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Mr. Howard Flight (Arundel and South Downs): Will my hon. Friend comment on the contrast between those in the private sector who failed to know and implement the rules correctly and who are being fined and often driven out of business, and those in the public sector who have done the same thing and for whom there seems to be no penalty whatever?
Mr. Pickles: That is a valid point. My hon. Friend was the first to elicit the original date, in a question to the Financial Secretary to the Treasury, and here we have something dated a year earlier. The guide was on every desk in the Benefits Agency in 1995, yet agency staff paid not a jot or tittle of attention to it, even when it was all over the newspapers. That is deeply worrying.
I hope that the Minister will come up with a solution. He was not quite right to say that the Government amendment in lieu honours the promise made by Lady
Hollis, because it is essentially Lord Rix's amendment with a few bells on. I am willing to give the Minister the benefit of the doubt, to give him time and to promise him our co-operation, but I hope that we will have a known and agreed solution to this very difficult problem before April 2000.
Mr. Burstow:
I echo the final point made by the hon. Member for Brentwood and Ongar (Mr. Pickles). We must find the right solution to the issue of misinformation on inheritance rights in respect of SERPS, even if that takes a bit of time, and I warmly welcome the Minister's constructive approach in explaining what the Government are doing to try to resolve a problem that they inherited and that they wish they could halve now, rather than facing the possibility of people's entitlements being halved.
When the other place debated the failure to publicise the 1986 changes that halved widows' entitlement to inherit SERPS pensions after April next year, Earl Russell made a telling point. He said that the issue was not necessarily a question of a failing of a political party--although I can understand why the Minister would wish to suggest that--but of the failure of government as an organisation to deliver. We will not know if that carries political overtones for many years to come, until the papers are revealed and some interested journalist digs out the necessary details of incompetence or whatever it was.
It is important to deal with the practicalities of how we move on from the current position. There has been a fundamental breakdown in communications between the policy part of the Department of Social Security and its implementation part on this issue. That is why I asked the Minister in an intervention a few moments ago whether similar breakdowns have occurred in other aspects of legislation in the past or since 1986.
It is clear that, as a consequence of that fundamental breakdown, the relevant advice leaflets were not properly updated, despite the references that have been made to the handbook this evening. Many of the basic advice leaflets available in Benefits Agency offices were not updated for 10 years. Many hon. Members have received correspondence from constituents who feel aggrieved by the situation, and I have passed on several examples from my constituency. Incorrect advice was provided in correspondence, on the telephone and over the counter at Benefits Agency offices. As we have heard already, even in April this year after the issue was well publicised, the public were still being given incorrect information and being misinformed about their entitlement.
I pay tribute to the work that has been done by my hon. Friend the Member for Newbury (Mr. Rendel) to raise the profile of the issue and to reach a solution. Over the past year, he has written three times on the issue of compensation and he has been instrumental in approaching the Parliamentary Commissioner to begin the investigation into whether the Department of Social Security is guilty of maladministration. Together with a representative from The Sun--I cannot think of a more unusual alliance--my hon. Friend also presented a petition to No. 10 to highlight the concerns on the issue.
So far we have had many announcements that there will be an announcement. The Minister moved further tonight by adding some more bells and whistles to the amendment passed in the Lords, but we still do not have a definitive
announcement. I speak for many of my constituents and others who feel that the sooner a concrete set of recommendations and proposals is in the public domain, so that everyone knows where they stand, the better.
When the scandal of private pension mis-selling came to light, the Government were right to insist that companies paid compensation and wrote to everyone who might be affected. That has not happened in this case and it is a shame that the Government did not apply to themselves the same rules that applied to the private sector. If they had, we would not be debating the issue again this evening. If action had already been taken, hundreds of people who have been, or who expect to be, affected by the changes would not be agonising about how they can afford to replace the income that their wives stand to lose.
In Committee, my hon. Friends tabled amendments that set out three options to try to address the issue. The first was that widows should continue to receive the full SERPS entitlement after April 2000. The second was that a gradual reduction should be phased in--for example, a 10 per cent. reduction could be made each year over five years, to try to ease the transition. The third option was a postponement to 2010.
