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To enshrine in law existing discrimination against disabled people is unfair and unjustifiable, but to try to peddle it as anti-discrimination legislation is shoddy and shabby.

The amendments will mean that, where a disabled person has been refused access to a scheme that is lawful under the terms of the Bill, there will be no requirement that the employer seek to make any adjustments to the employee's terms and conditions. On Third Reading in the other place, Lord Mackay of Ardbrecknish stated:

"the employer will not have to consider ways in which his overall remuneration package can be brought up to the level enjoyed by other employees".--[ Official Report, House of Lords , 24 October 1995; Vol. 566, c. 1001.]

It could not be clearer than that.

The Government's substitute for proper civil rights legislation, which they have trailed as an historic advance in the struggle to give disabled people equal rights, in fact makes provisions for disabled people to be forced into a position where they have to sell their labour more cheaply--and to be less well rewarded--than non- disabled people who do the same job, in the same place, at the same time. That is the effect of what Lord Mackay said. He spelled out the Government's position for all to see. Instead of attempting to integrate disabled people into the work place, the Government are attempting to integrate discrimination into the law.

Why should disabled people be less entitled to pensions and insurance benefits than anyone else? The higher risk argument simply does not stand up to scrutiny. It is neither logical nor fair, and evidence produced by the Minister's Department establishes that. The decision on whether a disabled person is eligible to participate in and contribute to a pension scheme is likely to be based on an estimate of risk, but that eventuality may never arise, which means that future benefits would be reduced because of the mere possibility of something happening at some indefinite time in the future. The Minister will no doubt attempt to justify that by saying that that is how many pension schemes are assessed, but if it is lawful for schemes to exclude disabled people on the grounds of a higher health risk, he must produce evidence to prove that that is the case, because his Department is producing evidence to show the opposite. There appear to be strong grounds for believing that the amendments seek not to give disabled people an absolute right to enter or enjoy the full benefits of a scheme and that, where people do not join a scheme on starting work but subsequently apply, trustees could refuse access or offer only limited membership. Will the Minister confirm whether that is his intention?

Why are the Government so set against a requirement that reasonable adjustment be made in respect of occupational pensions and insurance benefits? The problems are not insoluble. The Minister has a reputation for achieving what he wants to achieve, so surely it was not beyond his guile to devise some reasonable adjustments. For example, he could have required employers to make equivalent contributions to a private pension scheme. The Government often say that everyone should provide for his or her retirement. It would not have been an ideal solution, but it would have been better than what is on offer today.

Where no private scheme could be found, or where employer and employee could not reach agreement on a scheme's suitability, the Minister could have required the

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employer to increase disabled employee's wages or salary by an amount equivalent to the normal contribution, thereby allowing the disabled person to buy into a scheme of his or her choice. Again, it is not an ideal solution, but it is better than what is on offer. Those would have been reasonable adjustments in the light of the now famous Barber v. Guardian Royal Exchange decision, in which it was determined that occupational pensions should be considered as deferred pay.

The effect of the amendments is that those disabled people who are deemed ineligible to participate in an occupational pension scheme will not have their pay deferred but will simply not receive that element of their pay. That is unfair and discriminatory. It is a back-door way of reducing the pay of disabled people during their lifetime. It is doubly unfair that many disabled people are likely to be excluded not because of a greater risk of ill health but simply because of a perceived risk.

For example, some schemes might take the ill-judged view that someone with diabetes or epilepsy is ineligible because he or she might--just might-- develop complications later. Will the Minister clarify the Government's position as it relates to people with diabetes or epilepsy, for instance?

Yet again, disabled people are being singled out for unfair treatment. Under the amendments, it would be unlawful to exclude them because of risk. When I joined the parliamentary pension scheme, on which my right hon. Friend the Member for Wythenshawe does so well in representing all Members of the House, I was not excluded because I am, I am ashamed to say, a smoker. No one asked me whether I was. The Minister no doubt also belongs to that scheme and was not excluded because he is a member of the House of Commons football team, which is also a high risk. Nor was he excluded when he was Minister responsible for setting up the Child Support Agency, which, at the time, must have been the most dangerous job in Britain.

