Consideration of Commons amendments and / or reasons in the Lords
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton)Labour- Quote
- My Lords, I beg to move that the Commons reasons be now considered. Moved accordingly, and, on Question, Motion agreed to. commons REASONS [The page and line references are to Bill 61 as first printed for the Commons.]
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- Lord McKenzie of LutonLabour
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- My Lords, I beg to move Motion A, That the House do not insist on its Amendment No. 1 to which the Commons have disagreed for their reason numbered 1A. I am grateful to my noble friend Lady Hollis for all the work she has done on this important issue and it is clear that she gained the support of noble Lords on all sides of this House, as evidenced by those who spoke so passionately on Report. My noble friend’s amendment was overturned in the other place for reasons of financial privilege. The amendment carries with it spending commitments, as I outlined on Report. Since then further legal advice is that the amendment, although not in a form which achieves the desired objective, can sit alongside the current arrangements so it properly expresses the policy intent. As I said on Report, we understand, and are very sympathetic to, the objectives of the amendment, and hope that we can deliver its aim of helping women in this country if at all possible. The Government have always been clear about their desire to provide fairer outcomes for women and the measures in the Bill demonstrate that commitment. My honourable friend the Minister of State, during consideration of the amendment in the other place, recognised the strength of feeling expressed by your Lordships and I, too, was left in no doubt of that. As he made clear, we are keen to find a solution that may bring more people further into the contributory system. However, this is a complicated issue, and it is important to explore the complexities and possible implications of the range of options, including the proposal in my noble friend’s amendment. There are, for example, options in relation to the number of years that could be purchased, the rate at which additional contributions could be paid, the treatment of individuals overseas and the interaction with the current system. Those have varying administrative, legal, cost, distributional and policy implications, and we need to ensure that we get any targeted solution right. I hope that my letter to my noble friend Lord McIntosh, which was copied to all noble Lords who spoke at Second Reading and placed in the Library, explained a little further the possible cost implications. We want to find a way to overcome these problems. We are keen that any solution should deliver a fair outcome for individuals who have experienced complex and fragmented lives, but at the same time we need to be mindful of how any changes would impact on people living overseas. With that in mind, the Government will commit to looking at the range of options in the coming weeks, including the option to buy additional years as proposed in the amendment, and to provide an update at the Pre-Budget Report. In doing so, the Government will consider all the options in terms of the following principles: fairness, as any solution must help those most in need; affordability, as any solution must be affordable and sustainable; and simplicity, as any solution must be deliverable, simple to implement and understandable to those whom it would benefit. There is no difference between your Lordships’ wishes to help women in this country and our wish, but we need to deal with the practical problems. I cannot make a commitment that we will achieve that outcome today, but we will use our best endeavours to deliver the principles of the noble Baroness’s amendment. We have listened very carefully to your Lordships’ concerns, and we take them seriously. I understand that my noble friend Lady Hollis believes that our proposal is a useful basis on which to go forward; I thank her for that. I hope that your Lordships are of the same view. We also intend to seek the views of relevant stakeholders. Moved, That the House do not insist on its Amendment No. 1 to which the Commons have disagreed for their reason numbered 1A.—(Lord McKenzie of Luton.)
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Baroness O'CathainConservative- Quote
- My Lords, I very much welcome the moral commitment made by the Minister. I particularly liked his three points, which came through in the long debate that we had; fairness, affordability and simplicity. Of course it is a complicated and complex issue; most things that are worth fighting for are. The principle of the amendment is essential if poorer women in particular are to have the security of being able to look forward to saving. I am sure that next year, when we consider the personal accounts Bill, we will be able to come back to this issue if we have to. I hope that we do not have to do so and that what happens in the next few months, with the great commitment of the Minister, will make that unnecessary. Meanwhile, let us hope that he will understand that, certainly from my point of view, this issue will not go away. I thank him.
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Lord Lester of Herne HillNon-affiliated- Quote
- My Lords, I did not take part in the earlier debates on the Bill. Therefore, I apologise for saying anything, and I will be extremely brief. First, the noble Baroness, Lady Hollis, has done a great favour to everyone in tabling the important amendment, which deals with an ancient source of injustice, especially to women in this country. I wish I had been able to say that at Second Reading. Secondly, I am very pleased to note what has been said in the other place by the Minister and what has just been said by the Minister in this House. Wearing my hat as an unpaid legal adviser, to draw a distinction between people in this country and people outside this country on the basis of a close connection with this country in deciding on whether the purchase of added years should be permitted would, in my view, be compatible with the European Convention on Human Rights and the Human Rights Act. There is the case of Carson, which is a decision by majority of the House of Lords, which is now before the European Court of Human Rights. I agree with what the majority said in that case about the rational basis for drawing a distinction effectively on the basis of whether one lives in this country and throws in one’s lot in this country in order to get the benefit. There are wider problems about EU law but again those are not difficult, as one is drawing a distinction not between British and EU citizens but on the basis of residence in this country, which would apply equally to other EU citizens. I therefore believe that it will be possible for the Government to honour their obligation now, to give effect to the principles in the amendment of the noble Baroness, Lady Hollis, and I hope to see that come to pass soon.
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Baroness Howe of IdlicoteCrossbench- Quote
- My Lords, we all noted in the Minister’s language a genuine attempt both to take account of what was said and give it proper weight. I cannot say that I am entirely happy with the result; you would not expect me or many other noble Lords who took part in the debate to be absolutely overjoyed. However, I certainly recognise the attention that has been given to the issue. On the basis that the noble Baroness, Lady Hollis, will be around—nobody has greater expertise—I have every confidence that the maximum benefit will be extracted in the long run, and I hope in the very short run. I congratulate her sincerely on all she has achieved, and the Minister on what he has partially achieved so far.
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Baroness Thomas of WinchesterLiberal Democrat- Quote
- My Lords, it came as no surprise to these Benches that the other place did not waive financial privilege for the amendment; obviously there is no point in this House insisting on it. As my honourable friend Danny Alexander said, the amendment would have tackled the great injustice faced by many women in their quest to get a full pension, even under the new system, particularly the cliff edge from 39 to 30 years. The issue of a practical solution to the problem of a broken pension contribution record, highlighted by the amendment, has certainly touched a chord with the British people, as the number of e-mails sent to the “Today” programme in response to an item about it showed. It is obviously right for more research to be done by the department to make sure that any solution is targeted on those that it is designed to help. I hope that it will be possible for the matter to be brought up again, either in the next Pensions Bill when the department has done the research or, even better, by order under the 1992 Act. From these Benches, I congratulate the noble Baroness, Lady Hollis, on all her hard work. I hope that it will eventually bear much fruit.
