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Mr. Rooney: Is the hon. Gentleman telling us that it would be responsible to retain the present system, under which more than 1 million children get nothing? Does not he accept that there has to be a trade-off between fairness and simplicity? [Hon. Members: "Oh!"] We have to accept that the simpler the system, the fewer escape routes there are for non-resident parents.
Mr. Webb: The hon. Gentleman seems to want to object to a point different from the one that I was making. I asked how it could be responsible for a Government to introduce a reform without knowing who gains and loses, but the hon. Gentleman spoke about a trade-off between fairness and simplicity. Reform is necessary, but if I were the Secretary of State--as I hope to be one day--and if I were introducing such reforms, I would make an estimate of gainers and losers and make that estimate public. This Government are afraid to do that.
Is the CSA capable of being reformed? The hon. Gentleman said that people who ring the CSA often get a poor quality of service. How can that be changed when, although the numbers are fiddled with, exactly the same personnel are left in the relevant offices?
Mr. Webb:
I shall give way in a moment. The issue has to do with the culture of an organisation. What has happened is that the technocrats and anoraks in the Department of Social Security have done the sums and drawn the lines on the graphs, but they have lost the human touch. The culture of the CSA is beyond reform. That is why we believe that the agency should be abolished.
Mrs. Humble:
I refer the hon. Gentleman to the section in the report from the Select Committee on Social Security that covers this matter, and concentrates on the need for training staff. The hon. Gentleman will know that the Committee was given reassurances about the importance of training and of ensuring that staff are aware of the needs of people who telephone the agency. Will he accept the reassurances given by the chief executive of the CSA, who told the Committee that she was looking positively at such matters and that she was aware of the problems that the hon. Gentleman has mentioned?
Mr. Webb:
Obviously, any improvement in training is entirely welcome, but how often have such assurances been given in the past? How many times have heads of the CSA, past and present, said that the agency would perform better in the future? The culture of inefficiency and backlog, of excuse and cover-up is endemic to the CSA, and it has to go.
Mr. Webb:
I want to make some progress.
There has to be an alternative to the CSA. I was flattered that the Secretary of State began his speech by setting up a parody of the Liberal Democrat approach to the matter, and then attempted to knock it down.
The alternative that we advocate is a system based on family courts. In marked contrast with what happened in the past, under our new system, such courts would be given guidelines but, if those guidelines create an injustice for a person, that person will have the opportunity to have his or her individual circumstances taken into consideration. What leaves people most aggrieved with the CSA is the feeling that the formula does not fit their circumstances.
Maria Eagle:
I thank the hon. Gentleman for giving way to me at long last. I am trying to work out whether the hon. Gentleman is advocating adopting a simplified formula or retaining a complex one. Will he say whether he is in favour of simplifying the formula?
Mr. Webb:
Yes, I am indeed in favour of simplifying the formula, which should be the benchmark around which there is scope for discretion in individual circumstances.
In the past, the court process has been rightly criticised for its failings. It was often quicker than the CSA has turned out to be, but there was a problem of inconsistency arising from the lack of guidelines on plausible maintenance assessments. Courts are always given ranges in the sentences that they can impose, so that the right sentence can be chosen to fit the circumstances of each case. They are good at making such choices: why should they not do so in relation to matters of child support?
We are told that the Child Support Agency will move over to the new regime at the end of next year, and that that will require a new computer system. However, the process of securing that new system has not begun. The system has not yet been tendered for. The Under-Secretary, the hon. Member for Wallasey (Angela Eagle), said yesterday that the Government had not even asked
Parliament for the necessary money yet. Given the chaos of the national insurance recording system, NIRS2--which the Government told me last summer would be sorted out by the autumn, but which I note from a written answer this morning is not to be sorted out for another year--how can we have any confidence that this reform will be brought in on time? How can we have any confidence that the new computer system will be ready? What have the Government been doing for all this time? Why have they not got the new system commissioned and ready for when the legislation and the new formula are in place?
People who work at the CSA have told the Select Committee on Social Security that the management are making preparations to run the new formula on the old computer. That is incredible. Are we to have new cases on the old computer? If so, why do we need a new computer system? If the old computer is not up to it, what chaos will we have? The whole thing has all the makings of another fiasco, and the Government would do well to learn the lessons of the previous ones.
The final section of the Bill contains the obligatory illiberal clauses in any "new Labour" Bill. In this one, we have the benefit sanctions for people who breach community service orders. People on the ground dealing with offenders are united in saying that this is gesture politics. The people who deal with the resettlement of offenders say that it makes no sense as a way of tackling crime. Probation officers--who, presumably, are not all "woolly liberals"; the phrase of the moment--say that it is
Dr. Lynne Jones (Birmingham, Selly Oak):
There has been much interest lately in the reform of the other place. Looking at this Bill reminds me of the need to reform our Chamber, and especially of the need for better scrutiny. Time and again, Governments have introduced legislation aimed at achieving laudable objectives on which there is much agreement; time and again, the measures they have put in place have failed to meet those objectives.
The example of that, par excellence, is the legislation that created the Child Support Agency. There was genuine agreement on both sides of the House that it was right that absent parents should support their children. However, the net result was the absolute shambles of the CSA, which we know about from our casework.
It is interesting that in the Bill the Government will introduce measures to simplify drastically the complex formula that has come about over the years as the previous Government tried to grapple with complaints about the unfairness and lack of flexibility of the original formula. In contrast, the Government are now proposing reforms to pensions that will make the system horrendously complicated. There seems to be no joined-up thinking in the approach to these matters in the Bill.
