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The most recent news is that, from somewhere within the DWP, money is available. I do not know whether your Lordships saw an article in today’s Daily Telegraph, in which a Mr Bob Soar, who lives in Mr Hain’s Neath constituency, said that he had been urged by the Work and Pensions Secretary to lobby the Treasury. Mr Soar is quoted as saying,

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which may or may not include the results of this report; we do not know—

Just what is going on between DWP and Treasury Ministers?

6.30 pm

Lord Higgins: I have a sense of déj vu. I should have looked up my earlier speeches on the FAS and read them out verbatim to show how much “I told you so” was a justifiable comment on this occasion.

Like my noble friend, who has done a splendid job on this subject since I left the Front Bench, I was surprised by the comments in the weekend press—those are the ones I saw, rather than the comments today—with regard to the funding of the FAS. It was also suggested somewhere yesterday that the administrative costs of the FAS have amounted to more than it has succeeded in paying out. No doubt the Minister will tell us whether that is so. At all events, it was clear from the beginning, when the FAS was introduced to quell a rebellion in another place, that the amounts involved were totally inadequate. They were sufficient to buy off the rebellion in the other place, but they certainly were not sufficient to meet the needs of the group of people who are on the wrong side of the deadline. If you got the other side of the PPF being set up, it was all right; but if you have to rely on the financial assistance scheme, it has proved totally inadequate.

The ombudsman’s report seems to have been totally disregarded by the Government. This is becoming something of a pattern with independent reports. The reports spell out the problems arising as a result of government policy and maladministration, and then the action for which they call is not taken. Given that this is a deserving group of people who have been grossly misled about what was being done to help them, there is an argument for saying, as my noble friend Lady Noakes said, that this is indeed a charitable enterprise, albeit one which ought to be financed quite straightforwardly by the Treasury.

Lord Davies of Oldham: I am grateful to all noble Lords who have spoken, including those who have made a special effort to be here and to bring with them the expertise they have displayed on pensions legislation—expertise which, I hasten to add, I have not a hope of matching. The Committee will recognise that my task is to defend the proposals in the Bill.

The noble Lord, Lord Newby, is right: the issue of support for deserving pensioners is of great concern to the Government, hence the great deal of activity going on at the present time which is giving rise to some remarkably ill informed press comment. The issues we are seeking to address are challenging, but it would be singularly inappropriate to divert resources from dormant account funds to the lifeboat fund.

Lord Higgins: The Minister said it is singularly ill informed press comment. Is it in fact the case that the administrative costs are greater than the amount the FAS has paid out?

Lord Davies of Oldham: No. Normally when the press is speculating on clashes within government,

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from my perspective I am all too well aware that it is often singularly ill informed. That is why I used the phrase there.

It cannot be an intelligent strategy to divert to the lifeboat fund the dormant account money. It would be an open-ended commitment. We do not know how much money would be involved nor how long the undertaking would be. So we would be building into these accounts and the structures of the Bill a long-running commitment which we would not be able to calculate and the end of which we could not foresee; we would not know when the obligation was fulfilled. I have not the slightest doubt that in other areas of the Bill—I have already had some experience of this today—the Opposition are only too keen to identify how precise we need to be with certain calculations. Here we have a grandiose scheme which is utterly open-ended.

We have set out our key priorities for the dormant account money, we have discussed with the institutions the structure of a light-touch regime to which they broadly give their support and, of course, we have our priorities within it. The noble Lord, Lord Newby, emphasised that the issue should be dealt with elsewhere and the noble Lord, Lord Higgins, although he supports the amendment, also thought that the resolution of the pensions issues lies in other funding structures. The Government are extremely busy about meeting those needs, and it will be appreciated that the reason why there is considerable press comment at present is because of the degree of hard work going on to see how issues with regard to those suffering losses can be remedied. That is all against a background of the review of the financial assistance scheme taking place under Andrew Young to find out what better use can be made of the residual assets in the pensions scheme, and we expect that report in the near future.

