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Lord Christopher: My Lords, I am not at all sorry that I allowed the noble Lord to intervene. That was a fascinating piece of history, although I do not share the noble Lord's feelings about who won the election.
The cost of the state pension today is £30 billion, which is 10 per cent of GDP. We are all aware of the range of expensive demands being made from all round this House, from the other place and in the press for a great deal more expenditure elsewhere. The proposals in the Bill will add £5 billion to that cost in current terms by 2050. The noble Baroness, Lady Crawley, gave us a somewhat bleak picture of what would have arisen in about 30 years' time had the Government not taken this problem by the scruff of the neck and attempted to do something about it. Alistair Darling has produced a formula which is of considerable assistance. As I said in the House some time ago that no one since Lloyd George has ever got pensions right, I am certainly not going to give Alistair the benefit of actually conquering all, because I suspect that he has not. We are on something of a learning curve.
Some people feel that the only solution to the problem is to increase the state pension. I cheerfully acknowledge that it is unlikely that it is going to many really wealthy people but it is certainly going to a great many people who, strictly speaking, are not in that need. I declare an interest. I am one. No one has offered a solution beyond that--not even from the Opposition Front Bench. I suspect that the noble Lord, Lord Higgins, did not offer a solution because the integrity which he has displayed over so many years and which I have respected would scarcely allow him to do so given Mr Portillo's proposals for reducing taxation.
Even though the minimum income guarantee is to be linked to earnings, my advice to colleagues is to tackle that. There is nothing I have seen in the papers that we have received over recent months to suggest that an earnings-related link is the sole link or that something special could not be done. Reference was made to the winter payments and to the television licence assistance being given globally to those who qualify by age. I suspect the answer is that there is no other way of doing it. No one has yet come up with a refined system which will permit that degree of discretion.
Pension schemes are now high on the agenda of working people. That was not the case in my younger days when starting employment but it is so now, and it is right that it should be. Trade unions ensure that pension schemes are high on the negotiating agenda with employers. Trade unions and their members regard pensions and pensions contributions as deferred pay.
I should like to share with the House the concerns of pensioners and their representatives relative to company pension schemes and Clauses 42 to 45. The Pensions Act 1995 introduced a requirement for member-nominated trustees in occupational pension schemes. The good intentions underpinning the Act in that area were soon undermined by the numerous opt-out opportunities that were provided for employers to avoid the scrutiny that a member trustee can provide to a pension scheme. I am very pleased that the Government intend to change the position.
I now turn to the concerns that I want to express. Early indications suggest that the new structures may have limited value for one section of members in company pension schemes; namely, the pensioners themselves. From my own experience, pensioners nominated as trustees can, and do, provide a welcome knowledge and a high level of independence which are invaluable. Under the Bill, amendments to Section 16 of the 1995 Act would provide a framework that would allow trustees flexibility over certain aspects of nomination and selection. It is feared by many pensioners that the prospect for pensioner representatives could be few and far between if trustees are themselves allowed to allocate the majority of member-nominated seats. In other words, would it not be the case that active members would nominate other active members, and that other classes of members would be excluded? That is the genuine concern of pensioners receiving payment from company pension schemes and of pensioner organisations. What pensioners want is proper representation as trustees, not under some grace and favour arrangement but in their own right. I share their view, as I hope does my noble friend the Minister.
Perhaps my noble friend will be good enough to reply to the following questions and concerns. Does she agree that pensioner trustees would add value to the deliberations of trustees and that they would add a voice of independence? Will my noble friend ensure that pensioners are given equal treatment in the nomination and selection process? Finally, does she share my view and that of many others that the
I am sure the House very much wishes to hear my noble friend's comments on those points. In replying, I hope that she will satisfy the current concerns of pensioners and others regarding pension schemes.
The Bill introduces the state second pension. I very much welcome the principle of crediting in those with low earnings or who are unable to work due to caring responsibilities or disability. However, I am concerned that the level of the state second pension, when added to the basic pension, will not be enough to provide a decent income in retirement for everyone.
