Lords Sitting of 8 November 2004

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

Schools: Twinning
Lord Roberts of Llandudno Lord Roberts of Llandudno asked Her Majesty's Government:
Whether they will encourage, and provide assistance to, schools and youth organisations within the United Kingdom to "twin" with similar institutions in other parts of the world.
The Parliamentary Under-Secretary of State, Department for Education and Skills (Lord Filkin): My Lords, this Government strongly encourage such links. Assistance can come through the EU Socrates and youth programmes, and there are many other government and non-government linking programmes. Information on these can be accessed through the department's Global Gateway website.
Lord Roberts of Llandudno: My Lords, I appreciate the Minister's response and we are grateful for what is happening already. Many youth groups and others are involved in these partnerships. The Minister will be aware that in Wales we have a special link with Lesotho. Are the Government doing all they can at this time of great threat and when there is a mountain of hostility and prejudice? What is it like to be a child in Fallujah today? Will the Government encourage the provision of translation facilities, information packs and possibly even co-operation with the BBC World Service in fulfilling that object?
Lord Filkin: My Lords, I refer to the broad object of strengthening international links to benefit our own children in terms of understanding the wider world, of supporting other countries in being able to harness and connect with parts of our experience in education and other facilities that would help their own development, and of supporting UK competitiveness. For all those three reasons we are strongly committed to using these instruments to support our contribution to the wider world. As testament of that I would expect us in the very near future to publish an international strategy setting out how we want to take this journey further and faster in the future.
Lord Dearing: My Lords, the Government will be aware of the anxieties of teachers in today's litigious society about suits should anything go wrong when they lead an overseas visit of schoolchildren. Have the Government given thought to how teachers can be reassured on that concern?
Lord Filkin: My Lords, the essential approach of the Government on this matter has been to give clear
606
guidance to schools and to teachers about carrying out proper risk assessment to try to identify foreseeable risks that could occur as a product of going abroad. That process, if done well, should reduce, if not eliminate, risks. I can see the thrust behind the question of an indemnity of some sort. I undertake that we shall give that further reflection. However, one does not want to do anything that reduces the risk assessment process and incentivises people simply to indemnify risks. Having said that, I assure the noble Lord, Lord Dearing, that we shall reflect on whether this is a fruitful avenue for further work.
Lord Judd: My Lords, does my noble friend accept that his Answer will be greeted with a great deal of pleasure by many of those working in this sphere? Does he agree that in the context of not only the reality of the age in which we are living and the prejudice to which the noble Lord, Lord Roberts, referred but also the growing reality of total global interdependence, we will fail our young if we do not ensure that all their education is undertaken in the context of a sense of global reality and global understanding? Therefore, the Government need all possible support in the road that they are taking. Will my noble friend assure the House that he will consult closely with those leading NGOs which have become convinced that this kind of activity is crucially important?
Lord Filkin: My Lords, I am slightly shocked to find that my answers give a great deal of pleasure; that has not been my custom. However, I indeed assure my noble friend, and agree with him, that we would fail our young in a global world if they did not understand their position in it, the richness and diversity of the world and the importance of fruitful educational, cultural and economic links in society. I assure him that when we publish our strategy, led with considerable zeal by my right honourable friend the Secretary of State for Education, we shall be pleased to have dialogue with a range of NGOs and others.
Lord Tebbit: My Lords—
Baroness Sharp of Guildford: My Lords, may I join others in thanking the Minister for his Answer—
Noble Lords: Order!
The Lord President of the Council (Baroness Amos): My Lords, there is enough time for both but I believe that it is the turn of the noble Lord, Lord Tebbit.
Lord Tebbit: My Lords, how many children coming from abroad will have the language skills necessary to take advantage of going to schools in Wales where the, instruction is in the Welsh language?
Lord Filkin: My Lords, I do not have exactly at my fingertips the numbers in Lithuania who want to learn Welsh, but I am sure that it is more than minimal. I expect that people will make their judgment on which part of this great United Kingdom of ours they target

607
their twinned experience when they make such a decision. The UK is an enormously attractive destination for higher education both for European Union students and others for a variety of reasons, one of which is our language, or perhaps I should say our languages, given the question of the noble Lord, Lord Tebbit.
Baroness Sharp of Guildford: My Lords, will the Minister join me in congratulating the British Council on the efforts that it has made over many years in encouraging schools, particularly primary schools, to twin with schools in other countries?
Lord Filkin: Yes, my Lords. That is clearly part of what the Global Gateway website seeks to do. It provides—would you believe it?—a website that tells one how to twin and how to get support for twinning. The British Council has done great work. As a rough guess we estimate that about a quarter of all primary schools have partnerships of that sort. If it is part of a serious curriculum development and is not just an add-on, that undoubtedly is of great benefit to pupils, schools and international understanding.
Baroness Howe of Idlicote: My Lords, would the Minister not agree that the extra help on languages might do something to redress the disastrous effects of the decision to drop them as a compulsory subject from GCSEs? In one year, in three-quarters of all comprehensive schools, apparently the numbers taking French have already fallen by about 70 per cent.
Lord Filkin: My Lords, from personal experience, I know full well that foreign travel and relationships encourage one to treat language learning seriously. I do not agree with the noble Baroness on the decision to move from a position in which the national curriculum said that every child had to learn a language, even if they showed no interest or aptitude whatever at 14, to one in which every child had the opportunity to learn a language if they wanted to do so. We were wise to make that change and put further effort into giving an opportunity for language training to younger children, so that, we hope, we do not have classes of 13 year-olds who have not engaged strongly and no longer wish to learn. That is a sensible thrust of policy.
Baroness Perry of Southwark: My Lords, is the Minister aware that there are very good examples of links between schools via e-mail and the Internet? Is he also aware that that then requires the teachers to have the opportunity to meet, which costs money?
Lord Filkin: My Lords, most things cost money apart from, to some extent, e-mail exchanges. That is one great benefit that the web has given to international relationships. I do not take away the thrust of the noble Baroness's question—face-to-face contact is sometimes required as well. It is, but we have been able to do much more because schools in different parts of the world can have rich dialogue at
608
virtually no cost using web and e-based technology. That has been marvellous in terms of the shift that it has brought about.

ITV Regional Programming
2.44 p.m.
Lord Mackenzie of Framwellgate Lord Mackenzie of Framwellgate asked Her Majesty's Government:
Whether they accept Ofcom's recent proposals to reduce regional ITV output to particular areas.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): My Lords, the second phase of Ofcom's public service television review, published on 30 September, is out for consultation. In it, Ofcom has proposed that ITV1's regional programming obligations for the English regions should be reduced from three hours to one and a half hours a week. No reduction has been proposed for regional news obligations or regional programming within peak hours. At the same time, Ofcom proposes to increase the quotas for out-of-London production on the ITV network. Following the consultation, Ofcom will finalise and publish its conclusions and recommendations. It is not appropriate for the Government to comment during Ofcom's consultation.
Lord Mackenzie of Framwellgate: My Lords, I thank the Minister for his reply. Is he aware of the widespread concern in the regions that the implementation of such a proposal would cause a number of job losses and the closure of many independent TV production companies?
Lord McIntosh of Haringey: My Lords, I am aware of concern that has been expressed very considerably in the media. However, my Answer said that Ofcom proposed to increase the quotas for out-of-London production, which is, after all, where any job losses might lie. I am sure that Ofcom will take that into account in the response that it will give to the consultation.
Lord Walton of Detchant: My Lords, does the noble Lord accept that, while the voters in the north-east have recently roundly rejected the opportunity to have a regional assembly with virtually no executive powers, those same voters, if asked, would undoubtedly reject any proposal to reduce regional programmes produced by, for instance, Tyne Tees Television?
Lord McIntosh of Haringey: My Lords, without necessarily accepting the premise, I accept the conclusion.
Viscount Falkland: My Lords, can the Minister go a little further on an aspect of the proposals that extends a little from the Question on Ofcom's suggestions about ITV's public service remit obligations? Is it not suggested that, as well as there being a reduction of

609
those obligations, a discount will also continue in terms of ITV's access to the airwaves? How will that work? It continues what already exists, obviously as a quid pro quo for it having its public service obligations.
Lord McIntosh of Haringey: My Lords, I am not sure that I fully understand the noble Viscount's phrase about a discount for access to the airwaves. Two sets of licence negotiations are in progress. One is for the digital replacement licence, on which a decision has to be reached by the end of this year. In some cases, there is the issue of the extension of the existing analogue licences. However, those are carried out without particular reference to the very limited reductions that Ofcom proposes in non-news off-peak regional programming.
The Lord Bishop of Chelmsford: My Lords, I must declare an interest as a former religious affairs adviser to Yorkshire Television. Does the Minister accept that there is a risk in placing too heavy a burden on the BBC's local coverage, not least in the duty to maintain a proper balance between private and public provision in the area? That clearly has an impact on the potential delivery of religious broadcast services. Will he ask Ofcom to bear those concerns in mind in making the proposals?
Lord McIntosh of Haringey: My Lords, I entirely agree. It certainly ought not to be left to the BBC to cover regional programming. Our position has always been that a plurality of public service broadcasting obligations is not only desirable, but necessary. It is not for me to make that suggestion to Ofcom, because it is listening and consulting, but it has already been done through the right reverend Prelate's question.
Baroness Howe of Idlicote: My Lords, what effect would the proposals have, if adopted, on the percentage of high quality public service broadcasting programmes currently available to children?
Lord McIntosh of Haringey: My Lords, I do not think that there is a single answer to that. Clearly, that is one of the issues which Ofcom will consider. I should say that Ofcom has published a very detailed volume as part of the second stage of its review, entitled Reshaping television for the United Kingdom's nations, regions and localities, which contains not only detailed factual analyses of what is on offer and the nature of the audiences, but a good deal of attitude research about people's views on these matters. I recommend the document to those who are concerned with this issue.
Baroness Carnegy of Lour: My Lords, does the fact that people in England seemed less enthusiastic than the Government had hoped regarding thinking of themselves as living in regions, would Ofcom not be wiser to talk about locally produced, rather than
610
regionally produced, broadcasting? That sounds much more attractive and much more likely to bring in the viewers.
Lord McIntosh of Haringey: My Lords, again, without accepting the premise, I have just read out the title of the Ofcom consultation paper, Reshaping television for the United Kingdom's nations, regions and localities. If the noble Baroness looks at that document, she will find that she is right in the sense that people do have a strong identification with localities—in some cases a stronger identification with localities than with regions.

Kyoto Protocol
2.51 p.m.
Lord Truscott Lord Truscott asked Her Majesty's Government:
Whether they will urge President Putin of Russia to ratify the Kyoto Protocol on climate change at the earliest opportunity.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, the Russian Government approved the Kyoto Protocol on 30 September. It was subsequently approved by the Duma and the Federation Council; and President Putin signed the protocol last Friday. We are still awaiting the instrument's deposition in the UN headquarters in New York. Ninety days afterwards the Kyoto Protocol will enter into legal force. We believe that ratification will be in Russia's interests and is certainly in the world's interests. Therefore, we look forward to the completion of that process.
Lord Truscott: My Lords, I thank my noble friend for that helpful and positive Answer. Given the recent report by 250 scientists that the Arctic ice cap may well be ice free by 2070 and that sea levels may rise by a metre by the end of the century, and bearing in mind the statement by Her Majesty the Queen that she is concerned about global warming, will Her Majesty's Government use the forthcoming Washington summit as an opportunity to remind the United States, as the world's worst polluter, that it should either ratify the Kyoto Protocol or, at the very least, reduce its emissions of greenhouse gases?
Lord Whitty: My Lords, the precise agenda of the Washington summit has not yet been fixed, but noble Lords will know that the Prime Minster has clearly stated that global warming will be one of our main priorities in relation to the G8 process next year. Therefore, one can derive the conclusion that that will need to be discussed with the Americans. The latest information on the Arctic, and other signs that global warming is proceeding even faster than was previously thought, must give urgency to those discussions among all governments—even those who have hitherto been unwilling to regard the issue as a priority.
Lord Waddington: My Lords, is it correct that there was no ice in the Arctic 55 million years ago and, as far

611
as we know, no one was burning fossil fuels? I ask that question in a general spirit of inquiry, rather than to stir things up.
Lord Whitty: My Lords, the noble Lord's memory goes back further than mine. It is true that the Earth has passed through many different phases—many of which would be inimical to life as we now know it. The fact that the Earth has been through such processes before does not mean that we or other species on this globe could survive a global warming of the extent that is now predicted, unless we do something about it. Even if there are natural processes at work in that cycle, the burning of carbon makes the situation significantly worse.
The Countess of Mar: My Lords, in the absence of the noble Lord's noble friend, the noble Baroness, Lady Billingham, perhaps I may promote the report of Sub-Committee D of the European Union Committee which has been investigating climate change. The noble Baroness has done a brilliant job. Also, is it not the case that in the United States of America individual states are taking a very strong line on global warming and that the US Government are looking at technological ways of solving the problem?
Lord Whitty: My Lords, I agree with the noble Countess that the work of the sub-committee has been thorough, and the Government are taking many of its recommendations fully on board. Regarding the situation in the United States, in many respects central federal politics is well behind leading opinion in corporate areas of America and in many states. Noble Lords may know that the north-east and western seaboard states have begun to take serious measures to try to control carbon emissions—in fact, Mr Arnold Schwarzenegger is a leading campaigner in that regard. So, despite the fact that it does not seem possible at present to gain support in Washington for signing the Kyoto Protocol, the pressure within America is likely to begin to make that country focus on how it can contribute to combating global warming in the longer term.
Baroness Falkner of Margravine: My Lords, returning to the phase through which the Earth is currently passing, and looking beyond whether the US ratifies the Kyoto Protocol, which is desirable, does the Minister agree that the provisions of that protocol are fairly modest and that we need an international effort, not only to reduce emissions but to move to a fairer distribution of carbon use as the only long-term strategy to confront climate change, which, alas, affects the developing world disproportionately?
Lord Whitty: My Lords, it was clear that, the American political process being what it is, whatever last week's election result had been it was unlikely that the Americans would have been able to ratify the Kyoto Protocol. The objective now is to engage the Americans at all levels in the longer-term process,
612
which needs to go beyond the provisions of Kyoto. The importance of Kyoto is that we should establish mechanisms and commitments, but the objective of reducing carbon emissions must be much greater than that provided by Kyoto itself—not least because of the effect of global warming on developing countries that was pointed out by the noble Baroness.
Lord Lea of Crondall: My Lords, does the Minister agree that the decision by the Russians is remarkable in some respects, because the Siberian growing season could become longer, the Arctic seaway could be easier to open and so on? But in the short to medium term the Russians—and the Americans—would benefit if Kyoto worked properly by the great transfers through the Global Tradable Permits Scheme, because Russia is a low user of carbon per head of population. This is the goal that must be pursued so that every nation—India, China and the United States—now that this ratification has rightly been made, can move forward on a united basis.
Lord Whitty: My Lords, yes. The noble Lord has raised a number of aspects. It is certainly right to congratulate the Russians on taking this step, despite some siren voices within Russia itself. The Russians have recognised that it is for their benefit, and the benefit of the world; and that it will make sense of the Kyoto process, particularly regarding countries such as Canada and Japan who trade with Russia in relation to emissions. The fact that some parts of the world will see a beneficial climatic effect in the very short term does not mean that we should ignore the very long-term overwhelming effects that unrestrained climate change would bring to the whole globe.

Iraq: Civilian Casualties
2.59 p.m.
Lord Lamont of Lerwick Lord Lamont of Lerwick asked Her Majesty's Government:
What is their response to the claims in the Lancet magazine that 100,000 civilians have died in Iraq as the result of the military action by the coalition forces.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, there are no reliable or comprehensive figures for Iraqi civilian casualties. Such estimates that exist are not comparable in terms of periods covered or methodologies used. The Lancet article suggests a range of between 8,000 and 194,000 deaths over the period March 2003 to September 2004, while the Iraq body count website suggests a range of just over 14,270 to just over 16,400 over the same period. The Iraqi Ministry of Health says that just under 4,000 civilians have been killed in the past six months. My right honourable friend the Foreign Secretary has stated that when the Lancet estimates have been analysed, he will make a Statement to another place, and I shall put a copy in your Lordships' Library.
Lord Lamont of Lerwick: My Lords, I thank the Minister for that reply. Does she not agree that if the

613
upper end of the Lancet's estimates were right, that would make nonsense of the claim that the type of modern warfare waged by the coalition in Iraq was the most humanitarian in history? Is it not ironic that the Government are now defending what has happened by citing lower estimates of casualties, which previously they rubbished? And is it not regrettable that it has taken this article for the Foreign Secretary to say that he will do what he should have done long ago—that is, to make a proper estimate of the civilian casualties in this war?
Baroness Symons of Vernham Dean: My Lords, the fact that we have not had reliable figures has been a matter of enormous concern to Her Majesty's Government for quite some time. So I assure the noble Lord, Lord Lamont, that this concern has not arisen only in the light of the article in the Lancet. We take these estimated figures very seriously, and the Foreign Secretary has made that clear. But we are cautious about them because they are very different from the figures emerging from other sources, and they have been questioned by a number of independent observers. I am sure that the noble Lord, Lord Lamont, will have read the article in the Lancet, as, indeed, have I. I think that it bears more detailed analysis, and that work is being undertaken on the basis of the Lancet figures in order that my right honourable friend can put forward a detailed Statement.
Lord Garden: My Lords, can the Minister tell us why we do not have the accurate figures? As the Lancet points out, we have responsibilities under Article 27 of the Geneva Convention. Those at the Lancet have carried out a survey. They have explained how they have done it and they conclude:
"There seems to be little excuse for occupying forces to not be able to provide more precise tallies".
Why do we not have more precise tallies?
Baroness Symons of Vernham Dean: My Lords, again, the question raised by the noble Lord, Lord Garden, is absolutely apposite. Obviously we do everything that we can, first, to avoid civilian casualties and, secondly, to try to collect the figures relating to those who have sadly been killed. However, due to the very nature of the fighting that has taken place, it is not always possible to collect accurate estimates. In many cases, we are not on the scene when casualties are incurred. When we are, often we cannot be certain of the numbers involved because the casualties are taken away by their families and others, and we are not then always able to discriminate between those who are insurgents but claiming to be civilians and those who are genuine civilian casualties. Therefore, this fighting is not of the type that lends itself to the accurate analysis that the noble Lord. Lord Garden, and, indeed, I should like to see.
Baroness Turner of Camden: My Lords, has the Minister any response to the statement by Kofi Annan
614
relative to the assault on Fallujah, when he expressed deep concern about the possibility of a very large number of civilian casualties?
Baroness Symons of Vernham Dean: My Lords, the best response that I can give to the noble Baroness is that given this morning by the Iraqi interim Prime Minister, Mr Allawi, when he said with a heavy heart:
"I have today concluded, as did the National Assembly yesterday, that the terrorists and insurgents in Fallujah do not want a political solution. I have concluded I have no option but to take further measures now to protect the people of Iraq from these murderers and to liberate the people of Fallujah".
The fact is that many people in Fallujah have asked to be rid of the insurgents in their town and they have requested the help of the IIG to that end.
Lord Forsyth of Drumlean: My Lords, on the question of minimising casualties, which I am sure is the Government's principal concern, can the Minister tell the House whether reports in the press that the commander of the Black Watch has expressed serious reservations about its deployment and the risk in which it is being put are accurate?
Baroness Symons of Vernham Dean: My Lords, I know of the reports of which the noble Lord speaks but I have not had the opportunity to discuss them with my colleagues in the Ministry of Defence. Of course, your Lordships will be aware that on 4 November three British soldiers were killed in an attack on the Black Watch, together with an Iraqi interpreter, and a further eight soldiers were wounded in a suicide car bomb attack. The fact is that, in these terribly difficult circumstances, sadly our Armed Forces take losses. That is why we take so seriously any decisions about deployment.
Lord Hurd of Westwell: My Lords—
Lord Judd: My Lords, in the absence of reliable official estimates of the number of civilian lives lost—estimates which, it is widely felt, should be available—it would be unfortunate if we were to become lost in a debate about the relative merits of particular estimates. Surely the most important point is that, if we are to win the battle for hearts and minds, every innocent civilian life lost in this war and battle is a negative. We must continue to make it a priority to keep civilian casualties to the absolute minimum. I know that my noble friend agrees that we must also make a priority—not as an afterthought but as something that is absolutely central to our position—our concern for civilians who have lost their lives and our concern for all their relatives and dependants.
Baroness Symons of Vernham Dean: Yes, my Lords, of course I can agree with that. The only point I would make to my noble friend is that our concern extends to every life lost. I refer not only to every civilian life but to every life—that is, every military life, every member of the Black Watch and every one of our soldiers. They are all negatives. I am sometimes concerned that we talk only about the loss of civilian life and our concern for civilian life as though the loss of military life is a

615
matter of less concern to us. I know that that is not what my noble friend meant. Estimates are available. The question is how robust those estimates are, and that is why my right honourable friend has asked for a further analysis of the article in the Lancet and other available material.

Business
3.6 p.m.
Lord Grocott: My Lords, I shall say a quick word about business later today. With permission, there will be two Statements. The first—on the EU Summit—will be made as soon as convenient after 4.30 p.m. and will be repeated by my noble friend the Leader of the House. Later, at around 6.45 p.m., a Statement will be repeated by my noble friend Lord Rooker on regional referendums.
In order to be clear, the business scheduled for the dinner break, which, as noble Lords know, normally comes at 7.30 p.m., will come immediately after the regional referendums Statement. A further minor adjustment, which I think is common sense, is that we shall return to the debate on the Pensions Bill no sooner than 8 p.m. In straightforward terms, that means that the minimum gap in the debate on the Pensions Bill will be from 6.45 p.m., when the Statement starts, until 8 p.m. I hope that that is clear.

Civil Contingencies Bill
Lord Bassam of Brighton: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:
Clauses 1 to 18,
Schedule 1,
Clauses 19 to 32,
Schedules 2 and 3,
Clauses 33 to 36.—(Lord Bassam of Brighton.)
On Question, Motion agreed to.

Highways (Obstruction by Body Corporate) Bill
Read a third time, and passed.

Pensions Bill
3.8 p.m.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (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 284 [Financial assistance scheme, for members of certain pension schemes]:
Lord Higgins Lord Higgins moved Amendment No. 260:
Page 235, line 24, after "payments" insert "entirely from public funds with no charges, levies or contributions to be made by the private sector"
The noble Lord said: My Lords, Amendment No. 260 stands in my name and that of my noble friend Lord Skelmersdale. It may be helpful to put the amendment in a more general context by way of introduction. This and the following amendment are to a very important clause, which deals with the financial assistance scheme introduced by the Government at a very late stage in the Bill's passage through the House of Commons. Consequently, there has been very limited scope indeed for the House of Commons to express any views on the Government's particular proposals. I say "particular proposals", although if one looks at the measures that were introduced in Clause 284, with which this amendment seeks to deal, one will see that it runs to fewer than two pages and is in an extremely uncertain state indeed. Virtually every possible aspect of the financial assistance scheme is to be dealt with by way of regulation. The House of Commons had virtually no opportunity to consider the matter as we were able to in considerable depth in Grand Committee.
Your Lordships may recall that this clause and the proposal were introduced as a result of enormous concern expressed in the House of Commons about the plight of those whose pension schemes had, in simple terms, gone bust. That was reflected in a number of Early Day Motions, which were supported on all sides of the Commons. It also became apparent that there was to be a very significant Labour revolt on the Government Benches if something of this kind were not introduced.
The problem, as we now see it on this side of the House, is that the clause itself, as I said a moment ago, is extremely vague. The Chancellor of the Exchequer was obviously persuaded that something must be done, so came up with a nice round figure of £400 million by way of support—although in reality, of course, it is not £400 million because it is spread over 20 or 30 years and the present value of that £400 million might be something like £250 million. That figure was introduced and I fear that the Chancellor is likely to do all he can by way of damage limitation, if not actually to double-cross those who were persuaded not to revolt against the Government, at least to short-change them. We shall come to those points on later amendments.
However, this amendment is concerned with a specific government proposal; namely, to produce the sum of £400 million. As of now, and despite the debates in Grand Committee, we have no idea what is the basis for that £400 million, but we feel very strongly that it should be made clear that government money will be produced to deal with this particular problem.
Considerable concern has been expressed outside—for example, by the Engineering Employers Federation—that the sum will, to some extent, be contributed to by industry and so on, and that is the reason for the

617
amendment. In the Statement made on 14 May about the FAS, Mr Andrew Smith, who was then Secretary of State for Work and Pensions, said:
"The Government will therefore make available £400 million of public money … with the possibility of further contributions from industry".—[Official Report, Commons, 14/5/04; col. 32WS.]
Again, on the second allotted date of the Bill's Report stage in the House of Commons on 19 May, Mr Malcolm Wicks, the pensions Minister, stated:
"It is open to industry to offer further support. We hope that that support will be forthcoming".—[Official Report, Commons, 19/5/04; col. 983.]
It seems to us appropriate that this should be a government responsibility and one in which there should be no financial cost to the outside interests concerned. Essentially, that is the purpose of the amendment.
I make one final general point. In the course of Grand Committee debates, the noble Baroness, Lady Hollis, said that she was not prepared to accept the Opposition chipping away at the Government's proposals. That was a very strange expression to use. We do not seek to chip away at the Government's proposals, as they are simply a solid block of proposals on regulations and it would be difficult to produce any sculpture out of that solid block. We are exerting the right of this House, and indeed Parliament's right, to say that the legislation should be as specific as possible so that we have some idea where we are going.
At the moment the clause is a mere skeleton. It has come out of the cupboard, but we have no idea of its content. It is right that this House should, as far as possible—although it is very difficult—put some flesh on the bones of the skeleton. That is not chipping away. Unless we do that, the Bill will go through as it is and the Government will have complete control over what happens thereafter by way of introducing regulations. As far as possible, we want to pin down the Government to specific proposals and this is the first of a series of amendments that seek to do that. I beg to move.
3.15 p.m.
Lord Oakeshott of Seagrove Bay: My Lords, from these Benches let me clarify our approach to the FAS and to the matters that we are discussing this afternoon. I shall then deal with this first specific amendment. As I said in Grand Committee, and as the noble Lord, Lord Higgins, says now, this is barely a skeleton of a Bill. There really is nothing for us to see here at all. We are trying to pin down to some extent, and in very broad terms, what this provision will mean and who it will cover. We know roughly how much it will cost on average over 20 years, although we have no idea of the cost in the early stages. Specifically, what the ASW workers, and many other people who have been suffering for years while they waited for this want to know is when it will start. That is what we are discussing under this amendment.
Last May, after a long period of the Government saying that they did not want to raise false hopes and that they were unable to do anything, with defeat in the House of Commons staring the Government in the
618
face, suddenly this scheme was cobbled together—a tribute to democracy. We welcome it, but it was not the best way to do it. It is now right for us to scrutinise the provision and to put some limits on this use of public money.
Later we shall talk about eligibility; whether, in principle, what is called a solvent wind-up will be covered. On that, it seems entirely reasonable to us, that there should be a fixed starting date. Given how long people have been waiting and how desperate the need is, it would be inconceivable for the first payments not to be made within a few months after the Act comes into force. Whether it is a specific date as the noble Lord, Lord Higgins, has suggested, which we are happy to support, or another date, that is fine.
Specifically on this amendment, I pressed the Minister on the issue of money coming from private funds, and I thought that she gave me a fairly clear assurance that I would have been happy to accept in principle. However, I defer to the noble Lord, Lord Higgins, with his greater experience of Bills in this House and of government commitments in this House. If he wishes to put the Minister's assurance on this point more firmly on the record, we shall support him, although I invite the noble Baroness to be as specific and as clear as she can. I am sorry if I have given more of a tour d'horizon of our general approach to the Bill, but, before coming to the first vote, I believe that it is helpful for noble Lords to have an idea of where we stand on the financial assistance scheme.
Make no mistake, this is a matter of great public concern outside, not just to the 65,000 or more people directly affected, but also to the many who fear that, before the PPF comes into effect, they may be affected. The injustice of the 65,000 people, who already are clearly suffering, is deeply felt. I support the amendment.
Viscount Trenchard: My Lords, I support the amendment of my noble friend Lord Higgins. We are unclear about exactly who will be covered by this financial assistance scheme and how the £400 million will be measured. I suspect that if the financial assistance scheme is restricted to only £400 million—or £250 million at the present day value—the level of benefits pensioners receive will be considerably smaller than those under the PPF.
In the light of the decision of the electors in the north-east last Thursday perhaps the £200 million set aside for regional government could more sensibly be redeployed to boost the amount the Government will put into the financial assistance scheme.
Baroness Hollis of Heigham: My Lords, I am sure that that suggestion will be received with enthusiasm in the relevant government departments.
Perhaps I may also ask the House's indulgence to do what the noble Lords, Lord Higgins and Lord Oakeshott, did to some degree, which is to make a slightly more general statement about where we are in our approach to the amendments. That will perhaps allow us to be much tighter in discussion on the subsequent amendments.

619
I accept, particularly from the Official Opposition Benches, that the way we are handling FAS is not the most desirable. It would obviously give me profound pleasure to be able to bring a polished scheme to the House, which could then be properly scrutinised. To do that, we would probably need to delay the introduction of FAS for another year. That is our dilemma. I think that your Lordships will understand the pressure we are under. The matter came up late in the day as we saw schemes beginning to collapse around us. The provision responds to our concern to offer decent and honourable support to those schemes, which were never intended to come within PPF. The financial assistance scheme has come up late. It is in a broad form. Its regulations will come before your Lordships and will be affirmative. So there will be ample opportunity to scrutinise the matter then.
I wish that we could handle the matter in a different way, but, frankly, we are between a rock and a hard place. The noble Lord, Lord Oakeshott, stated that there is real concern outside. For that reason we thought that it was better to go with a less polished scheme—an outline framework scheme—in order to progress the Bill, and to fill in the detail through affirmative regulations under the full scrutiny of the House. It is not the ideal solution, but it seems to be the least worst in the situation we are facing.
We are discussing Clause 284. We all share the desire to give greater certainty about how and when FAS will operate. Perhaps I may state where we are. Since FAS was announced in May—only five months ago—we have made good progress in identifying the scale and magnitude of an extremely complex problem, involving hundreds of different pension schemes with differing scheme rules and at different stages of winding up.
We have consulted with scheme members and trade unions and have been working with industry experts to gather and analyse data and explore options. Let me give one example. In many schemes perhaps 30 or even 40 per cent of potential beneficiaries are deferred members. Trying to find out exactly what they might be entitled to in working through the scheme system is extremely labour intensive and time-consuming. Many noble Lords have practical experience of operating pension schemes so they will understand that very well.
The report we published in June was based on an information-gathering exercise which enables us to provide estimates but only at scheme level. We are now undertaking an exercise to try to find out the profile of individual members, including deferred members, and the position of schemes' sponsoring employers. That will help us in implementing the FAS. When it goes live we will already hold details of a large number of schemes. So we shall be able—I hope—to progress more quickly towards paying members, which again I know is a matter of concern to noble Lords.
Your Lordships should bear in mind—and those who have previously been on these Benches will understand this—that this is the first time that government have sought to collect such comprehensive information from
620
private sector occupational pension scheme trustees and actuaries. We do not hold this information as a rule. So we have had to devise systems and processes from scratch in a very short time. Even GAD has sometimes found it difficult to collect this information; so for us to do it on a very different basis is extremely laborious.
We are grateful for all the help we have received. There is a range of options. The first is to collect the information; the second is that there are some difficult policy issues behind what we do. Each option for the structure of FAS could have very different consequences in terms of the security that it would offer to FAS beneficiaries; the certainty it offers to trustees; the value for money it offers in terms of administrative overheads; how we treat fairly members of schemes whose schemes are still in the process; how we use the commitment of taxpayers' money so that those who have been hardest hit receive the most help; and/or should we have a de minimus provision? Should we give more to those closest to retirement? These are all difficult policy issues that we have to deal with and which must rest on the facts of the data we have collected.
The choices are not simple. We are looking at the pros and cons of those options and discussing with the relevant stakeholders.
It is instructive to compare where we are on the FAS with the development of PPF. For PPF we had a Green Paper published in December 2002 and it was announced in June 2003. We are operating FAS in less than five months. So unfortunately we have not been able to develop FAS in order to dovetail tidily with the Pensions Bill. I repeat what I said earlier. We will bring forward all the regulations which flesh out the provision through the affirmative procedure. Therefore, I do believe that your Lordships—admittedly belatedly—will be able to have full parliamentary scrutiny and control. I do not believe that noble Lords would want to say, "We are not going to have the FAS unless we see all the details now". Your Lordships will want FAS, but I am sure that you will also want to ensure that you can have a full debate about the particular details. I can offer your Lordships that.
So, with that explanation, I hope that your Lordships will accept the position we are in. I fully accept that it is not desirable. I can perfectly understand that the Opposition have the right to be unhappy with the situation we are in. But to meet the Opposition's wishes would be to delay significantly the introduction of the FAS to those who will most need it. That is the dilemma we are in.
Turning to the amendments—and again perhaps I may give the quickest of oversights—my judgment is that the amendments tabled on Clause 284 fall into four main categories. It may be helpful to your Lordships if I give some indication of how we might wish to respond to the amendments.
The first group is mostly about timetables and dates—for example, Amendment No. 264. I have to say now that we cannot accept the amendments. It may be that your Lordships will have a different view; it may be that the Commons could have a different view. But from these Benches I cannot accept the amendments for strictly practical reasons. The

621
statutory dates proposed in the amendments are simply not deliverable. I hope to persuade your Lordships that in looking at any legislation introduced by Members opposite—who had a far more extensive run-in period than they are apparently going to allow the Government on these—we have no option, should your Lordships decide to go for the amendments, but to seek to unpick them if we want to implement a sensibly designed workable financial assistance scheme.
I am not predicting how your Lordships will go; I am not trying to predict how the Commons will go; but the Government's position is that we cannot accept the amendments because they are too much of a straitjacket. We simply cannot meet them. They cannot be delivered. It would be foolish of me to pretend otherwise.
There is a second group of amendments where we are willing to consider whether acceptable wording could be put on the face of the Bill—Amendment No. 260 is one such amendment—or whether the concerns could be met through statements in Hansard. The amendments relate to any compulsory levy. I am happy to give reassurances, but if your Lordships are sufficiently concerned, perhaps we could consider whether to return to the matter.
Another such amendment is Amendment No. 266 in the name of the noble Lord, Lord Oakeshott. It requires three-yearly reports to be laid before Parliament on the financial assistance scheme. Whether the noble Lord is content with a verbal assurance or whether we need to revisit the matter we can discuss, but we do not have any substantive policy debate on this at all. We sympathise with where members of the Opposition are coming from. The third group of amendments covers topics where policy is still being developed—I cannot give your Lordships answers on these matters today—such as whether an individual's other income and capital should be taken into account when assessing his assistance from FAS—Amendment No. 261—or whether eligibility for FAS should extend to schemes which wind up all the way to the point where PPF becomes operational. These are topics where we are broadly sympathetic with the concerns that have been expressed, but we cannot yet have our hands tied before a final analysis of the complex problem is completed. Amendments Nos. 261 and 263 fall into that category. We are not unsympathetic, but we are not yet clear about what our final position should be.
Unsurprisingly, I hope to be able to persuade your Lordships that the amendments in the fourth and final category are simply wrong headed. They would require, for example, the scheme to be funded by the Treasury rather than from funds voted to the Department for Work and Pensions. Amendment No. 262 would disregard assistance payments in other income-related benefits. Somebody whose pension scheme had collapsed and gone into FAS would thereby be better off than somebody whose scheme had not collapsed at all. I cannot believe that that is what noble Lords intend, but maybe they have misunderstood the consequence of the amendment.
622
Those are the four broad categories of amendments. Where I can meet your Lordships' concerns, either through assurances in Hansard or even at Third Reading, I shall be happy to do so. However, there will be some areas where I cannot satisfy your Lordships with the detail that they require—I fear that we shall have to await regulations—and other areas where I hope to persuade your Lordships that the amendments as set out on the Marshalled List are simply misguided.
On Amendment No. 260, which relates to compulsory levy, I made it clear—the noble Lord, Lord Oakeshott, was gracious enough to accept it—that we have no intention to use the Bill to impose a statutory, compulsory levy or charge on private business to fund the financial assistance scheme. I cannot emphasise that strongly enough. However, I am unhappy about the amendment because it would have a second and far more damaging effect. By prescribing that the financial assistance scheme should make payments "entirely from public funds", the amendment would make it illegal for the scheme to receive voluntary donations from the private sector. It may be that that would not happen, but it would nevertheless be made illegal. As the scheme will increase confidence in pensions and benefit industry as a whole, we would like to keep that option open. I am sure that your Lordships will understand why that is so.
We are grateful for the voluntary and valuable expertise that we have had on this matter and we hope that it will be further supported. I cannot stop the noble Lord, Lord Higgins, pressing his amendment, but I can give him a categorical assurance that there will be no compulsory levy. However, the amendment would go further than we would wish and make it illegal for any voluntary assistance in cash or kind to be made available to FAS and it would be unwise to rule that out should organisations or sectors of industry wish to give that help either in cash or in kind. For that reason, I hope that the noble Lord will withdraw his amendment, but if he remains anxious about the matter, there is nothing to stop him or the Government tabling an amendment on the compulsory levy alone at Third Reading. I hope that with that explanation, the noble Lord will feel able to withdraw his amendment. I hope that the House will forgive me for addressing the amendments widely at this stage. I hope later to provide more tailored replies.
Lord Higgins: My Lords, throughout our discussions on the Bill, we have been grateful to the Minister for the sympathetic way in which she has dealt with these issues. We are all concerned to help those who suddenly find, through no fault of their own, that their prospects for retirement have been devastated.
I shall take up three points which the Minister made. She rightly summarised our amendments as falling into four different categories: timing; cash; policy; and whether we have simply got it wrong. On the latter category, I have some sympathy with her view on one of the amendments, which is why we shall not move it, but we shall come to each of the amendments in due course.

