Orders of the Day — Welfare Reform and Pensions Bill

House of Commons, 17 May 1999.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

On a point of order, Madam Speaker. It is relevant to the Bill and to the way in which the Government treat the House. Late on Thursday, at the last moment, the Government tabled new clauses and amendments that will add three new subject areas to what is already a very big and complex Bill. You will be aware that on Second Reading and throughout the Bill's consideration in Committee, we complained that the Bill already resembled three to four Bills compressed into one, which has meant that proper scrutiny has always been difficult, and that proper voting intentions could not be properly declared. The Government have now compounded that. On Thursday evening, essentially two working days ahead of Report, with little or no notification, they tabled new clauses and amendments on three areas: state maternity allowances, the effect of insolvency on pension rights, and earnings of workers supplied by service companies. At least two of those matters were mentioned in the Budget and are currently out for consultation—but this is way ahead of any return on that consultation—and they refer directly to the Finance Bill. Some six Government new clauses and 12 Government amendments were tabled on Thursday night, with no warning, lengthening the Bill. That is an abuse, and it makes it very difficult indeed to deal with the Bill in a decent time.

Betty Boothroyd (Speaker, West Bromwich West)

I am sympathetic to the burdens that are placed on hon. Members in such a situation, but I assure the hon. Gentleman that the usual procedures were carried out. I remind the House that Friday is a proper working day for the House—for some of us, at least. Amendments may be tabled from 9.30 am until 3 o'clock, so there was an opportunity to do so at that juncture.

EXTENSION OF ENTITLEMENT TO STATE MATERNITY ALLOWANCE

Hugh Bayley (Labour, City of York)

I beg to move, That the clause be read a Second time.

Betty Boothroyd (Speaker, West Bromwich West)

With this, it will be convenient to discuss Government amendments Nos. 9 to 11.

Hugh Bayley (Labour, City of York)

When we debated the Bill on Second Reading, my right hon. Friend the Secretary of State for Social Security explained that it is an essential step in our modernisation of the welfare state, and that it takes forward our reforms in four key areas. First, the Bill contains a package of measures to keep people in touch with the labour market, including new employment zones and the single gateway. Secondly, it brings disability benefits up to date, to give new opportunities to disabled people who want to work and to provide extra help for those in greatest need. Thirdly, it modernises the system of bereavement benefits to bring fairness and equality to the system. Finally, the Bill is a starting point for our pension reform. It introduces pension sharing on divorce and paves the way for future pensioners to have a more secure retirement. Since Second Reading, the Bill has been thoroughly discussed in Committee. In fact, I believe that it has been scrutinised at greater length than any social security Bill in recent history. I pay tribute to my hon. Friends who served on the Committee—indeed, to all hon. Members who were involved with the Committee—for their hard work. Thanks to that, I am confident that the Bill that I am presenting to the House today is an even better piece of legislation. In particular, we have improved the Bill by including new reforms to the structure of national insurance, to ensure that work pays and that people keep more of what they earn. We have made a new provision to prevent disabled people from being treated unfairly by the way in which overpaid benefits are recovered. We are not stopping there, as we are proposing more improvements today. The first is a reform of maternity benefits that further develops our principle of work for those who can and security for those who cannot. New clause 5 will extend entitlement to maternity allowance to pregnant women on low earnings and increase the basic rate of maternity allowance for self-employed women. That is not an isolated reform. We made a manifesto commitment to help families balance work and family life. Since coming to power, we have put in place a range of policies across Government to support families and children. We are providing better financial support for families, including the biggest ever increase in child benefits, a working families tax credit that will guarantee a minimum income for working families earning the national minimum wage of £200 a week and a child care tax credit to help make child care more affordable. From 2001, children's tax credit will be worth £416 a year. Today, my hon. Friend the Paymaster General has further improved the working families tax credit and our disabled person's tax credit proposals. She has offered new help to enable disabled people, whose health is deteriorating while they remain at work, to retain their jobs and the provision of increased support for parents of disabled children who seek to work and to benefit from the working families tax credit. Our new Employment Relations Bill sets out a basic framework of family friendly employee rights. We are investing £450 million in our sure start project in England over the next three years to improve the life chances of children in disadvantaged areas. We are delivering our commitment to a national child care strategy that provides families with genuine choices so that they can balance the combination of paid work, education or training and parenting. All that is in stark contrast to the policies of the Conservative Government before the 1997 general election. Our reforms to maternity allowance are yet another step forward. At the moment, maternity benefits are focused on pregnant working women who pay national insurance contributions or who earn enough to do so. Statutory maternity pay is paid by employers for up to 18 weeks to women who have worked for them for six months or more, and who earn at least £66 a week—the lower limit for paying national insurance contributions. Maternity allowance is paid by the Benefits Agency for up to 18 weeks to women who cannot get statutory maternity pay. It also supports self-employed women who have worked and paid contributions. All working pregnant women are entitled to 14 weeks maternity leave. My right hon. Friend the Secretary of State for Trade and Industry is taking forward measures in his Employment Relations Bill to increase this period to 18 weeks to bring it in line with maternity benefits. That has been widely welcomed, both by employers and other interest groups. However, we believe that the current maternity leave and pay arrangements have a number of serious flaws. To start with, low-paid pregnant working women—those who earn less than £66 a week—have the right to take time off work to have their baby, but receive no financial help to do so. Secondly, around 20 per cent. of working women are potentially excluded from maternity benefits because they do not earn enough to qualify. Thirdly, women whose earnings are more than £66 a week but who do not pay national insurance contributions because they earn small amounts from more than one employer are also excluded. Finally, self-employed women currently receive less maternity allowance than employed women—£51.70 instead of £59.55. That is also unfair. The reforms in new clause 5 address all those issues. Under the revised arrangements, women will still need to satisfy an employment test and an earnings test to qualify for maternity allowance. We are not changing the employment test, but the earnings test for employed earners will now be based on actual earnings rather than payment of national insurance contributions. In future, all mothers-to-be who earn at least £30 a week on average will be entitled to help from maternity allowance. Earnings from all sources, including self-employment, will count towards average weekly earnings. Fourteen thousand low-paid women will gain from that improvement. Women whose average weekly earnings are at least equal to the lower earnings limit will receive the standard weekly flat rate of maternity allowance—£59.55 a week. Women who earn between £30 and the lower earnings limit will receive a weekly maternity allowance of 90 per cent. of those earnings.

Angela Browning (Conservative, Tiverton and Honiton)

Before the Minister continues, will he clarify what will be the basis of the calculation of earnings for self-employed women in the year that they claim the benefit? I ask that question because when self-employed people file their accounts with the Inland Revenue, the last set of accounts may be for the previous financial year. Will the accounts for the previous financial year be taken to establish earnings, or will, for example, the previous three years be averaged out, which is not unprecedented for self-employed people in our tax system? What about the woman who becomes pregnant in her first year of self-employment? On what basis will her earnings be calculated?

Hugh Bayley (Labour, City of York)

The hon. Lady raises an important point. I regret to say that I cannot respond immediately, but I will do so before the debate concludes as it is important for the House to be absolutely clear about how the earnings are to be calculated. Of course, we will retain the existing rules for calculating the earnings of self-employed people. The change is that in the past the self-employed have been unfairly treated because they have received a lower rate of maternity allowance. As a result of our change, self-employed women will now receive the full rate of benefit—£59.55 instead of £51.70, which is an increase of £7.85 a week. Also, we are helping self-employed women with low earnings. If they hold a certificate to exempt them from national insurance contributions, they will be treated as having notional earnings of £30 a week and will receive maternity allowance of £27 a week—90 per cent. of £30. To summarise, as a result of the changes, low-paid women who earn below the lower earnings limit for national insurance contributions and at least £30 a week will receive maternity allowance of 90 per cent. of their average earnings. Women with more than one low-paying job will be able to add together their earnings to reach the level needed to qualify for maternity allowance.

Steve Webb (Liberal Democrat, Northavon)

The Minister mentioned the category of women whose wages are between £30 and the lower earnings limit and we support the extension of the allowance to them. Clearly, that group do not pay income tax or national insurance and, therefore, are largely unknown to the authorities. What will be the Government's take-up strategy to ensure that people claim that new entitlement?

Hugh Bayley (Labour, City of York)

We will be using similar means to those that we use to ensure take-up at the moment to inform the self-employed of their rights.

Steve Webb (Liberal Democrat, Northavon)

What about employers?

Hugh Bayley (Labour, City of York)

I thought that the hon. Gentleman was talking about the self-employed. Clearly, employers will have a responsibility to pass on information to employees, as they do with existing employees.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I was intrigued by the Minister's answer. He seemed rather hesitant. Is there some mechanism whereby employers will know clearly that they will have to pass on that information and has he costed the changes that that would entail?

Hugh Bayley (Labour, City of York)

The basic mechanism for establishing entitlement to maternity allowance is to show a wage slip. Every employer, however large or small, has a legal obligation to provide a wage slip for employees. It will be the passport to maternity allowance for those on low wages, as it has been for those on higher wages. To summarise, low-paid women who earn below the lower earnings limit, provided that they earn at least £30 a week, will receive maternity allowance worth 90 per cent. of their average earnings. Women with more than one low-paid job will be able to add together their earnings to reach the level necessary to qualify for maternity allowance. Self-employed women will receive the same basic rate of maternity allowance as employees. Low-earning, self-employed women who are exempted from paying national insurance contributions will qualify for maternity allowance of £27 a week. The Labour party has long campaigned for these reforms. Now that we are putting them into practice, they have been warmly welcomed by many voluntary bodies including the Maternity Alliance and the Low Pay Unit. These important changes will enable more women to strike a balance between paid work and parenting. They are fully in line with our strategy on family friendly employment. They will give low-paid mothers-to-be the financial help that they need to take their full entitlement of maternity leave. They will be good for the health and welfare of low-paid mothers and their children. I commend them to the House.

Jacqui Lait (Conservative, Beckenham)

It is a pleasure to join the debate, but I am sorry to have to speak to new clause 5 because, as my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) said, it adds to an already extensive Bill. The Minister listed the Bill's contents, which were sufficient to keep the Standing Committee going for 25 sittings. This is only the first of at least three more significant additions. New clause 5 is an unnecessarily hurried addition to our debate. We have complained that the Bill is already far too long but, now, new clause 5 has been tabled at the last moment. My hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) pointed out the difficulties that self-employed women will have. The hon. Member for Carshalton and Surbiton—

Steve Webb (Liberal Democrat, Northavon)

Northavon.

Jacqui Lait (Conservative, Beckenham)

My apologies; there are so many experts on the subject in the Liberal party. The hon. Member for Northavon (Mr. Webb) made a point to which answer came there none. We all know that the consultation has not finished, so why the rush to discuss new clause 5? We are happy to debate it, but cannot help wondering why we must do it today. We had no hint of it in Committee and, my goodness, it was a long Committee. We even sat on Budget day without any such hint. The Chancellor mentioned the proposal, en passant, in the Budget debate, as did the Secretary of State for Social Security, who also mentioned this Bill in that debate, but without putting the two together. No connection between them was made. I am not naturally of a conspiratorial turn of mind. I prefer the more random view of life, but I wonder why new clause 5 has suddenly emerged. It is 15 months before its provisions come into effect.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

It is a sop.

Jacqui Lait (Conservative, Beckenham)

Looking around the Government Benches, I can only agree, that it may be a sop. One or two may just fall for it. I am more inclined to believe that, while it has something to do with the later amendments, it is more likely that the Government desperately hope that any vote on the later amendments takes place at the dead of night. The new clause was tabled last thing on Thursday because the Government took one look at the list of amendments that had already been tabled, noticed that the Opposition had not tabled their amendments and panicked. The Secretary of State sent out his messengers like Lars Porsena of Clusium. They went out north and south, east and west. The Chancellor of the Exchequer obliged and decided to let the Secretary of State for Social Services have the honour of proposing the amendment set out in the Budget. The Government are trying desperately to hold off a debate and vote on benefit cuts. However, the debate is taking place before any consultation has finished. I am surprised that the Government should do such a thing. There is much in the Bill to discuss, and we shall make sure that it is discussed. Last week, we had a debate, introduced by the Liberal Democrats, on the abuse of Parliament. Those who were present will remember that they were not even effective enough to be able to vote on the motion. However, during the debate, my right hon. Friend the Member for South-West Surrey (Mrs. Bottomley) made an excellent point about the abuses that the House is facing.

Dale Campbell-Savours (Labour, Workington)

On a point of order, Madam Speaker.

