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Baroness Hollis of Heigham: My Lords, it is the responsibility of the Minister in this House to repeat word for word a Statement made in the other place.

Lord Higgins: My Lords, I accept that entirely. However, I merely observe that it was unfortunate for the noble Baroness to be put in that position. She will know of course that we on this side of the House have accepted throughout the proceedings that this was a piece of maladministration by the previous government which was then continued or perpetuated by the present Government. The fact that that is so is a responsibility for both governments. Indeed, it is deeply regrettable and we all understand that that is the case.

It is now important to find the right solution. Certainly, we on these Benches welcome what has been proposed to prevent a recurrence of what must be perhaps the worst example of maladministration that has ever taken place. I suspect that it will prove to be the most expensive.

I should perhaps mention one other point; that is, that there has been a plethora of press comment on this topic over the past two days. It does not bear precise relationship to what the noble Baroness read out. It would not appear to be a leak. But it looks like a classic Treasury case of softening up what is to come by saying that everything is going to be absolutely awful and then what actually happens is rather less. Perhaps the Minister will give the House an assurance that none of those stories originated from either her department or the Treasury.

We are helped in these matters by the reports of the NAO and the ombudsman. I want to ask questions about both of those. I am surprised that the ombudsman's report has taken so long. It would have been helpful to have had it much earlier in our proceedings. I do not understand why it was necessary for the ombudsman to take from March 1999 to March 2000 to produce this document. However, he makes a number of points which are helpful.

Similarly, the National Audit Office report is helpful. But the timing seems rather odd. At page 8 of the NAO report it says that the ombudsman reported his findings to Parliament in March 2000. But the

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report was only authorised to be printed today. Later, at paragraph 2.19, it states that in March 2000 the Secretary of State for Social Security "announced" a government decision to set up a preserved rights scheme, and then goes into great detail. It seems odd to have the three reports published simultaneously and yet for one to include information which was not available at the time the report was printed. Perhaps the noble Baroness can give us some indication of how that comes about.

I turn to the two crucial points made in the ombudsman's report. I apologise, in the light of the earlier exchanges in the House, for reading a lengthy paragraph from the report, but it is the best way of dealing with the matter. The ombudsman's report says, as part of a recommendation made to the Permanent Secretary,

    "individuals who claim to have been misled or misdirected by information given by a department are normally expected to provide some evidence that they have been misled into acting, or failing to act, in a way that has been to their disadvantage. Only then is compensation considered. However, I questioned whether that approach was tenable in the circumstances of the complaints being referred to me. As I saw it, anyone who had read the relevant DSS leaflets [I stress 'anyone'] might reasonably claim to have been misled by them. Whatever such a person then did or did not do, it seemed to me that the burden of proof that he or she would not have acted differently had he or she not been misinformed rested on the department".

The ombudsman then continues,

    "I therefore considered that, whatever the approach the department decided upon in order to make good the effects of their maladministration, it would need to be capable of providing due redress on a global, rather than an individual, basis".

The Statement the noble Baroness read out says that the Government accept the ombudsman's recommendations. That is not my understanding of what is proposed. It is not proposed that there should be a global settlement for everyone who may have been affected simply because they read the leaflets issued by the department. On the contrary, what is proposed is a system of protected rights.

We welcome the fact that the Government are proposing to delay the whole matter for two-and-a-half years because the deadline for all this is the beginning of April and the Statement, this report and the NAO report are all up against that deadline. So we welcome that deferment. But perhaps the noble Baroness can clarify one point in that regard. She says that the minimum cost of the operation would be £2.5 billion. Is that simply the cost of deferment and will the rest then be on top of it? I am not clear about that.

Despite the Statement, the Government do not appear to accept what the ombudsman says about a global settlement; on the contrary, they are proposing a protected rights scheme. That brings us to the question of the burden of proof. The paragraph I read perhaps confuses both issues, so let me turn to that question.

This issue came up clearly in the debates we had in this House on 6th July 1999 when the noble Baroness said,

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    "There is a very real issue of proof. The noble Lord, Lord Rix, asked me about telephone calls. No record is kept of telephone calls, any more than a record is normally kept of conversations at the desk. Paper records are kept for about six months. But if someone asserted that he had received that misleading advice, I suspect it may well be the case that the Government would have to prove that he had not, rather than the contrary, because there would be no evidence to counterbalance it".--[Col. 847.]

That is reflected in the ombudsman's report when he says that the burden of proof is to be on the department rather than on the individual concerned.

So we are left in a difficult position. First, it may be that someone has been misled simply because they read the leaflet, whereas the Government are now proposing, if I understand it correctly, that the individuals who feel that they have been misled and lost out as a result of that because they did not make proper pension arrangements will have to go through procedures where they say "I wrote to the department. The department gave me the wrong information" or "I telephoned the department"; and yet there is no such evidence. If there is no evidence but an assertion is made by an individual, on what basis will the department reject such applications? Clearly, this is an important issue and it is not the least bit clear either from the Statement or otherwise what the Government intend to do. It ought to be clarified at this stage.

I have one final point. The noble Baroness's reaction when this matter first arose in this House, in answer to a parliamentary Question from myself, was that she was going to take legal advice. Can she tell us what the legal position is now in the light of what the Government are now proposing? If people do not like what the Government propose, can they still take legal action?

