House of Lords
Education: Proficiency Levels
(10 years, 5 months ago)
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Lord Sharkey
To ask Her Majesty’s Government what assessment they have made of progress in achieving satisfactory levels of proficiency amongst 15 year-olds in reading, mathematics and science.
Baroness Northover (LD)
My Lords, OECD’s PISA results allow us to compare ourselves with the world’s best. The UK’s performance in mathematics, science and reading has not changed significantly since 2009. It remains at the OECD average in maths and reading, and above in science. The highest-achieving jurisdictions are in east Asia. We understand the significance of this and the need to ensure that our children are just as prepared as others to compete in the global economy.
Lord Sharkey (LD)
My Lords, today’s PISA report makes for gloomy reading about mathematics education in our secondary schools. We are stuck in 26th position, and 22% of our 15 year-olds are ranked as low achievers. The situation looks as though it is going to get worse. A quarter of our secondary school maths teachers have only A-level mathematics. Only half of our newly qualified maths teachers have a maths degree, and well over half of training posts for maths teachers are unfilled. What additional steps will the Government take to halt this very steep decline in the number of qualified maths teachers?
Baroness Northover
My Lords, we are well aware of the importance of ensuring that we have sufficient numbers of maths teachers, and have been putting a great deal of effort into this. We recruited 2,230 maths teachers in 2013-14, and we are continuing to focus efforts on recruiting the best graduates for the subjects we need most, which of course include maths. We have increased the number of maths places and the scholarships for teacher training. These scholarships amount to £25,000. We have increased the value of maths bursaries because we need to attract the top graduates. We have also introduced bursaries for graduates with good A-levels in maths or physics who train to teach maths, because we recognise the importance of what my noble friend is saying.
Baroness Perry of Southwark (Con)
Does my noble friend agree that the hugely encouraging increase in performance that has taken place in many of the new academies bodes very well for the results of the PISA in three years’ time, when the young people who have been through them will be tested?
Baroness Northover
My noble friend is right that we need to make a long-term assessment. Obviously, the 15 year-old students being assessed at the moment have had a number of years of education, and these results represent how they have done during those years. We hope to move things forward in the way that my noble friend suggests.
Baroness Hughes of Stretford (Lab)
In the area performing best in the OECD results published today, all teachers must have a teaching qualification and have to undertake 240 hours of professional development in the first five years of their career. In the UK now, academies and free schools can employ an unqualified person as a teacher even in these core subjects. The South Leeds Academy has just advertised for an unqualified person to teach maths, with a minimum qualification of just four GCSEs. Given what the Minister has just said, how does she think that unqualified people can make a contribution to raising standards in English, maths and science?
Baroness Northover
The noble Baroness will know that the proportion of qualified teachers in the state sector has increased. It now stands at 96.7%. I am sure that she heard my right honourable friend Michael Gove in the other place giving the numbers of unqualified teachers. In 2009 there were 17,400 unqualified teachers. Now the number has dropped to 14,800.
Lord Howe of Aberavon (Con)
My Lords, is the performance of our children not to be admired because of their achievement in mathematics? That subject is far more difficult that it should ever have been allowed to become, granted the fact that Magna Carta specifically requires the establishment of a single, uniform system of mathematics and measurements, such as has been achieved in many former British colonies, such as Australia and New Zealand, and even including the United States and Ireland. In almost all other territories, what should have been achieved has not been achieved in the simplicity of our measurement systems in this country. There is all the more reason to do so, given our abolition of the Metrication Board, which we introduced to give us one system during my time as Minister for Trade and Consumer Affairs. Alas, I confess that, as Chancellor of the Exchequer, I abolished the Metrication Board, disregarding its achievement, and so created the difficulties which I felt I had to spell out with candour in posing my question.
Baroness Northover
I pay tribute to my noble and learned friend for what he achieved—using the metric system rather than anything else certainly made things much easier when my kids were studying—and for his candour. I note that the PISA report is extremely long, complex and very interesting. I urge noble Lords to have a really good look at it. If they look at the breakdown on maths, for example, they will see that students in the United Kingdom do relatively better than some countries on uncertainty, data and probability, but are less strong on space and shape. In east Asia, they are doing much better in the other direction.
Baroness Armstrong of Hill Top (Lab)
My Lords, I thank the noble Baroness for her replies. I am interested that she acknowledges that the only way to enthuse young people is with a committed, knowledgeable and enthusiastic teacher. The Government need to do more to recruit the very best. We know that if you get the top 10% of graduates into education, you will do much better. I ask the Minister to look again at the messages that have been given to free schools and academies—I declare my interest as a governor—that qualifications do not matter.
Baroness Northover
I thank the noble Baroness for her initial tribute. It was very striking to see a steady increase in the number of high-quality candidates entering teaching. That is immensely encouraging, and we have to take it further forward. The proportion of postgrad entrants with a first class or 2.1 degree is now 74%, compared with 61% in 2009. That is moving in the right direction and shows that students recognise that it is worth teaching. The noble Baroness is absolutely right that all of us remember our outstanding, inspiring teachers. The report emphasises that autonomy for head teachers, along with accountability, is crucial to moving things forward.
Taxation: Rental Income
(10 years, 5 months ago)
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Lord Campbell-Savours
To ask Her Majesty’s Government what plans they have to ensure that taxation is paid on rental income on property owned by persons from overseas.
Lord Newby (LD)
My Lords, the Government believe that non-resident landlords should pay tax as appropriate, and HMRC operates a withholding scheme to ensure compliance. Tenants and letting agents are required to withhold and pay HMRC basic rate tax. Landlords whose UK tax affairs are up to date may apply not to have tax withheld and be automatically entered into self-assessment. Non-resident landlords in self-assessment are subject to HMRC’s usual rigorous compliance checks.
Lord Campbell-Savours (Lab)
My Lords, that only applies where a landlord uses an agent—I listened very carefully to the Minister’s response. How is it possible to quantify the scale of evasion on rental income without a means of establishing who owns what, what rents are paid, and to whom those rents are paid? Is there not a real need to establish a local authority-based national register of all domestic and overseas-based landlord rented-out property—a register that is accessible by HMRC? Is it not true that there is vast evasion in this area?
Lord Newby
It is not true that the scheme just covers letting agents. As I said, there are two other categories of people who should pay tax in this case: one, in the case of tenants, if their non-resident landlord wishes to go that way; and the other for the non-resident landlord to register for self-assessment. Perhaps I may give the noble Lord and the House some sense of the scale of the income generated from this scheme. In 2011-12, companies that held residential property in the UK on which tax was paid paid a total of some £375 million.
Lord Mackay of Clashfern (Con)
My Lords, is there not scope for using the deduction-at-source method against rents? It seems to be at least as effective as any other likely way of getting money from people who are overseas.
Lord Newby
My Lords, that is basically how this scheme operates. A letting agent has to take some 20% of the rent and pay it over to HMRC for the non-resident landlord.
Lord Howarth of Newport (Lab)
My Lords, is the noble Lord able to confirm what I have been told—and I do not know whether this is correct—that in France, if you are a non-resident owner of residential property, you are taxed on the rentable value of that property whether or not you have let it? Does he know whether that is the case; and if it is, does he think that it is worth considering introducing it here?
Lord Newby
My Lords, I do not know whether that is the case. I think that I might take advice from the noble Lord, Lord Lawson of Blaby.
Baroness Maddock (LD)
My Lords, I agree very much with what the noble Lord, Lord Campbell-Savours, said in his opening comments. There is a lack of transparency around who owns rental properties in this country. I do not know what the Government will do about that. If we want to improve the quality and standard of our rented properties, particularly the energy efficiency, it is vital that we know who owns the properties.
Lord Newby
My Lords, as the noble Lord mentioned and the noble Baroness raised again, this is an extremely important and live issue, which I will raise again with my colleagues in the DCLG.
Lord Davies of Oldham (Lab)
My Lords, is the Minister, a member of the Liberal Democrat Party, in favour of a mansion tax, which would certainly go a long way to dealing with this in terms of transparency of who owns property? He should be a little careful if he denies the validity of that, because the Chancellor has an awkward habit at present of listening to what the Labour Front-Bench says one day and doing something similar to it the next.
Lord Newby
My Lords, I am sure that the whole House knows that the Liberal Democrats are in favour of a mansion tax. I remind the House that, in the recent Budget, the Government introduced an annual tax on high-value dwellings—so-called enveloped dwellings —owned by companies, which will generate from £15,000 a year for properties worth between £2 million and £5 million to £140,000 a year for properties worth more than £20 million.
Lord Anderson of Swansea (Lab)
My Lords, what advice is given to our local authorities to ensure that, when housing benefit is paid, the recipient landlord pays UK income tax?
Lord Newby
I do not know the strict answer to that question, but HMRC makes strong efforts to bring home to everybody who should be paying tax that they should be doing that, which is why the Government have put in almost an extra £1 billion a year towards tackling tax avoidance and evasion.
Lord Phillips of Sudbury (LD)
My Lords, would my noble friend the Minister contemplate the fact that, in many London boroughs, 70% and more of the housing being purchased is purchased by foreign buyers? Many of them have poor credentials as to their abidance by law in their own states, let alone laws here. Might we not be getting near the time when we need to consider limiting the extent to which foreign buyers can dominate the housing market in London?
Lord Newby
My Lords, there is a very disparate housing market in London. At the bottom end of the market, the vast bulk of houses are purchased domestically. At the very top end, the vast bulk of houses are purchased by foreign buyers, particularly from Russia, eastern Europe and the Far East. One key thing that we are very keen to try to achieve is a greater degree of housebuilding in London and elsewhere. Only by building a lot more houses will it be possible to satisfy the demands of a growing population.
Baroness Farrington of Ribbleton (Lab)
My Lords, why has the Minister not undertaken to investigate the value of a register? Surely, it would help the Government, HMRC and taxpayers were a register to be established.
Lord Newby
I thought that I had said that I would take that matter up with colleagues in the DCLG.
Health: Talking Therapy
(10 years, 5 months ago)
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Baroness Royall of Blaisdon
To ask Her Majesty’s Government whether they have plans to create a legal right to talking therapy as part of their commitment to ensure parity of esteem between mental and physical health.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
My Lords, the department has no plans to create a legal right to talking therapies. Mental health and parity of esteem are key priorities for NHS England. The Government’s mandate to NHS England makes it clear that everyone who needs it should have timely access to evidence-based services, which involves extending access to talking therapies. We are working with NHS England to develop standards on access and waiting times across mental health from 2015.
Baroness Royall of Blaisdon (Lab)
My Lords, I am grateful to the noble Earl for his Answer, but I still have serious concerns about the services that mental health patients receive. I do not often quote the noble Lord, Lord Freud, but last month he said that,
“the association between poor mental health and poverty is clear”.—[Official Report, 7/11/13; col. 324.]
However, despite people’s increasing stress due to poverty, the cost of living and zero-hours contracts, the Government have cut mental health spending in real terms in the past two years. Funding for therapies not included in IAPT has been cut by 5%, despite ministerial assurances that this would not happen. Last week, the We Need to Talk coalition released a report that revealed that more than half of mental health patients are waiting at least three months for treatment. Can the Minister commit to reducing those waiting times by March 2015, the date by which time the Government are committed to making progress towards that important parity of esteem?
Earl Howe
My Lords, I agree that waiting times for talking therapies are too long, and we are taking energetic steps to address that within the bounds of affordability. In the context of the noble Baroness’s main Question, what surely matters is the quality of outcomes, rather than just the extent of inputs. We set the outcomes that we expect the NHS to achieve in the NHS outcomes framework. There are a number of outcomes in there specifically for people with mental health problems, and others, about the quality of services. It is up to commissioners to prioritise their resources to meet those outcomes for the population based on assessments of need, and we will hold them to account for that.
Lord Alderdice (LD)
My Lords, I entirely support my noble friend’s commitment to good outcomes, but those also require sufficient inputs. If the noble Baroness’s request for a right to talking therapy were implemented tomorrow, it would completely collapse because there simply are not enough trained therapists to provide the care that is required. What measures are the Government taking to ensure that in future there will be sufficient trained therapists to provide the parity of care for those with mental illness that is available to those with physical illness?
Lord Patel of Bradford (Lab)
My Lords, following on from what the noble Lord, Lord Alderdice, said about having staff who can provide appropriate talking therapies, and what the Minister himself said about someone who needs a service receiving it, we have a long history in the mental health field of mental health practitioners not referring certain minority-ethnic groups such as the south Asian and black African communities for talking therapies. I believe that that is still the case with referrals to the CBT programme. What are the Government doing to address this imbalance?
Earl Howe
I can tell the noble Lord that IAPT is working with a number of BME groups to promote wider access to the service from all sections of the community. A grant scheme will shortly be launched to encourage community-based interventions to increase uptake of talking therapies, including from BME groups.
Lord Elystan-Morgan (CB)
My Lords, will the Minister kindly tell the House roughly what percentage of in-patients and out-patients suffer from mental health problems compared with those who suffer from physical health problems? Can he say, roughly, how the resources of the NHS are divided between the two camps on a revenue basis? I have the clear impression that traditionally mental health has been short-changed for very many years.
Earl Howe
My Lords, the noble Lord’s perception would be shared by many, which is why we have been very clear in our mandate to NHS England that parity of esteem is of the essence, and we will hold the service to account for that. I do not have the specific statistics that the noble Lord seeks but we know that more people are being treated in secondary mental health services now than two or three years ago. However, the proportion who needed to be admitted to in-patient psychiatric care fell over that period, and that reflects increasing emphasis on care in the community.
Baroness McIntosh of Hudnall (Lab)
My Lords, as someone who has benefited from CBT on a number of occasions, may I ask whether the noble Earl agrees that it is not just a question of whether people need the therapy but rather that they receive enough of it? Following the question of the noble Lord, Lord Alderdice, about the number of people who could benefit from this, what is the average number of sessions of talking therapy that a National Health Service mental health patient will receive and is it, generally speaking, enough?
Lord Elton (Con)
Will my noble friend assure the House that this rule of parity will be introduced in the Prison Service as well as the National Health Service generally?
The Earl of Sandwich (CB)
Does the noble Earl share my concern about the overprescription of psychiatric drugs? Can he think of anything to do about this apart from encouraging CBT and talking therapies?
Earl Howe
My Lords, the noble Earl is right. I share his concern, and I think it has been a widespread concern across the mental health community. Nowadays, the guidance given to doctors is much broader than the guidance that was given some years ago. It embraces the talking therapies in particular and it seeks to avoid the overprescription of sometimes very strong pharmaceutical products.
Global Fund to Fight AIDS, Tuberculosis and Malaria
(10 years, 5 months ago)
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Lord Avebury
To ask Her Majesty’s Government what contribution the United Kingdom will make to the fourth replenishment of the Global Fund to Fight AIDS, Tuberculosis and Malaria.
Baroness Northover (LD)
As World AIDS Day reminded us, we have made great strides in our fight against AIDS, malaria and TB, but more still needs to be done. In 2011, AIDS killed 1.7 million people and TB killed 1.4 million people. In 2010, malaria killed 660,000 people. That is why the UK has pledged £1 billion to the global fund, provided that our contribution does not exceed 10% of the replenishment value.
Lord Avebury (LD)
My Lords, it was great that DfID was able to say recently that it had met most of the targets that were forecast in the 2011 paper Towards Zero Infections. However, will the new contribution enable the global fund to reduce the number of new infections among women by half a million, as was scheduled in the 2011 paper, to make a step change in prevention and to reduce further the cost of treatment?
Baroness Northover
My noble friend is right that the international effort directed through the global fund has had stunning achievements. The rate of new HIV infections among women and girls has declined. The pace of the decline is not as fast as we would wish it to be and that is something that the UK is putting renewed effort into, as will the global fund. Clearly, the focus on prevention will particularly benefit women. There has been far greater coverage of the population as a result of the global fund’s efforts and stunning reductions in the cost of, for example, HIV treatment. In 2000, treating a patient cost about $10,000 a year and that has now dropped to $125 per patient.
Lord McConnell of Glenscorrodale (Lab)
My Lords, the work of the global fund and the continuing UK commitment to it are to be welcomed, as that work is very important. However, I think that a new dimension is developing, particularly in sub-Saharan Africa, concerning the teenagers and young adults who were born with HIV/AIDS and who have survived due to the quality and quantity of those medical interventions but are now facing the prospect of relationships, marriage and having children as they move into adulthood. Either through the global fund or perhaps directly, might the UK Government pioneer some schemes to assist those young people with the advice and counselling that will be required to help them through that transition?
Baroness Northover
The noble Lord is right that a generation affected by HIV is growing up. He will also know that a lot of work has gone into trying to make sure that there is no mother-to-child transmission of the disease, and that is very important for these young people. The global fund is well aware that there is a young population whose needs it has to address.
Lord Fowler (Con)
I wonder whether my noble friend saw the BBC “Panorama” programme on the global fund last night, with the best tabloid title “Where’s Our Aid Money Gone?”. Over the past 18 months, I have been to more than a dozen countries looking at the HIV position. Is my noble friend aware that, without the help of the global fund and the President’s fund in the United States, the world would be in a desperate position, with escalating disease? Although there have been exceptions, overwhelmingly this money has been well spent and has resulted in millions of lives being saved. Would it not be nice if “Panorama” reported that?
Baroness Northover
My noble friend is absolutely right. Cambodia, for example, which was highlighted in the programme, has seen an 80% decline in malaria deaths, a 45% fall in TB and a 50% decline in HIV cases. I pay tribute to what my noble friend has done to highlight the challenge of HIV/AIDS and to his fight for the global fund, which has been transformative in this area.
Baroness Masham of Ilton (CB)
My Lords, does the Minister agree that it is in the interests of the world to prevent these conditions? I congratulate the UK on what it has done, but will the noble Baroness encourage other countries to do more?
Baroness Northover
The noble Baroness is right in terms of the impact. Yesterday, President Obama pledged $5 billion to the global fund. The US has said that it does not wish to contribute more than one-third to the fund. In other words, it wants to bring in other partners. Other countries, including Canada and the Nordic countries, have put in money and are coming forward in an encouraging fashion.
Lord Collins of Highbury (Lab)
My Lords, having identified TB-HIV as a strategic priority and the global fund as the lead provider for dealing with the TB epidemic and TB-HIV co-infection, will the noble Baroness tell us whether the department will follow the global fund in mandating that all HIV programming in high-burden TB and HIV countries includes specific strategies to reduce TB and TB-HIV incidence?
Baroness Northover
As the noble Lord knows, the two things go closely together. I will have to look carefully at what his question implied. Of course, both the global fund and DfID are well aware of that interrelationship. Where you have patients suffering from TB, especially when it is multidrug resistant TB, you often have HIV going alongside, so the two are being tackled together. I will need to look at the noble Lord’s question to see whether there is something in it that I did not understand.
Baroness Hayman (CB)
My Lords, I echo the remarks of the noble Lord, Lord Fowler, about the enormous benefits that the global fund has brought to international health and its commitment to transparency and to dealing with these issues when they arise. I declare my interest in malaria and neglected tropical diseases. Will Her Majesty’s Government encourage the global fund to look at partnership working and integrating programmes, particularly on maternal and child health and neglected tropical diseases, as part of the post-2015 commitment to strengthening health systems and doing that from the bottom up rather than the top down?
Baroness Northover
The noble Baroness is absolutely right. The global fund has had an effect across all those areas and I pay tribute to her work on neglected tropical diseases. DfID has been strongly supportive of that. There are a number of areas where obviously the work of the global fund is complementary. If you look at its aim to raise $15 billion, at the moment $37 billion across this whole area is coming from the developing countries, supporting the kind of work that the noble Baroness is talking about.
London Local Authorities and Transport for London (No. 2) Bill [HL]
The Chairman of Committees
That this House do agree with the Commons in their Amendments 1 to 52.
“( ) If a notice specifies an earliest date under subsection (5)(d), the authority may not begin the work after the expiry of four months beginning with that date (but that does not prevent the authority from serving a fresh notice).”
“( ) This section and section 5 shall not apply in respect of a theatre.”
““theatre” means any building or part of a building used wholly or mainly for the public performance of plays and “public performance” and “play” have the same meanings as in the Theatres Act 1968, but with the words “dance performance” substituted for “ballet”;”
“( ) For the purposes of this Part, a person to whom permission is granted under subsection (2) is referred to as an “authorised person”.”
““operate” in relation to charging apparatus for electrically powered motor vehicles includes supply or sell electricity by means of such charging apparatus;
“public off-street car park” means a place, whether above or below ground and whether or not consisting of or including buildings, where off-street parking accommodation is made available to the public, whether or not for payment.”
“( ) An authorised person shall not provide or operate charging apparatus in accordance with a permission given under section 18(2) unless the authorised person has first published a notice under this section.
“( ) In this section “the proposal” means the proposal to provide or operate charging apparatus.”
“( ) An authorised person shall not provide or operate charging apparatus in accordance with a permission given under section 18(2) unless the authorised person has consulted any authority (other than the London authority who gave the permission) who are a local planning authority for the area to which the permission relates.
( ) Consultation carried out by an authorised person before that person was given a permission under section 18(2) counts as consultation for the purposes of subsection ( ).”
“(1) A person shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale if he uses charging apparatus in contravention of a sign displayed on the apparatus which indicates that —
(a) the apparatus is not to be used for any purpose other than charging a vehicle; and
(b) it is an offence to so use the apparatus.
(2) A person is not guilty of an offence under subsection (1) if—
(a) he had the permission of the person who operated the charging apparatus at the time to use the charging apparatus for the purpose in question; or
(b) he had reasonable cause to believe he had such permission; or
(b) at the time there was on the charging apparatus an indication given by the person who operated the charging apparatus that it could be used for the purpose for which it was used.”
The Chairman of Committees (Lord Sewel)
My Lords, with the leave of the House, I beg to move that the House do agree with the Commons in their Amendments 1 to 52 en bloc. I do not intend to move these amendments individually as they all refer to minor matters. I hope that the House will agree to the amendments made in another place.
European Parliamentary Elections (Northern Ireland) (Amendment) (No. 2) Regulations 2013
(10 years, 5 months ago)
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Baroness Randerson
That the draft Regulations laid before the House on 24 October be approved.
Relevant documents: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November.
Local Elections (Northern Ireland) Order 2013
(10 years, 5 months ago)
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Baroness Randerson
That the draft Order laid before the House on 30 October be approved.
Relevant documents: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November.
Education: PISA Results
(10 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con)
My Lords, with your permission, I would like to repeat a Statement made by my right honourable friend the Secretary of State for Education in another place earlier today about the PISA league tables of educational performance published earlier today by the OECD.
“Before I go into the detail of what the league tables show about the common features of high-performing systems, may I take a moment—as I try to in every public statement I make—to thank our teachers for their hard work, dedication and idealism. Whatever conclusions we draw about what needs to change, I hope we in this House can agree that we are fortunate to have the best generation of young teachers ever in our schools.
The data show that the new recruits now entering the classroom are better equipped than ever before. I would like in particular to thank those head teachers who are, through the new school direct programme of teacher training, recruiting more superb new graduates to teach in our state schools. But while the quality of our teachers is improving, today’s league tables sadly show that that is not enough. When people ask why, if teachers are better than ever, we need to press ahead with further reform to the system, today’s results make the case more eloquently than any number of speeches.
Since the 1990s, our performance in these league tables has been at best stagnant, at worst declining. In the latest results, we are 21st in the world for science, 23rd for reading and 26th for mathematics. For all the well intentioned efforts of past Governments, we are still falling further behind the best-performing school systems in the world. In Shanghai and Singapore, South Korea and Hong Kong, indeed even in Taiwan and Vietnam, children are learning more and performing better with every year that passes, leaving our children behind in the global race.
That matters because business is more mobile than ever, and employers are more determined than ever to seek out the best-qualified workers. Global economic pressures, far from leading to a race to the bottom, are driving all nations to pursue educational excellence more energetically than ever before, and today’s league tables show that nations that have had the courage radically to reform their education systems, such as Germany and Poland, have significantly improved their performance and their children's opportunities.
There is no single intervention or single nation which has all the answers to our education challenges, but if we look at all the high-performing and fast-improving education systems, certain common features recur. There is an emphasis on social justice and helping every child to succeed. There is a commitment to an aspirational academic core curriculum for all students. There is a high level of autonomy from bureaucracy for head teachers. There is a rigorous system of accountability for performance, and head teachers have the critical power to hire who they want, remove underperformers and reward the best with the recognition that they deserve.
Those principles have driven this coalition’s education reforms since 2010. The first reform imperative is securing greater social justice. It is notable that many of the high-performing jurisdictions set demanding standards for every child, whatever their background, and Germany in particular has improved its standing in these league tables by doing more to promote greater equity to ensure more children from poorer backgrounds catch up with their peers.
The good news from the PISA research is that in England we have one of the most progressive and socially just systems of education funding in the world. But we in the coalition Government believe that we must go further to help the most disadvantaged. That is why we have made funding even more progressive with the pupil premium, extended free pre-school education to the most disadvantaged two year-olds and changed how we hold schools accountable so that they have to give even greater attention to the performance of poor children. I hope that today the Opposition will acknowledge these steps forward and give their support to our reforms.
The second reform imperative is a more aspirational curriculum. In successful Asian nations all students are introduced to more stretching mathematical content at an earlier age than has been the case here; and in the fastest-improving European nation, Poland, every child now follows a core academic curriculum to the age of 16. Our new national curriculum is explicitly more demanding, especially in mathematics. It is modelled on the approach of high-performing Asian nations such as Singapore. The mathematical content is matched by a new level of ambition in technology, with the introduction of programming and coding in the national curriculum for the first time.
In our drive to eliminate illiteracy, we have introduced a screening check at age six to make sure that every child is reading fluently. Our introduction of the English baccalaureate, which is awarded to students who secure GCSEs in English, maths, the sciences, languages and history or geography, matches Poland by embedding an expectation of academic excellence for every 16 year- old. I hope that today the Labour Front Bench will confirm its support for our new curriculum, the phonics screening check and the English baccalaureate. Our children deserve to have these higher standards adopted universally.
The third reform imperative is greater autonomy for head teachers. There is a direct correlation in these league tables between freedom for heads and improved results. That is why we have dramatically increased the number of academies and free schools and given heads more control over teacher training, continuous professional development and the improvement of underperforming schools. By giving heads control of teacher recruitment, the School Direct programme has improved the quality of new teachers. The creation of more than 300 teaching schools has put our most outstanding heads in charge of helping existing teachers to do even better. The academies programme has allowed great heads, such as those in the Harris and Ark chains, to take over underperforming schools, such as Downhills Primary in Tottenham. I hope that today the Front Bench will signal its support for these reforms and show that, like us, it trusts our outstanding heads to drive improvement.
The fourth pillar of reform is accountability. Those systems which have autonomy without accountability often underperform, but accountability has to be intelligent. That is why we have sharpened Ofsted inspections, recruited more outstanding serving teachers to inspect schools and demanded that underperforming schools improve far faster. The old league table system relied too much on a narrow measurement of C passes at GCSE, which generated the wrong incentives and wrote too many children off. We have changed league tables to ensure that every child’s progress is rewarded and ensured that children are not entered early, or multiple times, for GCSEs simply to influence league tables. I hope that today the Opposition Front Bench will endorse those changes and join us in demanding greater rigour and higher standards from all schools.
The fifth pillar of reform is freedom for heads to recruit and reward the best. Shanghai, the world’s best-performing education system, has a rigorous system of performance-related pay. We have given head teachers the same freedoms here. I hope that today we can have a clear commitment from all sides of the House to support those brave and principled heads who want to pay the best teachers more.
The programme of reform we have set out draws on what happens in the best school systems, because we want nothing but the best for our children. Unless we can provide them with a school system that is one of the best in the world, we will not give them the opportunities they need to flourish and succeed. That is why it is so important that we have a unified national commitment to excellence in all our schools for all our pupils”.
I commend the Statement to the House.
Baroness Hughes of Stretford (Lab)
My Lords, I thank the Minister for his Statement, which had a much more measured tone than the public pronouncements on the PISA results that we heard yesterday and this morning from the Secretary of State.
The results show that after three and a half years in government, the coalition has so far failed to make any further progress in improving standards in these core subjects of English, maths and science, compared to other countries. Any serious Secretary of State would regard these results as a call to action and a reason to scrutinise very carefully government policy in the light of the findings.
Instead, and typically, this Secretary of State’s line of defence has been one of attack, I think to try to divert attention from his own record. The Secretary of State claims that the UK’s current position in the international league tables is,
“a verdict on the last government”.
I say to the Minister, and believe profoundly, that if we had not had a Labour Government prioritising and investing in education year on year, the UK would be at the bottom of the league table. Without doubt, if the OECD had been comparing countries in 1996—it was not—the UK would have been on the floor. After 18 years of a Conservative Government, the education system in this country was in tatters, with crumbling schools, standards flatlining, teacher morale at rock bottom and a school system in chaos. The Labour Government, quite simply, had to rebuild that system from top to bottom.
That is why we saw the first and biggest transformation ever for pre-school children, with free early years education for all three and four year-olds and, later, for disadvantaged two year-olds. We also saw capped class sizes in primary schools and radical reform of the secondary curriculum. We introduced academies in disadvantaged areas because the Labour Government really did care about social justice and equity in our education system. We also saw massive investment in teacher and head teacher training and development, including the introduction of Teach First, and year-on-year improvements in GCSE and A-level results—achievements which this Secretary of State has ridiculed and said were a fiddle.
When we left office in 2010, the coalition inherited record results and the best cadre of teachers this country has ever had, by common acclaim, including from Ofsted. That was a solid foundation for the continued progress that we agree is undoubtedly still needed for us to compete with the rising economies elsewhere in the world. It would have been good to hear the Secretary of State acknowledge that progress, but instead of doing that and trying to build on it, this Secretary of State is in danger of squandering those advances by taking our education system backwards to didactic teaching and a rampant free market between schools.
The Minister selected certain factors that he thinks these results tell us. However, if PISA tells us anything, it is that the countries doing better have understood and are relentlessly implementing three important lessons. First, as a teacher using the Singapore maths model said on the news this morning, learning by rote is simply not good enough for the innovative technological world in which our children will work. However, this Secretary of State is returning the UK to an obsolete curriculum and an exam system that measures what children remember, not what they can actually do.
The second lesson is that collaboration between schools and schools challenging each other drive up standards. However, this Secretary of State has abolished the London Challenge, where schools worked together, challenged each other and produced the fastest rise in achievements. He also abolished the Greater Manchester and Black Country Challenges, which were beginning to produce similar results in some of the most disadvantaged parts of the country. If the Minister cares about social justice and equity in education, that should not have been done, as the scheme was addressing extreme disadvantage in our education system.
The third lesson is that qualifications, along with continuing development of teachers, is the single most important factor in improving education and achievement. However, this Secretary of State, as we just discussed in Questions, has allowed academies and free schools to employ unqualified people to work as teachers, even in core subjects. As I said, we have seen some academies putting out adverts for unqualified people with four GCSEs to teach maths.
I could not agree more with the Minister about the need to focus on social justice and equity, to introduce rigour and standards into the education system and, particularly, to make sure that those from disadvantaged backgrounds can gain the most. However, although we support some of the Government’s reforms, I cannot agree that all of their measures, taken together, will achieve those ends. Will the Minister explain to the House why the Government’s policies are flying in the face of the lessons from elsewhere in the world, which I have just outlined, that emanate from the PISA results today?