Betty Boothroyd (Speaker, West Bromwich West)

Does the point of order concern relevance?

Dale Campbell-Savours (Labour, Workington)

It does.

Betty Boothroyd (Speaker, West Bromwich West)

I think that the hon. Member for Beckenham (Mrs. Lait) is coming to her point.

Jacqui Lait (Conservative, Beckenham)

I am indeed, Madam Speaker. However, one of the factors in this debate is the speed with which the new clause was tabled and the lack of consultation. We have before us another example of the abuse that the House is suffering. We could easily have discussed the new clause in Committee. It could easily have been laid before the Committee. Once the split among those on the Government Benches became clear, we had to discuss the new clause. Part of the abuse of the House is the volume of legislation that is being brought forward by regulation, and the new clause introduces further regulations on maternity allowance. The Minister has denied that the clause would have much impact on business, notwithstanding the fact that all the women involved will need their wage slips. My hon. Friend the Member for Tiverton and Honiton has already pointed out how difficult it will be for self-employed women to produce the information that the Benefits Agency will need to enable it to pay the maternity allowance. No Opposition Member suggests that employers should not produce wage slips, but we are wary of the Government's tendency to introduce creeping regulations. It is easy to say that the Benefits Agency will pay out on the basis of wage slips only. However, when there is the slightest opportunity for anybody to query a wage slip, there will be a call to the employer. Suddenly, a case will be built up for the employer to justify. He will be called upon to fill in forms, to verify and to check. There has not been any reaction from employers so far because of the speed with which the new clause was tabled.

John Bercow (Conservative, Buckingham)

I am grateful to my hon. Friend because she highlights an important consideration, which is the exponential rise in regulation that this country has had to contend with since 1 May 1997. Has she made any assessment of the likely increase in the net number of regulations that we face as a result of the new clause? Does she think that that is important, given that the Secretary of State for Trade and Industry has already said that the Government have not got it right on regulations?

Jacqui Lait (Conservative, Beckenham)

I assure my hon. Friend that we would be happy to work that out, but, because of the speed with which the new clause was tabled, it has been impossible to do so yet. I am sure that employers' organisations will rapidly make their views clear. No regulatory impact assessment has yet been produced. I hope that the Government will give us an assurance that they intend to produce one, because otherwise we shall oppose the Bill on the basis of the costs to business. Many hon. Members have been lobbied by the Pre-School Learning Alliance, which held a reception in our Dining Room last week. I have visited many playgroups in my constituency. Every single one of them has pointed out to me the difficulties that it is experiencing with Government regulations. Playgroups are paying the minimum wage, but their objection is that the people who run them are turning from good-hearted volunteers who want to help children into unpaid form-filling slaves. They must deal with the working time directive, they will potentially have to deal with the stakeholder pension, as laid out in the Bill, and now they are likely to have to deal with the maternity allowance forms. The maternity allowance will affect primarily women who have been out of work, who are desperate to get back into work and who can work only part-time, either because they are not qualified or because they have children. Those are the very women who are likely to find employers less willing to employ them. As the Minister said, about 14,000 women are excluded—14,000 women who could potentially get further jobs, but whom employers are likely to find it difficult to employ. We are speaking of a relatively small sum in the overall total of social security spending.

Kali Mountford (Labour, Colne Valley)

I am trying desperately to follow the argument, now that we have finally got on to the clause. Is the hon. Lady telling the House that the Conservative party is opposed to extending maternity allowance on the basis of filling in forms?

Jacqui Lait (Conservative, Beckenham)

If the hon. Lady listened to my earlier points, she would realise that the crucial point is that there is no time for us to consider the proposal, and there has been no consultation. Our concern is that, with the best will in the world, employers will be unable to employ precisely the sort of women whom the hon. Lady is trying to help. The inability to balance the two interests is the focus of our discussion and, probably, our opposition. Some 14,000 women are excluded because they have been earning too little. The sum involved is relatively small compared to the overall total of social security spending, but weekend figures from the Library show that the Government's social security control total is spinning out of control. They promised to reduce social security spending, but it is increasing at a rate of 3.2 per cent. a year, which is more than inflation. Hence, the relatively small sum will add to social security control problems. I asked the Library to find out why it would take 16 months to introduce the changes. The answer was illuminating. Let us count back from 20 August 2000. Women are eligible for the allowance from the 11th week before the baby is due. It is also payable if the baby is born prematurely. That can be as early as 19 weeks before the expected week of birth. That takes the date back to April 2000. However, if the rules were to come into force in April 2000 to cover women who give birth to premature babies, women could claim from November this year. The interesting comment was that November this year is too early for the necessary legislative and administrative arrangements to be put in place. It cannot be too difficult or time consuming for the Benefits Agency to extend a known benefit. Do I detect a concern that the Bill will be delayed either here or in the other place? With the Government's majority, I can hardly believe that, but perhaps that it what they fear. As the Minister said, changes to maternity leave are going through the House, so it is not clear what the final pattern will be, but we must look at the interaction of this extended benefit with maternity leave. I should like the vulnerable women who would need to get back into the workplace to be encouraged to do so. We need to ensure that low-paid, self-employed women have the opportunity to have children, if that is what they want. The effect of the national minimum wage is that women who work for between eight and three-quarter and 18 and a third hours a week will receive this allowance, which is the point of the figure of £30 to £66 a week.

Dale Campbell-Savours (Labour, Workington)

Can the hon. Lady make the position absolutely clear? Is she for or against the extension of the maternity allowance?

Jacqui Lait (Conservative, Beckenham)

As I have said time and again, the Bill is the wrong place in which to put that allowance without full consultation. We want the single mums who need to get back into the workplace, or those who have few qualifications, to be working, and they are the ones who will be working part-time. Even if, as the Government have said, the initial regulation is minimal—because the Benefits Agency carries out the work on the basis of wage slips—and if maternity leave is extended, it will, over time and taking those two together, be much less attractive for employers and charities to employ women who could bear children. [Interruption.] The Minister may disagree—he looks at though he does—but small employers have to ask themselves whether they need this hassle. There will be no clear decision, but it will gently emerge that employers will choose to employ mature women or young men, who also need jobs. That could be damaging to the sort of women who everyone in the House would like to get back into the workplace. The Government say that they want a flexible, modern work force. The measure will make it much harder for women to get back into that flexible, modern work force. We cannot see the need for the new clause to be rushed through the House. There has not been proper time to consider it and to get the views of interested bodies. Tabling it at the very last moment was not the best way to help women; it is a shoddy attempt to cover up the splits between Labour Members, which shows their contempt for the House. We will oppose the new clause.

Angela Browning (Conservative, Tiverton and Honiton)

The Minister was kind enough to take an intervention from me specifically on the tax position and the claims of self-employed women. I should like to expand a little on my intervention. The Minister will be aware of the position under self-assessment for self-employed people—men and women. For example, a self-employed woman who needed to make a claim for the new benefit during this year would have to rely on her income from her filed accounts for the 1997-98 tax year. People will be looking to file their returns for the present tax year with the Inland Revenue at the end of September, if they want it to calculate the tax liability, or by 31 January next year, if they are doing that themselves. There will also be a period in which the Inland Revenue will examine and agree those returns. For self-employed women, we are therefore looking at a time scale in which income would not be immediately available, even to themselves, because it would have to be confirmed by the Inland Revenue. One factor differentiates self-employed women from self-employed men when they first set up a business: the income from the new business is often the second income in the household. Thus, many women start up a business in a modest way, perhaps working from home, so the income that they draw from the business in the first year or two is minimal because they want the business to grow before deriving a bigger income from it. The Minister's colleagues in the Department of Trade and Industry will confirm that pattern. Earlier, I asked the Minister about how such women would make a claim under this new provision. I am also concerned that, in the first or second year of a new business, it might be extremely difficult for some women to qualify for the benefit because of the way in which self-employed accounts are prepared. I do not imply that there is any irregularity in their preparation, but the owner of the business will have forgone earnings. To compare the earnings of such a person with those of someone under the PAYE system would be complex. When the Minister replies, as he promised that he would, to my specific questions about the tax point and the data that would be taken into account in determining those women's earnings, I hope that he will look carefully at the new way in which tax, particularly under self-assessment, is worked out for new businesses and people setting up as self-employed. He will be aware, that under his party's new deal, many people are being encouraged to become self-employed, and they will be particularly vulnerable to how their first and second-year accounts are treated in terms of their qualifying for the benefit. It is a matter of great disappointment that the Government have brought this proposal to the Floor of the House without even thinking through how it will be put into practice for self-employed women. The Labour party is good at launching new measures, but not very good at thinking them through.

David Rendel (Liberal Democrat, Newbury)

May I make just a few points on behalf of the Liberal Democrats? We accept the Conservatives' point that the proposal is being rushed through with minimum consultation. As my hon. Friend the Member for Northavon (Mr. Webb) succeeded in pointing out in an intervention, little thought seems to have been given to how the measure will be put into practice. The Minister might do well to think again about his response to my hon. Friend and come up with some clearer plans on how he will ensure that those concerned realise that they may be eligible for new benefits. Simply telling them to look at their pay slips—if they have a pay slip at all—is not good enough. None the less, we welcome the new clause. We have been pressing for some time for better and wider maternity benefits, and this is an attempt to provide them. The Government continually tell us that the Bill's aim is to provide more benefits to those who need them most, and we seem to be proceeding a little way down that path. However, as is so often the case with this Bill, it is not the very poorest who will be helped because they earn below the limits covered by the new clause—or perhaps earn nothing at all. A number of mothers will therefore not be affected by the provision, which will give a little more to those who are not quite the very poorest, but who are poorer than those who have been receiving the benefit until now. That is at least a step in the right direction. One of the most important things that any child can have is a good start in life, and we can help babies in that respect by reducing the stress on their mothers. Reducing financial stress, both before and immediately after birth, must therefore be of benefit not just to mother, baby and the bonding process, but to the whole of society. The Liberal Democrats welcome the new clause in so far as the Government are at least making a move towards providing those advantages by the extension of this benefit.

Hugh Bayley (Labour, City of York)

I shall begin by responding to the hon. Member for Tiverton and Honiton (Mrs. Browning). I welcomed her intervention because she made an important point. Having listened to her speech, I am now clear that she misunderstands the basis on which maternity allowance is currently paid to self-employed people. The benefit is based not on income, but on national insurance contributions. The national insurance contribution records will permit or deny access to maternity allowance. The contributory conditions for self-employed women are unchanged by the new clause. A woman will have had to have paid 26 contributions in the 66 weeks leading up to the birth. What is new is that maternity allowance at the reduced rate will now, for the first time, be available to self-employed women on low earnings who have small earnings exemptions from national insurance contributions for at least 26 weeks before the birth, so they will not have to file accounts to prove earnings. The hon. Member for Tiverton and Honiton is suffering from a misapprehension.

Angela Browning (Conservative, Tiverton and Honiton)

I am familiar with the contributions aspect, but my understanding is that there will in addition be an earnings threshold at which the benefit would apply. If there is to be an earnings threshold, there will clearly have to be some proof of earnings.

Hugh Bayley (Labour, City of York)

Hitherto, a self-employed woman has been able to obtain the maternity allowance on the basis of having paid 26 national insurance contributions in the 66 weeks before the birth. Some self-employed women, such as those who are setting up a business for the first time—precisely the women to whom the hon. Lady referred—will not have paid national insurance contributions because their earnings from their business will be too low to require them to pay contributions. If they have applied and qualified for the small earnings exemption for at least 26 weeks in the period leading up to the birth, they will qualify for the £27 rate of maternity allowance that we propose, which is 90 per cent. of the £30 bottom earnings limit that we are introducing for employed people.

Angela Browning (Conservative, Tiverton and Honiton)

In addition to their national insurance contributions exemption, a mechanism will have to be agreed in advance to establish the exact tax point in the earnings of those women at which the threshold will make them eligible. As I said, often their drawings from their business accounts may be minimal in order to enable their business to grow, and the accounts may show that they plough more back into the business. Will that be taken into account?