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Lord Mackay of ClashfernConservative- Quote
- My Lords, I join those who have congratulated the noble Baroness, Lady Hollis, on securing this. So far as I can see, it is really about as far as we could reasonably be expected to go with the amendment. I believe that, in due course, the Government will be able to overcome the obstacles that appear at present. I am sure that those obstacles are just to test their ingenuity.
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Lord BarnettLabour- Quote
- My Lords, I add my congratulations to my noble friend. Has the Minister’s commitment been agreed with the Treasury? I say that with a little experience, a long time ago. It is important that the Treasury be committed to what he said, so I hope that he can give me that assurance.
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Baroness Hollis of HeighamLabour- Quote
- My Lords, in the words of the noble Baroness, Lady O’Cathain, the statement repeated by my noble friend today—it was first offered by the Minister in the other place—to me represents a moral commitment or, to coin a phrase, a promise with menaces. We expect it to be delivered and I am confident that my noble friend will use his best endeavours so to do. I am very grateful for today’s comments suggesting that there need be no immediate legal obstacles in the road that would stop the show. There are problems to be addressed and overcome, but nothing that should stop the ultimate success of the amendment, which will bring women in this country, who have often spent their lives in caring, into the contributory system in their own right, as we should all wish to see. Therefore I should give some thanks. Thank you, first, to my noble friend, to Mr Mike O’Brien in the other place and to the civil servants supporting them, who have always been available to see one and were almost always open-minded when they did. That was greatly appreciated. To my certain knowledge, they have worked very hard indeed in negotiations with the Treasury, and this statement now represents the Government’s position and not just that of the department. I very much appreciate that. The second thank you is to the outside organisations, particularly Carers UK, Help the Aged, Age Concern and, above all, the Equal Opportunities Commission, which helped to form and organise the Women’s Pensions Network. I suspect that many noble Lords will have been at the receiving ends of its missives, e-mails and, indeed, its appreciation and gratitude. It very much values all that has been done in this House. Thirdly, if it is not impertinent, I thank your Lordships. It was amazing to sit here and watch how the debate took fire. It went right around the House, with contributions, support and votes almost equally judged around the Back Benches, including distinguished Back-Benchers, in a way that many of us could not have dreamed of when we started this battle a year or two ago. I am very grateful to the 179 noble Lords who supported the amendment in their speeches and votes. To the 86 noble Lords who felt that they could not support the amendment, I would at least like to place on record my appreciation of their generosity and tolerance to someone from their own side who, none the less, sought to challenge government policy. Among those 86 is a Peer whose wife has chastised him roundly for his vote. Another Peer’s two daughters have angrily criticised the position he adopted on the day. I do not doubt that, as the noble Baroness, Lady O’Cathain, said, if we revisited this issue, we could count on even greater support on the government Benches from those who realise that this is not just a House of Lords issue, but a family issue, a women’s issue and a citizens’ issue. Therefore, if it is not impertinent, I thank noble Lords most sincerely on behalf of all the women whose interests we have in mind on this. We have gone a very long way. I am comfortable with my noble friend’s statement. I am confident that the Government will deliver. It would be right to say that we all expect no less. Therefore, I suggest that we accept my noble friend’s recommendations.
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- Lord McKenzie of LutonLabour
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- My Lords, I thank my noble friend Lady Hollis for the way she has worked with us to reach what I think is a sensible solution that provides the basis of a move forward, and I thank all other noble Lords who have spoken in this short debate. It is clear that the sentiment of the House has not shifted from that which it expressed on Report and I, for one, hope that we can get a solution, because I would rather not go through that debate again. In response to my noble friend Lord Barnett: yes, this has been agreed with the Treasury. Clearly, policy relating to national insurance contributions is a matter for the Treasury and it has vetted the statement I gave earlier. The Government have been clear about their commitment to provide fairer outcomes for women. As I said previously, many measures in the Bill show that. I hope noble Lords will agree that we have shown sympathy for the objective of my noble friend’s amendment during debates in both Houses. The objective of fairer outcomes was never a sticking point here, rather the means by which to reach that objective. This is a complex issue and I am sure noble Lords will agree that it is sensible to explore all the possible implications of the options open to us before drawing conclusions. I particularly thank the noble Lord, Lord Lester, for his contribution and will specifically draw his comments to the attention of officials. The Government are committed to looking at all the options, getting the views of stakeholders—for example, the EOC—and coming up with a solution. This has to be fair, practical, affordable and easily understood, while meeting the principles inherent in my noble friend’s original amendment, which is to help women living here to achieve a full basic state pension. I cannot pre-empt what the outcome will be but I hope that the update provided in the Pre-Budget Report will provide an outcome with which we can all be satisfied. On Question, Motion agreed to.