I agree that this is a most important subject and we should use the OECD findings to our advantage as far as we can. Will the Government bring forward a considered and comprehensive analysis of the OECD findings so that we can have an informed debate in public about the implications for the UK, and regear some of the Government’s reforms to ensure that we can position our young people to compete with the best in the tiger economies?
Lord Nash
I am grateful for the noble Baroness’s considered analysis. With her experience, she probably knows better than to suggest that we can be expected to have turned round the education system after only three and a half years, as Andreas Schleicher acknowledged only yesterday. It is far too early to form a verdict on the coalition’s reforms. However, we have stopped the decline. Between 2000 and 2009 we fell from fourth to 16th in science, eighth to 28th in maths, and seventh to 25th in literacy. We have now stabilised at 23rd in literacy and 26th in maths, although we have done worse in science.
I agree that the Labour Government spent 87% more in real terms on the education system, but it is all about what results you get rather than how much money you spend. We must have a concept of value for money. It does not look as though we got very good value for money. We are now building schools at half the cost per pupil of Labour’s Building Schools for the Future programme; we are building many more purpose-designed schools, and more quickly.
I acknowledge that Teach First was a splendid idea. We have expanded that dramatically. I acknowledge that the academy programme was a splendid idea—indeed, I would not be here if it was not for the academy programme. The London Challenge was an excellent example of co-operation between schools. That is why we have taken these ideas and expanded them dramatically; for example, from 200 to 3,500 academies, working together in close geographic local clusters, with schools supporting each other locally, which we believe is the only model. We agree entirely with the collaborative approach.
The unqualified teacher story seems to run and run. It is a bit of a red herring. We have brought the numbers down to 14,800 from 17,800 under Labour. It is still a tiny proportion. It is interesting that the area that the noble Baroness refers to—London, which had some of the best results—has the highest incidence of unqualified teachers. It is also true that we have a high incidence of unqualified teachers in our academies and free schools because we have nationalised quite a few independent schools. However, we are interested in the best teachers with the best qualifications and now 75%—up from 61%—of our teachers enter the profession with a 2.1 or better.
However, it would be so much better if, rather than throwing stones at each other, we all acknowledged that these PISA statistics are a wake-up call for our school system and that we should work together in a unified way to improve it. I am delighted that the noble Baroness supports some of our reforms. I know that my right honourable friend the Secretary of State for Education would love to know which reforms, and I look forward to discussing that with her further.
The PISA report contains an extremely intelligent analysis, which I recommend to everyone in this House. In particular, it states that the schools that succeed are those with high levels of autonomy and accountability—both of which the Government are focusing on—and a core academic curriculum.
Lord Storey (LD)
My Lords, I am grateful to my noble friend the Minister for repeating the Statement. I agree with him 100% that the time for throwing stones at each other, as he puts it, should be past. That is something that schools get absolutely fed up with.
The Statement highlights the importance of head teachers. We all know that strong leadership in a school produces the results and the progress that we all want. Hong Kong, Shanghai and Singapore have been mentioned. What they have in common are focused and clear ways in which to become a head teacher, to train a head teacher and to put somebody into that role. Does my noble friend agree that we need to look carefully at how we prepare people for school leadership, that we cannot just have any unqualified person leading a school and that there needs to be proper training? On reflection, was it perhaps the wrong decision to do away with the leadership college and the leadership qualification for aspiring head teachers?
Lord Nash
I agree entirely with my noble friend that we need to grow a new generation of head teachers. We are going to be short of head teachers because many of them are retiring. We will have to promote younger people, which is why it is so encouraging that so many more highly qualified people are motivated to become head teachers. Many of the academy chains have very sophisticated training programmes for their heads to ensure that we grow the next generation of head teachers.
Lord Quirk (CB)
My Lords, the Statement made no reference to one issue which must have caused a certain amount of buzzing in the DfE yesterday. His ministerial colleague, Liz Truss, addressed the Publishers Association and very largely deplored the disappearance —which may surprise many of us—of the textbook from the classrooms of both primary and secondary schools. I was astonished to learn from a Telegraph report today that, as compared with 10% use of textbooks in primary schools here, Germany and Poland have around 80% or 90%. Only 8% of pupils in English secondary schools have textbooks in their hands, whereas the figure for Finland is 80%. I compare the UK largely with other European countries because of the huge cultural differences which make comparison with Taiwan and Hong Kong a bit difficult. In view of what Liz Truss said yesterday, why does the Minister think that there is such a gap between our countries and other European countries in the simple use of textbooks in classes? Does he think that this gap between the two lots of teachers and the two lots of procedures may account for our disappointing performance and the much more hopeful performance that he has drawn attention to in Poland and Germany?
Lord Nash
I agree entirely with the noble Lord. I think that the answer to his questions in brief, although I will elaborate, is that this situation has been caused by a lack of rigour in the curriculum and in teaching methodology. I agree entirely that this lack of rigour and methodology, which is expressed in one way in textbooks, is one of the reasons why we have declined. One also needs to look at workbooks. In far too many state-maintained schools, there is a complete absence of workbooks. We are finding that some of the much more successful schools—not just academies but maintained schools—insist that all their pupils have a workbook. A workbook is something pupils can be proud of and it can be marked. Pupils do more homework and they get more feedback. In all senses, we need to instil more rigour in our school system.
Lord Knight of Weymouth (Lab)
My Lords, the Government’s reforms borrow more from Sweden than from any other jurisdiction, but the position of Sweden in these tables is going backwards. As we have heard, the reforms also built on what the previous Government did on academies. Therefore, regardless of politics—and I regret the highly political tone of the Statement—should we not learn from the top three, from Shanghai, Hong Kong and Singapore? There, parents are much more involved in their child’s learning, and those jurisdictions are designing-in collaborative problem-solving to meet the needs of employers. Given that those skills will be tested by PISA in 2015, how does the Minister think our children will fare then, given the Government’s new emphasis on rote learning and individual testing?
Lord Nash
I know that the noble Lord is very experienced in these matters. I was recently visited by a delegation from Sweden consisting of MPs and others involved in education. They were here to study our accountability system because they acknowledge that they have half of the equation right—autonomy—but not the other half. They have been impressed with what they have seen here in Ofsted and our move to a more rigorous accountability system in examination analysis. That is why they acknowledged that they have failed; I do not think that it has anything to do with autonomy.
We are learning from Singapore, Hong Kong and Shanghai, particularly in maths. We sent 50 of our head teachers, with their heads of department in maths and science, to Shanghai earlier this year. I agree entirely that parents need to get more involved. When I first got involved in the academy programme, we had one ghastly meeting in Pimlico with all the antis. They were clearly not representative of parents, so to reach out to the parents, we organised eight one-hour meetings in Camberwell and Brixton, where the parents lived, to tell them what we were doing. There were 1,300 pupils so you would think that there would be 2,500 parents. I would like to ask noble Lords to guess how many parents turned up but I will tell you—one parent came to all eight meetings. We now have more than 90% attendance at parents’ meetings, because all state schools must now send out a message to their parents that if their children go to that school, they must turn up. That is what happens in independent schools and we must try to replicate that in the state system. I entirely agree with the noble Lord.
Lord Cormack (Con)
My Lords, I follow on from the wise, perceptive question asked by the noble Lord, Lord Quirk, and my noble friend’s response to it. Is not one secret a proper, disciplined framework in every school? In 10 years as a schoolmaster and 40 years visiting schools in my constituency, it was always the case that where there was proper discipline—allied to parental enthusiasm, I would add with reference to the noble Lord, Lord Knight—and children could learn in a disciplined framework, they made real progress. Should not our primary aim when we are talking of rigour be to ensure that there is real, rigorous discipline in every school?
Lord Nash
I agree entirely with my noble friend. Across the academy system a great many sponsors have taken over schools where, frankly, the previous behaviour was very poor indeed, and put in place a very effective behaviour management system. I saw a behaviour management system in America which I thought was particularly effective. You start the pupils on the left-hand side of the page, where they basically behave because they will get into trouble if they do not, and you slowly move them across to the right-hand side of the page, where they behave because that is the society they want. They want a calm society in their school because that is the only way they can learn. More sophisticated behaviour management systems are coming into place. We have strengthened teachers’ ability to confiscate mobile phones, particularly in the appalling incidents of sexting, and given more power for detention, and so on, but I agree entirely with my noble friend.
Lord Rooker (Lab)
Can the Minister confirm that although this is December 2013, the tests on those half a million children actually took place in 2012? I have to say that it is ludicrous beyond belief, and silly, for my friends in the Opposition to complain that it is the fault of the coalition. Two years is a nanosecond for change and it is ludicrous to make such connections. I would argue that although the Secretary of State went a bit far in his Statement in throwing stones, it is also a case of “What’s sauce for the goose”.
I do not go on many school visits these days but I was in a secondary school about a month ago. It has been dramatically turned around in the last six months, since a new head arrived. He described his office to me as being set out like a war room, with all the key five factors. I asked him, “What about the staff turnover in this period?”. There were very few changes; I had walked around the school and talked to the staff as well. In other words, the dramatic changes in the school had been brought about by leadership—not by going in to clear out teachers but by leading them. Even this head will therefore require help in future. I take the point about the leadership of schools being absolutely crucial. You cannot just put the best teacher in the role of head teacher. They have to be trained to lead but it can be done. Finally, if this is a wake-up call to the schools, it is equally a wake-up call to the governing bodies. More work needs to be done there because if governing bodies take the issues seriously, it is more likely that parents will take them seriously.
Lord Nash
I am grateful to the noble Lord for his comments. He made his opening point extremely eloquently and I think we all realise that you do not turn around an ocean liner in a couple of years. He is absolutely right and we should all just avoid having that conversation in the future.
Baroness Hughes of Stretford
If the Minister will give way, I have to clarify the points I made in my opening speech. It was not that I expected the Government to have turned around a tanker. What I said was that substantial progress had been made during the years of the Labour Government, and necessarily so because of the state of the education system in 1997. In their three and a half years, the Government could have built on that progress rather than starting again with some very destructive reforms.
Lord Nash
We will have to beg to disagree on this because I do not see our going from seventh to 25th in literacy, from eighth to 28th in science or from fourth to 16th in maths as progress.
The noble Lord, Lord Rooker, referred to a war room. I look forward to him perhaps taking me to visit that school at some stage. I entirely agree on the question of leadership. I was particularly impressed when I visited the Perry Beeches schools in Birmingham, which are run by an inspirational head, Liam Nolan, and by how he has managed to turn around a number of failing schools. He has not only kept in place people who were clearly not performing well under the previous regime but promoted them to very senior positions.
I entirely agree, too, about governing bodies. Whether the school is a local authority maintained school, a church school or an academy chain, real decisions can often be made in the governing bodies and we are focusing much more on them. We have recently made it absolutely clear that governing bodies should focus on a few key things: the vision and strategy of the school, holding the head to account for the attainment and progression of pupils, the performance management of his or her staff, and the finance. We need smaller governing bodies, in many cases, but with many more of the appropriate skills.
Baroness Humphreys (LD)
My Lords, I thank the Minister for his Statement. For many years I worked as a teacher in Wales, so it was with a great deal of sadness and disappointment that I read the PISA results for Wales today. Wales performed worse than the OECD average in all measures: maths, science and reading. Since 2009, Welsh pupils have slipped from 40th to 43rd in maths, from 30th to 38th in science, and from 38th to 41st in reading—a disastrous performance which shows Wales to be the poorest performing nation in the UK.
All this makes the ambition of Wales’s Labour First Minister to be in the top 20 by 2015 almost laughable, if it were not so serious. This is the culmination of nearly 15 years of Labour control of the struggling Welsh education system. I recognise that education is a devolved matter, but will the Minister be having discussions with Ministers from the devolved nations to ensure that standards improve throughout the United Kingdom?
Lord Nash
I know that my right honourable friend the Secretary of State for Education is deeply concerned about the situation in Wales, which—quite deliberately, it seems—lacks many of the systems of accountability and rigour that we are putting in place here. My noble friend puts it extremely well: if anyone wants a case study of how not to do it, Wales seems to be it. We would be happy to have conversations with them if they were prepared to engage in conversations.
Lord Grocott (Lab)
When he read out the Statement, the Minister began by paying tribute to the work and dedication of teachers, which is the right thing to do. I hope that it was meant sincerely, not by him but by the Secretary of State who wrote it. However, I have to say to him, although I am sure that he will know this if he visits schools, as I know he does, that that respect and affection is not reciprocated by teachers up and down the country. He will know that dedicated and committed teachers see the Secretary of State as being arrogant and failing to value the commitment and quality of teachers, their advice and their experience, which in my judgment is a very bad position for any Secretary of State to take. They do not feel valued and understood by him, and they do not feel, when they express strongly held opinions, based on experience, about how and what to teach and how to manage schools, that they are respected by this Government.
I will not say that I modestly suggest this because it is not a modest suggestion, but I simply suggest as a matter of common sense that if the Secretary of State wants to make changes in our education system, then a fundamental principle of management on his part should be to get on his side the people who have to implement those changes and improvements.
Lord Nash
I think that the Secretary of State wants to improve the lot particularly of underprivileged children in this country far more than he wants to be liked. He greatly values the advice of teachers and constantly has teachers and head teachers in and out of his office. It is a fact that where you have an organisation—I have seen this in business many times—that needs to go through change because it has slipped so dramatically down the international tables, we have to make a lot of changes. That is why we are making a lot of changes quickly, because we have slipped so fast. People are always reluctant to embrace change, and I understand that teachers feel under pressure from so much change. However, we have to do it if we are to do the right thing for our teachers. Both my right honourable friend and I constantly have conversations with head teachers around the country that go along the lines of, “I know you’re unpopular and I know that teachers don’t like it, but you’re doing the right thing. Keep going”.
Lord Elton (Con)
My Lords, can my noble friend give us a little more insight into the view that he takes of the comparison between examination systems—their design, their management and use—in competitor countries? How do they differ from ours, and is that in itself one element that needs to be improved?
Lord Nash
I am grateful to my noble friend for that question. We have looked at examination systems across the world in improving the examination systems in this country. We have reduced, or rather will be reducing—again, going to the point about turning the ship around quickly, a lot of these reforms have not even come into effect yet—the number of modules and the amount of coursework and continuous assessment in exams, and we will be reducing the scandal of equivalence that went on in recent years. You could take a higher diploma in construction, a subject that even someone as hamfisted as myself would probably pass because there were no exams at all and it was entirely continuous assessment, and it counted for four GCSE equivalents. I could give noble Lords many other examples of exams that were massively overrated, doing their pupils no favours at all and not valued by employers. We have taken into account a lot of what we have seen in international systems in our reform of the exam system.
Pensions Bill
(10 years, 5 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, the Bill contains important reforms to both state and private pensions, as well as to bereavement benefits, and representsa fundamental step forward in tackling a number of significant challenges facing today’s working-age population.
Before I turn to the provisions in the Bill, I would like to commend my colleague, the Minister of State for Pensions, Steve Webb, who has been instrumental in delivering the Bill before us and who continues to make such an important contribution to improving the pensions landscape. I also pay tribute to the noble Lord, Lord Turner, and the noble Baroness, Lady Drake, whose work as former pension commissioners provides the framework for much of what we will discuss today. Pension reform has traditionally proved the ability of the legislature to build consensus on an issue, and I am sure that noble Lords will endeavour to continue in this vein.
Automatic enrolment is a product of this consensus and is creating a substantial shift in the landscape of pension saving. The latest figures from the Pensions Regulator confirm that 1.9 million people had been automatically enrolled into a workplace pension by the end of October this year, and we expect to see a total of between 6 million and 9 million people newly participating or saving more in a workplace pension by the time automatic enrolment is fully rolled out, but this Bill was introduced to Parliament because we should not stop here.
In the latest DWP report Attitudes to Pension: The 2012 Survey, only 21% of respondents felt that they knew,
“enough about pensions to decide with confidence how to save for retirement”.
No fewer than 17 Social Security Acts covering pensions since 1975 and thousands of lines of secondary legislation have meant that considerable complexity has built up in the state pension system over time.
At the core of the Bill, therefore, is the provision for the new single-tier pension: a flagship reform which will simplify the current state pension system and provide a firm foundation for pension saving. These reforms will replace the current, two-tiered pension system with a simpler single-tier state pension for future pensioners—those who reach state pension age on or after 6 April 2016.
The full rate of the new state pension will be set above the basic means test. This will help to clarify the incentive to save privately for retirement without the need for the complex savings credit element of state pension credit. The savings credit will therefore close to those reaching state pension age on or after 6 April 2016. The introduction of the single-tier pension thus reduces means-testing in the pension system, halving the proportion of new pensioners qualifying for pension credit.
There will be far less variation in state pension payments under the new system. We estimate that more than 80% of people reaching state pension age by the mid- 2030s will receive the full single-tier pension. Those who have historically done poorly in the current system, such as the self-employed, carers and those with interrupted work histories, who are often women, will benefit from the introduction of the single-tier pension. Around 650,000 women who reach state pension age in the first 10 years after the single-tier pension is introduced will receive an average of £8 per week more in state pension due to the single-tier valuation.
There will be a minimum qualifying period for entitlement to the new single-tier pension. This period will be set out in regulations, but I am able to advise noble Lords that the Government have today announced that this is to be set at 10 years, in line with the assumptions made in the White Paper and the impact assessment. Integral to the single-tier reforms is the closure of the state second pension for people reaching state pension age on or after 6 April 2016. Contracting out of the state second pension for defined benefit schemes will therefore come to an end in April 2016 and all employees will pay the same rate of national insurance and become entitled to state pension in the same way. As part of the simplification of the system, the outdated provisions which allow a spouse or civil partner to boost their state pension on the basis of the record of their partner or ex-partner will end. These provisions, introduced in the 1940s, are no longer appropriate for today’s society, where the vast majority of men and women get a full basic state pension in their own right.
In addition to reforming the state pension system to make it simpler, the Government are taking action on state pension age to ensure the system remains affordable and fair between generations in light of continuing increases in life expectancy across all socioeconomic groups. The Pensions Act 2007 set the original timetable for increasing the state pension age to 66, 67, and 68. Since then, the average life expectancy of a man reaching age 65 in 2013 has increased by over a year. We are therefore bringing forward the increase in state pension age to 67 by eight years, so that it gradually increases from 66 to 67 between 2026 and 2028. No one will experience a rise in state pension age of more than 1 year compared to the original timetable that was set by the Pensions Act 2007 and I can assure noble Lords that this will not affect anyone whose pension age was changed by the Pensions Act 2011.
The fact that people are living longer is to be welcomed. Yet continued increases in life expectancy place a great deal of pressure on the pensions system. The Bill therefore also provides for a regular review of the state pension age so that is it considered once every Parliament. This will ensure that the state pension age is examined in an open and transparent way on a regular basis and prevent future Governments from needing to take emergency action. As part of these reviews, the Government of the day will ask the Government Actuary and an independently led review to report on life expectancy and a whole range of other factors relevant to setting the state pension age. The Government will then consider what adjustments, if any, should be made to pensionable age. This is not an automatic mechanism for future increases, however, and any resulting proposals to change the state pension age would still need to be set out in primary legislation.
I turn now to Part 3 of the Bill, which provides for the abolition of the assessed income period in pension credit. The assessed income period was introduced as part of pension credit in 2003 and was a new approach to case maintenance for customers aged 65 and over. This was based on the assumption that pensioners were more likely to have relatively stable incomes with fewer changes in their circumstances and so a lighter touch maintenance and review regime was deemed appropriate. However, it has proved more complex than originally anticipated and the assessed income period has allowed inaccuracies to build up in the system. As customers with an assessed income period do not need to inform the department if they experience changes in their capital or the make-up of their retirement income, an increase—for example, a windfall—can legitimately be ignored until the end of the period. Many see this as unfair, particularly in the current economic climate. The Bill will therefore abolish the assessed income period from April 2016. Older customers will be protected through the continuation of existing indefinite assessed income periods for those aged over 75.
Moving on from state pensions, the Bill contains measures to reform the bereavement benefits system through the introduction of the bereavement support payment, which will both simplify and modernise the current complex payment and contribution system of bereavement benefits. The current system was introduced at a time when women were not seen as workers and when widows were left destitute. However, society has changed. Women are no longer expected to be dependent on their partners and we now have an expectation for people to work, with universal credit to support those who cannot.
However, we recognise that many working-age people, regardless of income, do not make contingencies for the loss of a spouse or civil partner and are unprepared for the significant financial impact in the period immediately following the bereavement. We have therefore designed the new payment to focus on this period. It will support people with the additional financial pressures associated with bereavement, helping them plan during the readjustment period and better understand what they will receive from the state while encouraging a supported return to work for those without employment. An additional £110 million will be invested in bereavement benefits during the first four years of reform, so that existing recipients are protected over the course of the next Parliament and those who claim the new bereavement support payment get the help they need when they need it most.
Finally, the Bill contains a number of private pensions measures. As I said earlier, 13 million people are currently not saving enough to ensure an adequate income in retirement. Furthermore, the number of employees saving into a workplace pension has declined from 12.9 million in 1997 to 12.1 million in 2012. It is expected that automatic enrolment will see between 6 million and 9 million people either starting to save or saving more into workplace pensions, and the introduction of the single-tier pension will ensure that the state provides a good platform for private saving. Measures in the Bill are therefore designed to build on these reforms and give people greater confidence in pension saving.
As a result of more people saving into a private pension we expect to see more dormant pension pots as people move jobs—up to 50 million by 2050. The Bill therefore contains powers to introduce a pot-follows-member system of automatic transfers of small pension pots. This will help people to better keep track of their pension savings and ensure that they reap the benefits of consolidating those small pots.
The automatic enrolment of people into pension schemes and the introduction of automatic transfers make it all the more important that schemes used for workplace pensions are well governed, well administered and offer value for money. The Bill therefore extends powers to set minimum quality requirements for workplace pension schemes and to limit or prohibit charges to allow the Government to respond to the recent consultations on these issues accordingly. In addition, the Bill contains a number of measures to clarify and strengthen existing private pensions legislation, including a power to prohibit the offering of incentives to transfer pension rights. Finally, the Bill gives the Pensions Regulator a new objective to minimise the impact on the sustainable growth of an employer when regulating defined benefit pension scheme funding, and it also makes changes to the calculation of the Pension Protection Fund’s compensation cap to reflect long service.
Following further work done by my department and the report from the esteemed Delegated Powers and Regulatory Reform Committee, I plan to bring forward a small number of amendments during the Committee stage. I will ensure that noble Lords are made aware of those in good time. I very much look forward to an informed and constructive debate on the reforms and measures in the Bill, both this afternoon and over the coming months. I particularly look forward to hearing the maiden speech from my noble friend Lord Balfe, who I am sure will make an erudite contribution to this afternoon’s discussion.
To sum up, this Bill introduces significant reforms to state and private pensions and will bring our pensions system into the 21st century. It will allow security in old age and provide a firm foundation for today’s working-age people so they can save with confidence for their retirement, an ambition with which I am sure noble Lords will wholeheartedly agree. I commend this Bill to the House. I beg to move.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for that introduction. This Bill builds on the foundations laid by the Labour Government and, for that reason, we support many of its provisions. I hope that with the Minister we can find some consensus around the major direction of travel. I also hope that he will work with me in seeing what we can do during the passage of the Bill to make pensions interesting. I do not promise that my contribution today will advance that cause greatly, but it falls to all of us, if we want to raise the level of saving in this country, to try to raise the level of interest in it as well. So far, when anyone asks me what I am working on and I tell them that it is the Pensions Bill, I find that they have looked at their watch before I finish the sentence. I look forward to all the speeches, including the maiden speech, and to seeing what we can do to advance “Project Interesting”.
Moving firmly away from that agenda, I may say that one reason why we agree with the idea of a single-tier pension is that it is very much the direction of travel that the previous Labour Government took. However, we have some significant questions about the way in which this Government are doing it and about the decision to go with what is known in the trade as a hard/fast transition. We agree, too, with the need to address the way the state pension age is raised, but we have different views on the best way to achieve consensus around that.
The project of overhauling both state and private pension provision is of crucial importance to the future of our country. We on these Benches will do all that we can to improve this Bill to ensure that it is fit for the job ahead. But that job is a tough one, made harder by the climate of mistrust which obtains at present—mistrust of the industry, which we must all address, and, I regret to say, mistrust of government. People can become cynical, and sometimes have, in the welfare area, when something presented as a reform turns out all too often to be really just a cut. It is popularly assumed that with financial services products the bad news and exclusions are buried in the small print. The same may be true here, of course. Parliament does not yet have the small print, or the regulations, as we call them, but I hope that the Minister can tell us how soon we can get them. But we must maintain an appropriate degree of scepticism until we see what the detail is. That is particularly important in the light of the 13th report of the Delegated Powers and Regulatory Reform Committee, to which the Minister referred, which has a great deal to say about how this Bill uses regulations. So I look forward very much to the amendments that will come forward from the Government shortly.
Before moving on to the detail, I, too, would like to say a few words about the context of this Bill and background. When Labour came to office in 1997, we inherited two challenges in relation to pensions from the previous Conservative Government. First, there were disgracefully high levels of pensioner poverty, much of it among generations who worked hard to rebuild Britain after the last war. The second problem was the degree of mistrust in the pensions industry, some of it caused by the mis-selling scandals of the 1980s and 1990s. Labour addressed both challenges head on. We introduced a minimum income guarantee for pensioners, lifting incomes from £68.80 per week in 1997 to more than £132 by 2010. Under Labour, pensioner poverty fell to the lowest level for 30 years. We pegged pensions to increase in line with earnings and brought in pension savings credit to tackle the 100% marginal deduction rate facing many savers. We brought low earners and carers into the state second pension and introduced legislation for auto-enrolment. I pay tribute to the Government for taking that forward and implementing it. Crucially, we reduced the years of national insurance contributions required for a full state pension from 44 years to 30 years for men and from 39 years to 30 years for women. We also set up the Turner commission, to which the Minister referred. I, too, add my congratulations to the noble Lord, Lord Turner, and my noble friend Lady Drake on the excellent work that they did.
Labour supports the creation of a simple state pension system, and we are committed to the goal of encouraging people to save into private pensions in which they can have confidence. But we believe there are three tests that this Bill must pass if it is to achieve those objectives. First, is it fair to all those who have contributed? Secondly, is it sustainable in the long term? Thirdly, does it create a decent standard of living for all and, within that, will it encourage the private pensions saving that the Government are banking on to ensure decent retirement income? We will apply those three tests to the Bill as we scrutinise it over the weeks ahead.
I turn briefly to each part of the Bill. The biggest challenge to understanding the reforms to state pension provision in Part 1 is figuring out who are the winners and losers. The Minister has graciously allowed us access to his officials so we hope to dig down into that before Committee. However, I wish to lay out some big questions, on which I hope he can come back. First, as the Bill goes through the House, the Minister will need to confirm the precise level at which the single-tier pension will be introduced. The reason for that is twofold. First, the Work and Pensions Select Committee recommended that, given the importance of the principle that the STP is above the level of the pension credit guarantee, the level should be on the face of the Bill. Furthermore, paragraph 3 of the DPRRC report said that the Bill is drawn in a way which means that,
“for the first time, the rate of the state pension will be specified only in subordinate legislation”.
Given that, the Minister needs to tell the House what the level of the STP will be.
Secondly, there is the issue of those 700,000 women born between 1951 and 1953 who will have to wait longer to retire but will not get the new single-tier pension, unlike men of the same age. While a line has to be drawn somewhere, I think the House will want to reflect carefully before concluding that, after a reform of this scale, a twin brother and sister should find themselves in such markedly different positions.
Thirdly, some people who are married or widowed will receive a lower pension because the derived entitlements to which the Minister referred have been taken away. In other words, they would have expected to get a higher pension based on their husband’s or wife’s contributions, and they will now not be able to do so. Although state pension rules of course change over time, this is a long-standing provision around which some couples have planned their retirement income. The Work and Pensions Select Committee recommended that women within 15 years of state pension age should retain that right, so I would be very interested to know why the Government decided not to accept that advice.
Fourthly, the move from 30 to 35 qualifying years could mean that a number of people, especially women and the low paid, are less likely to get a full state pension, and someone with 9.5 years of national insurance contributions will get not a penny in state pension. The House will want to understand more about the rationale for that and the consequences of that shift which reverses a significant Labour reform which reduced the number of years to 30. I would also be grateful if the Minister could confirm for the record what the safety net will be for those who do not have 10 years of contributions.
Then we have the issue of the abolition of the savings credit element of pension credit. We are concerned that that will penalise those who have savings and could discourage saving in future. We will want to understand who will lose out and by how much and whether there is an issue about passported benefits which are currently attached to that. I hope that the Minister can tell us more about that either today or as we go through Committee.
Finally in Part 1, we will want to examine the impact on both public and private sector pension schemes of the changes relating to the ending of contracting out. In addition, when these reforms are implemented, national insurance contributions for contracted out workers will rise, as will those for their employers. The Bill allows private pension schemes to amend their terms to take account of the increase in employers’ contributions but public sector schemes cannot do that, presumably to avoid destabilising the public sector pension settlements. That leaves an unfunded cost on the shoulders of public sector employers. Can the Minister tell the House whether the Government have committed to meeting that cost for those public sector employers, perhaps from the £5.5 billion windfall the Treasury will get as a result of increased national insurance contributions?
In Part 2 of the Bill on pensionable age, the major issue relates to the proposal to have regular reviews of pensionable age, at least every six years. We agree with the need for periodic review, but the Minister is right to say that everything around this needs to be consensual. We agree with the principle but we think that, done badly, this could be very bad and could remove certainty for future pensioners and damage trust in the system, undermining incentives to save for the future. It is vital that the way the state pension age is reviewed is not just fair, but seen to be fair, ideally delivering cross-party consensual support for reforms in which the public can then have confidence. We believe that the best way to do that is for the reviews to be overseen by an independent cross-party panel, including a Cross-Bench Member of this House, and for it to have a broad remit. It should be tasked to consider not just the latest trends in life expectancy and the long-range public expenditure issues but also, for example, differences in life expectancy for different socioeconomic groups and the degree to which health and ageing go hand in hand.
I will return to Part 3 on assessed income periods when we get to Committee.
Part 4 is very interesting, proposing, as it does, a complete overhaul of bereavement support. As I understand it, bereaved people under 45 without children will benefit, receiving a flat-rate grant for one year for the first time, but I think that bereaved parents with children will be the losers. At the moment, they can claim widowed parent’s allowance for as long as they claim child benefit, although in fact the average length of claim is just five years. However, in future their support will last for only a year, and that is a major shift. We have received strong representations from charities which work with families with children, particularly bereaved families, and which are worried about the impact of this reform on bereaved parents. It would be helpful if the Minister could explain the Government’s rationale behind this. Although there may be more investment in the short term, I understand that over the long term the measure will save money, or at least be neutral, and effectively it will therefore redistribute money from parents with children who lose a partner to people who do not have children. Understanding why that choice was made would be helpful.
We are also very concerned about the conditionality requirements. The Minister mentioned that society has changed and that people are expected to work. They are, but early widowhood is not just an ordinary time for someone to go out to work. When families lose one parent, the effect on the other parent can be very severe. I hope that the Minister will think again about the conditionality requirements so that a person will not be expected to go out to work just six months after losing a partner. That would be very difficult.