623
However, the Minister was being naïve, if I may presume to say so, as far as the procedural aspects of the matter are concerned. She said that the provision will be dealt with by affirmative resolution and reassured us that it will receive full parliamentary scrutiny and decisions. I have two points about that: first, such regulations are not amendable, either in this House or the other place. The way in which one would like to change what the Government propose is therefore limited simply to saying "yes" or "no", as opposed to debating the issue as we are now and tabling amendments and so on. The Minister's reassurance is therefore unsatisfactory.
Secondly, although we on this side of the House reserve the right to vote against regulations on a "yes or no" basis, the Minister will know that that is very rarely done and only on matters of very great importance. It certainly would not be regarded as normal for this House to deal with regulations on this Bill by totally rejecting them. For both those reasons, it is important that we should do what we can to make amendments to the Bill at this stage.
On the issue of contributions, considerable concern has been expressed outside this House that, in addition to a levy, the private sector will suddenly find that it has to produce assistance in other ways. The Minister referred to the report, Insolvent Pensions Wind-Up—Report on Numbers Affected, which was published by the Government on 30 June 2004. Paragraph 8 states:
"In addition there is the question of what private sector contributions to the scheme may be forthcoming".
Paragraph 11 states:
"We continue to work with the business community and others to explore the scope to garner support in terms of finance".
This is a worrying matter. It would be better if the situation were made absolutely clear. Therefore, I shall test the opinion of the House on this amendment.
3.36 p.m.
On Question, Whether the said amendment (No. 260) shall be agreed to?
Their Lordships divided: Contents, 132; Not-Contents, 110.

Division No. 1

CONTENTS

Addington, L.

Brooke of Sutton Mandeville, L.

Allenby of Megiddo, V.

Brougham and Vaux, L.

Ampthill, L.

Caithness, E.

Anelay of St Johns, B.

Campbell of Alloway, L.

Attlee, E.

Carlisle of Bucklow, L.

Avebury, L.

Carnegy of Lour, B.

Baker of Dorking, L.

Cope of Berkeley, L. [Teller]

Barker, B.

Craigavon, V.

Beaumont of Whitley, L.

Crickhowell, L.

Biffen, L.

Darcy de Knayth, B.

Blatch, B.

Denham, L.

Bonham-Carter of Yarnbury, B.

Dholakia, L.

Bowness, L.

Dixon-Smith, L.

Bradshaw, L.

Dykes, L.

624

Eccles of Moulton, B.

Naseby, L.

Eden of Winton, L.

Neuberger, B.

Elis-Thomas, L.

Noakes, B.

Elles, B.

Northover, B.

Elliott of Morpeth, L.

Oakeshott of Seagrove Bay, L.

Elton, L.

O'Cathain, B.

Ezra, L.

Park of Monmouth, B.

Falkland, V.

Patten, L.

Falkner of Margravine, B.

Perry of Southwark, B.

Fearn, L.

Platt of Writtle, B.

Feldman, L.

Plummer of St. Marylebone, L.

Fookes, B.

Quinton, L.

Forsyth of Drumlean, L.

Rawlings, B.

Fowler, L.

Razzall, L.

Freeman, L.

Redesdale, L.

Garden, L.

Rennard, L.

Geddes, L.

Renton, L.

Gilmour of Craigmillar, L.

Roberts of Llandudno, L.

Glentoran, L.

Rodgers of Quarry Bank, L.

Goodhart, L.

Roper, L. [Teller]

Goschen, V.

Rotherwick, L.

Hanham, B.

St John of Fawsley, L.

Hanningfield, L.

Sandberg, L.

Harris of Richmond, B.

Scott of Needham Market, B.

Hayhoe, L.

Seccombe, B.

Henley, L.

Selborne, E.

Higgins, L.

Sharp of Guildford, B.

Home, E.

Sharples, B.

Howe, E.

Shaw of Northstead, L.

Howe of Aberavon, L.

Skelmersdale, L.

Smith of Clifton, L.

Hunt of Wirral, L.

Hurd of Westwell, L.

Stevens of Ludgate, L.

Jenkin of Roding, L.

Strathclyde, L.

Swinfen, L

Kalms, L.

Taverne, L.

Laidlaw, L.

Tenby, V.

Laing of Dunphail, L.

Thatcher, B.

Lamont of Lerwick, L.

Thomas of Walliswood, B.

Lester of Herne Hill, L.

Thomson of Monifieth, L.

Liverpool, E.

Tordoff, L.

Livsey of Talgarth, L.

Trenchard, V.

Lucas, L.

Trumpington, B.

Luke, L.

Waddington, L.

MacGregor of Pulham Market, L.

Wakeham, L.

Wallace of Saltaire, L.

Maclennan of Rogart, L.

Walmsley, B.

Maddock, B.

Walpole, L.

Marsh, L.

Warnock, B.

Mayhew of Twysden, L.

Weatherill, L.

Miller of Hendon, B.

Wilcox, B.

Molyneaux of Killead, L.

Williams of Crosby, B.

Mowbray and Stourton, L.

Williamson of Horton, L.

Murton of Lindisfarne, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Christopher, L.

Ahmed, L.

Clarke of Hampstead, L.

Alli, L.

Clinton-Davis, L.

Amos, B. (Lord President of the Council)

Corbett of Castle Vale, L.

Crawley, B.

Andrews, B.

Dahrendorf, L.

Archer of Sandwell, L.

David, B.

Ashley of Stoke, L.

Davies of Oldham, L. [Teller]

Ashton of Upholland, B.

Desai, L.

Bach, L.

Drayson, L.

Barnett, L.

Dubs, L.

Bassam of Brighton, L.

Eatwell, L.

Berkeley, L.

Evans of Temple Guiting, L.

Bernstein of Craigweil, L.

Falconer of Thoroton, L. (Lord Chancellor)

Bhattacharyya, L.

Borrie, L.

Farrington of Ribbleton, B.

Brooke of Alverthorpe, L.

Faulkner of Worcester, L.

Brookman, L.

Filkin, L.

Campbell-Savours, L.

Fyfe of Fairfield, L.

Carter, L.

Gale, B.

625

Gavron, L.

Monson, L.

Gibson of Market Rasen, B.

Morgan, L.

Golding, B.

Morgan of Drefelin, B.

Goldsmith, L.

Morris of Aberavon, L.

Gordon of Strathblane, L.

Morris of Manchester, L.

Gould of Potternewton, B.

Patel of Blackburn, L.

Graham of Edmonton, L.

Pitkeathley, B.

Grenfell, L.

Ponsonby of Shulbrede, L.

Griffiths of Burry Port, L.

Prosser, B.

Grocott, L. [Teller]

Ramsay of Cartvale, B.

Hannay of Chiswick, L.

Rendell of Babergh, B.

Harris of Haringey, L.

Richard, L.

Hart of Chilton, L.

Rooker, L.

Haskel, L.

Rosser, L.

Haworth, L.

Royall of Blaisdon, B.

Hayman, B.

Sainsbury of Turville, L.

Hilton of Eggardon, B.

Sawyer, L.

Hogg of Cumbernauld, L.

Sheldon, L.

Hollis of Heigham, B.

Simon, V.

Howie of Troon, L.

Slim, V.

Hoyle, L.

Snape, L.

Hughes of Woodside, L.

Strabolgi, L.

Hunt of Kings Heath, L.

Symons of Vernham Dean, B.

Jones, L.

Taylor of Blackburn, L.

Jordan, L.

Thornton, B.

Judd, L.

Triesman, L.

Lea of Crondall, L.

Truscott, L.

Leitch, L.

Tunnicliffe, L.

McDonagh, B.

Turner of Camden, B.

McIntosh of Hudnall, B.

Uddin, B.

MacKenzie of Culkein, L.

Wall of New Barnet, B.

McKenzie of Luton, L.

Warner, L.

Mason of Barnsley, L.

Wedderburn of Charlton, L.

Massey of Darwen, B.

Whitaker, B.

Merlyn-Rees, L.

Williams of Elvel, L.

Mitchell, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
3.46 p.m.
Lord Higgins Lord Higgins moved Amendment No. 261:
Page 235, line 25, at end insert—
"( ) Payments made under this section shall be made to eligible scheme members regardless of their other income or capital."
The noble Lord said: My Lords, in moving this amendment, which stands in my name and that of my noble friend Lord Skelmersdale, it would also be convenient to debate Amendment No. 262. The noble Baroness, in her opening remarks, gave a general survey of all the amendments and commented in particular on Amendment No. 262. She indicated four categories of amendment, of which the last was those where the Opposition had simply got it wrong. I am prepared to accept that that is probably the case with Amendment No. 262, and I therefore shall not move it.
On the other hand, Amendment No. 261 cannot possibly be wrong because it encapsulates word for word the point made by the noble Baroness in Grand Committee. Therefore, I should have thought that it would be acceptable to the Government. It says:
"Payments made under this section"—
626
that is to say, the financial assistance scheme—
"shall be made to eligible scheme members regardless of their other income or capital".
Those were the expressions used by the noble Baroness.
We are anxious to ensure that the payments made under this section shall not be means tested. I was worried that the noble Baroness seemed to indicate that decisions had not yet been made on this policy area. It will be necessary to gather data on some aspects of the Bill, such as the number of people who may be affected, the cost and so on, but one need only take a decision in principle on this issue.
Given that the people affected will no doubt get significantly less than they would have done had their pension schemes survived, it would seem inappropriate if suddenly they found that they were effectively being means tested. Means-testing is the hallmark of the present Chancellor of the Exchequer; no one has done more to increase means-testing than he has. But it would seem wholly inappropriate for it to apply to distributions under the financial assistance scheme. The fact that people may have been more or less prudent otherwise and that they may have had income or capital otherwise ought not to affect the extent to which they are eligible for help under the scheme.
This is a very important point, about which Members in another place, not least Mr Frank Field, have expressed concern. In the light of that, I hope very much that the noble Baroness can accept the amendment and then we can move on to the next one. I beg to move.
Baroness Barker: My Lords, we, too, on these Benches support the noble Lord, Lord Higgins, on Amendment No. 261, particularly in the light of his comments on Amendment No. 262, which would have muddied the waters somewhat. Along with our colleague in another place, Steve Webb, we believe that this is the right thing to do.
The one common factor to all people who fall within the auspices of the financial assistance scheme is that they had planned for their financial future, which has now gone. What people require more than anything else from the financial assistance scheme is certainty. It is quite clear from the way in which the scheme is set up that we are not talking about the full replacement of income or anything like it. It should be a scheme which enables people not only to recover some of what they have contributed, but to begin to put together the financing of their later life.
One reason in particular why we support this amendment is that we believe it is highly likely in practice that people who made sacrifices to belong to occupational pension schemes are more likely than other pensioners to have capital behind them. Therefore, we believe that, taken as a whole, this is an important

627
statement of principle, as the noble Lord, Lord Higgins, said, in making sure that the money gets to the right people. Therefore, we support the amendment.
Baroness Hollis of Heigham: My Lords, this amendment seeks to ensure that when assessing entitlement to assistance under FAS, any income or capital that the member might have is disregarded in full.
I would like to remind your Lordships that in Grand Committee I said:
"Planning work on the FAS is proceeding on the assumption that we will not determine eligibility for assistance from the scheme through an assessment of any income or capital which an individual may have, other than … the pension income that they have lost through a scheme winding up underfunded".—[Official Report, 13/10/04; col. GC 128.]
However, we are still examining in detail various options relating to how assistance from FAS will be paid out. My concern again here is trying to close down options too early. If we completely ruled out taking some account of other assets in advance of fuller information and analysis on the individual members, this could compromise our ability to design a coherent scheme. We need to make best possible use of the available funds which will ensure that those who have lost the most will receive the most help.
As I said in Committee, although we are working on the assumption that we will not take account of other assets, it is surely not sensible to rule that out completely until we know more about individual members' losses. Some element of this approach could—it is a very tentative "could"—prove to be the best way to target a significant, but cash-limited pot of assistance at those who need it most.
I understand the concern of noble Lords, but in light of what I have said, I hope that they will support us during the design phase and allow us the time we require to gather the data we need and to explore the options available to us to make FAS deliver what we all want. It is not a path I want to go down. It is possible, and just conceivable, that it may be a path one will have to use in order to protect those who are poorest under the scheme. As a result, I hope that noble Lords will be willing to withdraw these amendments.
Lord Higgins: My Lords, this again follows on from the opening debate and the same issues apply. We and the noble Baroness, Lady Barker, are quite clear where we stand on the issue. We believe that effectively it is a question of policy, but the noble Baroness said that the Government have not made up their mind for sure. The problem is that if we do not vote on the matter this evening, the Government may suddenly return, after the Bill has become law, and introduce a regulation which states that they have decided that they should means test after all. Given the Chancellor's propensity for that, it would not be a great surprise to these Benches. We shall then find that we cannot amend the amendment. Our only option would be to vote against the regulation. We would then find ourselves in a position which I
628
described earlier where the only option is whether to vote against the matter completely. It might be better to amend it. But we will not have the option to fine tune it.
The noble Baroness said that there are various detailed arrangements to be made and so forth. I believe that voting on this amendment will not close down the options but clarify the situation. I believe that the House would be doing its job in taking a clear view on what is a very straightforward issue. Therefore, I seek to test the opinion of the House.
3.55 p.m.
On Question, Whether the said amendment (No. 261) shall be agreed to?
Their Lordships divided: Contents, 139; Not-Contents, 117.

Division No. 2

CONTENTS

Addington, L.

Hamwee, B.

Ampthill, L.

Hanham, B.

Anelay of St Johns, B.

Hanningfield, L.

Astor of Hever, L.

Harris of Richmond, B.

Attlee, E.

Hayhoe, L.

Avebury, L.

Henley, L.

Baker of Dorking, L.

Higgins, L.

Barker, B. [Teller]

Home, E.

Biffen, L.

Howe, E.

Blatch, B.

Howe of Aberavon, L.

Bonham-Carter of Yarnbury, B.

Hunt of Wirral, L.

Bowness, L.

Hurd of Westwell, L.

Bradshaw, L.

Jellicoe, E.

Brooke of Sutton Mandeville, L.

Jenkin of Roding, L.

Brougham and Vaux, L.

Kalms, L.

Caithness, E.

Laidlaw, L.

Campbell of Alloway, L.

Laing of Dunphail, L.

Carlisle of Bucklow, L.

Lamont of Lerwick, L.

Carnegy of Lour, B.

Lester of Herne Hill, L.

Cope of Berkeley, L. [Teller]

Liverpool, E.

Craigavon, V.

Livsey of Talgarth, L.

Crickhowell, L.

Lucas, L.

Dearing, L.

Luke, L.

Denham, L.

MacGregor of Pulham Market, L.

Dholakia, L.

Dixon-Smith, L.

Maddock, B.

Dykes, L.

Marsh, L.

Eccles of Moulton, B.

Masham of Ilton, B.

Eden of Winton, L.

Mayhew of Twysden, L.

Elis-Thomas, L.

Miller of Hendon, B.

Elles, B.

Molyneaux of Killead, L.

Elliott of Morpeth, L.

Monro of Langholm, L.

Elton, L.

Monson, L.

Ezra, L.

Morris of Bolton, B.

Falkland, V.

Mowbray and Stourton, L.

Falkner of Margravine, B.

Moynihan, L.

Fearn, L.

Murton of Lindisfarne, L.

Feldman, L.

Naseby, L.

Fookes, B.

Neuberger, B.

Forsyth of Drumlean, L.

Newby, L.

Fowler, L.

Noakes, B.

Freeman, L.

Northover, B.

Garden, L.

Oakeshott of Seagrove Bay, L.

Gardner of Parkes, B.

O'Cathain, B.

Geddes, L.

Park of Monmouth, B.

Gilmour of Craigmillar, L.

Patten, L.

Glentoran, L.

Perry of Southwark, B.

Goodhart, L.

Platt of Writtle, B.

Goschen, V.

Plummer of St. Marylebone, L.

629

Quinton, L.

Stevens of Ludgate, L.

Rawlings, B.

Strathclyde, L.

Razzall, L.

Swinfen, L.

Redesdale, L.

Taverne, L.

Rennard, L.

Tenby, V.

Renton, L.

Thatcher, B.

Roberts of Llandudno, L.

Thomas of Walliswood, B.

Rodgers of Quarry Bank, L.

Thomson of Monifieth, L.

Roper, L.

Tordoff, L.

Rotherwick, L.

Trenchard, V.

St John of Fawsley, L.

Trumpington, B.

Sandberg, L.

Waddington, L.

Scott of Needham Market, B.

Wakeham, L.

Seccombe, B.

Wallace of Saltaire, L.

Selborne, E.

Walmsley, B.

Sharp of Guildford, B.

Walpole, L.

Sharples, B.

Weatherill, L.

Shaw of Northstead, L.

Wilcox, B.

Skelmersdale, L.

Williams of Crosby, B.

Slim, V.

Williamson of Horton, L.

Smith of Clifton, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Hannay of Chiswick, L.

Ahmed, L.

Harris of Haringey, L.

Alli, L.

Hart of Chilton, L.

Amos, B. (Lord President of the Council)

Haskel, L.

Haworth, L.

Andrews, B.

Hayman, B.

Archer of Sandwell, L.

Hilton of Eggardon, B.

Ashley of Stoke, L.

Hogg of Cumbernauld, L.

Ashton of Upholland, B.

Hollis of Heigham, B.

Bach, L.

Howie of Troon, L.

Barnett, L.

Hoyle, L.

Bassam of Brighton, L.

Hughes of Woodside, L.

Berkeley, L.

Hunt of Kings Heath, L.

Bernstein of Craigweil, L.

Jones, L.

Bhattacharyya, L.

Jordan, L.

Borrie, L.

Judd, L.

Brooke of Alverthorpe, L.

Lea of Crondall, L.

Brookman, L.

Leitch, L.

Campbell-Savours, L.

McDonagh, B.

Carter, L.

McIntosh of Hudnall, B.

Christopher, L.

MacKenzie of Culkein, L.

Clarke of Hampstead, L.

Mackenzie of Framwellgate, L.

Clinton-Davis, L.

McKenzie of Luton, L.

Corbett of Castle Vale, L.

Mason of Barnsley, L.

Crawley, B.

Massey of Darwen, B.

Dahrendorf, L.

Merlyn-Rees, L.

David, B.

Mishcon, L.

Davies of Oldham, L. [Teller]

Mitchell, L.

Desai, L.

Morgan, L.

Drayson, L.

Morgan of Drefelin, B.

Dubs, L.

Morris of Aberavon, L.

Eatwell, L.

Morris of Manchester, L.

Elder, L.

Ouseley, L.

Evans of Temple Guiting, L.

Patel of Blackburn, L.

Falconer of Thoroton, L. (Lord Chancellor)

Pitkeathley, B.

Ponsonby of Shulbrede, L.

Farrington of Ribbleton, B.

Prosser, B.

Faulkner of Worcester, L.

Prys-Davies, L.

Filkin, L.

Ramsay of Cartvale, B.

Fitt, L.

Rendell of Babergh, B.

Fyfe of Fairfield, L.

Richard, L.

Gale, B.

Rooker, L.

Gavron, L.

Rosser, L.

Gibson of Market Rasen, B.

Rowlands, L.

Gilbert, L.

Royall of Blaisdon, B.

Golding, B.

Sainsbury of Turville, L.

Goldsmith, L.

Sawyer, L.

Gordon of Strathblane, L.

Sewel, L.

Gould of Potternewton, B.

Sheldon, L.

Graham of Edmonton, L.

Simon, V.

Griffiths of Burry Port, L.

Snape, L.

Grocott, L. [Teller]

Strabolgi, L.

630

Symons of Vernham Dean, B.

Uddin, B.

Taylor of Blackburn, L.

Wall of New Barnet, B.

Thornton, B.

Warner, L.

Triesman, L.

Wedderburn of Charlton, L.

Truscott, L.

Whitaker, B.

Wilkins, B.

Tunnicliffe, L.

Williams of Elvel, L.

Turnberg, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
4.6 p.m.
[Amendment No. 262 not moved.]
Lord Higgins Lord Higgins moved Amendment No.263:
Page 235, line 25, at end insert—
"( ) New qualifying members shall continue to be eligible for membership of the financial assistance scheme until such time as the Pension Protection Fund is fully in operation."
The noble Lord said: My Lords, Amendment No. 263, which stands in my name and that of my noble friend Lord Skelmersdale, is an important amendment. In the two previous debates, we have discussed to what extent issues are of policy, how much money is involved and so on. On this amendment, there ought to be general agreement. We shall be fascinated to hear the reaction of the Government.
To the surprise of those people who saw the Bill when it was first introduced there are effectively two quite separate schemes now being produced by the Government. On the one hand, there is the financial assistance scheme, which we have been debating on these clauses, that is essentially a Treasury finance scheme to help those whose pension schemes have already collapsed. On the other hand, the main thrust of the Bill is the Pension Protection Fund, where funds will be raised from money that is levied on other company final salary schemes. Alas, to some extent, the effect of that will be to discourage employers who have such schemes from continuing.
Between the two schemes, there seems to be a gap: there is the immediate financial assistance scheme for those schemes that have already collapsed, but it will be some while before the Pension Protection Fund comes into operation. The amendment seeks to bridge that gap; that is, if a company scheme collapses between now and when the Pension Protection Fund comes into operation, members of that scheme will be eligible for assistance under the financial assistance scheme.
If the amendment is not accepted, the danger is that such people will not get the benefits that we hope they will receive. We have discussed moral hazards at enormous length in previous debates, but that is not relevant in this context. The benefits, if such they be, under the financial assistance scheme are likely to be less than under the Pension Protection Fund. Therefore, there is no great incentive for companies to speed up the process of collapse; rather, if anything, there is an incentive to delay it until the Pension Protection Fund comes into operation.
Amendment No. 263 is a sensible amendment, which, on reflection, the Government could accept. I cannot believe that there is some policy consideration about whether there should be such a gap: it would be absurd if the people to be covered by the financial assistance scheme and those who fall within the Pension Protection Fund are helped, but that those who happen to fall between the two receive no help whatever.
I hope that the noble Baroness will agree that this is a sensible amendment and is able to fill the gaps in our knowledge of how the scheme will operate. I beg to move.
Lord Oakeshott of Seagrove Bay: My Lords, we think that this amendment speaks for itself. Given the two new protection structures being set up, it is quite clearly unthinkable to leave a gap between them. Like the noble Lord, Lord Higgins, I cannot see an issue of moral hazard here, but even if there were, would that be the fault of members of schemes who have been paying in honestly for many years? I would not want to have to face the workers at Turner & Newell if it turns out that they may fall into that gap or, indeed, any other group, and give them a lecture on moral hazard. Simply to state the words makes that ridiculous.
I am always impressed by the ingenuity of the noble Baroness, but for the life of me I cannot think of a credible argument in support of reserving the right, frankly, to leave people in the lurch between the two schemes. I cannot see how that could possibly be fair or how it could arise. I hope that she will accept the amendment.
Baroness Hollis of Heigham: My Lords, I hope that the noble Lord will empathise with me rather more after my speech in response.
This amendment would permit members of all underfunded pension schemes that start to wind up until the introduction of the PPF to have access to the financial assistance scheme. I appreciate the intention behind this amendment and, like others, I am keen to ensure that members of schemes that start to wind up before the introduction of the PPF from next April—we hope—are not subject to the kind of devastating losses that have inspired the Government to set up the financial assistance scheme.
As noble Lords will be aware, non-pensioner members of schemes that start to wind up after 10 May 2004 benefit from the change to the priority order. As a result, they will be less likely to suffer the scale of losses to their pensions that they would have experienced under the old priority order. While this may not provide a panacea to the problems of underfunding, it should help to ensure that the assets within schemes are distributed more equitably between scheme members. Your Lordships will recall that this is where indexation will come at the bottom.
It is for this reason that we were initially minded to exclude schemes that started to wind up after May 2004. However, we have stated on numerous
632
occasions that we have not ruled out help for members of schemes which start to wind up between May this year and the introduction of the Pension Protection Fund next April. We continue to monitor the position of these schemes and to undertake further research and consultation before taking final decisions on eligibility. Those, in turn, will be based on sound principles and fairness.
I ask noble Lords to appreciate, however, that there would be significant risks in providing assurances of financial assistance scheme qualification for schemes which have not yet started to wind up. That would present an issue of moral hazard. We have all read newspaper articles, many within the past couple of weeks, about pension schemes that are threatened with wind-up. And we have followed with interest the negotiations between employers and trustees to increase scheme funds. Providing an assurance on the face of the Bill now that such schemes might qualify for assistance could seriously affect any such negotiations. Indeed, we have been advised by OPRA that this is already influencing people's considerations. It would not be right to announce a decision now on the inclusion of members of such schemes before we have had an opportunity to assess their circumstances and until the moral hazard risks to which I have referred are minimised.
I do not want to focus too long on the unintended effects of the amendment. However, as drafted it does carry an additional risk. It has not been timed by reference to the coming into force of any relevant PPF provision. As a consequence there is a risk of overlap of eligibility for both the PPF and the financial assistance scheme, and thus further amendment would be required. Not all of the various PPF provisions will be in force from the same date. For example, due to the fraud compensation provisions, the PPF will not assume responsibility for any scheme until at least 12 months after the introduction of the PPF.
Lord Higgins: My Lords, would the noble Baroness be kind enough to repeat the last point she made?
4.15 p.m.
Baroness Hollis of Heigham: My Lords, I am sorry. Not all of the various PPF provisions will be in force from the same date. For example, due to the fraud compensation provisions, the PPF will not assume responsibility for any scheme until at least 12 months after the introduction of the fund, thus allowing for the assessment period. PPF compensation payments cannot be made before that time has elapsed. To all intents and purposes, the PPF will not truly be fully operational until such payments can be made. Thus, as the amendment stands, members of qualifying schemes could be eligible simultaneously for compensation from the PPF and for assistance from the financial assistance scheme. If this amendment were accepted, it would be seriously technically flawed.
In view of the risks I have outlined, which I think are serious ones regarding moral hazard, although with my earlier acknowledgment that we will continue to monitor the position of schemes, together with the

633
effect of the amendment as drafted producing overlapping access, I ask the noble Lord to withdraw his amendment.
Lord Higgins: My Lords, before the noble Baroness sits down, could she clarify her point about overlap? While there is clearly the danger of a gap, I do not fully understand her remarks as regards an overlap. Is she saying that an eligible group that was entitled under the financial assistance scheme could also become eligible for benefit under the PPF? Given the interim period at the beginning of the PPF, will there be a problem with overlap? Could any group receive two lots of benefit?
Baroness Hollis of Heigham: My Lords, the trouble is that the amendment does not make clear the point at which FAS protection would end and PPF protection would begin. Because schemes would come within the protection of the PPF from 5 April 2005, or least they will do so potentially because they would be included in the assessment period of the PPF which is to last a year or so even though payments are not to be made until around a year thereafter, and given that the noble Lord's amendment as drafted does not indicate a terminal point for qualification under the financial assistance scheme, there is a potential for groups ultimately to be able to access both schemes.
Lord Higgins: My Lords, our objective on this side is to improve the Bill so that when it is returned to another place, despite the arguments originally advanced in this House, the Government will have been persuaded that these are the right things to do. Given the size of the majority in the other place, it is very much a question of persuasion over there rather than winning votes. Regrettably, at the moment it is difficult to win a vote at the other end. Having said that, I am reluctant to press this amendment to a vote if the argument at the other end would be simply that it is technically flawed.
We need to give this point some further thought between now and Third Reading, and I hope that the noble Lord on the Liberal Democrat Benches will take the same view. Perhaps we shall be able to devise an amendment which is not so technically flawed and deals with the problem of overlap mentioned by the noble Baroness. In the light of those considerations, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 264:
Page 235, line 25, at end insert—
"( ) The first payments under the financial assistance scheme shall be made no later than 1st June 2005."
The noble Lord said: My Lords, I apologise for my brief hesitation. This is another amendment which has been degrouped and is concerned with the date of the first payments to be made under the financial assistance scheme. We suggest that they should be made no later than 1 June 2005. It is important to clarify exactly how the various dates are to stack up, not least in the light of the comments made by the
634
noble Baroness a few moments ago. As I understand it, she envisages that the PPF will be operational by April next year. Can she give us some indication of when PPF payments are likely to commence? I presume that the levy starts in April next year. Approximately when does the noble Baroness expect the first payments under the PPF to begin to be made?
On the previous amendment we referred to overlaps and gaps. We believe that the financial assistance scheme should come into operation as soon as practicable. This obviously will depend on some of the policy decisions that we have been considering but we should have a deadline. If the noble Baroness does not like the six months in the Liberal Democrat amendment and does not like our suggestion of 1 June, can she give an indication of what she considers to be an appropriate deadline?
There is a case for a deadline. Otherwise, no doubt, internal government discussions will go on indefinitely; the Chancellor will not be paying out the money he has promised; to that extent, the national debt will not go up as quickly and the interest payments by the Government will be less. All these considerations—sordid though they may be—could lead to the scheme not starting as quickly as we would like.
I hope that the noble Baroness will be able to clarify the situation. In the absence of any convincing arguments, of course, it will be appropriate to vote on the issue, but we shall wait to hear what she says in reply. I beg to move.
Lord Oakeshott of Seagrove Bay: My Lords, we are quite happy to support Amendment No. 264 or, in the light of the Minister's remarks, we may prefer to press Amendment No. 267 a little later—but the principle of a fixed and early start date is very important for the reasons I gave earlier.
On various occasions in Grand Committee, when we tried to probe or help in some detail on the FAS, the Minister kept saying, "Don't chip away. Don't chip away at this". Frankly, at the moment there is very little to chip away at. Laying the firm foundation of when this scheme will start is a simple and clear thing to do. It is something for which people have been waiting desperately for years.
This is a reasonable matter for Parliament to decide. I would be happy with either the start date set down in the noble Lord's amendment or the one set down in our own, but we must have a firm date. In the absence of a firm date, we will press this matter to a Division.
Baroness Hollis of Heigham: My Lords, I very much hope the noble Lords will not do that. I want to persuade them that what they are asking for cannot be done—and therefore the amendments would have to be unpicked later—not because we do not wish to do it but because we cannot do it. I do not say that lightly; I say it in absolute good faith.
Both amendments seek to impose a date by which payments must start to be made from the FAS. As to the direct question of the noble Lord, Lord Higgins, in regard to when payments from the PPF would come

635
into play, we would expect them to begin to be made from the second year. The first year will be an assessment period and payments will begin to be made from the second year.
It should be remembered that although a scheme may come into the PPF, it does not mean that liabilities will be immediately paid out. Liabilities will be paid as they fall and the bulk of people will not normally, unless they are existing pensioners, be required to receive payments within a month or three months. This is rather different from what may turn out to be the case with the FAS, which might involve a question of purchased annuities. I shall come back to the House on that in due course.
I have to repeat what I said in Grand Committee—we all want the money to be made available by government as quickly as possible. I understand and fully accept the decency of the motivation behind the amendments in seeking to give people guarantees as to when they might be paid, but when I say I cannot do so I am being realistic.
Let me make some comparisons. The Government's proposals for pension credit were published for consultation in November 2000; the State Pension Credit Act gained Royal Assent in June 2002; and the first payments were made in October 2003, some 15 or 17 months later. We published a consultation paper on tax credits in 2000; the Tax Credits Act gained Royal Assent in July 2002; the first payments were made in April 2003. Under a previous administration, there was the Social Security Act which received Royal Assent in 1986. I am sure noble Lords can tell me when the first payments were made on that, but if they do not recall I will remind them that they were made in April 1988, nearly two years later. I see that I am getting an endorsement from the noble Lord, Lord Fowler. I am sure the subject is dear to his heart. So, in all those Acts, there was a timetable of at least a year, sometimes more, from the date the Bill received Royal Assent to when the first payments were made.
Lord Oakeshott of Seagrove Bay: My Lords, how many millions of people were affected by those Acts and how many people are we talking about in respect of the FAS?
Baroness Hollis of Heigham: My Lords, that is not the point. It is simple if everyone is receiving the same sum of money, but if you have to assess every individual entitlement, that is very different. The FAS will certainly be making payments to much smaller numbers but, whether a payment scheme is large or small, a set of pre-conditions have to be in place: the regulatory framework to enable payments to be made; a detailed business design; IT; accommodation; telephony; and properly trained and supported staff.
I stress that, unlike the situation with income support—whether it was called supplementary benefit or whatever—which we have been delivering since Beveridge, this is an entirely new area for government. It is the first time that a government are seeking to pay taxpayers' money directly to members of winding-up
636
pension schemes. We have to devise systems and processes which mesh with those already being operated by independent trustees and administrators during a complex winding-up process—and we have to devise them from scratch.
Committing to a statutory deadline for making first payments—and in particular one which would be only a few months after the principle of the Bill has been, I hope, accepted by your Lordships' House and the other place—could seriously compromise the successful delivery of FAS. We cannot do it. Noble Lords may argue with me, but I tell you that we cannot do it. I wish we could. There is no difference between us in that we want to see the scheme flowing as quickly as possible, but it cannot be done. It is an important principle that FAS should determine levels of assistance and make payments only when it is ready to do so.
Even if your Lordships pass the amendments today—and I do not doubt that you may have the numbers to do so—it cannot be done. We are a grown-up House. When we are dealing with matters such as technical dates, there is no point in going for gesture politics that will have to be unpicked. This is not about a statement of principle where it may be important to flag up such a gesture; this is about a technical handling of when we start to pay.
It cannot be done. If your Lordships pass the amendments against the advice of the Government, we will seek—and I am reasonably confident that we will succeed—to overturn them because we cannot meet the deadlines proposed. I wish we could, but we cannot. It is an administrative matter, not a political one, and Members opposite who have been in Government know that perfectly well. I hope the noble Lord will not pursue the amendment.
Lord Higgins: My Lords, does the noble Baroness agree that there is a case for a deadline? If she does not like this particular deadline, is there not a case for ensuring that the matter does not drag on indefinitely between one department and another? If she does not like this date, does she agree there is a case for a deadline of some kind?
Baroness Hollis of Heigham: My Lords, the noble Lord must accept—I am sure that he does—that we want payments from FAS to be made as soon and as speedily as possible. It may be that we can make payments earlier to some people nearer retirement and be more confident about it than for members of schemes coming in later but only when we have the regulations to bring before your Lordships' House—probably in the spring—will I be in a position to give your Lordships a deadline I am confident of delivering.
I am not trying to be awkward. I cannot do what noble Lords ask. I wish I could but I cannot. As I say, I expect the bulk of the regulations to be brought forward in the spring of next year. At that point we should have some idea of a deadline. If I can give any information to noble Lords before then, through correspondence and so on, I shall be delighted to do so.

