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We are only in the early stages of the Bill’s proceedings but we have had enough evidence already of how much the prospective role of the authorities and how they will act exercise the Committee. I am merely indicating within this framework that there is some understanding in the Committee of the necessity for a degree of flexibility.

Each section in the code can include more descriptive and therefore more helpful language on the intentions behind any specific action or requirement within it. That is why the code should not be in the Bill but can supplement it by providing information that it would not be appropriate to set out on the face of the Bill or in an instrument of similar status. The code will provide a significant amount of detail about the way in which the authorities will implement the SRR and can be updated to reflect experience gained from operating the special resolution regime without imposing hard-edged duties or requirements on the authorities. I recognise that there are other views about this issue in the Committee, but if we conceded the legal status of the code, we would introduce rigidities with regard to the legislation against a background where the main argument, as presented by my noble friend, was covered in subsequent provisions. I hope that my noble friend will therefore feel able, with some confidence, to withdraw his amendment.

Lord Higgins: While I agree with what the noble Lord has just said about the legal side, he has misrepresented what Amendment 21 does. It would not force the authorities to comply with the code but would say that they must comply or give an explanation. Of course, as he says, decisions may have to be taken in unexpected circumstances, and that would require deviation from the code. But surely that would be a great improvement if the authorities were to say why they had done so in those circumstances. Indeed, in view of recent events, it would certainly have been

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better if more explanation had been given at the time. Amendment 21 does not do what the Minister says and in the general spirit of good will prevailing in the Committee, I hope that he will at the very least be prepared to take it away and look at it again.

Lord Davies of Oldham: It goes without saying that we always look carefully at these debates. Even if a particular amendment did not re-emerge on Report, a different one might which would incorporate the same concept if our position was regarded as not being satisfactory. So of course I will look carefully at the arguments that have been mobilised, but the amendments are grouped together because they would both introduce into the Bill an element of legal rigidity. We are saying that the code will be followed, obeyed and responded to by the authorities but we are reluctant to see that imposed by statute. That is the basis of the Government’s position, which is why I am hoping that my noble friend will, at least for today, withdraw his amendment.

Lord Eatwell: I am grateful to my noble friend Lord Davies of Oldham for the comprehensive discussion of the amendment. I quite understand his desire for flexibility—indeed, I argued for it on a previous amendment. However, I was attempting to point out that the desire for flexibility actually contradicts another goal of government policy, which is to encourage netting and the use of relatively simple financial instruments to replace the complex instruments which are felt to have been an important element in recent, rather unfortunate, events. Having said that, I feel quite strongly that the words “shall have regard to” are very weak indeed and introduce a degree of legal uncertainty which is likely to be significantly damaging in the operations of financial services.

I have tabled amendments on the clauses to which my noble friend referred, specifically related to netting. I will be interested to see the Government’s response to those amendments in the light of what I see as the need for legal certainty to increase simplicity and financial services. Having said that, I beg leave to withdraw the amendment.

Amendment 20 withdrawn.

Amendment 21 not moved.

Clause 5 agreed.

House resumed.


Question for Short Debate

7.27 pm

Tabled By Baroness Greengross

Baroness Greengross: My Lords, the Employment Equality (Age) Regulations 2006 implemented a European directive which outlawed age discrimination in employment and adult education. However, the regulations introduced a national default retirement age as an exception to the general principle of non-discrimination on the grounds of age. This means that it is lawful for employers to operate a mandatory retirement age of

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65, in effect getting rid of people automatically just because they are deemed to be too old to do a job. There is provision for an appeal, but the effect remains that if an employer wishes to terminate someone’s employment at 65, normally it will happen.

A recent survey by the Chartered Institute of Personnel and Development with KPMG suggests that in the current economic climate, almost one in five employers said that they were going to enforce the retirement age of 65 more vigorously. That means that even more people will be turfed out of their job on the assumption that they are too old, regardless of whether they are or not.

When the regulations came into effect, the Government justified the default retirement age at 65 for the next five years as a legitimate aim of social policy on the grounds that it assisted employers in manpower planning, but they committed to review the arrangements in 2011. At the time, this annoyed many older people, who pointed out that they would be too old—more likely dead—by then.

