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Noble Lords: Oh!

Lord Higgins: A little more in the light! Either way, because the stakeholder pension is far from clear at this stage. We have to deal with the second state pension separately from the legislation regarding the stakeholder pension.

Perhaps I may say a few words about the Child Support Agency. The fundamental problem will be running the two systems side by side. There is also the question of a transitional period. The former system was clearly more rigorous than the new system will be and therefore people who are already in the system will say, "Why should we be treated more harshly than those who are now coming within the scope of the Child Support Agency?" Perhaps the Minister might like to say a little more about that aspect of the Bill.

We are concerned about other matters. The system is of course simpler. But the problem with simplifying matters is that there is less scope for adjustment in individual cases. In the debates in the other place there seemed to be a degree of inflexibility in the Government's attitude regarding certain matters. In

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particular, we are unclear why the Government have been so determined to ensure that the income of the parents with care is to be disregarded. In certain situations the parent with care may actually be a great deal better off than the absent parent. We believe that there is a case for taking both into account.

Another aspect which causes us concern is that there is no upper limit on the amount which, under the new simplified formula, will be taken from the absent parent. There are important issues here which we can do doubt pursue in Committee--for example, where someone is immensely rich but an absent parent, the extent to which that income should be transferred back to the children of the original marriage. It can be even more complicated. I remember having a number of constituency cases where there had been three or four marriages in succession. These matters can be immensely complicated. At all events, we believe that there is a case for the upper limit. Perhaps the Minister can clarify for us exactly how long she sees the transitional period lasting. I believe that 2002 for new cases and 2003 for existing cases have been suggested, with a further five years of transitional arrangements.

We also have some concern, as has the noble Lord, Lord Stoddart, about the penalties to be imposed on those who do not comply with the Child Support Agency's decisions. I find the driving licence penalty a very strange one. When it was first announced we thought that it would be in addition to other penalties. Perhaps the noble Baroness will confirm that it is not in addition to, but is instead of, other penalties. At all events, to quote the American experience seems quite wrong. In America, the removal of a driving licence, which carries a photograph and so on, is a very considerable sanction. Without it, one would be lucky to get anything at all on a credit card. So there is not a reasonable comparison. Noble Lords may like to consider when they were last asked to produce their driving licence in this country and whether, if they had had it removed prior to that, it would have been a severe or effective penalty or even whether the threat of removal, as the noble Baroness suggested, would have been a severe penalty.

There are other penalties in the Bill, in particular, the reduced benefit penalty. I understand that the Public Accounts Committee in another place took evidence on the matter on 3rd April. Unfortunately, the evidence has not yet been printed so I have been unable to check exactly what the committee has in mind. Apparently it has suggested that this penalty should be suspended during the transitional period. Perhaps the noble Baroness could clarify the point.

Complicated issues arise with regard to the relationship between cases that will be decided in court with regard to matrimonial settlements and whether, 14 months later, if one or other party disagrees with the original decision he or she can then take the matter to the Child Support Agency. These issues will need to be examined.

Perhaps I may say a word about other aspects of the Bill before turning to the question of the state second pension. Clause 38 introduces the Government's

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proposals regarding the vexed question of inherited SERPS, which we discussed when the Minister repeated a Statement on 15th March (cols. 1608-1619). Both I and the noble Lord, Lord Goodhart, expressed some concern. The Statement was made on the basis of the ombudsman's report, and the Government said that they had accepted the report's recommendations. Both the noble Lord, Lord Goodhart, and I had difficulty in knowing what the recommendations were. I asked the Minister for clarification, and she suggested that I should take the matter up with the ombudsman. I have done so. I wrote only recently and have not yet received a reply.

The report's recommendations--the ombudsman took more than a year to examine four sample cases--are by reference to a letter written by the ombudsman to the Permanent Secretary. I find that a strange way to express recommendations. At no point in the report are the recommendations stated in specific terms. What is clear if one looks at the paragraphs referring to the letter to the Permanent Secretary is that the important issue arises of burden of proof--whether people knew that the arrangements regarding inherited SERPS had been changed. The ombudsman goes on to state that redress should be,

    "on a global rather than an individual basis".

But that is not what the Government propose. They do not propose a global settlement for everyone who may have been misled by the lack of publicity in regard to widows' SERPS, but have introduced a system--apart from delaying implementation of the arrangement--of individual protected rights. It is not satisfactory for the ombudsman to say, "Let's see what the Government come up with, and then I'll say whether it's all right or not". By this stage he ought to have said what should happen; then we could judge the Government accordingly. Therefore, I very much hope that the ombudsman will make the position clear before our debates at later stages of the Bill. It is a matter which the noble Lord, Lord Rix, and other noble Lords regard as extremely important.