Hugh Bayley (Labour, City of York)

The hon. Lady has raised an important point, but she is making the matter more complicated that it needs to be. We do not need new regulations. People who run their own businesses do not need to submit accounts to qualify for maternity allowance. It will depend on their national insurance record. If people apply for the small earnings exemption from national insurance contributions for 26 weeks before the birth, that would passport them on to a maternity allowance. We do not need a new test of earnings: women who have established their entitlement through the existing national insurance system will now, for the first time, receive maternity allowance. The hon. Member for Newbury (Mr. Rendel) asked how we will get the word out. Self-employed people, particularly those who have started up businesses through the new deal, will get support from their mentor. Under the new deal, someone setting up a new business gets a mentor for two years. If the new entrepreneur is a woman who becomes pregnant during those two years, it will be the responsibility of the mentor to explain her rights. As for other women who are employed, at present a woman who is earning £66 a week knows how to claim. Now a woman earning £65 a week, who has hitherto been unable to claim, will submit her claim in exactly the same way. The only difference is that now, when women earning £65, £45 or £30 a week claim maternity allowance, they will be told that they qualify rather than that they do not, and will receive benefit. Let me tell the hon. Member for Beckenham (Mrs. Lait) that if the Conservatives oppose the new clause, they will perpetuate a two-tier system—indeed, two-tier systems. They will be saying that it is right for the law to provide maternity allowance for women on higher incomes, but wrong for it to provide the allowance for those on lower incomes. That is an absurd attitude. Moreover, the hon. Lady will be saying that it is right for a woman who is employed to receive maternity allowance at a rate of nearly £60 a week, but that those who are self-employed should be paid a lower rate. We are correcting those two wrongs. We are enabling all women earning £30 a week or more to receive maternity allowance, which must be a good thing. It is extraordinary that the hon. Lady should suggest that members of her party will vote against the new clause. The question that the hon. Lady must answer is the question that some of my hon. Friends posed to her during her speech: is her party in favour of extending maternity allowance to low-paid women or not? Low-paid women already have a right to maternity leave, but those who are so low paid that they are below the lower earnings limit do not receive maternity allowance, and therefore cannot afford to take the leave. Women on higher incomes receive maternity leave, and the allowance enabling them to afford to take it. That is good for their health and the health of the child; but women below the lower earnings limit are denied the same opportunity. If Conservative Members shoot through the Lobby to vote against the new clause, they will be condemning women on lower earnings to a denial of their right to maternity allowance. I should find it extraordinary were that to happen. The hon. Lady complained that the Government had tabled the new clause only on Thursday of last week. I can only assume that she has been asleep, not just over the weekend but since 6 May, when the new clause was actually tabled. Moreover, although 11 days' notice may not have been enough for her, the issue was flagged up for her two months ago in the Chancellor's Budget speech. The proposal has not been sprung on the House without warning or prior consideration. In the case of every Bill, new measures are presented as the Bill proceeds; and that is exactly what is happening now. The new provision will not impose a burden on business. Under existing provisions, the Benefits Agency checks a percentage of claims with employers to confirm employment, and to confirm that the appropriate national insurance contributions have been paid. We believe that the new scheme will reduce the need for the agency to check claims, because wage slips will constitute an additional verification of employment. The extra burdens on business will therefore be negligible.

John Bercow (Conservative, Buckingham)

The Minister said, to a fanfare of trumpets, that the new clause would not be burdensome on business. Does he seek to distinguish it from, for example, another measure to which he referred in his opening remarks£the working families tax credit, whose implementation has already been denounced by employers' representatives as distinctly burdensome?

Hugh Bayley (Labour, City of York)

The hon. Gentleman should listen to what I am saying. Under the new clause, there is no requirement for businesses to file additional returns or answer additional questions. In fact, we believe that the use of wage slips as passports to maternity allowance will somewhat reduce the need for the Benefits Agency to carry out checks. The hon. Gentleman's fears are therefore groundless. The argument of the hon. Member for Beckenham that the new provision might deter employers from employing women of child-bearing age is a crassly stupid point. It is a point that her party made when the Equal Pay Act 1970 was introduced—that equal pay should not be introduced for women because employers would not employ women if it were. We know what has happened since the Act has come in. Even though pay may not quite have equalised, the relative earnings of women have increased dramatically, and the number of women in the labour market has continued to grow. The hon. Lady's fear is absolutely groundless. The hon. Member for Beckenham said that the provision would affect just 14,000 people. She may have misunderstood something that I said earlier. There are 14,000 employed women on wages that have hitherto been judged to be too low to qualify for maternity allowance. In future, they will qualify; they will get the allowance. That is at the core of what the new clause is about. In addition, however, there are the 13,000 self-employed people who either have never qualified because their earnings were too low, or who have qualified for some allowance; in future, they will qualify to a greater extent because of our decision to pay the self-employed woman who has a baby the same rate of maternity allowance as the employed woman. The hon. Member for Beckenham complains on two fronts. She complains that we will not put the measure into effect until 2000 and that we are dragging our feet, yet at the same time, she says that we are abusing our role by introducing the measure so quickly. She cannot have it both ways. The Conservative party does not have long to make up its mind. It will have to decide one way or the other how to vote on the measure. It has to decide whether women on low earnings should get the same right to paid time off when they have a baby as women who are on higher earnings. If it believes that they should, it will vote with the Government. If it believes that one should discriminate against women on low pay and against the self-employed, it will vote against. That is the simple question that it has to consider. I hope that it will support the Government's proposal.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I will not detain the House long because the Government have already done that. I want to make just a few points to the Minister about some of his assertions and allegations. Two or three interesting things arise from the debate. First, the Government have presented the proposal not at the start of proceedings on the Bill, but on Report, which means that there is no possibility of understanding from business, or from anyone else who is involved in the matter, what the balance of cost is. The Government have produced no cost assessment. We are meant to take the Minister's word for it. It is yet again a great Government trick. It may work with their Back Benchers, who seem to take their word for everything, but the fact is that we cannot possibly accept their word when they say, "Don't worry. We know that the measure will cost no money." The question was raised by my hon. Friend the Member for Beckenham (Mrs. Lait), who said that we do not know what effect the measure will have on people employing the very women whom the measure is aimed at, given that the Government have produced no assessment of the extra cost or burden that may come through on the back of it. We have no idea, so the first point is that the Government want everyone simply to take their word for it. This is the same Government who have produced a raft of extra costs on business: the national minimum wage, the working time directive, the European works councils and parental leave. When each of those initially came through, the Government said, "Don't worry. There is no extra cost. There will be no problems." On each one, business said, "Rubbish." The Government said that there would be no cost at all in relation to the working families tax credit. They even voted down amendments that were tabled by the Conservative party and by the Liberal Democrats. Now we find that those in the other place are up in arms because they realise how much it will. The second point was raised by my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning); it is a powerful one, although I do not think that the Minister finally answered it. She was talking about the profits level of £3,770 a year. The point that she was making was that there is a grey area about exactly where the earnings threshold£the earnings assessment£would be. Because money may have been ploughed back into the business, profits may not be high enough to break through, so there is a grey area. The Minister did not deal with that point. Certainly I do not feel that the point was clarified in his reply, and certainly the people about whom my hon. Friend the Member for Tiverton and Honiton spoke would not have understood what he meant in trying to deal with it. Although the Minister may be right in his answers to our questions, at this point, it is simply too early to know the right answers. The Government want to rush through the provision even though they have 15 months before it is implemented.

Angela Browning (Conservative, Tiverton and Honiton)

I am grateful to my hon. Friend for again raising the issue with the Minister. The Minister seemed to be under the impression that, once self-employed people opt—based on expectations of their business's profitability—to make national insurance contributions as self-employed people at a certain level, that level will be set in tablets of stone. As we know, once a financial year has ended and a self-employed person's accounts have been approved by the Inland Revenue, and if there has been an NI contribution underpayment, the Inland Revenue will come back to that self-employed person for any shortfall.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I am grateful to my hon. Friend, who makes the point very well—I hope that my hon. Friends have understood it. She was making the point that we are not questioning whether the Minister was right or wrong in his reply, but saying that, ultimately, he does not yet know the answer to our questions. It is incredible that, on Report, a very important provision is being included in the Bill, but Ministers cannot answer our questions. As I said, although Labour Members may accept anything that the Minister says—such as "This is night, not day", or "Tomorrow will be not tomorrow, but the day after"—the Opposition's job is to ask questions. I ask: on balance, will the new clause make it more or less likely that those whom the Government intend to benefit will so benefit? Unless our questions are answered, there is no way in which we can possibly support the new clause. The Government talk endlessly about benefiting a specific group of women, but for one year, Ministers will be taking away from those same women £1.6 billion in married couples allowance. Those women will receive not one penny of that money; it will go straight into the Treasury's back pocket. Ministers ask us to believe that they are showing a bit of largesse and are really very decent, giving a hard-pressed group of women some extra money—but I do not believe a word of it. The public will not trust the Government on the issue. The Government should not be trusted on it. Ministers have 15 months—plenty of time—before implementing the proposals. Why do they not make proper proposals and give us time to consider them? The new clause is simply a sop to their own Back Benchers, to try to buy them off. What a joke.

Hugh Bayley (Labour, City of York)

With the permission of the House, I should like to answer the additional question asked by the hon. Gentleman and deal with the point, which he reiterated, made by the hon. Member for Tiverton and Honiton. First, the hon. Gentleman asked what the cost of implementing the measure will be. The cost to the Government will be £15 million. The cost to employers—for reasons that we have already discussed—will be nothing. Secondly, on the point originally made by the hon. Member for Tiverton and Honiton, I shall repeat my earlier reply. This time, however, I hope that the hon. Member for Chingford and Woodford Green might listen to it and understand it. Entitlement to maternity allowance is based not on earnings but on national insurance contributions. The NI contributions that are taken into account are those on an individual's record at the time that person applies for maternity allowance. That is how the system has operated in the past, and how it will operate in the future. The rule is simple, understandable and easy to operate. In future, however, self-employed women on lower earnings will benefit from an allowance; previously, they have not so benefited. Self-employed women, regardless of earnings level, will benefit from the same rate of allowance as employed women. That must be a good thing. Employed women on low earnings, who have previously been denied maternity allowance, will be entitled to the allowance and will receive it, so that they are able to take and use their maternity leave. That must be good for the women concerned, for their health and for the health of the children. It is a sensible measure from a Government who want family-friendly employment policies. Labour Members will vote for it. I shall be astonished if Conservative Members vote against it, but that is in their hands.

OPTIONAL WORK-FOCUSED INTERVIEWS

Andrew Smith (Labour, Oxford East)

I beg to move, That the clause be read a Second time.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, it will be convenient to discuss the following: Amendment (a) to the proposed new clause, leave out lines 22 and 23. Amendment No. 87, in clause 49, page 48, line 40, leave out from beginning to end of line 3 on page 49. Amendment No. 89, in page 48, line 40, leave out `designated authority' and insert 'Secretary of State'. Amendment No. 90, in page 48, line 46, leave out `designated authority' and insert 'Secretary of State'. Amendment No. 88, in page 49, line 17, leave out from beginning to end of line 22. Government amendments Nos. 16, 17, 78, 48, 49, 19, 51, 50 and 52.

Andrew Smith (Labour, Oxford East)

Clause 49 supports the introduction of the single work-focused gateway to the benefit system. The single gateway will radically change the way in which people access benefits. Under the single gateway, claimants will have an interview and get a personal adviser. They will be treated as individuals, and offered the help that they need to become more independent, where appropriate, through work. The single gateway will also provide a better quality service, by bringing together the relevant services currently operated by the Benefits Agency, the Employment Service and local authorities. The gateway approach will stop people being shunted from pillar to post and it will give them more help, as well as underlining that with rights go responsibilities. After extensive scrutiny in Committee, this part of the Bill received a measure of cross-party support, and I hope that the same will be the case today. I shall start by dealing with the Government amendments in this rather large group as they are make minor, technical changes to this provision to ensure that the gateway works in the way intended. I shall then move on to deal with the more substantial issues raised by the Opposition in their amendments. New clause 10 and the consequential Government amendment No. 48 will enable local authorities to conduct voluntary work-focused interviews and advice. That has always been the intention. We want local authorities to be able to provide additional help to people who want it—above and beyond the interviews that we will require under clause 49. As it is currently drafted, the Bill only enables local authorities to carry out compulsory interviews. New clause 10 will correct that position. Government amendment No. 16 also relates to the role of local authority staff in administering the gateway. It clarifies the definition of "designated authority" in clause 49. It makes it clear that that includes the common arrangement for administering housing benefits in which people are contracted by local authorities to deliver services on their behalf. That change reflects the definition of "local authority" in Clause 63, which enables such staff to participate in the information flows that that clause allows.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

Originally, there were three definitions in clause 16 and now there are four. What or who prompted the right hon. Gentleman to add a definition? There was no mention of the need to do so in Committee, but the extra definition has suddenly emerged on Report.

