely to cost the National Insurance Fund in the region of £350 million a year. This could also result in a move away from bonuses paid in cash to share options and some substitution of cash pay with share options. If this were to happen the loss to the National Insurance Fund could be multi-millions. This could also affect employees' entitlement to contributions-based, earnings-related and work-related payments such as statutory sick pay or statutory maternity pay.
  Finally, perhaps I may mention, after those six compelling arguments, a small technicality, which is that the amendment as drafted will not apply to Northern Ireland legislation, where NICs would remain payable on the exercise of unapproved options.
  Lord Goodhart: My Lords, I was well aware that it did not apply to Northern Ireland. It was simply that in this age of saving paper I decided to save some by not putting down an amendment which would have been in identical terms, would have been equally long and would have applied to Northern Ireland, because the main purpose was to raise this for discussion. Any discussion relating to Great Britain applies in exactly the same terms to Northern Ireland.
  Baroness Hollis of Heigham: My Lords, I knew that it could not possibly have been an oversight or a technical deficiency, but that it was a wisely considered

  887
  and considerably reflected-on decision not to introduce into the House an amendment that was defective, knowing it that would have to be withdrawn. I congratulate the noble Lord, Lord Goodhart, on exhibiting his drafting skills in order to ensure that he has good grounds for taking back his amendment, given that he has conceded that he has good grounds.
  I have advanced six reasons. It was worth putting those on the record because they are important issues. It is clear that different companies are coming from different perspectives, as illustrated by the fact that one company, QXL, was unhappy with this and another company, NTL, supported the proposal. We believe that they cancelled each other out.
  For all those reasons—and I hope because of the very full answer I have been able to give tonight since we could not do this at Committee stage—I would ask the noble Lords to withdraw their amendments.
  Lord Goodhart: My Lords, I am very grateful to the Minister for the full and detailed answer which she gave. It is clearly right that we should have had this discussion tonight because it is a most important issue. It will affect a large number of companies in what is a very important sector of our economy. It will involve many hundreds of millions of pounds. Having listened to the explanation which the Minister gave, I must say that my initial reaction to it certainly is that NTL is correct and QXL is wrong on this, that the Government's proposals are more in the interests of both the Government and the companies involved in this field than the alternative I put forward, which is to charge NICs on the value at the date of grant.
  However, one aspect remains with which the Minister did not deal in great detail. It is now clear that the form in which this legislation was introduced in 1999 has created very serious problems. There are important drawbacks for companies which granted options between 6th April 1999 and 18th May 2000.
  It could be said that those companies did not need to grant options, but in many cases options were granted pursuant to a contract of employment entered into earlier or have become so central to this sector of the economy that companies would have been unable to employ people without. I know that NTL did not grant options during that period, but it is clear that some companies did.
  In that case, would it not be possible to consider giving some form of relief against the excessive liabilities faced by the companies which granted options during that period?
  Baroness Hollis of Heigham: My Lords, for obvious reasons, including the fact that the subject is beyond my normal range, I should be loath to give any such assurances. However, I repeat in good faith the offer I made to arrange a meeting with the noble Lords, Lord Goodhart and Lord Higgins, to discuss the issue with the relevant officials. They will be able to have a much more informed discussion than I could possibly have
  888
  at this time of night on a subject that is technical but none the less of major significance to the companies involved.
  Lord Goodhart: My Lords, I am grateful and should provisionally like to accept that invitation. I should like to discuss the matter with those who briefed me on the subject in order to see whether they believe that there is an issue worth debating. I believe that they will.
  Lord Higgins: My Lords, we ran into similar technical problems last year with the IT industry and I recall an extensive discussion with the individual groups concerned under the inspiration of the noble Lord, Lord McIntosh. It might be helpful if a similar meeting could be arranged, not least because the representations we are receiving are on both sides.
  Baroness Hollis of Heigham: My Lords, no, I would not want to go that far. I am happy to hear their voices through the opinions put by your Lordships, but the constituency of such a meeting would produce major problems. That would not be appropriate. However, I am happy to offer a meeting in order to explore some of the technical issues. If, on reflection, noble Lords believe that questions are unanswered or that there are some partial moves that the Government might make—no commitment as to the outcomes—your Lordships would have the opportunity to pursue them.
  Lord Goodhart: My Lords, I am happy to take up that invitation. Provisionally, I shall accept it and, subject to confirmation, I shall contact the Minister accordingly. In view of that, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 78 [Liability of earner for secondary contributions: Great Britain]:
  [Amendment No. 135 not moved.]
  Clause 79 [Contributions in respect of benefits in kind: Northern Ireland]:
  [Amendments Nos. 136 to 138 not moved.]
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 139:
  Page 86, line 7, at end insert—
  ("( ) In paragraph 8(1)(ia) of that Schedule (power to provide by regulations for repayment in prescribed cases of the whole or a part of a Class 1B contribution), after "part" there shall be inserted "of a Class 1A or".").
  On Question, amendment agreed to.
  Lord Higgins Lord Higgins moved Amendment No. 140:
  Page 86, line 14, leave out ("with 6th April 2000") and insert ("on 6th April of the year after the date of commencement of this Act, or, if this Act comes into force on various dates, the earliest of those dates,").
  The noble Lord said: My Lords, I rise briefly to move the amendment. The group of amendments is related to contributions in respect of benefits in kind