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- Lord McKenzie of LutonLabour
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- moved Motion B:
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Lord Hunt of WirralConservative- Quote
- My Lords, I am surprised at what the Minister has just said. There is a paradox. He said that the amendments are faulty in that they are silent on the tax treatment of the fund, yet the Government have decided that the amendments are in breach of privilege because they deal with taxation. The amendments are either silent or they are not. Even more important, the amendments have been the subject of legitimate discussion on several previous occasions. For instance, on 15 November 2004, your Lordships’ House defeated the Government on the question of the maximum age for annuities. Then, on 17 November 2004, there was a further government defeat on the amendment tabled by my noble friend Lord Higgins to raise the age to 85. It is curious that suddenly privilege is invoked. The Minister owes us some further explanation. It may be that someone somewhere decided to protest about other amendments on the basis of privilege and to extend the protest to this group, failing to realise that the House has debated these subjects on many previous occasions. I think that the noble Baroness, Lady Hollis, responded in 2004. We are owed a further explanation. When I looked at the Official Report of the other place to see whether I could be persuaded by the arguments that had been used against these amendments, I discovered that no one had even discussed them because of the operation of a timetable Motion. I have not changed my mind, because no one in the other place tried to change it The Minister has once again put forward the case as he sees it. He is always very articulate, particularly about this terrible phenomenon of tax avoidance—being able to build up funds and avoid tax. I do not think that the Government have any right to tell pensioners what to do with their pension pot beyond what effect it can have on their eligibility for various benefits. The tax incentives that the Government give to encourage responsible savings in no way transfer the ownership of this money to the Government. In opposing the amendments on the previous occasion, the Minister claimed that the point of pension tax incentives is to provide an income in retirement “and nothing else”. If this is so, why does he feel that it is his Government’s responsibility to involve themselves in how that income is spent? He described the minimal flexibility that is allowed—the possibility of taking up to 25 per cent of the pension as a lump sum—as a generous concession on the part of the Government. That is ridiculous. What possible business of the Government can it be if a pensioner decides to blow 30 per cent, 50 per cent or any amount of their pension pot, as long as they do not throw themselves on to benefits by so doing? This patronising and paternalistic attitude taken by the Government can be further seen by the noble Lord’s words when talking about the alternative secure pension regime that the Government allowed for those with a religious objection to annuities. He described people as “piling in” and trying to abuse the arrangements. Why do the Government consider it abuse when a person attempts to use a legal and profitable mechanism for investing his or her money? After all, the Government created this opportunity for people. What is wrong with them taking that opportunity? The Minister said in response to these amendments the first time round, and has repeated it a few moments ago, that to spend a pension pot on things other than an annuity was an improper use of tax-privileged savings. Can he explain the difference between spending your savings and spending the proceeds of an annuity? The only principled difference between my amendments and the current arrangements is the mechanism by which care is taken to stop pensioners falling on to benefits. That must surely be the only legitimate reason for the Government to intervene. This issue will not go away. I can only hope that when we table these amendments again, the Government will be in a more receptive mood.
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Lord SkelmersdaleConservative- Quote
- My Lords, my noble friend may be surprised that another place’s reaction to his amendment is to plead privilege. For my part, I am far from pleased that the guillotine Motion meant that that House did not discuss the arguments at all. What price the Prime Minister’s pledge to give Parliament more say and control over the Executive? Instead, we got a knee-jerk reaction of privilege. My noble friend made a principled point that the Government should not be telling people what to do with their money above and beyond how that impacts on the taxpayer. This is doubly true when one considers what a bad bargain buying an annuity can be. The Government’s own Young review, the interim findings of which will be the subject of the debate to come in a few moments, clearly pointed out what a waste of resources buying an annuity can be. That the Government are forcing people to spend their retirement money—and it is still their money—in such an unprofitable manner is simply shocking. That they seem completely unashamed that they are doing so is no less than appalling. As we made clear in Committee, these amendments are a point of principle; my noble friend has just reiterated that. The issue that we were voting on is not how the tax provisions should be amended in response to retirement income funds as the Minister, and Ministers in another place, would like to make it. As the privilege reason makes clear, that is a matter for another place to decide on. These amendments did not presume to touch on it, as the Minister noted previously. I gently suggest that he occasionally read his own speeches, as I tend to read his. Instead, these amendments were an attempt to restart a debate that the Government promised but then failed to deliver. Where is the review on compulsory annuitisation that was promised by Mr Wicks in another place on 16 November 2004, at Hansard col. 1223, with “particular care and urgency”? We have not had it. The Minister claimed that there was a point of principle behind his objection to the lifting of annuity requirements, but I am unable to find it in his response in Committee. All I can see is a statement where he claims that the retirement income funds do not provide a secure income for retirement, but there is unfortunately little more explanation than that. He should take this opportunity, as my noble friend has requested, to set out his principled objections more clearly. Indeed, the Government have already conceded the principle. The exemption for the Plymouth Brethren shows that there are less restrictive ways to guarantee a retirement income, and I assume that the Government were satisfied that alternatively assured pension schemes did not waste taxpayers’ money, since the Government themselves invented them. Can the Minister please explain why what was considered appropriate in that case is not now considered suitable for the population at large?
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Lord Oakeshott of Seagrove BayNon-affiliated- Quote
- My Lords, I have considerable sympathy for the points made, particularly by the noble Lord, Lord Hunt, about the procedure for dealing with these amendments. I will go into more detail on the invoking of privilege on the financial assistance scheme when we come to those amendments, but I agree with the noble Lord on this. It is particularly unfortunate when there has been no debate in another place. That really makes a farce of democracy. On the substance of the amendments, as noble Lords will know from our previous debates, we on these Benches feel that the Conservative amendments are unnecessarily complicated. Simplicity is the key to sound pension arrangements. Like the noble Lord, Lord Skelmersdale, we still await the promised review. I remember it being promised in the light of the Turner report—I had detailed negotiations with Mr Wicks at that time—on the simple question of whether the age of compulsory annuitisation should be substantially raised, which is our preferred option. As the Minister said, we are trying to encourage people to work longer. Given how much longer people are working and the substantial increase in life expectancy and healthy life expectancy, we on these Benches believe that that age should be raised substantially and we expect and demand an answer on what has happened to the review.
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- Lord McKenzie of LutonLabour
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- My Lords, I shall start by dealing with the issue of Commons privilege. I am advised that the constitutional position is that the House of Lords accepts the Commons’ financial privilege and does not challenge it. That extends to not querying the Commons’ decisions to rely on financial privilege. I must adhere to that advice. The noble Lord, Lord Hunt, said that I said that the RIF was silent on certain tax issues. That is right, but this is to do with tax planning. We have to look at this in totality. The whole regime for pensions and any changes to the existing regime must encompass changes to the tax regime. Indeed, when this amendment was moved on Report, some noble Lords spoke about it giving an opportunity to accumulate a fund that could be passed on on death. There is no doubt that the intent of some of the people who supported the proposition related to getting a better tax deal than under the current arrangements. The noble Lord asked what this has to do with the Government. It has a lot to do with the Government. If the Government set down, because they have a democratic mandate to do so, a tax regime that encourages and incentivises pensions savings, there is a set of rules to subscribe to. I touched on those rules and I am happy to repeat that, within the parameters of lifetime allowance and annual allowances, there is tax deduction on the way in and tax-free build-up of funds within the scheme, but there comes a time when that has to be converted into an annuity, which is taxable on the way out. That is the regime that the Government have set down; we are entirely entitled to say that it is the regime under which we operate. I hope that my remarks touched on the added tax benefit that the 25 per cent tax-free withdrawal gives the pensions savings regime, because part of the fund comes out in a way that is not taxable. The noble Lord, Lord Skelmersdale, said that the Young report stated that buying an annuity is a bad bargain. That is an unjustified reading of the report. It stated that you could do better by taking the funds in a range of schemes in aggregate than by annuitising on an individual basis. In the 2006 report, there was a review of the annuities market—the biggest review that has ever taken place—and it concluded that annuities are fairly priced. There was substantial work to justify that.