637
Indeed, I suspect that my right honourable friends in the other place will wish to make a Statement to that effect because the matter is of such major importance.
But I cannot do it now and I cannot accept the amendments. I am afraid that whatever your Lordships may do today, they cannot remain on the face of the Bill because they are undeliverable administratively.
Lord Higgins: My Lords, one of the most difficult tasks for Ministers—and, by extension, for the House—on decisions of this kind happens when officials say that something is impossible. I can think of two past examples: when the late Barbara Castle was told that something was impossible, she said go ahead and do it none the less. The thing turned out to be impossible, and it was a total disaster. The other example was when officials told my noble friend Lord Barber, when he was Chancellor, that something was impossible. He said do it none the less, and it turned out to be all right. But it is a fairly high risk strategy.
Lord Lea of Crondall: My Lords, has the noble Lord taken into consideration the fact that my noble friend did not say it was impossible just because the officials said it was but because of what we called in Committee the blank cheque problem? Once you have the regulations and you know that there is a likely number of claimants with regard to the £400 million, you have better leverage when it comes to how much to pay each person. Unless I have got it wrong, that seems a very substantial reason indeed. It is not simply a matter of officials talking about maintaining flexibility. I am not sure that I have heard the noble Lord address what I think is a very strong argument.
Lord Higgins: My Lords, I was not necessarily rejecting the argument. There are official impossibilities and there are other impossibilities. I accept that there can be very real problems with a timescale of this kind. I am not totally persuaded that there is not a case for a deadline of some sort, no matter how far away, to concentrate minds, not least those of officials. But on balance, I am persuaded by the argument, so I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

EU Summit
4.31 p.m.
Baroness Amos: My Lords, I would like to repeat a Statement made in another place by my right honourable friend the Prime Minister.
"With permission, Mr Speaker, I shall make a Statement on the European Council that took place in Brussels on 4 and 5 November. I would like to thank Prime Minister Balkanende and the Dutch Government for their arrangements for the summit, and for the way they have conducted their presidency to date. The Council was inevitably dominated by Iraq, given the presence of Dr Allawi, the Iraqi Prime Minister.
"First, let me express what I know will be the sentiments of the entire House in sending our profound condolences to the families of the Black Watch soldiers killed by a terrorist bomb in Iraq last week, and our sympathy to those soldiers injured yesterday in another terrorist attack. We salute their dedication, professionalism and, above all, sheer and undaunted courage. They are an example to us all, and we can and should be very proud of them.
"Let us also be very clear about the fundamental importance to Britain's security in what the Black Watch and the British Armed Forces in the south of Iraq are doing.
"Defeat of terrorism in Iraq is defeat for this new and virulent form of global terrorism everywhere. A democratic Iraq is the last thing the terrorists want to see. It is precisely for that reason—because victory for the terrorists would damage security round the world, including here in Britain—that we have to hold firm, be resolute and see this through, including in Fallujah.
"The action by allied and Iraqi forces under way in Fallujah would cease now, immediately, if the terrorists and insurgents who are using Fallujah as a base for terrorism would lay down their weapons and agree to participate in the elections. Over the past few months, Prime Minister Allawi has tried to persuade them to do so. They have refused, not because they are fighting a foreign occupation—if the terrorism stopped, American, British and other troops would leave—but because they are fighting democracy, they are fighting to stop democratic elections supervised by the UN and due to take place in January.
"They know that while Fallujah remains outside the UN-endorsed government, they can use it to wreck elections. And why do the terrorists fear elections? Because they know that given the chance to vote for their government, Iraqis would reject the extremism and fanaticism the terrorists represent.
"The powerful speech made by Dr Allawi to the European Council made precisely those points. He appealed for Europe's help. Some promised support of a military nature; others promised only financial support. But all the Council agreed that it was in the interests of global security for Iraqi elections to take place.
"The Council agreed a comprehensive package of EU assistance for Iraq, including a further programme of financial and logistical support for the elections, and the financing for the UN Protection Force. This is on top of 300 million euros for humanitarian and reconstruction support from the EU over the past two years.
"Following the re-election of President Bush, the Council also agreed that a close transatlantic partnership was fundamental to building international peace, security and prosperity; and that we now need to strengthen the alliance, so that we can intensify our work together in addressing the main international threats and challenges of the moment, including regional conflicts, terrorism and WMD.
"The Council heard a presentation from the former Prime Minister of the Netherlands, Wim Kok, on his mid-term review of the Lisbon strategy on European economic competitiveness. He rightly concluded that Europe has to do far more to improve its underlying economic performance if it is to respond to the challenges of Asia and the United States. And he sensibly highlights the importance of completing the single market, developing flexible labour markets and promoting sustainable growth.
"The Council adopted a new five-year work programme of measures in the area of justice and home affairs.
"There are great benefits for the United Kingdom in co-operation with our European partners on these issues. Illegal immigration affects all member states. But the opt-in protocol for Britain, negotiated in Amsterdam in 1997, remains. It is also enshrined in the new constitutional treaty. We have successfully used it over the past five years to opt into new measures on asylum and on combating illegal immigration, and to opt out of measures on legal migration, frontiers and visas. It gives us the right to decide whether to participate in each item of the EU work programme and makes a nonsense of claims that Britain has given up the right to control its own borders. If, of course, we opt in, because we want a particular measure to happen, it is in our interests that in a Europe of 25 and soon 27 or 28 countries, the use of a veto by another country cannot block the measure.
"Finally, the President-designate of the Commission, José Manuel Barroso, briefed us on his proposals for restructuring the new Commission. He has reacted decisively to resolve the dispute with the European Parliament, and I am confident that, as a result, the new Commission will be able to take office soon.
"In summary, the meeting once again underlined the importance to Britain of maintaining both a strong relationship with the United States of America and a strong place in the councils of the European Union. Both partnerships are vital to the British national interest, and it will remain the policy, of this Government at least, to nurture both".
My Lords, that concludes the Statement.
4.38 p.m.
Lord Strathclyde: My Lords, I thank the noble Baroness the Leader of the House for repeating the Statement made earlier by the Prime Minister.
I begin by sharing the noble Baroness's horror and the Prime Minister's horror and outrage at the attacks on the Black Watch. I extend the deepest sympathy of all those on this side to the families of those soldiers who have given their lives or been seriously injured.
Those who know this great regiment know that its resolve will not be dimmed at a time when US troops are launching an assault on Fallujah, which the Black Watch was deployed to facilitate. I strongly support
640
the words of the Prime Minister on the need to confront and destroy the terrorists who are fighting the establishment of democracy in Iraq.
Like the noble Baroness, I much welcomed the presence of Prime Minister Allawi in Brussels. He is proving to be a courageous leader. So was it not disappointing that President Chirac found himself otherwise engaged when other leaders joined Dr Allawi in lunchtime discussion?
Mr Solana says that security is a problem. So can the noble Baroness tell the House what pledges were given by France and Germany at the summit to join in peacekeeping in Iraq? Did the Prime Minister have the opportunity to try to persuade them, or has he now given up?
I gather that President Chirac also visited Mr Arafat in hospital. Was he able to brief EU leaders on his condition? Has the noble Baroness any news for the House on that?
I support the reaffirmation of the EU commitment to the road map and its support for an Israeli withdrawal from Gaza. The communiqué says that the EU is ready to support the Palestinian Authority in upholding law and order. Can the noble Baroness explain what that might mean in practice? Can she tell the House whether there are any circumstances in which British troops would be committed on that?
On nuclear proliferation, the communiqué talks of building confidence in the peaceful nature of Iran's nuclear programme. Do the British Government share that apparent EU belief that Iran's nuclear programme is entirely peaceful? If not, what do they propose to do about it?
I welcome the reference in the communiqué to the deeply troubling situation in Ukraine, whose stability as a democracy is vital for Europe's future security and prosperity. Apart from calling on the Ukraine Government to assure the fair elections that they worked to pervert in the first round of voting, what will the EU do to make sure that fair elections take place?
Was there any discussion in the Council on the critical situation in Ivory Coast, where France has destroyed that country's air force and put tanks on the streets of the capital? Has there been a call for a debate in the United Nations? Have the British Government raised the crisis urgently? What will the EU do about it?
The communiqué talks about considering sanctions on the Sudan Government over Darfur. How long will it be before the EU response matches that crisis? I have noticed, yet again, that there was no mention of Zimbabwe on the communiqué. I am sure that many will share my dismay at the renewed failure of the Prime Minister to use a summit to step up pressure on the Mugabe regime. Can the noble Baroness explain the Prime Minister's uncharacteristic silence on the tragic problem facing Africa?
I turn to the institutional aspects of the summit. What progress was made in bringing the EU agenda in the British way, as the Prime Minister has boasted? There was talk in the communiqué of action on

641
regulation. Perhaps I can repeat a question that I asked after a previous summit. How many EU regulations have been withdrawn since 2001?
It is well known that we oppose the signing by the Prime Minister of the EU constitutional treaty. We would guarantee the British people a chance to vote on it in a referendum next year. What assurances can the Labour Party give? Can the noble Baroness speculate by what date such a referendum will take place?
On the Hague programme, the communiqué states:
"This programme reflects the ambitions as expressed in the Treaty establishing a Constitution for Europe".
It is certainly ambitious. It reads as a text written by people who take the agreement of the British people to the treaty for granted. It also pre-empts—indeed, it makes a laughing stock of—the claims of the Prime Minister to keep control of national policy on asylum and law and order.
It commits member states to a common European asylum system, stresses the importance of the abolition of internal border controls, and calls for approximation of substantive criminal law between member states, as if our separate legal evolution meant nothing. So, who does the Prime Minister think he is kidding when he says we will retain complete control of those aspects of policy? The Prime Minister claims that we retain an opt-out power. Yet he has chosen to opt into all the major measures on asylum.
The summit takes the EU further down an integrationist road. If the British people are eventually given their chance to vote against that in a referendum, will the noble Baroness assure the House that it will be respected as the full and final answer of this country?
4.44 p.m.
Baroness Williams of Crosby: My Lords, I, too, thank the Leader of the House for repeating the Statement on the EU summit made in another place.
I also strongly associate these Benches with her tribute to the Black Watch—one of the most beloved and admired of all British regiments. We hope and pray that their courage in going into the very centre of this terrible war will bring closer the prospect of a genuine and lasting democracy in Iraq.
The Statement is rather thin at a time when there are such huge issues confronting the European Union and this country, as a member of it. I shall follow what the Leader of the Opposition has said on some of the main issues that are touched on in the communiqué and, more briefly, in the Statement. It is something of a curate's egg. There are some things that we welcome and some things about which we continue to be unhappy.
First, we associate ourselves with the importance of a free, fair and open election in Iraq at the earliest feasible point. It is in that context that we are profoundly concerned about Fallujah. We are concerned not only because of what was said by the United Nations Secretary General Kofi Annan about the danger of an escalation of violence against civilians. There is another reason for our concern.
642
The Statement makes much of the victory against terrorism. We know already that Samara, which was effectively militarily reoccupied and controlled a month ago, is now the centre of a range of atrocities, even though it was supposed to have been brought within the control of the coalition forces. Many of us recognise that victory against terrorism does not happen as a result of a single battle. It requires a consistent, enduring and continuing effort to limit the influence and effects of terrorism.
As the noble Baroness, Lady Turner of Camden, said earlier, there is a real danger that the deaths of innocent civilians will turn a section of the public against those who are attempting to support the coalition. It is disturbing that the President of the provisional Iraqi government. Sheik Ghazi Al-Yawer, who is a Sunni, has made it publicly clear that he does not see eye-to-eye with Dr Allawi, the Prime Minister. The outcome will turn on whether the Sunni people believe that there has been as much restraint on the deaths of civilians as is conceivably possible in a military situation. Perhaps the Leader of the House will say something about the rules of engagement, or at least the strategy that is in mind for Fallujah.
Secondly, I turn to an issue on which I strongly commend the Government on what they are trying to do, and which I hope will be successful. That is the recent effort made by the Foreign Secretary, Jack Straw, and his French and German associates to try to bring about a diplomatic solution to the extremely troubling situation in Iran. I had the pleasure of meeting one or two of the British negotiators of that discussion at the US embassy today. It seems that there is a real chance that Iran may now decide to abandon its effort to enrich uranium for what could be military purposes, provided that we can make a clear distinction between that and civilian nuclear reactors in Iran. The noble Baroness will know, as will her colleague, the noble Baroness, Lady Symons, that that will depend very much on whether we can get sufficient inspectors to ensure that there is no merging of the border between the two, which we on these Benches appreciate is not an easy border. We commend the Government's tremendous efforts with a government who are not always easy to understand, comprehend or negotiate with. Perhaps the Leader of the House can bring us up to date, in so far as it is possible while negotiations continue.
On the third issue, we on these Benches have been somewhat critical—and I think justly so—about the relative stagnation of the Middle East process. There is a prospect of something of a new beginning, and let us hope and pray that that is true. But in that context there are two questions to ask. First, will Her Majesty's Government press for careful consideration to be given to the line of a wall or fence running so deeply, as it does, into the West Bank, as to make the West Bank less and less a viable economy for a future Palestine?
Secondly, can the Minister bear in mind the prospect of trying once again to get a freeze on new settlements in the West Bank, which eat up so much land that a possibility of a viable solution becomes increasingly distant? We recognise that the

643
Government have tried hard in that respect, but there must be more enthusiasm from the EU and the United States within the "Quad" if we are at long last to get anywhere at all in bringing some kind of momentum back to the peace process.
There are only two other points I want to make. First—and, again, there are grounds on which to commend Her Majesty's Government—we on these Benches believe that the Government were absolutely right to enter into a new system of co-operation with the rest of the European Union over the issues of asylum policy. In that context, I should mention not only the importance of preventing illegal immigration, which is very difficult to do unless one accepts a common European policy of some kind, but the importance for many of us of recognising that there are genuine asylum seekers—men and women of colossal courage—who fought for human rights and democracy all over the world. In that context, it is vital that the European Union should accept its fair proportion of genuine asylum seekers. Frankly, that is possible only if one has a common approach and does not try to split it up into a set of national bargains and see how few people one can get away with. On that, we commend the Government and believe that they are walking very much in the right direction.
Finally, it is of course true that the Lisbon process has been very slow. There are features of the European economy that we can particularly commend, especially the training of young men and women in crafts and skills, which has not been one of the great strengths of the United Kingdom. We have huge shortages of skills throughout our industry. However, against that, there is a need for the continent of Europe to understand the need for greater competition and higher levels of productivity. In that area of the Lisbon process, we need to recognise good practice throughout Europe and ensure that the rest of Europe follows that good practice wherever it has been inaugurated.
4.52 p.m.
Baroness Amos: My Lords, I begin by thanking the noble Lord, Lord Strathclyde, and the noble Baroness, Lady Williams, for their comments, particularly with respect to the Black Watch. Our hearts go out to all the families.
I shall go through the issues raised in order. The noble Lord, Lord Strathclyde, asked about the security situation in Iraq and asked specifically what the European Union would be doing about it. The noble Lord will know that the European Union has made a commitment to provide immediate financial and personnel support to assist the election process in Iraq. In addition, a commitment was made at the weekend to deploy a planning team by the end of the month to scope out an EU police training and rule of law mission. Other commitments were made with respect to enhancing our trade and political co-operation—but the issue of police training answers the noble Lord's point about security.
The latest news on Mr Arafat is that his condition remains critical. We all agree with the statements that were made by my right honourable friends the
644
Prime Minister and the Foreign Secretary and, indeed, my noble friend Lady Symons, and all wish him a speedy recovery.
The noble Lord Strathclyde, and the noble Baroness, Lady Williams, both referred to Iran. The United Kingdom and the EU believe that it is vital that Iran takes steps to build confidence in the peaceful nature of its nuclear programme. It must comply with successive IAEA board resolutions, including putting in place full suspension of all enrichment-related and reprocessing activities. That would help to build the confidence of the international community in the peaceful nature of its nuclear programme.
The noble Lord, Lord Strathclyde, raised the issue of Ukraine. We, together with the European Union, have called upon Ukraine to remedy the shortcomings identified by the OSCE in the first round of its presidential elections on 31 October, before the run-off ballot on 21 November. It is clear that that second round offers an opportunity to Ukraine to demonstrate its commitment to internationally recognised democratic standards and European values.
The noble Lord also asked about Côte d'Ivoire, which was not, I believe, discussed at the Council meeting. He will know that we are concerned about the government's breach of the ceasefire and the violence in Abidjan. We deeply regret the deaths of nine French peacekeepers and, with our UN Security Council partners, have condemned the breach of the ceasefire, calling for an immediate end to military action and a resumption of the peace process.
I pick up on the noble Lord's point on Zimbabwe—and I would have been very surprised if he had not raised that matter. We continue to be concerned about the food shortages in Zimbabwe and the way in which the government there are using food as a political tool. Of course we have kept up the pressure, with our European Union partners, the United States and others, but the noble Lord will be aware that we must be very careful about the way in which UK pressure is used in a negative way politically in Zimbabwe itself.
The noble Lord raised the issue of Sudan. The European Union continues to play a central role in the resolution of the conflict in Darfur and Sudan. The noble Lord will know that the EU presidency issued a statement on behalf of the EU condemning the forced relocations of 2 November in southern Darfur. We are deeply concerned about that situation ourselves, and there has been press reporting of that. We have made it clear to the government of Sudan that on a bilateral basis they must involve the UN, the international organisations for migration and others, to ensure that all returns are voluntary and appropriate.
The noble Lord knows full well that we have made a commitment to having a referendum. There has been speculation in the press that one will take place in early 2006; indeed, my right honourable friend the Foreign Secretary has speculated that it will take place then. That commitment remains.
The noble Baroness, Lady Williams, was positive about the role that the Government have played on asylum and immigration and law and order, and I

645
thank her for her words. She is entirely right: of course we need to co-operate and, of course, the European Union has a responsibility, as does the United Kingdom, as regards its international obligations with respect to asylum seekers. But we also have a responsibility as a country to deal with the issue of failed asylum seekers—and the European Union has that responsibility, too. That is why we have made it absolutely clear that we will not lose control of our asylum and immigration policy. The opt-in protocol we negotiated at Amsterdam remains. It is not under threat. It will not be eroded. Noble Lords may wish to consider what has happened over the past five years when we have successfully used our opt-in, retaining our border controls but co-operating with our EU partners. As the noble Baroness, Lady Williams, said, it is clear that immigration and asylum demand international solutions. We, of course, want to continue to influence EU immigration and asylum work. The noble Baroness said it was important that we accepted our fair proportion. It is clear that this Government accept their responsibilities in that regard. I do not agree with the way that this was put by the noble Lord, Lord Strathclyde, but I do not think he expected me to agree with him on those points.
On Iraq, the noble Baroness, Lady Symons, raised concerns about Fallujah and the importance of having free, fair and open elections. That is absolutely the point. That is what we want to achieve and it is absolutely what the Iraqi Interim Government want to achieve. Prime Minister Allawi's statements on that make that absolutely clear. My noble friend Lady Symons repeated some of his words today. I, too, repeat them. Prime Minister Allawi said:
"I have reached a conviction that we have no other option but to take necessary measures to protect the Iraqi people from these killers and to liberate the Fallujans so that they will go back, back to their homes and lead a normal life … There is a division between the Iraqi people and the terrorists, we are after terrorists we are not after anybody else and all the Iraqi people including people in Fallujah … want us to go ahead and finish the terrorists and have the rule of law prevail in Fallujah and this is what we intend to do".
The commitment to having elections in January remains.
Of course, the security situation remains a matter of grave concern because if the security situation is not controlled it raises questions about the extent to which elections can be held across the entire country. That is why Prime Minister Allawi, we, the Americans and others take this so seriously.
The noble Baroness, Lady Williams, congratulated the Government on what they are trying to do in Iran. I am afraid that at this point in time I cannot add to that. However, if I have further information I shall, of course, write to the noble Baroness. The noble Baroness pressed very hard on the Middle East peace process. That is something that she has raised many times at the Dispatch Box. The noble Baroness will know that my right honourable friend the Prime Minister has said that now that the US elections have concluded this is something he will take up as a matter of urgency. It will be a key element of the agenda later this week. We have made our views absolutely clear
646
with respect to the barrier and the road map. We have said that the construction of the barrier on occupied land and Israeli settlement activity risk jeopardising the two state solution. The barrier, settlement construction and road building are effectively carving up the West Bank. As we have said repeatedly, building a barrier on occupied land is unlawful.
We are also concerned about continuing settlement activity in the West Bank and Israeli plans to expand settlements further. We have repeatedly pressed Israel to freeze settlement construction and we will continue to do that. With respect to the road map, this remains the best way forward in the peace process. I do not think that anyone is under any illusions about the effort needed by the parties to implement it but the obligations are fair on both sides.
Finally, I turn to the Lisbon process. The noble Lord, Lord Strathclyde, pressed the issue of regulations in relation to that. The noble Lord will know that there have been a number of initiatives focused on making business more effective. We recognise that we need effective and efficient regulation to make the markets work properly. We are leading the regulatory reform effort.
On the wider questions raised by the noble Baroness, Lady Williams, of course there are problems with respect to moving to higher productivity and greater competitiveness. These have been identified in Wim Kok's report but our commitment to the Lisbon process remains very strong.
5.5 p.m.
Lord Lea of Crondall: My Lords, is it not fair to say there is a danger that some of the comments about the EU not doing enough in many parts of the world such as Darfur result in some people wanting to have it both ways? One minute we are asked to believe that the EU is getting ideas above its station but right through this Statement there has been example after example of where the EU needs to do more.
Baroness Amos: My Lords, sometimes there is a contradiction in the way that we talk about the European Union and what it can do. My noble friend is quite right. There are any number of areas where we look for greater EU action while at the same time we often hear complaints, particularly from the Conservative opposition, about the extent of EU activity. It is my view that we have the balance about right. It is important that where we can get added value from EU countries operating together we should push for that while at the same time recognising that there are different national characteristics.
Lord Dykes: My Lords, in pursuing the road map and a true peace between Israel and Palestine, on which the Prime Minister and the whole Government should be commended and supported—we understand that the Prime Minister will be raising this matter in Washington—will the noble Baroness the Leader of the House also emphasise the need to raise one very important item with the Israeli Government and the

647
Israeli authorities which is frequently overlooked; namely, the detention of Palestinians? The number now is apparently in excess of 7,000 Palestinian detainees held in various kinds of Israeli camps, prisons, detention centres and so on. Very little information comes out about that but apparently very harsh conditions prevail in many of those instances. Surely that must be a legitimate matter which puts Guantanamo Bay in a slightly miniature context in comparison with 7,000 plus Palestinian detainees held by Israel, some of them for a long time now, with no prospect of their release. That must be one of the important negotiating aspects of the road map.
Baroness Amos: My Lords, there is a list of issues that we raise on a regular basis with the Israeli Government, including the detention of Palestinians. This is an issue that my noble friend Lady Symons has herself raised with representatives of the Israeli Government.
Lord Hannay of Chiswick: My Lords, does the Minister agree that in pursuing this matter of the Middle East and trying to get a peace process under way on the basis of the road map, one of the most important things is for the President of the United States and the European Union leaders in backing such a thing to ensure that a process once started is not derailed by acts of violence against it? Hitherto, again and again, such acts have been taken as an excuse to stop the process in its tracks. This time surely, if we are not to enter into another period of frustration, it really is important to have a process that can be sustained through such acts of violence because the people who perpetrate the acts of violence have no interest in the peace process at all; indeed, they want to kill it.
Further, does the noble Baroness agree that welcome though the signals are that perhaps the Iranians are not proceeding with their enrichment activities, it is only part of the problem? If we are to prevent real damage to the non-proliferation system, we will have to work for a wider system that means that countries with civil nuclear energy are assured supplies of low-enriched uranium and the ability to reprocess their spent fuel without constructing the plants themselves, whose proliferation risks are so great. It really is necessary for the International Atomic Energy Agency to be given encouragement to try to put together a broader scheme that will mean that we do not have to address the issues one by one.
Baroness Amos: My Lords, I absolutely agree with the noble Lord's points about needing a process and then not allowing it to be derailed by acts of violence against it. That is precisely the point of having the road map, as he will be aware. He is quite right that we would leave the process in the hands of terrorists if we were not absolutely clear about what we were trying to achieve and the benchmarks along the way. On Iran and the wider question of the IAEA, the noble Lord will know that we are in active negotiations. They will be extremely sensitive over the next few days, so I do
648
not want to comment on them in any detail. However, I entirely take his point about encouraging some kind of broader scheme. I am sure that we can take that forward.
Baroness Falkner of Margravine: My Lords, the noble Baroness, Lady Symons, repeated Mr Allawi's statement on Fallujah earlier today. Although we recognise that it regrets the need to take the action that will be embarked on there, we still believe that taking that action in the holy month of Ramadan in a primarily Sunni town will send a very poor signal to the Muslim world, particularly if casualties are inflicted in large numbers. Will the noble Baroness exercise what political leverage we have with the Allawi government to suggest that one more round of trying to reach a negotiated settlement might be the way forward?
Baroness Amos: My Lords, it is very important that we take on board what the people on the ground think. Prime Minister Allawi is the interim leader in Iraq. We really must recognise that. It is clear that the interim Iraqi Government have made every effort at negotiations in Fallujah. Regardless of what we think about what is going on in Iraq and our positions on whether there should have been a war, we should recognise that. The interim Iraqi Government continue to talk to Sunni leaders from the region. Prime Minister Allawi has made it absolutely clear that any military action in Fallujah is taking place purely to create the conditions for free and fair elections for the Iraqi people. The top priority must be that all Iraqi people be allowed a say in how they are governed and whom they are governed by. Terrorists and insurgents cannot be given the power to stop that process.
Lord Forsyth of Drumlean: My Lords, although I welcome the Prime Minister's tribute to the Black Watch, will the noble Baroness the Leader of the House confirm whether the press reports that its commander has expressed reservations about its deployment are accurate? Will she indicate whether the Black Watch will be home by Christmas, as the Prime Minister has promised? If so, will it come back as a secure regiment, with no question of its being disbanded or amalgamated into another force?
Baroness Amos: My Lords, the noble Lord will understand if I do not want to comment on unsubstantiated press reports. I saw them over the weekend. My right honourable friends the Prime Minister and the Defence Secretary have made it absolutely clear that the Black Watch will be home by Christmas.
Lord Kilclooney: My Lords, at the Council meeting, did the French Government discuss with other governments in the European Union their further intervention in Côte d'Ivoire without the approval of the government of that country?
Baroness Amos: My Lords, I thought that I had made it clear that Côte d'Ivoire was not discussed at

649
the Council meeting; I made clear our support for UN and French action in Côte d'Ivoire. Further measures are being considered by the UN, but it is a very difficult and sensitive time in Côte d'Ivoire.
Baroness Carnegy of Lour: My Lords, will the noble Baroness the Leader of the House answer the third question asked by my noble friend Lord Forsyth? When the Black Watch returns by Christmas, will it return as a secure regiment, or will it be amalgamated into a larger regiment? We need to know, as it is unfair for it to fight in that dangerous place so gallantly without knowing the answer. I hope that she can reassure us.
Baroness Amos: My Lords, the noble Lord, Lord Forsyth, knows that I am not obliged to answer more than two follow-up questions, and I answered two. On the noble Baroness's question on the longer-term future of the Black Watch, she will know that there are ongoing discussions on the configuration of our defence forces. That has been said a number of times from this Dispatch Box, and I repeat it again.

Pensions Bill
5.17 p.m.
Further consideration of amendments on Report resumed on Clause 284.
Lord Higgins Lord Higgins moved Amendment No. 265:
Page 235, line 25, at end insert—
"( ) The level of benefits to be provided to qualifying members shall be specified in regulations by 1st March 2005."
The noble Lord said: My Lords, the amendment is concerned with putting a deadline on when the level of benefits to be provided under the financial assistance scheme is to be specified. We suggest that 1 March 2005 is appropriate. I think that the House recognises that the people who will be helped by the financial assistance scheme have been living in a state of great uncertainty with regard to their prospects for the remainder of their lives. Therefore, it is very important that they have a reasonable idea of their likely circumstances as soon as possible, so that they can adjust their affairs accordingly, to the extent that they are able.
One issue is when the first payments will be made. We discussed that on the previous amendment; even it is very uncertain. Presumably it is possible for the Government to make calculations fairly rapidly so that they have some idea of the likely level of benefits. We do not suggest with the amendment that everything regarding the FAS should be clarified in regulations by that date, but simply the level of benefits. For example, what percentage of the benefits do the Government have in mind as a reasonable amount?
The problem is that we do not know whether the so-called £400 million is a fixed amount. In a previous debate, the noble Baroness referred to it being cash limited. Are we to understand that the payments under the FAS will be cash limited at the amount that the
650
Government have specified? If that is the case, is it to be a cash limit for each of the following years over the life of the people who will be helped? Or will it be some kind of lump sum that is put into a massive annuity, where the benefits of the FAS are then subsequently rolled out? There seems to be much obscurity as to exactly what the Government have in mind, having announced the £400 million and the scheme on the spur of the moment. We still have very little idea about that, and so, I stress, do people outside of what to expect. I hope that the Minister can provide more information. I beg to move.
Baroness Hollis of Heigham: My Lords, to some extent we touch on previous issues. The noble Lord asked me regarding the previous amendment whether I could provide any guidance at all on when FAS payments might begin to flow. This matter also affects Amendment No. 267.
What I can say has the strictest health warnings attached, due to the genuine issues that the Government have to address. If, for example, all goes well and we have complete information about scheme members at an individual level and we can therefore design the scheme and allocate resources appropriately, and if schemes are close to completion of winding up and members have reached the appropriate age, and the administrative infrastructure is in place—which I was particularly worried about—including the helpline, staffing and so on, then I would hope that by the end of next year, that is November/December 2005, we should be in a position to calculate and administer payments. That is the sort of timetable to which we expect to work at the moment. In terms of Amendment No. 267, which has been ungrouped, if the noble Lord, Lord Oakeshott, was thinking about six months after April 2005, we would not be so far apart.
I must emphasise the health warnings that I have attached. Noble Lords opposite will remember that when they wished for firm deadlines regarding the jobseeker's allowance, it had to slip by six months and return to us, and so on. So I have stated our best endeavours, but all the elements have to be in place. The noble Lords pressed me for this information and I have been trying to use the opportunity given by the Statement to find out whether I could be more helpful than I was earlier and give people some sense of when we hope to be in a position to begin FAS payments.
That leads me on to the point regarding the dates. We want to make the best possible use of the available funds, and we fear that if we prescribe or announce assistance levels too early we may not be able to do so. We risk either overstretching the FAS budget or making a highly conservative estimate of benefit levels which may disappoint people unnecessarily. If we said that everyone would receive at least 5 per cent, we would probably have no problem in fulfilling that undertaking. But if people required a more accurate statement, we might not be in a position to meet the timetable specified in the noble Lord's amendment. Indeed, if we are required on the face of the Bill to prescribe levels of assistance before we have completed collecting data on schemes and members, and before

651
we have actuarial assessments, we would have no option but to set levels of assistance with the utmost and extreme prudence so that they might bear little relationship to the outcome sums. From the Government's point of view that would be gesture politics and unwise.
To meet the timetable sought by the noble Lord we would have to lay the draft affirmative regulations before the end of this year to be sure of having them debated in both Houses and enforced by 1 March. We cannot do that again. We simply cannot have draft affirmative regulations considered by this House in the next four weeks or so, when we still have not collected all the data that would allow us to see how this works out in terms of likely levels of benefit. I wish that I could. I cannot. We are back to the same problem regarding limitations.
We have a genuine difficulty here. Unless we are to end up saying that in March we will lay down that everyone gets 5 or 10 per cent, or something like that, which would not be helpful, we cannot do what the noble Lord asks. He pressed me regarding the sums of money and the £400 million. We have pledged £400 million of public money to be paid over 20 years. The allocation of the funds across different years must depend on the assistance that the scheme will have to provide and on what would work best for it. So we are looking at issues such as any provision needed for inflation as part of the work that is now under way on how the scheme will work. In other words, we are not yet in a position to determine whether, for example, it ends up being front-end loaded or back-end loaded, or in which pattern liabilities will fall.
So I cannot give the noble Lord the answer he seeks. All that I hope is that he will accept, regarding this amendment and Amendment No. 267, that I have genuine good reason for not being able to give him the information. Even the information that I am offering must have health warnings attached because we may find obstacles that we have not yet foreseen, even regarding being able to give guidance in terms of benefit levels by the end of next year. I hope that with those assurances that we are using our best endeavours that the noble Lord will withdraw the amendment.
Perhaps I should also say that I made much of the point earlier that the detail of this matter will be carried by affirmative regulations and I said that that would allow the House to scrutinise and debate them. The noble Lord, Lord Higgins, perfectly properly, said that that would make it difficult for the Opposition Benches, because one could not amend them and there would be heavy pressure not to overturn them, because it would then seem that the unelected House was vetoing the elected House. I am willing to say that, because those affirmative regulations will be circulated in draft form for consultation with the industry, would be happy to ensure that at the same time your Lordships receive them in advance. If noble Lords still had concerns, whether we met with officials or noble Lords chose to write to me regarding their concerns, I would see to what extent I could meet them before we laid the formal regulations. So there would be an
652
informal process of amendment and consultation on the regulations, which is not normally offered to this House. It would at least give your Lordships the opportunity which otherwise I would wish to provide by putting more detail on the face of the Bill.
So, given that movement on what are perfectly legitimate concerns, I hope noble Lords opposite will withdraw their amendments.
Lord Higgins: My Lords, before the noble Baroness sits down, perhaps I may say that that is an extremely generous and unusual offer. We appreciate the fact that we will receive the draft regulations.
Could the Minister clarify one point regarding the amendment? Are we to understand that the £400 million is a set sum, or one adjusted for inflation over time, which will then effectively be divided up, allowing for the dates of payment, between the total number of people who become eligible? Or is the £400 million not a set sum, but will depend upon the demands on the fund?
Baroness Hollis of Heigham: My Lords, no, the £400 million is the set sum. The amount that will be paid in any particular year will depend to a degree on when the liabilities fall. So, although the sum will equate to £20 million a year over 20 years, it is not our intention at this stage to say that in each year there will be £20 million, no more and no less. I am not yet sure, until we have the data, to what extent payments might be front-end loaded or back-end loaded and, therefore, how the pattern will fall. That is still to be determined and the noble Lord will understand why I cannot give him that information.
Lord Higgins: My Lords, again, I thank the Minister for her comments regarding the regulations—and I understand the problems that she faces. None the less, my reaction is that the £400 million spread over 20 years—and it is not clear whether it will be inflation linked—will be totally inadequate. The amounts paid out would be tiny. However, perhaps we may return to that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.30 p.m.
Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 266:
Page 235, line 25, at end insert—
"( ) In 2007 and three yearly thereafter, the Secretary of State shall present a written report to both Houses of Parliament on the adequacy of the funds provided by the Exchequer to the financial assistance scheme, including the numbers of qualifying members assisted under the scheme and a comparison with amounts payable by the Pension Protection Fund."
The noble Lord said: My Lords, this is a modest and, as I hope the House and the Government Benches will agree, helpful amendment in my name and that of my noble friend Lady Barker. To clarify matters, we are referring to the amount that people will receive under the financial assistance scheme as a percentage of what they would have been entitled to under the PPF.
In terms of the timing, given the noble Baroness's point about the need to consult and to get things set up, it seems to us that 2007 will allow a reasonable period in which to see how the scheme has been working and for the Secretary of State to come back with a proper report, and to do so every three years thereafter, so that we can see how the scheme develops. Clearly, none of us knows the exact scale of the problem. I share the view that the chances are that the amount will be inadequate. None the less, let us look at that on its merits. However, it seems to me that we need a proper and structured way in which the Government can report back at regular, but not too frequent, intervals. We are asking to be given the facts to enable us, and the Government, to make an assessment of the financial adequacy of the scheme. This is uncharted territory.
I repeat that this is a modest amendment. It is designed to bring clarity to a confused situation, transparency to the operation of the scheme and an improvement in accountability to Parliament. In my view, it will help Parliament to do its job of properly scrutinising the spending of public money. As the noble Baroness herself has admitted, at present this is a scheme with very few clear details.
If I may say so, in her opening speech earlier, the noble Baroness trailed her coat most encouragingly on this amendment. I now invite her to rise, simply to say "yes" and to sit down. I beg to move.
Baroness Turner of Camden: My Lords, my own amendment—Amendment No. 283—is grouped with Amendment No. 266. As we have heard this afternoon, Clause 284 has been described as something of an empty box. We know that there will be a financial assistance scheme but the Bill puts no flesh on the bones, and we had a great deal of discussion about that this afternoon. We know the Government's intention, but we do not know what the accepted anticipated liabilities of the FAS will be. We have a cash limit, but we want to know what proportion of benefits will be paid.
The intention of Amendment No. 283 is twofold. First, FAS benefits should be paid at the same level as benefits payable by the PPF in the case of schemes taken over by the PPF after the appointed day. Secondly, the FAS should be adequately funded on actuarial principles to ensure that those benefits are paid. Those actuarial principles will not assume that the FAS will receive in year one what it pays out in year one. It is pre-funded for liabilities which it already knows of or reasonably anticipates in much the same way as an ordinary pension scheme is funded. Benefits will be paid as and when they fall due and actuarial assumptions will be made by the GAD about future financial investment return, inflation and so on, and demographic matters.
It seems to me that Amendment No. 266, moved by the noble Lord, Lord Oakeshott, is reasonable and sensible and my amendment is meant to support that
654
concept. I cannot move my amendment; I am simply speaking to it because it is in this group. I wait to hear what my noble friend has to say.
Lord Higgins: My Lords, the noble Lord, Lord Oakeshott, said that this is a modest amendment, and I think that that is so. One feature which has been completely missing from our deliberations has been the Minister standing up and saying, "I accept that amendment". Not once in the whole of the Grand Committee stage did such an event occur; and it has not occurred in the first or second sitting of the Report stage or even now. This is the noble Baroness's opportunity to do so.
I consider the amendment of the noble Lord, Lord Oakeshott, to be admirable. In particular, the publication of such a report would give occasion for those who feel strongly on these issues to assess whether the scheme had worked out as they had hoped. As we said earlier, there has been enormous pressure from Back-Benchers in another place for the introduction of such a scheme. It may well turn out to be, as we hope, a success or it may be a disappointment.
At any rate, a report of this kind will give an occasion for those who are concerned about the issue to express a view on how things have worked out. No doubt, if sufficient pressure is applied, they will be able to obtain an increase in the level of benefits paid and to make a comparison of those benefits and those being paid by the PPF. As I said a moment ago, I think that £400 million will probably be a very inadequate sum, and the report will be able to include an assessment of whether or not that turns out to be so. I strongly support the view expressed by the noble Lord.
Lord Fowler: My Lords, before the Minister fits in, as I am sure she will do, with the proposal of my noble friend, I want to say one word. As the noble Lord, Lord Oakeshott, said, this is a modest proposal. Nevertheless, it is an important proposal and one with which I very much agree.
It raises an important point—that is, that there should be post-legislative reviews of what we do. As my noble friend Lord Higgins mentioned, we should be checking the progress of the legislation as we go along. Although we have had pre-legislative scrutiny in Parliament, I think that we should consider the far wider use of post-legislative scrutiny. Many of the mistakes and errors which occur when Bills become Acts could have been prevented had such scrutiny taken place. Frankly, I believe that there is a great case for doing that with all legislation but, in particular, there is a strong case for doing so with legislation on pensions.
In a sense, such scrutiny would also serve notice on the government department in question that it was expected to report back. Frankly, Secretaries of State change, and the new Secretary of State does not necessarily regard it as his number one object in life to carry out the work of his predecessor. Rather than concentrating on the No. 1 Pensions Bill, he probably wants his No. 2 Pensions Bill to be brought forward.