Andrew Smith (Labour, Oxford East)

On looking closely at the provisions of the Bill, we were advised that in order to operate the single gateway as intended—which, as I have said, enjoys a measure of support from the Opposition—it is only sensible to include people who have been contracted to supply services in administering housing and council tax benefit on behalf of local authorities, as well as staff employed by local authorities. It is a straightforward provision to ensure that local authorities will act fully within the law when they operate the single gateway in the integrated way that is intended. The change provides consistency, and will ensure that such staff are not excluded from playing a part in the administration of the new programme. Government amendment No. 17 is a simple consequential amendment which re-numbers the subsection. Government amendment No. 49 will ensure that local authorities can be paid for their role in helping to deliver the single work-focused gateway and our plans for a modern, integrated social security system. At present, local authorities can deal only with claims for housing benefit and council tax benefit. Clauses 49 and 62, and new clause 10, will extend their statutory powers—enabling local authorities to conduct work-focused interviews, and handle claims and information relating to a range of social security benefits. Existing powers to pay subsidy to local authorities do not cover those additional functions.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

The right hon. Gentleman is now talking about local authorities conducting interviews. Employment agencies are skilled in conducting such interviews. What skills will the staff of local authorities obtain that allow them to talk to people about possibilities in the jobs market? I am somewhat thrown as to how those people, who have never been involved in such work, can suddenly become involved in it.

Andrew Smith (Labour, Oxford East)

The hon. Gentleman cannot have been following events quite as closely as his hon. Friends who served on the Committee. It is a central aim of the single work-focused gateway that we stop people being shunted from pillar to post by drawing together in one place, at one point of contact, functions that are at present discharged separately. It is and will be an integrated operation. Therefore, positions for staff operating the single work-focused gateway and personal advisory interviews have been open to application from, and have been applied for by, staff of local authorities as well as those of the Employment Service and the Benefits Agency. The hon. Gentleman would do well to remember that many local authorities have initiated one-stop shops and advice services, so it is perfectly reasonable to expect their staff to have relevant experience. The amendment provides, not only that they can play their part in those functions, but that, where subsidy is payable, the powers in the Social Security Administration Act 1992 will be extended so that those local councils can be paid subsidy in respect of those functions.

Eric Pickles (Conservative, Brentwood and Ongar)

The right hon. Gentleman will recall that, in Committee, there were many discussions regarding confidentiality of information and people employed on a contract. I cannot see among the amendments anything that would apply to employees of local authorities the confidentiality provisions that apply to employees of the Employment Service. I am sure that they are included, but I should like an assurance to that effect.

Andrew Smith (Labour, Oxford East)

I thought that I had said that equivalent arrangements for sharing information with such staff were in the Bill, as amended. However, it is important not only that they can share that information but that there is a legal basis for them to do the work, and that the local council can receive appropriate subsidy in respect of those functions. Amendments Nos. 19, 50 and 51 are purely technical. They enable regulations relating to clause 49, new clause 10 and new paragraph 68A to schedule 12 of the 1992 Act to be made within two months of Royal Assent. We want to be able to present regulations to Parliament as soon as possible after that. That will allow staff and the outside world as much time as possible to prepare for the onset of the compulsory phase of the gateway, which, under the Bill, will commence in April 2000. The amendments are simply necessary to ensure that that can happen. Amendment No. 52 is a technical amendment, which ensures that the changes introduced by amendment No. 49 will apply in England, Wales and Scotland. Amendment No. 78 expands the definition of a work-focused interview, to clarify that such interviews can deal with future employment or training prospects. It makes it clear that its purposes may also include encouraging people to enhance their employment prospects over time. It spells out our intention to ensure that the interview will be helpful and relevant—not just for those with an immediate prospect of work. The amendment helps to ensure that work-focused interviews will be available to the greatest possible number of people, providing them all with the opportunity to move towards independence. As I explained, these are largely technical amendments, which ensure that the policy intention, so thoroughly examined in Committee, can be delivered. I commend them to the House. I shall now discuss the Opposition amendments. Amendment (a) attempts to remove subsection (4) from new clause 10. The purpose of that subsection is to ensure that those local authorities within the 12 pilot areas of the single gateway have the additional powers that they need to conduct voluntary work-focused interviews. There is no need for all local authorities to have those powers at this stage. Subsection (4) gives us the ability to ensure that areas not involved in the pilots remain unaffected by the provision. 5 pm Amendment No. 87 would remove our ability to give personal advisers discretion to defer or waive the requirement to take part in a work-focused interview. We need that discretion because the heart of the policy is that staff will be able to make decisions on whether or not an interview is appropriate on a case by case basis and in a way that takes account of the needs and circumstances of the individual. Our expectation is that the vast majority of people will have an interview immediately, but advisers will judge whether the help and support they can offer will be of use to the client immediately, or whether intervention might be more effective later. There may be clients—a grieving widow, for example, or a mother who has just given birth—for whom an immediate interview is not appropriate. In other situations, people may benefit from an interview straight away, even if there is no early prospect of work. It would completely undermine the policy if we attempted to set out in regulations the precise categories to which that principle applies. We want work-focused interviews to be as helpful as possible. We think that they will provide an excellent opportunity for clients to discuss their situations and the action that they might take. We want to get away from categorising people by some predetermined label.

Angela Browning (Conservative, Tiverton and Honiton)

I hope to expand on this point later in the debate, but I am concerned by the Government's apparent and remarkable failure to understand the groups who may be required to attend interviews. Many of those who receive severe disablement benefit have lifetime conditions. I am not labelling them, just recognising that they have medical conditions. For many such people, to have to attend an interview straight away would be a major trauma. While the Minister recognises the impact of an interview on someone who has just been bereaved, he does not seem to appreciate that for those who suffer certain types of medical condition, the suddenness of having to appear at an interview would be extremely traumatic.

Andrew Smith (Labour, Oxford East)

Recipients of that allowance suffer a wide range of conditions. I do not say that it is appropriate in every case that they should have an interview straight away, but nor is it right to defer the interview in every case. Flexibility and sensitivity to clients are at the centre of our approach on the single work-focused gateway, but we want, as far as possible, to provide an early interview. Those interviews are not just about exploring barriers to employability, although that is important. They also provide people with an opportunity to meet their personal advisers to discuss a wide range of issues to do with their circumstances and their entitlement to benefit. We shall see how well the pilots work, but I believe firmly that sensitively and expertly conducted interviews will be welcomed by claimants who will receive more effective support and advice. They will have a point of contact to which to turn for advice, and that point simply does not exist with any constancy at present. The hon. Lady should be cautious about saying that so-and-so should or should not have interview. We intend that people should find the interviews helpful and should welcome the opportunity to have them as soon as is sensible. Amendment No. 87 would remove our ability to give personal advisers that discretion to defer or waive the requirement. It would totally undermine the policy if we attempted to be overly prescriptive in regulation in the way in which the hon. Lady appeared to suggest. Staff need discretion to decide whether an interview is appropriate according to the individual circumstances of each claimant. Furthermore, and this may further allay the hon. Lady's concern, advisers need to have the discretion to defer the work-focused part of the interview if it becomes apparent during the interview that it is not appropriate, for example if the client is distressed or something about his or her personal circumstances emerges that was not previously apparent.

Angela Browning (Conservative, Tiverton and Honiton)

The right hon. Gentleman is saying that we should go ahead with the interview and curtail it if it causes distress. It is almost 100 per cent. certain that the way in which he intends to make people attend the interview will cause distress to people with certain medical conditions. I ask him to think again. His suggestion shows a remarkable lack of knowledge and sensitivity on his part and on the part of the Government. I am thinking of conditions that might broadly be categorised as mental health problems and developmental disorders.

Andrew Smith (Labour, Oxford East)

We are sensitive to the position of people who have those difficulties. Indeed, they were the subject of extensive debate and consideration in Committee. I remind the hon. Lady that clients can be accompanied to the interviews if they want. Of course, the advisers are being carefully trained to undertake the interviews. The whole point of the pilots is to learn from the experience. The hon. Lady should be careful about producing yet more regulations that attempt to specify in fine detail matters that must be decided in large measure by professional judgment informed by good experience and sensitivity to the needs of clients. That is the way in which the system will operate. The Opposition amendment could have some bizarre consequences, as it would be impossible to identify in regulations every situation in which the interview should be waived or deferred. Therefore, someone with a genuine case for deferral could be made to have the interview straight away if his or her precise circumstance had not been specified in secondary legislation.

Angela Browning (Conservative, Tiverton and Honiton)

Can the right hon. Gentleman guarantee that the sensitivity and experience will be such that no one from the two categories of people about whom I am concerned—those with mental health problems and developmental disorders—will do a runner or suffer a relapse in their overall mental health when invited to attend such an interview? That is the reality of what happens to such people when they suddenly get that sort of letter.

Andrew Smith (Labour, Oxford East)

It is ridiculous for the hon. Lady to ask me to assure her that no one who is invited to attend an interview will ever do a runner. She cannot be well informed about the day to day realities of life within the Benefits Agency and the Employment Service to suggest that a Minister could possibly give such an assurance. I will give her the assurance that people who are suffering from mental illness or other acute difficulties will be treated with sensitivity in the single work-focused interview and, moreover, that the purpose of the interview is to provide them with help, which they are not getting as a result of the way in which the system operates at present.

Simon Burns (Conservative, West Chelmsford)

The right hon. Gentleman says that he envisages and desperately hopes that the system will be sensitive and I in no way disagree. I believe that that is what he is seeking. Given that the National Schizophrenia Fellowship has carried out a review of the client group in question, which suggests that the mental health of 55 per cent. of people with schizophrenia and 65 per cent. of those with depression had worsened as a result of the Government's review of the benefits system, how can he be confident that the change that will be put into operation by the legislation will not have a similar effect on those who sadly suffer from mental illness?

Andrew Smith (Labour, Oxford East)

Because we are listening carefully to the groups that represent such people in the design of the single work-focused interviews. From the outset, I proposed organising sessions where we invited representatives from the various groups to test the process to destruction and ask what could possibly go wrong, to ensure that every possible contingency was prepared for in how the process is designed and delivered, and in the training that people receive. One cannot train and prepare people for everything that might happen, but that is the case in the present system. This system will be infinitely better than the anonymous, alienating and sometimes unhelpful way in which many clients are processed now.

Simon Burns (Conservative, West Chelmsford)

The Minister said that the Government were listening carefully to the views of special interest groups. Of that, again, I have no doubt, but it is one thing to listen sensitively and another to act on what one hears. If the Government are listening sensitively, what changes have they made as a result? Why will they not accept the view of all the groups that it would be better to exempt people suffering from mental illness?

Andrew Smith (Labour, Oxford East)

I disagree with the hon. Gentleman. He mentioned the National Schizophrenia Fellowship, which is one of the bodies that runs a pilot to help disabled people into work under the new deal for disabled people. Of course, with them and other groups, we will learn from the experience of the new deal for disabled people, which again involves interviews and all the hazards that he noted. They are clearly being dealt with in a way that commands the confidence of the group or it would not be involved.

Simon Burns (Conservative, West Chelmsford)

The Minister said that he disagreed with what I said because he had been working with the NSF. Of that, again, I have no doubt but can he explain the NSF's briefing, dated 17 May, which states: We believe that people with a severe mental illness should be exempted from the compulsory work focused interviews"?

Andrew Smith (Labour, Oxford East)

The Government's problem in attempting to act on that would be the definition of "severity". I have already assured the House that where it is inappropriate to hold such an interview, the advisory service will, of course, defer it to an appropriate time. I have also given the assurance that where it becomes apparent during the course of an interview that it would not be right to have the work-focused part of the interview, that part can be deferred. It is not as though such problems cannot arise in the present system when someone goes into a social security office or job centre. The difference is that our proposed arrangements make systematic and sympathetic provision for such people's needs that is not made in the present system.

Angela Browning (Conservative, Tiverton and Honiton)

I disagree with the Minister. As long as their medical professionals provide them with regular certification, people who receive severe disablement allowance do not go through this inquisitorial process at all. The Minister's arrangements introduce something that a group of people with lifelong disabilities will be exposed to for the first time.

Andrew Smith (Labour, Oxford East)

I have always counted the hon. Lady as one of those who, like us, believed in mainstreaming rights for disabled people and giving them a full and equal opportunity to take part in society, yet she erects a definition that would set them apart. We know from evidence and surveys, for example, that 1 million disabled people want to work. They want the dignity of being treated like everyone else. They want that civil right. They want the same opportunities that others enjoy. We are talking about an advisory interview. Except for those for whom the jobseeker's allowance is the appropriate benefit, no requirement is being made except that those concerned attend an interview and discuss their circumstances. Help will be available which is not available now. I am surprised that the hon. Lady would deny disabled people that help.