I wish to concentrate most of my remarks on pensions, although that does not mean that I do not have views on other parts of the Bill. However, time is short. I wish to examine the objectives that the Government have set for pensions reform, which are not entirely covered in the Bill. First, the Government say that they want to reduce dependence on means-tested benefits for pensioners, and that it is quite wrong that, after years of working, people must retire and depend on means-tested benefits. I am sure that everybody agrees with that.
The second objective is to encourage those who can afford it to top up state provision by joining a good private pension scheme. Again, I think that we can all agree with that objective. Not explicitly stated is a third aim that these measures should be rigorous and stand the test of time. That is implied in the proposals, because of course the measures will not come into full effect, as the hon. Member for Northavon (Mr. Webb) pointed out, for about 50 years.
Do the provisions meet the objectives? Unfortunately, I do not think so. Why do we need reform? If we want to achieve these objectives, the best way would be to ensure that the basic state retirement pension was set at a rate above the income support level for pensioners--the guaranteed minimum pension. That would, at a stroke, remove means-testing for all pensioners.
Private pension schemes have grown as a result of the undermining of the basic state pension and SERPS. I submit that the best way of encouraging more private pension provision for those who can afford it would be to restore a type of SERPS provision, although not exactly the same. I take the point made by my right hon. Friend the Member for Birkenhead (Mr. Field) that it would be too easy for future Governments to raid such schemes, which should perhaps be administered at arm's length by a trustee body. However, some type of SERPS provision could be reinvigorated.
People have difficulty in understanding SERPS, but once it is explained it is reasonably easy to understand the fundamentals. The same cannot be said for the proposals before us. It is not just because of the need to introduce changes in the original proposals to take on board concerns from private pensions schemes and employers that it will not be viable for people earning less than £9,500 to be in occupational pension schemes. The original proposals will have to be tinkered with to do something about those concerns. That will create horrendous complexity. In addition, there are three different accrual rates for the state second pension. People can go in and out of those rates according to how much they earn. It is a very complex scheme.
Pension providers such as the National Westminster Group and the Legal and General Group plc have, along with the Confederation of British Industry, pointed out that the reforms are likely to lead to less private pension provision, not more. In addition, good employers with good occupational pension schemes could decide to stop providing them because it would be easier and cheaper to recommend a stakeholder pension scheme.
There is a belief that stakeholder pensions will be like manna from heaven for people on low incomes, but they are simply personal pension schemes that require people to purchase an annuity on retirement. They are by no means secure. The Government have kitemarked personal pensions to limit charges, and that is welcome; but even
a 1 per cent. charging regime eats up 25 per cent. of any fund. That can be a significant amount to someone on a low income.
It is not surprising that the Government have accepted the view that to encourage more stakeholder pensions would not provide low earners with a decent pension--hence the need to invent the state second pension. The state second pension has been praised for its redistributive effects and for the fact that it treats people earning less than £9,500--or the threshold set by the Government--as though they earned that amount. That is most welcome, but a simpler way to achieve that aim would be to uprate the basic state pension.
I remind hon. Members that had the basic state pension been linked to earnings, it would now be worth about £27 more a week to a single pensioner. The state second pension will not deliver as good a deal to people in such income brackets. Labour Members should not delude themselves into thinking that the state second pension is a replacement for SERPS. It is not; it is a replacement for the proper uprating of the basic retirement pension. We should do far better to consider that uprating. At the very least, we should increase the state retirement pension to the rate of the guaranteed minimum pension.
People will ask, "How will you afford that?" When people like me propose measures that will cost money, the costs are thrown back in our face, but when the Government propose even more expensive measures, that is okay. We must be aware that the proposals for the state second pension and for the rebates for those with incomes above the earnings threshold will result in a cost of £16 billion. That is the Government's projection when the scheme is fully operational. The Government's proposals will be quite costly--the Secretary of State mentioned a figure of £5 billion. I suggest that we should do better to divert such resources into boosting the state retirement pension.
The need for reform arose because of grave concerns about pay-as-you-go schemes to finance pensions. However, funded systems are not necessarily better than pay-as-you-go systems. I do not have time to go into the reasons for that. The effects on the economy of drawing down a pension from a funded or an unfunded scheme are much the same.
I refer hon. Members to a helpful brief produced for the all-party group on occupational pensions by the Association of Consulting Actuaries. It includes an article by Benjamin Meuli, managing director of J. P. Morgan. He makes the fundamental point that whether the system is funded or unfunded, we need to consider its impact on the economy. There is no evidence that the economies of countries with largely unfunded schemes perform less well than those of countries where most of the pension schemes are funded. On balance, we probably need both. In order to limit the risk in equities, it is necessary for private funded schemes to hold part of their investments in gilts. That is much the same as the Government using the investment from national insurance contributions.
We shall do the country a grave disservice if we continue to undermine the social insurance principle. Despite the attempts of successive Governments to undermine national insurance and the social insurance principle, there is still a great deal of support for both. If
people knew that they would receive a good pension, they would be willing to pay into a state system, especially if it were managed in a way that prevented future Governments from raiding it.
"extremely difficult to envisage that the withdrawal of benefits from those who breach orders will enhance public protection or reduce crime."
However, that is not what the measure is about. It is all about tabloid headlines. It is another case where the substance of the policy does not matter--it is about the next morning's headlines.
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