The DSS report, Opportunity for all, gives an example of a woman who spends her life on low earnings or caring for young children who, in 2051, would have a total pension of £84 a week from both the basic pension and the state second pension in relation to today's earnings. Recent research by the Family Budget Unit commissioned by Age Concern suggests that that is not enough to avoid living in poverty and that it is a long way off the £150 a week, the minimum amount in total that is needed for a modest but adequate standard of living in retirement. To address that problem, both the level of the basic pension and the level of the state second pension will need to be higher.
While the state second pension will help people in the future, there is also a need to address the urgent problem of today's pensioners. The Government have already made some welcome improvements; for example, increasing the minimum income guarantee and other means-tested benefits for people of 60 or over and proposing to increase the capital limits quite generously from April 2001.
However, many older people who have struggled to build up savings or additional private pensions feel penalised for having done so, while others who would like to work part time are deterred from doing so because they would lose benefit. The Government have said that they will consult on a pensioners credit to reward work and saving, and I look forward to hearing further about this.
One major problem is that there is no official assessment of the actual needs and living costs of older people on which to assess the adequacy of current benefits and pensions. In order to address that, I should like to see the Government developing budget standards. The Family Budget Unit's report, Low cost but acceptable incomes for older people shows how these can be developed and indicates that current pension and benefit levels are not high enough to enable all older people to avoid living in poverty.
I have already referred to the importance of looking at the assessment of savings and income to ensure that people do not feel penalised for having saved. However, above all the Government must recognise the importance that older people place on having a basic non-means-tested pension and the anger there has been at this year's 75p increase. The level of the basic pension needs to be improved to act as a true foundation on which to build up additional income in retirement.
I now turn to Clause 38 dealing with inherited SERPS. As is now well known, the 1986 legislation would have halved SERPS for people widowed on or after 6th April. Most people were unaware of the change and some received wrong or incomplete information. On 15th March, the Government announced that they would delay the change to October 2002 and introduce a protected rights scheme to provide redress for people who have been misinformed.
Speaking in this House, I welcomed the Government's recognition that they must take responsibility for addressing this difficult situation, which is not of their making. However, I expressed some concerns about how a protected rights scheme would work in practice and whether everyone affected would find their spouse's financial position secure. On considering the matter further and hearing the comments of many people who have contacted Age Concern, I am afraid that my concerns are increasing rather than decreasing. The change has been delayed for two and a half years--that is welcome--but in the mean time it leaves people worried and uncertain about their position. One man wrote to Age Concern stating,
The onus of proof will be on the DSS. Yet it will still be up to individuals to make a claim; to show that they were given incorrect or incomplete information; to show that they relied on that information; and to show that otherwise they might have acted differently. Many still do not understand the situation. Others may well find it difficult to fit the rules of the scheme because they did not seek out specific information and assumed that the rules had not changed.
I am concerned that those most likely to benefit are those who are well educated, well informed or who have access to good advice and support. Most worryingly of all, however, there is a danger that the scheme will benefit those people who are prepared to be dishonest. Others less able to cope with applying or who, for example, honestly state that they cannot quite remember exactly when they contacted the Benefits Agency and everything that was said, may lose out. For those reasons, a delay of two and half years and a protected rights scheme are an inadequate response to a very difficult problem. I shall return to that matter at a later stage.
I fully endorse the observations of the noble Lord, Lord Brookman, and others about ensuring that pensioner members are represented on trustee boards. In view of the default procedures, although the Bill
Baroness Kennedy of The Shaws: My Lords, I speak to Clauses 61 to 66 in Part III of the Bill which provide for a reduction in welfare benefits, or their withdrawal, when an offender breaches a community sentence such as a probation or community service order. I believe that these provisions are in breach of human rights law and our commitments under a number of other international conventions. The measures are retrograde and counter-productive and are bound to increase crime. To push poor people into even greater poverty must increase the temptation to steal, burgle, shoplift, solicit for prostitution or sell drugs.