Angela Browning (Conservative, Tiverton and Honiton)

The Minister fails to understand the specific groups of people about whom I am talking. One of the categories consists of those with a lifelong developmental disorder. Many of them are in receipt of the severe disablement allowance. Many of them would like employment, and for most of my adult life I have been active in trying to help them into employment. However, we must face realities. When they receive the letter to attend an interview, and even with somebody to support them, the process will have to be dealt with extremely sensitively. The Minister should make further inquiries about the categories of people that he will invite into an office. If they are set up to fail yet again in their lives, which could well happen, that will have a dramatic effect on their lives.

Andy King (Labour, Rugby and Kenilworth)

The hon. Lady is failing them entirely.

Andrew Smith (Labour, Oxford East)

As my hon. Friend says, the hon. Lady appears to be failing them entirely before they start. The Government agree with her about the importance of sensitivity and care. However, if she is saying that by definition disabled people should not have the interview, we shall have to agree to differ. There has been talk, understandably, about people going in for interviews. Where it is better to do so, the interview can and would be held in the prospective claimant's home or in another location of his or her choosing.

Jacqui Lait (Conservative, Beckenham)

The right hon. Gentleman will know that in Committee, I raised the case of one of my constituents who is a paranoid psychotic. He is in the process of going to the appeal tribunal, and I alluded to that in Committee. I saw him on Friday. His condition is deteriorating by the minute and by the day. He is now being prescribed further drugs to calm him down so that he does no damage to himself or to anyone else. That is because of the stress that has been created by having to go to the tribunal. My hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) is making precisely the same point about the single work-focused gateway. I am sure that my constituent would get himself into exactly the same state as he is in now if he, too, was called for interview during that process. Does not the Minister see the point—it was made by the Royal College of Psychiatrists: people with certain mental and developmental disorders deteriorate under the pressure of the form of interview that is proposed?

Andrew Smith (Labour, Oxford East)

I understand the point that the hon. Lady is making, and that is why we must be careful. However, that is not a reason for excluding disabled people from the interview.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Concern about this matter is not confined to one side of the House. I have sought in correspondence with the ministerial team to make many of the points that are now being made by Opposition Members. Those of us who think that this is a good Bill which will constitute a significant advance for our country and for many people who have welfare and pension needs may nevertheless take the view that there is a group of people who, when invited to an interview by an authority, will have a condition that is significantly exacerbated by that very offer. I have sought assurances from the ministerial team that sensitivity will involve recognising that some people should have their interview not only deferred, but deferred sine die. If an interview is merely deferred, the additional psychological burden will cause their depression, concern and anxiety to deepen over time. I urge my right hon. Friend to have regard to the fact that unless full medical records are available and those records are used sometimes to defer such interviews sine die, there is a group of people who will unquestionably be affected deleteriously by the Government's proposal.

Andrew Smith (Labour, Oxford East)

I take serious note of the points made by my hon. Friend. Of course any medical recommendation in such instances would carry enormous weight. Just as it is appropriate in many circumstances to defer an interview, equally in circumstances where people's condition improves, it can be appropriate and helpful for them later to have the interview. Through the Bill and particularly through the single work-focused gateway, we are trying to get away from the practice of categorising people, pigeonholing them and treating them in a particular way in advance, rather than treating them as individuals in the light of their individual needs. We will have a more individually sensitive and responsive system.

Hazel Blears (Labour, Salford)

Does my right hon. Friend agree that it is vital for us to address people's individual needs, rather than writing them off for years? I have people coming to my surgery who have been put on benefit and simply ignored—given no help, advice or support and not made to feel part of our society. They have been written off and left almost to rot. Is it not important that we make sure that everybody in our society is given help, support, encouragement and, of course, handled with sensitivity? People are part of our society, whatever condition they are suffering from. It is important that the Government recognise their value and their individual contribution.

Andrew Smith (Labour, Oxford East)

Very well said. I agree with every word of what my hon. Friend says. It underlines the fact that our proposals for the single work-focused gateway are wholly consistent with our approach to the Disability Rights Commission, the new deal for disabled people and the other measures that we are taking to ensure that disabled people have full opportunities in the mainstream of our society.

Theresa May (Conservative, Maidenhead)

If the Minister believes that individuals' needs should be taken into account, should he not accept that there are some individuals whose need is not to be forced to attend an interview? As has been ably set out by my hon. Friends the Members for Tiverton and Honiton (Mrs. Browning) and for Beckenham (Mrs. Lait), there are some people who will be severely affected by the mere fact of receiving a letter requiring them to go to an interview. The Minister speaks about sensitivity and individual needs. Will the letters that are sent out be differentiated according to the circumstances of the individual, or will there just be a standard letter, so that someone who falls into one of the categories referred to by my hon. Friend the Member for Tiverton and Honiton would receive the same letter as someone in receipt of jobseeker's allowance? How will the letters inviting people to an interview be worded?

Andrew Smith (Labour, Oxford East)

On the hon. Lady's first point, we have not said that everyone must have an interview. We accept both that it may be appropriate to defer the interview, and that in some cases—terminal illness is an obvious case, which we discussed extensively in Committee—it would indeed be inappropriate to suggest any interview in the future. With regard to the sensitivity of the letters, in most cases letters will not be necessary. There are two stages to the single work-focused gateway. There is the initial registration and orientation stage—the first approach in making a claim for benefit. At that stage the interview will be arranged, as far as possible within three days. In the case of someone with a mental illness, the first approach for benefit may not even be made by the person himself, but by another member of the family or a social worker. Sensible account will of course be taken of the information given when that first approach is made in deciding whether and how to arrange the interview.

Simon Burns (Conservative, West Chelmsford)

Will the Minister explain the situation of people suffering from schizophrenia or other severe mental illnesses who have a history of violence, but are not in a secure unit or in prison, and who enjoy freedom as a result of the Mental Health Act 1983 and subsequent legislation? Why will they not be exempt, given the difficulties that the strain of such an interview could cause them? He said that some interviews might take place in the interviewee's home. A number of people suffer from mental illness; the interviewer may not know a person's mental history and could be in danger. That is an important point to consider.

Andrew Smith (Labour, Oxford East)

Sensible security precautions must be taken, whether the interview takes place in the single gateway centre, somebody's home or somewhere else. At root, our difference concerns not the judgment about what it is right or not right to do in particular circumstances, but the hon. Gentleman's naive expectation that everything can be finely defined in regulations so that we will know who will fall on one side of the line and who will fall on the other. I do not believe that that can be done.

Chris Pond (Labour, Gravesham)

Is my right hon. Friend aware that, like many other Members, I held a consultation meeting about the Bill with local disability organisations? Mine was well attended and they warmly welcomed the proposals on the gateway for two reasons. First, they believe that it is wrong that any category of person should be written off—exempted beforehand—and therefore given no opportunity to build on their abilities, hopes and aspirations. That was a powerful feeling among the people I spoke to. Secondly, although some hon. Members have discussed the stresses that might be linked to the requirement to attend an interview, is not considerable stress related to unemployment, to the prospect of having no future in the labour market and being unable to make contributions, and to people finding that they have been written off and isolated from the rest of society?

Andrew Smith (Labour, Oxford East)

Yes, indeed; my hon. Friend puts it well. Those who would, let us remember, deny people an interview would cut them off not only from immediate contact, but from the immediate help that could ease their circumstances and which their situation dictates. I start from the presumption that it is a good thing for as many people as possible to have an interview, although I accept that it makes sense to defer the interview for some people or not require them to take part in one.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I hear what the Minister says, but, given what many of my colleagues have said about the problems in the grey area and the Government's commitment to holding interviews within three to four days of someone becoming eligible for benefit, does he not agree that problems will be created for the individual making the decision about who should or should not attend? Three to four days is a tight time scale; does he still stand by it, in which case does he not recognise what is the problem?

Andrew Smith (Labour, Oxford East)

I do, because we are determined that our operation of the system will be more efficient and effective than that with which Conservative Members were content to put up when they were in government. Amendments Nos. 88 to 90 would remove the phrase "designated authority" and its definition from clause 49. That term has been introduced to allow certain decisions about the requirement to attend a work-focused interview to be taken not only by the Secretary of State, but by local authority staff or by those contracted to provide services to either. Where a claimant's first point of contact with the benefits system is the housing benefit department, for example, local authority staff will be able decide whether an immediate work-focused interview is appropriate, or whether the requirement should be waived or deferred to a more appropriate time. 5.30 pm One of the key changes that the single gateway will introduce is that it will streamline the delivery of benefits. We will provide claimants with a better service through a one-stop shop, which will give people a single point of contact for all of their needs. The amendments would prevent those working for local authorities from taking decisions in relation to imposing the requirement to attend an interview. All decisions would need to be taken on behalf of the Secretary of State. If the amendments were accepted, we would be left with two choices: we could either exclude local authorities from the single gateway process altogether, which would mean continuing the present inefficient, piecemeal delivery mechanisms, with all their disadvantages for claimants; or we could refer decisions to the Secretary of State while allowing local authorities to retain responsibility for all other aspect of delivery of the single gateway, including conducting the interviews. However, that would be administratively cumbersome and would inevitably lead to delays in processing benefit claims. Moreover, it would run directly counter to the streamlined service that we all want to see provided. I appreciate that the Opposition's amendments may have been tabled to probe the Government. They have raised some important points during our debates. However, if enacted, the amendments would be damaging and would prevent us from achieving one of the prime aims of the single gateway initiative—an efficient, integrated service for benefit claimants, which would be better than anything that they have had before. I therefore urge the Opposition to withdraw their amendments.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

This is an important element of the Bill. As I said on Second Reading, when I was last directly involved in the Bill, the trouble is that a provision such as this deserves a Bill of its own. Lumping it together with parts of the Bill with which we disagree has meant that the only option for us is to vote against all of it, which creates problems. As we said on Second Reading, we do not have a problem with the idea of the single gateway in principle. After all, it is nothing more or less than a continuation of what we started with the jobseeker's allowance. There is great logic in directly connecting a claimant's interview process and eventual job achievement with the claiming of benefit. We made that clear years ago when we introduced the jobseeker's allowance. The Labour party in opposition opposed the jobseeker's allowance. We are prepared to let bygones be bygones, as Labour Members have now seen sense. They have come round to accepting not only the JSA, but the logic behind it, which is to try to connect those in receipt of benefit with their employment prospects. As my hon. Friends made clear in Committee, we have no problem with this provision in principle. We hope that it continues our JSA policy successfully. However, we have tabled amendments because the Government appear to point in two directions at the same time. We agree with the principle that people should be interviewed and should, hopefully, be moved into work unless they have a reasonable reason for not working, in which case they should receive benefit—they may suffer from certain disabilities, as my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) said, or have some other problem, which could be clearly set out. However, the problem in general—I shall proceed to the particular—is that, in conjunction with this provision, the Government have taken a series of measures that will make it more difficult for those people to find employment. One of the keys to this whole process is that the gateway, if it is to be successful, must not become a bottleneck. The problem that we face is that the Government have talked about creating a gateway, but at the same time, they have succeeded in dramatically ramping up the costs on business—and there are more such proposals to come. I mentioned some of those costs in the previous debate, and I shall now wrap them up.

Andrew Smith (Labour, Oxford East)

What costs arising from the gateway fall on business?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

If the Minister holds his enthusiasm for a second, he will find that I am talking about costs across the board.