Finally, I turn to Part 5 on private pensions. The Government have explained to us the numbers coming into auto-enrolment. If we think about this, it is clear that the state owes a very serious duty of care to those who have auto-enrolled into the pension system. If we are going to ask people, at a time of wage stagnation and a cost-of-living crisis, to forgo spending on themselves and their family today in order to invest for the future, they absolutely must be able to trust their pension providers.
This is a huge industry in the UK. About £180 billion is invested in trust schemes and £275 billion of assets is invested for DC schemes. Some 180,000 people with assets worth £2.65 billion have money in pension pots with annual management charges of over 1%, and 400,000 people a year buy an annuity. The numbers are eye-watering but the principles are pretty simple: the pension industry has to deliver value for money. However, the OFT study published this year made it clear that there are some serious issues in this industry which need addressing.
We propose a number of ways in which the Bill could address the challenge of building a private pension sector that people can trust. The first is to improve pension schemes. We will argue for the full disclosure of all costs and charges, including the costs extracted by fund managers, and stronger trustee-based governance of savers’ pension money, including the extension of fiduciary duties to all intermediaries who handle pension savings and policies, with the aim of encouraging bigger, better, stronger, well resourced and expert pension schemes which are more able to provide value for money for savers.
The second proposal is better management of pension pots when people move jobs. We absolutely agree about the need to make sure that people do not lose track of pension pots when they move to a new job, but we absolutely disagree with the way that the Government have decided to do this. The Government have chosen “pot follows member”, as it is known in the trade, but that raises some really serious questions. The most important are probably, first, the potential for customer detriment if, for example, the new employer’s pension scheme is worse than the one that the person is leaving, and, secondly, the real concerns about administrative complexity and the cost of this way of doing things. We will need to drill down to that in Committee.
Our preferred solution would be for the pot, by default, to move to an aggregator such as NEST, or one of its competitors, rather than to the new employer’s scheme. That is not just a Labour position; it is backed by many key experts, as we will come back to in Committee. In fact, the DWP went out to consultation on this and, even though a majority of respondents preferred the aggregator model, the Government chose to plough on with “pot follows member” instead. I would be very interested to understand why the Government are so set on this mistaken path. I genuinely cannot see why they are so set on it. None the less, we shall seek to improve the Bill in Committee by bringing the aggregator model firmly into play.
Thirdly, pension charges have to be reasonable if people are to have confidence to invest their hard-earned money. I am sorry to say that it has taken the Government a long time to wake up to this issue. More than one year ago, my right honourable friend Ed Miliband raised the issue of pension charges and Ministers accused him of scaremongering. They said that no action was needed because the market was “vibrant”. In another place, the Pensions Minister ignored the evidence presented by experts. He stonewalled the determined efforts of my honourable friend Gregg McClymont as the Bill went through elsewhere to try to do something about pension charges. I am delighted to say that Ministers have now acknowledged that there is an issue and we are promised a consultation and a cap on charges. I absolutely welcome this change of heart. As I am sure the right reverend Prelate the Bishop of Derby will confirm, there is more rejoicing in heaven for the one sinner who has repented than there is for the 99 who have always been there. I welcome the Minister and the Government to the happy place which Labour has happily occupied for some time. However, we will need to drill down on this in Committee. We will need to understand exactly where the Government are going on this, the right level for the cap, whether the cap will include the full range of charges and deductions, and how soon action will be taken.
Finally, there is the means by which people turn their pension pot into an income for retirement—decumulation, in the jargon. Most people use their pension pot to buy an annuity. We are the annuity capital of the world. More than half of all annuities are sold in the UK but the annuity market has some serious issues and is badly in need of reform. Performance is hugely variable, charges are often unreasonably high and the margins are such as to raise serious questions about whether they are value for money for savers. We will seek to amend the Bill in Committee and on Report to ensure that people approaching retirement receive good quality, independent advice, something that is already best practice and available in many of the larger schemes.
In conclusion, there is much to do to improve the Bill but we very much welcome the direction of travel. At heart, pensions are about trust; trust that the system is fair and sustainable, trust for savers that their contributions are safe, and trust that the market is working fairly and in the interest of savers. People in Britain must trust us to ensure that, having contributed to pensions for their whole life, they will have the income to afford a decent standard of living and to enjoy their later years. We hope that the Minister will work with us in Committee and on Report to provide the House with all the information that it needs and help us all to make the Bill the best that it can be. That is what the pensioners of tomorrow expect and it is what they deserve.
Lord German (LD)
My Lords, the noble Baroness, Lady Sherlock, has set me quite a challenge in making pensions interesting, although I might venture to say that the capping of pension charges has appeared on the front pages of a large number of newspapers in recent weeks. I must say to her that calling my honourable friend Steve Webb a sinner is perhaps a step too far.
This Bill will transform the state pension system by introducing its new single flat-rate pension. I, too, pay tribute at the outset to all those who have contributed to its happening. I particularly want to acknowledge the hard work and dedication of my honourable friend the Pensions Minister, Steve Webb, not just for bringing this Bill to Parliament but for bringing to fruition a policy which reflects my party’s long-standing aspiration for a citizen’s pension. We have worked for that for many years.
The new single-tier state pension will particularly benefit women and the self-employed. It will also make it easier for people to understand what they will receive from the state when they retire. It will help to promote private saving and build on the base of auto-enrolment, which in itself has had a most encouraging start. Under the current state pension, a woman on average receives £40 less a week than a man. The new single-tier system will treat men and women alike. The Institute for Fiscal Studies estimates that of women arriving at state pension age in the first four years of this policy—between 2016 and 2020—61% will see their pension income increased as a result, and that there will be further progress as time passes by.
The IFS analysis also shows that the gains are greatest for those who have spent periods not in work, caring for children, and for those men and women who have had long periods of self-employment. The new system will fully count time spent out of work caring for children, which is of particular benefit to women, who are still more likely to take time out of work as a result of starting a family. The new system also benefits self-employed people, who currently lose out as a result, among other things, of irregular working patterns and the difficulty of applying a means test to them.
The benefit of simplicity cannot be overvalued. Simplification is very worthwhile. It enables people easily to understand their future position in respect of a state pension, which in turn should act as a spur to help people save more for their retirement. Coupled with automatic enrolment, we should see the quality and cost of private saving schemes improve. That is why the Government’s proposal to cap pension charges is so important. It is a crucial part of the mix in creating a strong, good-value and sustainable future pensions offer.
Reading through speeches from the other House and responses from a wide variety of interest groups, there would appear to be broad support for the single-tier proposal, and in particular for where it will stand when brought fully to fruition. At that point, the vast majority of people will have 30 or more qualifying years, and they will get at least as good a pension from the single-tier proposal as they would had the current system continued. However, as with so many policy changes, transitioning from one system to another is where we find the most difficulties.
Of course, as pensions provision has a long timespan tail, transitioning becomes even more difficult. The Government have made significant changes to the transitioning arrangements from when they first appeared as a policy proposal, but I know that your Lordships’ House will wish to examine and probe to see if the best balance, in the light of all the circumstances, has been struck. This is a complex issue, but there are some broad issues in the Bill that I would now like to highlight.
The first relates to public sector contracting out in pensions. As it stands, the Bill provides for private sector pension schemes to be able to amend their rules to accommodate the loss of income from national insurance contribution rebates. These permitted scheme changes can go no further than recouping the loss of these rebates, but can be used more than once to achieve any objective—perhaps by staging changes according to the strength of their overall funds. But this ability to modify does not apply to public sector pension schemes.
Public sector schemes cannot alter contribution levels into their funds, nor can they alter the benefits offered. Yet there will be a reduction to these schemes in national insurance contributions, of 1.4% from employees and 3.4% from employers. Meanwhile, the Government retain this money—which some estimate at £5.5 billion a year from 2016 onwards—for, among things, forward-funding the requirements of this new pension.
A helping hand to employers has been introduced to allow them from next April to offset the first £2,000 against their national insurance bill. This means that many small companies will pay no national insurance at all. Some of the retained government finance has already been committed to meeting the financial demands of other age-related policies, such as funding the care proposal cap outlined in the Dilnot report. Roughly on a 5:7 to 2:7 ratio, two-sevenths of the retained money has been allocated and five-sevenths remains to be allocated. That is an annual unallocated multibillion-pound sum.
I recognise that this could be seen as a decision to be taken by the Chancellor of the Exchequer at some stage in the future, at the beginning or after the beginning of the single-tier proposal. However, just as the current Chancellor has allocated support in certain areas in advance of retaining the current national insurance contribution rebates, I would like to understand why the Government cannot go further at this time.
By way of example, if we were in times of plenty, with public sector pension funds running strong surpluses, pension schemes would be able to deal with the changes in contributions. However, many funds are not. I wonder if my noble friend would agree that without the power to amend their schemes, any shortfalls will have to be made up by the public sector organisations responsible; and that this could mean local authorities, who are currently so stretched for resources to meet the urgent demands of their communities, having to find the extra cash needed to sustain their pension funds. It would therefore make sense for the Government to give some forward commitment to pension funds to enable them to bridge the transfer to the new regime.
There are also mixed schemes, with both private and public contributors, which will be treated as a public sector scheme, and others with public and private sector contributors that perhaps will be treated as a private sector scheme. I will quote my own example, and declare an interest. I receive a pension from a public sector pension scheme, but my contributions are, and were, made by a charity—a company limited by guarantee—which obviously was not in the public sector. Some of these anomalies are not immediately obvious, and I believe that we need further clarification on this very important issue during the course of the Bill through your Lordships’ House.
I am sure that my noble friend will be pleased to note that I do not intend to press for a review of the overseas frozen pensions issue, as raised by Clause 20. I am well aware of the costs to the Exchequer, and of the European Court of Justice decision. However, this issue is an anomaly and I can understand the feelings of many UK pensioners living in those countries, where no agreement was reached so many decades ago. Will the Minister tell the House how many Governments of countries with whom there was no such agreement have expressed an opinion on this matter to the UK Government—and, if so, whether any of them had a deal to offer? I would be grateful if the Minister could make any such correspondence available.
This Bill, not unusually, has tacked on to it a measure that is only loosely related to its principle—that of bereavement benefit. The current system pays people a relatively small lump sum and then a taxable weekly benefit over a longer period of time. It also uses a complex system of contribution conditions that makes it difficult to calculate what people will receive.
We are told that the reforms in the Bill are based on what people have told the Government would provide them with the most support. I understand that the Government believe they are not about reducing entitlement or saving money. However, there is one part of the reforms that is particularly harsh—and, some might argue, cruel. The Government will expect parents of bereaved children to look for work just six months after the child’s mother or father has died. Kinship carers, by contrast, will be exempt from full work-search requirements for a year after a child comes to live with them, to allow the child to settle. As charities have pointed out, this could lead to the perverse situation where a father caring for his daughter after his wife's death would be required to work within six months, whereas if the child went to live with an auntie, a full year could be dedicated to helping her adjust. Subjecting widows and widowers to full conditionality at such an early stage in their grief may be counterproductive; it may increase stress and anxiety, which in turn may lengthen time away from work.
In most families, the current weekly payments of bereavement benefit assist with general living expenses, with many finding those essential to meet basic living costs. Where the person who died was the main breadwinner, the benefit goes some way to replacing their income, allowing some continuity with arrangements for looking after the children. For others, it allows the surviving parent more flexibility to work fewer hours or to change jobs or even sector to fit with their new responsibilities as sole carer of their child. Requiring bereaved parents to complete a readjustment in just six months is harsh indeed, and I hope that the Government will reconsider it.
We will have an opportunity to examine this matter as well as other matters related to transition issues during the Bill’s passage through this House. We on these Benches will not lose sight of the value of this measure to our country.
This Bill is to be welcomed. It sets in train a new pensions settlement for the people of this country. It treats men and women, employed and self-employed, equally. It is easy to understand and simplifies the complexities that are a huge fault in the current system. It will help people of working age to make sensible choices about the need for additional saving for retirement. Whatever changes are sought, I hope your Lordships will recognise that this vision of a better pension is a goal worth pursuing.
Lord Brooke of Sutton Mandeville (Con)
My Lords, it is always a pleasure and privilege to follow my noble friend Lord German on DWP matters, where his own knowledge shames my ignorance but reassures me that the Government’s position is being knowledgeably defended.
When we debate subjects other than specific legislation, there is a happy convention that we congratulate the noble Lord who has secured the debate on having done so, and we can normally find it in us to congratulate him or her on the manner in which he or she has opened the debate and developed the underlying issues. We then speak to a time limit that is rationed by the time available for the debate. The latter does not apply to Second Reading, where we receive polite advice, on some occasions, from the Captain of the Gentlemen-at-Arms as to how long individual Back-Benchers can speak, if they are as anxious as the rest of your Lordships’ House to conclude the debate by 10 pm. Ironically, the more speakers, the more likely it is that some individual speakers will exceed the ration suggested by the Chief Whip. Today, this privation does not apply and, perhaps equally ironically, I propose to make a very short speech.
As to the absence of the normal advance congratulations to the Minister opening the debate, I find myself in the position of congratulating my noble friend not only on having secured the debate but on his substance. He has of course secured it through his and his DWP colleagues’ persuasive logic in L Committee and I join your Lordships’ House in its commendation of the Pensions Minister himself.
I am not myself competent to take up the challenge from the noble Baroness, Lady Sherlock, to make pensions interesting, but I entirely welcome her challenge to your Lordships’ House at large. In the note from our Library on the Bill, I was struck by the reasoned explanation of how British state pension legislation had evolved over the past century since our noble friends the Liberal Democrats initiated this provision in their pre-World War I legislation. I am perhaps one of the rare Members of your Lordships’ House who can truthfully say that, as in the old saw, Lloyd George knew my father, as my noble kinsman arrived in the House of Commons at the first by-election after Munich.
The Library note goes on to describe the state of the state pension in 1945 when World War II ended. It goes beyond that to say that much of the relevant legislation since then has been attaching legislative barnacles to the good ship “Provision for Old Age”. When I say that I congratulate my noble friend on the substance of the Bill, I am congratulating him and his department not only on riding the two bareback horses of welfare reform and pension revision at the same time, but on the extent to which the pension revision in the Bill improves the hull of the good ship “Provision for Old Age”—to the extent that the Official Opposition in the other place, echoed today by the noble Baroness on the opposition Front Bench, have felt able to launch it in our House with their support, whatever continuing gaps they have identified.
I ask my noble friend, in his wind-up speech, not to omit to acknowledge what gaps still need attention. Ideally, he should identify how he thinks they should be tackled and refined, even if it may be in the next Parliament. If he can do that with candour, and avoid some of the things that have gone wrong since 1945, a grandchild of mine, especially if he or she reaches either House of this Parliament, may be able to follow the Lloyd George saw with his or her own version: “Lord Freud knew my grandpa”; and, in yet another place, I shall smile quietly.
Lord Hutton of Furness (Lab)
My Lords, I draw your Lordships’ attention to the interests that I have declared in the register. I am an unremunerated non-executive director of Pension Quality Mark Ltd and advisory director to Dimensional Fund Advisors.
There is a great deal in the Bill that can be welcomed and supported. I genuinely believe that it takes forward much of the consensus that has recently been established in this country about the best way to ensure that more people retire with an adequate pension. That is a very important thing to be doing. There are some people—maybe even in this House—who recoil from the concept of a consensus in politics, but when it comes to pensions policy, consensus is a very important thing to strive for, in that it establishes the conditions for people to plan for the future with some confidence. The one thing that has bedevilled pensions policy in the UK in recent years has been the constant stop and start, chop and change, which has acted as a deterrent to people saving.
I, too, pay tribute to the noble Lord, Lord Turner, my noble friend Lady Drake and Sir John Hills—the three commissioners who made up the Turner commission —for helping us to focus our collective attention on two fundamental problems that we face in this country. If the goal is to ensure that more people retire with an adequate income, which I think is the right policy because we cannot ask the taxpayer to shoulder the principal burden in future years in the way that it has done in the past, we know that we have to address these two fundamental problems.
Not enough people are saving and what they are saving is probably not going to be enough to give them an adequate retirement income, so we have to address that. We are addressing that now with auto-enrolment. The speakers in this debate have already drawn attention to the progress that we are making. The Minister referred to the nearly 2 million savings accounts that have been established under auto-enrolment. That is to be welcomed, there is no question at all about that, but we need a reality check here. These are early days for auto-enrolment. The big challenge and the big test for auto-enrolment are still to come, but so far so good: we are making good progress.
However, we should never lose sight of one very important factor: it is wrong to say that we have an established or developed savings culture in this country. In fact, the opposite is true. We know from the Office for National Statistics survey of occupational pensions that in the year running up to auto-enrolment the number of occupational pension savers in this country fell by almost half a million—in one year. It is going to be a significant challenge to move from a culture that honours and pays homage to debt, consumerism and spending to one that puts a premium value on saving, but we have to make that transition. Auto-enrolment is the right policy to ensure that we make progress in that direction. The Bill makes some changes to auto-enrolment, such as the technical changes in Clauses 36 to 40. Some of those are to be welcomed. There is quite a lot of detail that needs to be fleshed out as we move to Committee and Report.
The issue of how much people are saving is altogether more complicated. Today is probably not the time for a debate about how much people are contributing via auto-enrolment into these new savings accounts, but the time is probably not far off when we will have to have a very honest debate in this country about whether 8% or 9% of earnings going into a defined contribution pension will be sufficient to guarantee people a decent and adequate pension in retirement. I, for one, do not believe it is.
The group of savers that we should be most concerned about are actually not those who are the lowest paid. They will do well in auto-enrolment, together with reforms to the state pension that I want to say a word or two about in a minute. The people we in this House should be most concerned about are those on median earnings, who are above the lowest threshold of earnings, who are almost certainly not heading in the right direction at the moment when it comes to ensuring that they have adequate pensions. That debate cannot be postponed for very much longer.
The second of the two big problems that we face in this country concerns the state pension. It has been clear to all of us—it was certainly clear to my colleagues in the previous Government—that the state pension has become far too complicated and far too wrapped up in means-testing, and there is a serious risk that it will act as a deterrent to people taking the principal responsibility themselves to save for their retirement. That would have been a major, mortal threat to auto-enrolment and the principle behind it, which is to shift over time the burden of responsibility for saving from the state to the individual.
Like my noble friend Lady Sherlock, who made an excellent speech from the Front Bench—to be fair, the Minister did too—I think that moving to a single state pension represents an historic opportunity to make sure that we avoid that car crash. Moving to a single state pension can complement auto-enrolment and not undermine it—and there would have been a good chance of that happening if we had continued on the path that we were on.
All I shall say about the single state pension today on Second Reading is that reform, very important and welcome though it is, is not going to be straightforward. I remember well the time when I had just become Secretary of State for Work and Pensions. I was going through a briefing with my officials on the nature of the state pension. We had a full discussion about that—there were pages in my briefing note about it and I hoped that I had got my head around it. When I turned the volume over to deal with the state second pension, there was nothing in the folder. I asked the Permanent Secretary at the time, “Where is the briefing on the state second pension?”. He said to me, “Secretary of State, it’s too complicated for us to explain it”. I was never quite sure whether he meant, “You aren’t capable of understanding it so I’m not going to bother with trying to do that”, or whether they were saying something which was actually true—that is, that it had become too complicated. I think that the latter is the case. There is no doubt in my mind that it has become complicated. As a consequence, there are some genuine transitional issues to sort out. I am quite sure that it is the right thing in principle to be doing. We know that some people will lose out; for example, people who due to their earnings would have built up a higher state second pension if these changes had not been made. It will be very important, although the principle is right, for Ministers to keep their minds open about how this change can best be implemented. However, as I have said, I think that it is the right thing to do.
Like others, I welcome Part 2 of the Bill, in particular the commitment to keep the pensionable age under regular review. This change will be necessary if we are to stay ahead of the demographic changes that have already had a tremendous impact on our society and that, if anything is true, are accelerating. Many think that at some point this trend for longer life expectancy will flip into reverse; I really doubt that to be true. There is no doubt that the pressures, both financial and societal, will build up unless we stay ahead of the process of demographic change.
That is easier said than done in many respects, and I say that for one reason: the age at which people retire, certainly for men, and for women in fact, had not changed for several generations. My grandfather would have retired at the age of 65. We have all come to expect as a natural order of things to get to that age and then retire. That is the old world and it has to be left behind, but it is sometimes difficult to persuade people to understand that. The good news is that I think that people have generally taken a very pragmatic view. If you compare the response in Britain to the increasing age at which the state pension is payable with the response to similar reforms in other European countries, you can detect a degree of welcome pragmatism here in the UK, and that bodes well for the future. However, further change is necessary and it is right that we make sure that the process is as objective and non-partisan as possible, which is why Part 2 is to be welcomed.
There is therefore a great deal to be welcomed in the Bill. I would like to say that the same is true of Part 5, particularly the clauses dealing with the transfer of pension benefits, but I really cannot say that to your Lordships’ House. The Government have made a significant mistake, or stand on the threshold of doing so, in their reforms around pot follows member.
The Minister made it clear that there could as a result of auto-enrolment be up to 50 million small pension pots being established. People will change employment fairly regularly, particularly early on in their working careers, and there is a danger of lots of small pension pots being developed and basically left dormant. We should not be complacent about that; we have got to decide what to do about it. The Government have come up with the idea of pot follows member. The other obvious course open to them, which my noble friend referred to from the Front Bench, to use aggregation as the default option, has been rejected.
I say to the Minister that I hope he can reflect on this with his colleagues. I think that a mistake is about to be made here and I hope that we can avoid it even at this late stage. I have nothing in principle against pot follows member—there is a logic to it—but making it the default option through legislation is the wrong decision. I say that it is wrong because it lacks ambition. It exposes some savers to the risk that they will move from well run, well managed, good value-for-money schemes into schemes that are less well run and provide less value for money. I am not entirely sure that the minimum standards will iron out or rule out that hazard.
When it comes to setting policy in this area, we must keep asking ourselves: what is the best thing for people who are saving? It is not necessarily the same thing to ask ourselves: what is the least risky reform for Ministers to make? The question is: what is in the best interests of savers? I accept that aggregation poses some significant challenges—there needs to be a clearing house, proper data, and so on—but that route genuinely offers the prospect of higher pensions in retirement than pot follows member.
The National Association of Pension Funds has made that argument very clearly. In my experience as a Minister, when the NAPF says, “You really need to think carefully about that”, Ministers really need to think carefully about the course of action that they have proposed. But it is not just the NAPF, it is other commentators, too. I am a great admirer of Michael Johnson and his recent pamphlet for the Centre for Policy Studies, which is not an organisation that I would naturally find myself standing up in the House to support. He has basically said the same thing to Ministers.
My noble friend is right to say that we need to debate those provisions in due course, and I am sure that we will. I hope that the Minister and the Government are open, even at this late stage, to taking a different perspective. The issue is: what should be the default option? I genuinely think that it is a mistake to offer pot follows member.
With that, I end my remarks. I look forward to taking part in Committee and on Report. I echo the congratulations that many others have offered to the Pensions Minister on taking forward these important historic reforms to the state pension. I am sure that it is the ardent wish of everyone in the House that the reforms work to support the savings culture that we so desperately need.
The Lord Bishop of Derby
My Lords, in terms of the terminology in this debate, I am not sure if my opening remark will be interesting, but it should be of interest to everybody. That is that Steve Webb is not alone; we are all sinners. I can say that, from these Benches, we all have the hope of heaven. That, of course, may be another understanding of the term “universal credit” that the Minister may like to note.
I understand pensions to be providing stability and continuity in life through a time of transition and adjustment and offering proper responses so that people can continue to live their lives securely and flourish. I see the Government’s role as creating a frame for that flourishing, stability and continuity to happen.
I want to raise a specific point about Part 4 concerning bereaved parents and their continuing family life. The Minister rightly said that society is changing rapidly, but my contention is that bereavement does not change much at all, and we need to think carefully about the notion of bereavement.
The new proposals provide for a lump sum and then bereaved support payment for one year, instead of longer term support which could last as long as you have a child on child benefit, so it is a very radical change of provision for bereavement for families who have lost a parent.
We all know that bereavement is devastating and complex and most others here, I guess, have experienced it. In my work as a priest, as your Lordships can imagine, I have a lot of engagement with people at the time of death and immediate bereavement, organising funerals, follow-up visits and then supporting the family in an ongoing way.
I suggest that one year is a very short time within which to encapsulate bereavement. Many people who work in this area in the voluntary sector would concur with that. I propose to the Minister that we should consider a three-year term to provide the stability and continuity that family life requires. I am not an experienced politician so I am not offering three years and thinking that the Minister might negotiate down to 18 months, I am saying that, from my pastoral experience, three years would be the right kind of timeframe if pensions are about providing continuity and stability.
I want to give three or four brief reasons why I propose three years. The first is in terms of the pastoral situation of the family concerned. If this support ends after one year, that comes at a very raw time. I can tell your Lordships, from my ministry, that many people who have nothing to do with the church will come back on the first anniversary to light a candle, come to Evensong and pray with a priest. We could be giving people a double loss if this support was withdrawn after one year.
Secondly, if we stop after one year, many who would then be lone parents, with children to look after, would probably have to face the prospect of working more hours to make up their income. Some people project that 75% of new claimants will be worse off under these proposals. This is just when children need more care and attention because their bereavement happens in phases, not just over a few weeks or months. Two or three years is a fair time to enable children to adjust but just when they need more time, the person who would now be their single parent might have to look to spend more time away from them at work.
Thirdly, would this be a withdrawal of the net of support for continuity and stability, and are these proposals more like a death grant than care in bereavement? There is a big difference between offering a grant, even if it is extended over a year on death, and care and bereavement. Pensions are about ongoing care and stability at a time of change into a new life.
My fourth point is on universal credit, the provision that is offered in its place. Just as families are having higher costs as children grow older and more expensive, the universal credit system which would take over after the year, as I understand it, would mean that the now lone parent would have to be willing to prepare for work while their children are three or four years old, and be available for work when they are five. That may be well within the three years during which children need special care and attention for their bereavement. Can the Minister comment on that point? Is this proposal about bereavement or an extended death grant? Bereavement is a proposal that takes pensions seriously; a death grant is nothing to do with pensions but something rather different. If pensions are to provide appropriate stability and continuity in life through times of great change into another way of living, and especially if children are involved, is there a case for having a three-year support rather than a one-year support and universal credit?
Baroness Drake (Lab)
My Lords, I refer to my interests in the register and mention that I am a trustee of both the Santander and Telefónica/O2 pension schemes. These state reforms accelerate the direction of travel set, with political consensus, under the Labour Government. The single tier is intended to be fairer, reduce reliance on means-tested benefits, provide a firm foundation for private savings and assist ordinary people to achieve a reasonable income in retirement. To achieve those intentions, it depends in part on the starting value of that single-tier pension and the uprating of its value over time.
The Government’s impact assessment assumes uprating will be by the triple lock but assumptions about pensions’ adequacy could be significantly different if it is not. I also note that the extent to which the single-tier pension is set above the guarantee credit is lower in the White Paper than in the Green Paper. I hope that we can explore these matters further in Committee because it is very important to understand where the consensus is settling on the value and uprating of the single tier.
The state pension age needs to rise in the face of increasing life expectancy. Five-yearly reviews by government will be informed by reports from the Government Actuary but it is less clear how much importance will be given to the report of the independent panel which will consider other relevant factors specified by the Secretary of State. Hopefully, these will include geographical, occupational and socioeconomic differences in morbidity and mortality. There is a need for greater clarity about the process and for clear public evidence to inform the debate.
The Bill also provides for the statutory override to allow private employers with contracted-out schemes to adjust members’ future pension accruals or contributions to recoup the employer’s loss of national insurance contribution rebates consequent on the abolition of contracting out. However, employers should not be able to make disproportionate adjustments. Will the actuarial advice of the trustee take precedence over that of the employer? What if adjustments disproportionately impact on one group of members compared to the other? What are the protections to be?
Many of the provisions on private pensions are to be welcomed: the abolition of incentives to induce a member to transfer their rights out of a salary-related scheme; the abolition of short-service refunds; the protection to workers’ pension contributions from the national insurance fund in the event of employer insolvency; and the granting of powers to the Secretary of State to impose requirements on work-based pension schemes on administration, governance and charges.
However, the question is whether the Government will be sufficiently bold in exercising these powers. Auto-enrolment utilises inertia, not active engagement, to get people saving. The employer chooses the pension product while employee choice is largely restricted to joining or not joining the employer’s scheme. The state harnessing inertia—together with the OFT finding that the demand side, the buyer, of the DC workplace pensions market is one of the weakest that it has analysed in years—raises the bar inexorably on governance requirements, especially as auto-enrolment drives a level of demand that the industry would not achieve under a voluntary system. Poor governance, a lack of transparency or scrutiny and conflicts of interest are to be found abundantly on the supply side. To quote the OFT,
“we have concluded that … competition cannot be relied upon to ensure value for money for savers in the DC workplace pensions market”.
Ordinary people are embracing auto-enrolment. Relatively few have opted out so far, and employers are fulfilling their duty. However, this places a reciprocal responsibility on the Government to protect ordinary people against poor standards and conflicts of interest. The challenge that the Minister is grappling with is apparent from the plethora of consultations and investigations: the FCA on annuity markets and asset management charges; the OFT on the workplace pensions market; the DWP on quality standards, governance and charges; the Law Commission on how the law of fiduciary duties applies to investment intermediaries, using pensions as an exemplar; and TPR on codes of practice. The imbalance between the buyer and the supplier sides of the pensions market, and the systemic inequalities of knowledge and understanding between saver and provider, mean that seeking an alignment of interests is not sufficient—the interests of the saver must come first. There must be a duty to act in the saver’s best interests and, where there is a conflict of interest, priority must go to the saver. No shareholder has a right to gain a dividend from selling or managing a pension product that fails to meet the interests of the saver. The product proposition cannot be designed with sub-optimal features simply to facilitate a profit.
I was therefore anxious to read that in investigating the workplace pensions market, the OFT had reached agreement with the industry to introduce independent governance committees to address the governance challenge, but before a wider community had had the chance to comment on that solution. As the Law Commission says:
“There are many difficult questions about how these committees will work”.
They,
“will not have the power to change investment strategies or investment managers … Furthermore, it is not clear whether … the committees will be under explicit legal duties to act in the interests of”,
the savers. Achieving low charges and good quality in pensions must be inseparable. Sound governance will ensure their delivery. Complexity and lack of transparency put employers and savers at a disadvantage. The OFT identified no fewer than 18 different charges. Full transparency is essential to those who are to be the guardians of the consumer’s interest.
The Secretary of State’s new powers must also be applied retrospectively to cover legacy pension savings. MoneyMarketing, in reporting that the Association of British Insurers has missed the deadline for the pension charge cap consultation, suggested that it was because providers cannot agree on whether existing pension arrangements should be included and quotes Adrian Boulding, Legal and General’s pension strategy director, saying:
“This is all about legacy and the L&G view that existing pension schemes should be able to enjoy the 0.5 per cent charge level that is widely available for new pension schemes. We are morally uncomfortable with the concept that an employer buying new in the market gets one price but an employer that has already bought and is a loyal customer is getting a worse deal for their staff … a charge cap … should apply to new schemes and existing schemes”.