The noble Lord, Lord Windlesham, spoke of a fundamental objection to the Bill. I agree. These changes create an unacceptable cross-over between the welfare system, which is based on need and entitlement and the duty of the state in any civilised society to keep people above subsistence level, and the criminal justice system. I understand that the measure is to be piloted in a number of areas, but that provides little consolation when the change in law means such a departure from principle and creates a double penalty for the poorest in our society.
The clauses provide that the penalty of reduced benefits will begin when the benefit office receives a notification from the probation service which confirms that an offender may be in breach and is being brought back to court. It is, surely, wholly wrong that the benefit is to be reduced before a court has found that the alleged breach of the order is proven. Reductions will begin as soon as the offender is referred back to court, but we are supposed to be consoled that there will be a repayment of arrears if the court finds that no breach has occurred. As the noble Lord, Lord Windlesham, said, this is the novel idea that punishment precedes trial. I hope that that does not creep into other parts of the system. It is a bit like fining everyone accused of a criminal offence before they go to court and telling them not to worry because they will be paid back if they are found not guilty. Probation officers should comply rigorously with the regulations in bringing people back to court for breaches, but a dreadful moral pressure will be placed on officers if they know that to report an accused for a second failure to attend will add to that person's social problems and poverty and possibly increase crime.
A matter of serious concern is the differential impact of these proposals. They will apply only to offenders who receive benefits and there is no equivalent sanction for those in work. Withdrawal of benefits will be additional to another penalty imposed by the court. This will be a double punishment applied selectively to the poorest offenders. The extra punishment will seriously affect other innocent family members. The unemployment rate for black males is higher than for
These clauses will also impact disproportionately on women. Many courts already face problems in finding suitable sanctions for women, particularly poor ones who cannot pay fines. Often the tariff for women increases. Women may find themselves on probation when such an order would not normally be imposed for the particular offence. These women often have children and therefore have problems in attending. Undoubtedly, the loss of benefit will place enormous pressure on them. Even if a woman is able to persuade the court that there was a good reason for her failure to attend, imagine her problems in the weeks in between in having to manage on significantly less money and go through the process again of obtaining the right entitlement so that the money is put back into her purse.
In opening, the Minister spoke of her serious intent to meet the challenge of child poverty in our privileged society. These measures will add to the problems of children. Loss of benefit impacts on whole families. Research shows that, even where the offenders are adult males, very often they will meet their own needs from the available income and women and children will be left to manage on what is left. If these clauses come into effect, they are likely to visit serious problems upon women and children.
I am glad that the noble Lord, Lord Windlesham, spoke about the Jesuitical claim that this is not a double punishment but another instance of "benefit conditionality". It sounds like another example of economy with realite. It is becoming unfashionable to speak of matters of principle, but I am an old-fashioned girl. When some of us speak out on matters of principle we are derided for expressing such concerns. It is cynically suggested that we must be looking after a vested interest. When lawyers in this House expressed concern about reducing the right to trial by jury it was suggested that they sought to look after their own interests. When the trade union leader, Bill Morris, suggested that there was a risk of inflaming racism because of changes in the laws on asylum it was said that he sought to look after his trade union members who were truck drivers. I do not expect such cynicism from the Minister. This is a matter of principle. I hope that the Government will think again about proposals which do not conform to the principles of justice and which diminish the honourable intentions of many parts of the Bill.
Lord Haskel: My Lords, I am sure noble Lords agree that, looking back over the past three years, one pattern that stands out is the Government's consistent attack on poverty, to which my noble friend Lady Pitkeathley referred. There has been an attack on poverty in the developing world by the cancellation of debt. Closer to home, there has been an attack on poverty at work by the introduction of the minimum
In this Bill, we now have an attack on future pensioner poverty with the introduction of the second pension. I welcome that consistent and determined attack to break the cycle of poverty which diminishes so many lives. It is that part of the Bill which deals with pensions and pensioner poverty that I should like to explore.