Andrew Smith (Labour, Oxford East)

rose—

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

Hold on; I shall give way in a moment. The Minister must acknowledge that the gateway cannot be dealt with in isolation, because a gateway to employment requires jobs to be found on the other side of the gateway for those who would be employed. Perhaps I have missed something, but the Minister is surely not telling us that the gateway is an isolated idea, and that once people are through the gateway, it does not matter whether they get a job because that is an irrelevance. He is not saying that, is he? No. He is not going to intervene on that point, because that is obviously not what he is saying. For a gateway to be successful, there must be employment on the other side—not only the current levels of employment, but increasing employment to deal with the numbers of people who are likely to be made available for work. Just under 1 million lone parents will be looking for jobs, as well as many others to whom my hon. Friends and others have referred. It is wrong and, indeed, impossible to consider the gateway in isolation. Before I deal with the particular amendments that we have tabled, I must examine carefully what the Government are doing on the other side of the fence. As a result of the windfall tax, the Government imposed a £5.2 billion cost on industry. That money does not come out of thin air: it must be found in some shape or form, and the cost is likely to find its way through to employment. It is estimated by others, including the Confederation of British Industry and the Institute of Directors, that the Government's first Budget cost business £14.25 billion. Their March 1998 Budget placed a further almost £5 billion-worth of costs on business. The national minimum wage is estimated by most people to cost employers an extra £8 billion, and will increase the cost of taking on employees. The working time directive, which the Government are keen on, will cost business an extra £6.65 billion. The European works councils will cost almost an extra £billion, and the parental leave elements will cost £0.11 billion. I have probably missed something; there may be other costs that we have not picked up. [Interruption.] Labour Members may laugh, but they have tenure of employment for up to five years. Many people do not have the same security of employment as Labour Members, although I wonder just how secure that employment will be come the next election. Those extra costs have a bearing on this matter, because if employers have to pay an extra £39 billion, they will find it more difficult to provide employment on the other side of the gateway. If there is not a serious and increasing number of jobs available, there will be frustration. People will be brought for interview in the hope of obtaining work, only to find that they hit a barrier on the other side of the gateway. They will have the interview, and nothing further will happen. There is no obligation on them to take work, so the people who come forward in the initial stages will be those with a deliberate and keen desire to find work. Hon. Members make the point time and again that people do not want to be left on the shelf. My general point is that the Government cannot have it both ways. They want to ape some of what is going on in the United States. They have examined the Wisconsin programme, and other programmes involving people returning to work. In those cases, people are obliged to take work, whoever they are—including lone parents—but the Government have decided that there is a halfway house. Here, people will not be obliged to take work, but will be obliged to undergo interviews as a first step towards taking work. I know about the exclusions, and I shall deal with them shortly. It is not possible, however, to copy only part of a scheme; it is necessary to take both sides into account. In the United States, the cost of employing people has been lowered, while here the Government are intent on raising the cost. The Americans recognise that there must be a balance in the equation: they do not see just one side. The Minister asked whether we were concerned about the cost of the programme. As I said earlier, we do not have a problem with the programme in principle. The cost that we are concerned about is outside the problem: the direct cost of the Government's decisions from Budget to Budget, as well as from subject to subject.

Gwyneth Dunwoody (Labour, Crewe and Nantwich)

Is the hon. Gentleman really telling us that the Opposition have no problem with the idea of people being interviewed, but have a problem with the idea that people will not be forced to take whatever job is offered to them during the interviews?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

That is not what I am talking about. I am saying that the principle follows the jobseeker's allowance principle. As the hon. Lady knows, jobseekers are obliged to take employment if it is there, and this process follows from that. My point is that, over the next few years, the Government will realise that they have not dealt with the second part of the equation. If new jobs are to be created, industry's costs must fall; if they rise, the jobs cannot be created. As was pointed out earlier, there are nearly 1 million lone parents out there, a large proportion of whom will want and need work as a result of the Government's present attitudes. Not enough work will be created for those people, let alone all the others involved. My point is very simple: this is a standard equation.

James Gray (Conservative, North Wiltshire)

May I develop the analogy that my hon. Friend used earlier, in order to help the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)? Am I right in thinking that my hon. Friend means that, if a gate is to work properly, it must be well oiled and easy to open? The costs imposed on business mean that firms will employ fewer people, and in particular, the non-wage costs of the working time directive mean that fewer will be employed. There is no point in entering the gateway if it is not possible to emerge on the other side.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

That is essentially what I am saying, but my answer to the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) was quite simple. I shall explain it once more—again, very simply. This may represent a clear dividing line between the two sides of the House, but, whether the Government like it or not, if the cost of employing people is raised, there will be no jobs for them. If we do not believe that, and if a division is created between supply and demand, we shall experience the problem that now exists in Euroland, of which the hon. Lady knows only too well. There, the costs and burdens imposed on business have risen dramatically over the past 18 years or so, which has resulted in probably the highest levels of unemployment that various European countries have experienced since before the war. That has happened simply because those countries have not dealt with the equation to which I refer, whereas, by and large, the United States accepts that there are two sides to it. The Government are trying to have it both ways. As was said earlier, the Secretary of State for Education and Employment is now talking about "three strikes and you're out". The Government are using lots of big tough language about getting people into work, but—this is the other side—what happens when the costs bite, as they are already beginning to? How many jobs will be created that are not already there, or likely to be there—jobs that are relevant to the legislation, and that the Government appear to expect?

Chris Pond (Labour, Gravesham)

Is the hon. Gentleman aware that, in recent years, countries in what he describes as Euroland have been rather more successful than us in creating employment, and that the previous Conservative Government left a larger proportion of non-pensioner households with no one in work than was the case in any other EU member state? Is he also aware that, in the United States, increases in the minimum wage were associated with growth in employment in those very sectors? Is it not a fact, therefore, that the Government's employment measures will ensure that, when people come through the other side of the gateway, there will be jobs for them?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

With respect, I do not know where the hon. Gentleman has been for the past 10 years. If he honestly thinks that employment in Euroland is better than it is here and that its policies have a fantastic effect, why does he think that his Prime Minister goes over there, lecturing all those countries almost weekly—the hon. Gentleman is off-message on the subject—that it is not good enough and that they have to be more like us? The hon. Gentleman has to realise that he cannot have it both ways. I hope that it does not get back to 10 Downing street and to Millbank that he is off-message. I hope that Hansard does not record it correctly because it is just rubbish. We have been more successful at creating jobs here because of the pressure to keep costs down. That lid is now blown off. We will find that it becomes more and more difficult.

Frank Field (Labour, Birkenhead)

Does not the truth lie between the two points that have been made? Over the past 20 years, this country has been far more successful in creating jobs than Europe, but our Governments have been far more successful in destroying those new jobs. What is significant about the past two years is that we have not had the economic downturn that practically everyone prophesied. About 7,000 people are registered unemployed in Birkenhead. We have not recovered from the loss of a shipyard and a steel mill, which occurred under the previous Government after the foolish way in which they managed the exchange rate. However, even in an area of high unemployment, within a single year, more people come on and off the books than, at any point, are a stock of unemployment. Given the extraordinary mobility of numbers moving on and off the books, even in an area such as Birkenhead, is not there everything to be said for the Minister's argument that, if we have a proactive welfare service, one of its tasks is to help those who stay longest in the queue, and who find it most difficult to get jobs, to the front of the queue to take some of the jobs that are there—despite what Governments do as they come and go—so that they are not left languishing at the back? That means, of course, that unless there is an increase in the number of jobs available, some people will have to spend slightly longer in the dole queue than they would otherwise have done. But, even if we take that static—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I should say to the right hon. Gentleman that the intervention is getting rather long.

Frank Field (Labour, Birkenhead)

To bring a long intervention to a conclusion, surely there is a case for having these work-focused, single gateway interviews to help those who have been in the queue the longest to the front of the queue, and to get the jobs that are available.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I always enjoy listening to the right hon. Gentleman. I recognise that it was a long intervention, but it was very interesting. The first point that he made was about conditions in Europe and Britain. If he looks at the figures over the past 12 years or so, he will find that, by and large, this country has been successful at producing private sector jobs. In the rest of Euroland, the public sector has been the main area of job creation. As the right hon. Gentleman knows, if one gets an imbalance, in the way that those other countries have, it creates more and more costs and fewer and fewer private jobs. In essence, that is what has been going on. We can call someone employed but if, in a year's time, that employment falls through and no one else is able to be employed, that is destroying jobs, not making them. On the other general point that the right hon. Gentleman makes about what we should be doing, I said earlier—I hope that he gives us credit for it—that we are not opposed to the principle of bringing people in. He will remember that when he was a Minister, in many discussions I agreed that, regardless of whether one agrees with the jobseeker's allowance, interviews are a continuation of implementing the JSA idea, although perhaps by applying fewer strictures than were applied under the JSA regime. Opposition Members generally have said that requiring interviews is the right move, and we do not question it. I am simply concerned that the Government should deal with the other side of the equation, which they have not yet done. If they think that they have dealt with it, they are simply sticking their heads in the sand. The types of people described by the right hon. Member for Birkenhead (Mr. Field) will feel endless frustration if they are not able to find work. I accept that the current system has some slack in it. Any of our constituents who have seen the many people who should and could be in work, but are not, will be aware of the slack. However, the issue is greater than simply how to deal with that situation. The programme, if it is to be successful, cannot create only frustration. If it starts causing major frustration, we will simply end up with many people trying, in almost every way, to avoid the process—bringing us back to square one, and requiring us to impose major demands and strictures simply to get people to the first interview. The right hon. Member for Birkenhead, when he was a Minister, always made the point that people should, ultimately, see the programme in a positive, not a negative light. I agree with that. I am therefore telling the Government that if people are to regard the programme positively, Ministers will have to strike the right balance, which they have not yet done. Ministers cannot have it both ways. They may think that as the economy is performing reasonably well, the cost side of the equation is not a problem, but—as hon. Members will have noted—employment costs are rising dramatically. That will cause big problems for the Government. The right hon. Member for Birkenhead mentioned the robustness of the economy. However, I remind Labour Members—whether they like it or not—that the economy is robust as a direct result of the tough decisions taken, over 18 years, by the previous Government. Many countries in Europe have not taken those decisions, and have consequently had problems. That is the point that I was making to the hon. Member for Crewe and Nantwich. The Government cannot have it both ways. If they want to get the programme right, they will have to get both sides of the equation right. If they want people to look for work, they have to accept that they must reduce employment costs. Our amendment (a), deleting subsection (4) of the new clause, is intended to complement our other amendments in this group. We tabled them because we believe that the Government's proposals are rather messy, as some of them will apply in different ways at different times, thereby causing problems. In amendment No. 87, we propose removing the provisions allowing massive leeway to the people mentioned in clause 49—but who are specified also in Government amendment No. 16. In the Bill, a tremendously large number of people are given dramatic powers to decide who should attend interviews. As the Minister may know—although he did not attend the debate—I made that point to the Secretary of State on Second Reading, saying that I had deep concerns about the provision. I have heard all that the Minister has said today on the matter, and I have avidly read the Committee Hansards to discover the Government's intention in clause 49. As I, my hon. Friend the Member for Tiverton and Honiton and other hon. Members have said, the guidelines—particularly subsection 3(c)—are very vague, and we have a problem with them. As farmers know very well, gates exist to control the access of sheep, or whatever, from one field into another, and no sheep should get through a closed gate. The problem with the Government's proposals is that they create a gap in the hedge, allowing a way round the gate. My concern is that the Government have no clear idea of how to address the access issue, which requires further consideration. I hope that the Minister will deal with that in his reply.

Andrew Smith (Labour, Oxford East)

I am a little surprised by the hon. Gentleman's analogy of a gap in the hedge. Is he suggesting that too many people who should have an interview will not have one, because advisers are exercising their discretion in allowing them to defer or waive an interview? Or is he concerned—as some other Conservative Members are—that some people will be required, inappropriately, to have an interview? Is it the one or the other?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

It is both—for reasons that I shall explain, and I hope that the Minister will appreciate. The Government are proposing that the discretion should be exercised more widely, from the Secretary of State to (b) a person providing services to the Secretary of State", to (c) a local authority", and now to (d) a person providing services to, or authorised to exercise any function of, any such authority". In other words, and as the Minister knows, the discretion will be exercised at a very low level. I made two points on Second Reading. The first dealt with a scenario in which an official is under pressure because he or she feels that the target—of three or four days—set for them by the Government is very tight, and a senior official is breathing down his or her neck, saying, "You've got to meet your targets. You've got people stacked up and you're beginning to miss the target, which you've got to stick to, as we are obligated to do by the Secretary of State." The official—particularly a local authority official having to take on the new responsibility—may say, as they often do, sometimes for very good reasons, "We need more staff or greater resources. The Government are asking us to do more than we were established to do. We're trying to get this sorted out, but can't do it."