Mike O’Brien, the Minister, committed during the passage of the Pensions Bill to match the extra funds that the review identifies with the goal of moving towards 90 per cent of expected core pension for all recipients. That was not a lightly entered-into commitment. We all recognise how difficult it is to fulfil, which is why the issue lies in where the resources will come from. But of course we are taking action on this important issue. I do not underestimate the noble Baroness’s opportunistic skill in identifying the issue—

Noble Lords: Oh!

Lord Davies of Oldham: Well, it is opportunistic in the context of this Bill. After all, noble Lords elsewhere in the House could identify a range of very good causes indeed. If I sit down now, I can see two noble Lords on the Liberal Democrat Benches who are eager to rise to mention excellent objectives that could be included in the framework of the Bill, while not recognising the resources of the Bill as the ones that should be directed towards those objectives.

I can say to the noble Baroness that it was a good try and an opportunity for identifying a very difficult issue that we want to see addressed. No one underestimates the deserving cause which she has identified, and the

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Government are addressing themselves to the issue, but we do not intend to do so within the framework of this Bill.

The noble Baroness constantly upbraids me when I fail to answer her more detailed questions. She asked me one on the taxation issues for customer accounts.

Baroness Noakes: That was not me.

Lord Davies of Oldham: Oh, it was the noble Lord, Lord Higgins, who asked that question. I hoped that I was going to answer the noble Baroness’s point but I shall keep my 0 per cent record with regard to her.

I think that the noble Lord, Lord Higgins, will be satisfied with my answer, which is why I was offering it to the noble Baroness, who has rejected it, of course. The changes in taxation will ensure that any interest credited to a dormant account on transfer to the reclaim fund or credited while the funds are held by the reclaim fund will be treated as paid for the purposes of income tax and tax reporting requirements only if a customer reclaims the money. Then it would be, otherwise not.

Lord Higgins: I am extremely grateful to the Minister for answering that point, although why on this amendment I am not entirely clear. However, what he is saying—if I understood him correctly—is that the revenue obtained by the Inland Revenue as a result of these disbursements will go up. If the account had simply remained dormant the Revenue would not have collected anything.

Lord Davies of Oldham: The Revenue will collect only from the person reclaiming the account—that would be the case at present. All we are saying is that taxation would be paid within the reclaimed fund only if an individual claims the account.

Lord Higgins: That is what I understood; namely, that the revenue is higher than it would otherwise be if the Bill did not exist.

Lord Davies of Oldham: That is the case, of course. If noble Lords pressed me from every side to have the most extensive campaign—and we are eager that the industry pursues the most intensive campaign—to ensure that money is appropriately directed to those who own it and that those dormant accounts are claimed, of course there will be an element of taxation and, therefore, the Revenue will benefit.

Lord Higgins: I am extremely grateful to the noble Lord for picking up this point at this stage, rather than waiting until a subsequent stage of the Bill. We are now much clearer about the situation, and we appreciate his help.

Lord Skelmersdale: The situation might be much clearer to my noble friend, but I am afraid that I am not convinced. The Minister quoted the then Minister for pensions and the current Minister repeated it. He said that the intention of the Young report and,

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presumably the findings—incidentally, have they reached the Treasury?—are to bring the FAS payment as close as possible to 90 per cent, the so-called PPF level. However, there is a vast difference between that and this incurious invention of the Government—the so-called core pension—which means that people, and especially their dependents, will get far less than they expected under the current scheme.

Having sat here for most of the afternoon—I accept not all of it—I readily understand the Minister’s implication that the FAS is not a charity and, therefore, would not fit into the remit of this Bill. But the Bill covers not only charities, but any social enterprise, as I understand it. For goodness’ sake, my noble friend Lord Higgins, to whom I pay tribute for his great work in this area, pointed out that if this is not a social benefit, what on earth is?

Baroness Noakes: I am grateful to my noble friend Lord Skelmersdale for reminding us that 90 per cent of core pension is certainly not what my amendments are about; they are about taking pensions up to PPF levels. So far, the Government have been searching only to increase pensions up to 90 per cent of core pension, which is simply not good enough in our view. While my noble friend Lord Higgins was delighted by the Minister’s explanation on taxation, I wish to report that I am not going to be diverted by a red herring on taxation in this amendment, which is about a serious issue of how we get appropriate resources to a relatively small group of people—some 120,000 or so—who lost their pensions before the PPF kicked in to give protection.