It is obvious that the poorest pensioners are those on low pensions who have to rely on benefits. We are all aware of the unfairness and indignity of working hard all our lives and, on reaching retirement, having to exist on benefit, means-tested or otherwise. I do not want to get into that argument. As the Minister said, if no action is taken, the present system means that one-third of working people are destined to retire on benefit. Clearly those people are destined to be the pensioner poor. I therefore join other noble Lords who welcome the state second pension. It will mean that everyone earning £9,500 in a year, and who pays into the National Insurance Fund, will be treated as though they had earned £9,500--a kind of minimum wage for pensioners.
I approve of the idea because most of those earning a low wage are not doing so deliberately to exploit the system. Circumstances force it on them--caring for children or elderly relatives; disability or illness; or changes in the economy affecting their work. This broken pattern of work can take up many years and, indeed, can affect the 20-year rule for SERPS.
The state second pension will, therefore, give these people the pensions that they would not otherwise receive, and they will not have to rely on benefit, which is clearly unpopular and difficult, judging from the nearly 1 million pensioners who do not claim the benefit to which they are entitled.
What about uprating the state benefit instead? In a way, the state pension has already been uprated with the minimum income guarantee. But as is clear from the figures given by my noble friend Lord Christopher, the truth is that there may be some encouragement to move to the private sector for pensions. I do not object to that; it is a sign of the times. Apart from the National Health Service, many aspects of service provision have been transferred to the private sector--I refer to utilities and to transport--all with a regulator to protect the public interest; such is the age in which we live.
Some have argued that the scheme is unnecessarily complex. Perhaps the reason for its complexity is to make the scheme flexible enough to allow people to move into occupational or personal pension schemes and to take the benefits of the second pension with them. This, too, is of particular interest to women whose earnings and circumstances fluctuate more than
Some noble Lords have said that it will take a long time for the scheme to have an effect. Some have spoken of backdating. Such an observation is more about pensions in general than this scheme in particular. The very nature of pensions is that any new scheme can be introduced only for people whose major part of their working lives is still before them. Of course, an occupational scheme would be far better but that is out of the reach of many people. This scheme ensures that those who have worked hard all their lives but whose earnings, for various reasons, have been low or intermittent will receive sufficient pension to retire at above the minimum benefit level. They will not be part of the pensioner poor. It is a good deal for those on low pay; and I welcome it.
The Bill deals also with other aspects of occupational and personal pensions on which I should like to comment. I declare an interest as trustee of a pension fund. Like my noble friend Lord Brookman and the noble Baroness, Lady Greengross, I welcome Clauses 42 to 45 which require that at least one-third of the trustees of pension funds must be nominated by the members. My noble friend Lord Brookman reminded us that under the Pensions Act 1995 employers could make alternative arrangements which meant that no members of a pension scheme were trustees. Quite rightly, that provision has now been removed.
One reason for the absence of member-nominated trustees was that no members were qualified; they lacked the knowledge and skills to understand pension schemes. I agree with my noble friend Lady Turner that the new arrangement emphasises the importance of training schemes for pension trustees--not least to learn the jargon. Such schemes are essential in order that members may be independent and effective trustees. That is the lesson of the Maxwell episode. I hope that the Government will draw attention to the work of the pension education working group and to the responsibility of the Financial Services Authority to promote financial literacy. Of course, the Financial Services Authority is not obliged to advise on different pension products, but it is obliged to promote understanding. I hope that the Minister will ensure that it does so by studying that section of the authority's annual report.
I also welcome Clause 51 about the annual benefit statements sent to members of occupational and personal pension schemes. Most statements about these schemes detail the amount of contributions paid and the current value of the fund. But what people really want is a clear statement of the likely value of their pension at retirement age.
