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The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, with the leave of the House, as the noble Lord has invited me to speak to the issue now, that may be helpful rather than going through a long discussion and putting the government view at the end.

At Report stage we discussed compensation for those suffering delay through the problems with the NIRS2 system. Last week in another place the Public Accounts Committee also pressed the issue of compensation. I am now in a position to say how we intend to deal with this problem--a problem not of our making but one we inherited.

We fully accept that, whoever's fault the problem is, it was not caused by widows and pensioners. So we accept that they should suffer no loss. As I said on Report, we shall be paying arrears and, in that sense, there will be no loss. But we intend to go further. We intend to relax the current departmental guidelines which require a lengthy period of delay in payment and provide no compensation where the amount due is less than £10. Because of the one-off nature of the NIRS2 problem we propose a one-off solution. In any payment system there are inevitable delays, such as where details need checking or where an address has changed. But where people have suffered unreasonable delay they will receive a minimum £10 payment on top of the arrears. Those due larger amounts within the normal departmental guidelines will of course receive them. The compensation will be paid automatically where cases are reviewed. That will necessarily take time.

There are three reasons why I believe the House should reject the amendment proposed by the noble Lord in favour of the proposals I have just put forward. I am advised that the noble Lord's amendment is defective in two respects. First, the provision that his new clause makes for the commencement of the Bill is flatly inconsistent with the existing commencement provision in Clause 28, which your Lordships have already approved. Yet the noble Lord's amendment contains nothing to provide for the way in which the new clause is intended to work alongside Clause 28, or vice versa.

Secondly, the new clause is drafted in terms which are so vague that we doubt whether a court would be able to give effect to them in a way which would meet the noble Lord's objectives as he described them today. For instance, the whole provision is set in the context of an unspecific reference to "the contributions Agency computer", and it speaks in terms of a "breakdown". As I explained on Report, our present difficulties arise out of delayed introduction of a new system rather than any "breakdown". It is, moreover, unclear how the noble Lord's reference to a "loss" would be construed when there is no doubt that every customer will receive every penny of benefit to which they are entitled.

To put these deficiencies right we should need to amend the Bill in another place, so delaying the transfer. I am not trying to make a partisan point; often in

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opposition one moves a technically deficient amendment as one does not have the drafting skills that are available to government. That is merely by way of explanation.

The noble Lord's amendment is unworkable. It means that the transfer could not happen until the last pensioner--in hospital, for example, for a hip replacement operation, or perhaps spending a month or so on the Costa del Sol or travelling around the world (that is, even if they were well off)--had been paid. In those cases it could take months to make the payment, hinging on one last pensioner who had not yet been tracked down. In the meantime employers would face uncertainty that they neither want nor need. The amendment also means that every individual compensation payment to some 300,000 people would need to be separately calculated--at huge administrative cost.

The substantive reason--the reason why I hope the House and the noble Lord will respond positively to the Government's proposals--is that the proposals are more generous than those put forward by the noble Lord as well as being more certain.

It may be helpful if I illustrate this by way of a couple of examples. Let us take the example of a pensioner underpaid by £2.50 a week and a worst case scenario that it takes some 18 months to review the case. Under present departmental rules he or she would not receive any compensation. If we offered the 0.5 per cent. we are offering pension funds, as implied by the noble Lord's amendment, he or she would receive £8.45 after a complicated manual calculation. Our proposals would offer £10 after a very simple calculation. Another example would be that of a widow underpaid for nine months. Under the current rules she would receive nothing. Under the noble Lord's amendment she would receive £2.25. Under our proposals she will receive £10.

Our priority is now to catch up with as much of the outstanding work on NIRS2 as possible, particularly the remaining end-of-year returns from employers and contracted-out pension rebates, and to roll out the remaining areas of the system. Then we can start reviewing the backlog of cases affected. We shall be looking over the coming months at the detailed operation of the compensation arrangements so that we can get money to individuals as quickly and effectively as possible.