A survey published in 1992 by the Office of Population Censuses and Surveys shows that disabled people are among the least likely to belong to a pension scheme. Some 34 per cent. of those who had a pre-retirement disability before the age of 50 had never belonged to an occupational pension scheme. The study also found that the chances of their ever having joined a scheme or attained rights to one decreased with the increasing severity of disability. The reason is simple: many disabled people simply cannot afford to join. They tend to earn less and must pay the inevitable additional costs of disability. The Bill and the amendments do nothing to change that. Worse, they build that position into the law.

The Minister will be aware that the Disability Alliance and Disablement Income Group have worked hard to produce a cogent, coherent and comprehensive document known as "There May Be Trouble Ahead"--perhaps prophetic words. It shows the inequity that exists in pension schemes and suggests ways of tackling that and other problems. The group is asking for a forum of all the interested parties to be set up. Is the Minister prepared to allow that forum to go ahead?

The Government cannot claim that the Bill is, in any shape or form, a comprehensive piece of anti-discrimination legislation so long as it excludes

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pensions and benefits. Civil rights mean full and equal citizenship without qualification or exclusion. As the amendments are full of qualifications and exclusions, unless the Minister can convince us otherwise, we shall press them to a Division.

Ms Lynne: I simply wish to make a few comments about the recent research carried out by the Disability Alliance and Disablement Income Group, which shows that disabled people are already less likely to be in occupational pension schemes. More than two thirds of disabled women have not joined such schemes because they could not fulfil the conditions as a result of frequent changes of jobs or interrupted employment. People with pre-retirement disability were less likely to retain any rights to an occupational pension scheme. On the surface, the Government's amendments look fine, but they do not really deal with the problem. I am extremely worried about amendment No. 17, which, as has already been said, could be the back door to reducing pay for disabled employees. We need reassurance on this matter, although I do not honestly believe that the Minister will give us the reassurance we need.

Mr. Dafydd Wigley (Caernarfon): I apologise to the Minister for missing part of his opening remarks. If he has covered the point that I want to raise, I apologise doubly.

I am concerned about the amendment that deals with insurance benefits. I realise that this is a fraught area. Although insurance is, by necessity, about the sharing of risks, insurance companies always make it their business to find out as much as they can in order to specify and appreciate the degree of risk in a case. In framing the amendment, have the Government accepted the principle that insurance companies that provide the services described in amendment No. 28(3) can adjust those services in terms of the amount of benefit paid, in line with a known disability or a disability that may occur in the future as a result of, say, a genetic condition? A new clause moved in the other place does not clarify that. It seems to be possible for an employer, or an insurance company working on behalf of an employer, to discriminate against disabled people, particularly those with a genetic condition, in terms of the insurance benefits that they could receive. If so, they would be discriminated against.

Given the choice between the conflicting interests of getting as much information as possible and the sharing out of risks between all beneficiaries under an insurance scheme, on the balance of fairness and particularly given the ethos of the Bill before us, we should come down on the side of sharing the risks. We should ensure, as far as humanly possible, that insurance schemes are not loaded, either in terms of increased premiums or reduced benefits, against people with a potential disability. I hope that the Minister can offer me some assurance on that.

6 pm

Mr. Burt: With the leave of the House, I shall reply to the debate.

I shall try to do what I can to offer reassurance, but as the hon. Member for Caernarfon (Mr. Wigley) said, this is genuinely a difficult area. I must clear up one thing. We are talking about individuals as opposed to types or groups. An employer may discriminate where there are clear grounds for believing that a person, including a

