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Lord Higgins: My Lords, we shall return to this on Monday, but perhaps I may just ask one question. To what extent have the pensioners and others involved been told what is going on?

Baroness Hollis of Heigham: My Lords, the noble Lord was right in his initial remarks. That sort of information tends to be generated by the very same computer which is unable to handle it. In that sense, that is true. However, in terms of the benefit helpline, the advice at local DSS offices, the voluntary agencies, from Age Concern through to CAB, there is ample information on this. We should not forget that people continue to receive an old benefit if they are not eligible through the faltering of NIRS to receive their up-rated benefit. If there are any individual cases that the noble Lord has in mind, obviously we shall look at them for him. We have got a fair amount of information. Having said that, at the end of December something like 60 per cent. of the age-related rebates that went with personal pensions were being paid compared with the previous year's records.

We are hoping that it will be on track. It was a contract established by the previous administration; it has taken a long time to bed down. We received it, with caveats, in 1998 and the problems associated with NIRS have continued to come through. We hope, having established a stabilisation programme between all the four parties--the Contributions Agency, DSS, the Employment Service and Andersen Consulting--that we shall now be on track. As I say, if the noble Lord wishes to come back to me on any of those detailed points, I shall be happy to try to answer him.

The noble Lord raised a point about the Government Actuary. He asked why, if the report said that the Treasury grant is not needed, as indeed it does, we are we making one. The contributions re-rating order provides that the maximum amount of Treasury grant which could be made available to the fund is set at 2 per cent. of annual benefit expenditure. This is a prudent and practical way of managing our finances. It means that the Secretary of State has further resources, agreed with the Treasury which he can draw on if necessary. It is not new. At this time last year the maximum estimated grant of £900 million was made available for 1998-1999, even though the Government Actuary did not estimate that we would require any such grant. That indeed proved to be the case. It is a well-established precedent of fall back.

I turn now to some of the wider points raised by the noble Earl, Lord Russell. He asked me first about BIP. We expect to see the end of the present system by the end of the financial year; that is, the beginning of April.

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Clearly the details of what exactly will be replacing it are still being discussed with the Disability Benefit Forum.

Secondly, the noble Lord said that we expected the social security system to carry the responsibility for poverty whereas that was the responsibility of the wider economy. I entirely agree. It was easy enough when most of the social security system was a contributory system based on 40 hour, 50 year jobs. What we now see is that one family in five is without work; three million children are in families without work; and we have work rich and work poor households. That is why we have support in the House for emphasising that the best pathway out of poverty is access to work. That is why we are combining that with new deals, personal advisors, minimum wage and the like in order to make work pay.

As to those unable to work, I should have thought that tonight's uprating statement which shows that pensioners will have a minimum income of £75 a week, that there will be a minimum income for disabled people and a record increase in child benefit should address the problems facing those unable to enter the labour market.

I think and hope that most of the rest of the noble Earl's discussion overlapped with that of the noble Lord, Lord Higgins on pensioner poverty, capital ceilings and how we are attempting to increase the take up of income support. I hope and believe that I have addressed most of those concerns and I hope, as a result that your Lordships will be able to accept the three uprating statements tonight.

On Question, Motion agreed to.

Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1999

Baroness Hollis of Heigham: My Lords, I beg to move that the draft order laid before the House on 13th January be approved [5th Report from the Joint Committee].

Moved, That the draft order laid before the House on 13th January be approved [5th Report from the Joint Committee].--(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

Guaranteed Minimum Pensions Increase Order 1999

Baroness Hollis of Heigham: My Lords, I beg to move that the draft order laid before the House on 13th January be approved [5th Report from the Joint Committee].

Moved, That the draft order laid before the House on 13th January be approved [5th Report from the Joint Committee].--(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

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Access to Justice Bill [H.L.]

8.38 p.m.

House again in Committee on Clause 10.

Lord Goodhart moved Amendment No. 133:

Page 7, line 1, at end insert--
("( ) The regulations shall not require any payment from a person whose capital resources are such that they would be eligible for income support.").

The noble Lord said: This is a much more important amendment than, on the face of it, it would appear. I should say at the outset that the drafting leaves something to be desired. It should have said that regulations shall not require any capital payment from a person whose capital resources are such that he would be eligible for income support. It was not the intention of this amendment to exclude payments out of income from those whose income permitted them.

Without this amendment, in its corrected form, the Government's plans will suffer from a very serious, potentially devastating, defect. Under the present law, applicants for legal aid have to pay contributions from capital if their capital exceeds £3,000, and they are not eligible for legal aid if their free capital exceeds £6,000. In the case of income support, if their capital exceeds £3,000 they are not eligible. For income support, the value of the home, the dwelling house of the claimant for income support, is disregarded completely. That used to be the case for legal aid but now the equity value of the house is taken into account so far as it exceeds £100,000. The equity value of course means, in non-lawyer speak, the value of the house less the amount outstanding on the mortgage. If the equity value is more than £100,000, the owner can be and is expected to borrow against it to fund his litigation.

That is fair enough. We would not object to an amendment to this amendment to modify it to retain that provision. However, the Government now propose to change the rules. The new rules are set out in Annex A to the explanatory notes. The effect of the change is that the equity value of the house will still be disregarded for the purposes of eligibility for funding--which means that you will still get funding if the equity value of your house is worth less than £100,000, provided your other assets are worth less than £6,000. But if the equity value of your house is between £3,000 and £100,000, there will be a liability to repay any costs not recoverable from another party as a capital payment. That repayment can be deferred until the house is sold, but meanwhile the liability will be charged on that house and a market rate of interest will be charged, not as at present a relatively beneficial rate of interest.