655
Under those circumstances, the department has a responsibility to report on its stewardship—that is, on how it has operated the legislation passed.
Therefore, although the amendment proposes a modest step, it is an important one. It would be brilliant if the Minister could now accept a post-legislative review of this pensions legislation as I think that that would be of great benefit.
Baroness Hollis of Heigham: My Lords, on the last point, there is nothing to stop any Member opposite using a Wednesday afternoon debate—rather like an Opposition day in the other House—some time down the line in order to review the operation of the Pensions Bill and to call the Government to account. Again, I am entirely in favour of learning loops, which we normally have through pilot and pathway schemes. There may be other devices and I have no problem with that. But, some time down the line, it would be sensible to have a debate, whether or not it was initiated by the Opposition, as to the efficacy of the Bill and as to whether it was working as Parliament intended. I do not have a problem with that but it will be for your Lordships to determine.
The noble Lord, Lord Higgins, asked why I cannot accept Amendment No. 266. He also said that I had not accepted any others. I have to say that that is a bit rich. When I sat on the Opposition Benches, the only time that any amendment was ever accepted by the government was when a negative regulation was made affirmative. That was the only time that I could be sure that I had the drafting right. At times, we have not been able to get the word "sheriff" right—with a decision on whether it is "a sheriff" or "the sheriff".
Noble Lords will see that the Government have effectively made a number of concessions in response to pressure, but they have brought back the changes as government amendments to ensure that they work. I have responded in dozens and dozens of ways but am being blamed for the inadequacy of the drafting of opposition amendments. Perhaps I may gently suggest to noble Lords that it is a piece of effrontery to blame me for not taking the amendment on board and thereby ensure that the provision will go before the courts at some point. But I do not blame them for having a go.
At the beginning I said to the noble Lord, Lord Oakeshott, and I repeat it now, that I have no problem at all with three-yearly reviews. I believe that is absolutely right and they may need to be more frequent than that. I have no difficult with that. That part of the amendment is fine, but the rest of it causes me difficulty. I am bothered by the weight that any court could put on some of the words.
The reports that we will expect to be brought forward, and that the FAS will have to publish, will set out how the funds have been used. I expect them to detail the number of members who have received assistance. I do not believe that there is dispute between us on that. But how can a report be made on the adequacy of the funding. Is it the adequacy in the
656
eye of the beholder? Or does it mean how the sums have been worked out, which will be in the information about how much people receive? Against whose judgment and whose standards is "adequacy" to be viewed? That is where the polemic comes in, which is why I cannot accept the amendment as it is drafted. That can be judged only against a promise that the Government have made, and we have promised that we shall provide a worthwhile package for those who have incurred the most significant losses.
Secondly, in relation to the amendment tabled by my noble friend—Amendment No. 283—I am concerned about comparing the FAS level of assistance with that provided by the PPF. At a mechanical level, any Member of your Lordships' House, any member of a trade union or any member of a pension scheme will be able to make that comparison. We know that there will be 90 per cent for members coming within the purview of the PPF. We have always said that the FAS, as my noble friend acknowledged earlier, will be less generous than the PPF and the Minister of State in the other place said:
"it seems unrealistic to expect that assistance will be set as high as future pension protection fund levels, as in future members will benefit from cover paid for by a premium to the pension protection fund".—[Official Report, Commons, 19/5/04; col. 991.]
In other words, there will not be a levy there.
My key point is that scheme members who will benefit from the PPF in the future will enjoy a level of assistance paid for by a levy on all defined benefit schemes. Because there is a levy, the PPF will be able to offer 100 per cent to some categories of scheme member—those already in retirement—and 90 per cent to others. In contrast, the financial assistance scheme benefits from £400 million of funding from the taxpayer. We believe that it is right to use public money in recognition of the severe losses suffered by some scheme members, but it would not be reasonable to expect taxpayers, most of whom are not members of defined benefit occupational pension schemes, to fund assistance to the same generous levels as the PPF.
Let me give an obvious example. The PPF will offer 90 per cent compensation to all those not coming in. With the FAS we might want to take account of how close people are to retirement and, therefore, to what degree they can remedy the situation they are in by a shortfall in the scheme. If someone has been in a scheme for only five or eight years and it collapses, he is in a different position as regards rebuilding than if he is two or three years away from retirement, when clearly there is very little capacity to rebuild. Those are different kinds of considerations.
I might add that Amendment No. 283 would require the FAS to determine levels of assistance according to the rules devised for the PPF. I hope my noble friend will accept that it would be in no one's interests to squeeze the FAS into the regulatory framework—including a regulator—that has been tailored to fit the PPF. They are different kinds of schemes, and there should be a clear understanding of the water between them, if I can put it like that. This framework has been finely tuned to respond to the needs and concerns of a pensions community—the PPF—that will contribute

657
financially to a compensation scheme. This framework would sit uncomfortably on the shoulders of an assistance scheme financed by the taxpayer. The schemes will be very different.
I return to the original amendment. I have no problem at all with regular reports, whether three-yearly or more frequent, of the FAS. I would expect that to happen anyway. I would expect the FAS to include what I would call the objective information about how many members have been helped, what level of assistance they have been given and so on. However, words like "adequacy", particularly when tested in a court, might seem to imply some other form of judgment with which I would be unhappy and could not accept on the face of the Bill.
With the set of signals coming from the Government—they are not confused but involve "on the one hand" and "on the other hand"—I hope that the noble Lord, Lord Oakeshott, will be able to withdraw his amendment. At Third Reading he may wish to return with a more tailored amendment, which pins down the issue on regular reporting, while leaving out words such as "adequacy", let alone a comparison with the PPF. People would have no difficulty with that because they would be able to put the two reports side by side. I seek to resist the linkage that one can measure the adequacy of one by the payments of the other. With those comments, I hope that the noble Lord will feel able to withdraw his amendment and, when the time comes, I hope that my noble friend will not press her amendment.
Lord Oakeshott of Seagrove Bay: No, my Lords. We have had a thorough, interesting and revealing debate. I believe that the time to resolve this issue is now rather than at Third Reading. First, I thank the noble Baroness, Lady Turner, for her support of my modest amendment that does not go as far as hers, but supports the principle of reporting. I appreciate that very much. I say to her that ultimately we hope it may be possible that the FAS will pay the same benefits as the PPF, but, at this stage, it is fair to say that that is not something that we would want to support because we do not yet know the scale of the problem. We shall have to see how it goes. I hope that the noble Baroness will support my more modest proposal.
Baroness Hollis of Heigham: My Lords, as the noble Lord appears to be indicating that he wishes to test the opinion of the House, is he saying that because these two amendments are grouped, that means that a vote on his amendment would also carry the amendment in the name of my noble friend, which would require that the FAS pay at the levels of the PPF?
Lord Oakeshott of Seagrove Bay: My Lords, I am moving Amendment No. 266 and asking for support for that. I have just made it clear why, were Amendment No. 283 to be pressed to a vote, I would not support it.
I was most unimpressed, to be honest, with the reasons given by the Minister. I do not want a report every year. I believe that three-yearly is the right period for a proper report. I am in the investment
658
management business and we have proper performance reviews at regular intervals. I was very taken with the points made by the noble Lord, Lord Fowler, that the prospect of a regular review on a reasonable basis like this concentrates the mind wonderfully. I believe that it will concentrate the minds of those running the FAS, of the civil servants and of the Minister of the day. I believe that that is the right time period, that that should be set out, and that one should work towards and expect that.
I was sorry to hear the spat about amendments just now. I hope the Minister will accept that we on these Benches have tried not to get into a large number of drafting amendments, but on this one we feel strongly. I cannot accept her argument, if indeed she is arguing that this is defectively drafted because of the word "adequacy". It is quite clear in whose eyes that is; it is in the eyes of the Secretary of State. The Secretary of State is being invited to bring the report and to report on the adequacy of the scheme. We would be testing and measuring it against the statements that were made when the scheme was set up. To me that is quite clear and that is the basis on which I am moving it.
The more I think about this and the more I listen to the interesting points about post-legislative scrutiny on a regular basis from the noble Lord, Lord Fowler, the more strongly I feel that this is a sensible amendment. To be frank, I am most unimpressed with the reasons given for not accepting it and I beg leave to test the opinion of the House.
5.48 p.m.
On Question, Whether the said amendment (No. 266) shall be agreed to?
Their Lordships divided: Contents, 135; Not-Contents, 137.

Division No. 3

CONTENTS

Addington, L.

Denham, L.

Allenby of Megiddo, V.

Dholakia, L.

Anelay of St Johns, B.

Dixon-Smith, L.

Astor of Hever, L.

Dykes, L.

Attlee, E.

Eccles of Moulton, B.

Avebury, L.

Eden of Winton, L.

Barker, B.

Elis-Thomas, L.

Beaumont of Whitley, L.

Elton, L.

Biffen, L.

Falkland, V.

Bonham-Carter of Yarnbury, B.

Fearn, L.

Boyce, L.

Fookes, B.

Bradshaw, L.

Forsyth of Drumlean, L.

Bridgeman, V.

Fowler, L.

Brooke of Sutton Mandeville, L.

Freeman, L.

Burnham, L.

Garden, L.

Buscombe, B.

Gardner of Parkes, B.

Caithness, E.

Garel-Jones, L.

Campbell of Alloway, L.

Geddes, L.

Carlisle of Bucklow, L.

Gilmour of Craigmillar, L.

Carnegy of Lour, B.

Glentoran, L.

Clement-Jones, L.

Goodhart, L.

Colwyn, L.

Griffiths of Fforestfach, L.

Cope of Berkeley, L.

Hamwee, B.

Craigavon, V.

Hanham, B.

Crickhowell, L.

Harris of Richmond, B.

Dahrendorf, L.

Henley, L.

659

Higgins, L.

Plummer of St. Marylebone, L.

Hodgson of Astley Abbotts, L.

Quinton, L.

Home, E.

Rawlings, B.

Howard of Rising, L.

Razzall, L.

Howe, E.

Redesdale, L.

Howe of Aberavon, L.

Rees, L.

Howe of Idlicote, B.

Renton, L.

Jacobs, L.

Roberts of Llandudno, L.

Jenkin of Roding, L.

Rodgers of Quarry Bank, L.

Laidlaw, L.

Roper, L.

Laird, L.

Rotherwick, L.

Lawson of Blaby, L.

St John of Fawsley, L.

Lester of Herne Hill, L.

Sandberg, L.

Liverpool, E.

Scott of Needham Market, B.

Livsey of Talgarth, L.

Seccombe, B. [Teller]

Lucas, L.

Selborne, E.

Luke, L.

Sharp of Guildford, B.

McAlpine of West Green, L.

Sharples, B.

Maddock, B.

Shaw of Northstead, L.

Mancroft, L.

Shutt of Greetland, L.

Miller of Chilthorne Domer, B.

Simon of Glaisdale, L.

Monro of Langholm, L.

Skelmersdale, L.

Montagu of Beaulieu, L.

Stewartby, L.

Morris of Bolton, B.

Swinfen, L.

Mowbray and Stourton, L.

Taverne, L.

Moynihan, L.

Tebbit, L.

Murton of Lindisfarne, L.

Thomas of Gresford, L.

Neuberger, B.

Thomas of Walliswood, B.

Newby, L.

Thomson of Monifieth, L.

Noakes, B.

Tope, L.

Northesk, E.

Tordoff, L.

Northover, B.

Trenchard, V.

Oakeshott of Seagrove Bay, L. [Teller]

Tugendhat, L.

Waddington, L.

O'Cathain, B.

Wallace of Saltaire, L.

Onslow, E.

Walmsley, B.

Park of Monmouth, B.

Walpole, L.

Pearson of Rannoch, L.

Walton of Detchant, L.

Perry of Southwark, B.

Wilcox, B.

Pilkington of Oxenford, L.

Williams of Crosby, B.

Platt of Writtle, B.

Williamson of Horton, L.

Plumb, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Corbett of Castle Vale, L.

Ahmed, L.

Crawley, B.

Alli, L.

David, B.

Amos, B. (Lord President of the Council)

Davies of Coity, L.

Davies of Oldham, L. [Teller]

Andrews, B.

Desai, L.

Archer of Sandwell, L.

Drayson, L.

Ashley of Stoke, L.

Dubs, L.

Ashton of Upholland, B.

Elder, L.

Bach, L.

Evans of Parkside, L.

Barnett, L.

Evans of Temple Guiting, L.

Bassam of Brighton, L.

Falconer of Thoroton, L. (Lord Chancellor)

Berkeley, L.

Bhattacharyya, L.

Farrington of Ribbleton, B.

Billingham, B.

Faulkner of Worcester, L.

Blackstone, B.

Filkin, L.

Boothroyd, B.

Fitt, L.

Borrie, L.

Fyfe of Fairfield, L.

Bragg, L.

Gale, B.

Brennan, L.

Gavron, L.

Brooke of Alverthorpe, L.

Gibson of Market Rasen, B.

Brookman, L.

Gilbert, L.

Campbell-Savours, L.

Golding, B.

Carter, L.

Goldsmith, L.

Carter of Coles, L.

Gordon of Strathblane, L.

Chelmsford, Bp.

Gould of Brookwood, L.

Christopher, L.

Graham of Edmonton, L.

Clark of Windermere, L.

Grantchester, L.

Clarke of Hampstead, L.

Griffiths of Burry Port, L.

Clinton-Davis, L.

Grocott, L. [Teller]

Cohen of Pimlico, B.

Hannay of Chiswick, L.

660

Harris of Haringey, L.

Morris of Aberavon, L.

Harrison, L.

Morris of Manchester, L.

Hart of Chilton, L.

Moser, L.

Haskel, L.

Newcastle, Bp.

Haworth, L.

Patel of Blackburn, L.

Hayman, B.

Pitkeathley, B.

Henig, B.

Prosser, B.

Hilton of Eggardon, B.

Prys-Davies, L.

Hogg of Cumbernauld, L.

Radice, L.

Hollis of Heigham, B.

Ramsay of Cartvale, B.

Howarth of Breckland, B.

Rendell of Babergh, B.

Howie of Troon, L.

Richard, L.

Hoyle, L.

Rooker, L.

Hughes of Woodside, L.

Rosser, L.

Hunt of Chesterton, L.

Rowlands, L.

Hunt of Kings Heath, L.

Royall of Blaisdon, B.

Irvine of Lairg, L.

Sainsbury of Turville, L.

Irvine of Lairg, L.

Jones, L.

Sawyer, L.

Jordan, L.

Sewel, L.

Judd, L.

Sheldon, L.

Kilclooney, L.

Simon, V.

King of West Bromwich, L.

Snape, L.

Kirkhill, L.

Stone of Blackheath, L.

Lea of Crondall, L.

Symons of Vernham Dean, B.

Leitch, L.

Taylor of Blackburn, L.

Lipsey, L.

Thornton, B.

McDonagh, B.

Triesman, L.

McIntosh of Haringey, L.

Truscott, L.

McIntosh of Hudnall, B.

Tunnicliffe, L.

Turnberg, L.

MacKenzie of Culkein, L.

Wall of New Barnet, B.

McKenzie of Luton, L.

Warner, L.

Mallalieu, B.

Warwick of Undercliffe, B.

Mason of Barnsley, L.

Whitaker, B.

Massey of Darwen, B.

Whitty, L.

Maxton, L.

Wilkins, B.

Merlyn-Rees, L.

Williams of Elvel, L.

Mitchell, L.

Woolmer of Leeds, L.

Morgan of Drefelin, B.

Young of Norwood Green, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.58 p.m.
[Amendment No. 267 not moved.]
Lord Higgins Lord Higgins moved Amendment No. 268:
Page 235, line 25, at end insert—
"( ) Payments made under this section shall be made by the Treasury and not from the vote of the Department of Work and Pensions."
The noble Lord said: My Lords, we have already stressed very strongly that the decision by the Government to allocate the sum of £400 million spread over 40 years, which in reality is a much smaller sum in present value terms, was made very much in a panic reaction to the danger of defeat in the House of Commons. One cannot help but feel that the Chancellor of the Exchequer, having decided by some process of osmosis that £400 million was the right amount and having bought off the threat of a revolt, may seek to reduce the cost to the Exchequer. For that reason, we are rather concerned about where the money is coming from. Therefore, I have a simple, straightforward question for the Minister—whose

661
attention I hope I have—namely: is this new money? Is it money that was not previously going to be spent by the Government either this year or later? Is it new money?
One suspects that there may be a certain amount of spare money around—to be found, strangely enough, in the Department for Work and Pensions, the reason being that the Chancellor is fond of increasing amounts which are to be paid under various benefits, a high percentage of which are never claimed because people do not understand what it is all about. That is particularly so with regard to a vast array of tax credits. So there appears to be a massive underspend by the Department for Work and Pensions.
Can the Minister tell us what the level of underspend is expected to be in the current year and what it was last year? It is no good the Minister shaking her head. It clearly was not a positive number in the sense that it was totally spent. Exactly how much has been underspent, and how much is likely to be underspent given the nature of a department which constantly announces benefits which people do not claim? Our rather sordid suspicion is that the Chancellor may suddenly discover that the best way of spending the £400 million which he was obliged to spend over 40 years is out of the budget of the Department for Work and Pensions, where there has been an underspend.
The other part of the amendment is concerned with who will pay it. It may be that this was a drafting mistake on my part. I have written "the Treasury". Perhaps I should have said "the Chancellor" or perhaps, curiously, "the Inland Revenue". Oddly, under the present Government, the Inland Revenue, which has long spent its time collecting money from people, suddenly finds, under the Chancellor's various tax credits, that it is repaying money to people. That strikes at the very ethos of the Inland Revenue and it really is not very keen on it.
The result has been that the Inland Revenue has collected money that it should not have collected and then did not want to refund it. None the less, it has now had some experience of disbursing money as well as collecting it. It would therefore seem appropriate that if the money is not going to come from the vote of the Department for Work and Pensions, it should be new money, and it should perhaps be administered by the Treasury rather than the Department for Work and Pensions.
On the second point, I am not totally committed to the idea. So long as it is new money, I am not terribly worried whether it is the Department for Work and Pensions that disburses it, since it is certainly better at disbursing money than the Inland Revenue, except in the circumstances where the Inland Revenue collected money that it should not have collected.
The purpose of the amendment is to ensure that the commitment that the Chancellor gave for obviously political reasons actually benefits those whom the financial assistance scheme is designed to help, rather than be removed from the department's underspend and therefore not be available should anyone by any
662
chance suddenly understand some of the tax credits which they previously had not understood. I beg to move.
Baroness Hollis of Heigham: My Lords, as the noble Lord will know, I have to deal with the amendment as it is on the Marshalled List. Given that the noble Lord has greater experience of the Treasury than I have, I was surprised to be somewhat confused by the amendment. Perhaps it will help if we first see whether we have a shared understanding of the principles behind the government funding arrangements.
All government departments are voted funds so that they can implement the policies for which they bear responsibility. That includes the Treasury, which is voted funds singularly for its own policies, just like any other department. The Treasury does not have privileged access to public funds in this sense.
If colleagues in the other place agree to vote funds for the FAS, as the Government are expecting them to do, these funds will be voted to the Secretary of State for Work and Pensions. That is because the Secretary of State for Work and Pensions, my right honourable friend Alan Johnson, is responsible under the DWP Delivery Plan 2003–06 for delivering policy to,
"combat poverty and promote security and independence in retirement for today's and tomorrow's pensioners",
and because the department is responsible for meeting the costs of the programme which it adopts from within the resource made available to it for this purpose.
It is only by following this procedure, whereby Parliament votes specific funds to each Secretary of State, that we can ensure transparency for the public accountability of each respective Secretary of State. I therefore do not see how FAS payments could be made from the vote of the Treasury. That is not my understanding of how public finances work.
The noble Lord expressed the idea that because less is being spent on benefits—perhaps because unemployment is decreasing—the Government could use that, so to speak, spare money. It would not work like that. The noble Lord will know the difference between DEL and AME better than I do. AME is the annually managed expenditure of the department, which is responsible for benefits. That is an open-ended commitment because benefits are a right. If unemployment increases, that money will have to be paid. The Chancellor of the Exchequer or the Treasury will not then say, "You can have only 90 per cent of your benefit moneys for unemployment because we have rather more unemployed people than we first thought". Unemployment benefit is an entitlement and has to be met fully.
DEL, on the other hand, is the departmental expenditure limits which are cash-controlled within, for example, a three-yearly spending plan, within which the Government and the departments must manage their resources. As that sum is fixed and is not an open-ended commitment, it is included in DEL rather than AME. Therefore, the noble Lord's concern that this might be a

663
type of virement of underspent benefit money is not founded because of where the budget would fall. In other words, it is a capped commitment.
I hope that I have answered the noble Lord's questions and that he will feel able to withdraw his amendment.
Lord Higgins: My Lords, before the Minister sits down, can she say whether it is new money? Will it come from money that is not already in the Chancellor's overall expenditure plans?
Baroness Hollis of Heigham: My Lords, the Department for Work and Pensions has a substantial budget. Within the spending review cycle, it is not unusual for the department to reallocate resources internally in response to changing policy priorities or the emergence of a new priority. That is what the DWP has chosen to do to accommodate FAS in the 2004 spending review. In future spending reviews, the DWP will take account of the Government's promise that a total of £400 million will be made available for FAS from public funds. FAS is being designed to offer a worthwhile package of assistance to those who have suffered the most significant losses from within those funds. In that sense, the noble Lord's question cannot be answered in the way that he has posed it, but I have given the answer as best I can.
Lord Higgins: My Lords, that was a fascinating discourse for which I thank the Minister. I fear that, ultimately, the answer to the question of whether it is new money is probably, "No", but that it will be shuffled from some other part of the budget of the Department for Work and Pensions. In all events, it has been an illuminating discussion. I need to consider a little more carefully what the Minister has said and be a little more precise in my wording on the next occasion. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 269:
Page 235, line 29, leave out ", at such time as may be prescribed,"
The noble Lord said: My Lords, a constant theme of the proceedings on this Bill has been its inclusion of great chunks of detail of which we knew nothing—to a great extent, we still do not know. There has been general agreement among the Front Benches today that this is a skeleton clause. In my book, that gives skeletons a bad name, because at least archaeologists can discover an enormous amount about skeletons. On this occasion, we are very limited in our ability to discover anything. Before the noble Baroness opposite explodes, I should add that, on many, many occasions, there are very good reasons for that.
Having got that off my chest, I shall now deal with the three amendments, all of which probe the phrase,
"at such time as may be prescribed".
664
Under Clause 284(2), on the financial assistance scheme, a "qualifying member" is somebody,
"who, at such time as may be prescribed, is a member of the scheme in respect of whom the scheme's pension liabilities are unlikely to be satisfied in full because the scheme has insufficient assets".
I seek to establish the start date not of the scheme itself but of the pensioners, deferred pensioners and so on who will become eligible to be covered by the scheme.
Subsection (2)(b) states that a "qualifying member" is someone who,
"at such time as may be prescribed, had ceased to be a member of the scheme".
In other words, one assumes, the subsection refers to a deferred pensioner of the scheme. Will the start date be the same as I asked previously or is it some other time?
Again, subsection (2) states that a "qualifying pension scheme" is one,
"which, at such time as may be prescribed, is not—

(i) a money-purchase scheme, or

(ii) a scheme of a prescribed description".

A scheme of a prescribed description is the subject of another amendment, which I shall move shortly. Is that "time as may be prescribed" the same as the start date—in other words, the backdating of the eligibility for falling into the scheme—or is it some other time?
The Minister has given the impression that both Opposition parties are asking questions on their own behalf; in this case, we are not. We were originally led to suppose that 60,000 people were waiting on the noble Baroness's every word—everything that she could possibly say to describe the operation of the scheme. Since then, the figure has been revised to 63,000. The most recent estimate by the department is 65,000. For all we know, by the time the scheme starts—whenever that may be—there may be more.
Having listened to the discussions earlier, a point occurred to me about the fact that the £400 million is supposed to last 20 years. During the past 20 years there must have been several actuarial revisions of life expectancy. In the next 20 years, presumably, there will again be several revisions of actuarial life expectancy. Therefore, it is extremely difficult for the Government or anybody else to work out exactly what we are in for. In this case, I am prepared, as is my noble friend, to buy what I can only describe as a pig in a poke; but the more flesh the noble Baroness can put on to that particular pig, the less unhappy will those 65,000 members be. I beg to move.
Baroness Hollis of Heigham: My Lords, I shall do my best to answer some quite detailed questions. The noble Lord is right to say that they are matters of concern.
This group of three amendments all refer to the powers taken in Clause 284 to describe who would be a qualifying member for the purposes of the financial assistance scheme (FAS). In particular, each amendment seeks to remove powers that would enable regulations to prescribe time frames relating to aspects of member qualification. The clause is littered with regulations, precisely because it is a framework—the noble Lord does

665
not like the word "skeleton", so perhaps he would prefer the term "framework". I do not like the words "pig" and "flesh"; we need not go that far.
Noble Lords have already voiced frustration at the lack of detail. I shall clarify our intention in taking the powers that the amendments seek to remove, and illustrate the ways in which we would like to use them. I shall take them in the order in which they are laid.
6.15 p.m.
Amendment No. 269 removes the power to prescribe in regulations the time at which a member must actually be a member of a pension scheme, in order to be considered for financial assistance from the scheme. When the clause was introduced, it was deliberately dratted to support a wide range of options for the design and delivery of the financial assistance scheme. Noble Lords will note, for example, that subsection (3) enables the scheme to be set up as a trust or in some other way; and for the Secretary of State, a prescribed body or some other person to be scheme manager.
The power to which the amendment refers was included in case, as development work, data-gathering and consultation on the scheme progressed, there was a good case for limiting assistance to those who had been members of their scheme before a certain date—for example, before 6 April 1988, when employers could choose to make membership of their occupational pension scheme a condition of employment. However, I can assure the noble Lord that this is not now the approach that we intend to pursue. We do not intend to determine people's eligibility for the FAS based on the dates at which they were members of their schemes. I hope that that is helpful.
Noble Lords will appreciate that there remain very many complex and detailed points to sort out when drafting the regulations. We will seek the technical input of pensions industry colleagues to ensure that we have covered all bases for the variety of different situations in which winding-up companies find themselves. It is much messier and more complex than the "clean slate" enjoyed by the PPF. Given the unique circumstances of the FAS, where we are doing much of the detailed work and consultation after rather than before taking primary powers, it would not be prudent to restrict our flexibility to make as yet unforeseen technical adjustments by removing this power. As we originally intended, we do not think that we will move in that direction, but we want to ensure that we have the power to do so, rather than coming back to the House again needing primary powers.
Amendment No. 271 would remove our ability to prescribe in regulations that some people, who had been members of schemes at some point in the past, would not qualify for assistance from the financial assistance scheme. There are two reasons why members could have ceased to be members of a scheme. First, the scheme could have been fully wound up. Such a scheme does not, by definition, have any members at all. I assure noble Lords that we have always intended to allow people who were members of schemes that have already wound up to qualify for the
666
FAS. Indeed, the Bill recognises that. However, members could also have ceased to be members because they voluntarily transferred out of their scheme, whether the scheme has already wound up or not. It could also be the case that people voluntarily accepted transfer values that were reduced as a result of their scheme being underfunded at that point. That could have happened many years prior to the scheme starting to wind up.
However, the option has always been available to leave transfer values in the scheme in question—provided that they have been there for two years. We are still considering whether the FAS should offer assistance to those people. That includes considerations about how it might be administered and assessments of the potential impact on funds available to help scheme members who left their accrued rights with their scheme.
The amendment would prevent our prescribing that members who took a transfer value at some point in the past would not qualify for the FAS. We continue to explore whether we would like to use the power in the Bill that would enable us to do that.
Amendment No. 273, would remove our ability to prescribe dates on or by which a member of an occupational pension scheme must meet certain conditions in order to qualify for the FAS. For example, we would be obliged to include all scheme members irrespective of their age at a particular date thereby leaving smaller amounts of available funds to assist the older members who are in no position perhaps to rebuild. That would remove one way in which we could provide significant help to those who face the most significant losses.
It is an important principle that great amounts of assistance from the FAS are provided to those who are least able to make up their loss. Should all members of occupational pension schemes potentially qualify for assistance from the FAS, it would mean that the FAS would be forced to cater for cases where negligible, if any, assistance would be provided.
The negative consequences of such a situation should not be underestimated. The FAS would be forced to deal with possibly thousands of cases where the assistance to be provided potentially would be less than the costs of considering, the claims. They would be quite small sums such as £100 or £200. That would increase the administrative costs on the FAS, thereby reducing the amount available for assistance to older members, surely an undesirable effect. It would wipe out a sector.
I hope that my explanation of our intention in taking these powers has been helpful. I am sorry that I have spoken at such length, but I have gone into detail. I accept the significance of the amendments. I hope noble Lords understand the framework within which we hope to make use of the powers. With that extremely detailed explanation. I hope that the noble Lord, Lord Skelmersdale, will be able to withdraw his amendment.
Lord Skelmersdale: My Lords, before the Minister sits down may I say that one date that I have

667
established from the Minister's long and very helpful explanation is that the eligibility of the scheme will start some time after April 1988? I have no other clue whatever. Could the Minister go a fraction further before I withdraw the amendment?
Baroness Hollis of Heigham: My Lords, I did not even say that. At one stage we were going to say that it might be restricted only to people before 1988 and now we shall not bring such restriction into place. In our very early thinking months ago an argument was put to us that people had no choice because it was laid down as a condition of the job. Therefore, it was a question whether that should be a consideration as opposed to people who have more voluntarily entered an occupational pension scheme. That is why I hinged on that. I cannot go further at this stage: when I can I will. I am sorry.
Lord Skelmersdale: My Lords, even that does not hold out much hope of satisfaction for the 65,000 members of schemes who, we believe, will be affected and could be helped by the financial assistance scheme.
Baroness Hollis of Heigham: My Lords, if the noble Lord were to pursue this matter he could unintentionally do more harm than good. Issues as to whether or not we should have the de minimis rule for very small sums would be removed from the possibilities. As a result, one would end up with potentially more serious losers than gainers. I can understand the noble Lord's frustration. I urge him not to go after this issue. What we propose allows us to deliver the contours of a scheme that I hope will become apparent once we can make it possible.
Lord Skelmersdale: My Lords, of course all these areas have to have times. They will be prescribed, as the noble Baroness said. I believe she said that this clause is littered with regulations. At least they are all affirmative so we can have another go at them. That said, the noble Baroness gave me the impression that she was protesting just a fraction too much. I knew exactly what the amendments did, but I explained in my opening words, I hope, that I wanted to find out when. To that there came no answer. These were all probing amendments. The probe has been extremely unsatisfactory, but it is not an occasion for seeking the opinion of the House. If I thought it were, I certainly would. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 270:
Page 235, line 32, after "assets" insert "because of an insolvency event in relation to one or more of the participating employers or otherwise"
The noble Baroness said: My Lords, in moving this amendment I shall speak also to Amendment No. 272 which is grouped with it. The first amendment deals with the insolvent winding up scheme where the assets are insufficient to meet the liabilities of the scheme.
668
The clause, as drafted, neither rules in nor rules out the situation where the scheme winds up insolvently, but the employer itself is still solvent. His is the usual intended outcome of a Bradstock compromise. We had talked about Bradstock earlier in connection with an earlier section of the Bill where the trustees agree to take less than full payment of the debt properly due from the participating employers so that the employer or employers do not go bust, but as a consequence of the compromise the pension scheme's liabilities are not met in full.
The Bill as drafted requires the employer to meet prescribed requirements. This gives the Government the opportunity to include the Bradstock cases or to exclude them by statutory instrument. The purpose of the amendment is to provide explicitly that solvent employer/insolvent schemes are within the FAS.
Amendment No. 272 deals with very much the same sort of issue except that it deals with a situation where the wind up has already been completed. With that difference the issue is exactly the same. I beg to move.
Lord Skelmersdale: My Lords, I accept that clearly one cannot have a government compensation scheme which picks up the pieces of solvent employers. That is turning the argument the other way round to the one which the noble Baroness, Lady Turner, produced.
So far I agree, but why the words "or otherwise"? It seems to have been added for some strange reason. Perhaps the noble Baroness can tell me when she winds up her argument.
Baroness Hollis of Heigham: My Lords, I am glad to see that the noble Lord's stiletto is wielded in a fine sweep on the Benches opposite.
Amendments Nos. 270 and 272 relate to FAS treatment of multi-employer schemes. The amendments are worded identically. Amendment No. 270 applies to the part of the clause which defines qualifying members who are members of schemes at a prescribed date. Amendment No. 272 applies to the part of the clause which defines qualifying members who ceased to be members of schemes, either because that scheme no longer exists or because the member has taken a cash equivalent transfer value.
These amendments, as the noble Lord identified, would force the FAS to offer assistance to members of multi-employer defined benefit occupational pension schemes that have lost accrued rights in the event of their winding up, where one or more of the participating employers are insolvent. It is also worth noting, however, that due to the qualification "or otherwise" at the end of the amendments, the actual effect of these amendments may be that the FAS would have to offer assistance to members of all schemes whose entitlement is unlikely to be satisfied in full irrespective of solvency status. The noble Lord was right to home in on that because they are the danger words.
As I will make clear as we move through the clause, it is still to be decided whether members of schemes that are connected to solvent employers will be eligible for

669
assistance from the FAS. While we believe that solvent employers should support their schemes and provide the benefits that members were expecting, issues of employer solvency remain under consideration. One of the issues which we are considering is that the treatment of multi-employer schemes where participating employers are solvent or possibly where one is insolvent and others are solvent.
It may be helpful if I give some information on this. There are a number of different types of multi-employer schemes and there are different relationships between employers that may participate in these schemes. For example, multi-employer schemes may be set up by large groups of associated employers which belong to the same group of companies or they may be set up by separate employers within the same industry. In these schemes there may be no association between participating companies.
On the one hand, in structure, multi-employment schemes may be sectionalised or non-sectionalised. If they are sectionalised different sections of the scheme apply to different employers or groups of employers. On the other hand, in non-sectionalised schemes assets and liabilities are shared across the employers within that scheme. Thus the structure of these schemes and the relationship between participating employers is diverse. So while the amendments are helpful in highlighting the special circumstances of the schemes, given their complexity, it is obvious that one cannot simply use the FAS to make a blanket statement as to how we will approach their treatment.
6.30 p.m.
For example, while the responsibility for providing pension benefits in a sectionalised scheme might rest with a single employer, that responsibility is held by all employers when the scheme is not sectionalised. In that type of multi-employer scheme, all participating employers have in effect made a promise to fund the scheme.
Added to that, irrespective of the structure of the particular scheme, there may be groups of connected companies participating within a scheme that are able and willing to provide the pension benefits that members expect. It would obviously not be prudent to provide all members of those schemes with assistance on the basis of the insolvency of one of those connected schemes.
I could go on, but I hope that I have said enough to my noble friend. While we take on board those issues, they are extremely complex. We do not want a situation where other employers in an associated group could pick up the pension liabilities but choose not to because we have let them off, and it then comes to FAS. That would mean that there would be less resources for other people who fall under FAS where there is no opportunity to share that responsibility.
With that explanation, I hope that my noble friend will accept that we are considering those issues and will withdraw the amendment.
Earl Ferrers: My Lords, I hesitate to join this rather cosy party, but in the past 10 minutes the noble Baroness
670
has used the term "FAS" 13 times. I am sure that almost everyone knows what FAS is, but not all of us. It would be helpful if the noble Baroness would be kind enough to talk not in acronyms but in English so that we can understand what she is saying.
Baroness Hollis of Heigham: My Lords, perhaps the noble Earl, Lord Ferrers, may forgive me, but I cannot resist this: I just wonder whether the noble Earl has voted previously. If so, he has voted on amendments that refer to FAS. I am sure that he would not have voted for something that he does not understand. FAS stands for the financial assistance scheme, which we have been discussing for the past two or three hours in respect of the various amendments associated with it on which Members of your Lordships' House have expressed a view.
Earl Ferrers: My Lords, I am deeply grateful to the noble Baroness. She need not worry too much because I did not vote on that. But I am grateful to her for at least explaining what she was talking about for those of us who did not understand.
Baroness Turner of Camden: My Lords, I thank my noble friend for that detailed explanation, which I shall study with some interest in Hansard. The noble Lord, Lord Skelmersdale, raised the matter of the inclusion of the word "otherwise". This is a case where I can blame the lawyers. A draft was proposed to me by the union's lawyers who worked with the union on wording. Since I assumed that they would know more about the matter than me, I repeated their wording. But I should have looked at it more carefully, as the noble Lord, Lord Skelmersdale, clearly did.
We were talking about a number of employers participating in a scheme, part of which may be sectionalised. I accept that that can be a very complicated matter. But I fear that there may be quite a number of such schemes around currently where employers have merged and bring their own schemes into an overall scheme, and so on. That could provide some problems for the future. My noble friend the Minister has acknowledged that and has said that it is receiving consideration. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 271 to 273 not moved.]
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 274:
Page 235, line 43, leave out sub-paragraph (ii).
The noble Lord said: My Lords, I shall ask a question to which I suspect the answer will be, "I have not the slightest idea": I am quoting what I think that the Minister is about to say. Quite simply, which schemes will not qualify? Under Clause 284(2), a
"qualifying pension scheme … is not … a scheme of a prescribed description".
In other words, what will not qualify?
I was more than a little surprised—in fact, I was horrified—to hear the noble Baroness say that there might be a case for having a solvent employer with an

671
underfunded scheme eligible for the FAS. That is what I understood her to say in part of her response to the noble Baroness, Lady Turner.
However, I suspect that I will not get a reasonable answer, but I shall still move the amendment. I beg to move.
Baroness Hollis of Heigham: My Lords, I hope that I will be able to help the noble Lord. The amendment would extend the potential range of schemes that could qualify for inclusion in the FAS to any occupational pension scheme that is not a money purchase scheme. The purpose of the clause is to ensure that schemes that qualify for the FAS would have similar characteristics to those that will be eligible for the PPF. That is still our intention.
Although the PPF has not yet set out precisely which schemes or descriptions of schemes will not be eligible, it can be expected that this will include those types of scheme that will be excluded from the new scheme specific funding regime, which was formerly the MFR (minimum funding requirement). On the assumption of a read across—therefore, who would be excluded—that is because those schemes already have an existing framework that provides a high level of security. One example of that is schemes where there are fewer than two members, where the sole member might be expected to monitor the funding level of their scheme.
In my second example, the FAS would also, by this amendment, be forced to help schemes that have not been tax approved. Those are generally established for highly paid employees, such as senior executives, and supplement the benefits that they will receive from approved schemes. The noble Lord asked who would be excluded. I have given two examples, which I hope he will think is enough.
Lord Skelmersdale: My Lords, things are improving just marginally. However, in answer to two successive amendments, I suggest that the noble Baroness has said rather different things. Just now, she said to the noble Baroness, Lady Turner, that the Government were considering whether solvent employers with underfunded schemes would be covered by the FAS. She is now saying that the PPF rules will almost invariably apply. The point about the PPF is that we are talking about employers who have gone broke with underfunded schemes.
The noble Baroness cannot have it both ways. Clearly, I shall have to read today's debate in Hansard even more carefully than usual and decide whether to sort this problem out at Third Reading. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 275:
Page 236, line 2, leave out "and"
The noble Baroness said: My Lords, in speaking to Amendment No. 275, I shall speak also to Amendments Nos. 277 and 281, which apply to
672
Clause 284. Amendments Nos. 275 and 277 would allow regulations to set a time limit within which schemes and members of fully wound-up schemes are required to notify FAS of their existence in order to be assessed to see if assistance may be provided in respect of those schemes.
It is important that the FAS is aware of all schemes in respect of which assistance may be provided within a reasonable time period. Otherwise, it would have to make contingency arrangements to meet an unknown number of possible future claims. That could have an adverse effect on budgeting arrangements and administrative costs.
It is quite common for such time limits to be set when claims are made for compensation or assistance that is not of an ongoing basis. We did that in the review of pensions mis-selling and the miners' compensation scheme, which were administered by the DTI. Unlike those two examples, the FAS will provide assistance rather than compensation. Therefore, it has greater justification for managing a limited budget through imposing a scheme notification period.
The details that would need to be provided as a result of the amendment would be minimal and merely relate to the scheme's existence. As part of the current data collection exercise, many schemes have already provided those details to the DWP. It is not our intention to require schemes to do them twice over, but we need to do it in that way.
Amendment No. 281 would allow, if required, regulations to set up procedures in connection with reviews and appeals against determinations made in relation to the FAS, and in connection with the investigation of complaints of maladministration against the scheme. It would also allow a body to be established, or for a person to be appointed, specifically for this purpose.
Noble Lords will be aware that we are still developing the details of the financial assistance scheme. This amendment would enable us to determine and put in place review and appeal arrangements which are congruent with Article 6 of the European Convention on Human Rights.
I hope that I have described in sufficient detail what these amendments seek to do and I ask noble Lords to support them. They are of course benign. I beg to move.
Lord Higgins: My Lords, I am most grateful to the noble Baroness for that explanation. I understand that one of the amendments is concerned with appeals and so forth, and one with the collection of data. Is it not rather strange that these amendments are being introduced at this stage in the proceedings? There were opportunities earlier in Grand Committee to bring forward this kind of amendment. I am not sure why they have turned up at such a late stage. Perhaps the noble Baroness could let us know the reason.
Baroness Hollis of Heigham: My Lords, I do not have an easy answer. In terms of the appeals procedures, I suspect that that may have been due to

673
an oversight. On the collection of data, I think that we realised after further scrutiny that we had not provided for a time limit in a way that does not apply to the PPF. This is one issue where we will not have an exact parallel and therefore we needed to take specific powers.
On Question, amendment agreed to.
Lord Skelmersdale: My Lords, before we move on, given that we are so close to the witching hour of a quarter to seven when we are supposed to take the next Statement, would it not be sensible for us to break now?
Lord Grocott: My Lords, I have a sense of the meeting although I was not in my place. I think that we are all agreed that we should take the second Statement now.
I beg to move that further consideration on Report be now adjourned. In moving the Motion I should remind the House that we shall return to consider the Pensions Bill no earlier than 8 p.m., although of course it may be later than that.
Perhaps I may remind the House of what I said earlier. We shall move from the Statement straight to the Motion tabled in the name of the noble Lord, Lord Lester. Since we cannot predict exactly how long these two pieces of business will take, I move that the House should not return to further consideration on Report any earlier than 8 p.m.
Moved accordingly, and, on Question, Motion agreed to.