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- Lord SkelmersdaleConservative
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- My Lords, is it not true that the Young report is, at least in part, about the globalisation of schemes and the purchasing of bulk annuities, which would be considerably cheaper than, if you like, drip-feeding? This amendment is about drip-feeding. They cannot be compared.
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- Lord McKenzie of LutonLabour
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- My Lords, the noble Lord is right in identifying part of what the Young report said, but the point about the RIF proposals is that they would work only for people who have significant pension pots because the investment risk—the longevity risk—is with the fund, which needs to be a certain size to sustain it and to afford the sort of advice that it needs to deal with the asset management issues that flow from that. In a sense, that is consistent with the Young review. The noble Lord pressed me, as did the noble Lord, Lord Oakeshott, about what had happened to the promise in 2004. I regret that I do not have a specific answer on that, but I will write to both noble Lords on the matter. I am conscious that this issue will recur in your Lordships’ House and elsewhere from time to time, but I urge the House to support the proposition that I have advanced. On Question, Motion agreed to.
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- Lord McKenzie of LutonLabour
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- moved Motion. C:
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- Lord SkelmersdaleConservative
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- My Lords, the Minister has sketched out the background to the problem and I am extremely grateful to him for that. I am also glad that the cut-off date is to be extended. The amendments that we moved originally would have set up a fund taking any unclaimed assets identified by the public assets register, with the exception of those in banks and building societies, which have already been allocated by the Government to another public good—that of assisting children and charities—as their unprecedented Statement on future legislation told us. I rather wonder whether the Minister has been reading the same Young report as I got from the Printed Paper Office yesterday. On page 5, it clearly states: “the Review team believe it should still conduct some further investigation of the complex legal and operational issues raised by unclaimed assets, involving Government and industry as required”. The story of unclaimed assets is by no means dead. It may become dead at the end of the day, but as of this moment it is not. When the lifeboat fund is being set up, the Government will kick-start it with a loan in exactly the same way that the previous Conservative Government treated the collapsed pension schemes of the late Robert Maxwell’s commercial venture. When the Bill returned to the Commons last week, the Government said—I paraphrase—“No way”, and the great clunking fist came down, manifesting itself in the Commons reason of privilege to all but one of the group of amendments, which we will discuss shortly. It is with great regret that I tell your Lordships that, despite what the Minister rather surprisingly said in his preamble, we must accept the reason produced by another place. Shortly before your Lordships’ activities in Committee, the Government rather sold the pass by setting up the Young committee to look at whether the assets of the failed schemes could be better used once they came under the remit of the FAS. Indeed, we have just had a little exchange about the results of that. In its interim report at the end of last week, it decided that they could but that the final report would flesh out exactly how much might be available and by what means. Ministers immediately announced that they would produce matching funds. This is yet another ratcheting up of government money for the FAS—something of which I of course approve. However, I note with a certain amount of irony that one of the Government’s objections to the lifeboat scheme was that it was uncosted. So, too, is the matching money that the Government have promised. What is sauce for the goose should be sauce for the gander. The expression “the pot calling the kettle black” rather springs to mind. We have not even been given a clear idea of how the Government intend to calculate the savings to which the Young review might lead. Do they perhaps intend to backdate any savings to the start of the FAS? The history of the FAS is shabby, to say the least. It was originally set up to quell a Back-Bench rebellion in another place, and was given the least amount of money—£400 million—that the Government felt they could get away with. To spread this evenly, they decided that they could not afford to pay the 90 per cent of expected pensions, which was the amount that would be paid to members of pension schemes that came under the PPF; so they invented what they called the core pension, with a de minimis limit. There is no lump-sum initial payment, no indexation and no widow’s rights. No one gets anything before the age of 65 and, even then, only after a protracted checking process that can leave people whose funds are still in wind-up with nothing at all. The number of people so far granted any sort of pension under this scheme is just under 1,500. The Minister may have an update on that figure. The Government realised that £400 million was nothing like enough, especially as they had committed themselves to paying 80 per cent of the core pension. Subsequently, £8 billion in total was eventually prised out of the Treasury’s greedy maw, although this sum is to last the entire lifetime of the FAS, which could be 50 or 60 years. Will even that be enough? They now believe that the Young review will push the amount closer to 90 per cent. When talking about this, as the Minister did just now, they conveniently leave out the word “core”, knowing full well that 90 per cent of the core pension is not even 65 per cent of the expected pension. Nevertheless, what is currently on offer is a minute extension to the amount that these pensioners will get, but not today or even this year. What is on offer is jam yesterday, jam perhaps tomorrow, but never jam today, and, thanks to that great clunking fist, regretfully your Lordships can do nothing about it. I promise this, however; the Government may have won a battle, but the war will go on until the 125,000 pensioners get what they deserve.
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- Lord Oakeshott of Seagrove BayNon-affiliated
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- My Lords, I welcome the Minister’s acceptance of the Young review’s recommendation not to enforce a cut-off date for solvent schemes. However, does he accept the Young review’s key conclusion on page 29 that, “the current FAS scheme is not the best way of ensuring good value, as there is a complicated process and benefit structure, considerable duplication of administration, insufficient risk pooling etc”? Even the Government’s own review comes to that damning conclusion. One hundred and twenty-five thousand members of failed pension schemes have been robbed twice; first when their funds collapsed, and now by a government ruse to block House of Lords amendments to the Pensions Bill today. Almost all Bills where the House of Commons and the House of Lords disagree involve some public expenditure, but the Government suddenly decided that they were losing the argument in Parliament and the country on justice for the robbed pensioners, so they forced through, by a 3:2 vote over Opposition protests in a reasons committee, to, “disagree to Lords Amendments … Because they would alter provisions relating to taxation, and the Commons do not offer any further Reason, trusting that this reason may be deemed sufficient”.