John Bercow (Conservative, Buckingham)

I should not want my hon. Friend to neglect one other important consideration before proceeding to his next point. Does he agree that the problem of staff overstretch, which he has just described, could in the future be especially acute because of the provision in the new Benefits Agency rules for interviews, in some unspecified circumstances, to last for up to one hour each? Will not that make it that much more difficult to meet the very burdensome targets that are being proposed?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

My hon. Friend again raises a serious issue—which, I am sure he will appreciate, is part of the reason why I am probing the Government on the matter. Officials will have to operate under the constraints that he mentioned, in addition to the three to four-day time limit. We are therefore beginning to discern a series of almost statutory requirements. I say "almost" because, although they may not be written in tablets of stone, the Minister and Secretary of State have described them and they may easily be cited. The official may say, "I'm under pressure. I could easily off load these two or three people for a while and give them a bye. I'm fed up with this lot. We'll get on with dealing with the other people. Now, I can declare myself on target. Yet again, politicians don't provide the resources to meet their requirements." I am worried that the Government's proposals will create pressures on officials and, consequently, an unintended hole through which people may pass. The second aspect is that people should know whether the provision applies to them. That is of particular relevance to those who are suffering from disabilities or are chronically sick. My hon. Friend the Member for Tiverton and Honiton made an important point. The Minister accepted that he did not have the absolute answers.

Andrew Smith (Labour, Oxford East)

I did not.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

All right, the right hon. Gentleman has the absolute answers. Perhaps we can hear them. This is the first time that I have heard a politician being rash enough to say that he has the absolute answers, but we now have a new type of politician. Perhaps this is new Labour. With no guidance, those who are not sure what the approach to them will be may expect to be brought in because they think that they fit within the categories, but how are they to judge that? Are they to spend their time worrying whether they will be called in? Can they not be given guidance on whether they fit within the categories? That gap creates the problem. The Government may fall into the trap of letting through people who should not be let through because of the total discretion that will be applied at such a low level and causing worry because, as subsection (4) of the new clause says, Regulations under this section may make different provision for different areas or different authorities. There will be different approaches throughout the country. Two people sitting next to each other in the same office may take different approaches. That will not be deliberate, but the gap is a problem. We have tabled our amendments in an attempt to get the Government to face up to the situation and promise to come forward with a clearer picture of the categories. I recognise that they cannot give a comprehensive list, but officials at whatever level should know who is most likely to fit in certain categories and who is less likely to need to come in at certain stages. The discretion and the huge variations that it will cause will lead to problems of uncertainty. The vulnerable will be worried and those who are bent on avoiding the issue may find ways to do so—through the gap in the hedge.

Jacqui Lait (Conservative, Beckenham)

Does my hon. Friend accept that there is a further complication? Most people do not comprehend 100 per cent. of what they are told, particularly when it affects them directly. Medical evidence shows that people usually comprehend only about 10 per cent. Does my hon. Friend agree that the low level of comprehension of what officials tell those who are interviewed will create a further huge area of potential disagreement and argument that would add to the problems of the lack of guidance from the Government on who is eligible?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I am grateful to my hon. Friend because she has gone to the heart of the issue. The problem is for the Government. I see Labour Back Benchers shaking their heads. I know that they are used to accepting absolutely everything that the Government say. We were in government once and many of us were Government Back Benchers. Sometimes, we used to accept as absolute what the Government told us—[HON. MEMBERS: "Not you."] Well, maybe not, but many did. As many now accept, that all-seeing Government often got it wrong. The new Government do not believe that they get anything wrong, but such arrogance has to be probed.

Andy King (Labour, Rugby and Kenilworth)

Will the hon. Gentleman accept that that is why we are establishing pilots? One is being established in my Warwickshire constituency on 28 June. It will be based in the town hall, with a team of people from across the three agencies. They are currently being trained to deal with people sensitively. That is not arrogance. The Government are moving forward in a way that will give people hope. Why cannot Conservative Members accept that we are giving a good deal to unemployed people?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I hear the hon. Gentleman and I hope that the Government do as well. However, the hon. Gentleman has missed the point. He accepts that the Government are all-seeing and will be able to establish what they want. I have visited some of the pilots and talked to the officials. Many of them have expressed the same concerns—which I hope they have expressed to the hon. Gentleman—about resourcing, pressure of work and numbers coming through. They are not panicking, but they are worried. Of course they are positive about the programme. Officials want to do what the Government ask of them properly. That is what they are there for and they should be applauded for that. My point is not that they should not be positive—they are invariably positive—but that we should not try to use and abuse that positive attitude and ignore the problems and pressures. With such discretion, the problems may become nightmares in due course, because different officers, even those working next to each other, may take differing views. Who is to check? Why not give clearer guidelines for the pilot programmes? Instead of seeing whether it hurts, why not see whether it works? With more clearly defined categories, it will be easier to decide whether the system works. That is a positive way to deal with the issue. With respect to the hon. Member for Rugby and Kenilworth (Mr. King), whom I saw shaking his head earlier, I hope that, in the spirit of constructive debate, he will accept that our points in amendment No. 87 are relevant. Amendments Nos. 89 and 90, which would delete the words "designated authority", are part of the same argument about too much variation and too little clarity. The Government must recognise that if there is no clarity, the gap will result in worry and concern, while some of the more defrauding element and those whose intents are not wholly positive or good will deliberately break the system. Unless the Government come up with serious answers or are prepared to accept our arguments, we shall vote on the issue. They have failed to recognise their obligation to lower costs while making a gateway, the need to resolve the confusion, the need for clarity and the importance of not allowing differences of attitude or behaviour to resonate throughout the system, creating problems for the most vulnerable. The Government still have much to sort out.

David Rendel (Liberal Democrat, Newbury)

I am slightly sorry to have to oppose some of what the Tories have said, because there has been agreement between us on many of their amendments and ours. However, I do not accept their amendments in this group. Amendment (a) to new clause 10 would restrict the right of local areas to take decisions in their own way. There may be good reasons why some areas do not want to go along with what happens elsewhere. It has been a long-standing principle of the Liberal Democrats that we would like local authorities to be given, as far as possible, the widest chance to take their own decisions in their own way where there are regional differences that may make that appropriate. In the amendments, the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) is restricting the opportunities for specific cases to be exempted from the gateway. That would run entirely contrary to many of the amendments that I tabled in Committee, in which I sought to ameliorate some of the potentially unfortunate effects of the single gateway by ensuring that there were widespread exemptions from the difficulties that otherwise might be imposed on someone seeking benefits. I cannot go along with the Conservative amendments in this case, and it seems that the new clause will be acceptable. Having said that, it is worth bringing to people's attention, as we did in Committee, some of the problems that the Minister has not addressed properly. Everybody would accept that there are good reasons for doing our utmost to make sure that people who want work—whether they are single parents or people with disabilities who may have had trouble getting work in the past—are given the opportunity to get work. The difficulty with the single gateway is not that people are not being given the opportunity to get into work—that is widely accepted—but simply what will happen if they do not attend the interview, and whether that carries certain implications in terms of their benefits. The Government's consistent answer is that, as the interview is for the benefit of the individual, why should he or she not want to come? They say that they are trying to avoid fraudulent reasons for not attending interviews. I quite accept that there are good reasons for doing our utmost to avoid any fraudulent use of the benefits system—we wish to avoid and counter fraud just as much as anyone else—but I still believe that there may be cases where people do not attend interviews for good reasons, which may not be clear to the authorities. It was to avoid that situation that we tabled a number of amendments in Committee, and I am sorry to say that the Government would not accept them. The Government have not properly answered the question on the problems that may arise when somebody does not come to an interview for what may be, to them, good reasons—reasons which, if most of us knew them, we might accept as good reasons. However, those reasons may not necessarily be known to the authorities, who then impose some form of cut in benefits or refuse to allow benefits to start for people who do not come to the interview. The Government have still not answered that properly. By forcing people to come to interviews by imposing certain sanctions if they do not, the Government are forcing people to do something that is for their own benefit. If it is for their own benefit, surely the Government ought to be able to persuade people of that. If they cannot, it is odd that they should take powers to force somebody—by imposing, or by threatening to impose, benefit sanctions—to do something that is supposedly for their own benefit. Unless the Government can be sure that there will be no case in which someone, very properly, does not go to the interview for a good reason that the Government fail to recognise as such, there will still be queries about the single gateway. I do not feel that the Government have allowed for sufficient exemptions. However, the new clause, without the proposed Conservative amendments, will go at least some way towards what I am asking for. Therefore, we support it.

Simon Burns (Conservative, West Chelmsford)

As my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) said, the single work-focused gateway is to be welcomed in principle. In no way do I part company from him on that. I agree also with the hon. Member for Newbury (Mr. Rendel) that any sane person would wish to give the maximum opportunity to those who are not in work to find it. It is a myth that a disproportionate amount of people who cannot find work are, to use the jargon, scroungers or loafers. They are not—they desperately want to get work to enhance the quality of their lives and to provide for themselves and their families. Given the economic cycle and certain educational circumstances, some need to be assisted to do that. I shall focus on those suffering from mental illness. I was perplexed by the Minister's comment that he and the Government were consulting the different disability groups and lobby organisations. As I have said, there is a great difference between listening and acting upon what they have heard, and I am concerned about how carefully the Government have listened. The Minister said that the National Schizophrenia Fellowship fully supported what the Government were doing, and said that it was operating a pilot scheme for the Government.

Andrew Smith (Labour, Oxford East)

It is possible that the hon. Gentleman has misunderstood or misheard me. I said that the National Schizophrenia Fellowship was participating in a pilot scheme for the new deal for disabled people, and that there would be lessons to be learned from that in terms of the advice that we give to people. I did not say that the fellowship fully supported everything that the Government were doing.

Simon Burns (Conservative, West Chelmsford)

The Minister will have to read Hansard in the morning, or perhaps his private secretary will read the galley proofs before Hansard is published. I distinctly heard him say that the NSF supported what the Government were doing. He then went on to say what he has just repeated about the pilot scheme. Yet the briefing from the NSF to Members of Parliament for today's debate states categorically: We believe that people with severe mental illness should be exempted from compulsory work-focused interviews. That is clear. There are no grounds for misinterpretation, or for arguing another case. That rather contradicts the impression given by the Minister, and it certainly contradicts the sycophantic intervention from the hon. Member for Gravesham (Mr. Pond). I know that there may be a Government reshuffle, but any sycophant must have an element of self-respect.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

No!

Simon Burns (Conservative, West Chelmsford)

My hon. Friend may be right, and that fact may not enhance the chances of the hon. Member for Gravesham—although, no doubt, he will be a gift to the Whips, who will need people to do the Government's business in future. The NSF carried out a survey last year of 660 people suffering from mental illness, and asked about their benefits and the Government's review of the welfare system. The findings are relevant to the comments of a number of my hon. Friends both today and in Committee. The mental health of 55 per cent. of people with schizophrenia and 60 per cent. of those with depression had worsened as a result of the Government's review, according to the survey. One in three people had debts, the majority of which were unpaid electricity, heating and telephone bills. More than half the people in receipt of disability living allowance used the money to pay for food, clothes and bills, so the benefit subsidised their basic necessities. The majority of people who took part in the survey felt that their mental health problems prevented them from working. The NSF says: As it stands, the Bill would prevent thousands of people with a severe mental illness accessing the financial support that they require to regain and sustain their mental health. Worse than this, some of the changes will actually create additional barriers and stress which will increase the likelihood of a relapse. I urge the Minister to think again. I understand, because of the neatness of his mind and the need to legislate, why he does not want to make too many—if any—exemptions to the broad thrust of the policy, which might allow a coach and horses to be driven through the Government's ultimate aim, but there are certain groups of people who, through no fault of their own, are incapable, because of their mental state, of coping with a system that has been proposed for what I accept are understandable reasons. We should consider whether we should make exceptions in certain limited circumstances. I do not think that that would open the floodgates for every special interest group to make a demand. There is an overwhelming case for not putting any additional burden on people who suffer from mental illness. The NSF says that clause 49, which is affected by new clause 10 and the subsidiary amendments, will cause problems because people may be persuaded into seeking jobs that they are not ready to take, and that the stressful nature of the interview itself may cause irreparable medical harm and cause relapses among those who have begun on the road to recovery.

James Gray (Conservative, North Wiltshire)

Does my hon. Friend agree that the question of who should be exempt from the interviews need not be a value judgment such as he is describing but could be determined according to whether the people's benefits themselves are dependent on the fact that they are not able to work? People on severe disablement allowance and incapacity benefit would then automatically be exempt.