I welcome the requirement that each statement should be accompanied by a calculation forecasting the value of the pension at current prices. It will be combined with a statement giving the state pension rights. People will then have a full picture of their financial situation at retirement. The purpose is to flag
My final point concerns Clause 40. This clause deals with the "Hollis split". The "Hollis split" is not some exotic ice cream dessert; it is the sharing of pensions on divorce. I call it the "Hollis split" because this little bit of social justice is largely due to my noble friend the Minister. In 1995 I supported my noble friend when from the Opposition Front Bench she moved amendments about pension splitting on divorce and was told categorically that it was actuarially and administratively impossible. When she moved to the Front Bench on this side of the House she introduced a draft Bill in 1998, and legislation on pension sharing was included in the Welfare Reform and Pensions Act 1999.
Clause 40 of this Bill tidies up some of the detail and consolidates the principle of the "Hollis split". This achievement is a tribute to my noble friend's grit, vision and determination over the past five years. I hope that noble Lords will join me in congratulating her.
Lord Goodhart: My Lords, I start by agreeing with the noble Lord, Lord Higgins, and the noble Baroness, Lady Fookes, that this is not one Bill but three, as was last year's Welfare Reform and Pensions Bill. That is true to such an extent that my noble friend Lord Russell and I have had to enter into a job-sharing agreement. As he explained, he will deal with the child support and social security aspects of the Bill; I shall deal with pensions and national insurance contributions contained in Parts II and IV.
However, before turning to those parts of the Bill, I should like to state our entire agreement with what has been said today by the noble Lord, Lord Windlesham, the right reverend Prelate the Bishop of Lincoln and the noble Baronesses, Lady Fookes and Lady Kennedy of The Shaws, on the withdrawal of benefits from those in breach, or, even worse, alleged breach, of community orders. The principle is the same as the withdrawal of driving licences from those who are in breach of their child support obligations, although to a more serious level. I am sure we all remember a song from the "Mikado" about the punishment fitting the crime. These punishments emphatically do not fit the crime. They are gimmicks; but they are dangerous and I believe illegal gimmicks.
The main function of Part II of the Bill is to introduce the rules governing the state second pension which we were promised last year. Last year we dealt with the first part of government reforms: the stakeholder pension. No doubt during the course of further stages of this Bill there will be further discussion on some aspects of stakeholder pensions. This year, we shall get the state second pension.
At stage 2 the state second pension changes its nature, like a butterfly emerging from a chrysalis. It will become a flat-rate pension, with a pension based on whatever the lower earnings threshold is at the time of the changeover. Stage 2 will be introduced at some uncertain future date when, we are told, the stakeholder pension is up and running. However, at both stages 1 and 2 an earner can opt out of the state second pension and can obtain a rebate of his or her national insurance contributions which can be put into a stakeholder pension or an occupational or personal pension. That will be particularly important at stage 2, when anyone who earns much above whatever the lower earnings threshold then may be will be significantly better off by contracting out.
As I understand it, the lower earnings threshold will be earnings-linked and the earnings factors derived from past years of contributions will be uprated in line with earnings. That means that the starting point of the state second pension for new pensioners will be uprated annually in line with earnings. However, once the state second pension becomes payable to a pensioner, the pension will increase only in line with prices. That means that if the minimum income guarantee increases in line with earnings, as is proposed, the state second pension for any given pensioner could start above the MIG level but could fall below it over a period of years.
The new pension system is, indeed, ingenious. It has many good features. When fully operational, the state second pension should lift everyone with a full contributions record above the minimum income guarantee, at least at the beginning of their retirement. It contains a considerable amount of redistribution and particularly benefits those who are on low earnings or who are unable to earn because of caring responsibilities or incapacity. However, it is fiendishly complicated, and that is a serious problem.
