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Earl Howe: My Lords, I fail to see the noble Lord's point and must take issue with him. The future of Recruitment and Assessment Services has been under consideration since early 1994, when the three-year review was announced. As a result of debates in your Lordships' House, your Lordships are aware that we believe privatisation to be the best way forward. That view was endorsed by the other place.

We shall look carefully at the committee's proposals on specific points related to the sale. However, it is important that we stay with the broad timetable that we set because further uncertainty for staff, customers and bidders should be kept to a minimum.

Lord Taylor of Gryfe: My Lords, with regard to the timetable, does the Minister realise that contracts with the successful bidders will need to be made? Presumably the contracts will run for anything from three to five years. Is it responsible for the Government, with only a few months to run by any standards, to make contracts of that kind three to five years ahead which will be inherited by a subsequent government?

Earl Howe: My Lords, this Government were elected for a full term and I do not see any reason why we should not pursue our policies during the time allotted to us. My noble friend the Leader of the House indicated in the Written Answer which appeared in Hansard on 22nd May that the timetable that we have set will allow us to study the Select Committee's report--assuming it is available; it will enable us to make a response before the House rises for the summer. Clearly the timing will be tight but with goodwill on both sides, which I am sure will exist, it can be achieved.

To say that the committee's report, as the noble Lord, Lord Taylor, suggested, is of no significance whatever and that the Government's actions amount to contempt of the House, is completely wrong. We have every intention of considering the report with the seriousness that it deserves. I would make the simple point that the main purpose of the committee established in your Lordships' House was to consider the public service. Consideration of Recruitment and Assessment Services is merely a part of that activity--an important part, I concede, but only a part.

I hope that the House will accept the assurances that I have given not only to the letter, but in the spirit in which I give them. We shall take due note of the committee's conclusions. The debate in another place has not affected the undertakings given to your Lordships and I hope that on reflection noble Lords opposite will see that there is no reason for them to be exercised in the way that they now appear to be.

Perhaps I may proceed to the Motion on the Order Paper. I noted with care the remarks of the noble Lord, Lord Richard, regarding the Motion. He spoke of the opinion that is current among the Civil Service unions particularly. We have taken fully into account the representations made against market testing of PCSPS

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administration. The central point, however, is that competition will ensure value for money and the focus on performance output will help to improve the quality of service to scheme members. That encapsulates the reason for the order.

The Government fully understand that civil servants value their pensions highly and that is entirely right and natural. But the changes being made in the way that the scheme is run will help to improve the quality of service to scheme members. The noble Lord referred to morale within the Civil Service. Morale is best maintained by allowing staff to perform to the best of their abilities in their chosen career. The reforms that the Government are enacting enable the staff to do just that; that is, to focus their attention on delivering high quality public service. That is surely the best way of satisfying both them and the users of the service.

The remarks made by my right honourable friend Sir Edward Heath were referred to, and again I noted with all seriousness what was said. But I re-emphasise that it is scheme administration that is being opened up to competition. The Civil Service pension arrangements will continue to be managed and controlled by the Office of the Public Service. The noble Lord, Lord Richard, asked what the difference was between management and administration. As I said earlier, administration encompasses such activities as operating the scheme in respect of individual scheme members; keeping files and so forth in relation to those scheme members serving in departments and agencies as well as retired members. Management of the scheme involves fixing the scheme rules; it involves the control of benefits that are available under the scheme; the resolution of disputes; accounting to Parliament for expenditure under the Civil Service Superannuation Vote. Those activities, as I stressed, will not be contracted out.

The noble Lord, Lord Richard, mentioned the efficiency scrutiny and said that it found no evidence to suggest that outside contractors could do the work any better. Neither was there evidence that they could not. Under the Competing for Quality programme, departments and agencies are required to test areas of activity to see whether alternative sources in the market give better service and value for money. If after a market test it is found that the arrangements already in place offer the best service and the best value for money, those arrangements will continue. Therefore it is not a case of the Government ignoring the maxim of "if it ain't broke, don't fix it"; if it ain't broke it will not need to be fixed.

Lord Richard: My Lords, can the Minister say why, in this order, he has taken such comprehensive powers as opposed to powers just to market test? Why does he not simply take those powers?

Earl Howe: My Lords, the order enables departments and agencies to do precisely that--to market test.

Lord Richard: And a lot more.

Earl Howe: My Lords, I am not quite sure what the noble Lord is referring to. The central point of the order

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is to enable those departments to see whether better value for money and a better service can be provided outside. That is what market testing means.

Lord Harris of Greenwich: My Lords, I apologise for interrupting the noble Earl again. In the light of what he has just said, can we be told about the timescale? How long will this procedure take? Will it be during the time that the present Parliament is in existence, or will it conclude before then?

Earl Howe: My Lords, this is an enabling order only. It enables Ministers in departments and agency chief executives to take a look at the whole question for themselves. It will be up to them whether they proceed in short order or whether they decide that it is a matter better left for the medium term. But it is of course incumbent on both Ministers and chief executives to pursue the market testing route at some point. That is government policy. Therefore, it is impossible to answer the noble Lord's question. It will remain a decision for Ministers and chief executives as to how long the process will take.

