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Lord Campbell of Alloway: My Lords, I am obliged to the Minister for giving way. The proposal is neither ingenious nor clever. It is a step towards a humane compromise and that is all.

Baroness Hollis of Heigham: My Lords, I was about to say why I do not believe it is a compromise. At any reception I attend when the relevant ambassador or high commissioner is present, I am pressed on the point. I do not want to say that consultation is a waste of time, but the facts are what they are. There is no equivalence between the position of the governments of Australia or Canada and our own.

Perhaps I may remind your Lordships of the figures. I know that Members on the Liberal Democrat Front Bench are well aware of them because we have exchanged them previously. As far as we know, 17,000 Australian pensioners live in this country while 214,000 UK pensioners live in Australia. In other words, it is hugely to the financial advantage of the Australian Government and hugely to the financial disadvantage of the British Government to move even in the direction suggested by the noble Baroness. The inequity of population applies also to Canada. As far as we know, 9,500 Canadian pensioners live in the UK while 138,000 UK pensioners live in Canada. The same inequity is true of New Zealand; 7,500 live here while 34,000 live there. Alas, I do not have the figures for South Africa.

That shows that disproportionately and overwhelmingly the flow of money would not be equal. The money going from this country to our pensioners in other countries and the money coming from other countries to their pensioners here would not be equal. Overwhelmingly, the flow would be from this country to Australia, New Zealand, Canada and South Africa. Therefore, if I sound critical of the concept of consultation it is because I believe that we can anticipate the result. The points have been made to me in person by the relevant high commissioners or senior government officials when I have visited those countries.

Earl Russell: My Lords, is the Minister telling us that it is wrong to do an injustice to a few people but quite all right to do an injustice to a lot of people?

Baroness Hollis of Heigham: My Lords, no, I am saying that at the end of the day it is a question of where your financial priorities lie. I shall make the point more fully in a moment. The noble Earl would ask us to equalise the benefits as between those under 25 and those over 25. He would regard that inequality as an injustice and I understand his point of view; he has argued it over many years. Is he about to say to me, "You should do that and somebody has to find the money for it"? We could go down a shopping list; indeed, the noble Earl has tabled amendments on the

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single-room rent. Does he regard that also as an injustice? I can see where he is coming from, given the research and the views he has expressed in the past.

Nevertheless, it is not enough to say that there is an injustice or an anomaly. One must also say how one rates the reparation of that in terms of the financial contours of the Budget. The noble Earl must say how his proposal will be financed and the Official Opposition Benches must say where they are going to make cuts in order to fund their proposal.

When we last debated the Bill in your Lordships' House, the noble Earl was distressed that changes in some of the pension arrangements were to be funded by cutting half of the Social Fund. It was proposed that £90 million would be taken out of the fund and the noble Earl, Lord Russell--and I was cheering him on--wanted to know from where else the noble Lord, Lord Higgins, would fund his proposed change.

The change to complete unfreezing would cost about £300 million; a partial unfreezing, say, for those over 75, which the noble Baroness suggested would be a compromise, could cost half of that sum. Those are substantial amounts and the changes must be funded at the expense of other priorities.

Perhaps I may remind your Lordships that UK pensioners are paid anywhere in the world and we pay some 870,000 pensioners in more than 150 countries. In 1999, the UK paid more than £1 billion in retirement pensions to pensioners living abroad. Some 470,000 of those pensioners have what is commonly referred to as a "frozen" pension. That means that the pension remains fixed at the rate payable when the person chose to leave the country. The pension remains permanently at that rate or at the rate initially awarded on retirement if a person is already resident abroad.

There are two broad grounds for uprating. They are paid within the European Economic Area, in the Channel Islands and the Isle of Man and in about a dozen other countries where certain long-standing social security agreements, mostly dating back to the 1950s, exist. Apart from a case in which the agreement was made earlier and not implemented until later--I believe it was in the Dominican Republic--I am not aware of any change made throughout 18 years of the previous administration in order to advance the general cause or to renegotiate any new bilateral agreements.

The policy has been followed by successive governments ever since retirement pensions and widows benefits became payable world-wide in 1955. I am sorry, but it is not a priority for this Government to reconsider. When the Social Security Select Committee considered the matter in 1996, it recognised that priorities for public expenditure would inevitably be taken into account in considering the issue. We know that that cost is likely to be £300 million a year and I believe that if the noble Lord, Lord Higgins, proposes to support the amendment in a Division tonight he is under an obligation to tell us how it is to be funded. I could point out to him that

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there is still another £90 million in the Social Fund and I suppose that he could raid the last of it, but he has to say from where the funding will come.

In 1995, a Member of Parliament said:

    "I hope that the House will remember that any increase in spending commitments involving sending money to people overseas will of course mean corresponding reductions in our expenditure here at home. Members should bear that in mind".

That was not said by me and not even by the noble Lord, Lord Mackay, although I have many quotations showing his position. It was said by a then fairly junior member of government, Mr William Hague. Only five years ago, the now Leader of the Official Opposition said that he did not regard this as a priority and that if it was to be supported by his government other reductions in expenditure would have to be found. If the precedent is the Social Fund or abolishing the New Deal for lone parents or the working families' tax credit, I would ask your Lordships to consider where your priorities lie. The change has to be funded from somewhere.

With regard to the Australian point, I was not shaking my head and saying that the situation had moved on since the matter was raised in the House in April. I meant merely that people seem to believe erroneously that Australia uprates British pensions. It does not. It allows British national insurance contributions to count for the Australian means-tested pension in the same way as we allow Australian national insurance contributions to count against eligibility for our non-means-tested pensions. If Australia decides to move away from that agreement, perversely the British Government will save money because more Australians benefit from the arrangement in this country than do our British people in Australia. It affects only 3,000 people; not the 200,000-odd people who are resident there.

Therefore, I am afraid that our policy is clear. We do not consider unfreezing to be a priority call on resources. We want and need to focus help on pensioners in the UK and we want to do most for those who need it most. I do not need to talk about winter fuel payments, TV licences or the minimum income guarantee. I do not even need to talk about our proposals for the introduction of the new pensioner credit to reward thrift on which we hope to go out to consultation in due course.

I recognise that people feel strongly about this matter. However, my first point is that people chose to leave this country in the knowledge that their pensions would be frozen. Secondly, if we were to uprate, as has been suggested, or even to go for consultation, what would the outcome be with regard to the position of other governments? It would cost £300 million, and that would have to be found from somewhere. We believe that our priorities lie elsewhere. Therefore, the Government do not plan to unfreeze UK pensions paid abroad, and I hope that noble Lords will not pursue these amendments.

Lord Selsdon: My Lords, before the noble Baroness sits down, I take some of the points that she made in her charming way. However, a problem exists which is

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not purely monetary; it is one of understanding. Perhaps her department could produce a small leaflet to be sent to pensioners explaining the position. They would at least then feel that someone had cared for them in some way, whatever the outcome.

Baroness Hollis of Heigham: My Lords, I am happy to ask officials to look at the literature that we give to people at the point at which they make their decision in order to ensure that they are as fully informed as possible. I believe that that is an entirely reasonable point to make and I shall certainly follow it up. Of course, if anyone writes to us from overseas--indeed, I receive letters regularly on this subject--I shall be happy to send the type of information to which the noble Lord referred.

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