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- Lord McKenzie of LutonLabour
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- My Lords, financial privilege has been raised again. I dealt with the position in relation to that when we discussed the previous amendment; that is, the Lords accepts those judgments of the Commons and the reasons given. It is also not right to say that the use of financial privilege has stopped debate on this issue. What have we just been doing? It would be perfectly in order for someone to move an amendment in lieu of the amendment that came forward so long as it did not impair the financial privilege of the other place. There was the opportunity to do that. We have not been stifling debate on this issue. Our exchanges have been reflective of the strength of feeling on this issue expressed in both Houses during the passage of the Bill. The Government have always been sympathetic to those who have lost their pensions. Given this sympathy, we have always sought a satisfactory solution for those who suffered. We have had to balance this desire with the responsibility to ensure that any solution is fair on the taxpayer. The contributions of noble Lords and Members in the other place have helped us clarify where we might strike this balance. We have moved forward. An amendment introduced by the Government during Report stage in the other place will guarantee that all 125,000 people affected will receive at least 80 per cent of their expected core pension. Let me make it clear: I believe that we have always used that term. If I have not in my earlier presentation, I reiterate it now. It is to do with core pension, which I accept is not the same as what would otherwise have been a full pension entitlement. That is of course subject to the cap. Indeed, with immediate effect from Royal Assent to the Bill, hundreds of people will be eligible for increased initial payments while their scheme is in wind-up. During the other place’s consideration of amendments originally tabled in this House, my honourable friend the Minister of State for Pensions Reform gave a further commitment: we will use the assets that we expect to be identified in the Young review, together with a matched contribution from the Government, to raise the levels of assistance towards 90 per cent of expected core pensions. The noble Lord, Lord Skelmersdale, said that that was an uncosted commitment, and we chided the Opposition for their position, as that was not a fair analysis. Our pledge to match the extra value available from scheme funds as a consequence of the assets review is not an uncosted commitment. The Government will match funds to get to 90 per cent, up to a maximum, we estimate, of £225 million in net present value terms. The lifeboat amendment promised PPF-level benefits. That is a £640 million commitment without any real evidence for where that money might be found. We will be working with trustees in order to maximise the assets in their schemes to make a real, not a possible, difference to the assistance level for members. The noble Lords, Lord Skelmersdale and Lord Oakeshott, asked whether we accepted the recommendations of the Young review that we could do better out of the assets of those schemes. That comes from the interim work that he has done, although we will have to await the final report. He believes that by a variety of mechanisms we can do better, and the amendment we are coming to next will illustrate the Government’s support for the position he has taken. There are tangible commitments that will make a difference to the lives of thousands of those who have suffered. Both the noble Lord, Lord Skelmersdale, and the noble Lord, Lord Oakeshott, quoted the figure of 125,000 people. That is right, but it should be borne in mind that most of those have not reached pension age. To date, about 10,000 people have reached the age of 65 and are eligible. We are currently paying 1,367 people, 246 of them in annual payments and 1,111 in initial payments. A further 67 members will be paid once personal details are confirmed. Gross expenditure on payments to date is £5.28 million. One hundred and two schemes have completed notification, 867 schemes have completed qualification, 682 schemes have qualified and 288 schemes have provided data on their members that have been assessed. I am sure that this issue, like the other amendment we have just discussed, will not go away, but I hope in the circumstances that the House will accept the Motion I have put to it. On Question, Motion agreed to.
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- Lord McKenzie of LutonLabour
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- My Lords, I beg to move Motion D, That the House do not insist on its Amendment No. 22, to which the Commons have disagreed for their Reason 22A. The other place disagreed with the amendment because, as drafted, it would have undesirable effects. The Government have great sympathy with the spirit behind the amendment, and we have decided to improve FAS benefits to members by matching the extra value produced as a result of funds remaining in schemes. We have written to trustees to urge them to consider carefully whether purchasing annuities, thereby depleting scheme funds, is in the best interests of all their members. The Government accept that there are good reasons why, in order to ensure the greatest possible benefit for the greatest number of people, they may need to take powers to prevent annuitisation by FAS-qualifying schemes. However, the amendment would have made annuitisation unlawful from 18 April. Some trustees will be in the middle of negotiations, or already have proceeded to purchase annuities since then. For that reason, it would not be reasonable to halt annuity purchase without some notice. Once the regulations introduced by Amendment No. 22 are made, the trustees who have purchased annuities believing that they are properly carrying out their fiduciary duty to members could be held to have acted unlawfully. That would not be a fair position to put trustees in. I would like to take this opportunity to anticipate and welcome Amendment No. 22B tabled by the noble Lord, Lord Skelmersdale, which achieves the aims of Amendment No. 22 without the drawbacks I have already outlined. It strikes a pragmatic approach by putting a hold on annuitisation for the benefit of all members of qualifying pension schemes who hope to see the extra funds generated by the assets within their schemes matched by the Government, while allowing trustees to purchase annuities with the permission of the scheme manager where it would be appropriate for them to do so. Clearly, the Government will need to consider carefully what those circumstances might be and how the scheme manager will exercise his discretion. I am grateful that the noble Lord’s amendment allows us a period of grace to think about this and consult trustees before we bring forward regulations. We will do that as soon as is reasonably practicable. I beg to move. Moved, That the House do not insist on its Amendment No. 22, to which the Commons have disagreed for their Reason 22A.—(Lord McKenzie of Luton.)
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- Lord SkelmersdaleConservative
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- rose to move, as an amendment to Motion D, Motion D1, at end insert, “but do propose the following amendments in lieu thereof—
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- Lord Oakeshott of Seagrove BayNon-affiliated
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- My Lords, we on these Benches welcome and support Motion D1. I have said a few harsh words to the Minister already and I shall chide him a little on the last Motion but, on this one, we welcome the spirit of compromise. I particularly welcome the pragmatic way in which the Minister has discussed this issue with the noble Lord, Lord Skelmersdale and me. This is the House of Lords at its best, if I may say so. We have ended up with a sensible and realistic solution, though obviously backed up to some extent—to use the words of the noble Baroness, Lady Hollis—by a certain amount of menace. We welcome this outcome. It is clear from being repeated at various places in the Young review that instant annuitisation, or the rush to annuitise, is not on balance likely to be in the interests of most schemes or most scheme members. Halting the current annuitisation process will or should offer greater value for money. Indeed, it must make a lot of sense to think about having annuities purchased at the level of the entire FAS population. That makes the case even more strongly that we should probably roll the whole thing into a PPF-type arrangement. But that is for another discussion. Reading the Young review, I am concerned at how many schemes have annuitised already or are in the process of doing so. The Association of British Insurers has written to me and no doubt to others, making the point—with which I have much sympathy—that there is probably not much in the unclaimed assets argument. On the ABI’s positive ideas on improving the use of the FAS existing assets to improve better value for money, one thing that leading insurers could do is not rush to enforce provisional arrangements when people are in the process of buying annuities. It is wise to stand back and take this window of review, and I hope that the ABI, whose two main members provide these annuities, will look at this very carefully. Even if people are well down the track of buying annuities, if they could put them on hold, that would be likely to be in the interests of members of those schemes. Having said all that, I welcome the Government’s movement on this and the amendment moved by the noble Lord, Lord Skelmersdale, and look forward to seeing it passed.
