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Baroness Hollis of Heigham: My Lords, I am sorry that as we come to the end of the Bill an answer by the Minister on an issue which causes so much distress to so many elderly people in such traumatic situations should have received such a reply. I would call it frivolous if that were not lighthearted. It was a scornful reply by the Minister in which, at various points, he uttered phrases such as the sob stories of local authorities or said that up in Scotland they had the money for nuclear-free zones. I wonder what world the Minister is living in. It is clear that he knows little about local government and cares even less about the problems it faces in trying to address the very real problems affecting elderly people.

At the core of the problem is the Minister insisting that local authorities have a discretion to do what he thinks they should do. I do not believe that anybody denies—I certainly have not argued—that they do not have that discretion in law. My argument was contemptuously brushed aside by the Minister in what I thought was the shabbiest of all the answers we have received at any stage of the Bill. I mean it. The Minister is an honourable man but he has let himself down tonight. No one is challenging that local authorities have a discretion in law. The argument I was trying to put and which the Minister did not even begin to address but contemptuously brushed aside with references to nuclear-free zones, for heaven's sake!—

Lord Mackay of Ardbrecknish: My Lords, I was answering the point the noble Baroness made about local authorities and that particular sob story, not the difficulties of the people whom she had in mind with this amendment. I believe that it was a perfectly fair point in response to her view of local government, which some of us have watched for 15 years. We have heard exactly the same thing said year on year but still all the pet projects are able to be funded.

6.30 p.m.

Baroness Hollis of Heigham: My Lords, the Minister is saying that when 80 per cent. of directors of social services are having to make cuts even in their statutory services, it is a sob story and that it is a pity that real people are affected. That is a very unfortunate reply.

I repeat that nothing the Minister said in his answer tonight gives local authorities any help in addressing a problem that, as the noble Baroness, Lady Seear, and others in your Lordships' House made clear, is a worrying and growing problem that, despite the Minister's contemptuous response, will not go away. It is a fact that many people who go into residential care must now take the whole of their occupational pensions

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with them to pay their fees, leaving the wife behind near destitute. The question is: what can be done about it? That is what the Minister should have addressed.

As I say, local authorities have a discretion in law which they cannot in practice exercise. That is the point of the amendment. We do not need to change their powers; we need to ensure that they can exercise them. They cannot exercise those powers because the settlement for local authorities has not been funded. What is more, even if they were not being capped, as virtually every local authority in the country is, they would still be punished by a reduced settlement in the standard spending assessments if they did not raise charges accordingly.

Perhaps the Minister does not know about standard spending assessments. I should have thought that he would. But it is a fact that, twice over, local authorities are unable financially to exercise the discretion that we do not challenge they have in law. It must make sense that local authorities can only do their job if they have a settlement which at least maintains their current spending levels in real terms and not, as we have seen, a cut on the one hand and a penalty in standard spending assessments on the other.

It is a pity that the Minister knows so little about local government and cares even less about the services that it has to provide, while at the same time telling local authorities that they must exercise a discretion which even he admits that they are failing to exercise because they cannot do so. Meanwhile, while the Minister brushes the issue aside, elderly women who have lovingly nursed their husbands are left near destitute through no fault of their own and through no fault of local government.

I shall receive no sympathetic hearing from the Minister tonight. But I hope that in the other House, where departments with more relevant experience of local government will be aware of these issues, the issue will be pursued and addressed properly. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 126 [Minimum contributions towards appropriate personal pension schemes]:

Lord Haskel moved Amendment No. 10:

Page 81, line 30, leave out subsection (2) and insert:
("(2) In subsection (1), for "41(1)" there is substituted "42B(1)".").

The noble Lord said: My Lords, in moving Amendment No. 10, I shall speak also to Amendment No. 11. This is a simple amendment. It deals with the different levels of rebates for contracted-out personal pensions and occupational money pension schemes.