I believe that it will be a particular problem when employees have to take the decision whether to contract out or to stay in the state second pension. That will be very important at stage 2 when the failure by people who earn significantly more than the lower earnings threshold to contract out will have a seriously damaging effect on their pension rights. I should like to ask the noble Baroness how the Government intend to ensure that people who need to take that decision will be properly informed about the advantages and
I believe that there is scope for simplification at stage 2. At that point, the basic state pension and the state second pension, or what is left of them, will both be flat-rate pensions. It would simplify pension arrangements greatly if at that stage the basic state pension, or what is left of it, and the state second pension could be merged into a single state pension with the right for employees to opt out of part of the pension and receive a partial rebate of contributions to pay into stakeholder or other private pensions. I wonder whether the Government have given any thought to that as a longer-term possibility.
I hope that we shall be able to move on to stage 2 fairly soon. I believe that the main problem with the state second pension is its slowness of implementation. On present form, it will take approximately 45 years to reach maturity; that is, to reach the point where everyone who is retiring will be entitled to a full state second pension if they have a full contributions record. Until then, they will have to rely on a mixture of SERPS and the state second pension.
As my honourable friend Professor Steve Webb pointed out in another place, no pension system yet invented in this country has survived for more than about 20 years. Therefore, it may well be that the state second pension will never reach maturity. However, until the state second pension reaches maturity, the pension improvement is inadequate; indeed, as I understand it, under the present proposals the poorest pensioners will be approximately only £1.30 per week better off in real terms by the year 2025 as a result of the introduction of the state second pension.
I can see no objection in principle to faster implementation. This is not a funded scheme, where the full benefits cannot be paid until the fund needed to pay for them has built up. This is a pay-as-you-go scheme. If the Government wanted to do so, they could, for example, treat all SERPS rights as rights to a state second pension. I do not suggest that the Government should do that all at once, but I believe that they could and should accelerate the right to the state second pension.
My honourable friend Professor Webb proposed to speed up implementation by allowing anyone who had proved an entitlement to the state second pension by contributions or credits in any year to receive, by reason of those contributions, two years' entitlement to the state second pension, provided one of those years was exchanged for the right to SERPS accrued in an earlier year. That would mean that earners who have existing SERPS rights could obtain more benefit from the state second pension by substituting it for the less beneficial SERPS rights year by year. That would, of course, accelerate increased government spending on the state second pension, but still over a fairly long time-scale.
As we made clear in the debates last year, restoration of the earnings link is not our policy. That is not because we believe that the pensions will be adequate as they will stand after the Bill comes into force but because we believe that there are more cost-effective ways to help poor pensioners without forcing them to rely on the minimum income guarantee, which is, of course, income support under another name. As I have already indicated, they include the acceleration of the state second pension and increases in the basic pension for the oldest pensioners. However, if the Government are not prepared to give way on those issues, it is very likely that on this occasion we shall support the noble Baroness, Lady Castle, and the other Labour rebels in your Lordships' House in any Division on a proposal to restore the earnings link, as, indeed, we did in the other place.
Of course, we welcome the extension of the state second pension to carers, to those with home responsibilities and to those on incapacity benefit. However, we are concerned about the requirement in Clause 30 that credits for the state second pension will be available only if someone is entitled to the invalid care allowance, has homecare responsibility or is entitled to incapacity benefit throughout the whole of a year. As the noble Baroness, Lady Pitkeathley, pointed out, for example, carers may lose their invalid care allowance because the person they care for has had periods in hospital lasting more than 28 days in any period of six months. That seems to us extremely unreasonable. We should wish to look at ways of allowing credits to be claimed on the basis of something less than a full year's qualification.
I move to the other pension matters in the Bill. Clause 38 deals with the very difficult question of inherited SERPS. The noble Lord, Lord Rix, spoke eloquently on that. We support him warmly in principle. We shall need to wait to see the words of his amendments before we can commit ourselves to support in detail but we shall certainly look on them with a very favourable eye.
I agree also with the criticisms of Clause 38 by the noble Baroness, Lady Greengross, especially the point that for those who are applying under the government scheme, dishonesty will be the best policy as the proposals now stand.
In the other place, we moved an amendment to give full SERPS to widows or widowers of pensioners who will be living in 2002 but have already retired, or will by then have retired, and therefore are not in a position to do anything to improve the financial position of widows or widowers. We shall no doubt move a similar amendment in your Lordships' House.