The effect of that is obvious and disastrous. Anyone currently paying a mortgage will, in practice, be unable to claim public funding out of the community legal service fund. They will run the risk of an open-ended liability and increased payments to fund interest to the CLS fund, as well as having to pay their current mortgage instalments. If a young couple are planning a family they risk losing the equity they need to trade up to a larger house. If the owners are pensioners who have

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paid off their mortgage they risk serious hardship if they have to pay interest to the CLS out of their pension. For owner-occupiers, therefore, funding will be by way of loan charged on the equity of the house, carrying what the notes describe as a "realistic rate of interest".

The consequences of the grant of funding out of the community legal service fund to an owner-occupier are therefore so potentially damaging that in a case involving a cost potential of any significance it is almost impossible to imagine that any such owner would wish to take it on. Therefore, in practice, funding will be available only to those who are living in rented accommodation. That would be grossly unfair. I hope the Government will accept the need in this respect for an amendment. I accept that some assistance is provided by the Government's new amendment, which says that nothing will be paid beyond what is reasonable, but I think that this remains an extremely dangerous provision. I beg to move.

Lord Archer of Sandwell: I rise briefly to echo the anxiety expressed by the noble Lord, Lord Goodhart. The equity in one's house is not really capital available for expenditure. If one loses the equity in one's house, one does not have a home. I hope that my noble and learned friend Lord Falconer has grasped that point, even though I think his attention was not always entirely on the argument. I support the amendment.

8.45 p.m.

Lord Falconer of Thoroton: The amendment tabled by the noble Lords, Lord Goodhart and Lord Phillips of Sudbury, is similar to the amendment of the noble and learned Lord, Lord Archer, Amendment No. 130, in its intention but is much more limited and specific in its effect. It provides that people whose capital resources are such that they would be eligible for income support should not be required to make any payment towards services provided by the community legal service fund.

In its naked form, the amendment, as I think the noble Lord accepted, would again prevent the Lord Chancellor from making regulations which provided for the same financial conditions that exist now for legal aid. However, as the noble Lord, Lord Goodhart, explained with total clarity, he has a much more limited aim in mind. As I understand his argument, he is seeking to remove one of the proposals for changing the current regime set out in the Explanatory Notes; namely, the extent to which the first £100,000 of the equity in your house is taken into account in determining the amount you have to pay to the legal services commission. I understand that, but just for the sake of the record, perhaps I may outline the relationship between income support and legal aid without repeating what I have said in relation to the amendment of the noble and learned Lord, Lord Archer.

Under the legal aid arrangements today, if you are on income support you automatically qualify for free legal aid. If, though not claiming income support, you would qualify on income grounds, you would also qualify for legal aid without any contribution from your income. People who have some capital assets may still qualify for income support. Capital of £3,000 or less is

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disregarded altogether: so is the value of any equity that the applicant owns in his or her own home. If someone has capital worth between £3,000 and £8,000, income support is reduced by a set formula to reflect an assumed weekly income from the "free capital" between those limits. If they have more than £8,000 capital they do not qualify for income support, regardless of how low their income is.

The legal aid provisions for contributions from capital are somewhat different: below £3,000 disposable capital, a person is eligible without a contribution from capital; between £3,000 and £6,750 (or £8,560 in personal injury cases), the assisted person is required to pay the full amount above £3,000 as a contribution from capital; with disposable capital above those upper limits, people are ineligible for legal aid, unless the Legal Aid Board exercises its discretion to waive the upper capital eligibility limit in a potentially very expensive case. Under the existing provisions, the first £100,000 of equity owned in a home is disregarded in these calculations.

The point focused on by the amendment of the noble Lord, Lord Goodhart, is Annex A, paragraph 8 of the Explanatory Notes to the Bill which proposes that the first £100,000 of equity in a home should continue to be disregarded for calculating eligibility, but that it should be counted in assessing contributions. However, under the new proposal, no contribution from capital tied up in a home would be payable until the end of the case, when costs liabilities are determined. Furthermore, the Explanatory Notes explain that the legal services commission would have discretion to postpone the payment of a contribution from this source, typically until the house is next sold. This is the position that already applies when the legal aid statutory charge attaches to a home that was recovered or preserved in proceedings.

The noble Lord has explained that this is the proposal that his amendment is intended to prevent. As I have indicated, the language of the amendment would go further than that. The amendment provides that,

    "regulations shall not require any payment from a person whose capital resources are such that they would be eligible for income support".
That would mean that someone whose capital did not exceed £8,000, but who had an income above the free limit, would qualify for free legal aid under the amendment. In other words, other than those exceptional cases where the upper capital limit is waived, no one who qualified for legal aid would ever be asked to pay a contribution. The noble Lord has accepted that that is not what he has in mind. He has the more limited aim in relation to the proposal with which I have just dealt.

There is a difference in kind between income support and legal aid contributions so far as the value of the house is concerned. Income support is provided as help with living expenses. Disregarding the value of the house for income support obviates the need to sell your house to live. Legal action is a one-off event. It is reasonable to ask people with assets, in whatever form, to pay what they can afford for it, especially if one considers the potential effects on other people of taking

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legal action. Capital is generally taken into account for legal aid contribution purposes and it would not be fair to owners of different forms of capital to disregard this first £100,000 absolutely. Justice is done by disregarding it for eligibility purposes and in practice making it available for contribution purposes only when the house is sold.

It is true that, under the regulations contemplated in the Explanatory Notes, delaying enforcement will be at the discretion of the commission. But the Lord Chancellor is willing to consider requiring the commission to call on the £100,000 only on sale and removing its discretion to do so earlier. I would also envisage that the commission would have a discretion not to enforce the contribution even then, where to do so would cause hardship. On that basis, which goes some way to meeting the noble Lord's argument, I invite him to withdraw the amendment.

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