Even if Legal and General has its own competitive considerations for saying those words, they still capture the issue well. We will have to see in the ABI’s crafted response where the common denominator comes to rest.
The Bill addresses the real problem of small, dormant pension pots by giving the Secretary of State power to provide for the automatic transfer of a worker’s pension savings to their new employer’s scheme up to a pot value of £10,000. “Pot follows member” cannot be implemented without raising quality standards or the Government risk transferring the savings of millions of ordinary people into myriad schemes over which they currently have little quality control. Generally, transfers take weeks, if not months. Lots of paperwork, bureaucracy, poor data and lack of standardisation combine to slow the process and increase costs.
All pension savers should easily be able to transfer and consolidate their pension savings, but some savers will never make an active decision, so an effective private pension system requires a series of efficient default arrangements over the life cycle of the saver. I have real concerns about pot follows member as the automatic default arrangement for small pots rather than the alternative of a scheme that can aggregate people’s savings.
I fear pot follows member does not accommodate people who leave the labour force or become self-employed as they have no employer to transfer to, but their ex-employer may nevertheless default them into a poorer personal pension because they do not want to provide for ex-employees in their existing scheme. PFM increases the regulatory burden to oversee the myriad workplace schemes into which automatic transfers would be made rather than focusing on leveraging extremely high quality in a few aggregator schemes. Pot follows member may prove complex for the industry to implement and increase risks to savers. Pot follows member increases risks of charges and transaction costs being incurred on the whole pension pot each time a worker changes their job and transfers rather than on the incremental amount of savings accrued with the previous employer. An efficient pot consolidation mechanism is needed, but I fear that PFM may not best meet this need.
Furthermore, many pots above £10,000 will be defaulted into a personal pension on which there is little quality control because employers increasingly will not let ex-employees stay in their workplaces scheme. The Government argue that significant sums accumulating in aggregator schemes will potentially disrupt the market, but in a dysfunctional market where competition cannot be relied upon to deliver value for money—the words of the OFT, not mine—the driver, as my noble friend said, should be the interests of the saver.
Lord Balfe (Con)
My Lords, I begin with a declaration of interest as a specialist director of the CERN pension scheme in Geneva, and as chair of the European Parliament members’ pension scheme. May I now move on to thanking your Lordships for the warmth of the welcome that I have received in this House? First, I thank my two sponsors: my noble friend Lord Plumb of Coleshill, who is in the Chamber tonight and whom I have known since we joined the newly elected European Parliament in July 1979; and my noble friend Lord Inglewood, whom I have also known for more than 24 years, since he similarly joined the European Parliament in July 1989. My introduction has been smoothed by many people, particularly my mentor, my noble friend Lady Fookes, and the staff of this House. I have discovered that the words, “I’m new here, can you possibly help me?” bring forth an instant and always helpful response.
This small area of London has played a very large part in my life. Foreign affairs have interested me, even from my schooldays. My working life began in January 1961 when, at the age of 16, I joined the Civil Service as a clerical officer in the Crown Agents for Overseas Governments and Administrations, based just across the road at 4 Millbank. I first came to this House because it was a nice, warm place to come to towards the end of the month when one’s money tended to run out and you needed some sort of intellectual stimulation that was free.
In the same month that I joined the Crown Agents, I first joined my trade union. I am proud to say that, from then to today, I have always been a member of a TUC-affiliated trade union. Subsequent to the Crown Agents, I went via the Foreign Office, of all places, to the London School of Economics, where I studied social policy and administration under the guidance of the late and great Richard Titmuss, with my first tutor being the noble Baroness, Lady Blackstone, who is in the Chamber tonight. I recall that on the first essay I ever gave her she wrote, “This is journalese”. You can tell how naive I was because I thought it was a compliment until I went to the tutorial, where I discovered it was not quite the compliment I had thought.
After that I went to the DHSS where, with the late Keith Joseph as Secretary of State, I served as research officer for the Finer committee on one-parent families. It was during this time that another interest, in statistics, which had started at LSE, developed. I recall that we were looking at the impact of work on women’s mortality. We discovered in a preliminary way that women subjected to the same work and life experiences as men had quite similar mortality and that the female differentiation then taken for granted was not, in fact, in all cases completely sustainable. However, the Government Actuary’s Department was not impressed with the finding and I must admit it was far from proven. It was, however, a straw in the wind and has been at least partially confirmed as time has passed. Today, differential mortality between sexes and social classes is an accepted fact, even if the contributing factors are still in need of further evaluation. My other achievement from this period was becoming a fellow of the Royal Statistical Society, which I remain to this day.
From the DHSS, I went to the Co-operative movement and simultaneously spent four years on the pre-Livingstone GLC where, for a time, I was responsible, as chair of housing development, for building houses for Londoners and in many areas outside. It was in that capacity that I learnt the full meaning of the word “nimby” and the extent to which specious community arguments could be deployed in support of personal gain. Then, for 25 years, I was in the European Parliament. I am sure that that will be of relevance to other areas of my life in this Chamber. However, it does not form part of today’s narrative, other than to say that I acquired a reasonable knowledge of European trade unionism and was privileged to be in Bournemouth on 8 September 1988 when, in a single speech, Jacques Delors turned around the TUC to face and befriend the European project. That was indeed a memorable day; my good friend, the late Clive Jenkins, was in the chair at that congress.
From 2004 to today I have been a directoral trustee of a number of European pension funds and have done various things on the European pensions circuit. Having succeeded—as a lot of people have since succeeded—in being expelled from the Labour Party, I re-evaluated my life and joined the Conservative Party, where I am extremely happy. In 2007, however, the present Prime Minister, as leader of the Opposition, signed me up as his adviser on trade unions and co-operatives. That is how I come to be in your Lordships’ House. I believe I am the first Conservative Peer ever to have had in his citation from a Conservative Prime Minister’s office:
“Envoy to the Trade Unions and Cooperative movement”.
I broadly welcome the Bill that is before us tonight. It is a tribute to my honourable friend the Minister for Pensions, Steve Webb, that this measure has a wide degree of support. I also welcome the stability of ministerial appointments that this coalition has introduced. After, I believe, 12 Pensions Ministers during the 13 years of the previous Government, the fact that the present Minister has been in office since 2010 is welcomed by all sides of the pensions industry. Again, I am sure that there is room for a debate on the stability of ministerial posts, but it has certainly benefited decision-making. I wonder whether that stability has lead to the current position. When I asked the TUC for its views on the Bill it was able to tell me:
“I am afraid we are not in a position to provide briefing on the Pensions Bill, as we currently have a staffing gap and are not likely to have a pensions policy specialist covering the role until the New Year”.
I put it to noble Lords that if there were major difficulties, the TUC would have found the capacity to cover the issue. The Minister has clearly achieved a degree of consensus.
I will briefly raise some points for consideration in the time ahead. The first picks up on a matter referred to earlier in this speech and in other speeches. Clause 26 makes provision for a periodic review by the Secretary of State of the pensionable age in the light of changes in life expectancy and other relevant factors. I referred earlier to differential mortality. It is now known beyond all reasonable doubt that there is a wide variation in mortality and that life experience is a key factor in that. What is often referred to as “postcode mortality” conceals a much deeper area. The Government have promised a review. It is envisaged that that review will be conducted by the Government Actuary’s Department. In addition to that, the Government must appoint a panel of one or more persons to consider factors relevant to the pensionable age. I ask my noble friend to consider appointing more than one person and, in particular, to appoint at least one person who, if not nominated by the TUC is at least acceptable to it.
I do not seek to speak at length on that, and realise that we do not enter into any controversy in maiden speeches. I look forward to taking part in the next stages of the Bill. However, I hope that we can get some stability and cross-party agreement on this issue, which lasts so much longer than pensions. I end with a quote from CERN, which noble Lords will know is the nuclear research institute. They say there, “It takes 50 years to decommission a nuclear reactor, but 60 years to pay out all the pensions in our fund”. I thank noble Lords.
Lord Whitty (Lab)
My Lords, it gives me considerable pleasure to follow and welcome the maiden speech of the noble Lord, Lord Balfe, in this House. He has described the slightly circuitous political route that he has taken through his life, whereby he has ended up sitting on the government Benches. I have long and, by and large, fond memories of his activities when he was, perhaps, in a slightly different political place. When I was in south London, in the early 1970s, he was already a force in the London Co-operative and Labour movement. Eventually, he became my Member of the European Parliament. He probably does not mention it that much to his colleagues these days but, during my period as general secretary of the party and his time as an officer of the British Labour group, or the EPLP, as we now call it—for some reason, whoever was in control of the EPLP, whether it was the right or the left, pro-Europeans or anti-Europeans, Richard was always an officer—he was extremely helpful to me. I shall put it no more strongly than that. When I did a European job in Brussels and Strasbourg, he was extremely helpful to me, personally, and I am very grateful for that.
Obviously, the road to Damascus is dangerous, and the noble Lord has had a bit of a conversion, the full political and spiritual aspects of which I am not entirely clear on. I suspect that the noble Lord, Lord Plumb, is a bit unsure himself, given the past history. But it is clear that he has retained some of his early interests and commitments, particularly in relation to the trade union movement. I recognise the Prime Minister’s wisdom in giving him his remit. I have two regrets. On the one hand, not all leaders of trade unions were prepared to talk to him on the subject; on the other, it is clear that the leader of the Conservative Party has not entirely followed his wise advice. However, he maintains an unashamed interest in that field, I am very pleased to say.
In reference to this Bill, the noble Lord’s experience with the pension scheme of European Members of Parliament is instructive. If he can make improvements to this Bill that render similar conditions for the bulk of the population, I think that we will all be seriously grateful. I extend a very good welcome to him.
As regards the Bill, I share the general consensus of the overall direction and, in particular, the concept of a single-tier pension scheme, but I do have a number of concerns. My main concern is about the impact on employee members and employers who run occupational pension schemes, both private and public. I have concern for certain other groups, as well, which may well come up in Committee—for example, the cohort of women born in the early 1950s, who seem to miss out on both counts, as well as those who would have got a better pension under the old system than they will with this one. We can deal with those issues in Committee.
My main concern at the outset is about the cost that these provisions will impose on all existing occupational schemes. I spent an early part of my youth getting large swathes of manual workers and others into occupational pension schemes, and it is one of my great regrets in life that the security that that seemed to provide them with for the first time has disappeared in the private sector to a large extent and has been diluted even within the public sector.
As the noble Lord, Lord German, said, all occupational schemes will, as a result of this Bill, face increased costs of approximately 1.4% for employees and 3.4% for employers as a result of the national insurance implications. I have a special interest in the local government scheme, and I declare an interest as a vice-president of the LGA and a member of the GMB. In neither capacity do I receive any pecuniary benefit, but nevertheless I have taken an interest, until recently being a chair of one of the member schemes of the local government scheme.
As the noble Lord, Lord German, said, in the case of private sector occupational schemes, Clause 24 allows for the overriding of existing rules and benefits which had previously been negotiated or provided by the trustees of a scheme, in order to offset these costs. I think that that is quite a dangerous move and will cause difficulties in a whole range of private sector occupational schemes. I certainly do not propose that the Government should extend that to public sector schemes. However, there has to be some recognition of the size of the impact on public sector occupational schemes. I think that the local government scheme in particular is likely to suffer from this. Some public sector trade unions and scheme members have been given a bit of a nod and a wink and been told that departmental budgets will adjust to cover these schemes. I suspect that that assurance is not worth the paper on which it is not written, but they have been given some assurance in that regard.
However, no such assurance has been given in relation to the settlement with local government. The cost increase of the local government scheme for the average employee earning about £27,000 per annum will be £25 a month over a lifetime. The cost to the employers is an additional £700 million. For a small Welsh council, that would mean charging an extra £33 in council tax. For a typical northern metropolitan district council, it would mean withdrawing £2.5 million per annum from expenditure on public services. That is not an inconsiderable cost and the Government need to face up to it. The speed with which local authorities are expected to adjust their pension schemes is also an important factor. These provisions are to be brought in almost immediately. Local authority finance directors are already budgeting for 2016-17. To have such additional costs imposed on them, with the accompanying uncertainty, gives them a real problem.
Obviously, every local authority scheme and every local authority fund will suffer as a result of this measure, but it is not only local authorities: a very large number of private bodies—several hundred—are also admitted members to the local government scheme. They vary from outsourced companies as big as Serco, Mitie and Sodexo to relatively small charities such as the North London Hospice, the Norfolk Heritage Fleet Trust and various museums, and to bigger charities such as the Alzheimer’s Society, the Children’s Society and Barnardo’s. They include all sorts of bodies such as museums, the local citizens advice bureaux and parish councils with full-time employees and so forth. So this is a cost issue that hits many large and small private bodies and charities as well as local government itself. It is important that the Government, including the Minister’s department, CLG and the Treasury, face up to this cost.
There are other complications. For example, under the Bill, LGPS funds will suffer significantly from the fact that the payment of pensions increases in members’ guaranteed minimum pensions, which currently the Government pay, will be shifted on to the employers and the public sector pension schemes directly. So there are significant additional costs which fall on the Local Government Pension Scheme and all the participants therein.
I do not have a solution to this problem but the Government need to have one. We took the then Public Service Pensions Bill through this House with some difficulty. However, the employers and the trade unions very responsibly sat down and agreed on how it should be effectively implemented in the LGPS area. These new costs, as well as the possible knock-on effects on the level of contracting out, particularly for low-income employees but more generally as well, and the costs for the employer of running the scheme are likely to tear up that agreement very quickly. At the very minimum, we need more time to ensure that there is an effective answer to this.
Given the scale of the potential financial impact on public services and local government in particular, today I simply ask the Minister to commit with his colleagues to meeting the LGA at some point during the course of the Bill so that they can discuss this matter. A number of potential ameliorations, if not total solutions, need to be considered. The one thing that I therefore ask the Minister today is that he and his colleagues commit themselves to such a meeting.
Baroness Donaghy (Lab)
My Lords, I believe that some humility is required when we consider people’s pensions. Trust in the pensions industry is low for a very good reason. What is decided in this Bill in 2014 has a 40-year horizon—that is, up to 2054. Does anyone really believe that this legislation will last for 40 years?
There are two things that I am absolutely certain about: Governments will tinker and the financial services industry will get away with whatever it is allowed to. The Government have said that their aim is to,
“better support people to save for their retirement”,
and that is surely welcome. I have no idea whether the proposals in the Bill will do that, although auto-enrolment is a very good start.
When SERPS was established in 1978 as an addition to the basic state pension, the thinking of the day was that those earning slightly more would expect a better pension. When SERPS was replaced by the state second pension, or S2P, no doubt the thinking was the same. If it all disappears next year, the additional state pension will have existed for 36 years, so it nearly qualifies for the 40-year time horizon but not quite. Does anyone really believe that a flat-rate state pension will last for more than 10 years? I very much doubt it. That is not to say that clarity and simplicity are not welcome, but they are only two ingredients. If someone realises that they are clearly and simply going to be poor in retirement, it does not take us very far.
My first encounter with pensions was in 1970 when, as a NALGO branch secretary, I campaigned for an occupational pension for university non-teaching staff at the University of London. The existing schemes were college-based and run by insurance companies with very high administration costs. It took five years to establish the Superannuation Arrangements of the University of London—or SAUL, as they are called—and it now has assets of more than £1 billion. It was an uphill climb because the majority of staff were women. The assumption was that women were not going to stay in the job very long and would probably get married, so why would they want an occupational pension? Those on the lowest grade and part-timers were not even allowed into the college-based pension scheme, presumably because it was felt that they would not stay at work for very long.
That was the era when men could ask, “What’s a nice girl like you doing being passionate about pensions?”—I am trying to make it interesting—and suggesting alternative ways of expending that energy. It was the era of smiling through gritted teeth. It is where the 700,000 women born between 6 April 1951 and 5 April 1953 started their working lives. They probably had to struggle to join an occupational pension scheme, and they were probably advised to pay the lower national insurance stamp and rely on their husband’s pension. They had to fight every step of the way for employment equality, and now they are told that they are not eligible for the single-tier pension.
To give the Pensions Minister, Steve Webb, some credit, he did try to construct an argument as to why the 700,000 women would not receive the new pension. He compared them as a group to those who reached state pension age before April 2010 and those who will do so after April 2016. The Minister weighed up the good and the bad news and the “somewhere in the middle”, and argued that, on balance, the 1951-53 group was not being disadvantaged. That may look good on paper but, for a generation of women who have experienced every form of pension discrimination, it must look like more of the same. I ask the Minister to reconsider this decision. It he agrees to reconsider it, he will have the satisfaction of having 700,000 pleased and extremely surprised women on his hands.
I want to turn to the impact of increased national insurance contributions on public service pensions. I shall keep my remarks short because the noble Lord, Lord German, and my noble friend Lord Whitty have covered this area very well. Are the Government planning to pay these unbudgeted extra costs, which, if not met, could unravel a series of delicate negotiations with public sector workers? Is the Minister able to give us some assurance on this issue at this stage? If not, it will certainly come back in Committee.
I now turn to the issue of trust and transparency. The recommendations of the Workplace Retirement Income Commission, chaired by my noble friend Lord McFall of Alcluith, in 2011 really say it all:
“For consumers to have more trust in the pensions system, the industry needs to show it can reform itself to be trustworthy. An industry-led drive around disclosure, transparency, clear communication, and driving down costs and charges will help to achieve this … the Government and the Pensions Regulator should make it a priority to promote strong and consistent governance and employer engagement with workplace pension schemes, whether trust or contract-based”.
It is a good report and, in my view, it deserves further consideration.
A lack of transparency and overcharging, if not dealt with, will scupper this legislation or its potential good reputation. The Centre for Policy Studies said:
“In 2010, the City extracted some £7.3 billion in implicit charges, about which investors were told … nothing”.
The Royal Society of Arts, of which I am a fellow, referred to written evidence to the Work and Pensions Select Committee stating that from the time when the new Pensions Act is introduced,
“we can expect that many will be sold pensions where 50% or more of their potential pension disappears in charges”.
I am sure that we will come back to this in Committee, but limiting the “wrapper” charges is only a quarter of the story. It is the hidden charges for investing where the costs add up.
I have been a board member of two pension schemes—one as an employee representative and one as an employer representative, although not at the same time, I hasten to add. I lost count of the number of times I listened to presentations by investment companies which were trying to win the contract for investing the pension fund. You were drowned in glossy charts and sales-speak, and I would have liked a hot dinner for every time I heard, “And we aim to be in the upper quartile of returns”. If everybody was in the upper quartile, it would not be the upper quartile. Of course that was their aim, but if only the delivery had been as glossy and promising we would not be so apprehensive now.
Finally, I look forward to the Committee stage when we will have the opportunity to consider this wide-ranging Bill in detail.
Lord Paddick (LD)
My Lords, perhaps I may start by declaring a couple of interests. I am already in receipt of a police pension and I thought that I would be in receipt of the state pension in 10 years’ time until I received a letter from the DWP telling me that it will now be 11 years. Some noble Lords may be intrigued as to why, as a former police officer, I am contributing to this debate. My main concerns are about the reforms to welfare that this Government have introduced. However, I am slightly less concerned about this Bill. Noble Lords also may wonder why I am contributing when there has been such a big build-up in terms of how interesting this subject is. I have to say that the contribution of the noble Lord, Lord Hutton of Furness, was fascinating more than interesting. I congratulate my noble friend Lord Balfe on his maiden speech, which may sound a bit cheeky coming from someone who made his only five minutes ago, but his wealth of experience will be very valuable in this House.
I support this Bill and pay tribute, as others have done, to my honourable friend the Pensions Minister, Steve Webb, and his team. This is a difficult subject for any government to tackle. It is to his and his team’s credit that they have taken it on. As the noble Baroness, Lady Sherlock, has said, there are three tests; namely, that pensions must be fair, sustainable and provide a decent standard of living. I believe that that is what this Bill does. Of course, it is up to your Lordships to test that during our debates at this stage, in Committee and on Report.
When the state pension was introduced in 1926, only half of those who reached the age of 15 were expected to live to the age of 65. On average, people would spend just over 11 years collecting their state pension. In 2013, 93% of 15 year-olds are expected to live to 65 and 32%, almost one-third, have a chance of reaching 100. Clearly, in terms of sustainability, things need to change. The level at which the new single-tier state pension is set appears to be reasonable, as has been said by the Minister, and is above the current state pension means test. It allows people to plan for their future on the basis of understanding what, at least in today’s money, they are likely to expect when they reach pensionable age.
The automatic enrolment of workers in pension schemes requires safeguards. This Government appear to have worked hard to ensure that those safeguards, including, as has been said, the very welcome capping of fees, are in place. I will talk about the “pot follows member” issue at the end of my remarks. The noble Baronesses, Lady Donaghy and Lady Sherlock, expressed concern about women born between 1951 and 1953 who will not be eligible for the single-tier pension whereas men of the same age will be. My understanding is that these women need to make only 30 years of national insurance contributions, as opposed to 35 years for their male colleagues. In addition, those women will be able to draw their state pension earlier than men, at some time between the age of 61 and 63. Men in the same age group will not be able to draw their pension until they are somewhere between the age of 63 and 68. Clearly, that is not a straightforward issue. Swings and roundabouts are involved.
As someone who has more than 30 but less than 35 years of qualifying national insurance contributions, I also might be concerned that I do not appear to qualify for a single-tier pension, which is currently set to be £144. However, I am reassured that, if the new system gives me more than the current £110, I will get that amount. If I would have received more under the old system, I will receive that amount. In short, while others may be better off than me under the new scheme, at least I will not be worse off. I ask whether these changes are to be brought about because of the need to be sustainable.
Clause 25 in Part 2 would increase the age at which the state pension becomes payable from 66 to 67 between 2026 and 2028 instead of between 2034 and 2036, as set out in the Pensions Act 2007. That is eight years earlier than previously planned but it still gives a lead time of 13 years, which will enable people to make provision for it. Surely, this makes sense when one takes into account the fact that, at the moment, life expectancy, I am reliably told, increases by four hours for men and six hours for women every day.
Clause 26 introduces a review of the state pension age, taking into account life expectancy and other relevant factors, every five years or, allowing for some leeway, every six years as stated in the legislation. These are difficult but necessary decisions from which previous Governments have shied away. This legislation ensures that future Governments will not be able to duck that responsibility. The first report would be in 2017. The Secretary of State will have to commission reports from the Government Actuary’s Department on life expectancy and from an independent, appointed panel on other factors to be specified by the Secretary of State. This Government have indicated that the panel will be similar in nature to the Hutton inquiry. It seems eminently sensible that not only life expectancy but other factors that may arise or change over the years are considered by an independent panel, provided there is sufficient lead time to enable those affected by such changes to plan for their retirement.
As noble Lords have said, differences in life expectancy in different parts of the country or among different socioeconomic groups need to be addressed. Surely those matters should be addressed by other means to try to equalise life expectancy in these different areas, rather than trying to equalise through pensions legislation. Most importantly, these reforms will ensure that the state pension remains available not just for my nephews and nieces but for their children as well.
On whether “pot follows member” would be the right system, my understanding is that Australia, a country that is held up as an example of good practice as regards pensions, now considers that it should have introduced such a system. The suggestion that this is the way that the country will go is encouraging. As regards ensuring that there are caps on fees charged by pensions providers, it is hoped that the minimum standards to be applied should ensure that if pot does follow member to a new employer, the new scheme will be as good as the one from which the money is being moved. Clearly, employees will have to consider into what pension scheme their money would be moved when they consider all other aspects of the remuneration package provided by the new employer.
Baroness Hollis of Heigham (Lab)
My Lords, I declare an interest as a board member of the Pensions Advisory Service. In that capacity perhaps, I suggest to the noble Lord, Lord Paddick, that he should consider buying some voluntary NICs to make good his shortfall and he will get a 25% return on his capital.
Private DC pensions are deeply problematic. Most people, especially poorer women, do not understand them. They do not trust them; they cannot afford them; they cannot access them; and they do not know what income they would get from them. Pensions for them are high risk. I think the Minister once said that the poor can better cope with risk as they have less to lose. In my view, the exact opposite is true: when you are a week’s wages away from going hungry, you cannot afford any risk at all.
For me, the great virtue of the new state pension, unlike private pensions, is that it removes risk. So my test of the Bill, not dissimilar to that of my noble friend Lady Sherlock, is: does it make pensions simpler, easier to understand and more transparent? Will it produce an adequate replacement income in retirement while being affordable both to individuals and society? Is the Bill fair, recognising women’s unpaid as well as conventionally paid work, and not leaving groups of women unfairly outside the system? Is it also fair in its assumptions about retirement age? Does it encourage savings where possible by removing means-testing, which inhibits them? My acronym is SAFER. The Bill must make pensions: simple; adequate and affordable; and fair; encouraging savings; and removing means-testing. Does it do so?
Is it simpler? Yes, although it is not yet simple. By bringing together the state retirement pension, S2P and pension credit into one single state pension, people can predict their state pension if they have full contributions. But they still have to work out whether their mix of contributions and credits will cover 35 years. Over time, it should do so given a full working age life, but it may not.
Is it adequate and affordable? Will the new state pension continue to address pensioner poverty? S2P, which redistributes to poorer earners, and pension credit, which especially helps older widowed women, were both in Bills that I took through this House. Together, they targeted pensioner poverty and succeeded. Since 1998, pensions have increased three times faster than wages. In 1997, pensioners were the poorest group of our society—the poorest of the poor. When we left, they were less likely to be poor than any other group in society.
But helping existing poor pensioners through means-testing has potentially the perverse effect of deterring future pensioners from saving. By building a stronger state platform, as the Bill does, we both target poverty and support saving. Is it adequate? A middle-aged couple, he on average earnings and she on a modest part-time job, might expect a replacement state pension in future of around 70%—adequate for them, yes. On top may come NEST, its value depending on their age, contributions and the markets.
Is it affordable for us? Given the raising of the state pension age, the capping of S2P and the overall £5.5 billion of NICs windfall from ending contracting out, which will go to HMRC, then, yes. Indeed, HMRC will make such a profit, no wonder we are bringing forward the new Bill by at least a year. In that case, some small fraction could be available for decent transitional arrangements.
Is the Bill fair? For me, that raises two questions. First, will all those who should do so get the new pension? No, it is not that fair. If I were the Minister I would want as inclusive a structure as possible. Those left out of the new single pension will continue to get pension credit, and the cost and confusion of running two systems for a further 40 years is clearly undesirable. Obviously, pension credit will remain as a residual safety net, but we want as few people as possible to fall into it. Who gets left out? Service wives do, possibly, depending on their age, and I will table an amendment on that. Women with several mini-jobs will also be left if they perhaps work 20 hours a week yet are not building their own state pension and are denied a future married women’s pension.
The problem in the past was the employers’ contribution and how we divvied it up. In 2007, the Government thought that there might be 15,000 affected women. We now think that it is almost three times that—40,000 women and 10,000 men—working above the lower earnings limit but still not coming within the NI system to give them a state pension. With real-time information—one of the bonuses of UC—and treated as self-employed as this Bill rightly does for all other self-employed people, we can and must bring those 50,000 people into the new pension.
Steve Webb said in the other place, in a slightly male way, that such women would not thank us for paying £2.70 a week NICs. How does he know? Has he asked them? He also believed that their situation was short-lived and that they should have enough contributing years. How does he know? Has he asked them? He said that they could pay voluntary NICs, but that costs five times as much and might not cover early missing years—that, we do know. I am not myself willing to see 50,000 or so excluded on the beliefs—not facts—offered by the DWP. Those 50,000 should be treated as self-employed unless they opt out. It would allow them to move seamlessly between mini-jobs and a longer-hours job, as we want them to do, as their caring responsibilities require.
The second question of fairness is around the state pension age. I am pretty fed up with people, usually in well paid, interesting, salubrious and physically undemanding jobs, pronouncing that as we are now living longer we must all work longer and what is more—the final insult—it is good for us. This House will know that we have three stages of older age. Most of us who reach 65 in good health can expect another decade of healthy retirement. From our mid-70s, we develop functional disability—mobility, sight, hearing and reach—which increasingly limits what we can do for the next decade. We need support. Then, in the last three to five years of life in our upper 80s, we need care. As the Government’s analysis in the ONS stats shows, between 2000-02 and 2008-10, male life expectancy rose by over two years. But—and this is key—only a third of that was healthy life expectancy. It was 0.7 of one year by the Government’s own stats. So we gain, as the noble Lord, Lord Paddick, said, three to four months every year, but only one month of that may be healthy.
Between 2007 and 2010, the most deprived fifth of the population had a healthy life expectancy of just 55 years—15 years less than the most affluent. The gender gap is narrowing, but the class gap is now widening. So those extra years that we are living are not, alas, years extending healthy retirement but additional years of increased disability and dependency, especially if you are poorer off. Every year that we raise the state pension age is deeply unfair on those who have had hard lives. They start work five years earlier than those who enjoy higher education, and they can expect 10 to 15 years less of overall life expectancy and of healthy life expectancy. By raising the state retirement age, we eat into and reduce their few healthy retirement years even further, all to subsidise the pensions of people such as me—the longer lived, healthier, better educated and better off, including those of us in your Lordships’ House. Our single-age retirement policy—one size fits all—is regressive and unfair. We do not need to shrug this off as Borisconi tough luck. We can do better than that, and I welcome the proposed independent review.
I proceed along with my SAFER acronym: simple, adequate, fair. Will the new state pension—E—encourage savings? Will it—R—reduce means-testing? Yes it should. It will do so by removing the perceived disincentive that having savings costs you benefit. Savings credit actually supported small savings, but under half of those entitled claimed. Its value is eroding and overall the doorstep line I always encountered when canvassing was, “I’m not any better off for saving”. There is one point here about AIPs—assessed income periods. We should not add to yet more means-testing for those on pension credit, which is what the Government propose, while stripping it out, rightly, for those on the new pension. I implore the Government to leave it alone.
The sums saved will be small—I calculate them to be £60 million a year net at best. The stress for older pensioners will rise. The implications for funding social care from equity release for the over-75s—over half of whom are owner-occupiers—on which the social care bill is premised will be catastrophic, overwhelming any savings that the Government may get. Do not go there. What you may save in pension credit, you will overwhelmingly lose in people not being able to co-fund social care. It is really not worth it.
Importantly, under the new state pension, auto-enrolment will be safe. Without the platform of a non-means-tested predictable pension we could, with some justice, be accused of mis-selling NEST. However, NEST was meant for women with low earnings. It originally kicked in at £5,700; from April it is £10,000. Every time you raise the tax threshold, another tranche—mainly women—drop out of auto-enrolment. There are 420,000 in 2013-14. Of course, consultation exercises show that employers like it. What is not to like? The last lift saved them £6.4 million. The losers—poor women—do not know and do not complain.
At the 2017 review we must reconsider NEST’s trigger, perhaps the PTT, and in the mean time strengthen opt-in arrangements. Some 1.1 million women have already lost the opportunity of auto-enrolment. Next spring, still more women will be excluded. Unless we intervene, NEST will lose the very group for whom it was designed.
I want also to register my disquiet at the proposed new bereavement benefit; the loss—proper stats, please—of the state pension lump sum; the interaction with other benefits, especially HB, after five years; the transitional arrangements for married women relying on the 60% pension; divorcees; and widows’ inherited rights. We can pursue all that in Committee.
