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Pensioners: Savings


3 pm

Asked By Baroness Seccombe

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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, tackling pensioner poverty remains a key priority, and we are committed to supporting pensioners during these difficult times. We will continue to build on the substantial progress we have made in lifting 900,000 pensioners out of relative poverty since 1998-99 on an after-housing-cost basis. In 2008-09, we provided extra help to pensioners through one-off boosts to the Christmas bonus and winter fuel payments and we are spending over £13 billion more on pensioners than if 1997 policies had continued.

Baroness Seccombe: My Lords, I thank the Minister for his Answer, which was probably predictable. I declare an obvious interest as I am a pensioner. Interest rates have plummeted but does the Minister think that it is right and fair that savers, most of whom are elderly and rely on investment income, are subsidising those who took on outsize mortgages?

Lord McKenzie of Luton: My Lords, I am not sure that that is an appropriate way to look at the issue. The Government keep all savings incentives under review and we should be clear about the extent of the issue, which is that 42 per cent of pensioners receive less than £1 a week or no income from investments. Around 70 per cent of pensioner benefit units receive less than £10 a week from investments. It is estimated that an 80 per cent reduction in investment income, which is roughly what has happened, would reduce pensioners’ net income before housing costs by 3 per cent on average but less than 1 per cent on the basis of a median analysis. It is an issue but it is not of the scale that some suggest.

Baroness Greengross: My Lords, is there any way in which the noble Lord could try to speed up the introduction of uprating state pension in line with earnings so that it is earlier than intended? That would help a lot of poorer pensioners among us who are suffering, as the noble Baroness suggested, because their savings are not giving them any return on their income.

Lord McKenzie of Luton: My Lords, the uprating of the pension from this April is 5 per cent, which is RPI. That, of course, is currently in excess of earnings. The ongoing uprating of pension was laid down in the Pensions Act 2007, which was to uprate in 2012 subject to affordability, and in any event by the end of the next Parliament. That remains the Government’s position.

Lord Campbell-Savours: My Lords, is there not an argument for switching some of the tax subsidy from SIPPs to ISAs? Would not more people on lower incomes benefit?

Lord McKenzie of Luton: My Lords, the Government’s approach to savings looks at incentives right across the life cycle, so we see ISAs as a key way, apart from pensions, to incentivise savings for working-age people. There are gateway proposals to help people on lower incomes to get into a savings culture, and child trust

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funds to help young people start off life with a little nest-egg and get involved in savings later on, we hope. Substantial tax reliefs are already available for pension savings, which is the right balance, particularly at the current time when we need to do all that we can to make sure that people see the benefit of savings generally and, in particular, the benefit of savings through pension arrangements.

Lord Fearn: My Lords, will any pressure be brought upon the banks in which the Government have taken a stake to increase pensioners’ income by increasing the interest rate? By that, I mean all pensioners rather than a few. It is all right to talk about fuel poverty, but this is about no one particular thing; it is about what they have saved up for their whole lives.

Lord McKenzie of Luton: My Lords, it should not be part of the process of engaging with the banks in which the Government have substantial interests to direct a particular interest-rate policy toward pensioners rather than addressing general market issues. There are, obviously, much more substantial issues for the banking sector, in getting money flowing into the economy and making sure that depositors feel and know that their deposits are safe.

Lord Skelmersdale: My Lords, some three weeks ago, on a Starred Question from the noble Baroness, Lady Greengross, I put to the Minister the Conservatives’ commitment to abolish income tax on savings for basic-rate taxpayers and to raise the pensioner’s personal allowance by £2,000. The Minister gave me a rather throwaway answer, saying, “Well, my Lords, we will have to cost it”. What work have the Government put in hand to achieve that costing?

Lord McKenzie of Luton: My Lords, I am grateful for the opportunity of a supplementary question on that matter. From April 2010, 60 per cent of pensioners over the age of 65 will pay no income tax. The Conservative policy would, therefore, presumably be skewed toward helping the better-off. I understand that the proposed funding for the arrangements is something like £5 billion, cut from public expenditure; in particular, that £2,000 increase in the personal allowance would cost around £1.3 billion.

Lord Higgins: My Lords, is it not completely wrong that neither this House nor the other place has had any opportunity to debate the unprecedented Statement last week by the Chancellor of the Exchequer, on authorising the Bank of England to issue something like £150 billion of new money? That will seriously affect interest rates. Also, have the Government estimated the extent to which that action will further reduce the few remaining final-salary schemes as a result of its effect on their balance sheets?

Lord McKenzie of Luton: My Lords, this supplementary seems some way from the original Question, but I will try to help the noble Lord. Quantitative easing is about trying to get money flowing back into the economy. As for the specific impact on pensions, it is likely to have an impact on gilt prices—in the short term, at least—and, therefore, on gilt yields

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and the liability value in DB pension schemes. We maintain the position, however, that pension savings need to be looked at over the longer term; that is the right sort of judgment.

