---

Lord Higgins: My Lords, in my short time in your Lordships' House, I have been impressed by the versatility of its Members. It would seem that the noble Lord, Lord Haskel, can transfer seamlessly from a debate on the Competition Bill, to this debate and, presumably, back to the Competition Bill. I fear that he may go to bed hungry and, if so, I regret that.

As the noble Lord rightly pointed out, this is a traditional debate. The four orders increase the level of various social security benefits either in line with the retail price index or the more relevant Rossi index. Correspondingly, they increase the contributions and have important indications for the operation of the Pension Schemes Act 1993, to which I shall return in my remarks.

There is no more fashionable a subject than that of welfare reform. Indeed, the Prime Minister has been in the forefront of it. There was a great fanfare in the press that he was to launch a national campaign and was to tour the country putting forward his views. There were two curious aspects about the campaign. First, almost every aspect of welfare in this country was under review and therefore it was not clear how the content of the great speeches would appear. Secondly, a great national campaign was announced in the first speech made on 15th January. However, the Prime Minister opened the second speech by saying that it was the second of his party meetings to debate the reform of the welfare state. If it is to be a national debate, it is far from clear why all the audiences are to be restricted to what one might call "the party faithful". At Question Time last week, I sought on two occasions to obtain from the noble Baroness, Lady Blackstone, an assurance that they would become public meetings, but, alas, I received no reply. Perhaps the noble Lord, Lord Haskel, can enlighten us tonight. We are debating important issues

23 Feb 1998 : Column 482

and if the Government put forward reasonable and sensible proposals we on these Benches will not oppose them.

However, we must note that at the meetings to which I referred there was a considerable air of dissent, even given the restricted nature of the audience. To a large extent, that reflects a widespread fear that the reforms are driven largely from the Treasury. Indeed, at times it seems as though the Treasury and the Chancellor have taken over the whole issue of welfare reform.

That is not surprising because the abolition of the ACT reliefs on pension funds, the rebates to which I shall refer later and in particular the issue of single parents, have rightly raised suspicions that this is likely to become a cost cutting exercise. Surely, that is not what it ought to be about. During the debate on the Statement on these orders I raised at length what can only be described as the Government's U-turn with regard to lone parents.

It seems that that decision was taken to reverse temporarily the line that the Government had taken in opposition. However, we have had no explanation whatever as to why that change took place. It is one of the reasons why there is considerable undermining of the Government's credibility on these issues. No doubt we can refer to those matters in the Committee stage of the Social Security Bill and I shall therefore not press the Minister on the point. However, we need an explanation--if fears about the change being Treasury-driven are to be allayed--of why the Government changed their mind on a matter on which they had clearly taken a position in opposition.

Perhaps I may pick up the point made by the Minister on heating allowances. Having represented for 33 years the constituency with the oldest population in the country I am well aware of the problem. However, one should put the record straight in one respect. While it is true that the previous government introduced VAT on fuel, they also introduced generous compensation arrangements for pensioners on low incomes. In the event, because of the success of the deregulation process, the price of fuel did not go up at all so people were compensated for an increase which did not happen.

I listened with great interest to the various points mentioned by the Minister in that context and many are welcome. However, I was puzzled by a remark he made with regard to the heating bonus and even more surprised at the inclusion of a reference to it in the Prime Minister's speech. In the second speech made in the course of his campaign, he said:

"We've already paid a fuel bonus to over a million pensioners".

As I understand it, the statement which the Prime Minister made on 30th January is simply not true. The bonuses had not been paid. No doubt the Minister will be able to tell us whether that is so. Moreover, if I understand the position correctly, the bonuses are not being paid to all pensioners. Perhaps the Minister can confirm the point because it is important. If the bonus is not paid until the weather has improved--though, goodness knows, the weather has been good enough already this winter--it is a matter of concern. However, we may reasonably welcome the other measures to which he referred.

23 Feb 1998 : Column 483

At the moment we have little idea what the outcome of the Government's various reviews will be. Some indication at least was given by Mr. Frank Field in opening the debate on the orders last week in another place. He made a similar reference in his distinguished and elegant Beveridge Memorial Lecture on 18th February. As I understand it, he said that the Government intend to reform and extend welfare but consensus now favours,

"a mixed economy of welfare ... while we shall aim to increase welfare expenditure, we shall aim also to decrease the proportion of the budget that is covered by taxpayers through benefits guaranteed by the Government".--[Official Report, Commons, 18/2/98; col. 1102.]