Do I support this Bill? Yes. On the state pensions front, indeed I do. I even wrote a pamphlet calling for something similar before the last election, and was delighted to corral Steve Webb, then a Back-Bencher, into contributing to said pamphlet. All credit to him and the DWP team behind him for delivering the SAFER pension; I am really pleased. It will continue to reduce pensioner poverty; it will eradicate for very many the snakes and ladders of means-testing; it moves us closer to a decent state pension for all, but one rightly clothed in a contributory system. It will make it safe to save. Those are really valuable contributions. However, it can be improved. The Minister will be delighted to learn that there will be quite a few amendments in Committee. I look forward to them; I hope that he does, too.
Lord Monks (Lab)
My Lords, I start by declaring an interest: I am a trustee of NOW:Pensions, which is a subsidiary of the Danish pensions institute, ATP. Those noble Lords who know about pensions internationally will know that Denmark has an enviable record in pensions.
Pensions in this country have become an area where successive Governments in the main have sought a degree of continuity with their predecessors. From time to time, there has been an impressive degree of cross-party agreement; my noble friend Lady Hollis has just reminded us of one or two significant contributions made by the current Pensions Minister. There is a recognition that this is a long-term problem and that long-term approaches need to be taken to pensions. They should be taken rather more in other areas, which are perhaps more politically controversial. Given the uneven nature of pension provision in Britain, we certainly need a continuous effort to tackle some of the more glaring inequalities that abound. Still, the degree of agreement has been impressive. That stems from a report by the Pensions Commission, which the noble Lord, Lord Turner, chaired and of which my noble friend Lady Drake was a member.
Despite a general welcome for the main pillars of the Bill, there are problems that I want to touch on briefly. I will look first at the statutory override in Clause 24 and Schedule 14, which provides that private sector employers must make changes in their schemes that are commensurate with the higher national insurance costs that arise from the end of contracting out, and for that be done without trustee or member consent. Because the calculation will be done at the aggregate level, not per individual, many scheme members may well lose out. Despite the requirement in Schedule 14 for actuarial certification of scheme changes, we believe that these protections are not solid enough to make sure that people do not lose out significantly.
On the state second pension itself, the concern has to be that the majority of future pensioners could well be worse off under the single tier, because its accrual rate is lower than the current system for people not contracted out. Those retiring later are more likely to lose out and to lose out more. It is not fair that people close to retirement and not contracted out of the state second pension will be unable to accrue a state pension above the single-tier starting rate, despite continuing to pay full national insurance contributions.
There are also problems with the accelerated timetable for increasing the state pension age to 67 in Clause 25. My noble friend Lady Hollis has just spoken eloquently along the same lines. There has not been enough time to address some of the inherent inequalities that exist both regionally and between manual and professional workers. It seems that you have won the jackpot if you are a professional worker in Dorset; if you are a manual worker in one of the old industrial areas, you are in trouble. Yet it is “one size fits all”, and that one size does not fit some, for whom, in the years after retirement, the forecasts are pretty poor. I hope that these will be considered. Certainly, if the state pension age is to be changed again, I hope that this review will lead to some independent process, to give people confidence in the judgment about retirement ages.
Of course, there are some obvious losers in the changes. In particular, dependent relatives look as though they are getting a pretty hard deal. As we go through the Bill, I hope that we can take a good look at their position.
On private pensions and auto-enrolment, Clause 35 extends government powers to cap pension scheme charges. Lower charges are very important. From my Danish knowledge, the contrast between low charges there and high charges here, historically, has been extremely marked and I welcome what is being done to bring down the British level. The principle is good, but the worry is that the changes over a single year can distort the benefits that come with long-term saving. We ask that the Minister and the House take a look at perhaps having a cap over the lifetime of the scheme, which would offer greater flexibility. In the current consultation exercise, it is important that we do not rush this fence too fast, without looking at the longer period over which to compute the appropriate cap.
On the “pot follows member” principle, several speakers have already questioned whether there is a problem with making that totally automatic, when a person could be transferred to an inferior scheme—and there are plenty of inferior schemes around. What about the costs for workers who change jobs frequently? They are often the lowest paid, on insecure contracts, and will be vulnerable to this kind of process.
My next issue concerns Clause 34 and the extremely broad power to create exceptions from the employer duty to auto-enrol staff into a workplace pension scheme. For our part, we are worried about the risk of abuse and are looking for strong safeguards to be built into this part of the Bill.
It is a useful Bill, but I hope that we will find the energy and time, and make the effort, to see whether we can make it better as it progresses through the House.
Viscount Eccles (Con)
My Lords, as we consider the detail of the Bill—many of those who have spoken have made very good points about the detail—I hope we will remember two things. First, a great deal of what actually happens will depend on secondary legislation. In essence, this is a framework Bill, and much will emerge as the regulations are produced. Secondly, as we go through the Bill, I want, from long private sector experience, to think a bit about other things that come on top of state provision.
Along with all other noble Lords, I fully welcome the move to a single-tier pension, which is an excellent thing to do. If I may venture an opinion, I would do it, in the end, with the smallest possible consideration of the difference between people and their experiences. I would eliminate, if I could, the idea that certain things should be taken into account, so that it would be a well established and very simple “that is what we are going to get” pension. As has been said before, pension legislation is a dense thicket, into which we venture sometimes but probably as little as we need to. We do not get very far and come out all scratched without really understanding the detail. Anything that simplifies what is going on out there must be welcome.
The departmental brief took us back to Beveridge and 1942. I remember the excitement when that report was produced. The terminology in Beveridge is very different from the terminology we use today. He referred to want, a subsistence minimum, savings on top and the avoidance of an intolerable financial burden. On that last point, we are probably in some form of denial, in that there is nothing which could be rightly described as an intolerable financial burden. Beveridge also said that we should do nothing that discourages the individual from doing the best he can for himself and his family. He was determined, in what he wrote, to make his progressive, reforming recommendations but, he hoped, without perverse incentives being contained in what was done.
Of course, between 1942 and today, very great changes have taken place. The brief refers, as all noble Lords have, to demography. In Beveridge’s time, 10 years of retirement would have been a pretty long time. I fully admit that this is a very theoretical point, but if we were, 10 years from now, to put up the retirement age to 70, we would probably be looking at more like 15 or maybe 20 years of retirement, which is a very big change. Because life is very uneven and unfair, that is only an average. I fully concede that averages can be very deceptive.
The brief referred to the much increased employment of women, something that has been completely transformed from what applied before the Second World War. However, other things are not in the brief which I think are very important and go to the point on confidence and trust, which has also been referred to many times this afternoon. There is the relative prosperity—real incomes today are probably three times what they were in 1942—but of course, alongside that, financial services have become immensely more sophisticated and much more difficult to understand.
Then there have been the rapid changes to the economy, including the disappearance of enormous industries. I come from the north-east of England, where there is not a deep coal mine left, which is almost unthinkable. ICI has disappeared, which is, again, almost unthinkable. Some of these changes have been created by the incredibly rapid progress of technology. Completely unimaginable things have happened, even in stable, long-running companies. British Telecom, for example, suffered the split from Royal Mail and the Post Office. When we were younger, all the equipment was electro-mechanical, but of course it is now digital and a completely different employment pattern is involved in looking after all the equipment in that business. Even in long-running and apparently very stable businesses, there have been enormous changes in the pattern of employment.
There has also been social change, with people wanting different types of career. The idea was certainly prevalent in the days of Beveridge that you joined a company and there you were: that was your life from coming out of school or university until you retired. That now is the exception and not the rule. In trying to deal with all these changes, we have tended to muddle the distinction between provision by the state and the top-up that Beveridge referred to, which is acquired privately. We have not thought carefully about the limits of state intervention or carefully enough about doing nothing that discourages individuals from doing the best they can for themselves and their family. Instead, we have got into a situation where there is an impenetrable thicket, which is not understood by many people and in which, therefore, very few people have confidence and trust. We desperately need to simplify wherever we can—not only in state provision but in private provision.
I turn to one or two examples. The linchpin of private provision was always the defined benefit system, which related to salary and service. Such schemes are dying on their feet. Company after company has gone out of defined benefit schemes after finding them impossible to retain. The promises made in those schemes were so long that the actuaries were unable to match their view of contributions and assets to the potential liabilities, and they kept getting the sums wrong. That is not at all surprising if you set that against the differences that have occurred in society and in business and commerce.
My own experience is of working for 27 years for an engineering company in the north-east, which was taken over, in a deal brokered by the Government of the day, by another engineering company in the north-east. That was in turn taken over by a big construction company, which was then taken over by a big shipbuilding company based in Norway with lots of other engineering industries. That company went bust. I am a pensioner—I should declare that as an interest—of a closed scheme where there are problems. There is now a separate, independent, ring-fenced company with all the funds that came from those different companies. If I told you all the companies that were in the current ring-fenced scheme, you would be amazed. It is nothing like four, and probably closer to 20. It is very difficult to maintain trust and confidence in schemes that are very long-term, if they are subject to such enormous change.
Moving from defined benefit to money purchase schemes, which of course is the solution in many cases, has also proved very difficult, because of the same sort of considerations. Promises have been made to the people in the defined benefit scheme, which is closed, under the contracts entered into with them, but newly employed people are put into a different mode. That creates two classes of employee. Many people have thought about some of these difficulties, and there are many others.
Just the other day, I was asked by quite a young self-employed person, “Why is it wise for me to have a pension?”. I said, “Is anybody else going to contribute to it or are you going to do it all on your own?”. That is the first question you should ask yourself. The second is: what are the tax advantages of putting whatever you save into a pension scheme, personal or otherwise? If you really think about it, the two reasons why we are so keen on pensions as a method of saving are: first, somebody else is going to contribute as well as myself; and secondly, it gives me tax capacity. For a lot of people, other forms of saving, provided that they have the tax capacity, may well be a better way of going about it than joining schemes.
Finally, I have a thought about fees. Of course, if a system is extremely complicated, I am afraid the fees will be high. They become high for two reasons: first, the complexity means that they will be high; and secondly, if you do not think through your own position as a member of a scheme, you contract it out to somebody else and do not pay close interest. In addition, there could be many regulations and rules. It was no surprise to get a letter from somebody involved in my self-invested pension plan saying, “Given everything that is happening now, you should expect fees of 2.5% per year”. I can tell your Lordships that I have been trying to ensure that that did not happen and it is not going to.
Baroness Turner of Camden (Lab)
My Lords, this is a very important piece of legislation. It changes the way in which we shall have to think about retirement.
Of course, we all know that we are living very much longer, and the Government already insist that everyone will need to work longer before collecting the basic state pension. The Bill proposes a single-tier pension for those retiring from 2016 and, of course, contains provisions under which men and women will work to the same age—67—by 2026. The single-tier pension will be £144 per week above the basic level of means-tested support. As indicated, the pack provided by the Government sets out the ways in which it is proposed to transfer people to the new arrangements. That could turn out to be really quite complicated.
How does all this affect people, poorer people in particular? Many people in well paid jobs are quite happy to work for longer before retiring. Some actually want to do so. Things are often very different for those who have spent a lifetime in employment such as manual labour or cleaning, often very low paid work. A woman who has done that kind of work, such as hospital cleaning, over the years is very anxious to be able to give it all up at a reasonable retirement age.
Then there are workers in strenuous or difficult, sometimes dangerous, work. We should remember the fire service staff who threatened industrial action if their retirement age was raised, who were successful in getting what they wanted. Of course, there are other industries in which people will want to retire early. There should be provision for them to do so. A single-tier payment may be easier to administer but people are different and work patterns are different, and a good scheme should take account of that.
The Bill also deals with the effect of private pensions. These have changed over the years, as many people have said. I well recall my years as a trade union official, when we all aimed to have members in what were then called final salary schemes—now known as defined benefit schemes. These have to some extent disappeared, except in cases where there is strong enough union organisation to prevent that from happening. My own union, Unite, has had several successes in that direction. But generally speaking, the number of employees saving in workplace pension schemes has declined.
The previous Labour Government sought to deal with that through the introduction of workplace pensions with automatic enrolment. Many of us welcome that development and the information pack tells us that this is proving successful, with far fewer opt-outs than was at first imagined. The Government clearly accept that the state pension, even in the new guise of the single-tier pension, is not going to be sufficient to provide a reasonable living standard. People must be encouraged to save for retirement.
As we know, the reform of the state scheme is intended to provide a platform for private saving. It is accepted that the new workplace schemes with automatic enrolment must give people confidence to save. Therefore, the schemes must be good; hence the Bill provides for the establishment of a Pensions Regulator, presumably with the power to intervene in order to protect workers’ savings.
Then there is the matter of pension pots. People change jobs and could perhaps lose track of pensions from former employment. The Government propose a system of voluntary transfers—pot follows member. This was criticised in the Commons and a different system was proposed—the establishment of a sort of separate aggregator—but unfortunately this was not accepted. This was discussed earlier in the debate, particularly by my noble friend Lady Drake, who referred to the pots and what happens to them. There was, however, general agreement that the security of the funds—mostly money purchase, of course—was absolutely paramount.
It is clear that the Government’s view is that a good pension entitlement for the average individual would consist of the single-tier pension plus whatever is derived from the pot or pots from the workplace schemes under automatic enrolment. Therefore, the way in which this money is managed is crucial. How is it to be invested? Can it be left to the market? I think not. Then there is the possibility of annuities; again, these are not popular. This is a very important aspect of what happens to the money that is provided under these schemes.
As we know, wages have been virtually stagnant in recent years. There is evidence that many families are struggling to make ends meet between paydays. Workers on low pay may have periods of unemployment. Saving of any kind may be difficult for them. The last thing people think about in such circumstances is retirement schemes and saving for them. Low pay can possibly indicate penury during retirement—I hope not—and this we have to avoid.
The provisions in the Bill appear to provide some improvements in certain directions—on bereavement, for example—but this seems to be on a short-term basis and there could therefore be losers. I note that the present restrictions on the payment of state pensions outside the UK will remain in place for single-tier pensions. The provision is strongly objected to by people who paid their contributions while they were in this country but who have retired to countries where there is no reciprocal arrangement. This was also raised in the recent debate in the Commons, but again, no change was agreed.
There is little in the Bill about the disabled, except a reference in the information pack which seems to indicate that there will be no change in entitlement. However, some of it also indicates that you would have to be rather heavily disabled before that happened. That is very unfortunate and something that we ought to explore further because disablement is expensive and people who are disabled deserve special acknowledgement and special treatment.
As I have already said, there are a number of issues that must be further explored in Committee. The impact on poorer people, many of them women, must be examined. As indicated, many find saving very difficult, if not impossible. Schemes that rely on individual savings are unlikely to be acceptable to future generations. This is a very important Bill and we must spend a great deal of time in Committee looking at the issues we have raised this afternoon.
Lord McKenzie of Luton (Lab)
My Lords, as my noble friend Lady Turner has just said, this is an important Bill which covers a major area of public policy: how we provide for and treat our citizens in retirement, the extent to which we expect them to make provision themselves through their lifetime and how we value contributions made otherwise than through formal work by way of caring or nurturing future generations. It is about the intergenerational bargain.
As a number of noble Lords have recognised, despite major and progressive changes to the pension environment in recent years, we cannot claim that the state pension construct has yet reached steady state. We know that the proportion of women in Great Britain qualifying for a full state pension will not equalise with men for another six or seven years, and for S2P outcomes to equalise will take much longer. While the availability of means-tested benefits—pension credit, housing benefit and council tax support as it now is—has lifted millions of pensioners out of poverty, there remain problems of take-up and ongoing questions of the extent to which their potential availability undermines incentives to save. Despite progress, we have not eliminated pensioner poverty, but neither does the Bill—all this, of course, in an environment where life expectancy for men and women continues to increase at an accelerating rate. As my noble friend Lady Hollis said, we should look at healthy years.
The introduction of a single-tier pension pitched above the rate—just, in the illustrations—of the guaranteed credit is therefore an important development. It is built on the foundation of auto-enrolment which grew out of the Pensions Commission work on which my noble friend Lady Drake was so influential. It was the report of this commission which clearly concluded that the then state and private pensions regime would not deliver adequate incomes in retirement through changes to the state system alone. Reform to make it simpler to understand and less means-tested were essential to provide clear incentives for individuals and employers to build additional private provision.
In analysing the reforms necessary to the state system to underpin private saving, it was clear that abolishing S2P before establishing the success of auto-enrolment and a national pensions saving scheme would be risky. Since then, things have moved on. We legislated for auto-enrolment—my noble friend Lord Hutton was Secretary of State at the DWP at the time—and for NEST, and the coalition Government have brought them into being. It is still early days, but opt-out rates look to be below expectations, which is encouraging. While continuing to acknowledge that the coalition Government have broadly followed the consensus, we should continue to express concerns about raising the bar to automatic entry. Every time the Deputy Prime Minister talks to us about how many people have been taken out of income tax, he might complete the sentence and say how many—mostly lower paid women—have been denied auto-enrolment.
As my noble friend Lady Sherlock said in her sparkling opening speech, the introduction of a single-tier pension deserves our support—our long-term support. I know that it will be music to the ears of my noble friend Lady Hollis, who has long campaigned for this approach. Of course, as proposed, the detail will not be unwelcome news to the Treasury.
We do not reach the sunny uplands of a simplified single tier overnight. There are complications along the way and we will seek the assurances of the Minister in Committee about the communications strategy to be adopted to explain what is going on. We also need to be assured of the capacity of HMRC and DWP to build and maintain the necessary systems which will give effect to all this. Without putting too fine a point on it, I suggest that the DWP has not covered itself in glory in managing change in recent times. It is a sobering thought that the transition to everyone being in receipt of a single- tier pension will probably extend beyond my lifetime. In the interim, there will be two systems running side by side. Those retiring before the single tier could receive the basic state pension, possibly uprated by the triple lock; S2P, uprated by earnings during accrual and CPI in payment; and the guaranteed credit, possibly uprated by earnings. On the single tier, the Bill provides for uprating by at least earnings, although the impact assessment assumes the triple lock. Protected payments under the single tier are to be uprated by price inflation. So it is hardly all simple and straightforward.
There will also be different access to benefits. Those retiring into the new system will be denied savings credit but not the guaranteed credit. They might also be eligible for housing benefit and council tax support, although the former could be affected by the withdrawal of savings credit. Those retiring before 6 April 2016 will be able to access benefits as now. There are complexities here, too, compounded by how passporting is to work. For some benefits, it is the guaranteed credit of pension credit which is the passport; for others, it is either the guaranteed credit or the savings credit. We need more clarity around all this.
Individuals retiring before 6 April 2013 will be able to defer their state pension under the current rules, including taking a lump sum. Deferral under single tier cannot involve a lump sum and will be more actuarially based and restricted. Qualifying conditions will be different for the two regimes—we now know that it will be 10 years for single tier—and both these changes contribute to the savings for the Treasury.
Over time, those reaching state pension age before single tier will comprise a smaller proportion of the pensioner population and it is important that their interests, too, remain protected. Those retiring in the earlier years of single tier will be better off than under the existing system—notionally, that is—although this reverses for those retiring later. The position of women improves, particularly because single tier benefits lower paid and part-time work.
Transition is not only about two systems running side by side. Provision is necessary for those who retire after 6 April 2016 but who have a contribution record prior to this—hence the need to grapple, as we doubtless will in Committee, with new concepts of “foundation amounts”, “protected amounts” and “rebate-derived amounts”. We should also test the transitional proposals for derived and inherited entitlement.
Perhaps a surprising fact to emerge from the various analyses that we have been sent is the extent to which means-testing will remain within the new system. While the amounts may have declined, the percentage of pensioners receiving housing benefit or council tax support in comparison to what would have happened under existing arrangements hardly changes. There is a significant fall-off of pension credit entitlement, but even 5% of those reaching pension age in 2060 will qualify. Overall, there is a reduction in benefit claimants of just 3%. Nevertheless, there is an improvement in the number having low marginal deduction rates, which is important for saving incentives.
In these circumstances, take-up remains an issue. If the rationale for the assessed income period—a degree of stability in the incomes and capital of pensioners—has not proved to be the reality, it could be difficult to argue for its retention, although I take the point that my noble friend Lady Hollis has just made. However, we think that the Government have done the right thing in retaining the current indefinite awards. Given the still significant scope of benefits within the system and the fact that take-up of pension credit is not high, the need for more regular reporting will bring its challenges. What assurances can the Minister give us about the support proposed for pensioners having to reconnect with the reporting system?
We should be clear that, because of this Bill, the state is going to do less than is currently planned. Over time, the share of GDP going to pensions will be smaller than currently predicted. At 2060, it will be 0.6% less—some £30 billion—but assuming the triple lock for uprating. Should uprating be as provided in the Bill, by earnings, the reduction is 1.5%. On top of those savings are the increased national insurance contributions which accrue to the Treasury from the abolition of contracting out—some £5 billion a year in the early years. More than 80% of that will be borne by public sector employers and employees. An additional 1.4% national insurance contribution is unwelcome news for scheme members at a time when incomes are being squeezed and household costs are rising. Costs have risen faster than wages in 39 of the 40 months since this Government came to power.
Notwithstanding the override given to private sector employers to recoup the loss of the 3.4% national insurance rebate—I share the concerns of my noble friend Lord Whitty about that—there is the risk that all of this will accelerate the decline in defined benefit provision. Public sector schemes will not be able to recoup the loss in that fashion. Following on from questions already asked, perhaps the Minister will say something specific about how those costs are to be met. On the local government schemes, specifically dealt with by my noble friend, as he said, the LGA estimates employer costs in the region of £700 million a year. Given the savaging of local authority budgets by the coalition, how does the Minister think that those costs can be found? Does he think that the new burdens policy should apply and that they should be met centrally? What analysis has been undertaken of the concerns expressed by the LGA that the Bill could undermine the agreement of the reform of the local government pension schemes due to be implemented next April?
The Bill is not only about state pension provision. It includes a raft of other measures, and it should be supported in its attempts to tackle some long-standing problems in the private pensions industry, including the prohibition on offering incentives and removal of short-service refunds. Although the focus on tackling small pension pots is to be applauded, like others, I regret that the proposed solution cannot be supported. The technical amendments to auto-enrolment look supportable, but is it not time to remove some of the historic constraints on NEST?
Finally, I have observed with admiration the work done by Gregg McClymont, the shadow Pensions Minister, aided and abetted by my noble friend Lady Drake, on the urgent need to restructure the UK pensions market, including the annuities market, to forge greater transparency and drive down costs for savers. Once again, we see the Labour Party, just as on energy prices, leading the way, standing on the side of consumers against the vested interests of dysfunctional markets.
Given the scope of the Bill, I hope that the Government will yet be able to pick up some of the amendments that will undoubtedly be moved. As for what is in the Bill, it should, sensibly amended, receive our agreement. I look forward to supporting my Front Bench to that end.
Baroness Dean of Thornton-le-Fylde (Lab)
My Lords, as a number of fellow Peers have said, this is a substantial and important Bill. It deals with the state pension fund, but it also covers elements of private pension funds. After buying their home, most people’s biggest investment in their life is their pension scheme. The Bill will be important for the quality of life of the whole nation at the end of their working life, so it is important that we get it right. We have a chance to get it right because it is very much cross-party; the single-tier pension has general consensus. Compliments have been passed. The Minister was generous enough to recognise the work done by my noble friends Lady Drake and Lord Hutton.
So the Bill has a very good start with a lot of cross-party support. I would like to be the first to sign up for the campaign of my noble friend Lady Sherlock to make pensions interesting. They are very important but, unfortunately, when you mention pensions, people’s eyes go to the ceiling—until they find out just what is wrong with their pension. Then, their interest is alerted but it is too late.
What we are considering today is important, but the Bill is inferior in some respects to the Green Paper which the Government issued. The Green Paper said that the changes would be cost-neutral, but the Institute for Fiscal Studies stated that,
“these proposals imply a cut in pension entitlement for most people in the long run”.
I would welcome the Minister’s comments on that when he responds.
The Bill covers a whole range of issues, all of them in their individual ways important, but I shall concentrate my remarks on its impact on women. There is no doubt that the change to a single-tier pension is one of the biggest and best changes to state pensions for women in this country. In my view, the women who will benefit from it do not want to get those improvements on the back of the women whom the Bill does not treat fairly in the transitional stage. That is where my real concerns arise. I hope that we will propose to amend the Bill to deal with those anomalies.
It is established and generally accepted that women make up by far the largest number of those on pensions living in poverty. The number is substantially different; far more women than men are in poverty on pensions. The Bill does not change that for a whole group of women. It is also true that women pensioners have a lower income than men. The Bill does not change that in the transitional period. We must deal with those issues.
For instance, currently, a woman who has been married or in a civil partnership may be able to use their partner’s record to receive a state pension or increase the amount they receive of their own accord. There are some transitional protections in the Bill, but they do not cover everyone. For instance, in the years ahead, some would reasonably expect to receive either a married woman’s pension or a full basic pension, if they were widowed, or would not have had the time before retirement age to make up the contributions. Are the Government going to change the Bill to protect those people?
The Government said that in 2020, there will be between 20,000 and 40,000 married and widowed individuals affected by a pensions loss. I find that unacceptable. Given the magnitude of what we are dealing with, we could amend the Bill to deal with that. I am joined in that view by the Work and Pensions Select Committee in another place. The committee has asked the Government to conclude a solution by allowing individuals within 15 years of state pension age to be allowed to retain that right. That would be a transitional measure and, in the nature of things, would not be hugely expensive. Will the Government accept the Select Committee’s recommendations?
Another group of women has been mentioned in this debate several times: those born between April 1951 and April 1953. Those women feel that they are being subjected to a double disadvantage. First, their state pension retirement age will increase. That is an issue that would have faced any Government. Any Government would have had the unpalatable task of changing the retirement age; I fully accept that. However, this group of women will face a later retirement age but will not go on to the single-tier pension, as I understand it. Will amendments be brought forward to rectify that situation?
Another issue has come up several times. Because an element in the Bill deals with private pensions, I feel able to raise it. That is the issue of part-time workers. We had a long debate on the previous Pensions Bill about the fact that although part-time workers who do not earn up to the national insurance level cannot join a pension scheme, they may have two jobs which, put together, would take them through that barrier and they would qualify for a pension. Those in that category are predominantly women. It is grossly unfair that we are having a major pensions change in this country which, I think, will put it on the right path for the future—although I think that we will have to make further changes later—without dealing with that issue.
Indeed, the Department for Work and Pensions showed in its own analysis that in 2012-13, some 50,000 employees fell into that category of having more than one part-time job but not being able to have a pension cover because both jobs, or three or whatever it was, fell below that level. Of that 50,000 people, again, 40,000 were women. In a Bill which marks a substantial and improved change on pensions for women in this country, there are those anomalies which I believe we should deal with. It will be our responsibility to try and do that. They are all transitional issues, not issues which will last for ever and a day, and we should be about to deal with them in the nature of things.
There are other aspects of the Bill which obviously cause concern. On the bereavement provision, it is a bit cack-handed to withdraw the pension on the first anniversary of the death of the spouse. After the bereavement of your spouse, the first year is always the most difficult. We need to consider what it would be like to be reminded of it. There are also the pension charges. I congratulate the Government on their announcement this week that they are looking at those. It may be that we will have something to discuss on pension charges during consideration of this Bill. I look forward to taking part in debates on this Bill which, if we get it right, will be a landmark for British citizens.
Baroness Sherlock
Before my noble friend rises, my Lords, I should say that I realised after I sat down from speaking earlier, with something of a sinking heart, that I had forgotten to draw the attention of the House to my interests in the register. I am the senior independent director of the Financial Ombudsman Service—a remunerated position. In an unremunerated position, I also chair a charity which has employees in pension schemes that could be affected by the Bill. I apologise to the House both for that omission and for interrupting the debate now to have to rectify it.
Lord Browne of Ladyton (Lab)
My Lords, I am delighted to follow my noble friend Lady Dean and I learnt a considerable amount from her contribution to this debate, some of which I shall draw on in my few remarks. I think most noble Lords will understand that I rise to the Dispatch Box with the words of my noble friend Lady Donaghy ringing in my ears, not just because she is sitting behind me but because she urged us in her opening remarks to approach this subject with a degree of humility. I do just that, as this is the first time in 16 years in one part of this building or another that I have had the lack of wisdom to debate pensions, and to do so from the Dispatch Box is a daunting prospect.
I open my remarks by thanking the Minister for his introduction. I thought that he laid out in a helpful way what this Bill seeks to achieve and I look forward to hearing him build on that in his response to the debate and throughout further consideration of the Bill. I have some experience of engaging with him in debate in your Lordships’ House and I know that he will do his best to assist the House to understand and, if necessary, improve this legislation. I thank him, too, for engaging with Members in all parts of this House in preparation for this debate and for his promise of further briefings. I join him in commending the noble Lord, Lord Turner, my noble friend Lady Drake and Sir John Hills for the work they have done; I add to that my thanks to my noble friend Lord Hutton and the noble Baroness, Lady Hollis of Heigham. I was privileged to work with her for a short time when I was the Minister for Employment in the Department for Work and Pensions.
If all those who deserve some recognition for their contributions to this debate will excuse me, while I hope to give them some recognition during these remarks I single out my noble friend Lady Drake. With an economy of words that was a model, she went through the Bill in a way that identified almost all the issues that many months of my trying to understand it had identified, if not understood, and some others that I had not even thought of. I can appreciate why she was on the commission led by the noble Lord, Lord Turner, and why she has had such a significant effect on the direction of travel. I also commend my noble friend Lady Sherlock, whom I am privileged to serve in this cobbled-together team for this purpose. She knows how much I admire her and I thought that she made a sparkling and excellent speech.
I congratulate the noble Lord, Lord Balfe, on an accomplished maiden speech. I have no doubt that the House will value greatly what appears to have been his long and varied journey since the age of 16. It took him all the way from 4 Millbank, which is just across the road, to your Lordships’ House. He referred to Millbank and the noble Viscount, Lord Eccles, referred to the Imperial Chemical Industries, or ICI, in his contribution. Since I am the survivor of a man who was an employee and then, for a short period, a pensioner of the ICI—my mother, who was widowed, was a pensioner of it for a significant period—I recognised the Millbank address as being very significant to the ICI. Those buildings are still there and at least the noble Lord, Lord Balfe, is still with us although the ICI is not. That just occurred to me as a relevant coincidence in the debate before your Lordships.
Turning to the issues raised in the debate, I start with my noble friend Lady Sherlock’s first question to the Minister, which challenged him to confirm the level at which the STP—the simple pension which we are all discussing—will be set. I do that because it seems to be the essence of our understanding of whether this significant reform of the pension system will meet the challenges that the Minister and others have set for it. There seems to be agreement that it needs to be high enough to provide an adequate platform for saving and to reduce means-testing. The problem is that, as we understand it, these reforms will reduce means-testing only if the flat rate pension is set above the pension credit level. Indeed, the Select Committee recommended that there should be some clear blue water between one and the other and argued further that that principle should be built into the Bill. None of us will be able to get a handle on whether this will, over time, consistently meet that condition unless we have some idea of the rate at which it is to be set.
Perhaps I may say in passing, and with all humility, to the noble Lord, Lord German, that this is assuredly not a citizen’s pension. A pension that requires 35 years of national insurance contributions cannot be described as a citizen’s pension.
