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I am, as I said, glad that thinking is at last progressing on this issue, and we will get a resolution in due course. I shall look forward to the statutory instrument. May I anticipate that it will arrive by 1 April?

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Baroness Morgan of Drefelin: My Lords, we have to be clear that the review needs to be undertaken in a very considered and consultative way. I would need to write to the noble Lord specifically on whether the review can be expected by 1 April.

Lord Skelmersdale: My Lords, I await the letter with interest. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.15 pm

Clause 5 [Up-rating of basic pension etc. and standard minimum guarantee by reference to earnings]:

Baroness Hollis of Heigham moved Amendment No. 4:

The noble Baroness said: My Lords, in speaking to Amendment No. 4 I shall speak also to Amendment No. 6, which is the more substantive one. Having already trespassed on the generosity of the House, I will not seek to press the amendment to a vote. However, the issue it raises is important and I wish to go round the track once more and then call it a day, at least for this Bill.

This is a very modest, nil-cost amendment, which is about future-proofing as far as we can. We have a contributory system for the BSP which Governments of all parties have tweaked, patched and twiddled with over the years in order to bring as many people as possible within it. Today, as a result of your Lordships’ support, we have, I hope, finally got a contributory system which is more inclusive than it otherwise could conceivably have been. However, although we will, I hope, end up with a comprehensive contributory system, it remains complex and obscure. I was very struck by the comments of the noble Lord, Lord Dearing, on the previous debate about just how complex he found the system. I defy most people to know what they are and are not entitled to at any stage because of the complexity of the system, however good the intentions behind it.

The Government believe—and I hope that they are right—that in the next couple of decades, 90 per cent to 95 per cent of the population will be drawing a full basic state pension. By then, a Government who are radical, enlightened and far-seeing may decide that we should clean up this untidy, ramshackle process, which has accreted over the years, and have a basic state pension based on residence. They may or may not. But to do so, there needs to be a record of residence—a database—and we must start building it before we need to employ it. As the noble Lord, Lord Turner, said in his report, if that is the path we are going down, we have to have a lead-in time in which to build up a database so that Manuel from Spain who is here for two years does not automatically qualify.

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A future Government may not wish to change the structure but if they do, they will find it very difficult unless a previous Government had kept their options open for them. One of the lessons we have learnt from pensions legislation over the past years is that we are rather good at dealing with problems when they have emerged but rather bad at anticipating where problems will emerge—in other words, future-proofing our legislation. The amendment would simply keep options open for a future Government. It does not commit that Government to doing anything but it would allow them to make a decision with the information they needed which otherwise they would not have.

The amendment seeks to build a residence database. Is it straightforward? I think so. We already have a pretty good database in the electoral roll. Some 97 per cent to 98 per cent of working-age adults who have not moved house in the past year are on that roll, and local authorities are already required to retain that roll for 15 years. Records could be cross-checked with council tax rolls and even, down the line, with the proposed identity cards, should they emerge. This could ensure that only those who have a genuine, bona fide record of residence would qualify.

I anticipate that, based on his response in Committee, my noble friend may run two broad arguments. First, he may say that residence is very hard—possibly too hard—to establish and that unless we know what we are establishing, we should not go down that road. Secondly, he may be against the amendment in principle. On the first argument, I suggest that consultation with electoral registration officers, local authorities, and so on, could address the inevitable follow-up questions about who qualifies. I suggest, as a starting-off point, Sections 4 to 7 of the Representation of the People Act 1983. They give a useful and workable definition which has been in existence for 25 years and presents, as far as I know, and according to the chief executive of the Association of Electoral Administrators, no problems at all. But, as there is no suggestion that we would go down this path in the next two, three or five years, if there were any problems, issues and wrinkles outstanding, then we would have plenty of time to address them.

The amendment is about establishing the principle. I do not ask my noble friend to agree that principle today. That is not the point of the amendment. I am not asking the House to support the principle of a residence-based pension; I am asking only that they support the principle of allowing a future Government to make that decision if they so wish. A different Government may take a view that is very different from that of the Minister. It is good public policy to keep options open, to future-proof. We owe to future Governments and future citizens of this country the practical possibility of clearing up the system if the Government of the day believe that it is right. I beg to move.

Baroness Thomas of Winchester: My Lords, some of us believe that the contributory principle is on its last legs because of the complications of the system and the need for ever more pieces of sticking plaster to address them. I well understand that that is not the

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Government’s view, but it was the view of the Turner commission, which advocated a universal basic state pension based on residency for those over 75. Keeping electoral registers just in case that view finds favour with future Governments is eminently sensible and commits the Government to nothing, but this amendment is needed for it to be legal to keep the registers for this purpose, as the noble Baroness said. What possible harm can acceptance of the amendment do? It does not have to be triggered until a future Government wish it. We support the amendment from these Benches.

Baroness Dean of Thornton-le-Fylde: My Lords, I, too, support Amendments Nos. 4 and 6. The Pensions Commission considered the matter and stated specifically that it preferred the way forward to build on the present two-tier system with an individual and universal system. It stated that by “universal” it meant based on residency rather than on contribution records or eligibility for credits. In general terms, the Government accepted the Turner report, although I am not saying that they accepted and agreed with every word of it.

