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Lord Higgins moved Amendment No. 68:

The noble Lord said: My Lords, the House is most fortunate in having a Minister who is able to explain the kind of technicalities that we have just debated. Indeed, if I may presume to say so, she gave quite a remarkable exposition. However, I fear that the matter now before us is probably equally complicated. I recall

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that I used to give instructions to parliamentary draftsmen a long time ago on how to draft a particular passage of legislation. A month or two later, when the matter reached Committee stage, I would perhaps experience some difficulty in recognising what was before me because there seemed to be no resemblance whatever between what I had asked them to do and what appeared on the face of the Bill. The drafting of this clause is somewhat unusual. I hope that the Minister will be able to clarify one or two points in that respect.

The whole clause is drafted in relation to Section 22 of the Social Security Contributions and Benefits Act 1992, but it relates to the state second pension, which is entirely new. Can the Minister say whether this section has repercussions on other pensions legislation apart from the state second pension? If it does not, can she tell us why it is set out by reference to the 1992 Act, when the state second pension could perfectly well have been self-contained? It is always most unfortunate to approach these matters by reference to previous legislation, because the subject matter is not then self-contained.

Having said that, it seems to me that we have a strange two-tier system of drafting before us. Under subsection (3) of Clause 30, a new Section 44A (Deemed earnings factors) is to be inserted into the 1992 Act. My amendment relates to new subsection (2)(d), as set out at the bottom of page 26 of the Bill. But, instead of going on to deal with all the other points relating to that subsection, the legislation goes on under new subsection (3) to define the,

    "requirement referred to in subsection (2)(d)".

Thereafter, new subsection (4) says that,

    "the purposes of subsection (3)--

the part I just quoted--are something else. I am not clear why those three provisions are not included in the same subsection. There are three descending tiers in the drafting. That makes it extraordinarily difficult to follow.

I believe that the proposal includes the provision for a state second pension; I am not sure whether it also affects other pensions--so that when determining their deemed earnings factors one should not only take account of primary Class 1 contributions but also Class 2 contributions.

If I understand the Bill correctly, it proposes to strip from those who undertake employment and self-employment in the same year the ability to count their income for both Class 1 and Class 2 contributions towards their pension. I understand that such an arrangement for both classes is possible under the existing legislation. Are we now adopting a more stringent process as far as those people are concerned? If I have understood the drafting correctly, this applies only to people who are on incapacity benefit payable throughout the year. This measure, unamended, would adversely affect the pension prospects of those who switch between low paid employment and self-employment--a group whose numbers may well increase as a result of rapid economic and technological change. I believe that the group is

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comparatively small but those who are self-employed are likely to have a small pension and to that extent they are more vulnerable.

Having said that, I hope that the Minister will accept that for those on incapacity benefit who meet all the requirements that I have just set out, the fact that Class 1 contributions are taken into account is insufficient. They should at least be allowed to have Class 2 contributions taken into account in calculating their entitlement to the state second pension and, also, perhaps, to other pensions. I beg to move.

Baroness Hollis of Heigham: My Lords, I am in some difficulty in answering some of the noble Lord's questions. Our understanding of the amendment did not encompass some of the issues that he raised in his speech. I am sure that the noble Lord did not do that on purpose. However, I am anxious not to "wing" my words as people, and pension fund personnel, need to be given precise forms of wording to assess the Government's intention in this regard. I shall answer those questions that I can and respond more fully in writing to those questions which do not appear to bear much relationship to the amendment as we understand it. None the less they are perfectly legitimate questions to raise. I do not blame the noble Lord for asking those questions but he cannot blame me for not necessarily having the answers ready to hand.

Amendment No. 68 would enable periods of self-employment to count towards the 10 per cent work requirement for long-term disabled people. As the noble Lord recognised, this raises the wider questions of pensions for self-employed people. It is in that context that I shall respond to the amendment.

Our proposals for the state second pension will do a great deal for disabled people with broken work records--indeed it brings them into additional pension provision for the first time. Of course, one can always go further, but I believe that we have--in that favourite phrase--struck the right balance: providing extra help where it is most needed; maintaining incentives to work and save; and protecting those who cannot work for periods. We are doing this within proper and prudent public expenditure limits.

We recognise that the nature of self-employment is changing and that there are real questions about how best to ensure that the self-employed are encouraged to save for their retirement, and protected where they cannot. There are wide-ranging issues which need to be explored, for example, the question of how including the self-employed in additional state pension provision would be funded. When we raised somewhat similar questions at Committee and Second Reading I was anxious to air with noble Lords the dilemma that while we were urged on the one hand to bring people within either compulsory stakeholder schemes or state second pension schemes there was a real problem with self-employed people who might regard their business as their pension. Any requirement to contribute to schemes, or any levying of national insurance for that purpose, might be regarded as a levy on their cash flow and on their ability to maintain the business. There are

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real dilemmas about what is the best public policy for self-employed people who may be working on very narrow profit margins, at least when they start.

Whether self-employed people should eventually be brought into the state second pension was part of the consultation exercise on the pensions Green Paper. There were a wide range of responses and we are still considering the outcome. We are talking to pension providers on the one hand--because it obviously has implications for stakeholders--and with Treasury officials on the other. It would be wrong and premature to accept an amendment on the question of the state second pension for self-employed at this moment. We shall certainly return to the issue--the noble Lord is right to draw it to our attention in that respect; it will not go away--but whether we have yet got the right answer I am not sure.

One of the questions raised by the noble Lord concerned the legal drafting. We are reforming SERPS through the introduction of the state second pension; in legislative terms it is still additional pension but the amount of entitlement is calculated in a different way. Therefore there are no repercussions for any other benefit.

Perhaps I may write to the noble Lord on some of his other questions.

9.30 p.m.

Lord Higgins: My Lords, in that case, why was it not self-contained? Why is it all done by reference to the 1992 Act? If it is concerned only with the state second pension, why is it done by reference? It may have repercussions if it is done that way.

Baroness Hollis of Heigham: My Lords, I cannot help the noble Lord on that question. I do not know why it was drafted in that particular form. If I were the noble Lord, Lord Ashley, I would know the answer by now. I shall have to write to the noble Lord. I apologise. I simply have not had any guidance as to why parliamentary counsel drafted the Bill in this particular form. Obviously I shall seek advice. If the answers I give to the noble Lord are unsatisfactory, he must come back to me and I shall make sure that he gets the fullest possible answer.

Lord Higgins: My Lords, I am not sure whether or not I have had an answer.

Baroness Hollis of Heigham: My Lords, it was the one I had already given. We are reforming SERPS legislation; this is why it takes the shape it does. If the noble Lord is less than fully satisfied by that answer, I shall make sure that he gets a fuller one.

Lord Higgins: My Lords, I am most grateful. I look forward to that. If I understand the noble Baroness correctly, now she is saying that this affects not only the state second pension--although that is the heading--but has repercussions for SERPS as well, which is not the heading. We obviously need to go into

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the matter further. I shall be grateful if the Minister will write to me with an explanation. Subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 [Additional pension]:

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