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disabled person, but not necessarily, represents a higher risk to the scheme because of his impaired health, and that higher risk could be justified on the grounds of cost. Any non- inclusion in the scheme's benefit provision will only be as a result of that person's health condition and not simply because the individual is disabled. Disabled persons whose propensity to take ill health retirement or die in service is not materially higher than other members would, of course, be entitled to be admitted to the scheme as normal. That is the ground rule, but we are talking about dealing with individuals. We are trying to create a differential between two individuals who, although both may be described as disabled, may have different conditions which mean that the likelihood of ill health or risk of early retirement is much greater for one than the other. We can all think of such examples. Where an employee is to be excluded, the employer will have to prove that that refusal is based on substantial grounds, not simply on the mere fact of disability. The most important question is, why should employers be permitted to discriminate on grounds of health? It is right that employers and scheme managers should continue to be able to make certain decisions on health grounds for a number of reasons. Employers have always been able to discriminate on grounds of health for such benefits. If that changed, employers could be faced with an unjustifiably large extra bill. It is estimated that the additional costs could be hundreds of millions of pounds a year. A significant amount of that additional expenditure would fall directly on the taxpayer, because approximately one third of pension scheme members are in public service pension schemes. Much of the balance would have to be passed on in the form of higher prices.

The pension schemes of many employers are too small to accept large potential liabilities for ill health and death benefits, and therefore those employers insure those risks in the commercial insurance market. Insurance companies operate strict underwriting criteria to control the risk which they accept. Those companies would offer policies that admitted individuals with all potential health conditions at truly prohibitive premium rates. It is more likely that they would not admit such individuals, so, effectively, the insurance route would be withdrawn.

As a result of the significant additional burden of costs and the lack of insurance, employers would seriously have to reconsider their options. There would be a real risk that many employers would restructure their employment packages to reduce or remove altogether any incapacity or death benefits. Some employers, if not permitted to take account of health risks, may simply wind up their schemes. Such are the likely changes in employment practice were the Bill not to allow employers to make decisions on the grounds of health Hon. Members have asked whether it would be possible to unbundle contributions, and whether an individual disabled person's contribution rate could be reduced if he or she is only receiving age retirement benefits. Such a proposal would not only be completely at variance with the manner in which occupational pension schemes with benefits defined in terms of a member's final salary are operated, but would result in significant extra administrative difficulties disproportionate to any gain to the disabled person.

Such a change could be achieved fairly only after taking medical and actuarial advice. Even then, the resulting adjustment would be subjective and open to

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dispute by the member. A doctor would be required to certify an individual's life expectancy or the probable length of his working life. On the basis of the medical prognosis, an actuary would then have to consider the value of the residual benefits compared with the total package. Overall, such a requirement would be

disproportionately expensive and administratively messy.

Salary pension schemes in the United Kingdom are predominantly operated on what is known as a "balance of costs" basis. Employees pay a fixed contribution and the employer meets the rest of the cost on the basis of advice from the scheme actuary. Typically, scheme members pay only one third of the cost of the scheme benefits. The employer considers the cost of providing the benefits in aggregate and does not try to isolate the costs for each individual member. The cost of the accruing benefits, however, will vary significantly between individuals according to their individual circumstances-- for example, age or sex.

All individuals pay the same member contribution even though they may not be entitled to all the benefits. For example, a spouse's benefits are of no use to a single pensioner, and some benefits may be more valuable to certain members than others. For example, a pensioner who lives a long time will get more valuable benefits than someone who died shortly after retirement.

To suggest that a disabled person, who may get less valuable pension benefits from a scheme, should pay a lower contribution rate would therefore rewrite the way in which final salary occupational pension schemes operate. Other groups could make claims for similar treatment. For example, under current sex equality legislation there is no similar requirement that men should pay a lower member contribution rate because they tend to live less long in retirement than women. Such arrangements would lead to additional costs. It should be remembered that membership of an occupational pension scheme is voluntary. If an individual member feels that he is going to get less valuable benefits out of a scheme than his own contributions, he can opt out. If he chose to take out a personal pension, he would, of course, be protected under part III. People with a genetic predisposition are not covered by the Bill. That reflects the views of the Select Committee on Science and Technology, which concluded that labelling that group as disabled was not the right way forward. We will consider the Committee's final report when it is available.

Mr. Wigley: If the report from the Committee on that important matter, which will be published before too long, suggested that the Bill should be changed to avoid discrimination against people on the basis of genetic information gained for insurance purposes, does the Minister have the facility to amend the Bill without having to come back with primary legislation?