Chapter II deals with a number of matters relating to occupational and personal pension schemes, especially the selection of trustees, the winding up of schemes and the extension of the jurisdiction of the ombudsman. We give those a general welcome, although there are some issues of concern on the selection of trustees and in particular the position of pensioner representatives.
There is a need for representation on the board of trustees of pension schemes of both employee and pensioner members whose interests are by no means always in alignment with each other. That issue was raised in particular by the noble Lord, Lord Brookman, and we shall need to look further at those issues in Committee.
Chapter III of Part II contains provisions relating to war pensions. We do not object to anything that is in Chapter III. However, in another place the question was raised of the termination of the right to attributable pensions of war widows who remarry. That is completely intolerable. That issue was debated on last year's Bill in your Lordships' House. The noble Baroness, Lady Strange, moved an amendment then. She will no doubt do so again and, if she does, we shall support her.
We shall also support the noble Baroness, Lady Fookes, on the issue of overseas state pensioners. The only reason that they have a low priority is that most of them do not have votes. Certainly, morally and logically, they have every right to have their pensions increased, along with those of other pensioners.
Finally, Part IV deals with national insurance contributions. The purpose is to make Class 1 contributions payable on all benefits in kind which are taxable in the hands of employees. The alignment of the tax base for national insurance contributions in PAYE makes obvious sense and in principle we support it. Treating some forms of "perk" as NIC-free distorts the system of wages and salaries. That was, for example, particularly true in the case of the company car, which led to an unnecessary and undesirable increase in the number of cars on the road. There is no reason, of course, why employers should not provide employees with health insurance, but that is part of the salary package and should be taxed as such. There may be a case, however, for giving special treatment to the provision of childcare by employers or by third parties at the expense of employers.
The general principles of Part II and Part IV are acceptable, although there are a number of issues which do not appear in those parts which cause us concern. But there are still worrying problems in relation to the state second pension, especially as regards the slowness of implementation. I believe that we shall need to do a lot of work on this Bill at its later stages.
Lord Astor of Hever: My Lords, the Minister put the best possible gloss on what my noble friend Lady Fookes described as a "vulgar club sandwich" of a Bill. As we have heard today, not all noble Lords agree with the Minister's optimism and she will not be surprised that we and numerous outside bodies which have been in contact with us have many concerns which we shall want to examine critically and constructively in Committee.
First, I turn to the Government's proposed reforms of the Child Support Agency. My noble friend Lord Higgins made it clear that we accept that the CSA needs reform in order to ensure that it functions effectively and with equity. But we have reservations about the way in which the agency is to be reformed, although we agree with the Minister that going back to the courts is not the answer.
We are concerned about the timescale in which the new, allegedly simpler, formula for assessing claims will take place. According to the Minister in the other place, the new system will not come into force until late 2001 and then only for new CSA claims. The transition may therefore be both long and complicated, which may exacerbate concerns over the system's efficiency and cause real resentment among those caught between the two arrangements. That concern was highlighted by the Social Security Select Committee last year when it said that,
We are concerned also that there may be pressure for existing cases to move onto the new system before it is clear that it delivers a better service. I should be grateful if the Minister will tell the House what criteria and timescale will be used by the Government to evaluate whether the new system is both more efficient and fairer than its predecessor.
All the evidence is that the new operation of two systems in conjunction may prove highly problematic, particularly if one is seen to be preferable to the other. Added to that is the potential for the IT systems not to be sufficient to cope. I hope that the Government have fully prepared for the operational implications of such proposals. Will the Minister assure the House that the new computer system mentioned in the Explanatory Notes really will enhance efficiency?
We are concerned, as is the Law Society, that under the Bill, the CSA can intervene in maintenance agreements, even when they have been drawn up fairly, agreed by the parents and approved by the courts. That reform really would be a triumph of bureaucracy over fairness.