Regional Referendums
6.43 p.m.
The Minister of State, Office of the Deputy Prime Minister (Lord Rooker): My Lords, with the leave of the House, I shall now repeat a Statement made earlier in another place by my right honourable friend the Deputy Prime Minister regarding the elected regional assembly referendum held in the north-east. The Statement is as follows:
"With permission, I would like to report to the House on the regional referendum in the north-east held last Thursday.
"May I first congratulate Ged Fitzgerald, the Chief Counting Officer, and his staff across the north-east, who ran such a well organised poll and count. I also want to thank the police, the Post Office and the Electoral Commission for their cooperation during the referendum.
"Turnout at nearly 48 per cent was a great deal more than many people expected, and has shown that all postal voting can be extremely successful when the ground is well prepared. The ballot was conducted successfully without witness statements and the turnout has increased considerably. It was higher than the turnout in the European elections in the north-east, at 42 per cent; higher than in the
674
London referendum at 34 per cent, and very similar to the Welsh referendum at 50 per cent. I am sure that the Electoral Commission will want to reflect on this.
"Throughout the referendum, the Government have made it absolutely clear that the decision whether to have elected regional government rests with the people. It is their choice, their say. Our policy of devolution set out in our manifesto means giving power to people in our nations and regions so that they can set their own priorities and make more decisions which affect their lives.
"As a result, London now has city-wide government and a Mayor powerful enough to run a global city. The Scottish Parliament enables the people of Scotland to make key decisions without recourse to Westminster for the first time in hundreds of years. The Welsh Assembly has given the Welsh people a powerful new voice to create jobs, prosperity and social justice. Each of these new bodies was voted for by the people and has since proved to be very popular.
"It is worth remembering that proposals for Scottish and Welsh devolution failed to win public support in the first referendum held in 1979, only for the situation to be reversed 20 years later in a new referendum.
"Last Thursday, 4 November, we offered the people of the north-east the chance to benefit from an elected regional assembly. Voters in the region decided by a margin of 78 per cent to 22 per cent that they did not want this, and of course we abide by their decision.
"I confirm to the House that the result of the referendum means, first, that the Regional Assemblies Bill will not be introduced in the coming Session of Parliament; secondly, that under existing legislation there can be no further referendum on regional assemblies in the north-east for at least seven years; and, thirdly, let me make it clear that despite speculation, there will be no reorganisation of local government in County Durham or Northumberland arising out of this referendum result.
"This now raises the question of whether to proceed, as we previously intended, with referendums in the north-west and in Yorkshire and the Humber. We have reflected on the outcome of the referendum in the north-east. We also made it clear that referendums in the north-west and Yorkshire and the Humber would have to wait until the Electoral Commission has completed its work on the 'new foundation model for voting'. This is not due to be published until the end of March 2005. The Electoral Commission has also said that there should be no electoral pilots using the new model until at least September 2005. But in the mean time, under the legislation, our ability to hold referendums based on the current soundings exercise runs out in June 2005. We would therefore need to conduct a new soundings exercise and bring orders to call the referendums before both Houses of Parliament under the Regional Assemblies (Preparations) Act 2003.
"All this would result in a long period of uncertainty for local government in the two regions, which we do not think is acceptable. I will therefore not be bringing forward orders for referendums in either the north-west or Yorkshire and the Humber. If and when, in the future, a region does want to move ahead with a referendum, the House will have plenty of notice of that event.
"I do not want to underplay the importance of last week's decision. But the House should remember that elected regional assemblies are just one part of a wider programme of devolution and decentralisation in England. For a decade or more it has been recognised that there are issues which must be dealt with at a regional rather than a national level, but which need to be co-ordinated over an area larger than any single local authority.
"That is why the party opposite established the Government Offices for the Regions in 1994, and rightly so. We have since strengthened the Government Offices to include more central government departments. We also created the regional development agencies in 1998 as economic powerhouses for their regions. The English RDAs have created or safeguarded more than 160,000 jobs over the past two years alone, and have played a major part in reshaping our regional economies.
"The House will also be aware that every English region was given the choice in 1998 to have a voluntary regional assembly composed of representatives of local government, business, trade unions and other representatives of the wider community. All eight regions chose to have one of these voluntary regional assemblies. All parties are represented on them, and some are even chaired by Conservatives.
"The voluntary assemblies have an important influence on housing, planning, transport, economic development, skills and training in their region. These regional bodies play a co-ordinating, strategic role with the full involvement of local authorities and other representatives of the region.
"The successful Northern Way initiative, launched in February this year, is a good example of the benefits of this approach. The RDAs and their partners in the three northern regions are working together to create more jobs, more prosperity and greater social justice.
"The Northern Way has been warmly received and has really energised the people in the three northern regions. It is one example of how, across the country, regional structures and initiatives will continue to work for the benefit of the regions with the full support of this Government.
"Our continuing agenda of reform and devolution to local government is equally important. This was evident in July, when we launched our document, Local Vision, beginning an extensive consultation about the future of local government.
"It means allowing more decisions to be made in local communities. Along with the modernisation and reform of local government, we have taken
676
several steps to devolve decision making to local authorities. We have removed restrictive controls on local authority borrowing; we have given local authorities greater power to promote the well being of their communities; we have given them freedoms and flexibilities to deliver better services; and we are piloting local area agreements which will streamline funding from Whitehall so that spending can better reflect local priorities, determined locally. All of these measures have been warmly welcomed by the local authorities concerned.
"Our agenda for reform, change and modernisation means we will continue to decentralise and devolve power wherever we can. We have already done a lot, and there is more to do. We have already brought economic stability, lower unemployment and lower inflation—and our commitment to delivering the best possible future for all the regions remains as strong as ever".
My Lords, that concludes the Statement.
6.51 p.m.
Baroness Hanham: My Lords, I thank the Minister for repeating the Statement made in the other place.
On an earlier occasion, when he was required to announce that the Deputy Prime Minister had made a decision to drop the referendums in the north-west and Yorkshire and Humberside—because it was as plain as a pikestaff that the Government would lose—I suggested that the noble Lord might be embarrassed at having to make such a statement. He denied it emphatically and he denied that he was ever embarrassed. But he should be today. The whole of the ministerial team of the Department of the Deputy Prime Minister, including the noble Lord the Minister, have been extolling the virtues of elected regional government—a policy which has now spectacularly blown up in their faces thanks to the good sense of the electors in the north-east. Theirs was a total and emphatic rejection of the Government's regional policy.
It cannot be stressed enough how overwhelming was the margin of the Government's defeat. The figures speak for themselves: 696,519, or 78 per cent, voted against a regional assembly; 197,310, or 22 per cent, voted in favour. That is a substantial rejection.
To give him his due, the Deputy Prime Minister does not try to say that this is a partial endorsement of regionalism or elected regional government. He sees, as well as we can, that the people of the north-east—and it is the people, not the politicians—have spoken, and they have spoken clearly against elected regional assemblies.
They knew that they were being sold a dummy. They could not be fooled into believing that the assemblies would have meaningful powers devolved from central government; rather that the reality was of responsibilities being sucked away from local government. They sussed out that the assemblies would have no powers, would bring more highly paid politicians with little to do, more bureaucracy, higher council tax bills and that the well tried and tested structure of local government would be

677
destroyed. It is little wonder therefore that they chose the only viable option open to them and voted in droves to reject such an ill-judged and half-baked idea.
All of this—I do not want to dwell on it too long—was rehearsed as being the reality of the outcome of the Government's regional policy over and over again in this House and in the other place. But the Government did not listen and now have only themselves to blame for the result they have now achieved.
The Deputy Prime Minister, having read the runes, now opines that he will not be bringing forward orders for referendums in either the north-west or Yorkshire and Humber—a truly inspired and wise decision, particularly, as he acknowledges himself, since he now has little authority to do so. Equally, as demonstrated, there is no electoral support for doing so. This policy is a duck so dead that it has mortified.
In light of the clear indication from the north-west and Yorkshire and Humberside, it is time to ask some searching questions about the whole fiasco. In going forward with this policy in this one region, were the Government aware that the Electoral Commission would spend more than £100,000 of taxpayers' money on the accredited "Yes" and "No" campaigns? Were they aware that the Boundary Commission would spend a further £6 million on publicity and an unnecessary complementary local government review? Were they aware that the Minister's department would spend another £5 million on advertising its "Your Say" campaign? Were they aware that unknown sums would be spent on supporting visits by Ministers to campaign in the region?
Taken together, the minimum cost to the Exchequer of one regional referendum campaign was around £ 11 million. Does the Minister appreciate that for this money the north-east alone could have employed an extra 518 teachers, an extra 382 policemen or paid for an additional 2,450 hip operations, or the Deputy Prime Minister could have bought 227—and a half—brand new S-type Jaguars.
With this rejection of regionalism, will the Minister confirm that the Government will not embark on any new plans for new legislation for any form of regional government?
In his Statement the Deputy Prime Minister drew attention to the fact that the previous government created the Government Offices to co-ordinate issues over an area larger than any single local authority. Indeed, but it was to co-ordinate the work of government departments as outposts, not to create and oversee planning strategy, not to impose policies such as the siting of hundreds of thousands of new houses, and not to manage the fire service.
Therefore, will the Government now say that regional fire authorities, regional housing boards, regional transport bodies, regional planning bodies, together with all the other regional quangos and nonelected bodies, will be restored to the current and proper structures of local government?
Local government needs to be acknowledged for the work that it does, given the tasks to do and the wherewithal to do them. The Government need to be
678
far more forthcoming about devolving more responsibility under the current structures of the bodies I have outlined. They need to recognise that the reversal they have suffered over this flagship policy is not just a little problem to brush over and pass on. The north-east electors can rejoice, but the Government cannot.
6.58 p.m.
Baroness Hamwee: My Lords, I, too, thank the Minister for repeating the Statement.
One must acknowledge that the Government started their devolution programme seven years ago with great energy. The result last week may have something to do with that energy appearing to have run out. The Deputy Prime Minister referred to devolved government in the city region of London, in Scotland and in Wales. Indeed, although the Welsh would like more powers and although he said that London has a Mayor powerful enough to run a global city, I do not think the Mayor or many members of the Greater London Authority would consider their powers nearly wide enough. They want powers as great as those which were on offer to the north-east.
One of my disappointments about the result is that we will not have the vehicle with which to argue that powers for the current devolved governments might be widened. That is an opportunity we will have to seek elsewhere.
The Deputy Prime Minister talked eloquently about the programme of devolution that is encapsulated in the quangos. That is not devolution, it is decentralisation. The term "co-ordination", which the noble Baroness has just used, is very telling. It is the co-ordination of central government policy at a regional level rather than true devolution.
The government offices have been mentioned. The Government Office for London has grown since devolved government was put in place. Having said that, I hear what the noble Baroness said about devolving powers down to local government. I cannot resist saying that this comes well from the Conservatives. They are comfortable with government from the centre, but I think that all of us—I include the Conservative Benches—need to recognise that devolution will not go away. It will not go away, in part because of the existing regional bodies which are not democratically elected.
Our sadness is that the Government have failed to pursue the regional agenda with sufficient enthusiasm, which must have, inevitably, communicated itself to the electors, along with the lack of powers on offer.
The campaign was inadequate; no message is much easier than that advocating a new body, but even its proponents seemed to have relatively little faith in it. I cannot help drawing comparisons between this campaign and the seven and a half years in which the Government have failed to campaign for the European ideal. We believe that that is wasted time, too.
I have heard from those who have been closer to the north-east campaign than I was able to be that although turnout was indeed respectable—it is,

679
however, a sad reflection that we think 48 per cent respectable—the postal ballot was regarded as something with which people were fobbed off. They thought that it was not good enough for the other two regions, but it was used for theirs. I remain sceptical about relying on mechanistic measures to deal with turnout.
It is incumbent on all of us who believe in regionalism to apply our minds—and I do not mean that we should dismiss the voters' verdict on this proposal; far from it—to advocating the democratic way. We on these Benches are prepared to explore what we might do to support a good regional delivery over the next few years.
I suspect that in years to come academics and commentators will be looking at what has happened in the past week in the context of attitudes to government generally. The irony is that perhaps the people of the north-east simply did not trust government enough to feel that this was a robust enough proposal for them to support.
7.3 p.m.
Lord Rooker: My Lords, the noble Baroness, Lady Hanham, asked me about embarrassment. No—what she misunderstands is that we spent a lot of time extolling the virtues of letting the people decide. I know that that sticks in the craw for the Tories, but that is what we did. The White Paper was called Your Region, Your Choice; what we extolled was letting the people decide, and they have decided that they do not want what is on offer. I freely accept that. But the people decided that, which makes it a more substantial decision.
The noble Baroness asked me a series of questions about whether the Government knew that the Boundary Commission spent X, the Electoral Commission spent Y and our department spent Z. The answer is yes—of course we knew what was being spent. The figures she quotes are correct; they are subject to public examination. There is no problem about that. It is a bit unfair to say that the overall costs should be divided by the one referendum in the north-east, because some of that expenditure covered the soundings for the other two regions, such as the information campaign. But that is a minor point.
Yes, that money could have been spent on other things, but I am not taking any lectures about an increase in the number of teachers and police officers under this Government from the Tory Party, which usually opposes us every time we try to increase services. If you are going to ask the people to make a decision, you have to make the money available. It will cost something. Pro rata, it probably cost less than London, which looked cheap because there was a population of 8 million to divide it between. Running a campaign to enable people to make a decision costs money—it cannot be done for nothing. That is part of getting a good decision; the decision is the people's, so it has to be a good one.
680
The noble Baroness also asked whether we will make changes to the regional boards and the voluntary regional assemblies. They were set up on a voluntary basis—the Government did not force any of the regions to do this—and, as I have already said, some of them are chaired by Conservatives. The answer to that is no. However, we have tried to learn lessons from the past, when local government was abolished by the Tories—the GLC, the metropolitan counties and the Royal County of Berkshire, I think. They never asked anybody beforehand, they just rammed the measures through Parliament. They thought they knew best, rather than asking the people, which, as I have said, I think is probably a good idea.
With regard to the comments of the noble Baroness, Lady Hamwee, I am not going down the road of the euro. There is a point about decentralisation and devolution. Both terms are used in the Deputy Prime Minister's Statement. It is true that government offices are there to co-ordinate central government policy in the regions. We have tried to make sure that it is more joined-up than it was. I am not saying that it is perfect, because it is not. But there were only three such departments to start with, and something like 10 are now involved at the regional level in the government offices. It is much better when it comes to a more joined-up, seamless policy, but it is the co-ordination of central government policy for the regions. I do not deny that. It means that for the foreseeable future there will be quangos, which is not a dirty word.
The regional assemblies consist of elected councillors, business, trade unions and other bodies doing a good job for their community. We should leave it at that for the time being. They are fairly new bodies anyway in the scale of things, and I am glad that the Deputy Prime Minister's Statement has been greeted with such acclaim as a sensible decision based on last Thursday's vote by the people.
7.8 p.m.
Lord Waddington: My Lords, will the Minister, who is well known for being fair-minded, bring himself to concede that the Deputy Prime Minister was, to put it mildly, foolhardy in pressing ahead with his plans for referenda when his own soundings exercise showed minimal support? I remind the noble Lord that only 323 individuals in the whole of the north-east said that they wanted a referendum.
Will the Minister publish details of the cost of the whole of this dismal exercise? That includes the cost of the White Papers, the preparation and passage of the legislation, the soundings exercise, the local government reviews and the north-east campaign? Is it not a crying shame that there is no machinery whereby the Deputy Prime Minister can be surcharged and made to pay back some of the money that he has squandered on this wholly irresponsible exercise? Will the Government now scrap the whole farce of regional government, including the unelected regional assemblies, and concentrate on real devolution to existing units of local government?
Lord Rooker: My Lords, that is an excessively trivial question from the former Conservative Minister. All

681
the costs that he has just requested are from public money, which is in the public domain, either in Government statements, Parliamentary Questions, and perhaps even in Select Committee. There is no hidden expenditure. One may disagree with it, but we cannot ask people to make a decision on the cheap or for nothing.
The Lord Bishop of Newcastle: My Lords, the referendum result in the north-east showed that the people of that region were not convinced by the offer on the table. The north-east is a region with a strong identity. We have a strong sense of who we are. It is the land of the northern saints. The people of Northumbria—if I dare call it that—are suspicious of innovations, especially if they think they will not make a significant difference to their lives. As someone who lives and works in that region, I understand that the proposals did not give any significant powers to the Assembly. There was considerable fear that it would become nothing more than an expensive talking shop, which would do little to address some of the deep-seated economic and other problems that the north-east faces.
I live and work in the city of Newcastle, which, as the regional capital of the north-east, is an exciting, vibrant and thriving place. But get past all the visible signs of really good and often culturally led regeneration and one will still find some of the most deprived estates and some of the most deprived former pit villages anywhere in the country. They are places that, in a sense, have lost their raison d'être.
The limited powers that would have been given to the proposed Assembly were not such that convinced the people that they would make a difference. We still have double the national rate of unemployment in the north-east, and there is little sign that that will change in the immediate future.
If the Government are serious about plans for regionalisation, devolution, decentralisation or regional government, I urge them to rethink their policy. They should come back to the people only if they are prepared to give significant power to the people of the regions. I believe that if the people in the north-east had felt that they had been given a real opportunity to exercise some real power to shape their own destiny, the vote might well have been very different.
Lord Rooker: My Lords, the people of the northeast will not be troubled again on this issue for at least seven years. That is what the Statement said and what the legislation requires.
I fully accept what the right reverend Prelate said about Newcastle. I am told when I am in the area that I have to look at Newcastle and Gateshead together as a whole. There has been a renaissance beyond belief, compared with what was happening 10 or more years ago. One of these days our London-centric press will find out about that and the countryside of Northumbria. We shall have to make sure that they do not wreck it.
682
I freely admit that the people did not like what was on offer and they have spoken. That is their choice.
Lord Hanningfield: My Lords—
The Earl of Onslow: My Lords, I was up first. Could the reason why the proposal was turned down be that people looked at devolution in Scotland and Wales and found it wanting? Is it not also true that the Government were completely misinformed about the general state of opinion? If they had had any idea of how people were thinking, they would not have held the referendum if they thought they would lose at that level.
On the issue of local government, the counties and boroughs should have the power. That is the old system and one that Ethelred the Unready got right when he abolished the heptarchy and created the shire system. That has stood the test of time. Let us not adopt newfangled ideas that do not work, but give power properly to the local authorities as opposed to using them as agents of government. We should allow them to raise their own taxes when they have to so that they are responsible to their people for the money that they spend. We should do it through the old and well tried system of local government rather than adopt newfangled ideas that were thought dotty by Ethelred the Unready.
Lord Rooker: My Lords, that was a much more thoughtful question that that of the noble Lord, Lord Waddington, especially the point made by the noble Earl about local government.
There is not time to go through it, but the Statement gives examples of what we have done to devolve issues to local government. On borrowing, there is much more freedom in local government to do things for the well-being of the community rather than only doing things that are set out in Acts of Parliament. It will become apparent in the near future how much more freedom local government has. It is true that people in the north—in two counties anyway—had a choice that if it were to take place it would be done only on the basis of unitary government. We did not want to impose an extra layer of government, and understand the consideration and complaints on that.
It is up to the people of Scotland and Wales to say what they think of the Welsh Assembly and the Scottish Parliament. But, as a complete outsider, I venture to say that given a choice they would not want to go back to the status quo prior to 1997.
Lord Shutt of Greetland: My Lords, this has been a very sad occasion indeed because the proposition was timid in the first place. I do not want to say, "I told you so", but I did. There has been no enthusiasm and the whole thing has been loused up by the local government changes that were to go alongside it.
This has nothing to do with local government, but is about devolving from the centre to the regions and taking matters away from quangos to give to proper elected bodies.

683
I also think that it was a matter of timing, which was hinted at by the noble Baroness, Lady Hamwee. The publication of the salaries and emoluments of Members of Parliament came at the same time as the ballot papers, and people may have thought, "We are paying enough. We don't want another crowd", even though great goodness could have come from that group of elected people.
It is also very sad that for a strange reason people may have referendumitis. I do not understand why, but that genie is out of the bottle. If that is so, we are told that we shall have to wait 20 years. I shall be 82 in 20 years' time. It beggars belief. I had hoped to see devolved government in my lifetime. But only 22 per cent voted on what some of us believe were the right lines, so does the Minister have any ideas on how that corner will be turned, whether it is 20 years or somewhere between seven and 20 years? What will light up the debate so that people will say that there is a good case for democracy at the regional level? Does the Minister have any ideas about that?
Lord Rooker: My Lords, no, but in your Lordships' House, there is nothing wrong with being 82. I hope that in 20 years we are still here debating this issue. I suspect that we probably will be. That is the only controversial thing that I shall say tonight.
During the debates on the Bill, I remember the noble Lord, Lord Shutt, saying that we had not gone far enough with the legislation. He said that he wanted to be enthused. We failed to enthuse him, as he rightly said. The hares are set off running—
The Earl of Onslow: My Lords, will the Minister abolish chasing them?
Lord Rooker: My Lords, not if I have anything to do with it.
The powers were coming not from local government but central government. Those powers are currently being exercised by unelected quangos, some of which consist of directly elected politicians, but they are there on a representative or delegatory basis. We were basically collecting them together so that for the people in the region there would be an elected, democratic element in some of those decisions. We were not taking the powers from local government; they were powers that we were letting go from the centre.
Lord Grantchester: My Lords, I have two questions for my noble friend, in the spirit of moving forward. In doing so, I declare an interest as the director of the Cheshire and Warrington Economic Alliance.
My noble friend drew attention to the RDAs and the good work that they do. Can he say what plans the Government now have to make RDAs more democratically accountable? He also drew attention to the Northern Way. It is my understanding that it will focus development initiatives on cities; can my noble friend say how that will not act to the exclusion of rural
684
areas? There is anxiety in Cheshire that that may be the case, as there is no city within the regional or sub-regional area, but a network of strong market towns.
Lord Rooker: My Lords, the answer to my noble friend's first question is that we need a period of reflection. The fact is that the referendum result has ruled out the plans for democratising some of the quangos, which include the RDAs. That was what was on offer. My noble friend asks how we will make them more democratic—well, it will not be by direct election, that is for sure. We need a period of reflection, but what has happened has put that democratisation on the back burner. I cannot give any other impression.
On the point that he made about cities, there is a host of schemes and programmes on at the moment, one of which is the "core cities" scheme—or, as it prefers to be called, the "city regions" scheme, for the eight city regions of the country. Those city regions would not include the particular area that my noble friend mentioned, but they do include the rural hinterland around those cities, because an interaction is perceived between the city and the hinterland. I know that to be the case, because I visited three or four of them in the summer as part of a city regions exercise by Ministers.
With those activities, one must take account of the areas not covered by the city region, which will essentially be rural areas and market towns. I do not want to be glib about this, but the work of the Market Towns Initiative and the other work that we have underway as part of the plan will ensure that the rural areas are not left behind. The communities plan is not a south-east plan or an urban plan; it is a national plan, for the north, south, east and west of England, and is both rural and urban at the same time.
Lord Hanningfield: My Lords, I ask my question tonight as the leader of a local government with more than 30 years' experience, rather than as a Front-Bencher in this House. I agree with what my noble friend Lady Hanham said and with what my noble friend Lord Onslow said, despite competition over who was going to speak.
In this country, we have no regions—England is England. There was one potential region, which was the area based around Newcastle; if anywhere was going to vote for a region, it was that area. I would have said that at any time when I have been involved with local government. The rest of the regions are artificial, and no one will ever vote for them. If they would not vote for the north-east, they will never vote for any of the others. All the countries that have regional government have historical regions. No government of any kind can invent regions and get people to support them. England is a country of 2000 years' history, and people will not support artificial regions. We have counties, and our counties are bigger than the average region in Europe. The county that I lead, Essex, has 1.5 million people and is bigger than the average European region.
I believe passionately in devolvement to local government. I have argued with my own party on the matter and, fortunately, a future Conservative

685
government would have a totally different policy from past Conservative governments on devolvement to local government, particularly if my noble friend Lady Hanham and I had anything to do with it. It is very important that we support the local government that we have and devolve powers and money to it, so that it delivers services. We should all be passionate about local government. Regional government was never going to solve problems with education systems, care for the elderly or anything like that—it is local government that can do that.
What concerns me about all this is that the Labour Government will now say, "Well, we have dropped our regional policy, so let's go ahead and reorganise local government". That is what the Conservative Party did, and I was opposed to the Conservative Party suggesting that we should reorganise local government. The United States has had the same system of local government since the declaration of independence, for 200 years. Most European countries do not reorganise local government. We have a passionate desire in this country to reorganise local government every 15 years. So please let us get on with delivering services. The Minister said that the Government would not reorganise Durham and Northumberland because of the ballot, but I would like an assurance that there will be no local government reorganisation and that they will be committed to local government and to delivering services to our people. That is what it is all about.
Lord Rooker: My Lords, anything I say at the Dispatch Box seems not to convince other parliaments or governments. We have no plans; what was on offer was tied intrinsically to the decision to have an elected regional assembly. We have made it absolutely clear that what was on offer in respect of local government in those regions would not happen if there was a "no" vote and that there would be no further reorganisation of local government at all. We have no plans in that regard.
I do not disagree with much of what the noble Lord said about some of the issues relating to local government. There are better relations between central and local government now than there have been before in my experience, from 30 years' service in the other place and my short service in this place. We are working extremely well together, in partnership. We have given local governments more freedoms and powers, so that they are not operating just as agents of central government, which would go right against the idea of a degree of independence for local government. There are far more freedoms and flexibilities now, and we hope that they are put to good effect in the near future.
Baroness Maddock: My Lords, in line with my noble friends, I am very disappointed about what has happened. It is particularly disappointing, given that it was Britain that set up in Germany after the war a very good devolved system of government, precisely to stop power being centralised. Yet we have somehow failed to do that in our own country, through a lack of enthusiasm. The other point that I feel most sad about
686
is that people have become very cynical about politicians and democracy itself. We need to think how we can enthuse people back into thinking that democracy and accountability are important.
I have two questions for the Minister. I have lived in the north-east for four years, having lived in the southeast for most of my life, so I know how forgotten that corner of England is. I relate very much to the remarks made by the right reverend Prelate the Bishop of Newcastle. Even when we were discussing how the postal ballot would work, the Minister told us that there would be drop-off points in every constituency for every 50,000 people. In Northumberland, that means absolutely nothing; people would have to go 30 or 40 miles to vote. That just illustrates how people do not understand the problems of the north-east. Do the Government have any plans to ensure that the voices of people in places that are farthest from London and our Westminster village are heard?
Secondly, in the planning Bill that went through this House, planning powers were not taken down from central government but up from the counties. I think we are owed an explanation from the Minister about what the Government will do about that.
Lord Rooker: My Lords, I do not know the turnout to the exact decimal point, but it was something slightly over 47 per cent. I have not read, heard or been briefed on any complaints from people who could not drop off their ballot paper if they wanted to do so in person. There was a postal ballot, but if people wanted to take their ballot paper to the returning officer or polling station, we made sure that was available. That was consistent with the pilots for other postal ballots for local government, and the turnout was substantially higher than what we would normally get in local government.
On the noble Baroness's second question. I have to disappoint her. There is an, ongoing debate on the matter, and it is true that the structure plans from the counties will be done on a regional, spatial planning level. However, planning decisions as Mr and Mrs Public understand them—in other words, who decides whether a planning application is agreed or disagreed—remains with the local authority, the district council.
Lord Kilclooney: My Lords—
Lord Evans of Temple Golfing: My Lords, it is a time limited debate and the 20 minutes is up.

Nationality, Immigration and Asylum Act 2002 (Specification of Particularly Serious Crimes) Order 2004
7.29 p.m.
Lord Lester of Herne Hill Lord Lester of Herne Hill rose to move to resolve, That this House calls upon Her Majesty's Government to withdraw the Nationality, Immigration and Asylum Act 2002 (Specification of Particularly Serious Crimes) Order 2004 (S.I. 2004/1910), laid before the House on 22 July, and to lay a new order which is compatible with

687
the obligations imposed upon the United Kingdom as a Contracting Party to the Convention relating to the Status of Refugees (1951).
The noble Lord said: My Lords, this order was laid on the last day before the Summer Recess. This is the first opportunity to debate its lack of compatibility with the UK's international obligations under the UN refugee convention. My colleague, Mark Oaten, MP, initiated a similar debate in the Commons earlier today. I do so both in a personal capacity and as a member of the Joint Committee on Human Rights.
Our committee published a report last Wednesday expressing our concern that the order as drafted is outside the lawful scope of the order-making power. The power to make the order was conferred by Section 72(4)(a) of the Nationality, Immigration and Asylum Act 2002. Section 72 says that it applies,
"for the purpose of the construction and application of Article 33(2) of the Refugee Convention".
To be lawful, any order made under this power must therefore be compatible with the refugee convention.
The relevant provisions of the refugee convention are Article 33(2) and Article 1F(b), the text of which is set out in paragraphs 17 and 19 of the JCHR report which is in the Printed Paper Office. Appendix 1 to the JCHR report contains a valuable memorandum from the Refugee Legal Centre. Appendix 2 sets out 10 questions contained in a letter from the chair, the right honourable Jean Corston MP, to Des Browne, MP, Minister of State at the Home Office. Mr Browne replied with commendable speed in a letter of 4 November. The Minister's letter is also available in the Printed Paper Office.
The UN High Commissioner for Refugees (UNHCR) has expressed its grave concern about this very important issue. Its views are of particular importance. UNHCR is responsible for supervising the application of the refugee convention, and the UK and other contracting states have undertaken to co-operate with the Office of the UNHCR in the exercise of its functions. States are therefore expected to pay due regard to the UNHCR's interpretation of the refugee convention. UNHCR guidance in relation to Articles 1F and 33(2) is set out in paragraphs 23 to 26 of our report.
A letter from UNHCR's representative in the UK, Anne Dawson-Shepherd, summarises UNHCR's concerns. It explains that the overriding objective of the refugee convention is to ensure that refugees are protected and are not returned to their countries of origin to face persecution. Exceptions to the convention's protections include individuals considered to be a danger to the security of the host countries or those who have committed a crime so serious as to pose a threat to the citizens of the host country.
The UNHCR is concerned that this order includes a list of some 500 acts said to be "particularly serious" and warranting the removal of refugees to their countries of origin, where they may face persecution. The JCHR report notes in paragraph 27 that the list includes,
"a number of crimes which cannot on any view he regarded as 'particularly serious crimes' as that phrase is to be interpreted in the context of the Refugee Convention. It includes, for example,
688
theft, entering a building as a trespasser intending to steal, aggravated taking of a vehicle, criminal damage, and possession of controlled drugs. We doubt whether these offences, per se, would amount to 'serious crimes' even for the purpose of Article 1(F)(b) and are even more doubtful that they are capable of amounting to 'particularly serious crimes'".
I have marked up, and have here, copies of the offences highlighted to show that many of them are not even offences triable only on indictment. Any noble Lord who wishes can have a copy of my marked up visual aid.
UNHCR points out:
"Both law and basic notions of fairness dictate that there must be proportionality between crime and consequences".
But the order includes a sweepingly broad interpretation of what is considered to be a "particularly serious crime", as well as disproportionately serious consequences to a refugee.
UNHCR notes that the threshold for determining a particularly serious crime in the legislation of other countries is significantly higher than in the UK, and that in those countries,
"proportionality tests are maintained and decisions are made using appropriate checks and balances".
The Minister, Des Browne, MP, has made it clear in answer to our questions one and two that the UNHCR guidance on the meaning of "serious crime" in Article 1F has been disregarded by the Home Office, even though it is plainly relevant in construing what is meant by "particularly serious crime" in Article 33(2). I find that extraordinary.
The lowering of the high threshold for the applicability of Article 33(2) is made explicit in the Minister's answer to question nine where he states that offences have been included which do not show a direct physical threat to the community, but,
"pose a danger … by creating significant anxieties within communities and breaking down cohesion".
Resort to "anxiety within communities" or community "cohesion" are not permissible under Article 33(2) because they fall far short of "danger to the community". That is the most explicit statement of what I can only describe as the Home Secretary's populist motives. It is in line with the response to the JCHR's concerns about asylum seekers being subjected to forced labour, where the Home Office referred in a letter to our committee to the need to be doing something to preserve "community cohesion"—see JCHR 17th report of Session 2003–04, 9 July, page 48. That illustrates how political populism is undermining the principle of non-refoulement in Article 33(1) by a deliberately over-expansive interpretation of what should be restrictively interpreted exceptions.
Another alarming element is the effective removal of case-by-case consideration, since individual circumstances should always be analysed. Indeed, Des Browne MP's letter confirms in answer to question five that, contrary to UNHCR guidance, no special circumstances relating to the offence will affect the presumption that a particularly serious crime has been committed for the purpose of Article 33(2). He also confirms in answer to question seven that no account will be taken of the gravity of the fear or risk of persecution the person may face if returned, which is also directly

689
contrary to the UNHCR's interpretation of the convention. The Government simply state brazenly that they disagree without giving any reason.
The order shifts the burden of proof to the refugee to prove that he or she is not a danger to the community. UNHCR notes that this will be,
"a near impossible task, particularly for an individual with little or no command of English and limited financial means".
The Home Office accepts in answer to question six that the burden of proof will, indeed, be on the individual. That is directly contrary to UNHCR's interpretation of the UK's convention obligations. Also
"of grave concern to UNHCR are recent guidelines issued by the Immigration and Nationality Directorate that extend the range of Home Office powers by denying access to protection to individuals seeking asylum".
The JCHR report recognises in paragraph 30 that it is highly unlikely in practice that the order will lead to the return of refugees to persecution because they will continue to be able to rely on human rights grounds, and because Article 3 of the European Convention on Human Rights is probably at least as wide as Article 33 of the refugee convention. But even if that is so—and it is a question only of probability—as the JCHR notes in paragraph 31, there is the,
"deprivation of an opportunity to establish refugee status, and the various concomitant advantages which come from such status".
For example, once convicted of a crime prescribed by the order—theft or breach of the peace—and labelled as a danger to the community, the individual will be limited to six months' discretionary leave, at the end of which a further six months may be applied for. No greater degree of settlement could be applied for until after 10 years. That will effectively preclude or impair family reunion, and interfere with the ability to work and study.
The Minister will need to explain to the House why this unsightly and unfair measure is thought to be necessary. It appears to be a squalid exercise in populism at the expense of one of the world's most vulnerable minorities. I beg to move.
Moved to resolve, That this House calls upon Her Majesty's Government to withdraw the Nationality, Immigration and Asylum Act 2002 (Specification of Particularly Serious Crimes) Order 2004 (S.I. 2004/1910), laid before the House on 22 July, and to lay a new order which is compatible with the obligations imposed upon the United Kingdom as a Contracting Party to the Convention relating to the Status of Refugees (1951).—(Lord Lester of Herne Hill.)
Lord Judd: My Lords, I should explain at the outset of my remarks that I too am a member of the Joint Committee on Human Rights. I can say with considerable emphasis that everything said by the noble Lord, Lord Lester, expresses very clearly the committee's anxiety. The Minister should be under no illusions. In a bipartisan committee—indeed, a representative committee in terms of its party and Cross-Bench representation—there was unanimity of anxiety about this proposal. The Minister always listens to debates of this kind with great care, and takes the thinking and evaluation of
690
the Joint Committee on Human Rights very seriously. I therefore hope that he will weigh with great consideration the fact that the committee came to a firm conclusion, as a committee, about why the provision was unacceptable.
I cannot compete with the noble Lord, Lord Lester, in his legal expertise although, as a layman listening to him, I thought that he put the legal arguments as well as he always does. I want to emphasise several points. First, if it is true that the order could be negated by other provisions to which we are committed, the issue about still being denied the prospect of refugee or asylum status is a very serious consideration. I hope that the Minister will deal with that very fully in his reply.
Secondly, the issue about reversing the whole balance of responsibility in establishing the truth is, again, very grave. As a non-lawyer reading the advice put down by the United Nations High Commissioner for Refugees, I think it quite clear that it is the responsibility of government to demonstrate why there is a special circumstance. In the context of the order and its operation, of course, the balance moves in precisely the opposite direction. That is a serious matter.
The third issue that concerns me deeply is that the provisions involved in the operation of the order overlook the whole question of the reliability of the administration of justice in any particular country. I totally agree with the noble Lord in saying that the list has become quite extraordinary, in terms of the order. Even where we regarded something as a serious crime, if another country or government had on record that such a crime had been committed and the person responsible found guilty in that country, why should we automatically accept that the administration of justice there could be equated with our position in the United Kingdom? That seems very worrying, particularly when we surely all take very seriously, in our approach to the administration of law, the principle that justice should not only be done but be seen to be done. That question has wider implications. It is again one on which the Minister should dwell.
My final point is to pick up a more general issue on which I speak not for the committee, but for myself. I have great respect for the Minister, and I hope that he will take seriously the argument that I put forward. He carries responsibility in a department of state that is faced with incredible challenges at the moment, in the age of global terrorism. It carries the responsibility on behalf of us all of being a lead department in ensuring the security of our citizens.
Any study of terrorism demonstrates that what matters to its successful deployment is that there be a climate of ambiguity, to say the least, among a significant number of people about whether justice is done effectively—whether they enjoy their rights as they should. If they are not absolutely convinced of that, although the overwhelming majority of them would not contemplate participating in an act of terrorism, they do not necessarily get up every morning saying that their first job—their first