Moving on, I am encouraged to draw the Minister’s attention to the questions asked by a number of noble Lords, including my noble friend Lord McKenzie, about the fact that all the documentation we have before us, set in the context of the impact assessment, assumes that the single-tier pension will be uprated by the triple lock. Of course, we know that the triple lock is in place only until the end of this Parliament and I am not suggesting that it is reasonable to expect the Government, or indeed any party aspiring to government, to promise the triple lock going forward. One does not know what financial circumstances or degree of growth there will be in the economy in those times. However, I would argue that if we are to understand fully the implications of this policy, and whether it meets the tests that we are all generating for it, we have to have some information against which we can compare the performance of this policy going forward. It would be much more helpful if the Minister could provide us with additional information, other than that which is in the impact assessment and has that assumption underpinning it. If there were alternative calculations provided to us that showed the other ways in which could it be uprated, or not uprated at all, that would give us some sense of whether this policy is dependent on the triple lock or whether, on its own terms, it can be sustainable into the future.
I turn to the question of the continued review of pensionable age, which was raised by my noble friends Lady Turner of Camden, Lady Hollis of Heigham, Lord Whitty and Lord Hutton of Furness. The noble Lord, Lord Balfe, also raised it in his maiden speech. I make it clear that we on these Benches recognise that, as life expectancy increases, it is reasonable to consider extending working lives. However, along with many other Members of your Lordships’ House, we believe that it is very important to consider a range of factors. One of those is that there are differences in healthy life expectancy between different groups and varying employment opportunities for continued working in later life. A number of noble Lords made reference to that.
It is our argument that the Bill needs to provide greater clarity about that process. It is also essential that people have sufficient notice of any changes in state pension age in order to make or revise their plans for retirement. To meet the first objective, we proposed consistently in the House of Commons an amendment that would have ensured that the panel set up to assess rises in longevity included representatives from opposition parties and trade unions. We also have concerns about the methods of periodic reviews.
On the second of these objectives, I point out to the Minister that only this month the Government themselves published a document entitled Reshaping Workplace Pensions for Future Generations, in which they conceded that:
“Our current thinking is that employers would not be able to adjust the”,
normal pension age,
“of anyone within 10 years of the existing NPA in the scheme”.
That concession—that advice—that they published in their own document brings into question a five-yearly review and the consequences of such a review. At this stage I am not seeking to argue beyond the amendment that we tabled in the Commons, and will probably repeat here in Committee and perhaps on Report, but it raises a question about the consistency of the Government’s thinking when that document, published just last month, can strongly make that point while the Government expect that the review of pensionable age will be every five years.
My noble friend Lady Hollis of Heigham made reference to part-time workers—I think she called them people in mini-jobs. As she identified, there is a group of people, mainly women, who have more than one part-time job but are below the national earnings limit in each job, so are not building up the rights to a future pension. In fact, as she pointed out, recent analysis found that in 2012-13 50,000 people—40,000 women and 10,000 men—had two jobs with a combined income above the lower earnings limit but were not accruing qualifying years towards their pensions. My noble friend argues, I think with some authority, that this is unfair and could prejudice hard working people who are doing everything possible to provide for themselves and their families at a time when full- time jobs are acknowledged to be in short supply. Characteristically, she has an innovative solution, which, as I understand it, is essentially that they be treated as self-employed. That would ensure that all those in work with total earnings above the lower earnings limit were building up rights to a state pension. I commend this approach to the Minister, and we will be interested, as I think other Members of the House will be, in the Government’s position regarding this. I suggest that the arguments that have been put forward thus far do not meet the challenge that my noble friend has set out.
My noble friend and others have concerns about the phasing out of the assessed income period. She makes the very good point that the phasing out of this period generates challenges relating to equity release to pay for care and its impact on pension credit when changes to capital are taken into account. While I am not arguing that the release of equity should be dependent on administrative easement that was meant for other purposes and may not be sustainable in the long term, we on the Front Bench do not disagree with the phased abolition of an assessed income period but we wish to use Committee to probe the evidence base for this change. We know that some elderly people struggle with correspondence, particularly official communications, and we wish to be assured that there is support in place for those who need it, with the additional burden that these provisions impose.
A number of noble Lords raised issues reflecting the dysfunctionality of the private pensions market. It is at the heart of this reform that, from a base of a single-tier pension, people are encouraged to save. As my honourable friend Greg McClymont has made perfectly clear, this will work only if they are saving into pension funds in which people have trust and confidence. At the Bill’s Second Reading in June, Greg made clear that our focus on the Bill would be on the half of the Bill that was missing—essentially, the part that would make private pensions value for money for the saver. The Pensions Minister responded throughout the deliberations on the Bill in the Commons in a relatively dismissive way to these suggestions—the Minister smiles; I think that he recognises some of the phraseology that was used—and resisted all our amendments throughout Committee, despite the fact that he recognised consistently that they were relevant to existing serious problems. Throughout that time, he was able to take advantage of the alibi that the OFT report had not been concluded. However, as many noble Lords have said, the OFT reported in a devastating fashion, confirming all our criticisms of the dysfunctional pensions market and raising the sword of a market investigation reference, which is still hanging over the pensions market pending Parliament’s completion of the Bill.
In response to that and the fact that the report expressly, or by implication, supported every one of our amendments, the Government performed a U-turn, but only in response to a part of the problem with charges. The Government have listened to the OFT report on charges and have done a U-turn, and that is welcome, but perhaps now they should listen to the other OFT recommendations, which include the areas that we have tabled amendments on. Indeed, the OFT has gone further than we did to make our pensions industry value for money for savers. We encourage the Minister to consider some of these issues in relation to transparency and governance of the pensions industry, which we will continue to urge.
In anticipation of this debate, I wrote myself a set of notes that said, “No one supports the Government’s line on pot follows member except possibly the ABI”. That was before I heard the speech from the noble Lord, Lord Paddick. I think that he was the lone voice in this debate supporting pot follows member. I say to him, again with some humility, that the Australian example that he encouraged us to follow comes from an entirely different environment. In Australia, as I understand it, there are several hundred pension schemes, whereas there are over 200,000 pension schemes in this country. This is an entirely different environment and the Australian analogy does not quite work.
I am conscious of my time and I shall endeavour not to go through all this now, saving some of these arguments for Committee. However, I am sure that the Minister knows the arguments that have been put forward by many, including the Centre for Policy Studies, as my noble friend Lord Hutton identified. Reading carefully the briefing we all received from the ABI, I am not entirely sure that it is still as supportive of pot follows member as it was at the outset of the debates on this issue.
I commend the right reverend Prelate the Bishop of Derby for a measured and informed speech in relation to bereavement benefits. He made a very powerful argument for consideration of the effect that bereavement can have on children and the importance of the support of parents. I do not intend to go into any more detail on this other than to commend to the Minister the questions that were asked by noble Lords who also made this point. It is an issue that we will to return to in Committee and later during the passage of the Bill.
There are issues about the consequences of the phasing out of contracting out. There are significant potential impacts on public sector and local government pension schemes. There is a related but not directly analogous issue in relation to protected pensions. I also commend to the Minister the observation made by my noble friend on this Front Bench and by the noble Viscount, Lord Eccles, that this is a framework Bill and encourage him to give us some indication about when we will see some of the regulations that inform the Bill.
Unusually, I want to refer to an issue that was not raised, but I promised my noble friend Lord Dubs, who is well respected in this House, that I would indicate to the Minister that my noble friend will raise in Committee the issue of Jarvis and the small number of employees who have lost out very badly in its pensions.
My noble friend set three tests in her opening speech. However, there is a series of other tests that the Government have set that we will measure this Bill and these reforms against, because the Government claim substantial consistent consequences for them. I think the Minister has comprehensive notice of them, particularly from the informed contributions by my honourable friend Greg McClymont, who went over the detail of this with some care. I think he can expect interesting and engaged debates in Committee and on Report. I was very struck by the number of times the Minister used the phrase “very complicated” or “very complex” when I was speaking to him earlier and he and his officials were giving me an explanation of what we can expect in the Bill. He is right about that. I stand before your Lordships’ House confident that behind me I have a significant number of Members who are comfortable with that complexity. One or two of them will be talking to me quite a lot before the later stages of the passage of the Bill. This is a reform that we broadly support, but we will challenge it every step of the way.
Lord Freud
My Lords, I expected an interesting and valuable debate and I got one. I congratulate my noble friend Lord Balfe on his remarkable maiden speech, which I know we all enjoyed. I hope we provided him with adequate intellectual stimulation this evening of a kind he will remember. Whether we met the challenge set by the noble Baroness, Lady Sherlock, in making the topic interesting, at least we will, as my noble friend Lord Paddick pointed out, have all gained an extra hour in our lives during this debate.
I shall focus first on the transition which many noble Lords rightly focused on. There are some tough issues around it. People who have contributed to or been credited into the national insurance system have expectations, so we cannot switch to the new system overnight. I assure the noble Baroness, Lady Sherlock, that this is not a hard, fast transition. It is pretty difficult to design a transition that strikes the right balance and takes account of people’s expectations as far as possible while also ensuring that those who are part of the transition—in other words, those who will retire over the next 50 years—will see the benefits of the single-tier pension. I believe this Bill has been successful in this difficult endeavour, and for that reason I expect it to outlast by a considerable factor the 10 years predicted by the noble Baroness, Lady Donaghy.
The foundation amount allows people to see the value of their pre-2016 national insurance record in one figure, which gives simplicity to the single tier but also recognises past contributions. It is a smooth transition. For the vast majority of people reaching state pension age in the years after single-tier is introduced, their outcomes are similar to what they would have got under the old system. Nearly three-quarters of those reaching state pension age in the first five years will see a change in their state pension of less than £5 a week. Of those who see a larger change, five times as many gain as lose. Those who see this boost are likely to be those who have traditionally been badly served by the state pension system: women, carers and the self-employed.
While moving to a modern system based purely on individual entitlement, the transition provides, for example, for inheritance of additional state pension where one member of the couple is in the current system. There is also transitional protection for those who paid the married woman’s stamp. Difficult decisions and trade-offs have been necessary to redesign the state pension within its cost-neutral envelope, and inevitably this means that while some people get more than they would have done under the current system had it continued into the future, some people get less.
I shall move on to as many of the specific points as I can—there were a lot. The noble Baroness, Lady Donaghy, said I would delight the 1951 to 1953 generation of women by moving. I think I might delight them a little bit. Ninety per cent of these women will get more in state pension and other benefits over their lives by drawing their pension in the current system at their state pension age than they would if we gave them a state pension at 65 and single-tier pension. The women in this cohort will reach state pension age between two and four years before a man born on the same day, which means that they will get between £13,000 and £26,000 more state pension than a man of equivalent age. To correct the point made by the noble Baroness, Lady Dean, it is not a double whammy. They have not seen their state pension age rise, except for the equalisation under the 1995 Act. The only change this group has seen recently is in the triple lock.
The noble Baroness, Lady Sherlock, raised derived entitlement. We will clearly go into this in some detail, but we estimate that in 2020 fewer than 30,000 married and widowed women—less than 5% of single-tier pensioners—will be affected by loss of derived entitlement to a basic state pension based on their spouse’s national insurance record. I know this is an area we will debate in great detail.
Baroness Hollis of Heigham
This is an area of some concern to a lot of us. Will the Minister be kind enough to give us all the stats he has, including how many of those getting the married women’s 60% were born or live overseas, do not have UK residence and so on, which was the argument in the Commons? We are very short of detail on this.
Lord Freud
My Lords, as I hope everyone in the Chamber knows, I have arranged to run a series of briefings at the appropriate time—about a week ahead of every Committee session—particularly to try to go through this detail. It really is extraordinarily complex, to reuse a tired word. One needs to go through it with examples and graphs and so on, which is much better. We will get all the information that we can, but we will do it in that context and will then be able to look at it in Committee on the basis of that process.
The noble Baroness, Lady Sherlock, and the noble Lord, Lord Browne, asked what the start rate will be. We will need to decide that closer to implementation when the level of the pension credit standard minimum guarantee for 2016-17 is known. I am afraid that I cannot reveal all tonight.
The noble Baroness, Lady Dean, asked about cost-neutrality. The reforms are designed to be cost-neutral in terms of spending on persons. The spending on the single tier should be within 1% of projected spend on pensions until the late 2030s. In the longer term, after that, the single tier will slow the rate of increase in pension spending, helping to make it a sustainable system.
The noble Baroness, Lady Sherlock, raised the savings credit. One of the things that the single tier does is to clarify savings incentives, so that people will know what pension to expect from the state and be able to plan the additional provision that they want. The issue of passporting was raised by the noble Baroness and the noble Lord, Lord McKenzie. Clearly, passporting will be through the guarantee credit, not the savings credit, although in practice the numbers are not that different. On the difference between being on the single tier and being on a credit, and whether you get various passporting, that is always the case when you have a system of passporting. However, it is worth bearing in mind that when you look at the relative rates for members of a couple, the single-tier rate is much higher than the credit guarantee rate; the single tier comes out at £288 for a couple in 2012-13 prices, against £216.55 at 2012-13 prices. So there is a very big gap for couples on that passporting issue.
My noble friend Lord German asked me for the latest correspondence on bilateral agreements. I regret that I just do not have that information to hand right now. I will search the cellars of the DWP to see if I can do any better and write; it is probably very heavily buried there.
Several noble Lords—the noble Lord, Lord Whitty, my noble friend Lord German and the noble Baroness, Lady Donaghy—raised the abolition of the rebate and the costs that would go to the public sector employers. The noble Lord, Lord Whitty, asked whether we would talk to the LGA. The Chief Secretary to the Treasury has met with the LGA and I can confirm that Her Majesty’s Treasury is happy to meet with them.
We will spend a lot of time on multi-jobs in Committee. One point to make is that the effect of welfare reforms will naturally be to improve coverage. All adults on universal credit, many of whom will be the lower paid that the noble Baroness, Lady Hollis, is rightly concerned about, will get their pension correctly that way. In that way, the crediting system is extremely comprehensive. By the 2040s, more than 80% of people will receive the full single-tier amount based on the 35 qualifying years. Clearly, we will be reviewing the crediting arrangements in the light of reforms and will look at the position of these people as part of the review. The noble Baroness is as familiar as I am with the quite revolutionary opportunities which Governments can look at, now or in the future, around RTI when that is built in. I know that we will spend a lot of time on that.
A lot of noble Lords raised the age review and some of the relevant issues: the noble Baronesses, Lady Sherlock and Lady Hollis, and my noble friend Lord Paddick. Clearly, one point of having a review is that longevity on its own is not the only factor. That is exactly what is being realised here. We have debated that in the past, and I know that we will debate it further.
On equity release and the AIP change, income-related benefits take account of any income and capital generated by liquidating assets. However, equity release may not necessarily result in a reduction in eligibility for means-tested benefits and will depend on overall income and capital.
The right reverend Prelate the Bishop of Derby and the noble Baroness, Lady Sherlock, raised bereavement support. This is clearly driven substantially by the change in the welfare system when you have universal credit as a basic bedrock for people. Bereavement benefits were another way of producing that kind of income in an entirely different way. We are now targeting this support for the period of financial need, as we heard that it was required; we did a survey on that. One therefore needs to separate it from bereavement, and maybe the right reverend Prelate’s point about what we call it is relevant there. It is a financial support which is underpinned by the universal credit but, clearly, we do not offset it against universal credit which, if it went on for a long time, we would do. By not offsetting it, we are targeting help at those with the greatest need, whether they are a widow or parent or not. It is a very progressive structure in that way. It means that 62% of the very poorest are actually better off. We will go into this in great detail in Committee; I will not do so now. However, that is the structure and the thinking behind it.
The noble Baroness, Lady Sherlock, and my noble friend Lord German raised conditionality. The structure is that all recipients of bereavement benefits—not just partners, but also if you lose a child—have access to Jobcentre Plus, purely on a voluntary basis, for the first three months; no conditionality for the next three months; and at the end of the six months, advisers will use their discretion to ensure that individuals’ capability and requirements are taken into account.
We will have a major debate in Committee and, I suspect, beyond on the pot-follows-member approach versus the aggregator approach. At this stage I will make a few minor protests about why we have chosen the former rather than the latter. However, I will make an impassioned defence as we go through it in great detail. The pot-follows-member approach maximises the consolidation, is in the best interests of savers and will reduce by half the number of dormant pots by 2050. We estimate that an aggregator approach would achieve just half the cumulative administrative savings for the industry by 2050. We will spend more time on that.
The question from my noble friend Lord Brooke is a suitable last question: what more is there on which to legislate? We will probably have some open questions left after the Bill on how much people are saving. Quite a few noble Lords suggested that perhaps people are not saving quite enough for what they anticipate they will want to spend when they retire. There is also the nature of the savings vehicles—we talked about defined ambition. Those are the two big areas in pensions. I suspect that there are probably several more, but perhaps I would pick those two.
I close by thanking all noble Lords who contributed to the debate, which was informed, measured and interesting. As I said, we will hold a number of briefing sessions. I am keen that in this debate we deal with the real issues on an informed basis and do not waste time. That is what these sessions are for—so that we have full information. I will endeavour to make sure that noble Lords have all the information they need to make the contributions they want to make. In particular, I want to make sure that the noble Baroness, Lady Hollis, is able to table all the many amendments that we all look forward to.
The Bill does a remarkable job of creating a pension system fit for the 21st century—nine times as long as the noble Baroness, Lady Donaghy, thinks. It is a return to the simplicity of Beveridge’s model for the state pension, it strengthens the private pension system, and it will enable today’s and tomorrow’s working-age population to plan for and build towards a secure retirement income. I commend the Bill to the House and ask for it to be given a Second Reading.
Northern Ireland (Miscellaneous Provisions) Bill
(10 years, 5 months ago)
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The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD)
My Lords, there can be little doubt that the political settlement in Northern Ireland has delivered huge benefits, both for the people of Northern Ireland and for the wider United Kingdom. Many noble Lords present today are far better placed than I am to describe the changes we have seen since the dark days of the Troubles.
So much is now happening that would not have been considered possible even 10 years ago. Whether we look at big events like the G8 summit, the World Police and Fire Games, or the first Fleadh to be held in Northern Ireland, or important milestones in the process, such as the end of the first full Assembly term in 2011, or indicators of wider attitudes towards institutions, such as the almost 2,300 Catholics who applied to join PSNI this year, it is clear that enormous progress has been made. However, alongside those markers of progress, we have also seen violence and political tensions linked to issues such as flags. It is today exactly one year since violence broke out over flags issues.
We are all aware that there is still a long way to go before Northern Ireland has the prosperous economy and stronger society which I know all of us in this House would like to see. Sectarian division carries great risks to the economy, to security, and to the general well-being of Northern Ireland’s people. Without economic success, peace is less well rooted. There is much to do in Northern Ireland to bring us on from the legacy of decades of troubles, but it seems to the Government that the two challenges of community division and rebalancing the economy are ones that are critical for the future.
Of course, other questions are being considered in Northern Ireland at present. The all-party group chaired by Dr Richard Haass is considering parades, flags and emblems and the past. Those are some of the most deeply rooted problems that Northern Ireland faces, so that is important work. It is very welcome that that group is undertaking it, first, because the devolved institutions have taken up the challenge of dealing with these issues—not, as would have happened in the past, leaving the lead to the Government. It is welcome also because the Northern Ireland authorities secured to chair the talks someone of the eminence of Dr Haass, who has earned universal respect in Northern Ireland for his grasp of the issues and his energetic dedication to the task. I am aware that some noble Lords in the House will take a close interest in those issues, and we will have to consider when we see the report how we can best give opportunity for those views to be expressed, bearing in mind that the process and the report are owned in Belfast rather than here.
Few would argue that the institutions established under the agreements are beyond improvement, but let us remember that they have given us the relatively stable politics that no other approach in the past 40 years has been able to do. There may come a time when significant change is considered. However, the Government have been very clear that major changes to the institutions established by the agreements can go ahead only if they have broad support across the community in Northern Ireland. It is also essential that any such change is consistent with the principles of power-sharing and inclusivity that are at the heart of the Belfast agreement. At present it is clear that there is no consensus around fundamental changes, and the Bill does not seek to make any. The imperative in Northern Ireland at present is, as I have suggested, to tackle the issues around sectarianism and around strengthening the economy.
I therefore readily acknowledge that the Bill does not make radical changes, but it does make important ones. It is a Bill for more normal times. It reflects progress in Northern Ireland, making changes which remove some of the special measures which have been implemented because of Northern Ireland’s unique situation, and which bring the system in Northern Ireland closer to Great Britain. However, it also acknowledges that there are areas where institutions in Northern Ireland might benefit from further reform. I know that some noble Lords look forward to a day when there might be scope for more substantial changes to the institutions. I hope that debates during the passage of the Bill in this House will give us the opportunity to reflect on these possibilities, always bearing in mind the need to proceed by agreement.
I turn to the contents of the Bill, which amends the regime governing political donations and loans to make more information available to voters in Northern Ireland about the funding of political parties. This matter has been debated on several occasions in this Chamber and I know that noble Lords take the issue very seriously. I hope we can all agree that it is right to protect the names of those who made donations in the past. These individuals made donations in the belief that they would remain confidential, and it would be wrong to change this retrospectively. I hope we can also agree that future political donations in Northern Ireland should be published as soon as the security situation allows. What we may not agree on is whether that time has already arrived.
The provisions in the Bill take a cautious approach. They set a date after which permanent anonymity will not be guaranteed, and they give the Government the power to increase transparency incrementally. For the moment, we believe the security situation does not justify publication of donor names, but it is important to ensure we have the flexibility to move towards the goal of bringing Northern Ireland’s transparency rules into line with the rest of the UK. If the Bill proceeds successfully to the statute book, we intend to move as swiftly as possible thereafter to draft secondary legislation on transparency. We would, of course, consult on these provisions, but we can confirm that our intention is that information about donations and loans made to political parties since 2007 which does not identify the donor would be made public—for example, the type of donor, its value, the date on which it was received and whether it was from an Irish source. We will look to use the power to increase transparency in the Bill to bring Northern Ireland closer to the system which operates in Great Britain as soon as possible, taking into account the security situation.
The Bill will also bring about the end of dual mandates between the Northern Ireland Assembly and the House of Commons, or the Dáil, by the time of the next Assembly elections in 2016. The practice has long been a matter of concern. Indeed, the Committee on the Preparation for Government, formed prior to the talks at St Andrews in 2006, debated the issue of dual mandates and agreed that the practice should be phased out. Even though good progress towards ending dual mandates has been made since 2010, half of Northern Ireland MPs were also MLAs following the Assembly elections in 2011. Of course, some have now given up one seat or the other, but it is important to ensure that double-jobbing ceases permanently to be a feature of political life.
Over the years, many Members have served with distinction in the House of Commons and at the Assembly. While the institutions in Northern Ireland were not stable, it was understandable that double-jobbing was a feature of political life. But times have changed; the stable operation of the Assembly seems set to continue. Being an MLA is now a full-time job and it is therefore no longer appropriate for dual mandates to continue.
When the Fixed-term Parliaments Bill was debated in late 2010, concern was expressed in Scotland and Wales that a general election would overshadow the devolved one and cause voter confusion if held on the same day. The decision was taken in early 2011 to extend the terms of the Scottish Parliament and Welsh Assembly to avoid their elections coinciding with a Commons election. As regards Northern Ireland, my noble and learned friend Lord Wallace indicated during the course of the debate on the Fixed-term Parliaments Bill at that time that similar changes for the Northern Ireland Executive would be considered following the triple poll of May 2011. The Bill brings the position in relation to the Northern Ireland institutions into line with the approach in Scotland and Wales. By providing for a fixed five-year term for the Assembly, it will also permanently decouple Westminster and Assembly elections.
The Bill also makes changes to give the Justice Minister the same security of tenure as the other Executive Ministers. This is in response to a request from the First Minister and Deputy First Minister that followed inter-party discussions, after which the Assembly agreed the permanent method of selecting a Justice Minister. It is vital for the continued stability of the Northern Ireland institutions that the Assembly is able to elect an individual who commands cross-community support to the post of Justice Minister and that the allocation of ministerial posts between parties thereafter is fair. I hope that all Noble Lords will be able to support the changes set out in the Bill to achieve this.
Clause 6 gives the power to the Assembly to reduce the number of MLAs itself, subject to consent from Westminster. Unfortunately, it has not been possible to secure agreement among the parties on an actual reduction, but we hope that agreement will be forthcoming. Many now take the view that Northern Ireland has too many elected politicians. Long-awaited reforms of local government structures are addressing that level, but there is also clearly scope to reduce the size of the Assembly. To allow the reduction to take place without further primary legislation, the Bill makes this matter reserved, meaning that the Assembly could legislate on this matter, with the consent of the Secretary of State.
This Bill also recognises that progress has been made in Northern Ireland that makes it appropriate for the Government to consider whether the Assembly and the Executive might take the lead on issues that have previously been excepted matters. The relationship between Stormont and this place is maturing, and the Executive are taking the lead on Northern Ireland’s future. In this context, we believe it right that we make provision that opens the way to devolving functions relating to the Civil Service Commissioners for Northern Ireland, the Northern Ireland Human Rights Commission and the District Electoral Areas Commissioner. By placing these matters in the reserved category, the Bill would enable devolution to take place, following a full consultation, a cross-community vote in the Assembly, and votes in both Houses here. The Government would also be ready to consider devolution of the Secretary of State’s appointment responsibilities for the Equality Commission. We hope to begin consultation on these issues shortly after Royal Assent.
The Bill also makes a number of other important, but more minor provisions, in relation to equality duties, court rules and electoral registration and administration, among others. We want to give effect to recommendations by the Electoral Commission and Chief Electoral Officer to improve the conduct of elections in Northern Ireland, and to reduce the special measures that have been applied to Northern Ireland in respect of elections, recognising that, while we must always be vigilant, past concerns about electoral fraud have been ameliorated.
The measures in this Bill do not make the kinds of sweeping changes to government in Northern Ireland that we have seen when considering Northern Ireland matters in the past. But although the changes made in the Bill are not radical, they are important. They would improve the functioning of Northern Ireland institutions and the way in which they function; they would open the way to changes in the powers of Stormont vis-à-vis Westminster; and they would improve democratic accountability and strengthen the electoral system. I hope that this Bill will play its part in helping to address the challenges faced by today’s Northern Ireland, and I commend the Bill to the House. I beg to move.
Lord McAvoy (Lab)
My Lords, I thank the Minister for her explanation in moving the Second Reading.
As was stated in the other place, this has been a momentous year for Northern Ireland and is an appropriate time to bring forward this Bill. With the visit of President Obama to Belfast and the G8 summit in County Fermanagh attended by the Heads of Government, Northern Ireland was on the world stage, and these events were a great boost to morale throughout the community. Two thousand young people from schools across the whole of Northern Ireland were given a vision of the role that they can and must play in the future of Northern Ireland. President Obama’s speech was inspirational not only to those present in the Waterfront Hall but throughout Northern Ireland. The G8 summit worked out very well and it is only right to congratulate the Prime Minister and the Secretary of State on their vision in locating such an important international event in the magnificent location of Lough Erne in County Fermanagh. I declare a personal interest in that my maternal grandmother came from the Enniskillen area.
Lord McAvoy
I will not say where my paternal grandfather came from.
The whole of the Northern Ireland community can be proud of the way that the G8 was organised, including especially the co-operation between the PSNI, police forces in the UK and An Garda Siochana, which resulted in protests being facilitated in an orderly way. The summit was a success and a source of pride in the United Kingdom and the island of Ireland. That is the background to this Bill—one of success and not confrontation.
We are all aware that danger remains and there is a lot to do. The flag protests testify to that, and the activities of dissident republican groups remain a severe challenge to the peace process. We can all be grateful for the work of the various security services in making sure that the peace process continues. The Opposition are committed to supporting the Government in a bipartisan way, where it is possible, and we will work very hard to do that. We also have a duty and responsibility to hold the Government to account when we disagree.
As an Opposition, we have to state that there is some disappointment attached to the Bill, not because of what it contains but more to do with the issues that are not dealt with. The use of the word “miscellaneous” is unfortunate as it gives the impression that a number of minor issues are being bundled together and dealt with. The Bill’s provisions have been discussed within the Northern Ireland parties and received general but not universal support. In principle, we support the ending of dual mandates; the extension of the Assembly’s term—temporarily and then permanently; giving security of tenure to the Justice Minister and devolving power on the size of the Assembly. We want to move to full transparency and accountability in political donations. Clearly, we will look at the detail of all the proposals in Committee, but by and large they make sense. However, the Minister will know that the Assembly and Executive Review Committee at Stormont is looking at the size of the Assembly, the number of executive departments, designation, the composition of the Executive, and provision for opposition. These are difficult and sensitive issues. The principles of power sharing and inclusivity are fundamental, but there is an acceptance that the system could be improved and there are demands for more accountability and more rigorous scrutiny of the Executive.
The previous Secretary of State last year launched a review of the operation of the Assembly during a speech in which he criticised the Assembly and the Executive. Vernon Coaker said at the time that that criticism was largely unwarranted and unnecessary and suggested that the Government work in partnership with the Executive and the Assembly to look at how they and the Northern Ireland Office could work more effectively, individually and collectively. To be fair to the current Secretary of State, she has taken an approach more in line with that thinking. However, Vernon Coaker worried that in some respects she has gone too far the other way and has not engaged with some of the issues. Vernon Coaker also said that devolution should not mean disengagement. The Bill gives the House a chance to put its views appropriately and constructively and we hope that, as the Bill goes through its stages in the House, the Government will reflect on how they could take that opportunity.
A lot of progress has taken place on policing and justice. Security of tenure for the Justice Minister has to be welcomed. David Ford continues to do a good job in very difficult circumstances. One issue which I must raise is the National Crime Agency’s inability to operate in Northern Ireland. We regret that, and I hope that as we go through the Bill, we will support the Secretary of State in her attempts to persuade the Home Secretary to work with the Northern Ireland Executive to get the legislative consent necessary for the agency’s remit to extend to Northern Ireland. My noble friend Lady Smith of Basildon has experience of this issue and I hope that she will enlarge on it later in the debate.
On the electoral registration provisions, Westminster still has a role in helping to build a shared future in Northern Ireland that is inclusive of all communities. However, we would like to urge some caution. There needs to be a balance between ensuring that as many people as are entitled to do so engage in the democratic process while protecting against the kind of electoral fraud that undermines the process. The history of violence is very difficult and painful to speak about, but we have had many difficult and painful conversations in Northern Ireland and made progress, and we need to have a conversation on the history of violence. Is there nothing we can propose in the Bill that would help this process and take it forward? The Government say that there is no consensus on the way forward, and therefore no possibility of agreement. We fundamentally disagree, as Members of your Lordships’ House will know.
Dealing with the past—the legacy of the Troubles—is expressly a responsibility of the Northern Ireland Office. It cannot act alone, of course, and we have consistently said that we need a comprehensive and inclusive process with victims and survivors at the centre. The last time that Northern Ireland was debated in the other place, Lady Hermon asked what was meant by that. I repeat today that the Government, in partnership with the Irish Government, and in full co-operation with the Assembly, have a duty to lead but not to prescribe. There has to be consensus all the way. It is very difficult but we must try to create a vehicle through which these issues can be discussed and resolved. Of course that will take time, and it will not be easy, but the prize will be worth it. Victims and survivors are not afraid to talk about the past; the Governments should not be either.