I am disappointed that the noble Lord, Lord Newby, whose party has supported us in our efforts to get a lifeboat, feels unable to support us in this instance. I hope that he will think again about this before we get to Report. The amendment is permissive. It does not require any amount to be transferred and the decision on whether money could be transferred, as opposed to being put to any other purpose via the Big Lottery Fund, would be taken, in part, in the light of the amounts available. As I shall say later, there is significant doubt about how much money is available and, therefore, it is a shame to miss this opportunity to reinstate a version of what we tried to include in the most recent Pensions Act. This is not very different.

6.45 pm

The Bill has an emphasis on youth, but no emphasis on the other end of the generation spectrum; that is, older people, who are at least as important members of our community. Some reflection of the amounts that could probably be spent in that direction would be a useful addition to the Bill. The Minister castigated me for saying that it was an open-ended commitment, but it is open-ended only to the extent that there are some variables, such as longevity, in how much is involved. However, the Government are grappling with the amount that is involved, and the mere fact that we cannot calculate it down to its last penny does not make it not a problem or a proper use of money, it simply makes it difficult to ascertain the final bill.

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I am disappointed by the Government’s response to the amendment, but we have been disappointed with the Government’s response on the FAS from the very outset. As the noble Lord, Lord Skelmersdale, reminded us, the FAS was invented only in the face of a big revolt in another place. It was invented at a mean level and incrementally made a little less mean, but is still nothing like good enough. I hope that we will return to the matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 20:

The noble Baroness said: I shall speak also to Amendment No. 52.

In my previous amendment, I sought to amend Clause 5 so that payments could be made to a pensions lifeboat, which is a specific example of something that could be funded from dormant account money. With these two amendments, I am seeking to allow money to flow through bodies other than the Big Lottery Fund.

Amendment No. 20 is a small, paving amendment, but the meat is found in Amendment No. 52, which would alter Clause 15, which sets up distribution of funds only via the Big Lottery Fund. My amendment would allow the Secretary of State to specify the body or bodies to which a reclaim fund should transfer money. That money would still have to be transferred for social or environmental purposes, so the purposes for which money could be spent would not be changed. The mechanism or the distribution channel would be changed. That mechanism would be an order requiring the approval of both Houses. It is clearly a significant issue that should be brought for parliamentary approval.

The order could specify the bodies to which the money was to be transferred and how the money was then to be distributed. It could specify particular sums to be transferred to a particular body or say that money could be transferred to the bodies only if certain levels of money or thresholds had been met. This could be important if, for example, the Government wanted to specify a transfer to the lifeboat fund—I do not detect any enthusiasm for that—but not until, let us say, £150 million already had been distributed for youth purposes. My amendment would allow some flexibility in how money could flow and transfers to be time limited.

If, or to the extent that, the Government had not specified particular bodies under new subsection (1A), new subsection (1B) would require the money to flow to the Big Lottery Fund. The scheme would then operate under Part 2 exactly as the Government have drafted it.

The advantage of drafting the Bill in this way is that it would allow the Government to specify that money should go for national purposes. The scheme of distribution via the Big Lottery Fund is predicated on sharing money out among the individual countries, with spending priorities set by those countries. That simply does not allow for money to be spent on things which cross our internal borders in the UK. One

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example is the lifeboat, because, clearly, pensions are a national issue which could not be addressed through the devolved Administrations without ending up with a curious result of different pensions being paid in different parts of the UK.

There will be other examples related to functions which operate on the national dimension. The noble Lord, Lord Newby cited one, international aid, which would not easily flow out of how the Big Lottery Fund is structured but may well be a proper priority. Another example that I want to press on noble Lords is the Armed Forces and the ability to provide additional support to our servicemen and their families. This may not fit well within a distribution system that is not focused at national level. The Bill means that national causes will almost inevitably be bypassed.