691
responsibility as a citizen—is to expose the terrorists, because a deep sense of injustice inhibits them. They sometimes may even go so far as to ask themselves whether, however much they condemn the act of terrorism, the misguided people responsible for it may be on their side.
Of course, that brings us to the point at which, if we are to win the battle for minimising the deployment of terrorism, we have to win the battle for hearts and minds. We need people working with us on our side. I put it to my noble friend, as a Minister in the Home Office, that it is tremendously important to do some joined-up thinking in government on the issue. If we really are preoccupied with the threat of global terrorism and its deployment in our society—it would be irresponsible not to be so concerned—we must be rigorous and inexhaustible in our commitment to ensuring that people enjoy their rights in society and feel confident that they are doing so. Anything that can be exploited in the contrary context is dangerous; I use the word advisedly.
I am afraid that, in much of the way in which immigration policy is administered, there is a danger that it may be turning people sour in a way that indirectly, if not directly, will lend itself to a climate of ambiguity in which it is easier for the terrorist to operate. Quite apart from the principle—I do not need to spell out my concern for that principle—in terms of the practicality of policy in our whole campaign against global terrorism, issues such as the one that we are discussing have a central relevance that is sometimes not recognised as it should be.
7.45 p.m.
The Lord Bishop of Chelmsford: My Lords, I am hugely grateful to the noble Lord, Lord Lester, for raising the issue in the House, and to my friend, the noble Lord, Lord Judd, for his remarks. As is fairly typical in the life that my colleagues and I live, in two weeks time I shall meet representatives of quite a range of groups across my diocese who are working with refugees and asylum seekers. We constantly deal with people who feel extremely vulnerable in our community. I simply want to draw attention to and underline two points that have been made; I look forward to the Minister's response.
With regard to the list of crimes, it is very important in our practice on such issues that we do not break the principle of proportionality. It is one way in which the independent objectivity of our law in relation to justice is preserved. In the atmosphere of the world in which we live today—one of great insecurity and uncertainty, as the noble Lord, Lord Judd, said—it is very easy for departments such as the Home Office to shape their responses in the light of the anxieties of the general populace and forget that we have a fundamental duty to defend the rights and lives of those most vulnerable in our community.
692
Given the comments of the noble Lord, Lord Lester, regarding the issue of shifting the burden of proof, I wish to underline my second point, which relates to my first; the issue is deeply serious. When one meets with refugees one is hugely conscious of their feeling of weakness and vulnerability in the face of the state, its powers and the structures of the law. It is very important that those of us who speak for the state, for government and for the structures of the law are very careful and reticent about how we handle the situation. I very much hope that the Minister will provide us with some comfort when he answers these questions.
Baroness Carnegy of Lour: My Lords, I had not intended to join this discussion, but I have been interested over the years in these difficult problems regarding how we receive our asylum seekers and what the law should be. I have taken part in the debates on most of the legislation of the past few years.
I have listened with great interest to what has been said. Thank goodness we have a human rights committee in this House which can report to us and identify the problems in this matter. Thank goodness we have distinguished human rights lawyers in this country—and the noble Lord, Lord Lester, is one of those. But when the noble Lord, apparently slightly looking down his nose, uses his huge experience of the law and an intricate argument about how the different pieces of international and United Kingdom law interrelate in this matter, and he talks about the Government succumbing to political populism, we have to be careful.
People living in this country have their rights too. We know that this is a fragile subject. One has only to visit or even drive through parts of this great city of London to realise the pressures that there are for people living here. Many new citizens who have arrived from many countries have not yet come to terms with each other in their communities. We must be very careful. To use human rights arguments to justify accepting an asylum seeker into some of these areas who has been convicted as a burglar, perhaps several times, or convicted as a child abuser or some of the other 500 crimes listed in the order, is not easy.
I have not discussed this with my noble friend on the Front Bench and I do not know what she will say. I shall listen to what the Minister has to say with great interest. I see only too clearly the problem with which the Government are dealing. We should not use human rights arguments—that business is becoming almost an industry. That can be damaging. We should not use it to bring the wrong people into communities just as a result of the intricacies of the law. We must we careful. So I shall listen with interest to other speakers, particularly the Minister.
Lord Avebury: My Lords, it has certainly become an industry, and one which is backed by enormous multinationals, to attack human rights and to try to undermine them—as one sees almost daily in newspapers such as the Daily Express and the Daily Mail. But this is a matter not solely for lawyers but for the ordinary people of this country. I hope that the

693
noble Baroness, Lady Carnegy, has had the opportunity of listening to my noble friend and of reading what the UNHCR representative said regarding this matter. Whether or not she recognises that, does she think that it is totally unprecedented for the UNHCR representative to write a memorandum in such critical terms about a matter that has come before your Lordships' House?
The UNHCR representative draws our attention to the enormous number of crimes that are treated as "particularly serious" and that also disturbs the JCHR. At one end of the scale are offences such as knowingly causing a nuclear weapon explosion or, as the noble Baroness would have it, the offences of paedophiles, which everyone would accept should be treated in the manner of this order. But, as Ms Dawson-Shepherd observes, the principle of proportionality makes it inappropriate to return a person to a country where he may face torture or death when he has been convicted of an offence as trivial as some of the 500 that are listed in the appendix, such as those that my noble friend has mentioned.
The appellate authorities are not required to consider that proportionality, which is an essential ingredient of the consideration of cases under the convention, as the right reverend Prelate the Bishop of Chelmsford reminded us. In proceedings where the offender is trying to prove that he is not a danger to the community, that matter does not come into the equation at all because, as the Minister said in the letter to Jean Corston, to which my noble friend referred, it would not be for consideration in the second leg of a decision that had to be made under the order.
All noble Lords have referred to the fact that the UN HCR points out that the order of proof in criminal trial would be reversed, even though the consequences of losing are potentially far more serious. The "rebuttal presumption" means that a person sentenced to two years or more on any of the range of offences in the schedules to the order is presumed to be "a danger to the community" unless he can prove otherwise. In the guidelines on Article 1(F), dealing with exclusion, that concept is permissible only in the circumstances given in paragraph 19: that the person remained a member of a government clearly engaged in activities such as crimes against peace, war crimes or crimes against humanity or membership of an organisation involved in violence. Under paragraph 34 of the guidelines, the burden of proof rests on the state in every single other case. But this order lifts the concept of the rebuttable presumption from the guidelines, where they are applied to a narrow set of Article 1(F)(a) cases, and applies it to all Article 33(2) expulsions.
As my noble friend has observed, the UK, in common with other signatories to the convention, has undertaken to co-operate with the UNHCR in the exercise of its functions; a duty which must include compliance with the guidelines in the absence of any formal reservation. I am not aware of any discussion between the Government and the UNHCR on the issue, or of any objections raised when the UNHCR
694
published the latest edition of the guidelines on the interpretation of the exclusion clauses in September 2003. Although the guidelines go on to say that the exclusion clauses should not be confused with Article 33(2), which deals with the expulsion of a person who has been admitted to the host state, the underlying principles must be the same.
Paragraph 2 of the guidelines states that,
"given the serious consequences of exclusion, it is important to apply",
the excluding clauses,
"with great caution and only after a full assessment of the individual circumstances of the case".
Paragraph 38 of the background note, which should be read in conjunction with the guidelines, sets out the ingredients of such an assessment. But the order precludes any process of that kind. In sentencing a person for any of these offences, the court has no obligation to consider the seriousness of the crime for the purposes of Article 33 in relation to the five sets of criteria proposed by the UNHCR, nor has the Secretary of State to think about them in deciding whether to issue his certificate. The noble Lord, Lord Filkin, stated:
"He will not act without carefully considering the individual circumstances Of the case".—[Official Report. 31/10/02; col. 361.]
That was when we were discussing the Nationality, Immigration and Asylum Bill. But the Minister is not obliged to do that before deciding whether to certify that the person is a danger to the community. In seeking to rebut that particular presumption, it is not easy to see how the question of whether he considered the factors in the background note could be introduced. As I said, in the letter to Miss Corston, the Minister specifically says that they would not be considered.
8 p.m.
The expression "particularly serious crime" in Article 33(2) must surely have a more restricted meaning than "serious non-political crime" in Article 1(F)(b) or the drafters would not have bothered to insert the word "particularly". It no doubt still includes offences such as murder, rape and armed robbery. Whereas crimes such as petty theft or the personal use of illegal drugs would not reach the Article 1(F)(b) threshold, there should at least have been some additional offences between those two extremes that would fall below the Article 33(2) threshold.
It is rare in the extreme for the JCHR to state baldly that a provision in either primary or secondary legislation is in breach of the UK's treaty obligations, but that is what has happened with this order. The committee states that it is incompatible with the refugee convention—a very serious matter which Parliament will have to examine in greater depth than is possible in one hour. But the committee goes further and suggests that Section 72 of the Nationality, Immigration and Asylum Act may itself be incompatible with the convention.
We criticised that provision at the time, as did the noble Lord, Lord Kingsland, from the Tory Front Bench. We received no answer to the question why, as the courts already have power to recommend the deportation of a person who is convicted of a particularly serious crime, the Secretary of State could not then consider in each individual case whether the requirements of Article 33(2) were satisfied. At that time, the noble Lord, Lord Filkin, was unable to say even how many individuals had been sent back to their countries of origin under that article.
If the JCHR is right, this is in any case a pointless exercise because the order does not affect the rights of a person under Article 3 of the ECHR. As an applicant now has to state all the grounds of an appeal at the same time, the issue of the Secretary of State's "danger to the community" certificate will cut off only the refugee convention leg of any appeal and not the human rights leg.
It is not clear what happens during the period taken up with the separate appeal against the rebuttable presumption of the certificate, but the order contains nothing that would prevent that appeal being heard, with the possibility of a second appeal if the rebuttal is successful. But, in fact, as the detainees in Belmarsh could testify, even persons who have committed extremely serious offences are not refouled if they would be at risk of torture or execution.
It is a great pity that this Government have got themselves into such a mess with this legislation. The best thing that they could do to avoid endless futile litigation on these matters would be to withdraw the order and think again about Section 72.
Baroness Carnegy of Lour: My Lords, before the noble Lord sits down, I think I am right in saying that he stated that such people might be returned to a country where they might be tortured or might even suffer death. Surely the Human Rights Select Committee report points out that the convention on human rights precludes that.
Lord Avebury: My Lords, the rights of a person under Article 3 of the ECHR are not extinguished by the order. That is why I asked what would happen to the person's ECHR leg of his appeal during the period that the rebuttal of presumption was being considered.
Baroness Anelay of St Johns: My Lords, I start by recognising the fact that the reason that this order is even before us today is that the Government agreed to a compromise during the ping-pong on the Nationality, Immigration and Asylum Act 2002 in response to proposals put forward by my noble friend Lord Kingsland in Committee and on Report. I am grateful to the Minister in another place, Mr Des Browne, who this afternoon, during the debates in another place on this statutory instrument, referred to my noble friend's work as "a helpful intervention". I can only say that I was there at the
696
time and the Government did not seem to treat it like that then. However, they are obviously partly reformed characters now.
It is important that we reflect briefly on how we have reached the point of having this list before us today. It will explain the view of the Front Bench that I put forward today on the order. The Government agreed that,
"the Secretary of State should be in a position to specify in an order offences which, whatever the length of sentence imposed, by their very nature connote such a degree of seriousness that conviction of one of them would be appropriate to create a presumption that the offender is a danger to the community".—[Official Report, 6/11/02; col. 847.]
That statement was made by the Minister.
The Government's first approach had been very different. It was to prescribe that a person is a serious criminal for the purposes of the refugee convention simply if he has been sentenced, either in the UK or abroad, to a period of two years' unsuspended imprisonment. As noble Lords then said, the presumption could be rebutted but the burden of proof would be reversed, and the shifting of the burden of proof remains.
We were concerned that at that stage the Government's approach differed from the text of the refugee convention in the following three respects. First, the presumption in the clause arose in relation to the punishment imposed rather than to the crime committed. Secondly, the inflexible criterion of two years' imprisonment would not cover a situation where someone was convicted of a particularly serious crime—or one that we considered to be particularly serious—such as dealing in child pornography or drugs, but was sentenced to perhaps only 14 or 18 months' imprisonment because of a substantial discount for an early guilty plea or for other mitigating circumstances. The third issue was that the proposal that related to the sentences imposed for crimes committed abroad took no account of the sentencing policies or the applicability of the rule of law in foreign countries. I know that that issue remains at the heart of some of the points raised by the noble Lord, Lord Lester, today.
We argued that the presumption should arise from the crime committed and not from the punishment imposed. Here, we have ended up with a mish-mash of the two and that is what we face. We accepted the Government's compromise at that stage, and we do not resile from that position today. As my noble friend Lady Carnegy of Lour said earlier, the Government are in a difficult position in trying to protect the public and in trying to ensure that, when people are given refuge here, they should be given refuge and are not people who pose a threat to the community. I do not think that the noble Lord, Lord Lester of Herne Hill, resiles from that either. The difficulty at issue here is how broad the list of offences that we face today should be.
I recognise the Government's difficulty. Some noble Lords have referred to this matter in terms of the fact that the country needs to face a threat of terrorism. We have always been aware of the fact, and have agreed,

697
that the Government need to face far more difficulties due to applicants coming here who have committed other crimes that in no sense can be called terrorism, but who will form the mainstay of those who will be refused permission to be here under the order.
It is important that the Government respond to the points put today, not least because the Minister in another place did not have time to do so. That was not his fault. For once, I can say that of a Minister. Whether I would have liked what he had said if he had had time to give his answers I do not know, but he had a mere few minutes in which to respond and then the guillotine of 6.15 p.m. came down. I attended the other place earlier and listened. Much of the argument that has been put today so cogently by noble Lords simply did not receive a response from the Government earlier. Therefore it is important that we consider some of the practicalities of the issue.
First, the list raises a broad sweep of offences, not just in a list of 500, but particular offences in themselves can cover a very wide range of criminality. That is the argument used by the Joint Committee on Human Rights in its conclusion that the order is incompatible with Article 33(2) of the Refugee Convention.
I shall be interested to hear the Government's response. I do not actually object to the list, but my questions are probing. The list, as noble Lords have mentioned, includes Section 1(1) of the Theft Act 1968 which refers to dishonestly appropriating another person's property, intending permanently to deprive him of it. It also refers to Section 1(1) of the Criminal Damage Act 1971. I find that confusing, given that this is a Government who only recently introduced penalty fines for those offences and who, at the same time, say that in some circumstances those can be particularly serious crimes. So the Government are sending out a mixed message.
In one instance one can get a penalty fine and not have to go to court for theft or criminal damage and here it is said that they are such serious offences that one cannot have political refuge here. I think that is a confusion that needs to be resolved by the Government. Therefore, can the Minister explain how the Government intend to decide when offences are sufficiently serious in themselves for someone to be refused refugee status and, of course, perhaps returned to another country? I listened with interest to the right reverend Prelate. I entirely agree with him that it is important to retain a sense of proportionality. We need to know how that will underwrite what the Government will do in respect of the order.
My second question is: who is affected? I notice that the right reverend Prelate referred to refugees and asylum seekers. It is very tempting to do that, but we need to be clear who is subject to this order. Will those who have been given indefinite leave to remain here be covered and what will happen with regard to their families? I am sure that there are straightforward answers to those questions, but the Minister in another place did not have a chance to give them.
698
Can convictions ever be considered to be spent? My honourable friend in the other place, Humfrey Malins, raised the issue of someone who in his youth commits an offence that we would all perhaps accept to be very serious, but by the time he claims asylum here at my age, 57—I shall be 87, when I think back to the jibe made by the Minister about referendums—and applies for refuge, does his seriously misspent youth count against him still, or can we consider that he has reformed? We need to hear some proportionality from the Minister.
My third question refers to the duty of the courts in all these matters. In future, what will be the duty of a district judge when, having found someone guilty of one of these offences, he sentences him to prison for more than two or three years? Does he have to say to that person, "Mr or Mrs whatever, do you have pending any claim for asylum/refugee/immigration status in this country?", and if the person says, "Yes", does the judge have to report that? What is the flow of information back to the Home Office about who is being found guilty and who should come within the circumstances of this order?
My fourth question is a technical one on Northern Ireland. In the other place the position of Northern Ireland was raised by one of my honourable friends. Perhaps I may seek reassurance from the Minister. Will the level of criminality that someone has to reach before he is denied refuge be the same in England and in Wales as in Northern Ireland? I ask that because, as ever, there are in the schedules different lists for Northern Ireland. We would like reassurance that there will not be one way of calculating criminality in England and Wales and a different way of calculating it in Northern Ireland.
Finally, perhaps I may invite the Minister to confirm what I understand to be the case, that the vast majority of people who seek refuge here will not be caught by these provisions and will not be offenders at any stage in their lives. They may be refused refuge because they do not qualify for asylum as they are economic migrants and do not come within these particularly carefully drawn rules. But it is my understanding that the majority of people coming here would not be considered to be offenders within the rules of this order.
8.15 p.m.
Lord Rooker: My Lords, I shall do my best to answer as many of the detailed questions as I can before I sit down. I understand that this was a normal order in the other place. They had 90 minutes for debate. It is up to the people who are debating to choose whether the Minister has enough time to respond. I have been involved in silly game playing in the other place where you deliberately leave the Minister only two or three minutes so you can go around complaining that he did not answer all your questions. I hope that that was not the attitude of today's debate.
I shall not speak overlong, but I will certainly have to take slightly more than the 12 minutes Des Browne took in the other place. Perhaps I may say by way of

699
introduction, because I suspect that most of what I say is not going to go down very well, do not commit the crime. Basically, that is the end of the line—do not commit the crime.
Only people who have committed crimes and been before the courts will be affected. That applies equally to British citizens as to visitors—asylum seekers or refugees. If you commit the crime, there are consequences. For certain classes of people the consequences could be quite severe; in other words, as identified in the order.
I will give some background first and then come to the individual points that have been raised as they are all valid questions that deserve answers. One point goes back to what my noble friend Lord Judd said. I was Home Office Minister in 2001–02 when we were planning what is now the Nationality, Immigration and Asylum Act 2002. I remember the early discussions about the issue. Obviously, during the course of ping-pong, we achieved a much more satisfactory solution due to the intervention of the noble Lord, Lord Kingsland. Quite rightly, tribute has been paid to him.
One of the things we wanted to get clear when planning the legislation was an asylum system—and it is true that lots of Bills had gone through—which was fair to everybody, but which was also robust and credible in the eyes of the public. Certainly, in many respects, our systems were not robust and credible in the eyes of the public. That meant that we had to consider every asylum claim individually—which is what happens now while being as tough as possible on the very small proportion of asylum seekers or refugees committing serious crimes. Indeed, to answer one of the noble Baroness's questions, the vast majority of people are not affected by this legislation.
Frankly, we do not want to accommodate in our country those who abuse our hospitality and sanctuary through criminal activity. No one in their right mind can stand up and defend that. The Section 72 order builds on and reinforces the progress we have made in dealing with the misuse of the asylum system in many different ways. There is no one quick fix on this.
I will just say a few words about the background to Section 72 of the Nationality, Immigration and Asylum Act 2002. The section provides an interpretation of Article 33(2) of the refugee convention and is applicable both to persons who are already refugees and to asylum seekers. That answers one of the questions asked by the noble Baroness. In a moment I shall come to the point she asked about those with indefinite leave to remain.
Section 72(2) provides a rebuttal presumption that for the purposes of Article 33(2) a person convicted of a crime and given a non-suspended custodial sentence of two years or more has been convicted of a particularly serious crime and is a danger to the community in the UK.
700
Unless the presumption is rebutted, a person will not then be able to rely on the refugee convention to prevent his removal. So the presumption is rebuttable—something of which the noble Lord, Lord Lester, forgot to remind the House.
What does the order actually achieve, because we are debating the order and not the legislation? Section 72(4) applies a similar presumption to those convicted of any offence specified in this order, irrespective of the length of sentence imposed. For serious crimes listed in the order, the normal expectation is that the courts would impose a sentence in excess of two years. I will give examples of why I think that that would be an expectation. We fully accept that there may be rare situations where a shorter sentence is imposed—that is up to the judge, looking at the circumstances of the case—or where, for example, the sentence imposed is three years, of which only 18 months is in prison and the rest is suspended.
The order ensures that there is no loophole in the application of Article 33(2) for those criminals who get shorter sentences when convicted of these offences. As has already been mentioned, during the debates on the Bill in 2002, the noble Lord, Lord Kingsland, rightly pointed out that loophole, raising the possibility of those committing serious crimes against children falling outside the scope of Section 72. The noble Lord was right to highlight the shortcoming, and the introduction of the order-making power to list specific offences arose from his helpful intervention—even though that was not how it appeared to the noble Baroness at the time. It really is good for governments to sleep on things. In this case, we have a better Act as a result of it.
I fully accept that there has been criticism in this debate and in the report of the Joint Committee on Human Rights that the list of offences in the order is too long. It has also been mentioned that our position is at odds with that taken by the United Nations High Commission for Refugees. We do not accept those criticisms. They are criticisms that need to be rebutted, but we do not accept them.
In considering what offences to include, we looked first at the seriousness of the offence, for which the maximum imposable sentence is a good guide. Of the offences listed in the order, 40 per cent have a maximum sentence of life. If one takes the order in its totality, 85 per cent of the offences have a maximum sentence of 10 years or more, including the 40 per cent which I have just mentioned.
The report of the Joint Committee on Human Rights mentions a few offences that it considers to be low level, but the description of the offences in the report is not always complete. For example, paragraph 27 of the report of the Joint Committee on Human Rights lists the offence of,
"entering a building as a trespasser intending to steal".
That is followed by a comma. The report then lists the further offences of,
"aggravated taking of a vehicle, criminal damage, and possession of controlled drugs".

701
That is not a full description of the offence in the order. I invite noble Lords to look at page 8 of the order, which lists offences under the Theft Act 1968. The third offence in the list, in Section 9(1)(a) of that Act, is described as,
"entering a building as a trespasser, intending to steal, inflict or attempt to inflict grievous bodily harm or rape".
Perhaps the printers of the report did not have enough pages or print to describe the offence in full, but it does not do justice to the case to include less than a full description of the offence. The fuller description better reflects the potential seriousness of the offence and the dangerous nature of those who commit it.
We accept without qualification that our list of offences goes wider than the United Nations High Commission for Refugees recommends. The UNHCR is of course entitled to its view on what offences should be included, but the Joint Committee on Human Rights report is wrong in its implication that the United Nations High Commission for Refugees provides the proper interpretation of the refugee convention. It does not.
Interpretation of the convention is a matter for the courts and the legislatures of the sovereign states.
Lord Lester of Herne Hill: My Lords, I am grateful to the Minister for giving way. Does he agree that the supervisory nature of the UNHCR in the interpretation and enforcement of the refugee convention is an obligation that has to be recognised by all contracting states? Can he explain how, to take a couple of examples, a breach of the peace—not even a racially aggravated breach of the peace—or malicious damage to property can on any ordinary English meaning be characterised as a particularly serious offence?
Lord Rooker: My Lords, on the first part of the noble Lord's question, I accept what might have been the convention, but the fact is that the interpretation of the convention is a matter for the courts and the legislatures of the states. I pay tribute to the UNHCR. I am not in any way being critical of the work that it does; far from it. However, it is a matter for the courts and legislatures of states. This partly answers the second part of the noble Lord's question. The report of the Joint Committee on Human Rights does not mention that other contracting states have chosen to define Article 33(2) and that, in some respects, they have included a broader definition of "particularly serious crimes" than we have done. I had hoped that there would be several examples but I have only one. In Australia, violent drug or property crimes carrying a maximum sentence of three or more years meet that definition—they are shorter sentences. So Section 72 and this order are not out of step with practice elsewhere.
I agree that the order goes beyond what might be considered. The majority of offences on the list in the order fall into six broad categories: sexual crimes, violent crimes, drug-related crimes, racially motivated crimes, crimes against children and terrorist offences. In our view and that of the public those who have committed those
702
offences are a danger to communities. It is up to them to make the case that they are not a danger to the communities. We do not think that that is impossible.
I want to make it absolutely clear that each case will be assessed individually. We are not moving away from that position. I shall quote from the Minister's letter before moving on. In the four schedules of the order,
"there are 228 offences of which 91 (40%) have a maximum sentence of life, a further 59 (26%) have a maximum sentence of 14 years and 45 have a maximum sentence of 10 years".
Just a few have a maximum sentence of fewer than 10 years. Seven have a maximum sentence of two or three years. They are very much the minority of offences on the list.
Each case will be assessed individually. Where we are considering an application for asylum based on the refugee convenion and we think that a Section 72 presumption applies, the individual concerned will be given an opportunity, at a pre-decision stage, to rebut the presumption that he poses a danger to the community. The assessment of the danger that a wrongdoer might pose to the community is an assessment of the present or future danger. It is made on the basis of the evidence of their past conduct and the likelihood of their repeating such conduct in the future—for example, parole reports or prison reports, which provide an assessment of the person's character near the end of sentence. A successful rebuttal of that presumption, no matter how serious the offence committed, means that Section 72 will not apply. Remarks about the burden of proof are therefore misplaced.
As the report of the Joint Committee on Human Rights says, the burden will lie on an individual to rebut the presmption that they are a danger to the community. We consider it right that, where a person commits a crime of that magnitude, and by definition he has been convicted, the burden should rest on that individual to say that he is not a danger to the community. It is not an insurmountable hurdle, as the individual has the facts available to make out his case.
Furthermore, any decision we take in reliance on Section 72 will be subject to the oversight of the appellate authorities. In that respect, it is not the final decision; it can be appealed. They will consider whether our decision to issue a certificate under Section 72 was correct. Both we and the courts will also have to consider all relevant ECHR issues, since the existence of Section 72 and the order in no way alter our obligations under that treaty.
Suggestions that the order is unfair, that it will lead to unlawful removals or that it will prevent individual consideration of cases—by the appellate authorities as well as the Immigration and Nationality Directorate—are therefore misplaced.
I shall now briefly answer some of the points raised rather than use the rest of the notes. The noble Lord, Lord Lester, raised a point that the order provides no balancing test between the seriousness of the offence and the gravity of fear. He said that the order puts a burden on the individual to rebut the danger to the

703
community. It is not the order but Section 72 which rules out the balancing test and puts the burden on the individual to rebut the danger to the community. Section 72 of the Act was approved by Parliament and that is not being debated today; we are debating just the order.
As regards the two issues he raised, first, Article 33(2) provides no balancing test. It is perfectly reasonable for our law to reflect that. Secondly, if a person commits an offence under this order it is perfectly reasonable to put the onus on the individual to rebut the presumption that they are a danger.
I have not noted which noble Lord raised the next point as regards offences overseas. It is an important point because it returns to what the noble Baroness, Lady Anelay, said about age. Section 72, and therefore the order, will apply very rarely to offences committed abroad. We would consider its use only where the person committed the offence abroad having already been recognised as a refugee here before committing that offence—they would have gone abroad and returned or an asylum seeker would have gone abroad. It is not unknown for asylum seekers to arrive in this country, file a claim for asylum and go abroad while the application is being dealt with.
Where we considered the use of Section 72 for offences committed overseas we would take account of any suggestions that the conviction was unreliable and whether the offence would be a crime in the United Kingdom. I hope that that will satisfy noble Lords. My noble friend Lord Judd raised the issue of depriving a refugee when a Section 72 order applies. Why deprive the refugee of asylum status? That allows us to keep the refugee's position under review. Obviously, the refugee would not be returned to a country if it were one to which we did not return them for all the reasons we understand and which I shall not go into. I call them human rights reasons.
However, if the situation changes in the country concerned we will return the refugee because refugee status here has been lost. It is as simple as that. The refugee should understand that before committing the crime. If return is not possible, it is right that the person committing the serious crime and posing a danger to the community should not benefit from all the benefits of asylum seekers such as family reunion rights. That is absolutely right: there will not be any family reunion rights because they will be lost as part of the cost of committing crime.
The noble Lord, Lord Avebury, asked me about the human rights element of an appeal where the order applies. There would be a single appeal, as in other immigration appeals. Section 72 requires the appellant authorities first to consider whether the Secretary of State was right to say that Section 72 applies. If the appeal body agrees with the Secretary of State that ends the asylum aspect of the appeal. The other grounds of appeal, including human rights, will lie to be considered and that is quite right. I hope that that answers the noble Lord. If the appeal body disagrees with the application
704
of Section 72 then it will consider whether the person has a well founded fear of persecution unless that has already been accepted.
The noble Lord, Lord Avebury, also asked about the comments of the noble Lord, Lord Filkin, on individual consideration. There would be consideration of individual circumstances in applying Section 72 or the order. This individual consideration would be in assessing whether a person had rebutted the presumption that they were a danger to the community. As I said before, we do not believe that it is impossible for a person to have the facts to rebut that; for example, as regards the comments of the court when sentencing, the police reports, probation reports and court reports.
Lord Avebury: My Lords, paragraph 7 of the Minister's letter says that Section 72 makes it clear that in considering whether Article 33(2) applies, no account is to be taken of the gravity of the fear or the risk of persecution which a person may face if returned to their country. So the individual consideration which is being given by the Minister in deciding whether to issue a certificate bears no relation to the threat which a person might incur of persecution, torture or even death if he is returned to his own country.
Lord Rooker: My Lords, as I have already said, they may not be returned, but if the situation in that country changes, they will be returned. That is the point. It has to be the consideration at the time when we want to remove a person. We want to make it clear that a person cannot commit a crime in a country where it is known that he or she will not be returned by the UK and still claim refugee status later when that country has a brand new government, is democratic and has good human rights structures. Such a person cannot say, "No, no. I am staying in the UK. That is where they gave me refugee status. I may have committed these serious crimes, but my human rights are affected". The Government could reply, "Sorry sunshine—back home".
A person would not be removed until the situation in his country has changed, but he would lose the permanent right that he gains now, which allows him to remain in the UK. That is the difference. We are not in the business of sending people back who have a well founded fear of persecution, of being tortured, murdered or whatever. We are not in that business. I want to make that absolutely clear.
Of course, situations in countries change and we want to take account of that. No one knows, but that may serve as a deterrent to stop someone committing a crime. As I have said, "Don't commit the crime. Then you don't come up against these problems".
The noble Baroness, Lady Anelay, asked who was affected by the order. It applies to recognised refugees if, having been recognised, they commit a Section 72 offence subsequently. It also applies to asylum seekers whose claims have not been decided. It is part of the decision making process. The asylum seeker has the chance to rebut before the decision is made.

705
The order will not apply to recognised refugees who the Secretary of State knew had committed a crime specified in the order when he decided to recognise the refugee but chose not to rely on Article 33(2) at that time. That is fair enough. Otherwise, a person would be done twice for the same thing, which would be unfair.
The noble Baroness asked me about the position in Northern Ireland. We have tried as far as possible to ensure that there is comparability between the offences in the order as they apply in England and Wales, Northern Ireland, and Scotland. That is why the order is set out as it is. Unfortunately, it appears more complicated than it is, simply because of the judicial systems.
It is not possible to get a 100 per cent match in areas where the nature of the offences is different in those different areas; that is, England and Wales, Northern Ireland, and Scotland. The intention is to make things as fair and as even handed as we can.
Finally, the noble Baroness, Lady Anelay, asked me about offences committed a long time ago and what the courts will have to do. Offences committed a long time ago might be affected by the order if we have not previously assessed them. However, if the person is a reformed character, he or she can provide evidence of that in rebutting the presumption that they are a danger to the community. It is still open to the person concerned to have the chance to rebut.
The courts will not be obliged to inform the Immigration and Nationality Directorate of any convictions for offences under the order. Those offences would be relevant only for refugees or asylum seekers. So we do not consider it appropriate. The Immigration and Nationality Directorate has good links with the Prison Service, which will advise us whenever a non-UK national is being released. That will provide a source of information for those offences. That happened when I was at the Home Office. Sometimes it was quite distasteful when people were released from prison having committed very serious offences against, in some cases, young children. They could not be sent out of the country because they could not be returned to their country and they had to be let out of prison. So there are good links for knowing who has and who has not been released.
I shall get the transcript checked. If there are any points that I have not covered in detail, I shall write to all noble Lords participating in this debate. The intention is to change the structure—we do not want people to commit the crimes—and to set up a fair system that is clear for everyone to understand when they apply for refugee status in this country.
Lord Lester of Herne Hill: My Lords, I am grateful to all noble Lords who have participated in this important debate. I am glad that this debate has not been disfigured as it was in the other place where I am
706
told that the Minister interrupted my honourable friend Mark Oaten MP four or five times. Therefore, the Minister took up time in doing that and was not able to reply to the debate. With respect to the other place, that is not the right way to proceed. It certainly has not happened here.
As the Minister has said, ultimately the question of the lawfulness or otherwise of the order and the compatibility or otherwise of Section 72 are questions of law for the courts and, in the event of a legal challenge, it will be for the courts to decide those questions. Unfortunately I shall not, as I would like, be able to appear pro bono in such a case because today I have behaved as a parliamentarian, but I hope and believe that an advocate who is sufficiently public-spirited and who is representing a client will challenge what we have been listening to today against the standards of law.
As the right reverend Prelate the Bishop of Chelmsford indicated, one of the principles that will have to be considered is that of proportionality: are the means employed proportionate to the Government's legitimate aims? But other principles—of legality and fairness—also arise.
I shall not test the opinion of the House on what are issues of law, but I hope and believe that this debate will prove to be influential. I hope too that the Minister has enough of a sense of humour to understand what I am about to say, because I mean it honestly. I believe that his reply is one of the best speeches I can think of to show the unlawfulness of what is being proposed. But that will have to be considered carefully if it comes to court.
I have great respect for the noble Lord, Lord Rooker, and for Des Browne, MP, who was an original member of the Joint Committee on Human Rights. I am genuinely sorry that they have to bear collective responsibility for a measure which I believe stains the reputation of this country and is an ultra vires abuse of power. But that is a matter for the courts to decide. On that basis, I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

Pensions Bill
8.41 p.m.
Further consideration of amendments on Report resumed on Clause 284.
Lord Higgins Lord Higgins moved Amendment No. 276:
Page 236, line 3, leave out paragraph (c).
The noble Lord said: My Lords, I am glad that the noble Baroness has moved the Motion, since she omitted to do so on the last occasion that we resumed business. I see that my amendment has been grouped with Amendment No. 278 in the name of the noble Baroness, Lady Turner, and Amendment No. 279 in the name of the noble Lord, Lord Oakeshott. The content of our