The amendment is necessary. We have all learnt in dealing with pensions that this is not an issue for today; it takes many years to address. Quite often, one’s ability to make changes is stymied because of a lack of information. It is one of the problems that we face when considering pensions for women with broken service. The amendment would help to overcome that hurdle. I hope that the Minister will give a little more support to it at this stage of the Bill than he was able to last time.

Baroness Greengross: My Lords, I support the amendment. It relates to the principle that we have in this country, and which I think we all accept, that no Government can make decisions that cannot be reversed by a future Government. I congratulate the Government on taking a much longer-term view than is usually the case. The amendment seems to be about prudence, with all that that implies, keeping in line with the recommendations of the Turner report and looking towards the long term. We cannot tell now what view a future Government might take on residency being the criterion for receiving a state pension. The amendment is a simple way of ensuring that that it is possible should a Government wish to do it.

Lord Skelmersdale: My Lords, in introducing the amendment, the noble Baroness, Lady Hollis, said words to the effect that it was previous, and intended to be previous, to keep the door open for a future Government to do something that neither this Government nor this Official Opposition have the slightest intention of doing. I therefore find it difficult to support even the long-term thinking of the noble Baroness. It follows therefore that we cannot support the unnecessary collection of personal information for something that we never expect to happen. Indeed, I am slightly gobsmacked by the whole idea. Collecting these data before the public have even a

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chance to comment on the desirability of a universal state pension, no matter what the noble Lord, Lord Turner, and his commission have said, is at best a waste of time and at worst completely undemocratic.

Lord McKenzie of Luton: My Lords, it is slightly worrying to find myself on the same side as the noble Lord, Lord Skelmersdale, twice in a row. However, the amendments give us a chance to discuss again whether pensions should be provided on the basis of contributions or of residency, although I understand that that is not my noble friend’s direct proposition. I thank her for tabling the amendments, which stem from a commitment on her part to ensure that state pensions are available to as many people as possible, particularly women who may have been discriminated against because of how the system has operated in the past 60 years.

The Government’s reforms modernise the contributory principle and will deliver fair outcomes to women and carers as a priority. The Pensions Commission proposals supported a residency accrual-based pension, but our reforms will address concerns about the current system and improve outcomes for women and carers far faster than the commission’s proposals would, as has been acknowledged and welcomed by a number of commentators.

The two amendments together would have the Government collect information to support a future Government’s possible decision to move to a residency-based pension and each year, as part of the normal departmental uprating process, to review the build-up of information and record keeping on residency. The assumption is that at some point we could then introduce legislation to switch from the new contribution test, which we will introduce in 2010, to a new residency test.

The annual review of benefits is a routine process in the life of the DWP. It starts with a review of benefit rates in the autumn, is followed by consideration by both Houses over the winter and, most important, provides increases in benefit rates at the beginning of the new tax year. I agree that, should we ever introduce a completely new way of testing the basis on which people build their basic state pension entitlement, we would want to keep the evidence that underpinned the new test under review. However, should we ever go down that route, we would want to form bespoke legislation to underpin the evidence-gathering process, rather than borrowing from what we have to try to fit it into existing legislation.

That leads me on to a discussion of Amendment No. 6, about the storage of relevant information for the purpose of enabling the possible future payment of a residency accrual-based basic state pension. My noble friend has made it clear in previous discussions that this amendment does not say that we must have a residency-based pension; rather, it is intended as an enabling amendment to allow a future Government to explore residency as an approach that could be adopted some time in the future.

There is nothing to prevent the Government from keeping this aspect, or any other aspect of reform, under review in the longer term, but without

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legislation. We believe that our reforms provide a long-term settlement for pensions, but that does not mean that we will not be assessing reform outcomes. For example, we know how important it is to establish why people fail to build up a full basic state pension, which is why we are undertaking research on this, including consideration of people who will retire in 2025.

I make this point because my noble friend believes that the Government should keep their options on residency open in the long term in case reform outcomes are less successful than predicted. However, we have no reason to believe that this will be the case or that residency would deliver better outcomes. She may fear that, unless we start to collect information for residency, we will not be in a position to consider residency as an alternative. Adopting a residency approach raises a problem in that there are no appropriate records beyond those that exist under current tax and benefit systems to support that approach, and we do not believe that there is any effective proxy information.

My noble friend has suggested that electoral register data could help to fulfil this role and quoted in Committee research from the Electoral Commission that she believes supports this view. This is the evidence that, of people of working age over 45 who have not moved house in the past 12 months, between 97 per cent and 98 per cent are on the electoral roll.

This research, which is found in the report Understanding Electoral Registration: TheExtent and Nature of Non-registration in Britain, published by the Electoral Commission, relates to the position in England and Wales in 2000-01. It raises a number of other issues worth noting with regard to electoral register information and how well it might support residency requirements. This same research indicates that around 3.5 million people across England and Wales were eligible to be on the register at their main residence but were missing from the register in 2000—this equates to between 8 and 9 per cent of the population.