The review will look at the extent to which employees’ right to request to stay at work beyond 65 will have created a culture which reduces reliance on the old-style cut-off date of retirement. It cannot be right that, on one day, you are a person with a job, status and the recognition that goes with it, and that, on the next, you have a 65th birthday and, just because of it, you lose the lot. However, to change this culture is a formidable task, but we have to take it on board. Equality legislation should be precisely that. As a commissioner at the Equality and Human Rights Commission, I believe that the default retirement age is a serious blot on our equalities landscape. Discrimination is not acceptable in the case of gender, race or disability; it should not be in respect of age.

I am aware, however, of understandable concerns of bodies such as the Engineering Employers Federation, which argues strongly that any change to current arrangements will adversely affect the UK’s competitive position and that, fearing expensive litigation, some employers will retain older workers who are not the best people for a job. They believe also that removing the default age of retirement will undermine workforce morale and result in “dead-men’s-shoes” succession planning problems. They believe also that management time would be diverted to dealing with industrial tribunal cases brought by disgruntled workers, whatever their age, whose performance had been deemed unsatisfactory. However, I strongly believe that in a country where we are promoting equality as a societal norm we must find ways of addressing these concerns rather than allowing them to be used as a means of retaining the unjust system currently in place.

Any good employer should have in place an appraisal system that ensures that its employees are competent and meet their delivery targets. Surely this is even more important in the current economic climate. However, if after appropriate support and training an employee, whatever their age, fails to deliver, it is surely for the good of the organisation and its other employees that an employer should consider whether to retain that employee in the workforce.

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It is this test of competence, through annual appraisals, that gives us the way forward for removing the DRA. It is not easy for a young manager to tell an employee who is the age of his father or perhaps his grandfather that he or she is no longer competent to do the job that they have been doing for years. If companies’ appraisal systems are applied properly throughout an organisation to employees of all ages, those people who are able to contribute effectively to the success of the organisation can do so whether they are 25 or 65.

Those who express concern make a good point about the termination of employment of long-standing workers who would under present arrangements retire perhaps with a clock and some good will, but who might be perceived under a new regime as having been sacked for incompetence. I would expect employers to maintain morale by recognising years of loyal, good service, as many do now, through measures such as long-service awards and retirement presentations, but they must be based on performance, not on age.

If competence becomes the test by which to determine continued employment, certain benefits would stem from the abolition of the default retirement age. First, companies would retain existing talents within their workforce without the need at considerable cost to recruit and train new people to replace those who currently retire at 65 and to cover their posts while the recruitment and training process is under way. The Chartered Institute of Personnel and Development estimates that the average cost of replacing a manager or professional person is £10,000, so it is quite expensive. Secondly, it would help address the ratio of workers to non-workers in our population, which, without action, is forecast to become 54.7 inactive people over 65 for every 100 workers by 2050. It is an issue of which I am very well aware as chief executive of the International Longevity Centre. Thirdly, and perhaps most importantly, it would help address the growing pensions crisis by extending some employees’ working lives and enabling them to contribute more money to their pension schemes, which was one of the key recommendations of the noble Lord, Lord Turner, in his review of pensions policy. Fourthly, it would provide an opportunity to raise more revenue if national insurance contributions and direct taxation were to be applied to earned income irrespective of the age of the worker, a policy which seems justified on grounds of equality if the argument for abolishing the default retirement age is based on equality.

A number of substantial employers, and the Government in respect of the Civil Service, are already implementing no-mandatory-retirement-age policies; for example, B&Q, Defra, the DCLG, Hertfordshire County Council, HM Revenue & Customs, M&S and Sainsbury’s and many more. All have adopted such a policy; it works for them; and, in many cases, customers are recorded as welcoming being able to ask an older employee, especially somewhere like B&Q, “Which is the right screwdriver?” and “What do I do if I want to put up some shelves?”—I know that I have been in that position myself. It is very helpful to ask someone who has done it for many years.

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We need to change our thinking so that employees are treated on an equal footing throughout their working lives, with the same opportunities to progress and the same requirement to show competency to deliver at the age of 65 as at the age of 30. Chronological age is an inadequate proxy for capability. Some people are over the hill at 35; but some are competent, quick-witted and innovative at 65, and the cost of losing such talent is unacceptable. In the future, our society will be judged by its basic fairness and humanity, especially in a period of economic downturn.