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- Lord McKenzie of LutonLabour
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- My Lords, a question was posed about the speed of regulations. I assure the noble Lord that we would obviously seek to do it as quickly as we possibly could. I reiterate our support for the amendment.
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- Lord SkelmersdaleConservative
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- My Lords, I am very pleased that the Government have seen the logic of my argument—that a little delay in annuitising individual scheme members’ pots is the right thing to do in the wake of the Young report’s interim findings. I must say that it is a pleasure to do business with a Minister who fights for the feelings of the overwhelming majority of your Lordships. On Question, Motion D1 agreed to. On Question, Motion D, as amended, agreed to.
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- Lord McKenzie of LutonLabour
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- My Lords, I beg to move Motion E, That the House do not insist on its Amendment No. 28, to which the Commons have disagreed for their Reason 28A, but do propose Amendments Nos. 28B and 28C in lieu thereof. Before getting into the detail of the argument, I emphasise to the House that this is the one remaining issue that we have left unresolved, and it would be really good if we could reach consensus on it this afternoon rather than have to send it back to another place and expect its return. In that spirit, I reassure the House that the Government strongly agree with the principle of post-legislative scrutiny. However, the other place has decided that imposing an obligation on the Secretary of State to arrange for post-legislative scrutiny, as the amendment proposed by the noble Lord, Lord Fowler, would do, is unnecessary. I shall now set out what the Government propose in its place. We made clear in earlier debate the very extensive programme of post-legislative activity that the Department for Work and Pensions will undertake to keep pension reform issues under review, and of course departmental Select Committees, independent think tanks, ad hoc commissions and external organisations all have their part to play in the scrutiny and review of how the law is working. But, quite separately, we are considering across government the case for a more formal process of post-legislative scrutiny. I can assure the House that the Government, led by the leaders of the two Houses, are giving close and continuing attention to this issue and will certainly be responding to the Law Commission report. I hope, from the tone of the remarks of the noble Lord, Lord Fowler, when winding up the debate last time, that I had not inadvertently given the impression in some way that the commission's report was being left to gather dust. That is absolutely not the case, although I accept that it has taken longer than we had hoped. It is important, however, that the response to the commission is properly considered. The noble Lord's amendment places a duty on the Secretary of State to undertake post-legislative scrutiny, and since we as yet have no shared understanding or legal definition of what formal post-legislative scrutiny might entail, neither the Secretary of State nor anyone else could be absolutely certain whether what has been done would comply with that duty. In moving the amendment at Third Reading, the noble Lord, Lord Fowler, called for post-legislative scrutiny to be undertaken by a parliamentary committee. It is for Parliament to decide to constitute such a committee and it is not within the Secretary of State's power or remit to do so. However, Parliament has already constituted the Work and Pensions Select Committee which is appointed to scrutinise the policy, legislation, expenditure and operations of the DWP. In addition, the Social Security Advisory Committee has a statutory remit to advise the Secretary of State on matters related to social security and to consider draft regulations. So any further scrutiny by another parliamentary committee would need to give careful consideration to ensure that efforts were not duplicated. Our second concern relates to the timing proposed in the noble Lord's amendment. There is a package of reform measures which will come into effect over the next five years or so. In our view, it would be premature to carry out post-legislative scrutiny before the reform measures had been implemented or had time to bed in. For example, the reforms to the basic state pension take effect for people reaching state pension age in April 2010. Reviewing the Act in four years, in 2011, would provide very little time to gauge whether the reforms have been properly implemented. At Third Reading, the noble Lord offered us a cautionary tale in the form of the 1986 Act and the subsequent failure to ensure that the measures on inherited SERPS, which did not come into effect for a further 14 years, were properly implemented. I assure the House that a great deal of activity is already under way to prepare for the implementation of the measures in this Bill from 2010. However, I accept that there might be concern about the implementation, for example, of the changes to the state pension age which do not come into effect until 2024 because of the time delay. Notwithstanding the assurances that we have already given about our intention to keep the reforms under review, we accept that it would provide greater reassurance if this commitment were placed on a statutory footing. The amendment that I propose in lieu of the noble Lord's amendment would require the Secretary of State to review the operation of the Act and present a report to Parliament. That will provide Parliament with the opportunity to consider and debate any such report and, to all intents and purposes, effectively provides post-legislative scrutiny. The timetable I propose, for a review to have taken place by the end of 2017, would allow such a review to take place after most of the provisions have had sufficient time to bed in. It will also enable us to review the state of readiness for implementing the state pension age changes from 2024 and take any remedial action that may appear necessary. As I said, the measures in this Bill take effect in stages. For example, the changes to the contribution conditions which will be of significant benefit to women come into effect for those reaching state pension age in or after 2010. But the flat rating of the state second pension will not take effect until 2012. We have also made clear our aim to restore the link between the basic state pension and earnings in 2012, subject to affordability and the fiscal position. The state pension age changes, on the other hand, do not come into effect until 2024. We therefore think it sensible to conduct a review at the mid-point when the first of these changes have had a chance to bed down and we can at the same time ensure that we have a robust delivery plan in place for the later stages. I should point out that the amendment includes the flexibility to carry out the review earlier than 2017 if it seems appropriate. The House will recall that 2012 is also when personal accounts go live. We have already said in our response to the Select Committee that we will undertake a review of aspects of the personal accounts arrangements in 2017, so although the scope of the review of the operation of this Act will be limited to the setting up of the delivery authority, the timetable will allow for these issues to be looked at in parallel. This amendment does not, of course, mean that we should not examine the effectiveness of our policies before 2017. For example, the data on the number of women who have benefited from the reforms to the basic state pension will be available by mid-2011 and the personal accounts delivery authority will be required to publish annual reports on its activities throughout its lifetime. However, I suggest with great respect that the requirement to review at the four-year point is surely too early given that some of these provisions simply would not have come into effect by that time. For completeness I should add that the amendment to Clause 28, Amendment No. 28C, is purely consequential. Clause 28 defines the extent of measures in this Bill; this amendment would ensure that any review of the operation of this Act takes account of those provisions in so far as they relate to Northern Ireland. As I have said, we have no objections to the noble Lord’s amendment in principle. Indeed, it is eminently sensible and consistent with the principle of good administration that we ensure that the measures enshrined in the Bill are followed through. I hope that he will accept that the amendments I propose in lieu of his own substantially address this concern. I urge the House not to allow this legislation to linger longer. There is much in it that we need to get under way as quickly as possible. I beg to move. Moved, That the House do not insist on its Amendment No. 28 to which the Commons have disagreed for their reason numbered 28A, but do propose Amendments Nos. 28B and 28C in lieu thereof.—(Lord McKenzie of Luton.)
