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Lord Higgins: My Lords, far from apologising--
Lord Avebury: My Lords, I wish to ask the noble Baroness one question before she sits down. Will the fees paid to Andersen's enable the Government to recover any of the costs which are now being incurred in compensation payments to the victims of the delay? Will they be able to get this money back from the contractors?
Baroness Hollis of Heigham: My Lords, obviously some of this information is commercially sensitive, as
I am sure the noble Lord will understand. However, my understanding is that Andersen's has already paid some moneys to that effect. Basically, we get compensation from Andersen's if, first, there is a fault established; secondly, if there has been a loss, as opposed to a cost--which is rather different--and, thirdly, if Andersen's has failed to rectify that or has failed to use its best efforts. My understanding at the moment is that we are paying Andersen's about £39 million in total over seven years for the NIRS service. In addition we shall have costs of about £90 million over the seven-year period for training and other such matters. That brings us to a total cost of about £134 million. If Andersen's is established to be at fault, it would be liable for that. However, that is obviously a matter for commercial negotiation.3.45 p.m.
Lord Higgins: My Lords, I was about to say that the noble Baroness certainly should not apologise to the House for giving what is obviously a pretty comprehensive reply. However, one feels bound to say that it has taken a long while--from Second Reading to Report stage--for the full scale of this problem to emerge. However, at least we have much of the information on the record.
It is rather surprising that there does not appear to have been any serious attempt by the department--other than to react to incoming telephone calls--to let people know what is happening. One would have thought that as there appear to be problems with the computer system, some kind of publicity campaign in the press or elsewhere might have been helpful. Indeed it might still be helpful in one respect; namely, with regard to what people should do in respect of their tax returns. As the matter we are discussing is about to be transferred to the Inland Revenue, perhaps it might be appropriate for that department to tackle this matter. Self-assessment forms could inform people what they are supposed to do in this regard. I believe that that was the only point which the noble Baroness did not cover.
I was a little puzzled when the noble Baroness said that people are being paid but not the right amount. I am not clear why it was not possible to tell them that. As regards compensation, we seem to be in an extraordinary position. The noble Lord, Lord Goodhart, pointed out that a particular group of people will get compensation. However, those at the lower end of the income scale who are not in a company scheme but receive the ordinary national insurance pension--although not as much as they are entitled to--appear to be caught by the normal rules which stipulate that one is not compensated if the amount involved is less than £100. Therefore there is the paradoxical situation where the better-off are compensated, but the less well off are not. That does not appear to be a sensible arrangement.
The rules may be appropriate in individual cases where the department makes a mistake but one would have thought that the Secretary of State in consultation with the Treasury, should consider whether the normal rules ought to apply, or whether some adjustment ought to be made. The reality is that the pensioners at the bottom end of the income scale have not been getting
the money to which they are entitled. If I have understood the noble Baroness correctly, they will not be compensated in any way whatever.
Baroness Hollis of Heigham: My Lords, anyone who has been underpaid will have their payments fully made. The question is whether they get compensation in addition to the full payment of their arrears.
Lord Higgins: My Lords, they will get the amount to which they were entitled, but they will get it late and they will be out of pocket in the meantime. The Treasury has gained and the pensioners have lost. It is as simple as that. There is a problem here. At the risk of complicating the issue, I believe the noble Baroness said that the increments are also not being paid.
We have several different animals here. We have the increase from the uprating and we also have what I understood to be an increment; namely, the extra amount people get if they defer their pension by a certain time. Perhaps we should look at this matter in more detail to see whether we can clarify it. It now looks as if people will not get the increased amount which they should have got if they had deferred drawing their pension for as long as the actual delay in payment. I shall try to spell that out a little more clearly. If someone had asked for his pension to be paid last July, for example, but was not paid it, will it be increased as if he had volunteered to defer the payment of his pension? Leaving compensation and uprating on one side, I am not clear as to whether, because that person has been out of pocket meanwhile--this may be an alternative to compensation as regards people drawing deferred pensions--his permanent pension will be increased as if he had volunteered to delay the payment for a year, for example.