7.37 pm

Baroness Turner of Camden: My Lords, I thank the noble Baroness, Lady Greengross, for introducing this timely debate. I understand that the default retirement age of 65 is due for review by 2011.

It is now widely accepted that we are all living longer. The Government appear to accept this when they talk about pension entitlement. There is also frequently expressed concern about the increased demands which may be placed on the NHS as a result of an ageing population. But this does not have to happen.

A healthy population is likely to be active. When competent individuals who want and need to work are removed from the workforce, not only is it a waste of valuable assets, but it may result in ill health which might not have occurred had they been actively involved in a working environment.

An unintended consequence of the introduction of a default retirement age in the age regulations has been the forced retirement at the age of 65 of employees who would otherwise have been able to continue working beyond that age. A recent survey revealed that, in the current economic climate, almost one in five employers said that they would try to enforce retirement at 65 more vigorously. The right to continue to work beyond retirement age is included in the regulations, but it is weak. An employer has a duty to consider an individual’s wishes, but can refuse without giving a reason. Many employers refuse all requests to work beyond 65 to avoid setting a precedent.

It is clear that many older people want to work, but are effectively prevented from doing so because of the existence of the default retirement age. In the current financial crisis, many more people will need to work beyond the age of 65 because of the falling value of their pensions, which is regrettable, and the drop in interest rates, which is diminishing substantially any income from savings.

Of course, there are types of employment, including heavy manual or possibly dangerous physical work—the construction industry comes to mind—where employees may wish to retire early or at least be provided with work that is less physically demanding. But these jobs are in a minority; we are here talking about vast ranges of non-manual employment where employees are quite competent and willing, indeed desirous, of continuing in employment.

The research on which a lot of what I am saying is based tells us:

“The age discrimination legislation has made it worse for those of retirement age who want to continue working. Employers have found they can use the Act to their advantage and retire an employee without any problems”.

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The Government have said that they have plans to end mandatory retirement age by 2010 for all non-senior civil servants. Those working in the private sector and other parts of the public sector should have the same choice about retirement. The existence of the default retirement age seems at odds with the Government’s exhortations to people to extend their working lives to ensure that they are comfortable in retirement and non-benefit-dependent. That is very important. I await with interest the Minister’s response.

7.40 pm

Lord Selsdon: My Lords, I have to declare an interest in that I am long past my sell-by date. In accordance with the age prescriptions of your Lordships' House, I believe that it is only the noble Lord, Lord Stevenson, from the Back Benches, who has 18 months to go before he should technically be put down. Young Front-Bench people will have no problem.

I shall approach this from a different point of view. I have a great respect for age. Some of that has come from 46 years in your Lordships' House, where I have been drip fed by people who I thought were geriatrics before I made the average age. The learning is always there.

What I am going to suggest now may be a bit radical, even for myself. I do not believe that any cap should be put on people’s working age; they should be allowed to go on working as long as they want to. The problem we have is that, in the bureaucracy in which we live, at a certain age in life people are entitled to a pension. Possibly when people reach the retirement age—perhaps when women are treated equally with men, although they do live three years longer than men, on average—those who continue to work should be paid tax-free, with no obligation for any contributions by the employee to the state.

In this strange economic world in which we live, at one level people say that we must reduce employment. Your Lordships will be aware that there are companies that have issued instructions across the world, saying to heads of department that they must reduce the number of people that they employ by 20, 30 or 40 per cent. Those who were intelligent and saw this coming have already worked out that there are people whom they might like to have dismissed two years ago and have therefore garaged the reserves. There will be industries—probably the larger organisations—that will say that it may be better to get rid of the older ones and not take on any more of the younger ones. Therefore, you have a period of stagnation in employment, which may be quite worrying.