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Lord FowlerCrossbench- Quote
- My Lords, I beg to move, as an amendment to Motion E, Motion E1, leave out from “House” to end and insert “do insist on its Amendment No. 28.—(Lord Fowler.) I welcome the tone of some of the Minister’s remarks this evening, which are substantially different from what we have heard at previous stages of the Bill, particularly what he said about the principle of post-legislative scrutiny and seeking to put a duty in the Bill. Step by step we are getting to the position that we would like to get to but we have not yet arrived there. I am not very impressed with the so-called compromise being offered by the Government on when their form of post-legislative scrutiny should take place. Many advocate scrutiny after three years. I have proposed four years, but with the addition that the Secretary of State can carry out further scrutiny at any stage later on, which I think meets many of the points that the Minister put. The Government propose their form of post-legislative scrutiny not in 2012 or 2015 but 10 years hence by the end of 2017. Frankly, it puts a whole new time-scale on the plea, “Make me good but not yet”. Even then it sounds as though it will be only half good because I suspect that the review being offered is the Secretary of State’s own review and not that of a Select Committee. However, I may be wrong on that. I am afraid that, as regards the timing, the offer is impossible to accept. I suspect that that does not come as a vast surprise to him, the Government or the department.
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Lord Norton of LouthConservative- Quote
- My Lords, I support my noble friend in pursuing his original amendment. The Government have only themselves to blame for the fact that the Motion is before us. Had they responded to and acted on the Law Commission’s report on post-legislative scrutiny, there would be no need to pursue the case for such scrutiny on an ad hoc basis. The Law Commission published its report in October last year. The Government are committed to providing a detailed response to all commission reports as soon as is practical and, as the former DCA website states: “In any event, the relevant department will provide at least an interim response to the Commission within six months of publication of each report”. Nine months on, we are still waiting. At Third Reading, the Minister said: “We are consulting across government before we respond formally to the commission’s proposals in the coming months”.—[Official Report, 11/7/07; col. 1418.] The Minister’s reply was the same as that given to justify the delay in responding to the report of the Merits of Statutory Instruments Committee on the management of secondary legislation. That report was published in March last year and the Government’s response was debated in this House at the end of November. The justification for the delay—consultation across government—meant that it was proving difficult to gain agreement from departments because, I suspect, officials realised that the recommendations, if implemented, smacked too much of hard work and there was a lack of leadership from the top. The result was a response that came from the bottom up, rather than from the top down. The noble Lord, Lord McKenzie, would be well advised to read in that debate the concluding comments of his noble friend Lord Filkin, chairman of the Merits Committee. I very much hope that we will not see a repetition with a late and meagre response on this occasion. The delay is far from encouraging. There is movement within Parliament, primarily through the Liaison Committee in the other place, but not much, apparently, within government. The noble Lord, Lord McKenzie, said at Third Reading that accepting the need for post-legislative scrutiny of this Bill might pre-empt some of the Law Commission’s recommendations. That does not follow. The Motion is not prescriptive in terms of form, which I regard as a strength not, as the Minister does, a sign of weakness. There are precedents for providing for post-legislative review in specific cases, as shown in appendices to the Law Commission report. In any event, as my noble friend pointed out, the case is now conceded by the Minister’s own amendment. The principle embodied in my noble friend’s Motion is important. The Government, as the Minister indicated, now accept the principle. During the Committee stage of the Legislative and Regulatory Reform Bill, the noble Lord, Lord Bassam, declared: “We … believe that all departments should keep their legislation under review”.—[Official Report, 10/7/06; col. 494.] However, the Government have yet to deliver a mechanism for such review. The Minister’s amendment accepts now the case for review in respect of the Bill, but the delay until 2017 is essentially a long-grass provision. The chances of it being undertaken earlier are, I suspect, slim. The response in the other place to the amendment passed by this House can be challenged on two grounds. First, as my noble friend said, the amendment was not debated. Secondly, the reason given for the rejection is at odds with the Minister’s amendment. The Commons reason is that post-legislative scrutiny is unnecessary. The Minister’s amendment provides for post-legislative scrutiny—albeit at a point too far in the future. The Government thus concede that the reason given by the Commons is flawed. The case for post-legislative scrutiny is compelling and I trust that by pursuing this Motion we will spur the Government not only to accept the case for it on this Bill but to respond positively to the Law Commission’s report. I support my noble friend’s Motion.