The noble Lord, Lord Richard, referred to the private sector. In fact quite a number of employers in the private sector contract out their pensions administration work to specialist advisers. The National Association of Pension Funds and other organisations hold regular conferences for delegates to discuss the pros and cons of outsourcing, and a number of employers with in-house services are actively considering their options. That indicates that the private sector as well as government believe that in certain circumstances there is better value to be found outside.

As I have stressed, the order is about securing value for money for the taxpayer and a better service to scheme members. I am surprised and a little disappointed that the Benches opposite do not embrace those aspirations. Perhaps I should not be. However, on that somewhat melancholy note, I trust that the House will nevertheless agree to the order.

On Question, Motion agreed to.

Damages Bill [H.L.]

7.12 p.m.

Report received.

Clause 1 [Assumed rate of return on investment of damages]:

The Lord Chancellor (Lord Mackay of Clashfern) moved Amendment No. 1:

Page 1, line 6, leave out ("general").

The noble and learned Lord said: My Lords, in moving this amendment, I should like to speak also to Amendments Nos. 3, 4 and 5. Amendment No. 1 is a minor amendment to subsection (1) to recognise the fact that it may be appropriate for the court to apply a discount to reflect accelerated payment of damages for future pecuniary loss, whether those damages might fall under the classification of "general" damages, or some

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other classification, for other purposes. The word "general" therefore appears to be superfluous. The next three amendments are consequential drafting amendments, removing separate references to "damages" in Scotland. It seems to me that for the purposes of this Bill any distinction between general or special damages is of no importance. I beg to move.

On Question, amendment agreed to.

Lord Ackner moved Amendment No. 2:

Page 1, line 15, leave out ("and the Treasury").

The noble and learned Lord said: My Lords, I raised this very small amendment in Committee. It seeks to take out "and the Treasury" from subsection (3) of Clause 1. It arises in these circumstances. The Explanatory and Financial Memorandum to the Bill, under the heading "Financial and manpower effects of the Bill", provided:

    "The Bill's only likely effects on public expenditure are that any exercise of the power in clause 1 could affect the size of awards of personal injury damages against government departments, and that, under clause 6, ministers may accept secondary liability to support the primary obligations of public sector bodies".
It is subsection (3) to which this amendment is directed. It states:

    "Before making an order under subsection (1) ... the Lord Chancellor shall consult the Government Actuary and the Treasury; and any order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament".
Subsection (1) deals with the determination of,

    "the return to be expected from the investment of a sum awarded as general damages for future pecuniary loss".

I raise this amendment on the simple basis that it seemed to me quite wrong that a potential defendant should be allowed to advise on a factor that affects the amount of damages he must pay. That is indeed a startling position. The Treasury has a vested interest in the level of damages and accordingly should not be involved unnecessarily in providing advice in this area. The question really is: is the Treasury being unnecessarily involved?

I submitted to your Lordships in Committee that the Government Actuary is well able to undertake without assistance from the Treasury his actuarial task, which is somewhat similar to that undertaken by actuaries in insurance companies which issue life and pension policies. I submitted that we are not in a field of forecasting; we are not looking into the future; the actual rate of return at the moment of the calculation is what is required. That is what is done day in and day out when there is, for instance, a purchase of an annuity.

I promised to consider the observations made by my noble and learned friend the Lord Chancellor in Committee and I therefore obtained through Sir Michael Ogden, who your Lordships may remember was the chairman of the committee set up to consider these issues of damages and whose report was accepted by the Law Commission, the views of a very experienced actuary who sat on the committee that produced the report. The recommendation which the Law Commission made was that legislation should be

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introduced inter alia to direct courts to take into account the net return on an index-linked government security when determining the return expected on investment of damages but to leave it open for any party to show in individual cases that a different rate of return was more appropriate. By relying upon index-linked government securities there would be no danger of the kind that arises when one bases one's figures on a basket of Treasury and other stock.

In fact, Clause 1 refers to the court taking into account,

    "such rate of return as may from time to time be prescribed by an order made by the Lord Chancellor",
and not the net rate of return on an index-linked government security. Of course, if the Lord Chancellor ultimately decides that the rate of return should be prescribed by reference to index-linked government securities, then clearly the Government Actuary's Department can provide the necessary information without reference to the Treasury. But Mr. Prevett, the actuary to whom I have made reference, has gone on to advise that even if the Lord Chancellor decides that the rate of return should be prescribed by reference to some other portfolio of investments, the Government Actuary's Department has all the expertise required to provide the necessary advice without reference to the Treasury. He says that the department is involved daily in the consultation and determination of rates of return on invested funds in relation to its work on occupational pension schemes and insurance companies.

Therefore, the mention of the Treasury in Clause 1(3) is quite unnecessary. It is wrong as a matter of principle because of the vested interest which the Treasury has in the level of damages. I beg to move.

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