We have a high unemployment forecast—and I do not mind admitting that in the past when I have written papers making forecasts, I have always exaggerated and been horrified when I turned out to be right. I thought that the suggestion many years ago that we could have 22 per cent inflation and 17 per cent interest rates was in the extreme and wrong. Now we have possibilities of very high unemployment—and the wrong sort of unemployment. The older age group are having a problem. When those who have been wise and have saved, and who have hidden things under a bushel, are required at the age of 75 to take out a

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policy or surrender their capital, what will they get in terms of an annuity? Those who have their savings on deposit at the moment may find that even 1 per cent is on the high side. So what is the answer for the older people? It is to go on working. If a formula could be introduced so that those who have reached the statutory retirement age could go on being employed at a lower cost, because there were no added values, we may arrive somewhere quite interesting.

We are faced with an economic crisis that is related possibly more to industry than we realise, and not to service industries. The logical thing that you do in a recession is to train everybody you can think of for all you are worth—and the best trainers are usually those in the older generation who have experience. In parallel, when you are looking at age, as the noble Baroness, Lady Greengross, said, there is no one factor that determines whether you go on working. It can be physical or it can be mental. We all forget what it is we intended to do next, but we can remember what it is we were doing 50 years ago.

The worry that I have is that if we concentrate solely on the bureaucracy of getting rid of a regulation, we will be wrong to do so. If employers can be encouraged to recognise that there is some economic benefit to themselves in retaining people longer—or, perhaps more positively, in going out and recruiting those in the older age group—we will find something worth while.

I return to where I came in. I used to be in the asbestos industry, which is not the best thing to have been in. We did industrial and economic research. I was asked one day, with my team, if we would be bold enough to put a value on a human life. What is a person worth, throughout the seven ages of man? Is there an economic value that you can put on it? What does it cost if there is a death? We were talking in those days about road accidents. I believe that the older people in this country have a greater value now than they have had in the past 25 years.

7.46 pm

Baroness Afshar: My Lords, I thank my noble friend Lady Greengross for putting this Question to the House. I declare an interest, because I am rapidly approaching the age of 65, so the axe is about to fall. I am fortunate in serving in your Lordships' House, where you might keep me for a bit longer, and also at a university where, as yet, our contractual agreement to work until 67 has not been revoked.

I find the imposition of a compulsory retirement age very problematic. I find it problematic culturally because I grew up in a society in which old age was venerated. As a result, I have celebrated every birthday as a step towards achievement, so I would find it very difficult to discover at the age of 65 that I have suddenly failed to achieve. This notion of respect for older people, which I am glad to see is shared in this House, is a common concept in the Middle East. In a recent study that we did in West Yorkshire, working with women of different origins, we found that that respect for old age and the experience and knowledge of old age is shared by Polish and Irish and by many working-class British women, as well as the Muslim women with whom we were working.

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We found as part of our research that the most successful women, who made the least demand on the health services and social services and even on the churches and support systems, were the women who had a strong sense of functionality—people who served their communities, had a job and served their families. They felt an obligation to get up and go to work and do something. We had one wonderful case of a lovely lady whose grandchildren had left and who was feeling a little bit old. She collected a young man—a drug addict—from the side of the street and decided to adopt him and shake him into shape, so that again her life had a focus.

We also found that being paid for the work that they did was incredibly important to those women. Research after research indicates that older women are the most dispossessed and the poorest as well as the people with the least amount of advantage in our society. We now have a cohort of women who have worked in full-time employment and, therefore, may have the possibility of not ending on the poor heap. It will be a great sorrow if, just as we are about to achieve the same status as men, with a decent retirement age and pension, those of us who had to pull out because we had babies or other caring responsibilities suddenly find that we cannot actually do the years that we need to get to a decent retirement age because we are chopped off. Therefore, there was this sudden death experience for the people we talked to.

We talked to many successful, retired people, who enjoyed going to more theatres, concerts and so on, but those women who had depended on a wage felt that without a decent income they did not have an identity. They could not support their families, provide presents at Christmas or keep themselves warm. Therefore, they became dysfunctional, dependent categories.

In this age of equality and equal opportunity, to have a provision that intentionally creates more people that are dysfunctional seems to me to be a great pity. Therefore, I very much hope that the Government will consider doing something about it.

7.50 pm

Lord Giddens: My Lords, I congratulate the noble Baroness, Lady Greengross, on having initiated this debate and on her elegant introduction, which made me feel a bit uneasy as I feel that I am one of those people over the hill at 35 who were so aptly identified.

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