The Government have already said that any compensation scheme would need to take account of misleading written communications and also advice given by telephone. That was accepted in an exchange in the House on 24 June, during a Supply-day debate initiated by the Liberal Democrats. The Liberal Democrat amendment would provide a minimum period of 10 years for any delay in implementing the SERPS reduction. If the Government opt for the postponement option to solve the problem, 10 years would offer people a reasonable time--we have already debated the meaning of the word reasonable tonight--to make other arrangements.
The House originally intended, when it debated the issue in 1986, to give people 14 years' notice of the changes, but people will have had just four years' notice since the Benefits Agency woke up to the fact that it had failed to amend its leaflets. Therefore, it seems only fair to give people the 10 years' notice that they never had. The gross cost of a 10-year postponement, according to a
recent written answer, would be £60 million in the first year, with a peak of £1.16 billion in 2010. The Minister also gave a net cost figure of some £5 billion.
Another written answer revealed that the projected surpluses on the national insurance fund for each of the next three years are between £1.4 billion and £1.6 billion. In other words, the money to pay for a postponement is available in the national insurance fund and, therefore, a postponement of 10 years is affordable. It has been speculated that the Government are considering a five-year postponement, but such a short delay would leave the Government open to further claims for compensation through the courts.
Our amendment seeks to rule out any postponement for less than 10 years, because that would assist the Government by reducing the likely numbers of compensation claims and the consequential administration costs of any compensation scheme that would still be necessary, and would perhaps give greater certainty to those many people who are concerned about their SERPS entitlement in the future. The clock is ticking and we have only six months until the April deadline when the changes would have been introduced. The Government amendment puts that on hold until they can come up with a scheme, but it is never satisfactory to leave something in limbo and that is especially true of people's pension provision. I hope that the Government will give people information at the earliest opportunity so that their minds can be put at rest.
Mr. Eddie O'Hara (Knowsley, South):
It is refreshing to have such an honest and forthright Minister fronting such a difficult debate. My hon. Friend has been straight with the House and we should give him credit for that. It is also refreshing to have a Government who are prepared to hold up their hands and accept responsibility, even though the mistake was made by their predecessors. There are two types of responsibility--responsibility for the mistake, and responsibility to the people affected by it. The Government accept that it has the latter type of responsibility.
It is absolutely necessary to introduce some corrective measure to overcome the fiasco facing us in connection with SERPS. SERPS is not quite the same as the national insurance contributions scheme. Because it is an insurance against possible illness or incapacity that can occur at any time, payments into the NIC scheme can be redeemed at any time. People who are lucky do not need them, and I have always been very fortunate in that I have never had to redeem much of my national insurance contributions.
SERPS is more akin to an annuity or an endowment. Under that scheme, extra payments are made that are intended to be redeemed on retirement or at the death of a spouse. Alternative annuity and endowment schemes are available in the market, of which the people affected by the proposal might have preferred to take advantage.
The enormous amount of work that has gone into the new clause seems to point the way towards a possible compensation scheme. My hon. Friend the Minister honestly believes that a compensation scheme is better than deferment, mainly on grounds of cost. He gave the gross figures to prove it, although out of those gross figures can be taken tax payments incurred as people's
income rises above tax thresholds, and also the benefits that people forfeit as their income rises as a result of SERPS.
My hon. Friend also said that a scheme of deferment, although it would catch a lot of people, would not be perfect and would therefore not be fair. However, would a scheme of compensation be perfect or fair? I suggest that it would not, and that it would be expensive. No figures have been given, but I would guess that administering a scheme such as that foreshadowed in the new clause would be horrendously expensive.
A scheme of compensation would open up a can of worms. People who received incorrect advice would have to be distinguished from people who did not seek advice in the first place. People who did not seek advice may have thought that they already knew the rules: they may have seen how the system worked for their brothers and sisters and for the friends with whom they have grown old, and decided that they did not need to seek advice. Would it be fair to distinguish between those who did not seek advice and those who did not think that they needed it?
A problem remains even when people seek advice. The question would arise whether that advice was given in writing, or by telephone. How does one prove that advice was given by telephone? A telephone call cannot be photocopied or put in an envelope. The problems would be horrendous.
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