707
debate is more clearly illustrated by the two subsequent amendments than by my rather brief one; namely, the question of whether a scheme that was closed while the sponsoring employer was solvent and found to have insufficient assets to meet the scheme's liabilities in full shall be a qualifying pension scheme for the purposes of the financial assistance scheme.
In our earlier exchanges the noble Baroness said that this matter was still being considered by the Government. I was slightly surprised by that because while we all agree that it is highly deplorable for a company which is perfectly solvent to renege on its pension promises, a classic moral hazard argument would ensue if the company concerned believes that the FAS will pick up the pieces and lets it do so. It would indeed be singularly unfortunate were that to happen.
The first case which came to my attention was that of Maersk, but eventually public opinion in that instance caused it to change its position. The other one, which was referred to several times in Grand Committee, is that of the Japanese company, Nikko. I think that the name of the company has changed over time from Nikko Securities to Nikko Cordial, which I understand is part of Citigroup. That company seems to be in the same position. Complaints have been made by some 400 deferred pensioners of the company who have found that, as a subsidiary, the company went into what is known as members' voluntary liquidation. The result of that has been that the parent company, which is perfectly solvent and, indeed, extremely profitable, has not met the commitment to the deferred pensioners. This is very unfortunate.
I shall be interested to hear to what extent the Minister's consideration of the matter has developed. It seems to me that this will be a burden on the financial assistance scheme, which clearly, from what the Minister has said, will have limited resources. Therefore it will be to the disadvantage of someone else. If all the schemes which are solvent renege on their promises and act in that way, presumably the cost on the financial assistance scheme would be considerable.
The Nikko case raises difficult questions about the position of trustees who, I gather, have changed over time. These are very difficult issues. It may be that publicity and moral persuasion is not sufficient.
The Government's position is also not clear on the question of what date they will select as a cut-off point. I was going to say a "deadline" but, in a sense, it is a lifeline; it is how far back you go rather than stopping at a certain point. Perhaps the Minister will tell us the Government's present position so far as concerns the start date of the scheme.
These are difficult issues which affect people very seriously and it is important that we get them right. I shall be interested to hear the Minister's response and to what extent this is still a live issue or to what extent it is one on which the Government have not yet made up their mind. I beg to move.
8.45 p.m.
Baroness Turner of Camden: My Lords, I shall speak to Amendment No. 278, which is grouped with the amendment of the noble Lord, Lord Higgins.
The noble Lord has outlined the problem in some detail. We debated in Committee the problems that arise with a scheme that is wound up when the employer is solvent. The view of the Minister in such cases has been that it is right to look to the employer to make up any deficit in pension entitlement. However, I and others concerned with the Bill have had some heartrending letters from people who have suffered in circumstances such as those outlined by the noble Lord, Lord Higgins.
In one instance the scheme was wound up, the firm was later taken over by another firm, and then I believe there was insolvency. As a result, the pension payments of a number of individuals—including those with deferred pensions—have been very severely reduced and there seems to be no way in which they can obtain recompense. They are, apparently, outside what they believe to be the timeframe. I think the timeframe is June 2003 that is one that has been mentioned to me anyway.
Under the Bill as it is presently written, the scheme is not a qualifying scheme as far as the FAS is concerned. It is not much use directing the former employees and the pension scheme members to the employer because there is no money to be obtained from that source. I gather that those affected are currently pursuing their case with the Parliamentary Ombudsman. Whether or not this will be effective is somewhat doubtful.
It seems unfortunate that certain groups will be left out of the cover provided by the Bill. Like the noble Lord, Lord Higgins, I will be grateful to hear what the Government have to say about the issue.
Viscount Trenchard: My Lords, what are the Government going to do about this? It is debatable whether public money should be used in these circumstances at all, but if public money is to be made available to the FAS, why do the Government consider it right to provide public money to assist those whose pension schemes are underfunded because their employers are insolvent, but not right to assist those whose pension schemes are underfunded because their employers have decided not to pay? If this is a proper area for the Government to provide public money, what is the justification for them discriminating between these two groups?
Lord Hoyle: My Lords, I support my noble friend Lady Turner on Amendment No. 278. There are some very difficult cases, and it is not the fault of the people who have been in the scheme. The scheme was closed while the employer was solvent. Afterwards, these people have found that, through no fault of their own, they do not qualify. It must be wrong that they are

709
excluded in this way. I simply ask that this is given consideration; I shall listen with interest to what my noble friend the Minister has to say about it.
Lord Oakeshott of Seagrove Bay: My Lords, I hope it might be for the convenience of the House, given that the hour is rather late, if I support the noble Baroness, Lady Turner, on Amendment No. 278 and speak briefly to my own Amendment No. 279, which effectively says the same thing.
As we discussed in Committee, we feel that this is an issue of principle. None of us believes that a very large number of people is involved, and we believe that they should be eligible. There does not need to be a lot of detailed analysis and work on how much money will be available for the scheme before one decides whether these people should or should not be included.
There can sometimes be a little misunderstanding about solvency or insolvency. A technically solvent employer can be in a very weak financial position, and not really in any position to contribute further to a scheme, particularly if that happened some time ago. The moral case is equally strong for including people in the solvent wind-ups as it is for other people covered by FAS.
It is nearly four weeks since we had quite a detailed, probing discussion on this in Grand Committee. I hope that the thinking of the Minister and her department has moved forward and that she can tell us what the position is.
Baroness Hollis of Heigham: My Lords, I shall do my best. I am grateful that the noble Lord, Lord Oakeshott of Seagrove Bay, is grouping Amendment No. 279 with Amendments Nos. 276 and 278, because I would have been repeating myself otherwise.
Amendment No. 276 would force FAS to offer assistance to members of schemes without regard to the circumstances of employers connected to those schemes. Amendments Nos. 278 and 279 appear to intend to force FAS to offer assistance to members of schemes regardless of the solvency position of the employer.
Let me deal with the "techie" point before coming on to the substance. Because of the use of the word "closed" in the amendments, they would not have this effect, because "closed" is generally applied to schemes that are closed to new members but otherwise operate normally. As noble Lords will be aware, FAS will offer assistance only to members of underfunded schemes that are winding up or have wound up, and the solvency position of employers at the point when or if they close their scheme will be immaterial.
The substance, I suppose, is related to a point that was pressed on me by the noble Lord, Lord Skelmersdale. Because we have made it clear that in the PPF we will not be asking other employers to subsidise employers who are solvent and therefore can reasonably be assumed to keep their own pension
710
schemes afloat, and because I also said that we hoped that entries to FAS would be modelled pretty much on the rules of the PPF, there was a worry, by implication, that solvent employers would come in to FAS. There is clearly a difference of view here. Some people argue that that would not be proper, while others argue that because these events happened in the past and we cannot reopen them, it is unfair to leave people with severely deficient pension schemes with no possibility of remedy.
Let me outline where we have got to in our thinking. There are two different issues here. The point I was making about excluded schemes is that a number of particular types of pension scheme are not appropriate for the sort of collective assistance which either FAS or PPF makes. The noble Lord, Lord Skelmersdale, bet that I would not know, and, for once, I was able to say, "Please, guv, I've got two versions"; one is for small schemes, the other is not tax-approved schemes. Our starting point for FAS is that we are likely to use similar rules as for PPF, although we shall examine the matter carefully in case different considerations apply to PPF and FAS. We know that some schemes would not come under protection.
The question of solvency is rather different. It is about the status of the employer when the scheme winds up, not the type of scheme. The PPF will not help schemes with solvent employers. There are other things, such as contribution notices, financial support directions, remediation schemes, and the possibility of going to the regulator for clearance if there is a question of a merger or takeover. In general, we expect employers to honour their pension promises. In future, the new regulatory regime that we are putting in place will reinforce that approach.
For the FAS we are still considering issues of employer solvency, for reasons that were outlined by my noble friends behind me, and supported by the noble Lord, Lord Oakeshott. We expect employers to meet their pension promises, but a range of complex situations occurred in the past that cannot be unpicked now. We need to understand them properly before we take a final decision.
For example, we are looking into the issue of members' voluntary liquidations. For those to take place, a statutory declaration of solvency is required. However, the Pensions Act 1995 does not exclude such solvent liquidations from winding-up provisions, and we are exploring that potential anomaly. The circumstances of pension schemes winding up underfunded where the employer is in NVL is part of our work on definitions of insolvency that may be used for FAS.
Equally, we may find that there are other circumstances. For example, we are looking into issues raised by pension schemes when the employer becomes insolvent very shortly after the scheme winds up underfunded. We may have schemes when there was a

711
solvent employer at the time, but there is now no solvent employer. Either it is insolvent or the employer has gone bust.
Lord Higgins: My Lords, when a company goes into voluntary liquidation, the noble Baroness says that it has to be solvent. Does that include the solvency of the pension fund?
Baroness Hollis of Heigham: My Lords, I understand that it is the solvency of the employer. Is the noble Lord talking about PPF or FAS?
Lord Higgins: My Lords, it does not matter which. I am merely implying that a system in which a company can go into voluntary liquidation with the company being solvent and take no account of its pension liabilities seems highly undesirable. If that is true, should we not do something about it?
Baroness Hollis of Heigham: My Lords, this is exactly why the regulator will expect to be a player in reaching agreement on everything, compromised agreements, and so on. That is why we had debates on the regulator earlier about how possible cosy decisions could be unpicked. We were concerned that the trustees might decide that because their scheme was only 70 per cent funded, they might as well make it only 20 per cent funded and shift the other money to the employer so that there were more assets to meet other debts. We aired those discussions previously.
I have given two examples. If there is members' voluntary liquidation, as I understand it—I am briefed—employers have to be technically solvent for that to happen. There is the case when an employer has subsequently gone insolvent after the point of wind-up but before the scheme can go into the PPF. We are seeking to address those issues.
I cannot tell the House yet where our lines will be drawn. On the one hand, we are trying to prevent an indecent situation arising in which people are caught by the accident of timetabling and end up with poor provision. On the other hand, we are trying not to so dilute the financial assistance moneys that people coming properly within the scheme have very little.
There is a final point. I hope that your Lordships understand the language that I am using on employer solvency. People desire to know who will be eligible for FAS help. It is positive help in terms of trying to manage entry into the fund if we do not make the decision too early because of the problem of moral hazard. If companies know that they cannot get into PPF, but believe through an early announcement by us that they may come into FAS, that would guarantee what we are trying to avoid. We want them to be willing to pick up their own liabilities. So, given that, I can take the noble Lord only so far in our thinking on this matter. We are considering those issues, for exactly the reasons expressed by the noble Lord, Lord Oakeshott, and my noble friend. We are, however, seeking to prevent FAS from being over-diluted, and to prevent the issue of moral hazard. It
712
may not be until the new year, but as soon as we can come with a clear line, we shall do so. If I can do that earlier, I shall be happy to do so.
I have here a full briefing on the Nikko Bank, but at this late hour I would prefer to write to the noble Lord, Lord Higgins, with all that material, rather than take another 10 minutes of the House's time to explore the ramifications. I shall make sure that other noble Lords receive it, if that is acceptable.
9 p.m.
Lord Higgins: My Lords, that was a very helpful reply. I see that the Minister is still contemplating carefully to what extent, with regard to FAS, the position of those who have a solvent employer but one that has reneged on his promises is appropriate. It seems rather odd that the taxpayer should pick up that tag—but, as the Minister and the noble Lord, Lord Oakeshott, said, a comparatively small number of people and cases may be involved. However, she has not quite taken the point that I made in my intervention.
There may be a situation in which a company goes into voluntary liquidation, and it may well be a subsidiary of a larger group. Both the larger group and the company going into voluntary liquidation may be solvent, but are they still regarded as solvent if the pension fund is in deficit? Should not the estimate of solvency include the position of the pension fund as well as the position of the company? That matter is not directly related to the Bill but, in the context of pension provision, it raises very important issues with regard to the general state of the law.
The case that comes to mind, although I hope that it will never happen, is when things are disproportionate, as with British Airways. In such a case, the company is solvent—but the stock exchange would certainly take into account the pension liabilities. I shall not belabour the point any longer at this time of night, but I believe that I have spelt it out reasonably clearly and that it is worth consideration.
Baroness Hollis of Heigham: My Lords, I am happy to have another go at explaining the issue. The difficulty arises because the definition of the solvency of a pension scheme will have changed depending on whether it is under the minimum funding requirement or scheme-specific funding.
An employer that enters an NVL must meet all debts of creditors in full. However, the debt owed to the pension scheme is currently at MFR, rather than full buy-out. That is why there is a problem as to whether one considers a pension scheme solvent, as it could meet MFR but still not be in a position for full buy-out. That will change with the changes to the buy-out regulations introduced from April 2005, which is why there is no unambiguous answer to the noble Lord's question. It may be in a situation to meet full buy-out, but more probably it will not if it is funding at MFR level.
Lord Higgins: My Lords, I am most grateful for the Minister's response. Whether in the case of Nikko Bank

713
it was even able to meet the MFR I rather doubt. Be that as it may, I am grateful to the Minister and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 277:
Page 236, line 4, at end insert ", and
( ) prescribed details of which have been notified to such person as may be prescribed by a person of a prescribed description—

(i) in the prescribed form and manner, and

(ii) before the prescribed date;"

On Question, amendment agreed to.
[Amendments Nos. 278 and 279 not moved.]
Lord Higgins Lord Higgins moved Amendment No. 280:
Page 236, line 15, after "person" insert "with qualifications equivalent to those of the members of the Board of the Pension Protection Fund"
The noble Lord said: My Lords, this is a nice simple amendment which we can all understand—which is not true of myself, and possibly of other noble Lords, with regard to some of the previous debates.
One suddenly realises that we spent an enormous length of time discussing the board of the Pension Protection Fund in all its aspects but we really know remarkably little about the structure of the financial assistance scheme and, indeed, whether the qualifications of the people who will manage it will be the same or not the same as those managing the Pension Protection Fund. I noted with interest two adverts in the paper last week stating that so-called six figure salaries are to be offered to those on the board of the Pension Protection Fund. Will the same be true of the financial assistance scheme, or will that scheme simply be an offshoot of the Pension Protection Fund structure? At the moment the structure is extremely obscure. Perhaps the noble Baroness can enlighten us. I beg to move.
Baroness Hollis of Heigham: My Lords, the noble Lord asked whether the same structure would apply to the financial assistance scheme or whether it would be an offshoot of the PPF. At the moment we envisage that these will be two separate bodies. I can quite conceive in a number of years' time the PPF taking over the residual responsibility of the FAS as those obligations are discharged. I refer to a finite number of schemes going through. Once the basic information has been established and it becomes primarily an administrative function, I can conceive—I am not saying that it will happen—that it would make good sense for them to become the same organisation. As I say, it will not be known for a number of years whether that makes good sense.
The problem with this amendment is the wording. As drafted, this amendment would require that, where the scheme manager of the FAS is a person other than the Secretary of State or a body established for that purpose, that person has qualifications equivalent to those which the people appointed to the board of the PPF have.
714
As noble Lords know all too well, I am afraid, final decisions on the FAS have yet to be taken and we are still consulting. However, this summer when we discussed the qualifications needed for appointees to the board of the PPF we all agreed that it was to be expected that such people would have the appropriate skills and experience for the task in hand. Obviously, we would expect the FAS scheme manager to have the appropriate skills.
However, the amendment could have a further effect in that such a scheme manager could be required to have equivalent qualifications to those of the people on the board of the PPF. People on the board of the PPF would have appropriate qualifications regarding investment, fund management, calculating and imposing a levy and so on. However, it is not clear at present that such qualifications would be a relevant requirement of the scheme manager of the FAS. For instance, the FAS will not impose a levy and other details of the scheme's operation remain under consultation. For example, it may not involve pooling and investing scheme assets. It could, for example, simply involve buying annuities and that is it. I am not saying that it will but it could. In addition, there may be areas where we want the FAS scheme manager to have experience and skills which would not be relevant for the board of the PPF.
This is a useful probing amendment. However, the nature of the fund and the construction of its operations will be sufficiently distinct in the early years and a straight read across, as the noble Lord suggested, would not make good sense. I am sure that we shall seek to appoint the most appropriate people for this task. I hope that the noble Lord will withdraw his amendment.
Lord Higgins: My Lords, I am grateful for that response which has helped to illuminate the situation. No doubt the salaries of those on the FAS will be somewhat lower than the salaries of those on the board of the Pension Protection Fund. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 281:
Page 236, line 39, at end insert—
"( ) for or in connection with—

(i) the review of, or appeals against, any determination, or failure to make a determination, in connection with the financial assistance scheme, or

(ii) the investigation of complaints relating to the financial assistance scheme,

and for the establishment of a body or the appointment of a person or persons to hear such appeals or conduct such investigations:"
On Question, amendment agreed to.
Lord Higgins Lord Higgins moved Amendment No. 282:
Page 236, line 42, leave out paragraph (h).
The noble Lord said: My Lords, this is in effect a probing amendment. Clause 284 is a very short clause concerning the financial assistance scheme. Clause 284(3) states:
"Regulations under subsection (1) may, in particular, make provision … (h) providing for a person to exercise a discretion in dealing with any matter in relation to the financial assistance scheme".
What on earth does that mean? What is its purpose? It seems quite strange. What power is such a person to have in exercising his discretion on matters about which we know absolutely nothing, other than that they are in relation to the financial assistance scheme? As I said before, there are certain points in a Bill where one thinks that the draftsman has finally had a nervous breakdown, and this seems to be one of them. I beg to move.
Baroness Barker: My Lords, having had my attention drawn to the paragraph by the noble Lord, I cannot help but think that if Earl Russell were here, he would tell us an anecdote about the poor law. I am afraid that my historical knowledge does not allow me to do anything so eloquent.
Baroness Hollis of Heigham: My Lords, I much enjoyed and will much miss Earl Russell's comments on what he called Humpty-Dumpty clauses in which, I remember vividly from most of them, income should be treated as capital and capital as income whenever the Government see fit. He sought to demolish that with good humour, asperity and wit. I then tried to explain that it was all about capital lump sums being paid back in instalments and, if one did not treat them as income, one was stuck, so one got round all the rules. It persuaded me, but I am not at all sure that it persuaded Earl Russell, whom we very much miss.
The amendment seeks to remove a provision which allows regulations setting up the FAS to provide for a person to exercise a discretion in any matter relating to the FAS. It is a bog-standard provision frequently used when taking regulation-making powers, to make explicit the range of ways in which those powers may be used. Section 183 of the Pension Schemes Act 1993—an Act passed by the noble Lord's government—contains a similar provision in relation to most regulation-making powers within that Act.
I do not encourage the noble Lord to move an amendment to it tonight, but Clause 313(4) has the same power. It reads:
"A power conferred by this Act to make subordinate legislation includes power to provide for a person to exercise a discretion in dealing with any matter".
Again, that is a bog-standard provision to deal with the regulation-making powers in the Bill. However, the provision has been repeated in Clause 284. This is where the noble Lord, Lord Skelmersdale, asks why, if it is in Clause 313, it is not overriding and we need to put it into Clause 284. It is because Clause 284 contains wide powers, and it was thought best to present a full
716
picture of the range of the powers within the clause itself. It might not have been necessary; I suppose that Clause 313 might have done it for us.
Let us look at how the FAS in particular may benefit from the provision. There may be cases in which it is sensible to allow some discretion, within guidelines, to help us to deal with a wide range of individual circumstances. An example is where scheme trustees are required to provide certain information within a set period—say three months—but the FAS manager has the discretion under the power identified by the noble Lord, Lord Higgins, to allow a longer period in certain cases where there are particular difficulties.
I reassure noble Lords that the provision certainly does not offer a blank cheque for the use of discretion in matters relating to the FAS. As with all other powers under the Bill, the FAS regulations would set out clearly where and within what limits discretion would be exercised. It goes without saying that such discretion would have to be exercised in accordance both with public law principles and the European Convention on Human Rights.
I do not know whether I have reassured the noble Lord by saying that it is a fairly bog-standard requirement or that we are also taking the power later in the Bill. However, the main point of substance is that regulations will specify and constrain how the power is to be exercised. I have given one such example, which I hope will satisfy him. It is a sensible discretion. With that, I hope that he will withdraw his amendment.
Lord Higgins: My Lords, we shall have to look forward to the regulations and see what they specify. As in other cases, no doubt the noble Baroness will let us have a draft. I was not a member of the previous government—I spent most of my time as the chairman of the Treasury and Civil Service Committee criticising much of what they did—so I do not think that I can be held responsible. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.15 p.m.
[Amendments Nos. 283 and 284 not moved.]
Clause 292 [Stopping disposal of assets of institutions administered in other member States]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 285:
Page 241, line 8, leave out from "may" to second "an" in line 11 and insert "on an application made by the Regulator with respect to UK-held assets of the institution grant—

(a) an injunction restraining a defendant, or

(b) in Scotland,"

The noble Baroness said: My Lords, Clause 292 relates to stopping the disposal of assets of institutions administered in other member states. In moving the amendment I shall speak also to Amendments Nos. 286 and 287.
Article 19(3) of the European Directive on the Activities and Supervision of Institutions for Occupational Retirement Provision 2003/41/EC(IORP) Directive requires member states to put in place mechanisms to prohibit, in accordance with the provisions of Article 14, the free disposal of assets held by a depositary or custodian located within its territory at the request of the pension scheme's home member state.
Amendments Nos. 285, 286 and 287 are technical, replacing "claim" with "application". They are necessary to provide consistency in the terminology used in the context of applying for an injunction where such cases may arise in the UK. I beg to move.
Lord Skelmersdale: My Lords, given that this matter is a requirement under EU legislation, and knowing other countries' sloth in putting EU legislation into law, has the Minister any information as to what extent this is reciprocated across EU countries?
Baroness Hollis of Heigham: My Lords, no, not offhand. I said to the noble Lord during previous discussions that officials from our regulation team are meeting officials of other countries who are doing the same job in terms of cross-border schemes and so on to ensure that there is a common understanding of "home" and "host" and how one deals with issues as to where the scheme may be registered in the home country of an employer who may be in a different country with employees in, perhaps, two or three different countries.
Those technical discussions are underway at the moment, but this matter will have to apply in all member states from 2005, whether they like it or not. But we are in the process of trying to obtain consistency of terminology at the moment.
On Question, amendment agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 286 and 287:
Page 241, line 13, leave out "claim or"
Page 241, line 32, leave out "claim or"
On Question, amendments agreed to.
Lord Higgins Lord Higgins moved Amendment No. 288:
Before Clause 294, insert the following new clause—
"PENSION ANNUITIES
(1) The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.
(2) In subsection (1) of section 630 (interpretation)—

(a) in the definition of "personal pension scheme", substitute for the words "or lump sums" the words ", lump sums, or withdrawals from a Retirement Income Fund", and

(b) in the definition of "income withdrawal", insert after the word "annuity" the words "or withdrawal of funds from a Retirement Income Fund".

(3) In section 633 (scope of benefits) after subsection (1)(e) there is inserted—
"(f) the payment to a member of income from a Retirement Income Fund satisfying the conditions in section 637B".
(4) In section 634 (annuity to member)—
(a) after subsection (1), there is inserted—
"(1A) Subject to subsection (7) below, the annuity must provide the member with an annual income not less than the Minimum Retirement Income set under section (Minimum retirement income) of the Pensions Act 2004.";
(b) in subsection (2), the words from "commerce" to the end are replaced by the following—

"(a) before the member attain the age of 50, or

(b) in relation to a member who is in receipt of benefits under section 634A before the date of this Act's entry into force, after the member attains the age of 75, or

(c) in relation to any member aged 65 or over as at the date of this Act's entry into force, within twelve months of that date, or

(d) in relation to all other members, after the member attains the age of 65."

(c) after subsection (6) there is inserted—

"(7) Section 45 of the Sex Discrimination Act 1975 shall not apply to the annuity provided under subsection (1A).

(8) The income provided each year from the annuity under subsection (1A) must increase by reference to increases in the retail price index, so far as not exceeding 5%."

(5) Sections 634(A) and 636(A) are repealed.
(6) Subsection (5) shall not apply to schemes executed before the date of entry into effect of this Act.
(7) After section 637A (return of contributions on death of a member), the following section is inserted—
"637B Retirement Income Fund
(1) Subject to subsections (2) and (3) of this section, a Retirement Income Fund is a vehicle for the reinvestment of savings in retirement, which—

(a) has been established by a person designated by subsection (1) of section 632; and

(b) is a vehicle whose investments are—

(i) investments of a kind described in the Insurance Companies Regulations 1994, Schedule X, Part 1, or

(ii) approved by the Inland Revenue.

(2) Funds held in a Retirement Income Fund as referred to in subsection (1) may be withdrawn from the Retirement Income Fund by the member as and when he elects.
(3) A member may not invest in a Retirement Income Fund unless the requirements of subsection (1A) of section 634, in relation to the Minimum Retirement Income, are satisfied.
(4) A Retirement Income Fund, and any income derived from it, must not be capable of assignment or surrender by the member.
(5) Any withdrawal from the Fund by the member under subsection (2) shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and shall be treated as earned income of the member.""
The noble Lord said: My Lords, the grouping has gone slightly awry at this point. Amendment No. 288 is grouped with Amendment No. 289. There will then

719
be another debate, after which we shall return to the question of annuities in Amendments Nos. 290A and 290B. It would probably be of convenience to your Lordships if we discussed together all these matters relating to annuities—in effect grouping Amendments Nos. 288, 289, 290A and 290B. Otherwise we shall have a strange interruption with a Liberal Democrat debate in the middle.
The amendments are important probing amendments. It has long been our position in the Conservative Party that we are in favour of abolishing the obligation to take one's pension in the form of an annuity at the age of 75. On two previous occasions I have moved amendments on the Floor of your Lordships' House to bring that about. Your Lordships have agreed with them, but when they went to the House of Commons they were reversed. It is now time that these matters were resolved.
On previous occasions, I think that there was a tendency—although I forget whether it was actually the case—for such an issue to be handled in the other place in the traditional way by saying that it was a matter of privilege. There was then no dispute when the matter came back to your Lordships' House. A little while ago, I mentioned that I was chairman of the Treasury Select Committee in another place for well over a decade, and I do not believe that these amendments—in whatever form we eventually put them at Third Reading—raise the question of privilege. On the one hand, they do not involve the imposition of taxation and, on the other, they do not involve a change in the structure which results in an increase in expenditure. Therefore, I hope that the proposal will not be rejected by the Commons on those grounds. Indeed, I hope that, on reflection, the Commons will believe that these are sensible amendments.
We discussed this matter at considerable length in Grand Committee. Effectively, we are saying that one should not be obliged to take a pension in the form of an annuity at the age of 75 but, at the same time, one should take steps to ensure that one does not become a charge on the taxpayer and dependent on means-tested benefits. Generally speaking, that is what we have sought to bring about in these amendments, and the principle has been reflected in at least two Private Members' Bills in another place.
I want to stress a point which did not come out adequately in Grand Committee and it is a point to which the noble Baroness did not really reply. What is really wrong is that one is forcing a person to make an investment in an annuity which is fixed at the rate at which annuities are available at that moment in time. But one might well feel that it is not the right moment to do so or one might well feel that annuity rates are going up. If I were taking out an annuity at the age of 75, which I am not, I would certainly not wish to do so at present. I believe that the Chancellor is borrowing enormous sums of money. He can borrow greater sums of money only at a higher rate of long-term interest, and that, in turn, will lead to an increase in the annuity rate. Therefore, unless we accept amendments
720
of this kind, people will be forced to take out annuities which they believe will provide a lower rate than they would receive later.
That is the core of the argument, and the simplest of the amendments seeks to deal with it in a very simple way by amending the Income and Corporation Taxes Act 1988 to leave out the expression,
"or after he attains the age of 75".
As your Lordships know, the Act is a fairly substantial document, but that would be a simple way of dealing with the point that I have just mentioned.
Of course, there are other aspects to this question. The Chancellor of the Exchequer himself seemed to become aware that there was increasing pressure in relation to this issue, and he then introduced what I consider to be a quite extraordinary scheme. I find it totally incomprehensible. So far as one can gather, it was introduced in response to representations from the Plymouth Brethren—a relatively small Christian sect—who felt that it was wrong to have annuities because they were effectively a bet on someone's life and, on moral grounds, they were not in favour of betting in such a way. That, apparently, persuaded the Chancellor to introduce this quite extraordinary scheme, which does not meet the point that we are seeking to make in this amendment. If the argument were at all persuasive, I am not sure why the Chancellor did not simply make all annuities illegal. In some ways, that would have been an easier way of dealing with the matter.
Another aspect is that certain outside groups—notably the Association of British Insurers—are strongly against the kind of amendment that I am putting forward. I do not think that that is surprising. After all, they represent an industry which is the sole provider of annuities. If people are obliged to take annuities at the age of 75, the amount that needs to be expended in marketing costs is remarkably small.
Indicative of the whole issue is the fact that there are now only two companies—Prudential and, I believe, L&G—that are still providing annuities on an enormous scale. Therefore, I discount the arguments put forward on that. However, that raised some points; namely, that some of the earlier forms of the amendment might result in people being told that they did not have to take their annuity at the age of 75, but they had to take out an index-linked pension to cover the dangers of going on social security.
Clearly, that is undesirable, so as we are determined to return to the matter at Third Reading and press it to a Division, I hope that we can try to ascertain from the Minister which of the three sets of amendments best meets the case. They are technical and there are problems associated with them. It occurred to me earlier, having been in Report stage for some time and with one's mind beginning to consider imaginative possibilities, that one should simply knock out age 75 and insert 105. That would overcome the whole problem and the noble Baroness's objections to what we have in mind here.
Given what the Turner report says about age going up, leaving the age at 75 seems to be a strange thing to do. Of course, the noble Baroness became very incensed and said that it would affect a relatively small number of relatively well off people. That is not the case, for the reason I mentioned. It affects almost everyone who is forced to take out an annuity because people are told when they have to do it. So it is not just the very well off who are affected by this issue.
In Grand Committee, the noble Baroness put forward all kinds of complicated calculations and seemed to envisage that somehow the tax relief that those who had built up a pension fund had enjoyed, should somehow be clawed back if this amendment were accepted. I do not accept that view at all. The fact is that the purpose of tax relief on taking out pensions was designed to ensure that people made provision for their retirement. To that extent, and to the extent that people took advantage of it, it achieved its objective. That is desirable, but it is something in the past. One cannot suddenly claw back that particular tax relief; I do not think that that would be at all appropriate.
In Grand Committee, the Minister also produced a number of startling figures, on this debate or on an earlier one, showing the enormous level at which one's pension pot had to be to float oneself off means-tested benefit. Of course, that has been going up and up. I see the noble Baroness, Lady Turner, agrees with me on that.
I believe that we can devise a form of words that deals with the problems raised by the Minister. I have lifted—I think that is the right expression, and plagiarised is a more unfavourable one—two sets of amendments from earlier attempts to deal with this problem. They relate to the Income and Corporation Taxes Act 1988. I am not sure whether that is the latest piece of legislation dealing with this issue. The noble Baroness indicates that it is not, in which case I shall be interested to hear what is the right piece of legislation so that we can bring the amendments up to date before Third Reading. These issues have been around far too long. The arguments in favour of them are very strong.
I conclude with one other point made in a recent study by Watson Wyatt Worldwide, entitled, Who would buy an annuity? An empirical investigation. That is an extensive survey, containing a graph entitled "Attitudes to annuities". I shall quote only the figures for all respondents: never annuitise, 58.8 per cent; annuitise later, 12.1 per cent. So, over 70 per cent of the people in this really very sophisticated survey did not want to annuitise, or at any rate wanted to annuitise their pensions later. That is a considerable sampling force for the arguments that I have put forward. I beg to move.
9.30 p.m.
Lord Lea of Crondall: My Lords, I simply wanted to ask the noble Lord why he dismissed so readily the idea that taxation has nothing to do with this. Half the tax relief at the moment goes to the top 15 per cent of contributors. We have had this discussion before.
722
Would it not be those sorts of people that would take the greatest advantage of the removal of this requirement? For me, until that point is answered, that tilts the balance of the argument very much in favour of the status quo.
Lord Higgins: My Lords, as I say, the argument about people being forced to take an annuity at the wrong moment applies to everyone, not just to the people at the upper end of the income scale. Of course it is the case that those with larger pensions would have a greater interest; that is a purely quantitative aspect. None the less, I think it is important to stress that they also have lost, compared with what they expected to get, because of the huge drop in annuity rates which has taken place under the Government.
People were incentivised to save by the Chancellor, and the economy has gained by their saving in the mean time. I do not believe that forcing people to do what they do not want to do is justified by the argument that they had tax relief. They had tax relief because the Chancellor of the day believed that it was a good incentive to encourage savings and so on. As has been pointed out, a lot of people did not save all that much. None the less, I think that the arguments I have put forward stand up.
Lord Lea of Crondall: My Lords, the inference that many of us would draw from this interchange is that in principle there may well be a case to be made here, but that, if that case is to be made, it must be accompanied by a total reconstruction of the tax regime for pension contributions. That is the inference that I would draw.
Lord Higgins: My Lords, I am not sure whether that was an intervention or not. Perhaps I may just add that of course the whole thing is massively affected by inheritance tax and the fact that house prices have gone up so much. That brings more people into that structure. Incidentally, I think that the noble Baroness was wrong about capital gains tax and housing; she was certainly wrong about ISAs, which are an alternative to this sort of pension scheme, because they have fallen dramatically. These are broader issues. We can go further into them.
Lord Oakeshott of Seagrove Bay: My Lords, I wonder if this is a private party or whether anyone else is allowed to join in. We support these amendments in principle. Whether we are able to support them in practice will, I am sure, depend on the Minister's answer and the helpful guidance to opposition amendments that certainly the noble Lord, Lord Higgins, seems to be expecting. Obviously we shall listen to her with interest.
The point had also struck me whether it would be simpler, if indeed all these amendments prove to be defective, to raise substantially the limit for the compulsory buying of an annuity. No doubt the noble Baroness can tell us, either now or in correspondence, in what year the limit of 75 years was fixed and what the average age of death was at that time, and update it pro rata. I suspect that we would find that the average is higher. If one fixes a suitable number of

723
years beyond the average age of death—say, it were 85 or 90 now—one would not need to keep revisiting the issue as life expectancy increases. We certainly would be prepared to consider that alternative. But, as I say, in principle, we support these amendments.
Baroness Hollis of Heigham: My Lords, I agree that it is late, and I do not want to revisit everything that we said in Grand Committee. There are three levels of critique which I could apply to the amendments. The first is what I call the "blue sky" level, which was the level at which we discussed the issue in Grand Committee. I made it clear then that none of the proposals had a claim to be considered unless they included at the very least both an annuity to float people off income-related benefits and a full claw-back of the tax-protected regime and advantages, which is what Members of another place sought; otherwise, there would be an unreasonable fiscal burden on the rest of us.
So before I even begin to engage in serious discussion of these issues, those two points must be a given; that is, there must be both an IRB-related annuity and a look at a full claw-back of the tax-protected regime. People are putting moneys into those pots over and beyond what they need for their retirement precisely and only because of the attractiveness of the tax regime. If one is using that money for a purpose other than a pension, one would need to look at that before any further discussions.
That is the "blue sky" level of critique. We could argue who gains and who pays under the whole financial package, as my noble friend has done. However, there is a bottom level of discussion which would involve a very close reading of each of the amendments. I could spend a considerable amount of time showing how technically flawed they are in every particular and so on, but I do not think that that is required.
I shall opt instead for an approach that was known in my graduate classes in Berkeley as "middle-level generalisations", which is the point between those two levels of critique, and show why each of the amendments as constructed has major flaws. They are not just technical details, but major policy flaws which may not have occurred to Members opposite. That is why we cannot proceed with the policy in the way the noble Lord seeks, even if we were persuaded of the "blue sky" arguments, which we are not. I am dealing now not with the little words and the cross-references, but with the substantive problems with the amendments as they stand.
These are important amendments that would abolish the obligation to take an annuity at the age of 75 and instead would require that people purchase a minimum retirement income annuity to ensure that they have sufficient income to avoid relying on income-related benefits. We understand that the intention might also be to require purchase of this annuity from age 65. I understand, as I said, the "blue sky" arguments.
724
I turn to the particulars. Amendment No. 288 would force people, apart from those few currently in income draw-down, to buy an index-linked annuity for each personal pension arrangement they hold. That would take away the current right of people to take the annuity that best suits their needs at the time that best suits them up until they reach age 75. For example, it would deny people who are sick the opportunity to achieve higher incomes through the purchase of an enhanced annuity and it would potentially force people to take a low rate rather than delay purchase as they currently can.
In other words, to float them off IRBs, Amendment No. 288 would require members to take their annuity at 65 whether they wish to or not. So in order to help the best off—the 1 per cent or so—one would be reducing the current freedom of the other 99 per cent of people to choose the time between age 65 and age 75 when they might wish to annuitise. That cannot be right.
Amendment No. 288 would have other consequences. I am looking at the firm policy points that are tucked away in the drafting of the amendment. The amendment would ignore the situation of the surviving spouse. The amendment provides no capacity for an annuity to continue on the death of a member. There is no statement on what happens to the retirement fund at death. There is no tax provision for that fund if it is paid out. The amendment would force 99 per cent of people to buy their MIR annuity at 65 instead of having the current freedom to continue until 75 if they wish. It applies only to personal pensions, but to each and every one of them, so that someone with half a dozen pots would be required to meet those needs in respect of each of them.
Leaving aside the situation of spouses and the problems of RPI, Amendment No. 288, by requiring everybody to take an annuity at 65 and requiring the provision to apply not to DC schemes but to every personal pension, would not begin to carry the policy intent that the noble Lord wants. I could outline what would happen to the gilts markets and so on, but I shall not.
Amendment No. 289 requires any withdrawals from the retirement income fund to be taxed at the member's marginal income tax rate. That goes back to my noble friend's point. Initial estimates suggest that we would have to levy tax at 55 per cent to make the change tax-neutral, broadly to recoup the tax fully from the individual's pension contributions, national insurance and tax relief on any employer's contribution, and the pension fund investment relief previously enjoyed. As drafted, the amendments would continue to provide a highly tax-favoured regime that a small number of people would be able to take advantage of. In short, the average, hard-working taxpayer could end up funding the legacies of the better off.
Equally, the amendment does not require withdrawals to be made from the retirement income fund, nor does it provide what happens to any funds remaining on the member's death. But the amendment's rules on non-assignment and non-surrender seem to prevent the retirement income fund paying death benefits to