We have further concerns over the proposals to make criminals out of absentee parents. The decision to incarcerate may very well make it far more difficult for parents to find suitable employment in order to pay
The alternative to prison, which is to surrender a driving licence, is absurd and objectionable in principle. Several noble Lords today have said that they believe that there is a clear distinction between the withdrawal of a driving licence for a motoring offence and withdrawal for failure to comply with maintenance obligations. The Opposition believe that this is a major flaw in the Bill as the Government in effect are saying, "If you don't fancy going to gaol, you can always hand in your driving licence instead." Why driving licences? Why not passports, as my noble friend Lady Byford suggested, or curfew orders, or electronic tagging, as my honourable friend Eric Pickles suggested in the other place?
Underlying much of the proposed CSA reform is the concept of so-called "rough justice". We on this side need far more convincing of the nature of how "rough" such justice will be and what will be the practical impact of this change in policy. We are also concerned with the impact of the reforms on second families. The Opposition fully accept that it is essential parents realise their responsibilities to all their children. However, the Government have much more to do to ensure that their proposals do not treat second families as second class.
In particular, the proposals ignore the possibility of the parent with care re-marrying and, as a result, enjoying enhanced circumstances that are greater than those of the former spouse. It would be contrary to natural justice if such changes were not taken into account in an appropriate recalculation of contributions. We believe that the incomes of both the non-resident parent and the parent with care should be taken into account in maintenance payments. It would be quite wrong for affluent parents with care to receive maintenance from absent parents with far lower incomes. That is also the view of the Child Poverty Action Group which called for the proposed protection for second families to be strengthened through a phasing in of the assessments to decrease, help for second families on income support and a broadening of the appeals mechanism. We hope that the Government will treat those concerns with due respect.
I move on to the Government's proposals for the state second pension. There can be no doubt that the Government are making pension arrangements ludicrously complicated and confusing for the vast majority of lay people. Indeed, many people in the pensions industry to whom I have spoken in the past few days worry at the complexity of the scheme. The new proposals only add to such complexity and increase the number of available options to the bewildered: the basic state pension, SERPS, personal pensions, occupational and company pensions, stakeholder pensions and now yet another state second pension. The complexity will especially manifest itself in the rebate and top-up structure. It will make an already complicated structure even more so.
Planning for retirement is one of the most critical decisions an individual makes, either privately or as an employee. We feel strongly that the Government should act to make those decisions more accessible for the individual. The two-tier introduction will make it even more complex for lower earners to plan for the future.
A serious question must be asked about the effects of the introduction of the new arrangements. There is a clear danger that the Government will create two classes of pensioner for the future; those who earn less than £9,500 per annum, and those who earn more. Those in the former category will be effectively trapped in the state system and excluded from private provision. That rigidity is out of line with the increasingly flexible labour market mentioned by the noble Earl, Lord Russell. The proposals are not well suited to those with fluctuating earnings.
The NAPF said that the danger of pension mis-selling is immense. Individuals will be pushed into one arrangement or another at an early stage of their employment. It also criticised the proposals initially for the evident lack of thought by the Government in relation to the interaction of different types of provision within one overall framework. The sheer complexity, to which the Government have added, would only really be addressed by competent expert advice from pension professionals, which is exactly what people will not obtain within the 1 per cent stakeholder cap. It is highly unlikely that those who suffer from the Government's proposals will have the same access as those who can afford private pension provision. The pensions system needs to reflect and understand the growing career flexibility in this country. These proposals fall far short of that requirement.
The complexity and potential mis-selling relates not only to the state second pension, but also to the Government's wider approach to pensions, including stakeholder pensions. We believe that measures are required to address those problems, including concurrency between stakeholder pensions and all occupational schemes. The complexity of the Government's pension proposals was pointed out by the noble Baroness, Lady Castle. It was for me a privilege and a pleasure to hear her speak tonight. I am not so sure that it was such a pleasure for the Minister, although I am sure she cheered up when she heard the nice words from the noble Lord, Lord Haskel.
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