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  in Northern Ireland. I am not sure whether a similar passage appears in—perhaps I may have the Minister's attention.
  Baroness Hollis of Heigham: My Lords, I was taking advice from my learned friend, the noble Lord, Lord McIntosh.
  10.45 p.m.
  Lord Higgins: My Lords, this requires very little learning. It is an extremely simple point in one sense in that it appears to introduce retrospectively the provisions of Clause 79, which is concerned with national insurance contributions in respect of benefits in kind for Northern Ireland. It states:
  "This section shall have effect in relation to the tax year beginning with 6th April 2000 and subsequent tax years".
  However, it is already mid June. I am not in the least clear as to why this particular measure is so urgent that it should be backdated to 6th April 2000. I do not believe that that would be the normal practice. Similarly, Amendment No. 141, which refers to subsection (8), states:
  "Regulations made by statutory instrument under any power conferred by virtue of this section may be made so as to have retrospective effect in relation to any time in the tax year in which they are made".
  I have the greatest difficulty in recollecting any piece of legislation which sets out in terms that it will have retrospective effect. That is something which, generally speaking, we are reluctant to do unless there is a good reason. However, no doubt the noble Baroness can provide us with one. I beg to move.
  Baroness Hollis of Heigham: My Lords, in answer to the noble Lord's last question my friends on the Front Bench refer me to the Sea Fishing Grants (Charges) Bill. Therefore, there are plenty of precedents such as that. I have a long answer and a short answer, but I do not believe that your Lordships want a long answer tonight. The amendments before us relate only to Northern Ireland. Clause 79 mirrors the GP provisions in Clause 75 in Northern Ireland and the NIC scheme is UK-wide. Therefore, my remarks make no specific reference to Northern Ireland.
  If the noble Lord, Lord Higgins, is seriously worried about this matter, my brief answer is that, given that we are proposing to arrange a meeting, I shall be happy to add it to the agenda. However, if your Lordships wish me to offer the House a fuller reply at this time of night on the amendment as tabled, I shall be happy to do so; but I suspect that the amendment as tabled is not the substance of the amendment to which the noble Lord spoke, which essentially relates to the Northern Ireland situation. Therefore, I am happy to read into the record a reply to the amendment as tabled, but it would not be a reply to the speeches made. It may be
  890
  that, in the light of those circumstances, the noble Lord would prefer to put the matter on the shopping list for our meeting.
  Lord Higgins: My Lords, I am puzzled as to why the noble Baroness's answer does not refer to the speech which I made. The normal procedure in this House is that it should. However, so far as concerns the amendment, I believe that what I said was exactly the same as what the amendment does; namely, it queries why there should be a retrospective effect. However, if the noble Baroness's reply does not seem relevant, perhaps it would be easier if she wrote to me and, if necessary, we can consider the matter at Third Reading—assuming that no one votes me down in trying to do that. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 141 not moved.]
  Schedule 9 [Repeals and revocations]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 142 to 145:
  Page 156, line 9, column 3, leave out ("paragraph 3(2)") and insert ("paragraphs 3(2) and 8(1)(i)").

  Page 156, line 16, column 3, at end insert-

  ("In Schedule 1, paragraph 19(2).")

  Page 156, line 30, column 3, leave out ("paragraph 3(2)") and insert ("paragraphs 3(2) and 8(1)(i)").

  Page 156, line 37, column 3, at end insert-

  ("In Schedule 1, paragraph 22(2),")

  On Question, amendments agreed to.
  Clause 87 [Commencement and transitional provisions]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 146:
  Page 96, line 16, leave out (", 9, 11 and 12") and insert ("and 9 to 12").
  The noble Baroness said: My Lords, I shall be extremely brief. This is a straightforward technical amendment which allows Schedule 5(10) to be brought into force on a date to be specified by commencement order instead of on the date of Royal Assent. Again, I suggest that your Lordships accept it. I beg to move.
  On Question, amendment agreed to.
  [Amendment No. 147 not moved.]

Crown Prosecution Service Inspectorate Bill [H.L.]
Returned from the Commons agreed to with a privilege amendment; the amendment considered and agreed to.
House adjourned at eleven minutes before eleven o'clock.