These are technical matters. They are of deep consequence to many people. It is hoped that we can find a satisfactory solution to them. For the reasons I mentioned, it is not at all clear at the moment what the Government's solution is, let alone what the right answer is.

7.17 p.m.

Lord Goodhart: My Lords, we too are grateful to the noble Baroness for repeating this Statement on this occasion. I begin my saying that we strongly support the proposal to set up a new pensions directorate to take operational responsibilities and actions out of the Benefits Agency and to have a single dedicated body to deal with those matters. In saying that, I ask the noble Baroness whether she will confirm that benefits such as housing benefit, which goes to both pensioners and non-pensioners, will stay with the Benefits Agency.

The widows' SERPS issue was first raised in Parliament by my right honourable friend in another place, Mr. David Rendel, in November 1998. It was then debated extensively during the passage through your Lordships' House of the Welfare Reform and Pensions Bill in the previous Session; indeed, the last occasion on which it was debated was 8th November last year when your Lordships considered the Commons amendments. On that occasion the House accepted the revised version of an amendment

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originally moved by the noble Lord, Lord Rix, who played such an effective part in raising and obtaining a solution to this issue.

That amendment gave the Government three options: first, to increase the surviving spouse's rights to a rate of more than 50 per cent where the contributor died after 5th April this year (that option has been clearly rejected by the Government); secondly, to defer the commencement of the reduction to a date after 5th April; thirdly, to provide a compensation scheme for those who can prove that they acted in reliance on incorrect advice from a government department. What the Government now propose is a combination of the last two options.

I should just point out that in the course of that debate the noble Baroness said that she was unable to announce a decision on the preferred course of action, but added that the Government would make a further announcement "soon". I have to say that it is now more than four months on, with only three weeks to go until the original changeover date, and, therefore, I find it difficult to regard that as being "soon".

We, too, welcome the deferment of the changeover for a further period of two-and-a-half years. But, after that, the Government have chosen an option which may well severely restrict the number of people who can in fact claim. I note that the National Audit Office has indicated that there is a very wide range of possibilities as to what this will cost. I certainly suspect that the number of people who can prove reliance on incorrect advice to anything like the standards that a court would require will be small. The truth of the matter is that this is not just a problem for those who asked a question and received the wrong answer.

The change in the rates of the spouse's SERPS should have been flagged up and printed in very large bold type. Both the present Government and the previous one--the latter even more so because they were responsible for a longer period--should have gone out of their way to publicise the approaching change. That publicity should have said: "You should be aware that if you die after 5th April 2000 your spouse will get only half your pension. Therefore, you need to consider taking action now to protect your spouse's income if he or she survives you".

There are probably plenty of people who did not ask the DSS about it. But if the cut in the spouse's pension had been brought to their attention, they would have done something about the situation. I recognise that an effective remedy is likely to be extremely expensive. However, I believe that it is essential to provide redress, especially for those who are now over or close to pensionable age and who are no longer able to take out a personal pension to make good the shortfall in SERPS for their spouse.

There are important recommendations in the ombudsman's report. The noble Lord, Lord Higgins, drew our attention to one of them, which appears in paragraph 32. I should like to refer to paragraph 41 of the report, where the ombudsman says that his proposals,

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    "will also need to take account of the fact that most of those misled by DSS or BA are likely as a result to have decided that no action on their part was needed, because they had been led to believe that a surviving spouse was secure in an entitlement to full inheritable SERPS. In view of that, it would be wrong to exclude from redress those who took no action; and the proposals will need to recognise that it will be difficult, and in some cases impossible, for claimants to demonstrate that they would have taken a particular course of action had they been correctly advised. The scheme should also, in my view, recognise that many people will have been misled solely by reading inaccurate leaflets, and will have received no further wrong advice, written or otherwise, from DSS or BA. They will need to be catered for in any proposals".

Therefore, can the Minister say whether the Government accept the full recommendations of the ombudsman as set out in paragraphs 32 and 41 of his excellent report?

7.23 p.m.

Baroness Hollis of Heigham: My Lords, I am grateful for the responses from both noble Lords. I especially welcome the response from the noble Lord, Lord Goodhart, to the proposed administrative changes. I believe that they are our best assurance against such calamities happening again. The noble Lord, Lord Higgins, may well be right to say that, so far as concerns government policy, this has been one of the worst and certainly one of the most expensive errors. However, I must disagree with him in one respect. I do not think that it is just a question of saying that his government were in office for 17 years and ours has been in for three--yah-boo!

The previous administration was responsible for the change in policy. If you change policy, you have an additional responsibility to ensure that those who may be affected by it know about it. That is our complaint. We are not suggesting that there was any conspiracy here. The previous administration perfectly properly and openly debated those changes through Parliament, but then failed not only to ensure that people knew about them but also continued to publicise and print leaflets suggesting the contrary. That seems to me to be a very different situation from one where a new administration comes into office and is looking at an entire waterfront of proposals--for example, the New Deal, child poverty, pension reform and the like--and then discovers a year or so into that term that errant leaflets and errant advice based on a previous government's administration are still being perpetuated.

I am glad that the noble Lord accepts responsibility for that situation. However, I believe that it is even worse than he suggested. Any government who change policies that affect the lives of so many people have a double obligation to make sure that they know about the change and, therefore, do not suffer further disadvantage--

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