The proposals I have announced today mean that the claim repeated today by the noble Lord, Lord Higgins, that under our proposals the better-off are compensated but the less well off, because they are below a floor of compensation, are not, does not hold. The compensation we have announced today is more effective, more workable and more generous than that proposed in the noble Lord's amendment. Therefore, I hope that, given the spirit of this offer, the noble Lord will be able to withdraw his amendment and that the House will support the Government's proposal.

3.15 p.m.

Lord Goodhart: My Lords, before the Minister sits down, perhaps I may raise one point. What she said is

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most welcome. It is a considerable step forward. I am sorry to cavil on any aspect. However, this provision will be triggered only by "unreasonable delay". The noble Baroness gave no indication as to what "unreasonable delay" might be. Will she comment further?

Baroness Hollis of Heigham: My Lords, perhaps the House will consent to my replying to that point. My reference was to delay caused by the NIRS2 computer; namely, delay in calculating the contributions record in the previous year. We were trying to avoid a situation whereby, because someone failed, for example, to give accurate information and the payments were therefore five or seven days late, that person would automatically qualify for the £10 payment.

Lord Morris of Manchester: My Lords, before my noble friend sits down, she has announced an imaginative and eminently decent response which will be welcomed by disabled people, retirement pensioners and widows alike. Almost by custom, Ministers receive more brickbats than bouquets. Will she accept my congratulations as well as my thanks?

Lord Higgins: My Lords, I served my apprenticeship in the House of Commons under the late Iain Macleod. As I said previously, his remark when an amendment was accepted in principle was, "You don't shoot Santa Claus." By that, he meant that one does not go on at enormous length afterwards.

Nonetheless, there are one or two points that ought to be made. I do not feel gravely concerned about the technical deficiencies of my amendment. As the Minister has pointed out throughout our debates, this is a highly technical Bill--so much so that there are still two government amendments to come at this Third Reading stage. I appreciate the points made by the Minister.

We have been anxious throughout to ensure that this matter received rather more coverage and attention than it had previously received. Up to now, it has been very difficult indeed to get at the facts, although I pay tribute to the noble Baroness for the way in which she has responded. If I may say so without embarrassing her, her response has been much more satisfactory than was the response of the Secretary of State on the uprating Bill in the other place.

This matter presented a problem. I am still not clear on two points. Perhaps the Minister will say how many people will benefit from the concession that she has fortunately now announced. Secondly, what is the total cost likely to be?

As regards the point made by the noble Lord, Lord Goodhart, am I right in thinking that all those who have suffered as a result of the delay in payments because of the computer problem will receive the minimum amount which the noble Baroness mentioned and, if they are entitled to more, will receive that under the normal rules? I have a vague feeling that one of the conditions normally applied is that the delay has to be for a certain period of time. It would be wrong in these circumstances to set a deadline of that kind. I presume that it will apply

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to all those whose payments have been delayed and have not received on time the benefit to which they are entitled.

The next point which I should be grateful if the noble Baroness would clarify is the position with regard to SERPS. What will the compensation arrangements be and how will they differ from the arrangements for those whose payments of national insurance pensions or other contributory benefits have been delayed?

Finally, a number of people affected are those who applied for payment of a pension to be deferred and paid on a certain date in order to obtain a higher rate of pension in perpetuity than they would otherwise have received. Presumably when such people are eventually paid their pension they will receive the full amount, the compensation which the noble Baroness mentioned and the recent uprating covered by the uprating orders. What I am not clear about is whether such people would have the option to receive either £10 or--which is likely to be a much more valuable amount--the amount which they would have received if they had deferred the payment of their pension not to the date they originally suggested but to the date when it will, because of the Government's mistake, eventually be paid.

Having said all that, I hope that those who have suffered because of this problem will feel that they have benefited as a result of our debates, the attention focused on this issue and the understanding which the noble Baroness has shown. What is important is how the Government have responded, not the origin of the computer problem itself.

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