Having said that, the hurt, anger and pain in Northern Ireland which are a legacy of more than 40 years of the Troubles—40 years of killing, bombing and other events—cannot be overestimated. We do not underestimate that legacy but a start has to be made some time, and we think that could be now. We are a little disappointed that the Government cannot find a way in the Bill to allow the issues of the past to be discussed and addressed so that consensus may emerge. The legacy of the past has to be dealt with and the Government must consider the impact that it has on the victims, the survivors and everyone else in Northern Ireland. However, despite those criticisms, we give the Bill our support.
Lord Trimble (Con)
My Lords, this is a worthy Bill and I welcome it, but when we go through it in detail I would like us to deal generally with devolved matters as opposed to excepted and reserved matters. During the interparty talks that preceded the agreement of 1998, I raised this issue on a number of occasions. We were then using the devolution provisions in the Government of Ireland Act 1920, with minor changes, as the basic starting point. However, I thought—and still think—that some matters which were devolved in 1920 were no longer suitable for devolution in 1998. Unfortunately, this was considered to be a side issue, but I do not think that is any longer the case.
In those discussions I gave two examples. The first concerned commercial law. I am not sure whether it was seriously intended in 1920 that there could be regional variations in the law concerning commerce, but it is not a valid idea now. Now, commerce operates within a single EU-wide market, and there is no scope for any regional variation and no real function for the Assembly. However, because of its 1920 Act inheritance, the Assembly must pass legislation identical to that enacted here to give effect to European directives. To have this matter no longer devolved would relieve Stormont of drudgery and add to its resources to do something useful.
The second example which would relieve the Assembly of even more drudgery concerns social security, and that is because of the operation of the principle of parity. That principle flows from the existence of the unified tax and benefits system, which is at the heart of being part of the United Kingdom. I do not have to remind folk in Northern Ireland that that parity was hard won and is of huge importance to poor and unemployed persons. The Stormont Parliament stuck firmly, step by step, to UK national welfare policies, whether it liked them or not, and resisted opportunist suggestions from some within its own ranks to depart from parity. The Northern Ireland Executive have done that until now.
I am not going to debate the advantage or otherwise of recent changes to social security because those changes are not relevant. What we are dealing with here is a matter of principle. I say to those in Belfast who are seeking regional variation that they have to bear in mind the consequences that would flow from it. If the door was open to regional variation, it could be a two-way street, and it could apply to other things as well. What comes to mind immediately are things such as public sector pay. Therefore, I suggest to the Northern Ireland Executive that they should close this Pandora’s box as quickly as possible.
If one favours, as I do, a nationally unified tax and benefits system, it does not make sense for part of that system to be under Westminster and part to be devolved to Stormont. Both parts should be together, which is the case with regard to Wales and Scotland, where welfare is not devolved. The anomaly could be tolerated while Stormont adhered to parity, but now, when Stormont has departed from parity, the matter should be addressed properly. I am sure that the Government here would prefer to sort things out quietly, but so far that has not worked and, as noble Lords will know, a financial penalty has been imposed. That is scheduled to increase but one cannot be sure that that will be the end of the matter.
Westminster has the power to enact its new welfare policies over the head of Stormont. However, if there is to be legislation, there is a case for transferring welfare to Westminster as an excepted matter so that this issue will not recur in the future.
There is an instructive example in another part of the Bill, and it was mentioned by the Minister. After devolution in Wales and Scotland, the national parties were against dual mandates. Originally there was a suggestion of legislation, but a voluntary approach has been adopted and that works after a fashion. However, with regard to Northern Ireland the voluntary route is being abandoned and this Bill legislates to put an end to dual mandates. Therefore, that, in a sense, is a precedent for what I am suggesting in this case.
If there is legislation to transfer welfare, I doubt whether there will be serious opposition at Stormont. I suspect that Sinn Fein has raised the issue of these welfare changes because of its embarrassment at the contrast between its bitterly opposing austerity in Dublin while appearing to implement it in Belfast. I suspect that privately it would be relieved if this burden were removed. I am not sure what the DUP’s position would be, but parity is a unionist position.
It may be objected that this is swimming against the tide when one considers what Calman has suggested regarding a fresh commission in Scotland amid talk of devo-plus and devo-max. However, while there have been suggestions in Scotland that some relatively minor welfare powers might be devolved in the event of a no vote, there appears to be no inclination to devolve welfare as a whole, and I would advise caution on that matter. I look forward to returning to this issue in Committee.
Lord Alderdice (LD)
My Lords, when the notion of a Northern Ireland Bill was first discussed a couple of years ago, the Secretary of State at that time undoubtedly considered that the centrepiece of the Bill which he hoped to see through would be the devolution of corporation tax. I suspect that most noble Lords and indeed Members of the other place will see this as a very modest Bill because of the failure to be able to include that measure. I perfectly understand the concerns about the impact that such a proposal might have on Scotland. However, I think that that is mistaken: the argument for the devolution of corporation tax in relation to Northern Ireland is wholly different because of the existence of a land border, and that fundamentally changes the economic questions and challenges. Therefore, when the Minister says that there are no fundamental changes in the Bill, she is absolutely right, and that makes it a fairly modest provision.
The measure which I guess was not considered when the Bill was first thought of a couple of years ago concerned the position of the Justice Minister. That really emerged only at a later stage. I very much welcome the regularising of this situation. I know that my former colleagues in the Alliance Party found themselves having more Ministers than would be justified by their votes, although not by their abilities. However, in all fairness, they, like others, would feel that it is better to regularise this and to give a degree of stability to the position of the Justice Minister. In the context of Northern Ireland the Department of Justice is even more important than it is in any other state, although it is always an important ministry. Indeed, today, with the results of the Smithwick tribunal being announced, we recognise and recall that issues of justice and policing have always been central, difficult and contentious. I pay tribute to my friend and colleague David Ford, who has, I think, fulfilled this role with considerable distinction. It is not an easy role but he has worked hard at it and deservedly has gained considerable respect for the work he has done.
The rest of the measures are relatively minor and some of them are wholly unobjectionable from my point of view. I declare an interest as a serving member of the Committee on Standards in Public Life. A number of these measures were recommended by the committee. I suspect that the current chairman, the noble Lord, Lord Bew of Donegore, probably will have something to say about that. I welcome the transparency of donations, although I feel that that could go considerably further. I have always been a bit sceptical of the degree of caution that there has been on this question over quite a number of years. The dangers are a lot less than people have claimed in recent years. It may not have been the case quite some time ago. Double-jobbing also was raised by the Committee on Standards in Public Life. I welcome too the relatively minor electoral measures brought forward.
One of the questions raised by the noble Lord, Lord McAvoy, is whether this Bill might have been made a bit more substantial by some kind of legislation on dealing with the past. Dealing with the past is a very difficult issue. I notice the noble and right reverend Lord, Lord Eames, in his place and no one needs to tell him about the difficulties in dealing with that issue. I am exerting myself considerably in thinking about it. I am not persuaded that lawyers or legislation will necessarily be the right way to deal with what is fundamentally a question of difficulties about identity. I hope that we find a way forward and that Dr Haass and his colleague Meghan O’Sullivan can assist us in that way, although I am not at all sure that we need more flags. We probably have enough of those in Northern Ireland.
However, there are two measures about which I would express a little caution. First, on the size of the Assembly, I know that in times of austerity the need for efficiency and care about money is important but there was a reason why the Assembly was larger than was justified by the number of electors. It is about dealing with a range of issues from a range of perspectives and having an Assembly large enough to make it function. For example, the Welsh Assembly is much smaller but there are substantial complaints about its size.
A number of people are proposing that we probably need something like 100 Members because certain fundamental functions need to be carried out to make an Assembly viable. I have a concern with the proposal that it should effectively be given, albeit with the say-so of the Secretary of State, to the two large parties to determine the representation size in the Assembly. I could see a temptation on those parties to reduce the numbers and the numbers in the electoral areas in such a fashion that those who vote for it might benefit most from it. One reason why past measures were accepted was that there was always a danger that those who were in power might use them to their own advantage, which is the fundamental problem in the Northern Ireland situation. It is one of the limitations of democracy in a society which is bedevilled by the problems we know well.
I understand what is being proposed and certainly my former colleagues in the Alliance Party have been very supportive of this kind of proposition. I believe that they are concerned about efficiency, reasonableness and so on. I remain somewhat concerned. I just want to flag that up. I hope that my noble friend and her civil servants and officials will think seriously about this issue. One could be creating a problem for the future.
The same thing applies to the human rights commission. It needs to be able to speak truth to power. It needs to be able to challenge authority. One of the dangers of repatriating arrangements and appointments to the commission might well be to create a similar kind of problem. Whereas there is a feeling on this side of the water that, “They are all grown-up boys and girls over there and they should just get on with things”, I am not sure that we are quite at that stage in Northern Ireland. There are still some difficulties that we need to find our way through before having that degree of confidence. So I flag up those concerns.
Of course, I support the general thrust of the Bill and wish it well. I hope, too, that it might not be too long before we come back with a subsequent Bill that would fill out the more substantial things that perhaps should have been here in the first place.
Lord Browne of Belmont (DUP)
My Lords, I welcome this Bill, which provides the opportunity to give the Northern Ireland Assembly, the Executive and Northern Ireland politicians the tools that they need to continue to move forward as agreement allows. This will allow Northern Ireland to maintain the process of maturing and evolving politically as trust and confidence is built. The greatest challenge that we in Northern Ireland face daily is rebuilding our society after many years of division.
After the longest period of stable government in a generation, politics is changing. It is right that the regulation in relation to political donations should be adjusted to reflect that change. My party, the Democratic Unionist Party, supports Clauses 1 and 2, which provide for greater transparency concerning donations made after 1 January with the important proviso that a final decision will be made only when the security situation in Northern Ireland allows it. Those who donated to political parties under the current procedure did so with a full expectation to full and perpetual anonymity. We support the commitment not to retrospectively publish the names of donors who have given in the past.
Northern Ireland of course is a special case and I am sure that noble Lords will appreciate that, in this instance, there is a requirement for it to be afforded special status which does not exist elsewhere in the United Kingdom.
Many individuals and businesses are to be commended for stepping forward during the bad old days of the darkest of times in the history of Northern Ireland. Despite great personal risk to themselves and their businesses, these brave persons donated to political parties, standing up for democracy. As we move forward to a more normalised society and as we attempt to put our troubled past behind us, it is correct that we move towards the system of donations employed throughout the rest of the United Kingdom. We support the normalisation process for political donations as is outlined in the Bill.
With regard to setting a timetable for the removal of anonymity, sole responsibility for this process lies with the Secretary of State for Northern Ireland. Under the Bill as currently drafted, in assessing the security risk and potential future risks to commercial companies, the Secretary of State is obliged to consult only with the Northern Ireland Electoral Commission. It is certainly right for it to be consulted regarding the mechanics of changes, but as regards the security situation, surely the Secretary of State should also consult with those who have relevant experience and specialised knowledge of the subject. We also believe that provision should be made for consultation with political parties as political parties will have to live with the consequences of reduced funding if the Secretary of State gets the timing wrong.
One issue of concern is that the Bill will not close the sizeable loophole that at present permits political parties based outside the United Kingdom to be bankrolled by donations made abroad. Unfortunately, the Government have not so far seen fit to close that particular loophole, which should not be made available to any political party. Under the Political Parties, Elections and Referendums Act 2000, political parties registered in Great Britain are permitted to accept donations only from UK residents and bodies. That is a solid and sound principle. The same Act extends to parties in Northern Ireland. However, parties registered in Northern Ireland may accept donations from the Republic of Ireland. Unfortunately, in this particular instance, an exception has been made in relation to Northern Ireland. Certain political parties have raised substantial amounts of money outside the jurisdiction, and that money is used to influence the political and electoral process within the United Kingdom. That is wrong and it is an area that should be looked at.
In relation to Clause 3, dual mandates served a useful purpose in Northern Ireland during the period of the Troubles. It was important to have political leaders present in both the Northern Ireland Assembly and another place when negotiations and decisions around Northern Ireland's future were being made. Given that the Troubles as we knew them are now over, we hope, the constitutional debate has been won and we now have the longest and most stable period of devolved government in a generation, it is clear that dual mandates are something that have naturally come to an end. My party, the Democratic Unionist Party, has been actively phasing out dual mandates for a number of years and by 2015 all our dual mandates will have ended. This legislation change simply underscores and re-emphasises what has been happening already on a voluntary basis.
While dual mandates do indeed need to be addressed, the anomaly of non-representation must also be brought to an end. It is time for those persons from Northern Ireland elected to the other House to make a decision. If they want their expenses and office costs, they need to demonstrate that they are doing the work. That means taking their seat. They are free not to take their seat if they so wish. However, the situation that exists where people do not take their seat but are allowed to claim expenses must end. The issue of non-representation while still claiming expenses is an affront to democracy.
Regarding Clause 6, there is broad consensus within Northern Ireland that there should be a considerable reduction in the size of the Assembly. As Northern Ireland moves towards a more normalised society, this should be reflected in a more proportionate legislature. As the party that has most consistently sought to improve Assembly structures, we believe that it is right and proper that the Government should change the Northern Ireland Act 1998 to allow determination of the size of the Assembly to be a reserved matter. That will allow the Assembly to legislate for themselves following consultation and agreement with the Secretary of State.
However, an important point that could arise from the reduction in numbers in the Assembly is that, as it stands currently, a petition of concern requires 30 signatures. If the Assembly were to be reduced to 90 MLAs or fewer, as would be my preference, it would clearly be right, proper and sensible to reduce the number required to sign a petition of concern. This debate should take place between the parties of Northern Ireland at the same time as a discussion on the reduction of MLAs. Thus, I believe that the Bill should be amended to make petitions of concern a reserved matter upon which the Assembly may legislate following agreement.
I also welcome Clause 7, which will bring Northern Ireland into line with the rest of the United Kingdom. Holding elections for the Assembly and the other House on the same day leads only to confusion and does not allow for the issues pertaining to each body to be properly debated and considered. This change has been legislated for already in Scotland and Wales and is welcome for Northern Ireland as well. There is unanimity of support for the changes proposed in respect of the appointment of the Justice Minister. Those changes would permit that appointment to become normalised within the d’Hondt system.
As regards changes to the reform of electoral registration and voting, I welcome any proposals that will improve and simplify the current process. It is very important to compile an accurate and complete electoral register and I am glad to see that there has been a good uptake of people registering for voting, although some areas still need more work.
I welcome this Bill: it addresses some incredibly important matters. As I have mentioned, I wish that it had contained further provisions concerning political party donations and, in particular, the loophole regarding donations from outside the United Kingdom; but I have no doubt that we will turn to that issue some other time. It is to be welcomed that elections for the Northern Ireland Assembly have now been brought into line with those for Scotland and Wales. I welcome the new arrangement in place for the Minister of Justice and the Assembly’s power to reduce the number of MLAs, which we certainly want to see. It is clear that there are far too many Assembly Members in Northern Ireland and they need to be reduced.
I recognise that there are many other issues that need to be debated and for which provision needs to be made. I hope that after the talks with Dr Richard Haass and further consideration in the Assembly and Executive Review Committee, we will be in a position to come forward with some consensus on these issues and debate them further. I believe that the Bill will help to keep politics moving forward in Northern Ireland and improve the working of the devolved Administration. Finally, in reply to the point made by the noble Lord, Lord Trimble, the DUP is fully in support of parity.
Lord Brooke of Sutton Mandeville (Con)
My Lords, I think this is the first time since I came to your Lordships’ House a dozen years ago that I have followed a Cross-Bencher who in Northern Ireland is a member of the Democratic Unionist Party. The noble Lord, Lord Browne of Belmont, has spoken well on this thoroughly useful and comparatively tidy Bill.
The Library’s briefing pack identified this Bill as the first piece of constitutional legislation in Northern Ireland that has undergone recent examination by Parliament without a background of crisis. During the pre-legislative scrutiny of this Bill, Lady Hermon MP even elicited from Raymond McCartney, a Sinn Fein MLA, that he did not see any reason why Sinn Fein would not respond to an invitation to give evidence at Westminster, dependent on the context. This was the first evidence from Sinn Fein to a Westminster committee given in public.
That is not to say that one can only have a useful measure in less critical times. A particularly striking instance of that was the Electoral Fraud (Northern Ireland) Bill, carried through your Lordships’ House early in the new millennium by the late, great Lord Williams of Mostyn, who, effectively, completely changed the Bill between Second and Third Reading, to its great improvement. My own absorption in Northern Ireland detail has diminished during the past score of years; but I am batting at number six among the 11 initial speakers in this Second Reading debate, which makes me its fulcrum and an apposite place to make the sort of remarks the chorus makes in a Greek tragedy.
I like the format of the Library’s briefing pack and I am delighted that the Northern Ireland Affairs Committee is now used to give pre-legislative scrutiny to new Bills. That House of Commons committee, which I chaired during the 1997-2001 Parliament, did not exercise that power, though we did, after ten years, review the working of the Fair Employment (Northern Ireland) Act 1989. Ken Livingstone, then an MP, who served on that Select Committee before he resigned to contest the mayoralty of London, suggested the review and agreed at first that it should be delayed until the end of 10 years. When we reached the time for the review, he acknowledged that he had originally suspected the legislation to be simply a sop to American critics, but that he now agreed it had made a real beneficial difference.
My only unease about the pre-legislative scrutiny was that it contained 29 recommendations whereas the Government’s response—they claimed that they had addressed each recommendation, as indeed they had—said that the report contained 24. On a day when the Government has made a Statement on, inter alia, UK arithmetic, the Northern Ireland educational establishment can still teach its colleagues in Great Britain something.
Having myself approved the title “National Lottery etc. Bill” in 1993, I suppose it is churlish of me to regard “Miscellaneous Provisions” as an inadequate substitute for,
“measures to improve the operation of the Northern Ireland Assembly”,
and separately,
“donations and loans to Northern Ireland political parties”.
Those were the subjects of consultations by the NIO in 2012 and 2010 respectively, which underlie the Bill and which both have a fine 17th-century timbre. My locus is all the more insubstantial to make these comments when I know even less about d’Hondt than I do about the Duckworth-Lewis scoring method in limited-overs cricket matches. Selfishly, I must say that I hope amendments about d’Hondt will not trouble us in Committee. As it is, there is clear evidence of progress on the size of the Assembly, the dual mandate and the transparency of donations—even if history takes a meandering course and it is less well known than it should be that there was a fall-off in Irish-American donations after Mrs Thatcher gave authority for the United States Air Force to fly bombing raids from British airfields to Libya in the mid-1980s, when France and Germany had declined to do so.
I profoundly welcome the Bill’s attention to detail over the year 2016, not just because of the centenary of the Easter Rising but because of that of the opening salvoes of the Battle of the Somme. I had no role in the Anglo-Irish agreement, the Downing Street declaration, the IRA’s ceasefire in August 1994 or the Belfast agreement, but I did have a role in the 75th anniversary of the first day of the Battle of the Somme. I represented the Cabinet on behalf of Her Majesty’s Government, accompanied by the late Alan Clark, who was representing the Ministry of Defence. The noble Lords, Lord Bannside and Lord Molyneaux, were also present. It was a memorable day, not least because of accidents in the arrangements on the battlefield in both the morning and the afternoon.
In the morning, the local Catholic priest was passed over for his planned prayers, which were then taken at the end of the service at the Lutyens memorial. In the afternoon, under a light but wetting rain at the commemoration of the 36th (Ulster) Division at Helen’s Tower, mishaps were happily overcome. The first happened when the Minister from the Ministre des Anciens Combattants, representing the French Government, having returned to Paris after an excellent local lunch, was therefore not available to take up the tray of fleur-de-lys, which were refused in turn by the lady Mayor of Thiepval—population 86—and the British ambassador and were eventually accepted by me. The second was because of the ambiguity in a sentence in the service sheet to the effect that a piper, “will play a lament. Wreaths will be laid”. The latter phrase could have made the actions either simultaneous or consecutive.
The truly memorable event of 1 July 1991 was that, back in Belfast, the inter-party talks of that summer continued under the chairmanship of my noble friend Lord Mawhinney, who during the day negotiated an agreement that the talks had now run their course and should be brought to a gentle close. It was agreed that the close should be temporary and that the gentleness should bind everyone not to get into the blame game, so that the talks could be peacefully resumed in due course, as indeed they were, to the long-term benefit of the peace process. If useful Bills go well, the climate improves and we must hope that this is true this time too.
Lord Shutt of Greetland (LD)
My Lords, I have to follow that slot. I thank my noble friend Lady Randerson for explaining the Bill to us. For me, the starting point in considering the Bill is, indeed, the Belfast agreement of 1998, which was of course endorsed by 69% of those who voted in that May 1998 referendum. It is perhaps right that we are considering this 15 years on. We are looking at the revision of two Acts of Parliament —the Northern Ireland Act 1998 and the much earlier Act, the Northern Ireland Assembly Disqualification Act 1975.
I support much of the miscellany that is before us in connection with the transparency of donations and loans to political parties, the ending of the dual mandate and the new method of appointing a Justice Minister. But I would like to highlight one or two areas of reservation. I am concerned about the size of the Assembly. The Bill suggests that this could change, and we have heard noble Lords speak about reducing the number of Members in a constituency from six to five.
I looked at the results of the most recent Assembly election. Of course, in looking at results one is not to know exactly how people would behave if there were only five elected rather than six. However, after studying that election, it is my view that the losers would not be the DUP or Sinn Fein but other Members of the Assembly, and there would be fewer people from minority causes serving in the Assembly. That would result in a loss of plurality, which is embedded in the Belfast agreement as to how Northern Ireland should go forward. Indeed, if we were to reduce the number from six to four, it would be even worse. If there were to be reductions under the present system, I would sooner reduce the number of constituencies from 18 to 12 and stick with the six Members.
One also has to take into account the fact that there will be a reduction in the number of those who serve in local government—it seems that the legislation is there for 2015. The folks in Northern Ireland would be well advised to think through what that will mean in terms of the number of public representatives who are available to serve the people there. I caution against that and wonder whether that clause ought to be supported in the Bill.
The Northern Ireland Assembly Disqualification Act 1975 has not been referred to by anyone else but I would like to refer to it. It is interesting that it sets out those who are disqualified. Of course, those who are disqualified are justice officers, and there are 17 different sorts of justice officer specified; there are also civil servants, Armed Forces, police, national criminal intelligence people, the National Crime Squad, any member of a legislature of any place outside the Commonwealth, and other offices in Parts 2 and 3 of Schedule 1.
There are 105 offices listed in Part 2 and 136 in Part 3. For example, if you happened to be a member of the Football Licensing Authority, which is in Part 2, you are not able to stand for the Northern Ireland Assembly. If you are chairman of the Plant Varieties and Seeds Tribunal, you are not able to stand for the Northern Ireland Assembly. Northern Ireland is quite a small place and if you think of those who are serving on these 241 bodies, you are reducing the gene pool from which candidates can come. I think that needs looking at.
If this issue is not looked at in itself, it can be looked at in another way. The Minister will be aware that there was a little local difficulty in Wales a couple of years ago in terms of people standing for the Welsh Assembly and the problems that were caused. There could well be a situation where on nomination day you could stand down from the office of profit, and if you are not elected you resume after polling day. Of course, the specific reason that I am able to speak on this is that the Civil Service Commissioner for Northern Ireland is to be so listed, so there are 242 rather than 241 appointments that exclude people from standing.
As I said, it is important to look back at the Belfast agreement. Strand One of that agreement sets out:
“A consultative Civic Forum will be established. It will comprise representatives of the business, trade union and voluntary sectors, and such other sectors as agreed by the First Minister and the Deputy First Minister”.
Furthermore, Clause 56 of the Northern Ireland Act 1998 sets out:
“The First Minister and the deputy First Minister acting jointly shall make arrangements for obtaining from the Forum its views on social, economic and cultural matters … ‘the Forum’ means the consultative Civic Forum established in pursuance of paragraph 34 of Strand One”.
Where is the forum today? It is not there. I do not know whether legislation will help, but again this is about plurality—about everybody being in this together for Northern Ireland. We should look again at that Belfast agreement. That is the test that we have as we take this Bill into Committee. Is there anything else that needs adding to the miscellany that is before us? Of course, I welcome the Bill, but I wonder whether there are some changes that we should be making.
Lord Empey (UUP)
My Lords, as we discuss this Bill this evening, we have to measure its provisions against the strengths and weaknesses of devolution as it has operated now for nearly 10 years. Do these provisions help or do they largely ignore developments and avoid the many problems that need to be resolved?
It is true that Northern Ireland has progressed in the years since the Belfast agreement was ratified. I say to the noble Lord, Lord Shutt, that the percentage in the referendum was 71.2%, if I recall correctly. As has already been referred to, the visit of the President Obama and other world leaders ahead of the very successful G8 summit held in County Fermanagh in June signified just how far the Northern Ireland political process has come after many false starts. The noble Lord, Lord McAvoy, indicated his antecedence from that district—it is as well that that information was not freely available when the Prime Minister took his decision to go to County Fermanagh—and I join him in saying to the Prime Minister that he took a very brave decision which put the Province on the world stage in the most favourable possible circumstances.
However, it must also be acknowledged that to look forward to a bright future of peace and justice we must first deal with the weighty and at times seemingly unconquerable issues of “the past”. Attempts are being made as we speak by Ambassador Haass to do this, but it would be a brave Member who predicted a totally successful outcome to these deliberations before Christmas. The past, flags and parades are among the most difficult problems that we face. If Dr Haass does not succeed at this stage, we have to look at a completely new way forward; we just cannot allow things to sit where they are.
We have entered a decade of anniversaries in Northern Ireland, as has been referred to, with the first one of last year, the commemoration of the Ulster Covenant, having passed peacefully in September 2012. Given that positive start to the period, it was regrettable that, exactly one year ago today, we were plunged back into a dismal place following the decision of Belfast council with regard to the union flag.
Up until last year, there were no flag protests and demonstrations, not even from those who would have preferred no flags to fly—indeed, many citizens did not even realise that a flag was there at all. But Sinn Fein did, and it has waged a campaign for more than 30 years to get it removed. Even the public consultation held on the proposal to pull the flag down indicated that very few people in Belfast were seriously worried or offended by its presence, but, like so much that is symbolic in Northern Ireland, taking things down is both difficult and dangerous.
On the night when the decision was taken, two other events occurred. Newry and Mourne council decided to ratify the naming of a children’s playground after an IRA gunman who had been in possession of a weapon linked to the Kingsmills massacre. Sadly, David Ford, who has been referred to, whose councillors’ votes were necessary to take the decision, issued the statement that night:
“Tonight’s result has been a clear victory for the Alliance Party. Through the dedicated work of Alliance Councillors the image of a shared future has prevailed in Belfast”.
In view of the events of the year that has followed, many of them deplorable, I can hardly think of a form of words so far removed from reality. Community relations in Belfast have been set back by many years. Indeed, I have not seen things so bad in the city, having represented part of it for 26 years.
What we are seeing in Belfast and other places is really the legacy and the inability of our institutions to deal with the consequences of the brutal and lengthy campaign of terror that has left two extremely frightened and polarised communities in fear of each other and unable to come to terms with the past. To suggest that those injustices should be whitewashed or simply forgotten about as time goes on is both unrealistic and not in the spirit of justice.
The people of Northern Ireland know all too well that, if not adequately dealt with, those feelings of grief, injustice and hurt travel through the generations as if they were implanted in the genes. They leave the younger generations with true and genuine feelings of grief, anger and disgust although they have no real memories of the darkest and most brutal days of that period.
Acts of “tribal, intimate revenge”, as the late Seamus Heaney put it, will carry on for generations to come if there is no sense of due process and closure for every family who have been affected and feel that they need justice for their injured and lost. The idea that it is easier for the Government and perpetrators simply to write it off only adds to the hurt of each mother, father, son and daughter who has endured unspeakable grief and has carried on in the quest for truth.
In 1998, it was in the spirit of truth and justice that my party, the Ulster Unionist Party, under the leadership of the noble Lord, Lord Trimble, endorsed the Belfast agreement in the hope that the long and bloody days of terror would be put behind us and that it would install a functioning political institution enshrined in statute. Since then, and in the provisions before us, a number of measures are proposed that will slightly alter the configuration and circumstances in which the Assembly functions.
There is a proposal to extend the term: not a big proposal in itself. However, I make two points. The idea that that guarantees in perpetuity that future Assembly elections will not coincide with Westminster elections is false. The Fixed-term Parliaments Act does not guarantee in statute five-yearly elections to Westminster. That could change because of circumstances, which we debated here at enormous length. If it can happen, it will happen. The idea that that brings to an end a clash between the Assembly election and the Westminster election is untrue. It does not guarantee that at all.
My anxiety about that issue is that, in the other place, the Minister, and the Member for South Leicestershire, said that there was “general consensus” that the Assembly term should be extended from four to five years. That is not so. There is a majority for it, but it is not a general consensus. We take the view that all the people in Scotland and Wales knew in 2011 that they were voting for a five-year assembly. The people of Northern Ireland believed that they were voting for a four-year Assembly. The information was there, because the Government contacted all Administrations at the same time, but it did not filter out. When the Government came forward with their initial Explanatory Notes, they indicated that they were not proposing to effect the five-year change because there was not consensus on it, but, all of a sudden, consensus materialises. It is not a huge issue but I am making the point that when people went to the polls in Belfast and Northern Ireland, they did not know that they were voting for a five-year term. There has been little or no debate about whether there should be a permanent five-year or four-year term, just as we had people on all sides of this House with different views on that sort of measure.
On Third Reading in the other place, the Secretary of State said that the measures contained therein,
“do not reopen the political settlement enshrined in the Belfast agreement”.—[Official Report, Commons, 24/6/13; col. 49.]
It is a pity that Governments over the years did not adhere to that because in 2006, the then Government did not show the same respect for that document. They brought forward proposals that were not even discussed in St Andrews to change fundamentally how the First Minister and Deputy First Minister were identified. These changes were made behind the Speaker’s Chair without the involvement of political parties in Northern Ireland, with one exception. There was no widespread consensus on them and they have radically altered the agreement that was voted on by the electorate. I know that a number of us will be returning to that as the Bill progresses.
However, there are other, welcome measures in the Bill, including that on the issue of donations, which has been referred to. I fully endorse the comments of the noble Lord, Lord Browne of Belmont, when he referred to the ongoing funding of political parties in Northern Ireland from outside the jurisdiction, which I believe would not be tolerated anywhere else. It is entirely wrong that people from any part of the world can put money into a party in the Republic and that that party can transfer money to fight elections in Northern Ireland. It is entirely unjustified and unreasonable but it is all part of a policy of “Don’t rock the boat. Don’t upset the Shinners. We don’t want to annoy them”, never mind whether the thing is right or wrong. It is wrong, and it should be spelt out clearly that that is the case.
I have to say that I find one or two other issues concerning. I agreed with the noble Lord, Lord Alderdice, in his comments about some of the more minor provisions, which appear to be fairly innocuous with regard to appointing certain key individuals, whether that is in terms of human rights or district electoral areas. I say that because we have just had what is probably the longest local government reform process in the democratic world. It has taken 14 years from inception to finality to carry out a minor reform of local government, because the number of powers being transferred has gradually been eroded over the years until it is effectively a matter of a general competence and power over planning. That has taken 14 years but it is not my main concern.