Perhaps I may make a passing reference to Clause 54, dealing with the prohibition on different rules for overseas residents so far as occupational schemes are concerned. I thought for one wonderful moment that this provision would be with regard to the state pension and the question of overseas residence. Unfortunately, that appears not to be the case. Perhaps that matter can be debated at a later stage.

Another matter that has recently preoccupied this House is the question of the way in which pensions are drawn. A Question was asked on 12th April about whether benefits would continue to be paid through the Post Office. It applies to all the benefits that we shall consider in relation to the Bill. I asked the noble Baroness the simple question:

    "are we to understand that the Government have not yet decided how the option to continue to receive cash through the post office will work? Will she state clearly by what method people will continue to be able to do so?"--[Official Report, 12/4/00; col. 185.]

The noble Baroness gave a lengthy reply--for which I was grateful--but did not answer the question. Perhaps I may put the point to her again. By what

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method will people now be able to draw their cash from the Post Office? It is a matter on which the House has understandably expressed concern. It not only affects pensioners; it affects the position of sub-post offices and has wider implications with regard to the social environment.

I am conscious of the fact that a large number of noble Lords have put their names down to speak in the debate, but before turning to the question of second pensions I must add one other point regarding the imposition of national insurance contributions on benefits in kind, and in particular contributions to private health schemes. As I understand it, the provision will raise some £225 million a year--yet another example of a stealth tax.

I turn finally to the question of the arrangements that are made for the second state pension. We are effectively creating a three-tier system. There is the second state pension for those earning over the minimum but less than £21,600; we then have the stakeholder pension; and on top of that we have occupational pensions.

Baroness Hollis of Heigham: My Lords, I think the noble Lord may have misquoted the figures.

Lord Higgins: My Lords, the matter is slightly complicated. In the early stages, as I understand it, the second state pension will be income related and at the later stages it will become a flat-rate pension. So I may have slightly misquoted the figures.

Baroness Hollis of Heigham: My Lords, perhaps I may help the noble Lord. He said that the state second pension was for those earning up to £21,600. That is not so. It is intended primarily for those earning up to about £9,500. From £9,500 to about £21,000 the pension would be a stakeholder pension--people could use the state second pension but it would be less advantageous to them financially than for those earning less than £9,500. It was simply a matter of the income cut-off points.

Lord Higgins: My Lords, the noble Baroness is absolutely right and I understand her point. None the less, there will be a three-tier system: a second state pension, a stakeholder pension, and occupational pensions.

We welcome the fact that the Bill will help many low-paid people--for example, carers, those with a broken contribution record, those with long-term disablement and so on. That is understandable and will be appreciated. However, there is a problem as to whether the combination of the various levels will effectively divide people into different classes and whether it will be difficult to move from one class of pension to another.

A further point was expressed in a letter from Age Concern, which is of course very much involved in these issues. Age Concern continues to express concern about the relationship between the pension and the minimum income guarantee at the later stages.

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Many of these schemes will not become operative for many years, and by that time the minimum income guarantee, which we understand is to be uprated in relation to earnings, will "overtake" the state pension--which is apparently to be uprated only in relation to prices--and any other proposals on that basis. Age Concern believes that,

    "for many people heavily dependent on the basic pension and State Second Pension for their income in retirement, the levels will be inadequate to meet the Government's aim of people not having to rely on means-tested support in retirement".

It points out that in a situation such as I have described more older people will become newly entitled to means-tested benefit year on year. The relationship between benefits which are based only on prices and the minimum income guarantee which is based on earnings is likely to create a difficult situation in which an individual's contributions, or even those of the state, are inadequate to take him off means-tested benefit, and in the long term he will not gain from the Government's proposals.

The Bill now before us is clearly in conflict with the manifesto of the Labour Party at the time of the last election. The Labour Party said in the clearest possible terms that it would retain SERPS as an option for those who wished to remain within it. That is not what the Government now propose. I am not surprised to see the noble Baroness, Lady Castle, nodding her assent.