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- Lord Oakeshott of Seagrove BayNon-affiliated
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- My Lords, I am delighted to support my sea-view neighbour, the noble Lord, Lord Fowler. I was invigorated by a bracing dip in Seagrove Bay this morning before I came here and I feel particularly vigorous on his behalf. I have received a letter from the honourable Mr Justice Etherton, the chairman of the Law Commission, following my speech in support of the amendment of the noble Lord, Lord Fowler, at Third Reading. The letter states that, “consultation has been taking place across Government and considerable effort is being made to secure agreement on how to implement our recommendations … Although there has been no formal response by the Government to our report, we have been fully aware for some considerable time that the recommendations have been well received … and that the Government has been and still is actively considering the most appropriate method of implementing them”. In government, I was a special adviser to the Home Secretary, many years ago. I know the code. I know when nothing is happening. The noble Lord, Lord Norton, has already told us the timescale. I should say to the chairman of the Law Commission and the Government that achieving consensus is not simply, or even mainly, a matter of interdepartmental negotiation within government, as the letter seems to imply. It is high time that the Government gave their official and considered response to the Law Commission’s report on post-legislative scrutiny, so that Parliament, opposition parties and informed and interested opinion outside can debate, consider and build on it a genuine and lasting consensus. You do not do that behind closed doors with the long grass growing. The noble Lord, Lord McKenzie, also kindly sent me a letter on similar lines to that of the Law Commission. I wonder whether they are written by the same person. He said that, “the Law Commission’s report has been the subject of close and continuing consideration … the issues … are complex … It is important that we get the response right if we are to draw the maximum benefit … I cannot be specific at this stage as to when final decisions will be taken, but I accept that the response has taken longer to prepare than we would have wished. The chairman of the Law Commission … was updated with the state of play at a meeting in May”. That will not have been a very long meeting. When will the Government give their response? Can the noble Lord assure us that it will not take four more years? If he can, there is no earthly reason why he should not accept the amendment of the noble Lord, Lord Fowler, today because, if this Government are still in office, they will be able to put this Bill, when enacted, through whatever their preferred form of post-legislative scrutiny might be. If he cannot give us that assurance, he should simply curl up in shame.
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- Lord SkelmersdaleConservative
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- My Lords, amusing as that speech was, perhaps it is now time to return from the general to the particular with the amendment of my noble friend Lord Fowler. I am glad that he intends to insist on that amendment. The amendment in lieu offered by the Government is not in any way adequate to achieve the sort of scrutiny that was set out, and it would reduce the concept to what I can only describe as a mere fig leaf. The whole intention of post-legislative scrutiny is to catch problems before or shortly after they arise. By ensuring higher-level scrutiny of the provisions in the Bill as they are rolled out, the Government’s assurances and commitments to Parliament can be checked against the guidance that is given. That is doubly important, as this Government have drastically reduced the amount of detail in Bills and are in the habit of assuring your Lordships that a promise on the Floor of the House is the same as putting it in the Bill—not that the Minister has done that today. With this amendment, as has been said, such promises would carry more weight and do more to hold Ministers to account. Much in the Bill would benefit from independent post-legislative scrutiny. Not only would it confirm the Government’s assurances that their new plans are enough to make the amendment of the noble Baroness, Lady Hollis, on women’s pensions unnecessary but it would also provide valuable scrutiny of the initial stages of the Personal Accounts Delivery Authority and, of course, it would allow the Government’s promise that the FAS is poised to start handing out money to be validated. I therefore hope that the Minister will appreciate the feeling in this House that it is time that the Government came forward with some serious proposals for post-legislative scrutiny, rather than just talking around the subject. This Bill is an excellent place to start and I hope that noble Lords will continue to support my noble friend today.
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- Lord McKenzie of LutonLabour
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- My Lords, I suspect that it will not be fruitful to prolong this discussion endlessly but I want to take the opportunity to make a few points. I emphasise that the issue of post-legislative scrutiny does not divide us. We agree that it is appropriate and confirm that we would want it for legislation—in particular, for this Bill. The noble Lord, Lord Fowler, said that some say that the timescale should be three years but that he has moved to four. It depends what time you switch the clock on for those timeframes. There is a difference between a date from Royal Assent and a date from when the provisions in the legislation take effect. When one thinks about it, 2017 is simply one year on from when some of the key provisions in the Bill will kick in. The amendment in lieu concerns an obligation on the Secretary of State. Nothing prevents Select Committees from doing their work in the interim and, quite properly, that should not be under the direction of the Secretary of State. The noble Lord himself said that there was a lot to scrutinise and look at in relation to the delivery authority. That is absolutely right, but a second Bill will be introduced in the next Session and there will be ample opportunity to look at that in considerable detail as the legislation is put in place. Both the noble Lords, Lord Norton of Louth and Lord Oakeshott, pressed me on the issue of the Law Commission report. I do not think that I can go further than what has been put in writing. I thought that it was rather a good letter. The Government are looking at this seriously. I know that it is always possible to chide the Government and say, “Why didn’t you do it last month or the month before?” but these issues are not altogether straightforward. There is an intent to move them along as quickly as we can, but I cannot give a commitment on timing. It is a pity that we will divide on this, because in the scheme of things the difference is narrow. The timeframe may be a few years from the date when some of the key provisions in the Bill kick in. I emphasise that there is nothing to prevent a Select Committee, Joint Committee or whatever from discussing post-legislative scrutiny. That is a matter for Parliament, not the Secretary of State, which will have its will in accordance with whatever is constituted. Nothing in the amendment of the noble Lord, Lord Fowler, or my amendment in lieu changes Parliament’s ability to do that. I do not see the substantive difference that the debate has suggested. I shall leave it to the noble Lord to test the opinion of the House.
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- Lord FowlerCrossbench
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- My Lords, I thank the Minister for his reply, although at some stages he made my case even stronger. The fact that a second Bill is coming makes the case for post-legislative scrutiny stronger rather than weaker. I thank the noble Lords, Lord Norton, Lord Oakeshott and Lord Skelmersdale. The noble Lord, Lord Norton, is absolutely correct. At one stage—this is even in the paper that we have in front of us—the Government were saying that the amendment was unnecessary. That is what the Commons said. Now, we are hearing, “Curiously, secretly and privately we agree with the principle of post-legislative scrutiny”.
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- Lord FowlerCrossbench
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- My Lords, I heard the Minister’s reply and leave it for the Government to sort that out. The idea of having post-legislative scrutiny of this Bill by the end of 2017 is unacceptable. The noble Lord, Lord Oakeshott, is right that we have the opportunity of taking a decision now after years of prevarication. This is not about a few months; post-legislative scrutiny was the subject of my maiden speech when I came into the House in 2001. What was fascinating about the Minister’s reply is the point that he did not mention from beginning to end. When we passed the amendment and put it to the Commons, it was not debated in any way, shape or form. The Minister was not questioned; no one could give their views or say anything about it. I cannot believe that anyone in this House or in the House of Commons could regard that as an acceptable or desirable way of doing business. The amendment would allow the House of Commons to consider the issue for the first time. The Minister said that the Commons has now decided; it may have done so, but not on the basis of any argument. We are saying to the Commons, “For the first time, you have the opportunity to debate and question this”. On the constitutional side, the Government’s position is entirely indefensible. The only sensible and fair way forward is to test the opinion of the House.
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