Arrangement of Business


3.08 pm

Lord Bassam of Brighton: My Lords, with the leave of the House we will have two Statements repeated today. Immediately after the Second Reading of the Northern Ireland Bill, my noble friend the Leader of the House will repeat a Statement on Northern Ireland, followed by my noble friend Lord Myners, who will repeat a Statement entitled “Banking: Asset Protection Scheme”. We will then resume proceedings on the Marine and Coastal Access Bill.

Business of the House

Motion on Standing Orders

3.08 pm

Moved By Baroness Royall of Blaisdon

Motion agreed.

Health and Social Care Act 2008 (Registration of Regulated Activities) Regulations 2009

Motion to Approve

3.09 pm

Moved By Baroness Morgan of Drefelin

Motion agreed.

European Parliamentary Elections (Franchise of Relevant Citizens of the Union) (Amendment) Regulations 2009

Representation of the People (Amendment) Regulations 2009

Motions to Approve

3.09 pm

Moved By Lord Davies of Oldham

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Motions agreed.

Northern Ireland Bill

Bill Main Page
Copy of the Bill
Explanatory Notes
6th Report Constitution Committee

Second Reading

3.09 pm

Moved By Baroness Royall of Blaisdon

Baroness Royall of Blaisdon: My Lords, before I move on to the substance of the legislation before the House today, I wish to mention the tragic events of the weekend. The attack on Massereene Army base in Antrim, which resulted in the cold and deliberate murder of two people and serious injuries to four more, including two civilians, was a shocking reminder of Northern Ireland’s dark past. Following the completion of this Second Reading debate, we will have an opportunity to debate the contents of a Statement that my right honourable friend the Secretary of State will make shortly in another place. For the time being, I am sure that the House will join me in expressing its condolences to the victims and their families, as well as to all those affected by this callous attack.

For many years, the political history of Northern Ireland was one of division. Attacks of the type that we have seen at the weekend, while no less callous and cold-blooded, were unfortunately all too common during the dark days of Northern Ireland. In recent years, however, thanks to the Belfast agreement in 1998 and the St Andrews agreement of 2006, the political environment of Northern Ireland has been transformed, with the development of firm foundations for a shared future in devolved government. Whenever such significant developments take place over a short period of time, there will always be those who wish to reverse that progress, and this is certainly true in Northern Ireland.

A small minority of people is determined to halt the political progress and drag Northern Ireland back to the climate of fear and uncertainty that dominated the political landscape for years, but it will not succeed. That small minority has no community support, as the revulsion towards the weekend’s murders from both sides of the community and all points on the political spectrum demonstrates. The people of Northern Ireland are set on a political path and set against the type of criminality that has dominated our news programmes over the weekend. That is why it is important that we are not deterred from that political path, which has been carefully constructed over the past 12 years. The mindless actions of a tiny minority must not be allowed to place that progress and that new future at risk. We must press ahead with the political process and the process set out by the First and Deputy First Ministers in their statement of 18 November. The legislation before the House today represents the next stage in that process.

During the past 12 years, this House has seen many pieces of Northern Ireland legislation, most of it significant and some of it historic, but all of it helping

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to build the political process that has seen Northern Ireland move away from that past and towards a new, shared future in which locally elected politicians take decisions for the people of Northern Ireland. This legislation is certainly significant but it is also historic, because for the first time the parties in Northern Ireland have come together to decide on the way forward without intervention by the UK or Irish Governments.

The agreement announced by the First and Deputy First Ministers on 18 November last year set out a process whose completion would see the transfer of policing and justice responsibilities to the Northern Ireland Assembly. Subsequently, the work of the Assembly and Executive Review Committee, which is made up of the four largest parties in the Assembly, considered the modalities for devolution and made a series of recommendations in relation to the shape of a new department with responsibility for policing and justice functions. This report was accepted by the Assembly after a cross-community vote on 20 January and, subsequently, the First and Deputy First Ministers indicated that they wished the Government to introduce legislation giving effect to those elements of the agreement that required primary legislation. That is the effect of this Bill.

The Bill ensures that the necessary framework is in place to enable the continuation of the process set out by the First and Deputy First Ministers in November. It is made in Northern Ireland by the democratically elected representatives of the people of Northern Ireland. It will be for these elected representatives to decide when the time is right for devolution to take place. That is right and proper. It is for us to ensure that they can do so by fulfilling a commitment made to ensure that the Assembly has the necessary tools to move forward in a timeframe determined by the Assembly.

The Bill does not impose devolution. The process by which policing and justice will be devolved has already been set out by Parliament in Section 4 of the Northern Ireland Act 1998—the triple lock. It will initially require a motion requesting devolution to be tabled by the First and Deputy First Ministers acting jointly; that motion will then need to be approved by the Assembly on a cross-community vote. A series of orders giving effect to devolution would then be introduced in Parliament, which will have an opportunity to debate these orders and approve them if it so wishes.