The Government put forward a series of proposals. On the one hand, they create a situation in which there is likely to be more means-testing. On the other hand, a number of benefits (so-called) are to be introduced; for example, winter fuel payments and free television licences, which go to everyone regardless of need. There appears to be a fundamental contradiction in many aspects of government policy. On the one hand, it is said that benefits must be focused by way of means-testing and, on the other hand, there are to be handouts--I believe that to be an adequate description of the free television licences, and perhaps also of the winter fuel payments--to those who have no need for them. The Government do not appear to have adopted a consistent policy, and it is important that in Committee and at later stages of the Bill noble Lords examine very carefully the whole basis on which the system of pensions is to be constructed.

3.51 p.m.

Earl Russell: My Lords, speaking at three minutes to one in the morning tends to lead both to brevity and bluntness. It was at that hour of the morning that my honourable friend Mr Webb, speaking on Third Reading of this Bill in another place, said:

    "The Bill does not take social policy forward. We regret that it has come before the House".--[Official Report, Commons, 3/4/00; col. 781]

If we wrap that up in a little more cotton wool it is because we are able to enjoy the courtesies of tea time; it is not that we disagree with that judgment in any way. This Bill has not found favour on our Benches. As usual, my noble friend Lord Goodhart will deal with

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pensions and national insurance matters, and I shall deal with issues involving the Child Support Act and other miscellaneous matters arising out of the Bill.

I have been concerned with the Child Support Act for 10 years. I wish I could say that the first 10 years are the worst. One is told that one must be consistent and avoid repetition. Having spent over 10 years on one subject, it is quite difficult to achieve both objectives at the same time. We all believe that we are consistent. I decided this morning to check that out by looking at what I said on 29th October 1990 when the first proposals for the CSA were put before us in the form of a Statement. First, I said that fathers should be responsible for the financial support of their offspring. Secondly, I agreed that the taxpayer had an interest in the matter. Thirdly, I said that the Government would be mistaken to hope for too much from the Bill. Today I could repeat all of those remarks which show absolutely no sign of dating.

It appears that we are following the line of debate which we had, for example, on the poll tax. Following in a seamless robe of continuity from her predecessor, the noble Lord, Lord Mackay of Ardbrecknish, the noble Baroness has sought to transform this matter into a debate on the willingness or otherwise of fathers to pay. The Minister referred throughout her speech to those who would not pay. I was reminded of the observations of the noble Lord, Lord Waddington, on poll tax defaulters in the debates in this House in 1991. We on these Benches have always sought to argue that the issue is not just about those who will not pay but about those who, because of the nature of the formula, either cannot pay or feel a profound sense of injustice about the terms on which they are asked to pay.

We agree that there is a hard core of fathers who feel considerable reluctance to support their children after separation or divorce. If, however, one is dealing with those fathers, or any hard core resistance to a government measure, sensible politics demand that one sets out to isolate that resistance, not provide it with a large body of gratuitous extra support. One does not provide those who will not pay with the support of a large number of allies who either cannot pay or feel a profound sense of injustice about the terms on which they are asked to pay. That is the mistake which has been made in all three of the CSA Bills and innumerable CSA regulations with which I have been concerned. Every now and then a fashion sweeps through the Palace of Westminster while leaving the rest of the world almost totally immune. The CSA has been one of them. The CSA has very little support in the country at large, the media or the general body of informed opinion. It appears to enjoy support only within the walls of this Palace.

The argument here is entirely about the nature of justice. I have said to the Minister before--I am sure that I shall have occasion to repeat it--that it illustrates as clearly as anything could why, although we agree on a great many things, we shall nevertheless always be in different parties. I believe that I am correct in saying that the Bill's notion of justice is fundamentally derived from Plato. That notion of

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justice is essentially mathematical and invokes consistency. Its claim to consistency relies on what is taken to be a single material point. It is the justice of Procrustes. We on these Benches believe that our notion of justice owes a great deal more to the English common law and, with it, Shakespeare. It begins with the belief that both parties must be heard.

Nothing has caused more grievance in the whole of the CSA than the fact that those who feel aggrieved by its operations are simply not entitled to a hearing. They write to me in their hundreds--I suspect that they write in their thousands--setting out reasons why the assessments appear to them unjust. Some of those reasons are bad, some are good and some very good indeed, but in all cases they believe that they are entitled to a hearing. One after another I must write back to say that, by the decision of Parliament, the CSA is not allowed to give them a hearing. That is the basis of a great deal of resentment.

For us, justice is a bottom-up matter. It does not come down from the top simply as a Mikado-like decree. It comes up from hearing the facts of the case. When one has heard the facts of the case, one is allowed a certain element of discretion and, above all, the quality of mercy. Justice without mercy seems to me impossible. Nowhere in the formula of the CSA is there any room whatever for mercy, and we do not believe that that can be right. The Minister shakes her head. I know she does not think it, but I beg her to accept that we do. We cannot start from anywhere other than where we are. We think that the formula is unjust because it is a formula.