Mr. Burt: No, I do not believe there is such a facility. The principle on which the hon. Gentleman will have to rely, and which may emerge from the Committee's report, would operate on an individual basis and the circumstances facing a particular applicant.

As I tried to establish from the start, that principle does not discriminate against disabled people in general. It will not be possible for an employer to exclude someone from

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a pension scheme just because that person is disabled. The employer will have that right only if the nature of the disability is such that it would cause the sort of problem with the pension or insurance scheme as might affect anyone whether he is disabled or not. It is on those grounds that I put the case to the House. The individual is protected unless he has a marked disability which may cause concern.

Mr. McMaster: With the leave of the House, may I say that the Minister has simply reinforced our concerns, so we will divide the House on the amendment.

Question put , That this House doth agree with the Lords in the said amendment:--

The House divided : Ayes 290, Noes 249.

Division No. 225] [6.07 pm

AYES

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Ainsworth, Peter (East Surrey)

Aitken, Rt Hon Jonathan

Alexander, Richard

Alison, Rt Hon Michael (Selby)

Allason, Rupert (Torbay)

Amess, David

Arbuthnot, James

Arnold, Jacques (Gravesham)

Ashby, David

Atkins, Rt Hon Robert

Atkinson, Peter (Hexham)

Baker, Rt Hon Kenneth (Mole Valley)

Baker, Nicholas (North Dorset)

Baldry, Tony

Banks, Matthew (Southport)

Banks, Robert (Harrogate)

Bates, Michael

Batiste, Spencer

Bellingham, Henry

Bendall, Vivian

Beresford, Sir Paul

Biffen, Rt Hon John

Bonsor, Sir Nicholas

Booth, Hartley

Boswell, Tim

Bottomley, Peter (Eltham)

Bottomley, Rt Hon Virginia

Bowden, Sir Andrew

Bowis, John

Boyson, Rt Hon Sir Rhodes

Brandreth, Gyles

Brazier, Julian

Bright, Sir Graham

Brooke, Rt Hon Peter

Browning, Mrs Angela

Bruce, Ian (Dorset)

Budgen, Nicholas

Burns, Simon

Burt, Alistair

Butcher, John

Butterfill, John

Carlisle, John (Luton North)

Carlisle, Sir Kenneth (Lincoln)

Carttiss, Michael

Cash, William

Channon, Rt Hon Paul

Chapman, Sir Sydney

Churchill, Mr

Clappison, James

Clark, Dr Michael (Rochford)

Clarke, Rt Hon Kenneth (Ru'clif)

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Clifton-Brown, Geoffrey

Coe, Sebastian

Colvin, Michael

Congdon, David

Coombs, Anthony (Wyre For'st)

Coombs, Simon (Swindon)

Cope, Rt Hon Sir John

Cormack, Sir Patrick

Couchman, James

Cran, James

Currie, Mrs Edwina (S D'by'ire)

Curry, David (Skipton & Ripon)

Davis, David (Boothferry)

Day, Stephen

Deva, Nirj Joseph

Devlin, Tim

Dicks, Terry

Dorrell, Rt Hon Stephen

Douglas-Hamilton, Lord James

Dover, Den

Duncan, Alan

Duncan-Smith, Iain

Dunn, Bob

Durant, Sir Anthony

Dykes, Hugh

Eggar, Rt Hon Tim

Elletson, Harold

Evans, David (Welwyn Hatfield)

Evans, Jonathan (Brecon)

Evans, Nigel (Ribble Valley)

Evans, Roger (Monmouth)

Evennett, David

Faber, David

Fabricant, Michael

Fenner, Dame Peggy

Field, Barry (Isle of Wight)

Forman, Nigel

Forsyth, Rt Hon Michael (Stirling)

Forth, Eric

Fox, Sir Marcus (Shipley)

Freeman, Rt Hon Roger

French, Douglas

Fry, Sir Peter

Gale, Roger

Gallie, Phil

Gardiner, Sir George

Garel-Jones, Rt Hon Tristan

Garnier, Edward

Gill, Christopher

Gillan, Cheryl

Goodlad, Rt Hon Alastair

Goodson-Wickes, Dr Charles

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