As regards pensions it seems clear that the Government's intention is that more private provision should be made rather than the normal social security budget bearing as heavy a load as it does at the moment. The pension budget is 40 per cent. of the total social security budget, which is, as noble Lords know, a very large item.

What is curious is that, having indicated that that is the way the Government's thoughts are going, the actions which have been taken seem inconsistent with the aims they declare. In particular, with regard to the limitations on PEPs and the move to ISAs, many people who have made pension provision through PEPs will find that they are no longer receiving the same reliefs as they expected and on which they made decisions with regard to pension relief.

I have already referred to the serious effect amounting to something like £5.4 billion which the abolition of the ACT dividend credit will have on pension funds. Here I must declare an interest because for many years I have been a trustee of a company pension fund. But some of the Government's actions have been puzzling in that respect. The effect of the ACT change did not appear to be appreciated either by the Chancellor or by the Department of Social Security when the changes were announced.

The result of the change made in the Budget is to downrate the rebate which is given to occupational pension schemes. The Department of Social Security, as I understand it, asked the Government Actuary to produce some figures to show what will be needed to be done to adjust that. The Government Actuary duly replied. But, as I understand it--and no doubt the Minister can clarify the point--the Government did not do what the Government Actuary recommended. I do not understand why that should be so. What they have done seems clearly to be inconsistent with the aim which the Minister for Welfare Reform has clearly stated: namely, to move more towards private provision of pensions.

The effect of the decision not to implement the recommendations of the Government Actuary in full will, it seems, tend to push people from some company schemes into personal pensions or back into SERPS. Personal pensions which the Government have previously criticised seem to do rather well on the deal.

Therefore, I ask the Minister why is it, if the aim is to move towards more private provision and away from the taxpayer carrying the whole burden with regard to SERPS in particular, they appear to have taken the

23 Feb 1998 : Column 484

decision. It has an adverse effect on people's pensions, but the amounts of money do not seem so large--about £0.5 billion over the life of a Parliament. At the very moment the Government were saying that they would move in one direction, they took actions which seem to move in precisely the opposite direction. Perhaps the Minister can, in the context of the orders which are relevant, explain why that appears to have happened. Once again one is left with the impression that it is all driven by the Treasury who seek to get back money here, there and wherever they can without regard to the longer term objectives which the Department of Social Security has set up.

I turn to two other points. The first is the real fear over the National Insurance pension and whether it should be means tested. Just before Christmas we had the sudden introduction of the hitherto unknown expression "affluence testing". That seems to have been clobbered and, if so, it is welcome. I speak from many years of constituency experience. There is a real fear among pensioners that at some stage there will be a situation where the National Insurance pension will be subject to affluence testing, means testing, come what may. I hope that the Government will be able yet again to state the view that that is not their intention, although a statement by the Secretary of State for Health recently caused some doubt about it.

The second of my last two points is that we anxiously await a Green Paper on welfare reform. We were told that it would be published much earlier, at the turn of the year. Then, when the matter was debated last week in the House of Commons, the best Ministers could do was to say that it would be published before the next annual uprating. That seems to me to be a strange, almost contemptuous, way of putting it. Shadow Ministers and others in the other place reasonably said: "Are we going to have it before the Budget, on Budget day, or after the Budget?" To give a contemptuous answer that it would be some time before the next uprating does not seem to me to be satisfactory. It may be that the Minister can enlighten us further on that.

The Minister for Welfare Reform, in the recent distinguished speech to which I referred, suggested that it will be concerned largely with principle rather than detail. Nevertheless, in the context of the forthcoming Budget, that is something which we shall obviously await with great interest.

If the proposals in that are consistent and compatible, we shall welcome them if they are likely to improve the lot of people and also bring about the move to which the Minister has rightly referred, from welfare to work--always provided that the position of those who are unable or who do not wish to work is protected.

Having said that, I thank the Minister for his opening remarks and I shall look forward to his reply.

---