I shall not dwell at length on the obvious points about housing, travel to work, or support of aged parents who need nursing care. I am sure the Minister will say that you do not claim those factors against taxes. Fair enough; but just because you cannot claim them against taxes, you cannot apply the same rule to child support. It is the nature of the case that you can make only one thing top priority.

Let me cite an actual case to the Minister. It dates from before the CSA but the principle to which it gives rise affects it. A woman was bankrupted by being left £1 million in shipping shares. In case that perplexes your Lordships, she was left the shares in April 1929 when they were assessed for duty which was payable in October 1929. On a day when the morning headlines envisage losses of £100 billion on the Stock Exchange, we are not entitled to say that that cannot happen here. Anyone asked to meet an assessment which was based on the financial situation and took no account of the debt which had made him bankrupt would be in a fairly sticky position.

I do not think that the Government have ever understood quite how multifarious the situations of matrimonial break-ups are. A man settled a large capital sum on his ex-wife which should have set her up for life. She remarried, and her second husband, who put all the money into property on top of the boom in 1988, went bankrupt and left her. The CSA then assessed the first husband a second time for the same child on whom he had already made a fully adequate

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settlement. He thought that unfair. The CSA was unable even to give him a hearing. That causes resentment.

Not enough account is taken at any time of the need of people who wish to remain employed, especially in rural areas, to retain their cars. I agree with what the noble Lord, Lord Stoddart of Swindon, and the noble Lord, Lord Higgins, said about driving licences. It is no good saying, as the Bill does, that the courts are to take account of whether the person needs to drive to remain employed. They can only assess the need to drive to be employed at the time. But in the flexible labour market in which we now live, people may lose their jobs through no fault of their own and in many parts of this country they cannot look for work unless they can drive.

I shall table an amendment to delete the clause and, as a fall-back which makes my point, I shall table a further amendment that those so deprived shall be exempt from the actively-seeking-work rules until they get back their driving licence. Depriving fathers of their right to earn their living is killing the goose that lays the golden egg.

I regret deeply that there is no room for negotiation between the parents. After all, in those cases where they are co-operative with each other--and such cases occur--they know their situation better than anyone else. I have the report by Ann Corden and others by the Family Policy Studies Centre on child maintenance regimes in other European countries. It states:

    "A key finding is that across Europe, at least in the case of divorce and separation, large numbers of maintenance determinations incorporate or build on agreements worked out by the parents themselves. In countries where parents are required to behave in this way, there are arrangements for advice, help or mediation, and much of this is free of charge ... developments in the UK ... appear to be heading in the opposite direction compared with these other European countries".

The Minister will of course invoke the interests of the taxpayer. That is fair enough. The noble Baroness heard the full passage that I quoted. She knows the report already. There is machinery within the system for the Treasury to be able to put its case before the negotiation is concluded. The present exclusion of any negotiation reminds me of the proverbial professor of the ancien regime in the University of London who once commented of a syllabus reform proposal, "This proposal originates with the teachers of the subject which I regard as a most improper manner".

We on these Benches agree strongly with the criticisms which have been made on the loss of benefit for breach of community service orders. My right honourable friend Mr Kennedy committed us to this in the Queen's Speech debate and I cheered him to the echo. When we are dealing with people who already have a criminal record, and we deprive them of any legitimate means of making a livelihood, does it take much imagination to ask, "What are these people likely to do next?"

The Minister knows well that we on these Benches have a profound concern about the effect of disentitlement on those who suffer it. I thank her for drawing my attention to DfEE Report No. 68 to which

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we shall return. It has some interesting information on whether people who were disentitled felt that they had suffered hardship, and whether they felt angry about it. It is not a particularly startling discovery that on the whole they did. What one does not gain from the report is an answer to what we on these Benches have been asking from the beginning. What income is available to people who are disentitled? By what means, legal or illegal, do they gain that income? What hardships do they suffer? What do they have to forgo to live on it? What behavioural effects does the disentitlement have on them? The Minster said generously that the system will be introduced by pilot schemes. We on these Benches hope that the pilot schemes will answer those questions. We are ready to negotiate about how that should be done. The skills of my honourable friend Mr Webb in matters of social security research are considerable. But if it is not done, we shall not answer for the behaviour of these Benches when the regulations are ultimately put before the House. I hope that the Minister is listening.

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