These are complicated matters. There is a strong reason for the Government making much clearer than they have to the public what is the situation. We had a problem, which the noble Baroness rightly did not seek to minimise, on a significant scale but there has been no serious attempt to tell people what actually happened. Nonetheless, in the light of the noble Baroness's reply--to which we may or may not wish to return on Third Reading--I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham moved Amendment No. 2:
After Clause 3, insert the following new clause--
(" . The provisions of Schedule (Recovery of contributions where income tax provisions not applicable) shall have effect with respect to the recovery of--
(a) those Class 1, Class 1A, Class 1B and Class 2 contributions to which regulations under paragraph 6 of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (power to combine collection of contributions with income tax) do not apply,
(b) Class 4 contributions payable by virtue of regulations under section 18 of that Act, and
(c) interest or penalties payable under regulations made under paragraph 7A or 7B of Schedule 1 to that Act.").
The noble Baroness said: My Lords, I shall speak also to Amendments Nos. 33, 38 and 43. These amendments concern the procedures available to enforce the collection of contributions that have not been paid at the right time. Let me make it clear that we are dealing here with NICs that are not the subject of any unresolved dispute between the contributor and the department over whether NICs are properly due. We are concerned here simply with unpaid debts.
The amendments give the Inland Revenue, from next April, access to exactly the same methods of enforcing the recovery of unpaid NICs as it currently has for tax. The amendments permit summary proceedings for the recovery of smaller NIC debts in magistrates' courts. They also give authorised officials who are not lawyers the right to take county court proceedings.
I shall set out the current position. Tax enforcement provisions currently apply for the recovery of unpaid contributions that are already collected by the Revenue--that is, 94 per cent. of total NICs. But the procedures available to the Contributions Agency to gather in the other 6 per cent. are currently not as comprehensive as they are for tax. We are talking principally here of flat-rate Class 2 NICs paid by the self-employed and that part of Class 1A NICs paid directly to the Contributions Agency.
Apart from the use of proceedings in the High Court for very large NIC debts, the only method the Contributions Agency has to enforce the recovery of unpaid NICs is having DSS lawyers take county court proceedings, or sheriff court proceedings in Scotland. In the Social Security Act 1988 those powers were supplemented to allow officials to recover contributions by distraining on the goods of debtors and by the equivalent process under Scottish law, thereby bringing recovery procedures for NICs a step closer to those which have long been available for tax.
We propose now to complete the alignment process begun last year in time for the transfer by extending NICs recovery powers in two ways. The first is to allow summary proceedings for the recovery of NIC debts under £2,000 to be taken in magistrates' courts in England, Wales and Northern Ireland. Again, that mirrors existing tax law. The Revenue's experience is that summary proceedings are an effective way of collecting small debts. They are likely to be the most effective way of collecting unpaid Class 2 NICs from the self-employed. Your Lordships will recall that the recently published report of the Comptroller and Auditor-General on the National Insurance Fund expresses concern about the high level of Class 2 arrears. This proposal directly addresses that concern, as well as being fully justified in its own right. No Scottish equivalent of the proposal is needed, as last year's Social Security Act has already made provision for equivalent recovery action to be taken there.
The other proposal is to give officials who are not lawyers the right to conduct proceedings in the county court, and in the sheriff's court in Scotland, to recover NICs. Collectors of Taxes already have that power for tax and indeed for the NICs that are recovered through the tax system.
That change will avoid the need for Revenue lawyers to scurry around the country at public expense to conduct proceedings that are normally of a quite routine character. That would be a waste of scarce and expensive resources and will be a greater waste when recovery proceedings, which currently have to be taken in the High Court, are devolved to county courts.
Those new provisions appear in the new clause and new schedule. The other amendments extend the new provisions to Northern Ireland and make a consequential amendment in the Social Security Contributions and Benefits Act 1992. I beg to move.
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