5.30 pm

Areas with the highest levels of unemployment and income deprivation had the highest levels of non-registration. Non-registration was highest among private renters, the unemployed, those without qualifications and those in non-permanent employment—indeed, many of the people whom my noble friend is most concerned about.

This gap in coverage of the electoral register represents a small but significant and disadvantaged minority, who could find it difficult to prove residency if electoral register data were the basis for determining this. Of course, the precise outcomes would depend on the exact test of residency to be used, and this is where the next problem arises.

To consider residency seriously, we need a definition of it and a test to determine it, which in turn would determine the information needed to support this proposal. But this amendment makes the collection of information the starting point, with consideration later once we have that information of

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whether it is actually useful for determining residency. To do this without consideration of fundamental issues, such as the length of test and the implications on the universality of the basic state pension, would not be sensible. Our reforms are intended to make it easier to build up full basic state pension entitlement, and any residency approach should be considered similarly.

As to the practicality of using electoral registration data to determine residency, the electoral register simply provides evidence of a person’s eligibility to vote. It indicates that a person lives at a particular address but cannot on its own confirm this or tell us how long that individual has lived there. There is no way in which to link periods of residence at different addresses to say whether the John Jones who lived in Anywhere Avenue in 2004 is the same John Jones who lived in Somewhere Street in 2005. Some form of unique identifier or other information would be needed to make this work, and currently no additional identifier is included on the register except in Northern Ireland.

The use of unique identifiers or other information in conjunction with electoral registration data would require further arrangements and legislation to be put in place. This presupposes that a test for proportionality and justification of the use of such information could be met for data protection purposes. This is not necessarily the case, as this amendment is about information for possible future use, not definite future use. Without this, at best the amendment would allow for the collection of information but without the ability to make practical use of that information.

Legislating now for a potential move to a residency basis, and regular consideration of this as part of a largely unrelated process, is not necessary. It risks undermining the long-term nature of the Government’s pensions settlement by leaving the future operation of the contributory approach open to question.

With regard to electoral register information, we believe that the use of such data to support a residency-based approach is questionable. In terms of universality, there would still be gaps in coverage. Electoral register research suggests that the use of register data to prove residency could particularly affect people from disadvantaged backgrounds, yet the outcomes delivered would still not better those from our reforms.

I think that my noble friend indicated that she does not propose to press the amendment. I encourage her not to do so.

Baroness Hollis of Heigham: My Lords, I am grateful to my noble friend for his full and thoughtful reply. However, I was slightly taken aback by the response of the noble Lord, Lord Skelmersdale, who said—I think that I quote him accurately—that the measure was “a waste of time” and “completely undemocratic”. Perhaps I did not make this sufficiently clear, in which case it is entirely my own fault, but the amendment seeks to keep options open for a future democratically elected Government to make a democratic decision. However, they would not be able to do so unless the prior information tools were already in place.

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Given that this is a nil-cost amendment and given that local authorities already have 15 years’ worth of these data now, as required by law, for the life of me I cannot see why it would be expensive, why it would be a waste of time or why it would be undemocratic. The noble Lord’s comments may have been addressed to an amendment that I did not actually move.

My noble friend made several comments. First, I do not think that the amendment is so much about the Government collecting information; they would bring together the information held by local authorities and keep it under review. He made the valid point that the existing electoral register does not provide a unique identifier. However, this has not proved an insuperable problem for verifying information relating to overseas electors, largely because the onus is on the applicant to provide sufficient information for the verification to take place. That would remain the same in any such system.

Secondly, on residency, Section 4 of the Representation of the People Act 1983 says that the individual is entitled to be registered if on the relevant date he is resident in the constituency. Sections 5 to 7 deal in considerable detail with the issues relating to residence. It would not be difficult to amend those.

Finally, although the Minister says that the registers are held locally by individual local authorities, it is also true—and my noble friend did not mention this—that the Government have taken new powers in the Electoral Administration Act 2006. I wonder whether the DWP is fully aware of what is going on in what is now the Ministry of Justice on some of these issues to create—I was not aware of this until I went into the matter—the equivalent of a central record through the CORE project. Provided that the necessary legal provisions are in place, which is done easily by regulations, there is no reason why CORE could not be used for this purpose. Most of the quasi-administrative, quasi-technical arguments that my noble friend advanced can be easily overcome, as I am assured by the society of electoral registration officers.

Lord McKenzie of Luton: My Lords, does my noble friend accept that the evidence suggests that many people are not on the register, wherever or however it is kept? The evidence is that most of them are disadvantaged people—we know that from our own experience. Would she further confirm that you can be on the electoral register if you live in a particular location for three months of the year and spend nine months in the Cayman Islands? Would somebody who did that be resident, for the purpose of her residency test?

Baroness Hollis of Heigham: My Lords, that person at the moment can acquire a full basic state pension through the contributory system, as we have previously discussed. There is no difference; there is full eligibility now for them.

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