I turn to the detail of the Bill before the House. Clause 1 gives effect to Schedule 1, which provides for a new departmental model. This model was set out in the statement by the First and Deputy First Ministers in November last year and in the report of the Assembly and Executive Review Committee, which was approved by the Assembly in January. As such, we would anticipate it being the model used to set up the first department of justice. However, the legislation does not require it to be. It simply adds this model to the menu of options provided by the Northern Ireland Act 1998. It therefore increases to eight the number of options that the Assembly can choose from when it legislates to set up a new Northern Ireland department with responsibility for policing and justice functions. The model itself consists of a single minister, nominated by any Member

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of the Assembly, elected by a cross-community vote in the Assembly and removed in the same way. Under this model, the justice Minister would not count towards the parties’ allocation of seats on the Executive under the d’Hondt formula.

Both the agreement announced by the First and Deputy First Ministers and the Assembly and Executive Review Committee explicitly stated that this model should be subject to a sunset clause that would bring the arrangements to an end by May 2012. The Bill provides for the department to be automatically dissolved on 1 May 2012 unless the Assembly has agreed to continue the arrangements or agreed alternative arrangements.

I know that in another place concerns were raised about the mechanism provided in the Bill for the removal of the justice Minister. It may be helpful if I deal with some of those concerns now, although there will of course be a further opportunity to debate the detail of the provisions in Committee. In the models already provided for in the 1998 Act, there is a symmetry between the methods of appointment and removal. For example, under the d’Hondt system, the party’s nominating officer appoints and has the power to remove. The Bill provides for the justice Minister to be appointed by a cross-community vote and, similarly, to be removed by a cross-community vote, reflecting the same principle of symmetry.

However, the most important point for noble Lords to consider in relation to this issue is that the methods of appointment and removal were explicitly recommended by the Assembly committee report that was approved by the Assembly. At a time when we are continuing to try to build confidence among the people of Northern Ireland, which will enable us to move towards the devolution of policing and justice, it is vital that we are able to provide as stable a system as possible for the justice Minister. I recognise that there are those, including some in this Chamber, who consider this method of removal as evidence of a lack of stability for the justice Minister, but to them I say that surely the best method of providing a stable framework for the future administration of justice is to provide the framework that the people who will be operating within it feel is sustainable. That is the framework set out by the First and Deputy First Ministers, recommended by the Assembly and Executive Review Committee and endorsed by the Assembly in the cross-community vote that approved that report. It is a framework that I believe the First and Deputy First Ministers are committed to making work. We saw a clear illustration of this when the Bill was debated in another place last week. The right honourable Member for Belfast East, speaking as the First Minister, was categorical in his assertion:

“Neither the First nor the Deputy First Minister will wish to do anything other than give full support to a Justice Minister, especially a Justice Minister who will have been appointed by a more democratic method than any other Minister in the Executive and who will therefore be harder to dismiss”.

He went on to say:

“If there were any difficulty in the process, of course the prospective Justice Minister could talk to the First and Deputy First Ministers about what lay ahead to ensure a clear understanding of the nature of any potential removal from the job”.—[Official Report, Commons, 4/3/09; cols. 940-41.]

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To my mind, this makes it clear that the fears of some noble Lords relating to both the ease with which a justice Minister could be dismissed and the desire to do so are unfounded. The Government believe that the framework, set out by the democratically elected representatives of the people of Northern Ireland, should be provided to those representatives as an option for use in setting up the new justice department.

Given the careful consideration that was given to this model both by the First and Deputy First Ministers and by the Assembly and Executive Review Committee, and given the belief among the elected representatives of the people of Northern Ireland that this is a model that they can make work, I hope that noble Lords will see the reasons for the Government providing for this model in the Bill and see fit to support these provisions in the later passage of this legislation.

Clause 2 and Schedules 2 to 6 deal with the arrangements for judicial appointments and removals following the devolution of policing and justice. We will have a further opportunity to debate these provisions in greater detail in Committee on Wednesday but, broadly speaking, the Bill provides for functions relating to judicial appointments and removals to be exercised by the Judicial Appointments Commission and, in some cases, by the Lord Chief Justice and the Northern Ireland Judicial Appointments Ombudsman as opposed to the First and Deputy First Ministers, as had previously been envisaged. In particular cases, important roles also remain for the Prime Minister and the Lord Chancellor.

The agreement between the First and Deputy First Ministers last November stated that these arrangements would be temporary and that permanent arrangements would need to be put in place by May 2012. Schedule 6 provides for this by placing a requirement on an Assembly committee to review the arrangements put in place by the Bill and to make recommendations before 1 May 2012. It also places a freeze on any new appointments to the Judicial Appointments Commission from 1 May 2012, unless and until the Assembly has agreed the future arrangements for judicial appointments and removals. While this freeze will not prevent judicial appointments from being made, it will result in a significant incentive for the Assembly to agree a way forward.

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