My main concern is that the boundaries that have emerged, particularly as they apply to the city of Belfast, were flagrantly gerrymandered. For any of your Lordships who know the geography of the area, the outlying housing estates around the city are being brought into Belfast, which is perfectly natural because that is how cities have evolved. However, there are two glaring exceptions. In the north of the city, the Rathcoole area is not being included, yet it is part of the North Belfast parliamentary constituency. In the east of the city, the Dundonald and Ballybeen areas are not being included but are part of the East Belfast parliamentary constituency. When you get past Stormont, the third entrance into Stormont off the Upper Newtownards Road is now going to be in the city of Lisburn; anybody with any knowledge of the area knows that that is absolute nonsense. It has been done for political purposes and it is entirely wrong, so any thought that some of these matters can be handed back willy-nilly to Stormont will require thorough scrutiny in later stages of the Bill.
There is a final point that I want to make. We will deal with the NCA, the definition of victims and other matters at later stages, but there is a point about devolution in the United Kingdom in general that I hope the Government, and indeed the alternative Government, will pay attention to. It concerns the Sewel convention. We are getting ourselves into a position of saying that once you hand over a power, forget about it—devolution can just deal with it, and Scotland, Wales and Northern Ireland can go about their own business. Consequently, Parliament is becoming progressively more London-centric, and that is a mistake. It is nice for Whitehall to get these regional problems off the table and out of the way, but then you wake up to a headline, as some Members may recall we once did, such as the famous Sunday Times one, “John Bull’s Political Slum”. If noble Lords do not remember it, they may have read about it. Although I did not agree with the article, it was making the point that something was happening in Northern Ireland way back in the 1960s that people here did not know anything about because they were not focused on it. Northern Ireland was dealt with by someone at a desk at the Home Office, and that was it.
We are going to make the same mistake with regard to Scotland, Wales and Northern Ireland if we do not watch ourselves. A point comes after you have transferred more and more powers when you have to say to yourself, “Apart from being a cash machine, what else is Parliament for? What other role does it have?”. There is a wider issue that we as a Parliament have to address about how we treat devolution. In the aftermath of whatever happens to our colleagues in Scotland next year, no doubt we will have an opportunity to return to that.
Lord Lexden (Con)
My Lords, it is a great pleasure to follow the noble Lord, Lord Empey, with whom I agree about nearly everything, in the closing stages of this debate on a Bill that has a limited but nevertheless most beneficial purpose: to help further the arrangements under which the Province is currently governed and its electoral system administered. As a Conservative and unionist with a long-standing interest in Northern Ireland, I welcome it.
The Bill has been the subject of extensive consultation within Northern Ireland. It has undergone detailed pre-legislative scrutiny at the hands of the Northern Ireland Select Committee in the other place, and has been usefully improved as a result. Such careful preparation is not a feature of all the legislation that comes before this House. As a Member of your Lordships’ Select Committee on the Constitution, I have from time to time put my name to reports expressing regret that measures have been brought forward without having been given the full and detailed preliminary consideration that they needed. This Bill warrants no such comment, and the Northern Ireland Office is to be congratulated on its thoroughness. The manner in which it has been developed accords fully with the best practice recommended by your Lordships’ Constitution Committee.
From my own staunch unionist standpoint, the Bill has much to commend it. Northern Ireland ought, as far as possible, to be treated in the same way as other parts of our country on issues that affect them all equally. The funding of politics is one such subject. The Bill deserves full support for setting an early date—1 January 2014, less than a month away—after which information about new political donations can be made available without restriction by the Electoral Commission. At the same time, common prudence indicates that the precise moment at which the new power can be used must be determined in the light of security considerations. The Bill rightly leaves the Secretary of State, who I am sure will engage in widespread consultation, to judge when the change can safely be made, and so bring Northern Ireland into line with the rest of the country, in conformity with unionist principles and the wishes of the people in the Province. In a survey carried out by the Electoral Commission at the end of last year, fewer than one in 10 favoured the retention of confidentiality.
The Bill also brings Northern Ireland into line with practice elsewhere in another important respect, by extending the term of the current Assembly from four years to five, and by providing for five-year terms in future. There is nothing inherently superior about five-year intervals between elections; indeed, a powerful case can be made for elections every four. However, the next elections in Scotland and Wales will take place at the end of five years, and Northern Ireland stands to gain no obvious practical benefit from having a shorter electoral cycle. The Bill brings a welcome consistency to this aspect of the United Kingdom’s devolved institutions. All of them will now be re-elected in 2016. Having been brought into a common mould, they should retain it. Elections every five years are to become the rule in Wales as well as in Northern Ireland. It is a rule that Scotland should adopt too.
Much reference has been made in this debate to one particularly glaring disparity that currently exists between the Northern Ireland Assembly and devolved bodies elsewhere. The Stormont Assembly, with a smaller electorate than its counterparts, has a much higher ratio of elected representatives. Electors in Northern Ireland are therefore seriously overrepresented in comparison with their fellow countrymen in Scotland and Wales. The carefully defined power which this Bill gives to the Assembly to reduce its own size provides a most welcome means of tackling the problem. The Assembly should use it to serve both the interests of Northern Ireland, where every opportunity to cut its high levels of public spending should be seized, and those of the country as a whole. Greater uniformity between the various devolved institutions strengthens the unity of the kingdom. At the same time, the important points made by my noble friends Lord Alderdice and Lord Shutt need to be noted most seriously.
The Bill has been given wide support, and rightly so, because it bans elected representatives sitting in the House of Commons and the Northern Ireland Assembly simultaneously. There is nothing new about the existing practice. The first Speaker of the Northern Ireland Parliament in 1921 was also a Member of the House of Commons, and later went on to become Father of it; no one turned a hair. Over the years, his example was followed by a not inconsiderable number of Northern Ireland politicians. Today, in the face of much public criticism, the practice has declined sharply: only three Northern Ireland politicians currently hold dual mandates. However, the practice should cease for one simple and straightforward reason above all: the volume of work that elected representatives have to undertake today makes it impossible for them to discharge their duties adequately in two legislatures simultaneously. The era of part-time politics for constituency representatives that existed until after the Second World War has, for good or ill, gone for ever. The Government should, of course, go further—although this Bill is not the vehicle—and apply the principle of “one representative, one legislature” in all parts of the country, as the Commons Northern Ireland Affairs Committee recommended in its report on the draft Bill. Action is to be taken in Wales, but should not end there: Scotland, too, should be brought into line. Certain fundamental principles should apply throughout all devolved institutions, and that is one of them.
Should those elected to the Northern Ireland Assembly continue to be eligible to sit in this House? The Government have not so far accepted the arguments in favour of change. Again, there is nothing new about existing practice. Membership of this House and of the Stormont Parliament were combined by the first Lord Brookeborough and by the first and second Lord Glentoran. Today, the noble Lord, Lord Morrow, is a Member of the Northern Ireland Assembly. Effective membership of this House may not require the commitment of as much time as the Commons demands, but even so the practical possibilities of working in this House and in the Northern Ireland Assembly simultaneously are severely limited, not least because the hours of business in both places tend to overlap. I suggest that it will be difficult to secure acceptance in the country at large for the proposition that the two Houses should be treated differently in this respect. The Commons Northern Ireland Affairs Committee recommended that,
“the abolition of dual mandates should be applied consistently across both Houses of Parliament”.
The case for a consistent approach seems to me to be very strong. That is one matter to which we can return in Committee.
Another matter is the much discussed question of moving towards the creation of a formal Opposition in the Northern Ireland Assembly. Its absence, for well understood reasons, sets Northern Ireland apart from other parts of the country and is incompatible with unionist principle. Disraeli said in 1844:
“No Government can be long secure without a formidable opposition”.
Is there not perhaps a link between the very slow progress now being made in tackling sectarian divisions and improving public services, such as education, and the absence of an Opposition that could hold the Executive rigorously to account? The Assembly and Executive Review Committee has recently concluded that,
“there is no consensus at present to move to a formal Government and Opposition model”.
However, given the growing evidence of increasing support for this move within Northern Ireland, it is surely incumbent on us to ensure that a transition can occur without difficulty in future. Perhaps the most effective way of doing that would be to add to this Bill a clause conferring on the Assembly the power to make the move in due course when agreement has been reached.
Committee may also be an appropriate stage at which to consider action by the current Executive that is contrary to the best interests both of the Province itself and the country as a whole. One example is the severe limitations that have been imposed on the new National Crime Agency, highlighted by my friend the noble Lord, Lord Empey, on several occasions and by the noble Baroness, Lady Smith of Basildon, who knows Northern Ireland well. The noble Lord, Lord McAvoy, of Fermanagh descent, also made a reference to it earlier in the debate. Another well known example is the Executive’s rejection so far of the new Defamation Act, which was the subject of a debate in Grand Committee in June. These issues raise fundamental constitutional questions that relate to the future government of the United Kingdom, as highlighted and expanded upon by my friend, the noble Lord, Lord Empey. They are of immense importance.
In 1966, as dark clouds were starting to gather in Ulster, an incisive analysis of rising disorder was published in the New Statesman by Seamus Heaney, whose death this year has been so widely mourned and has been marked by a special occasion here at Westminster. Heaney wrote sorrowfully of the re-emergence of political extremism,
“directed at the breaking down of any bridges that might exist between Catholic and Protestant; it would create its own Troubles and set the political and religious question back 40 years”.
Tragically, these were prophetic words. Heaney also quoted words used by Keats after visiting Belfast in the 1830s:
“What a tremendous difficulty is the improvement of the condition of such people”.
The difficulty, tremendous now as it was then, can surely be overcome only by rebuilding the bridges that were so cruelly broken down after 1966, while showing true understanding of those whose sentiments are summed up in a well known line of popular verse quoted by Heaney at the conclusion of his article:
“It’s to hell with the future and live on the past!”.
It is surely our duty to do all we can to encourage Northern Ireland’s power-sharing institutions to direct all their attention in one direction: towards the future. The Bill can help us in that task.
Lord Bew (CB)
My Lords, it is a pleasure immediately to follow the speech of the noble Lord, Lord Lexden. His speeches in this House reflect not only his love for the Province but his grasp of the political detail, the complexity and the history of the Province. He, at least, will not shirk the tremendous difficulty that Keats noted in improving the condition of these people.
Batting at number 10, I will make some brief remarks about the Bill, and I start by thanking the Minister, the noble Baroness, Lady Randerson, and her officials for the helpful briefing last Thursday on the different elements of the Bill. I should also indicate that I welcome the broad thrust of the Bill.
I accept the point of the noble Lord, Lord Browne of Belmont, that the culture in the political parties of Northern Ireland is changing, and that double-jobbing is gradually curing itself and moving out of the system. I still welcome the provisions in the Bill to give a certain finality to that. It is worth recalling that there was a substantial struggle on this point. As the noble Lord, Lord Alderdice, said, the Committee on Standards in Public Life and its previous chairman, Sir Christopher Kelly, played a major role, as the Library’s briefing note makes clear, in entrenching judgments and moving opinion towards the conclusion which we now have in the Bill. I pay tribute to that work this evening; we should not forget it. The Committee on Standards in Public Life—I declare an interest in that I am its newly appointed chairman—also pushed very strongly on another key element in the Bill, which is greater transparency in the area of political donations.
Because we have been absorbing some difficult news from the OECD today, it might be worth while drawing attention to the fact that in mid-November the OECD held a conference in Paris under the heading of “Restoring Trust in Government”. One of the features of that conference was an acknowledgement that the United Kingdom had a good record in the matter of transparency as regards political donations. One blot on the United Kingdom’s record is the problem with respect to Northern Ireland that has already been alluded to by the noble Lords, Lord Empey and Lord Browne. However, the United Kingdom generally has a good record of transparency, and there is no question but that the Bill, in some of its provisions, reduces some of the criticisms that can be made as regards part of the Northern Irish tale which reduces the overall record.
None the less, it is a fundamental fact that a key principle of our law in the United Kingdom is the notion that it is inappropriate to have foreign donations working in our domestic politics. That is increasingly widely accepted and is a key principle of our law. The difficulty, which has been the case for some years and remains so under the Bill, is the continuation of the arrangements that allow Irish citizens to contribute to Northern Irish political parties. I fully accept that there is a special relationship between Northern Ireland and the Republic of Ireland and that the need to make provisions for Irish citizens who live on the island of Ireland to play that role is implicit in the Belfast agreement itself. That agreement conferred new rights on those who consider themselves British, those who consider themselves Irish and those who consider themselves both; it did not confer new rights on those who consider themselves Irish or American or both. However, we are effectively doing that by continuing with those arrangements.
When the noble Lord, Lord Rooker, was the Minister responsible for these matters, he was very open in Grand Committee in acknowledging that there are a lot of Irish citizens around the world. The point is that the Irish state has an expanded extraterritorial definition of citizenship. We are locked in by those arrangements to the Irish state’s constitutional view of those matters. As a consequence, there is indisputably a contradiction between our broad approach to the question of foreign donations and what we are permitted in this particular case. There is a difficulty here.
One of the things that slightly surprise me is that, after all, in recent times we have heard a great deal about the very good relationship between the two Governments and how it has never been better. We—or those who pay attention to Dublin politics—also hear an unease about the money that arrives in Dublin politics; I am talking now purely about politics between the Irish Republic and America. There is growing unease on those points. One of the questions that I want to ask the Government is: are serious discussions going on about the implications of those matters? Is there a sense that both Governments have an interest in at least looking more closely at current arrangements? There are some very striking recent newspaper reports about fundraising developments in the United States and very striking unease in the Dublin newspapers about it. As I say, we are stuck with the capacious definition of Irish citizenship currently available in the Irish constitution. Finally, in the same context, perhaps I may ask the noble Baroness if she can explain whether the new guidelines from the Standards in Public Office Commission in Dublin which came out in 2013 offer any real comfort to those of us who are concerned about that matter.
Baroness Smith of Basildon (Lab)
My Lords, it has been an interesting and useful debate. Some of the descriptions of the Bill have been that it is modest, useful and tidy, which probably explains the record number of shorter speeches in your Lordships’ House on Northern Ireland issues. Other noble Lords have spoken about the context in which this Bill is being considered, in that it shows how much progress has been made in Northern Ireland for future generations since the Belfast agreement.
I do not think that anybody in your Lordships’ House tonight underestimates the challenges and problems faced by Northern Ireland; that was evidenced by the flag protests. I was in Foyle a couple of weeks ago, and the lead item on the evening news—I am sure that the noble Baroness has read about this—was about a bomb that was left on a bus. The bus driver was told to drive the bus, and she showed enormous courage and bravery in getting passengers off before alerting the police. A similar incident happened in Belfast.
The difference now is that these kinds of stories do not dominate the news every day, but they highlight the continuing activity of dissidents and the challenges faced. My noble friend Lord McAvoy and other noble Lords referred to the hugely successful G8 and the visit by President Obama, as well as other events and examples of great progress, improving the reputation of Northern Ireland at home and overseas.
The Bill before us today has been drawn up by agreement with the Northern Ireland political parties. As the noble Lord, Lord Brooke of Sutton Mandeville, said, it is the first Northern Ireland Bill to benefit from pre-legislative scrutiny. I certainly agree with his comments about the value of such scrutiny. I very much enjoyed his speech, particularly his references to the Somme. I recommend to him a play that I saw in the Lyric Theatre in Belfast some time ago, called “Sons of Ulster Marching Towards the Somme”, which he may know of already. It says a lot about Northern Ireland history.
Everyone in your Lordships’ House tonight knows that progress is hard won. Northern Ireland has got as far as it has today only because those in positions of responsibility have been prepared to get together to talk and have not been frightened to disagree before finding grounds on which to agree. The provisions in the Bill on greater transparency for political donations, electoral registration and administration have been agreed by political parties and largely welcomed here tonight, as well as being welcomed by the Electoral Commission. However, we also need to recognise and understand why transparency is not yet the same as in the rest of the UK; that must remain the objective, and that is part of the difficulty.
The Northern Ireland Home Affairs Committee in the other place heard conflicting views on this issue. This Bill seeks to find a way forward while holding the door open for further reform in future. There has to be recognition that, even when agreement can be found in principle, it is a harder task to work out and then agree on the detail. We found that with issues that are not in the Bill—with the number of MLAs, for example. I found the comments from the Liberal Democrat/Alliance Benches quite interesting—about not having a smaller Parliament or reducing the number of MLAs—because those were the exact proposals from the party opposite regarding the House of Commons. There seem to be two different views from the Liberal Democrats on that, but we should perhaps let that pass.
The point is that it is harder to work out the detail. The noble Lord, Lord Empey, mentioned the difficulty with the reorganisation of local government, and how long that has taken. These things are difficult, but I hope that we see the start of a process and not the end of seeing any progress.
I also concur with the very sensible changes regarding the position of Justice Minister. The noble Lord, Lord Alderdice, spoke about the difficulties that it could create for the Alliance, but it may not always been an Alliance MLA holding that position. I pay tribute to David Ford, as I know him well and know the work that he has done. In principle, those changes are very sensible.
The issue of double jobbing and the dual mandate came up several times. The comments from the noble Lord, Lord Bew, and others were that political parties have largely achieved this—and that is welcome—but all noble Lords still welcomed that provision.
There seems to be little disagreement about what is in the Bill, and a lot of the points raised tonight, particularly by my noble friend Lord McAvoy, highlighted our areas of concern about the missed opportunities—what is not in the Bill. He was not alone in raising such issues; the noble Lords, Lord Trimble, Lord Alderdice and Lord Empey, raised those issues, too.
As the noble Baroness said, this is a technical Bill. It will not make a great difference to the lives of people in Northern Ireland although it introduces some important changes. I refer to two areas of concern highlighted by my noble friend Lord McAvoy. I know that we are not the only ones concerned about these issues. The noble Lord, Lord Lexden, referred to one of them, as the noble Lord, Lord Empey, has done previously, which is the deficiencies in the Crime and Courts Act 2013, specifically in connection with the operation of the National Crime Agency.
I understand the criticism of those political parties that did not support the relevant legislative consent Motion, although I do not think that blame is necessarily helpful in this case. I was the shadow Minister at the Home Office at the time and I think it would have been very productive if the Government had engaged with all the political parties at a very early stage. I spoke to Ministers very early on in the process about the obvious issues that would arise with policing being devolved and the creation of the National Crime Agency, but I never received any indication from the Government at all of any proper political engagement with the Northern Ireland political parties on the part of the Home Office or the Northern Ireland Office. Ministers in both departments told me that the other department was dealing with it. Where do you go from there? No one seemed to take responsibility. Whoever we may think is at fault, the Government should have worked harder and engaged more fully with the relevant people to try to prevent this problem occurring. I would have liked to see something in the Bill that gave confidence that the Government now better understand those difficulties and want to find a way to engage properly in order to move forward. It is so disappointing to see no such provision. I hope that does not mean that the Government have given up. This is too important an issue for that.
My noble friend Lord McAvoy has made the following point, as have other noble Lords. Devolution does not mean disengagement. I hope that the noble Baroness will assure me that the Government have not put this issue on the back burner, that it is still a very live issue and that the Government, with the political parties in Northern Ireland, will continue proactively to seek a way forward to address it.
Other noble Lords have referred to dealing with the past. I was the second Minister responsible for victims and survivors in Northern Ireland, following the noble Lord, Lord Browne of Ladyton. In all the issues affecting the future of Northern Ireland, the past is always present. I echo the comments made by the noble Lord, Lord Empey, on the importance of the Haass talks, the necessity of their succeeding and the consequences if they do not.
When the Northern Ireland Assembly in 2011 unanimously passed a Motion, proposed by an Alliance MLA, to ask the Secretary of State to convene all-party talks at Stormont to try to find a way forward—a framework, perhaps—that would allow some progress to be made, I think we all expected to see some movement. The substantial and very impressive report and proposals in 2009 from the Consultative Group on the Past, jointly led by the noble and right reverend Lord, Lord Eames, and Denis Bradley, had a mixed reaction in terms of the conclusions it drew. However, Shaun Woodward, as the former Secretary of State for Northern Ireland, undertook a consultation to see where there was consensus. It is shocking that in 2011, Owen Paterson, the then Secretary of State for Northern Ireland, refused to convene a meeting asked for by the Assembly, saying that there had to be consensus before any talks took place. What if the Government had said that there had to be consensus before the talks took place that led to the Good Friday agreement?
Noble Lords will know how difficult this issue is, and I share that view. I have met and listened to many victims and survivors and their organisations from different communities across Northern Ireland. I have heard their stories, as other noble Lords present this evening have done who have lived through those events. I do not have the answers; I do not think that anyone does. There is no consensus. Progress might even mean talks about having talks or taking small baby steps to start with. However, I do know that there will be no headway unless there is a start to this process. This issue matters and the Government have a role to play in it. They cannot just step aside.
We support the Bill and many of the measures in it. It contains some welcome measures and we look forward to further debate in Committee and working with the Minister on this issue.
Baroness Randerson
My Lords, I have listened with great interest to the debate and I thank all speakers for their thoughtful and constructive contributions. Their depth of experience and the imaginative approach that has been adopted across the House augurs very well for the quality of the debate that we will have in the future as we examine amendments and go through the Bill clause by clause. I know that many of today’s speakers are truly expert on the matters under discussion and clearly their views are very valuable.
I am pleased that so many in this House felt able to express support for some of the provisions in the Bill. The Government have been mindful of the need to seek as much consensus as possible, particularly on the constitutional matters dealt with in the legislation. I say to the noble Baroness, Lady Smith, that possibly our definitions of “consensus” are different. Consensus that there is a problem is probably the starting point with many of these things, although consensus on the solution may not come until some hard work has been done in searching for that solution to the problem.
I welcome the support for the Bill from the noble Lord, Lord McAvoy, and should like to address one of the issues that he and the noble Baroness, Lady Smith, raised concerning the NCA. The Crime and Courts Act includes order-making powers so that the NCA arrangements can be fully extended to Northern Ireland when the Northern Ireland Assembly gives its consent. Unfortunately, as a result of not securing consent, the activities of the NCA in Northern Ireland are restricted and the level of support that the NCA can provide to the PSNI in the fight against serious and organised crime is reduced. However, I emphasise in particular to the noble Baroness that David Ford, the Justice Minister in Northern Ireland, is continuing to discuss this matter and is seeking to get agreement with the Northern Ireland parties. The Home Secretary remains open to proposals for arrangements to ensure that the NCA is answerable for its activities in Northern Ireland.
Baroness Smith of Basildon
I am very grateful to the noble Baroness for that explanation and I apologise that this issue is not quite clear to me. I am trying to understand whether the Government were engaged in discussions with Northern Ireland. I appreciate David Ford’s role—he has been very good on this—but my query concerns the Government’s role in this.
Baroness Randerson
It is important to remember that justice is now a devolved issue. Although the Secretary of State and indeed the Home Secretary take a very proactive approach in liaising with the Justice Minister, the decision has to lie with the Northern Ireland Executive. I understand the sense of frustration felt by many noble Lords when we often talk here about issues that are devolved, but the whole stream of thought behind the Bill is to enable the devolved Assembly in Northern Ireland to operate more as the other devolved bodies do, so that Northern Ireland becomes less of a special case. In this particular case, the Government are very concerned that there should be a solution, and they are actively working towards obtaining that solution in a way that is acceptable across the parties in Northern Ireland.
Lord Empey
I am sorry to interrupt the Minister but the National Crime Agency—I repeat, the National Crime Agency—is not exclusively a matter for the devolved regions. I respectfully request that the Minister refers to a comment made by the noble Lord, Lord Taylor of Holbeach, who answered a debate in this House. I specifically asked him what would happen in the event that the Northern Ireland Assembly did not agree to this because I felt that it had no intention of agreeing to it. I asked what would happen if there was deemed to be a potential national threat posed by a pool of individuals in Northern Ireland who were not subject to the same rigour as would be the case elsewhere. He said that the Government would act responsibly.
I accept that the right way to do it is the way in which it is being pursued at the moment with Northern Ireland Ministers and the Executive. But this House cannot escape ultimate responsibility if leaving things unsatisfactorily resolved in Northern Ireland would ultimately pose a threat to the entire United Kingdom, which could happen. I just make the point to the noble Baroness that she might refer to the comments made by the noble Lord, Lord Taylor of Holbeach, when he answered the debate.
Baroness Randerson
I thank the noble Lord for his intervention and for his comments in respect of accepting the fact that this is a devolved issue and that the right way to deal with it is via the Justice Minister. The devolution of justice and the failure to accept the role of the NCA does not mean that it does not operate at all in Northern Ireland. Only some of its functions are affected. I say again that the Home Secretary is very proactively working to encourage a solution that will enable the NCA to be answerable within Northern Ireland.
Comments made by the noble Lord, Lord McAvoy, about the past on this topic were similar to those made by my noble friend Lord Alderdice, the noble Lord, Lord Browne, and others. This relates to the Haass talks and the whole topic of the past. It is important to bear in mind that the Haass talks are reaching a conclusion. The expectation is that there will be a report before Christmas. The Northern Ireland Executive once again owns this process. These are sensitive and difficult issues, and it is important that we give our support to that procedure so that we are able to take from it any positive outcome that is possible. Three issues are being dealt with by the Haass talks. They are separate but intertwined issues and the past is a very important part of them.
I remind noble Lords of the words of Her Majesty the Queen when she said that as a society we must respect the past but should not be bound by it. It is important that, when the Haass talks are concluded, we give full support to the Northern Ireland Executive in the way in which they intend to implement any recommendations.
As my noble friend Lord Trimble pointed out, welfare devolution has existed in Northern Ireland since 1920. It would be a serious piece of undevolution to take that back now in the context of the Northern Ireland Executive’s failure so far to introduce parity. It is important to bear in mind that it would be open to the Northern Ireland parties to seek to have the responsibility in these fields taken back, but it would require the agreement of my right honourable friend the Secretary of State. There would also have to be cross-community support in the Assembly and votes here and in the other place, so it would be a very complex issue.
To my knowledge, there been no call for control over welfare to be brought back to this place. It is, however, to be seriously borne in mind that the failure of the Northern Ireland Executive until now to address the issue of welfare reform will impose a serious financial penalty on the Northern Ireland Assembly and the Executive because of the costs of a more expensive welfare system.
Lord Trimble
I appreciate the points that the Minister has made, but I just wanted to point out to her that her earlier comments about this being a serious and grave matter are completely beside the point. This has in the past been a mere formality. There has been no substance to the devolved character of welfare in Northern Ireland. It is not a matter of significance at that end at all. With all respect, I think that the Minister's comments on this are inaccurate and premature.
Baroness Randerson
At the moment, for the first time, I believe that we are seeing that the devolution of welfare to Northern Ireland is becoming a separate and tricky issue. Until now, it has not been of any great significance on a day-to-day basis because, after all, the welfare system in Northern Ireland has mirrored that in the rest of the country. Only now are we seeing an issue. Once again, it is an issue for the Northern Ireland Executive to take on board. There is a possibility that the legislation would make a successful passage through the Assembly.
Several noble Lords raised the issue of dual mandates and whether this legislation was only for Northern Ireland, although the noble Lord, Lord Lexden, mentioned that legislation would also be going through for Wales in the near future.
On the issue of not legislating in relation to the House of Lords, we are talking about a dual mandate. The House of Lords enjoys a very separate and interesting role, which is almost unique in the world. We are not elected, as such, and have no fixed terms. Indeed, many noble Lords rejoice in the fact that we are enriched by having so many Members who have very active lives outside this place. Therefore, it is unlikely that the Government would regard any restrictions on Members of this House in that respect.
Can I make a point about there being a lack of legislation in relation to Scotland? The Government are very concerned not to legislate to solve a problem that does not exist. This has not been a problem in relation to the Scottish Parliament. Therefore there is no proposal to deal with the dual mandate in relation to Scotland.
I turn to the comments made by my noble friends Lord Alderdice and Lord Shutt. In relation to the size of the Assembly and the proposal to enable it to become smaller, I take on board entirely the warnings that they both made in relation to making the Assembly so small that you could not allow breadth of opinion or enable minority parties to be elected. The Government and my right honourable friend the Secretary of State certainly will be considering that very seriously. The most commonly suggested figure is that each area should be represented by five MLAs rather than six, which would bring the number down to 90.
Comparison was made with the Welsh Assembly. I know from my personal experience that membership of the Welsh Assembly is a stretching exercise, because Members of the Assembly—there are only 60—have to be so broad in their approach. However, I do not think there are suggestions that would take the Northern Assembly down to that level.
I note the comments of my noble friend Lord Alderdice in relation to the Northern Ireland Human Rights Commission and the need for independence of view. I am sure that I can look forward to some probing amendments and some interesting points.
I note particularly the comments of my noble friend Lord Alderdice about David Ford. My noble friend said that he had done a good job as Justice Minister; I add my own endorsement. David Ford has tackled a heavy workload of very difficult issues with great sensitivity and imagination. We can rapidly forget how controversial it was when justice was devolved to Northern Ireland and the success he has made of that. His tremendous contribution is to be applauded.
The noble Lord, Lord Browne, referred to the issue of transparency on donations and supported the proposals in the Bill. He rightly reminded us of the difficulty of getting donations in past years. Those of us who are politicians in mainland Britain probably find it hard to imagine how difficult it was in Northern Ireland in years gone by to encourage people to donate to political parties.
I want to address particularly the issue of donations from Ireland and Irish citizens living abroad. The Secretary of State already has the power to deal with that, should she wish to do so; but because some parties are established on both sides of the border, it can be very difficult to deal with that issue. However, I say to noble Lords who are concerned about this that the Bill makes the first steps to greater transparency. We do not yet know how much of a problem this is; the noble Lord, Lord Bew, speculated about it. We will know in the future, when the Electoral Commission is in a position to tell us the type of donation and where it came from. We will have those categories in the immediate future, even if we do not have the names of the donors. It is important that we welcome the Bill from that perspective.
The noble Lord, Lord Browne, also referred to the petition of concern and asked whether the number there should go down proportionately if the number of MLAs is reduced. I remind the noble Lord that 30 was specified in the Good Friday agreement, so we would be open to changing that only if there was broad cross-community agreement. However, I share his support for the Bill in the hope that it will keep politics moving forward.
My noble friend Lord Brooke spoke from his own extensive experience. He referred to the name of the Bill and to the d’Hondt system. The d’Hondt system is very close to my heart as a Liberal Democrat because it is intrinsically connected with proportional representation. I think that MLAs in general understand the purpose of d’Hondt, even if they cannot actually do the intensely complex calculations. However, I share my noble friend’s comments about the need for, and the hopes for, improvement.
I ask noble Lords whether they will bear with me and accept that I will look through their speeches carefully and respond to any specific questions noble Lords have asked me at this point. Some things are clearly going to crop up time and again.
Finally, I know that the changes in the Bill do not go as far as some would like and that, in some cases, they go faster than others would like. I look forward to a flurry of amendments as noble Lords apply their creativity and test the provisions of the Bill. It may be miscellaneous but it has certainly provoked some very serious thought here today. The Government are focused on the priorities of rebalancing the Northern Ireland economy and creating a shared society. We do not view legislation as the answer to Northern Ireland’s most important problems but this Bill is an important step along the road to ensuring that politics and the constitutional structure in Northern Ireland become more normal and more like the rest of the UK.