One of the main reasons for seeking flexibility in distribution outside the Big Lottery Fund is that the scheme may well realise far greater sums than have been estimated by the British Bankers’ Association and the Building Societies Association, which have referred to sums of £400 million to £500 million initially, dropping down to possibly £10 million a year. As we discussed at Second Reading, estimates based on the Irish experience lead to very much higher sums. It was the noble Lord, Lord Shutt, who said—probably about 63 times—we are talking about billions, my Lords, billions. If we are talking about a sum of around £20 billion, we are talking about a sum of an order of magnitude such that it should not be pushed through the Big Lottery Fund. There ought to be another mechanism in the Bill for dealing with money in another way.

The Government have steadfastly refused to discuss figures and have given the impression of not having the faintest idea of how much is involved. For example, the Minister during the Second Reading debate said:

That was some form of boast, I think. He went on to say,

It is quite clear that that means, “not the faintest idea”. By saying that they cannot estimate how much money is involved, the Government cannot avoid the fact that they are setting up a system on the basis that it could be handling anything from low tens, or perhaps low hundreds, of millions up to many thousands of millions—billions of pounds. The distribution structure should be robust in the face of potentially very variable outcomes.

The amendment does not threaten the Big Lottery Fund as a distributor. I shall leave that to my noble friends, who have a series of penetrating amendments to which we shall doubtless come on our next day in Committee. In this amendment I am simply seeking greater flexibility and the ability to direct money on much broader fronts than the scheme is currently set up for. I beg to move.

Lord Shutt of Greetland: It just occurs to me that it would be right to ask a question of the noble Baroness. I am not trying to be clever about this but she seems to

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have a hierarchy of ambition in the sense that in earlier amendments she has suggested that all banks and all building societies should be able to take part in the alternative scheme. I was more modest than that when I talked about the 10 per cent versus 90 per cent thing. If the banks and building societies availed themselves of that, there would be nothing left for either the pension life boats or anything else that she is suggesting. Will she set out her hierarchy of ambition here, because it is very important to be clear? I know where I stand on this, but I should be interested to know where she stands.

Lord Newby: While the noble Baroness thinks about the hierarchy, I have a further couple of comments to make. If we were to go down the route that she proposed on the pensions protection lifeboat fund it would be logical for this amendment to be carried, because you would be pretty crazy to expect the Lottery fund to get involved in all that. However, if we are not going down that route the argument seems to be much less clear. As the noble Baroness said, it would be possible for the Government to specify UK-wide causes for this money to be spent on. It would also be possible to expand that to cover completely different fields—and the noble Baroness mentioned the Armed Forces.

It seems that whatever amount of money is to be available from this fund—no doubt it will be between the lower and upper estimates that have been made—the causes to which the fund will be directed are perfectly capable of absorbing virtually any amount of money that one could conceivably imagine the reclaim fund could attract. Therefore, potentially to expand the scope in the way proposed by the noble Baroness beyond even the lifeboat fund runs the risk of a serious lack of focus. I do not doubt that one could propose many national programmes. The Armed Forces need additional resources but the same applies to the health service and to every aspect of public expenditure.

The Bill must plump for a definition and a series of containable and manageable programmes. I am not saying that it is absolutely perfect, but our broad view is that the way in which the Government are planning to spend the money makes sense. If you start dissipating it across a whole raft of other things you will lose focus, and that would be detrimental to the whole scheme, not least in the public’s perception of how the dormant assets are being used. For that reason, and the reason given by the noble Lord, Lord Shutt, we are unable to support the amendments.

Lord Skelmersdale: That is all very well, but one of the Bill’s purposes is for funds from this particular conglomeration to go to social enterprises. The noble Lord, Lord Newby, has just mentioned the health service. I was thinking much more in terms of health charities. Surely to goodness they would be defined as social enterprises. Irrespective of the pecking order for which the noble Lord has just asked my noble friend, the Bill should specify whether the shelling out is going to local charities or whether national charities are included. I hope that the Minister can answer that question for once.

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