725
survivors. There will be problems in that respect. The amendments would also make it difficult for trustees or managers of pension arrangements to comply with an attachment order requiring them to pay a percentage of a member's benefits to a former spouse. It would not be possible to make a pension-sharing order, due to the rule embodied in the amendments against non-assignment. So among the many losers from the amendments of the noble Lords opposite would be divorced spouses, mostly women, of individuals who had set up a retirement income fund.
I could talk about leaving the powers with the Chancellor of the Exchequer and so on, but I am sure that the Chancellor could address the issues raised by the noble Lord.
Amendment No. 290A is a very narrow provision. It suspends the age of 75 for personal pensions, leaving other people in a hiatus. It produces a problem for those who will be affected by the rules of 2006, when there will be new rules on amalgamation to create a simple tax regime. The amendment would only have effect until 2006, as it amends the Income and Corporation Taxes Act 1988, which will be repealed by the Finance Act 2004. So it benefits only individuals who have pension savings in a personal pension fund and who reach age 75 on or after 6 April 2005 and die on or before 5 April 2006, when the new, simplified pension tax regime comes into force. This very short-term amendment, which would apply for only one year, cannot be what the noble Lord intends. I could go on.
Amendment No. 290B is the heavyweight among these amendments. It would allow people to acquire an annuity to attain income-related benefit—not just through an annuity; it brings into account any other income they might have. If there were sufficient other income, they would not need to annuitise at all. Then the whole issue of what the fund stood for in the first place would come into question.
Until now, all three amendments have addressed only the issue of personal pensions, but the "biggie" here is DC schemes. That is why in this amendment the noble Lord is seeking to apply Amendment No. 290B to the DC schemes that he cannot get at because of the three amendments which apply only to personal pensions.
9.45 p.m.
The complexity here is huge. We would still need to broaden it further even to begin to make it work. At that point I believe that real problems are presented for the restructuring and relative attractiveness of DB to DC schemes. If somebody in a DB scheme found that if only he had saved in a DC scheme he could have got access to his money in a DB scheme there would then be a stampede from one to the other in order to gain access to the equivalent of the money pot.
All the amendments as they stand have serious policy flaws. I do not mean just technical drafting problems, but serious policy flaws. I have yards of speaking notes on this matter. I have not tried to go into the small level, detailed technical drafting. I have
726
not tried to open up again the big blue sky issues. I am saying that these amendments create far more problems than they solve while none of them does what the noble Lord seeks to do, which is to remove the requirement to annuitise at 75 whether the losers be the 99 per cent who all require to do so at 65 instead of having a choice between 65 and 75 and whether it is simply abandoning the position of divorced spouses who have rights to attachment orders. All these are insuperable problems as regards these amendments.
I do accept that there are real concerns about the issue of an nuitisation and the gamble one takes about the level of annuities as well as the gamble of longevity risks at the age of 75. I do understand why people would want to have access to money they have saved in pension funds. I can see why, if it could be made fiscally neutral, people might think that it was something that was worth looking at further.
I repeat three points. First, these amendments cannot carry the policy of noble Lords opposite. If passed they will not deliver and they will introduce new injustices and anomalies into the system. They are so deeply flawed that unless the Government were willing to take them over, which is a matter for another place as well as this, the amendments cannot do what the noble Lord wishes. It would be a monumental task of drafting given the read-across to all the existing tax legislation. As they stand, they would force everyone to annuitise at 65. The amendments do nothing for divorced spouses and there is no protection for the surviving spouse. Those are three compelling arguments against the amendments. There is no time, even if the Government were so minded, which they are not, to take them over on behalf of noble Lords opposite.
There are real consequences for the Treasury about the differential impact of tax relief taken and enlarged suddenly by the pension pot becoming a savings vehicle. People would certainly be much more willing to invest in a pension pot up to the pension cap ceiling, which they do not do at present, because they know they could access it if they found that it was surplus to what they thought were their requirements. That would have quite complicated cash flow problems for the Treasury. I am not saying that it is an insuperable problem because it could be restructured over time. The pattern of payments and receipts would have to be very heavily reconfigured and that has not been mentioned here today.
Finally, and perhaps most worrying of all, there is a deeper effect on pensions structure. If people have the choice of a DB scheme which they can never access and a DC scheme which they can, particularly if the levels of contribution are not so disparate, why would they ever go for a DB scheme when they could use the DC scheme as both a savings pot and a potential legacy?
More to the point, there would be huge pressure on DB schemes to convert and to be translated into a money pot with the destabilisation of the market that would occur, with pressure moving away from DB schemes onto the annuity markets that would

727
have to provide the base annuity to float people off. At the moment DB and DC schemes with similar levels of investment should produce broadly similar results over a long period of time except that the risk is carried by the employer under the DB scheme and by the employee under the DC scheme. In turn they also have the flexibility of that decade which will be lost with these amendments. I am confident that the relative attractiveness of DB compared to DC schemes would disappear with this amendment. It has repercussions across the whole of pension provision.
As I have said, I have not sought to engage seriously in the blue-sky stuff; I have not sought to do low-level techy stuff. As drafted, these amendments have really substantial policy flaws in them. I cannot say to the noble Lord, "If you go for this one, this will work and the others won't". Bluntly, all the amendments would need government consent in order to find the time and parliamentary counsel willingness to redraft across the board an elaborate array of tax legislation and so forth. That certainly cannot be done in the immediate future; that is, in the next 10 days or so.
Given that, I am sorry not to be able to help the noble Lord on which of the amendments might have some chance of staying power and robustness. The truth is that none of them will. Whether the noble Lord or noble Lords opposite can come up with an amendment that has more staying power at Third Reading, I do not know. That will be for them to determine. I emphasise that we could not even begin to consider any of that unless it is not only fiscally neutral but also addresses the issues, as I have said, of the reconfiguration of Treasury cash flow and the deeper consequences for the existing structure of our pensions system—DB and DC schemes. That cannot be pulled out in isolation, as noble Lords seem to think.
I have tried not to repeat what I said in Grand Committee. With those remarks, I invite the noble Lord—as he has already indicated—to withdraw his amendment.
Lord Oakeshott of Seagrove Bay: My Lords, before the noble Baroness sits down, I asked a question about when the limit of 75 years old was fixed. If she does not have that information, perhaps she may write to me.
Baroness Hollis of Heigham: My Lords, I shall do my best to find out, but I do not know the answer to that.
Lord Higgins: My Lords, I think that the answer is time immemorial. Certainly, in the light of the Turner report and the latest figures available, the 75 years-old is inappropriate. It may not need to be raised to 105 years old but an uprating at the very least would be appropriate.
I am most grateful to the noble Baroness for that very thoughtful and extensive reply. I obviously have quite a lot of work to do between now and Third Reading. As regards the point that she made about the change in structure, in a sense, she knocked down her own argument. As she rightly pointed out, in a defined
728
benefit scheme the risk is taken by the employer. In a defined contribution scheme, the risk is taken by the individual, which is why it is such a tragedy that we have seen the changes that we have from one to the other. Given the rate at which defined benefit schemes are declining, I am doubtful about the relevance of that argument.
Crucially, we should convince the Government that the arguments on this are right. However it is drafted, there is widespread concern. People are being forced to make investments that they do not want to make at a particular time, which is wrong. In a way, the number of people who are affected is more important than the argument about whether someone gets a legacy.
The noble Lord, Lord Oakeshott, will know more about the effect on financial markets than me; I view those arguments with some scepticism. But this has been an extremely helpful debate. I shall throw away my Income and Corporation Taxes Act 1988, which will help the environment by way of recycling, and look up the one to which the Minister referred.
Certainly, none of these amendments are as "crackpot" as the scheme that the Chancellor of the Exchequer came up with, which I do not think anyone understands other than the Plymouth Brethren who no doubt are delighted about it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 289 to 290B not moved.]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 291:
After Clause 295, insert the following new clause—
"ENTITLEMENT TO A CATEGORY A RETIREMENT PENSION (WOMEN)
Women whose national insurance contributions would otherwise be insufficient to entitle them to a full Category A retirement pension may become entitled to receive such a pension, subject to a United Kingdom residency test in accordance with regulations to be devised by the Secretary of State."
The noble Baroness said: My Lords, in Grand Committee my noble friend Lady Dean introduced an amendment, the text of which had been supplied by the EOC, attempting to deal with the pension entitlement of people acting as carers. It was understood that it would apply mostly to women, and attempted to cover the situation of people who had more than one low-paid, part-time job. The idea was that such a person would be entitled to a category A retirement pension whether or not national insurance contributions had been paid on earnings above the lower earnings limit, provided that certain conditions were met.
The Minister did not accept the amendment, although I think that she expressed some sympathy for it. It was felt that the proposals were rather complicated. In fact I think the EOC accepts that devising an amendment to deal with low pension entitlement among so many women is a complicated matter.
Sixty-four per cent of retired people are women, but their income in retirement is just 57 per cent of that of men. Poverty in old age is mostly found among

729
women, one of the reasons being that many women spend time out of the workforce as carers of children, sick relatives, the disabled and, later, often of their spouses. But those are not the only reasons. Another reason is that 1.4 million women are prevented from making contributions to their state pension because they earn less than £77 a week. Someone working for 16 hours a week on the minimum wage does not earn enough to qualify for a state pension.
The majority of people in low-paid, part-time work are women. Under the current system, anyone who earns less than the lower earnings limit from a single employment makes no national insurance contributions. Our system is based upon contribution payments. I have always supported that idea. It stems from the original programme based on the Beveridge concept, to which most of us gave complete support. But more recently it has been questioned, and this is particularly true so far as women are concerned. Has the time arrived for a completely new look at the way we seek to ensure that women do not suffer poverty in old age?
We now have a significant number of low-paid workers who are immigrants. In my view much more should be done, including by unions, to ensure that they are more successfully integrated into the workforce and are not simply used as cheap labour. But that is another argument. In the mean time, they may be here for many years and have no entitlement to pension benefits when they can no longer work. Devising a system that deals with women in caring roles can be a complicated matter as well.
The time has come to look at the whole issue again. Indeed, it seems from statements made recently that my right honourable friend the new Secretary of State is already thinking about it. I do not know whether this amendment is the right way forward. I know only that it is time for us to look at the whole matter of women and pensions with particular reference to those who, for no good reason and through no fault of their own, are quite unable to comply with the present contribution requirements.
My amendment is grouped with Amendment No. 297A, tabled by the Liberal Democrats. Their amendment goes rather beyond mine, which concentrates on women. The Liberal Democrat amendment addresses that party's more general policy in support of a citizen's pension. No doubt the case will be made for that. In the mean time, my amendment is directed quite specifically at low-paid women and at the need to take an entirely fresh look at the problems. I beg to move.
Lord Oakeshott of Seagrove Bay: My Lords, in view of the lateness of the hour, I shall not be moving the Liberal Democrat amendment grouped with Amendment No. 291, but I am delighted to support this amendment. The noble Baroness, Lady Turner, has rightly pointed out that it is consistent with the Liberal Democrat policy regarding a citizen's pension.
730
A woman is waiting for me at the Liberal Democrat ball tonight. I hope to get at least one dance before the glass coach turns into a pumpkin. I am happy to support the amendment.
Lord Hoyle: My Lords, before my noble friend rises to respond, I wish to support this amendment. While I understand that there are difficulties with the amendment, we ought to look at how they can be resolved. We should not have such women living in poverty. They were exploited while they were working because they earned such low pay. I hope that my noble friend will come up with a solution.
10 p.m.
Baroness Hollis of Heigham: My Lords, like everyone else, I shall try to be brief. I am very interested in this subject and, as my noble friend said, my Secretary of State has a genuinely open mind about it. He finds aspects of it very attractive, particularly insofar as it deals with the situation of women. So, in that sense, there is a consensus of minds around the problems that women face if they undertake the caring responsibilities and so on that we, as a society, ask of them, and that they, as individuals, are more than willing to embrace.
None the less, they then get punished for doing what is right. They find that, as a result, their pensions are very often incomplete and inadequate in retirement. I could go on at very considerable length about this, but I will not do so.
There is a series of very real issues associated with the desirability of a universal citizens' pension. There is an issue of cost but I do not wish to concentrate too much on that. Clearly, whether you are talking about gross or net costs, the trailing of benefits and women's HRP will help, over time, to bring more and more of them into the basic state pension system. That is important.
It is also the case that although 50 per cent of women have a full BSP, most are widows who enjoy the BSP by virtue of their husband; only 14 per cent of recently retired women have a BSP in their own right. So, as marriage will increasingly not carry protection in retirement for women, there is an issue there.
There is an issue of costs, an issue of trying to see where the future may lead, and an issue of whether individuals rather than relationships should carry pension provision. There is also an issue of the transitional arrangements. Above all, there is the very real issue about what happens to the basis of the Beveridge settlement, which is that there is a contributory pension to which people believe they have a right and an entitlement. So there are bigger issues.
Unless, until and if there is to be consensus about the future of the contributory principle and whether it can be maintained, we must continue to debate how it equates into a language of rights and responsibilities, what is earned and what one is entitled to, as well as the practical issues of costs, coverage, redistributional effects and transitional arrangements. There is still a great deal of debate to be undertaken.

731
My right honourable friend the Secretary of State, Alan Johnson, recognises the situation in which too many women find themselves, even today. Pension credit was designed to address their immediate problems and, if I may mix my metaphors, there has been the beginning of a sustained debate on whether pension credit will carry all the obligations towards women that we seek to impose on it.
We have done a great deal to help poorer women, but over the next few years we have to try to get our responses right. We have to consider whether the basic state pension, our provisions on HRP, our provisions on pension credit, our provisions on S2P and so on will fully address the dilemma that women face in caring not only for their children but also for older people as we live longer. That debate is only just beginning.
I have to ask my noble friend to withdraw her amendment today. The time is not right. I ask her to do so not by saying that the Government will not contemplate it—on the contrary, the Secretary of State has said that he is attracted to it but that there are very profound issues to address before the issue can be taken further. There are not only practical and administrative issues; we need to consider what the pension settlement that will take over from Beveridge should be asked to do. All of these issues will require much more work than has so far been done on them.
With that not unsympathetic response, I hope that my noble friend will feel able to withdraw her amendment.
Baroness Turner of Camden: My Lords, I thank my noble friend for that response. As I anticipated, she has been very sympathetic to the idea behind my amendment. Of course I appreciate that there are considerable problems involved, such as transitional problems, the fact that most people are committed to the notion that you get what you pay for through the contributory system, and a number of other considerable problems. However, I am very grateful for the assurance that the Government are well aware of the difficulties facing many women who have nothing much to look forward to in retirement except poverty, and that pension credit has not been the answer to everything, as we perhaps hoped.
Baroness Hollis of Heigham: My Lords, I am going to ask my noble friend to allow me to intervene. I would not wish anything that I have said to he a criticism of pension credit. I genuinely believe that pension credit has been brilliant at addressing the problem of pensioner poverty that we inherited. However, I have tried to suggest that that does not necessarily mean it should be the long-term solution many years down the line.
Baroness Turner of Camden: My Lords, I am grateful for that intervention.
As my noble friend rightly surmised, it is not my intention to press the amendment to a vote this evening. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 292:
After Clause 295, insert the following new clause—
"THE STATE SECOND PENSION AND PARENTS
In section 44A(2)(c)(i) of the Social Security Contributions and Benefits Act 1992 (c. 4) (deemed earnings factor), for "six" substitute "twelve"."
The noble Lord said: My Lords, to some of your Lordships, this amendment may seem slightly opaque. We got into this in Grand Committee; the noble Baroness, Lady Hollis, opened her response by saying that the amendment was generous in spirit but also generous in cost. I shall explain in a moment why I disagree with her.
The objective of the amendment is to extend entitlement to the state second pension to people who are not in paid work or who are in low-paid work, and who receive child benefit for at least one child under the age of 12. The current provision is for children under the age of six.
There is a rationale for change. School hours tend to increase when a child goes to secondary school, and it is easier for the caring parent to seek paid employment. The idea also has a reputable history: during the passage of the Child Support, Pensions and Social Security Act 2000, my party favoured amending the Bill in this way. The Labour MP, Dr Lynne Jones, also supported this type of reform. This year, my right honourable and honourable friends in another place sought to amend the Pensions Bill as an alternative way of achieving the same objective.
Many people who would earn a new entitlement to the second state pension under the proposed new clause would have been entitled to additional means-tested benefits in place of the higher second pension anyway. However, under this proposal, they would be paid the money as a contributory benefit instead of as a means-tested benefit, and the problems of low take-up and stigma would correspondingly be much reduced. I should also add that the Equal Opportunities Commission, an organisation much favoured by the noble Baroness, Lady Turner, has indicated that it supports the spirit of the amendment.
The rules are much harsher for the second state pension, as I have indicated. In order to benefit from home responsibilities protection, the children for whom child benefit is received must be under six. If entitlement to home responsibilities protection as it relates to the second pension was extended so that it more closely matched the rules of the basic state pension, this would help millions of people, the vast majority of whom are, by definition, women.
It is interesting to note that when he was pensions Minister, the noble Lord, Lord Rooker, told Parliament:
"The number of additional people who would be brought into State Second Pension by the suggested changes"—

733
in order to align the rules for HRP to S2P—the noble Lord was using shorthand in exactly the same way as the Minister has been doing all day—
"is likely to be negligible".—[Official Report, Commons, 27/1/00; col. 257W.]
What has changed?
In 2000, the Government estimated that the cost of extending HRP to the second state pension to those with children under 11 would cost £1.3 billion a year in 2050. Since then it could be expected—quite reasonably—that the net cost would have fallen significantly because of the increase in means-tested benefits, the introduction of pension credit and higher employment rates, for example, among lone parents.
However, in Grand Committee the noble Baroness, Lady Hollis, repeated the £1.3 billion figure, although she did not provide us with any information on exactly how the figure had been calculated, or indeed, whether it had been recalculated, whether it was net or gross, and how it related to the statement made by the noble Lord, Lord Rooker, which I have just repeated.
Moreover, although it is not a small sum, £1.3 billion is only 2.6 per cent of estimated expenditure on the second state pension in 50 years' time, when the entire expenditure on that pension is forecast to be £49.8 billion or 1.7 per cent of gross domestic product. In other words, the additional expenditure arising as a result of the amendment represents a measly 0.04 per cent of GDP by the middle of the century. Even that is probably generous because it is not clear how realistic the Government's assumptions for future spending on the state second pension are.
An appendix to the Turner report makes very interesting reading because it notes that current indicative indexation plans for the lower and upper earnings limits, if pursued over the long term, would involve a reduction in the amount of compulsory earnings-related pension provision/saving within the United Kingdom system. It is open to question whether any government would allow that situation to persist, and many current trends are in the opposite direction.
We know that the Government will not make any decisions on what was in the first Turner report until after the second report is published and they have had time to consider it. No doubt your Lordships will want to debate it at some length.
There is a final point that I should make. The reasons given by the noble Baroness, Lady Hollis, for rejecting the amendment in Grand Committee were not only on the ground of cost but also on the ground that the second pension was designed,
"to give those who were in the labour market an alternative pension that was more generous than SERPS".
She went on to say:
"It was therefore deliberately linked to being in the labour market".—[Official Report, 18/10/04; col. GC166.]
That is very strange. Given how the state second pension extended additional pension entitlement to carers and people with long-term illnesses or disabilities, it is at the very least arguable that the
734
benefit is at least as much about helping people who have good reason to be out of employment as it is about helping people in employment. The amendment is therefore most definitely in tune with the spirit of the state second pension as originally formulated.
For all those reasons I believe that we ought to be extending the home responsibilities protection in that area from six years to 12 years as the amendment, slightly opaquely, suggests. I beg to move.
Baroness Hollis of Heigham: My Lords, I am sure that the noble Lord did not intend to, but he marginally misquoted me from Grand Committee, as I was very clear about what I was saying.
I could revisit the argument about costs and the £1.3 billion and say that if I had that sort of money to spend on pensions, that is not where I would necessarily spend it. The figure of £1.3 billion each and every year is not negligible.
I could run other arguments: that between the ages of six and 12, children are usually in a school day that runs from 9 until 3.30 p.m. or thereabouts. To qualify and to be over the lower earnings limit and come up to the S2P, one has to work 16 hours a week, which would be, say, four hours a day for four days. That could be easily levered into a child's school day.
Perhaps I may make my point rather more fully. I can see where the noble Lord is coming from. He is seeking through his amendment to make S2P resemble ever more closely BSP—the basic state pension. I believe that he is profoundly wrong in that. The very debate that we were having earlier about the role of BSP and the extent to which all people, including women, might have access to it, denotes our reading of BSP as a pension to which as many people as possible should be entitled. Over the years since Beveridge, we have stretched it and stretched it, through credits and home responsibility payments, to bring more and more people within its coverage. S2P had a completely different history, and it does no kindness not only to BSP but to S2P to try to replicate the BSP function.
S2P was designed in recognition of the fact that people with earnings of more than £25,000 a year or so were likely to be in an occupational pension. We were running stakeholder schemes for those with incomes between about £12,000 and £13,000 a year and about £25,000. As your Lordships know, in the Pensions Bill we are trying to make employers more likely to contribute towards those schemes than they have done in the past. But we also accepted that very many people on very modest earnings, who worked 16 or 18 hours a week at minimum wage, would take home incomes of £5,000, £6,000 or £7,000 a year. Those people were in the labour market and working but, for them, a funded occupational pension was a dream. It was not possible, although they were working 16, 17 or 18 hours a week and trying to combine that with home life.
With S2P we were trying to produce an alternative occupational pension—and some of your Lordships were present when we developed it. That alternative not only built on SERPS but was more generous than SERPS, because it meant that whether one was

735
earning £6,000 or £11,000 a year, one would get the same S2P. But the condition of that was that it was a reward for being in the labour market, and a compensation at that level of earnings for having no access to an occupational pension scheme. It was attached to the labour market. In that sense, the more that BSP moves away from the contributory principle, as it has to some degree with issues such as HRP, the more important it is to protect S2P as a contributory pension to which people have added their contributions over the years through the national insurance principle. Without that, we will have very real difficulty in sustaining a second pension distinct from that of the basic state pension.
With S2P, we agreed that there were some people who could not enter the labour market—disabled people—and some who were getting carer's allowance because the element of caring was so substantial that it was unwaged work, which would not be alleviated because they were dealing with people with a middle or high-rate DLA, whose condition might very well deteriorate over time, although that was not invariably the case.
Therefore, S2P was for those in the labour market and unable to gain access to an occupational pension because of the poverty of their earnings, or for those who could never enter the labour market but who were, particularly as carers, doing the equivalent of a non-waged, full-time job. But we were clear that it was never an optional pension for those free to make choices to enter the labour market, even at the modest level of 16 hours a week.
I firmly believe, with all the work that we have done on the new deal for lone parents and the rest of our strategies, that we are helping women, including lone parents, back into the labour market. There need be no problem for women who wish to enter the labour market to reach the lower earnings level with children between the ages of six and 12 at school—and they do. Hosts of them do. It would be quite wrong to extend this provision to people caring for children up to the age of 12, thus increasingly aligning what is meant to be a contributory labour market occupational pension, and to seek to turn it into a diluted version of basic state pension. That is what this amendment would do, and I think that is profoundly wrong.
I could go on at greater length but I hope that the noble Lord will recognise or accept the force of that argument. If he continues in the way that he is going, we would end up, as I say, breaking the connection between S2P and waged work for a whole swathe of people for whom we should not break that link. If we do that, the whole justification of S2P itself becomes increasingly shaky. I hope that with those comments the noble Lord will feel able to withdraw his amendment.
Lord Skelmersdale: My Lords, the noble Baroness is quite right; the whole basis of S2P is extremely shaky, especially when she says that the rationale for allowing
736
carers of disabled people to claim HRP is because it is a state's recognition of unwaged work. Surely to goodness, being a parent is unwaged work.
Baroness Hollis of Heigham: My Lords, I made the point that a carer would be eligible for the provision only if he or she was on carer's allowance. The passport on to that is middle or higher rate DLA. The noble Lord knows about the conditions for DLA. He has been involved in debates on that. He knows that they involve frequent and, if necessary, continuous supervision, support and assistance to a disabled person. It is a full-time job; you need to be there. It is not a situation where a disabled person is out of the house for five, six or eight hours a day and one can fit in work. I am talking about a situation where a person is with that disabled person in the home. It is work that, sadly, is all too often under recognised and, frankly, under financed by society as a whole. It is a totally different situation from a parent with a non-disabled child whose child goes off to school at half-past eight in the morning and comes home at half-past four in the afternoon. The noble Lord will not persuade me that such a parent cannot in any sense go into the labour market for four hours a day.
That is not to undervalue parenting and it is not to say that being a parent is not the most important job in our society. As a parent myself I believe that it is. However, I am saying that such parents can perfectly properly be full and proper parents while going into the labour market and acquiring an entitlement to S2P within the hours that a child is at school without strain and without problem.
Lord Skelmersdale: My Lords, the noble Baroness also claimed that it was quite possible—indeed, she repeated that just now for a mother in this situation to work for 16 hours a day.
Baroness Hollis of Heigham: A week, my Lords, but she probably will work for 16 hours a day.
Lord Skelmersdale: My Lords, I apologise, 16 hours a week, although, as the noble Baroness says, she probably will work for 16 hours a day. However, that is an argument which the noble Baroness has just sought to refute regarding a parent working on behalf of the child. But surely to goodness the fact of the matter is that children have illnesses and the mother has to go off work. Children have half-terms and the mother has to go off work. Children have school holidays and the mother has to go off work. Teachers have training days—I do not know what they are called—and the mother has to go off work. If you average it out over the year I find it very difficult to bring myself to believe that what the noble Baroness has said regarding 16 hours a week regular employment is a possibility.
However, that said, it is very rare that the noble Baroness and I antagonise each other to quite such an extent as we have on this amendment. I am sorely tempted indeed to divide the House but I will not do so

737
because we are on Report and all that would happen is that I would give the Government a very easy victory on something that I believe in very deeply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 11 [Deferral of retirement pensions and shared additional pensions]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 293:
Page 325, leave out lines 34 to 37 and insert—"
"(3) Regulations—

(a) may enable a person who has made an election under subparagraph (1) (including one that the person is treated by sub-paragraph (2) as having made) to change the election within a prescribed period and in a prescribed manner, if prescribed conditions are satisfied, and

(b) if they enable a person to make an election under subparagraph (1)(b) in respect of a period of deferment after receiving any increase of pension under paragraph 1 by reference to that period, may for the purpose of avoiding duplication of payment—

(i) enable an amount determined in accordance with the regulations to be recovered from the person in a prescribed manner and within a prescribed period, or

(ii) provide for an amount determined in accordance with the regulations to be treated as having been paid on account of the amount to which the person is entitled under paragraph 3A."

The noble Baroness said: My Lords, in moving Amendment No. 293 I wish to speak also to Amendments Nos. 295 and 296 with which it is grouped.
They concern the provisions in Schedule 11 that would allow a person a short "cooling off" period after they have chosen between increments and a lump sum at the end of their deferment. We intend to set that cooling-off period at three months and allow people to revisit the choices if they wish. The provisions are benign; it is late at night; I hope that noble Lords will accept that the amendments are desirable. I beg to move.
Baroness Barker: My Lords, it is late at night, but I want to ask the noble Baroness to explain why the Government have chosen three months. We talked at some length about lump sums in Grand Committee, and we will talk a little more about them on the next amendment. We talked about the enormity of the decision for some people. Without going over all the arguments again, people are essentially betting against the Government when they choose to defer.
In Grand Committee, the noble Baroness talked about reasons why people might want to change their mind on election to defer, such as discovering that they had a serious illness. In such circumstances, three months does not seem a particularly generous length of time on the part of the Government; in fact, it seems quite arbitrary. How did the Government come to the figure of three months?
Baroness Hollis of Heigham: My Lords, I do not deny that there has been a decision to go for three
738
months. The noble Baroness should remember that we are talking about the choice that people will have after they have deferred on how to take the extra value to their basic state pension. They will have been working for perhaps two or three years and acquired increments that, at the point of retirement, they can decide to convert into either additional increments on their basic state pension or a lump sum. While they have been working beyond state pension age and choosing not to draw down their pension, I do not believe that they will not have been considering and reflecting on that.
Once they retire, they make that choice, having no doubt considered what for them makes best sense all the time that they have been working. We could assume that choice to be irrevocable unless there is good cause. We do not; we are doing something else. We are not giving people a long-term guarantee against risk or whatever, so that they can revisit it in two or three years' time, but people will presumably have taken the extra period with a presumption of which way they want to cash the extra value. When it comes to their retirement, they make their choice but, instead of it being irrevocable, if on reflection they decide that they have made the wrong choice they can revoke it within three months. That is really rather generous, relatively speaking. It is more generous than applies to many such choices, when one thinks about the amount of time that one has to reconsider commercial contracts and so on.
We are allowing people to revisit a choice that they will have made, possibly fully and certainly in good faith, if they so wish. Clearly, the length of time in which they can revisit the choice cannot stand open-ended. There would be questions then of repayments and all the rest of it. We think that three months gets the balance about right.
Baroness Barker: My Lords, would the Minister agree that, in the circumstances that she outlined, the main reason why someone might change their mind is because they have had a serious life-changing event such as illness? I am not for one moment suggesting that the period ought to be open-ended, or that it necessarily need be a great deal lengthier than what she outlined. I would merely like to see some basis on which the length of time can be aligned to what happens in people's lives. I suspect that, in those circumstances, things might be different.
I would be interested to know in due course whether, if the provision remains—I suspect that it will—it will be monitored to see how arbitrary it is and the extent to which it mirrors the people who make changes and decisions for those reasons. My reasons are not of dogma or principle, they are of pragmatism.
10.30 p.m.
Baroness Hollis of Heigham: My Lords, I take the point regarding monitoring. I am perfectly happy to give the noble Baroness an assurance that I shall do my best to monitor the situation. Obviously, if we discover situations with an unacceptably high number of what I would call good causes that would properly be of

739
concern, we might revisit the matter, I suppose. But I will monitor it, because we certainly do not wish to have a situation where people are making inappropriate choices which are too late. Equally, one cannot, as the noble Baroness accepts, say a year or two down the line, "My circumstances have changed and now I want to do something different", because otherwise the Government would be being asked permanently to guarantee or second-guess peoples' choices—in other words, insure them against the bad choices that they might have made because they did not know what might happen to their health.
There is a balance to be struck. We believe that three months is generous, but I shall seek to ensure that the situation is monitored. If the noble Baroness's fears are valid and take place, I am sure that she will be one of the first to raise concerns and to draw them to our attention.
On Question, amendment agreed to.
The Deputy Speaker (Lord Geddes): My Lords, before calling Amendment No. 294, I must advise the House that if it is agreed to, I cannot call Amendment No. 295, by reason of pre-emption.
Baroness Barker Baroness Barker moved Amendment No. 294:
Page 328, line 8, leave out paragraphs 9 to 11 and insert—
"9 After paragraph 3B (inserted by paragraph 8 of this Schedule) insert—
"Treatment of lump sum of deceased pensioners
3C Where a person has accrued a right to a lump sum payment under paragraph 3A of this Schedule the value of the lump sum accrued by the time of death shall be payable to the estate of the deceased.""
The noble Baroness said: My Lords, as I said a moment ago, in Grand Committee we discussed the matter of deferments and lump sums, principally on the grounds that we thought, and still feel, that the provisions of the Bill were open to charges of discrimination in that they related only to spouses and to people who were married. We did not find the Minister's answers convincing at that point.
Nevertheless, there is another element about which we think that the Government's proposals regarding deferral of lump sums may be open to challenge under Article 1 of the first protocol of the ECHR, about the right to enjoy one's possessions. We had a discussion in Grand Committee, although not a particularly satisfactory one in terms of the Minister's response, about whether or not a deferred pension could or would be considered to be a possession and, therefore, something that should be treated as part of an individual's estate.
At this time of night, I do not wish to enter into much detail about the case of Muller v Austria in 1975, except that although in that case it was held that a state pension was not protected as such by Article 1, a property right might arise from making compulsory contributions to a pension fund. The basic state pension in this country requires compulsory contributions. The entitlement to a state pension depends on previously made national insurance contributions.
When reaching state pension retirement age, pensioners have a legal right to receive those state benefits. On these Benches, we believe that a lump sum should be made up of past entitlements to pension payments to which there has been a clear legal right. Therefore, the deferred pension sum is as much the property of an individual as if he had taken the money when he was entitled to it and put it in a deposit account in his own bank. We therefore believe that, as the Bill stands at present, it is open to challenge on those grounds, and that is the reason for raising the matter again. I beg to move.
Baroness Hollis of Heigham: My Lords, the noble Baroness, Lady Barker, has helpfully returned to what I would call the legal arguments of the issue and she has invited further contributions. Again. I am trying to avoid repeating what I call the "blue sky" arguments that we entered into in Grand Committee.
The noble Baroness raised two main issues. The first concerns the legality of the proposed inheritance arrangements for the lump sum. These extend the rules that already apply to increments and would allow a surviving spouse—but no one else—whose married partner died while still deferring his pension to choose a lump sum payment derived from the deceased's deferment.
The question put forward by the noble Baroness is whether the lump sum constitutes a possession before the person deferring his pension makes a claim for it. If it does, then by restricting the payment of any lump sum to a surviving spouse if the deferrer dies before claiming, it is argued by the noble Baroness that we are at risk of being found to be in breach of Article 14, read in conjunction with Article 1 of the First Protocol of the European Convention on Human Rights, or, indeed, in breach of Article 1 of the First Protocol alone; that is, as the noble Baroness said, we are interfering both with the person's enjoyment of his possessions—I presume by not allowing him to dispose of it freely on his death, which is a little strained—and we are also discriminating against unmarried couples.
We do not accept those arguments. It is a well established principle in social security legislation that entitlement to benefits requires a claim to be made by the person. That principle has also been upheld in the European Court of Human Rights. In our view, therefore, the deferrer's right to a lump sum cannot precede his claim for it any more than his right to obtain his normal weekly pension cannot exist separately from the requirement to claim it.
Therefore, while a person may have an expectation that he will receive a payment as a result of contributing to the National Insurance Fund, we do not agree that that creates an obligation on the part of the state to make any payment of that benefit or that it creates an expectation on the part of the individual that he will receive a payment before a claim for it is properly made as required by law. Indeed, the deferrer is free to make a claim at any time, and naturally we would not be in any

741
position to second-guess what the deferrer might choose by way of reward, be it a lump sum or increments, once he does make a claim.
The noble Baroness made the point that a person who defers is in no different a position from one who has drawn his pension and banked it and that therefore the accruing amount should be treated in the same way. As I hope I have made clear, we consider that there is a difference. The one has claimed his pension and is therefore entitled to do what he wants with it; the other has not. If we are right on this point—I am assured that we are—it therefore follows that we are not unreasonably interfering with the person's peaceful enjoyment of his possessions because, until such time as he has claimed his pension and chosen his lump sum, it is not his to enjoy.
On the issue of discrimination between married and unmarried couples—however cross he was about the previous amendment, I think that the noble Lord, Lord Skelmersdale, will support me on this—I simply say that we are doing no more or less than we do now with respect to the other elements of the state retirement pension.
As I have already said, we accept that an argument of principle is involved here, but it does not turn on the lump sum in isolation. The lump sum is intended to be an alternative form of taking the rewards of deferring the state pension. In that context, what would be the rationale for paying the lump sum to an unmarried partner but not the increments? As the noble Baroness knows, unmarried partners are not entitled to increments or even the basic state pension by virtue of their relationship to their partner. That applies only to married couples, and that is the law as it stands. Therefore, in our view, it makes no logical sense to separate the one element from the other.
I could continue, but I have tried to address the two points raised by the noble Baroness. One is the legal status. I have gone into that at some length in order to give the noble Baroness the legal basis and the considered legal view that we have sought. With regard to the second, concerning the unmarried partner situation, I have tried to suggest that what we are doing here is entirely fair. We are treating the lump sum as we will treat increments—no more and no less—and it applies to the spouse or the bereaved spouse and not to unmarried partners in either circumstance. To do the one rather than the other would produce new anomalies and new unfairnesses. I am afraid that I cannot accept the noble Baroness's amendment.
Lord Skelmersdale: My Lords, before the noble Baroness sits down, does she accept that there is no entitlement to a lump sum until it is asked for at the end of an extended retirement period and, therefore, by definition, the noble Baroness, Lady Barker, is asking for an ephemeral thing? Does the Minister further accept that this is the first time today that I have been in total agreement with what she says?
Baroness Hollis of Heigham: My Lords, that was such a splendid intervention. I have never yet heard of
742
a basic state pension being called an "ephemeral thing". I was relishing that phrase and wondering how I might enlarge on it, but then the noble Lord spoilt it by saying that this is the first time we have been in agreement.
Lord Skelmersdale: My Lords, I said total agreement. There is a difference.
Baroness Hollis of Heigham: My Lords, let us hope that that is a difference without a distinction. With that, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Barker: My Lords, I thank the noble Baroness for her full and timely response to the points that I raised. I too find myself in complete disagreement with the noble Lord, Lord Skelmersdale. I do not believe that a basic state pension lump sum is ephemeral—far from it.
I thank the noble Baroness for the points that she made about discrimination against unmarried couples. Perhaps that is a fight for another day on another Bill when we may return to the matter and have more agreement between us than now.
On whether a deferred lump sum is a possession that should go to someone's estate, I still believe that the Government will find themselves open to challenge on that. Whatever the legal status of the matter, the noble Baroness has finally and comprehensively made the case against deferral. I do not believe that was in the Government's interests either. I see absolutely no reason why anyone in their right mind would wish to defer their state pension at all.
On that note, I thank the noble Baroness for putting those arguments on record, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 295 and 296:
Page 328, leave out lines 29 to 32 and insert—
"(4) Regulations—

(a) may enable a person who has made an election under subparagraph (2) (including one that the person is treated by sub-paragraph (3) as having made) to change the election within a prescribed period and in a prescribed manner, if prescribed conditions are satisfied, and

(b) if they enable a person to make an election under subparagraph (2)(b) in respect of a period of deferment after receiving any increase of pension under paragraph 4 by reference to that period, may for the purpose of avoiding duplication of payment—

(i) enable an amount determined in accordance with the regulations to be recovered from the person in a prescribed manner and within a prescribed period, or

(ii) provide for an amount determined in accordance with the regulations to be treated as having been paid on account of the amount to which the person is entitled under paragraph 7A."

Page 332, leave out lines 1 to 4 and insert—
"(3) Regulations—

(a) may enable a person who has made an election under subparagraph (1) (including one that the person is treated by sub-paragraph (2) as having made) to change the election within a prescribed period and in a prescribed manner, if prescribed conditions are satisfied, and

(b) if they enable a person to make an election under sub-paragraph (1)(b) in respect of a period of deferment after receiving any increase of pension under paragraph 2 by reference to that period, may for the purpose of avoiding duplication of payment—

(i) enable an amount determined in accordance with the regulations to be recovered from the person in a prescribed manner and within a prescribed period, or

(ii) provide for an amount determined in accordance with the regulations to be treated as having been paid on account of the amount to which the person is entitled under paragraph 4."

On Question, amendments agreed to.
[Amendments Nos. 297 and 297A not moved.]
Clause 314 [Parliamentary control of subordinate legislation]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 298:
Page 257, line 30, at end insert—
"( ) an order under section 241(A1) (power to provide for minimum fraction of member-nominated trustees or directors to be one-half);"
On Question, amendment agreed to.

Housing Bill
Bill returned from the Commons with certain amendments agreed to; with certain other amendments agreed to with amendments; with another amendment disagreed to but with amendments in lieu thereof; and with the remaining amendments disagreed to with reasons for such disagreement; it was ordered that the Commons amendments and reasons be printed.
House adjourned at seventeen minutes before eleven o'clock.