I raised this matter on Report and the response from the Minister was that, as personal pensions are more expensive to manage, there must be a higher level of subsidy in order to make them a realistic choice. Personal pensions are a more expensive form of retirement provision; yet in all other sectors of the economy, if consumers choose a more expensive product, they are expected to pay for it. With retirement pensions, if consumers choose the more expensive product, then the Government pay the difference. It is

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not as though the additional subsidy goes towards providing the pension; it goes to the financial institution providing the pension to cover its extra costs. Furthermore, that money comes from the national insurance fund, which means that the subsidy comes out of general taxation. The total cost is £300 million, which means that a large amount of money is involved.

The insurance industry has many products. Why then are personal pensions different from other financial products where it is left to the market to provide choice? When debating the central discontinuance fund earlier this afternoon, we were told how careful the Government are with taxpayers' money. What is it then about personal pensions that is different so that that care no longer applies? It seems to me that it is a case where the market is being rigged. As the market rigging costs £300 million a year of taxpayers' money, I make no excuse for returning to the matter yet again. It is an unsound basis for personal pensions and I hope that the Minister can satisfy our doubts. I beg to move.

Lord Mackay of Ardbrecknish: My Lords, these are familiar amendments for those who have been regular attenders at our debates. They seek to ensure that those contracting out via a personal pension scheme receive the same levels of age-related rebates as those in money-purchase occupational schemes. The amendments would restrict the choice of pension provision available to many people, and would impose a burden of greater SERPS expenditure on the workforce in the next century.

I have explained in previous debates why it is essential that the rebates set for each type of scheme reflect the charges associated with such schemes. If the rebate were insufficient to replace the SERPS given up by contracting out, it would not be best advice to contract out of SERPS at all. That in turn would lead to increased expenditure on SERPS in the future, and reduce the choice of pension provision available to the individual.

Additionally, the rebates for personal pensions and occupational pensions will be paid at different times, with occupational schemes receiving some of the rebate earlier than personal pensions. At Report and Committee stages I outlined this: that members of money-purchase occupational schemes and their employers would receive part of the rebate during the course of the tax year as a reduction in national insurance contributions and the balance would be payable at the end of the tax year. Personal pensions will receive the whole rebate at the end of the tax year and that requires different levels of rebate to take into account the extra investment return available to the occupational scheme by investing the rebate earlier.

The noble Lord, Lord Haskel, conceded during the debate at Report stage that personal pensions play a vital role in extending choice. That is true only if the rebates are set at the amount required to produce a pension equivalent to SERPS. If the rebate is insufficient to do this, then personal pensions do not offer any sort of choice at all. He also argued that people opting for personal pensions should bear the costs themselves. For many people, personal pensions are the only alternative

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to SERPS available. I do not believe that those people should be penalised simply because their employer does not offer a contracted-out occupational pension scheme. We are committed to offering everyone the widest choice of pension provision possible, and the rebate must be set at a level to ensure that personal pensions remain a viable option.

The issue of the level playing field has been raised many times during these debates. These amendments would actually slant the playing field rather than levelling it, though I might share with the noble Lord a view that somebody once put to me; that is, that there is no such thing as a level playing field, otherwise why do the teams change ends at half time? But as a Scotsman perhaps I should not talk about team games after last Saturday.

Different allowances in the rebate for expenses are essential to ensure that the pension produced by different types of schemes is equivalent to the SERPS given up. The expense allowance in the rebate for personal pensions is necessary to compensate for the additional costs of administering fully individualised pensions. If that were set too low, the playing field would be tilted towards SERPS. There is no question here of subsidising excessive expenses. The Government Actuary—who is a friend of the party opposite, or at least they keep quoting him—will be asked, in advising on the levels of age-related rebates, to make allowances for the reasonable costs and charges of the more efficient pension providers.

This is the third time we have debated these amendments. I am sorry that I disappoint the noble Lord, Lord Haskel, by repeating the same argument. In my view, if one's argument is soundly based there is no reason to change it, and I believe that the argument is soundly based. The line I have taken is consistent and I hope that our position is clear. We are committed to choice in pension provision and personal pensions are an essential part of that choice.

To restrict the level of the rebate for personal pensions would simply mean that those plans were not viable and the choice of pension provision would be reduced. In some cases, as I have explained, people would be offered no choice of pension provision at all. I hope, not with a great deal of confidence, that, having explained it on three occasions, the noble Lord might feel able to agree with me this time and withdraw his amendment.

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