Simon Burns (Conservative, West Chelmsford)

That is an interesting point, and I hope that the Government will consider it. What I am about to say is in no way a criticism of those who will carry out the interviews. As the Minister rightly said, they will be given first-class training to make them as well equipped to carry out their work as is humanly possible. Sadly, there is a stigma attached to those with mental illnesses, and a lack of understanding of the problems that they experience and the way in which they respond to circumstances and challenges. However well trained people are, the interviews will be carried out across the whole range of society, and I fear that there could be problems because, through no fault of their own, not all staff at all times will be able to live up to the highest standards of their training. Some individuals may be so unwell that, as well as being unable to attend, they are unaware of the impending interview. The Minister sought to allay those fears, and to some extent I have been reassured by what he said on that narrow issue. There will always be the fear, before, during and after the interview, that people with mental illnesses may lose their benefits because they have not been able to answer the questions or cope with the interview properly. The increased tension and concern could contribute to a relapse. We should not duck the issue that, because of their condition, some people who are called for interview will not understand at all what it is about. They will be totally confused both in the run-up and during the interview itself. Given all those circumstances, I wonder why the Government are not prepared to reconsider. I asked about schizophrenics or others with mental illness who have a history of, or may be prone to, violence, especially if they are tense or under pressure. That could cause grave problems to the individual concerned and, equally importantly, to the officials and staff involved in the interviews or other parts of the process. I am bewildered about why the Government are not prepared to budge on what is a very sensitive issue. They certainly say that they want to handle the matter sensitively, and I do not doubt their sincerity, but that is not enough: they should be prepared to think again.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

If we gain an assurance that there will be an explicit input from the medical profession, with support and advice intimately associated with the process, so that those being interviewed can see clearly that the difficulties associated with their mental condition, especially if it is a fluctuating condition, will be fully taken into account, would that not settle many of the hon. Gentleman's doubts?

Simon Burns (Conservative, West Chelmsford)

I am not convinced that it would, although it might settle some of them. The hon. Gentleman's suggestion has merit, and should be considered further, but I fear that it might cover fewer people than he imagines. There is still a great lack of understanding of problems and treatment patterns. The medical opinion on a person could be wrong or could not be relevant at the time. The suggestion would not be a catch-all way of allaying all fears. The Government should consider it, but I do not think that it would be helpful in all that many cases.

Angela Browning (Conservative, Tiverton and Honiton)

The intervention by the hon. Member for Hemel Hempstead (Mr. McWalter) and the Minister's comments earlier both referred to the point that medical evidence would show whether an interview would be inappropriate. However, officials would have to obtain the permission of the person concerned before accessing those medical records. While that lengthy process was going on, the person would be aware that an interview was pending and that could cause them stress.

Simon Burns (Conservative, West Chelmsford)

That is a powerful and important point. Another issue is the civil liberties aspect, given that the medical history of individuals is not normally made available to officials of the Benefits Agency or the Employment Service. The Government should consider that point carefully, because such an approach could cause more problems and complications than the suggestion by the hon. Member for Hemel Hempstead (Mr. McWalter).

Jacqui Lait (Conservative, Beckenham)

I agree with everything that my hon. Friend has said. Does he agree that some people with fluctuating mental conditions could perform ably at an interview, but, by the time they were fed through the system and went to see an employer, they might have relapsed? That could cause problems and tensions between the Benefits Agency and the employer.

Simon Burns (Conservative, West Chelmsford)

That is a relevant and interesting point, and my hon. Friend is right.

Eric Pickles (Conservative, Brentwood and Ongar)

Does my hon. Friend agree that it would make more sense that the person performing the interview should undergo a personal capacity assessment? The Government's proposals contain no such requirement and they resisted amendments in Committee to include it.

Simon Burns (Conservative, West Chelmsford)

My hon. Friend makes a pertinent point. I fear that the Minister will not be able to answer that point because he was not listening to my hon. Friend. He will be able to read the intervention in Hansard tomorrow and, I hope, will accept the point. No one disputes that the ethos behind the Bill is twofold. First, it is to encourage people into work or back into work. Secondly, it is to make savings in the welfare budget. However, the Minister's resistance to giving serious consideration to exemptions to those suffering from severe mental illness contains an irony. Have Ministers considered that, if they force an individual suffering a mental illness to an interview and he or she suffers a relapse, that could cost the state far more in treatment than might be saved by forcing him or her to an interview? It is a supreme irony that what is a cost-cutting, money-saving, Treasury-driven Bill could, in this narrow instance—the Bill may contain other examples—have the opposite effect and cost the state more than it would save. The Minister has been reasonable in this debate, although he has not budged an inch. I urge him to listen to all the contributions, from Conservative, Labour and Liberal Democrat Members, and, on reflection, to think again. If he continues on his current course, the Government will bitterly regret it when it becomes apparent how much suffering the Bill will cause to a section of the community who deserve our help instead of the burdens, worries and confusion being placed on their shoulders.

Gwyneth Dunwoody (Labour, Crewe and Nantwich)

I wish to ask a few questions of my right hon. Friend the Minister. Who will be asked to give evidence about the state of mind of a person who is to be brought to an interview? At the moment, it is mostly the Department's own doctors who are required to give evidence on physical disability. Will the support of a general practitioner not be regarded as sufficient evidence that an applicant is not fit to be interviewed? I am also worried about the calm assumption that those who suffer from some form of mental illness can be easily and rapidly clinically diagnosed. That is not my experience. Especially in cases of recurring clinical depression, people's mental states fluctuate so widely that they can be capable of being coherent at an interview and within a short time become incapable even of being summoned to an interview. I dealt recently with a case in which the mere announcement that a meeting was to be held six weeks later to examine an applicant's case history in detail reduced the person in question to a state that required considerable medical assistance. Another difficulty is that some general practitioners ask for extra money if asked to provide any form of certification. They feel, with some justification, that they are doing the work of the Department and they see no reason to expand their existing responsibilities. I hope that my right hon. Friend the Minister has considered those points and will be able to provide a coherent answer, because to insist on a particular machinery to achieve a result without having thought about the implications for those who could be damaged by it is not an advance—it is a retreat. Many of the objections that have been raised may be artificial and unnecessary, but by the time we find out, people could already have been damaged. That is not, I believe, the intention of the Bill or of Ministers, but they must be prepared to think of the answers before, not after, the situation deteriorates.

Angela Browning (Conservative, Tiverton and Honiton)

I declare two unremunerated posts, one as vice-president of the Alzheimer's Disease Society and the other as specialist councillor on the national council of the National Autistic Society. The speeches we have heard so far have raised genuine concerns. I am aware of the problems people have with identifying, within the general framework of legislation, separate groups of people with disabilities. However, by the same token, if legislation contains no recognition of its impact on groups such as those we have been talking about tonight—especially those with mental health problems, including a group I am closely involved with: those with developmental disorders—it becomes a case of using a sledgehammer to crack a nut. I repeat to the Minister something that my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) said. Talking about the interviews that people would be required to attend, he asked, "Why wait and see whether it hurts?" Ministers have a duty of care not to introduce legislation when they are unsure whether the process that they are introducing by statute will cause hurt to certain identifiable groups. There is enough knowledge about mental health, especially schizophrenia—as was so ably argued by my hon. Friend the Member for West Chelmsford (Mr. Burns)—and many developmental disorders, to make it possible to predict today that there will be hurt if those groups are subject to the process that the Minister proposes. The Minister said that he was surprised by my earlier intervention, because he felt that I had an integrationist approach to employment opportunities for people with disabilities. He is absolutely right, but that does not mean that I do not recognise that although, for those two specific groupings, integration is to be achieved if possible, the process whereby it is achieved is absolutely key to whether integration is a good thing or hurtful and harmful. It has been said that some people's response would depend on the day on which they were invited for interview. Much has been said about mental health problems—specifically, schizophrenia—with which I entirely agree, and I endorse what has been said. I shall not develop that further. I want to explore in more depth what happens when people with developmental disorders are interviewed. The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) spoke of the impact on a person who was given six weeks' notice to attend an interview. If something suddenly happens to a person within the autistic spectrum disorder grouping that is not part of their usual routine, the magnitude of the distress that they suffer is very different from that suffered by someone with a physical disability. I want to draw a distinction. In my constituency, I know of some young people with cerebral palsy who are well qualified and deserve to be in employment for 101 reasons. I would wholeheartedly support a process that would enable them to get into work tomorrow as a result of attending an interview. However, although some people with autistic spectrum disorders have the potential to obtain employment, to be realistic—this is not being unkind to them—they are very few. For many, setting them up to fail—which is what we are contemplating—compounds their distress, and compounds their feelings about themselves and the rest of the world. The Under-Secretary of State for Education and Employment, the hon. Member for Barking (Ms Hodge), attended last week's launch of autism awareness week in the House, and we were very grateful to her for doing so, but we still feel that we have to work hard to promote understanding of autism. Many social workers and GPs do not understand the autistic spectrum at all. We are working very hard to fill that gap. I am very worried that the people who will carry out the interview process—and whom my hon. Friend the Member for Chingford and Woodford Green mentioned—would have great difficulty in distinguishing, on paper, which people with autism would be ideal candidates to bring in for interview.

Jacqui Lait (Conservative, Beckenham)

I realise that my hon. Friend is a true expert on autism. Will she perhaps describe the reaction of some autistic people when their routine is disturbed, and say how badly such a disturbance affects them?

Angela Browning (Conservative, Tiverton and Honiton)

For the purposes of the debate, I am assuming that those people with autism who are in full-time residential care would not come within the remit of the policy. I am talking about those in the community. Some may be living independently; some may have supported living arrangements. The vast majority of adults in this category would be living with relatives. They are all different. Although certain common features might typify the response of a person with autism, every response will be different. Many people with autism, faced with an interview, would do a runner. They would disappear for the day, and would not turn up even if they knew that someone was going to accompany them. Others would simply put the letter in the bin, and it is possible that no one else involved in their case would even know that they had been called for interview. As the Benefits Agency knows, it is not untypical for many of those adults who now receive communications from the Benefits Agency to bin any piece of paper that they find confusing. In their eyes, the problem is solved. They are not looking at it; they need not deal with it any more. Obviously, that is not an ideal way of dealing with the matter. 6.45 pm The Minister said that, in many cases, the interviewer would visit the person's home. The presence of a stranger who has come to talk to a person with autism, and to ask them questions in their own home, could be met with a range of reactions, no matter how experienced the interviewer was. It would not be untypical for an adult with autism to sit with their face to the wall during the interview, instead of looking at the person asking the questions. It is very important to emphasise—because this is what distinguishes autism—that I am not talking about people with a below average IQ. In autism and other conditions, such as Down's syndrome, there is often a high IQ. It is not that people do not have verbal skills. Some have very good verbal skills, but would resist using them and engaging in conversation in a stressful situation, such as an interview. Another possible reaction is over-anxiety to please. The person would try to second-guess the interviewer, and try to give the answer that he or she felt that the interviewer wanted. It is very difficult for someone with autism to imagine a situation that is not within their personal experience so, when asked the straightforward question "What sort of work would you like?" it is not unknown for the person with autism to say, "I would like to be an astronaut." Such a case has been recorded. Such a response does not mean that the person is of low IQ; it is simply that they may have seen a film that tells them what an astronaut does. They have understood it, and they have understood it sufficiently to give that answer. I do not know how many vacancies there are for astronauts, but that is not an untypical answer. Unless interviewers have a great deal of experience, not just of interviewing, but of asking questions in a specific way, they will not receive a useful answer. The question "How do you feel about this?" is very difficult for a person who cannot conceptualise an answer. It is not simply a case of asking questions in a gentle or non-pressurised way; the work is very specialised. In the previous Parliament, when I was Parliamentary Private Secretary at the Department of Employment, I took part, with the then Secretary of State, now Lord Hunt, in a pilot scheme co-funded by the Department of Employment—the supported employment scheme in London for people on the higher functioning end of the autistic spectrum. There was some success. I am not saying that no one on the autistic spectrum is capable of employment. I am simply telling the Minister that autism is different from any other developmental disorder. In order to get people with autism into employment and in order for that employment to work—which is the key, as has been said—what happens when they have passed through the gateway is crucial. The people conducting the job interview need coaching. Someone must be present during the interview to be with the person being asked the questions. Once the person is in an appropriate job, they will need someone there to support them—not to do the job, because some people with autism have university degrees and can hold down very high level jobs. I know of several who have worked in the civil service. What I am saying is that someone will need to be in the workplace to sort out communications with other people there. That is invariably the challenge at work for people with autism. There is a way around that problem if the Minister recognises not that some groups should be excluded from the opportunity to get into employment, but that a different approach would be the answer. Even if it worked in only one case in a hundred, that would be worth while. I am convinced that the top-down approach of the proposed structure and the compulsoriness of the interviews will make it less likely that more people with autism will become employed. Although there has been much welcome emphasis and recognition of autistic spectral disorders among children over the past 10 years, a gap remains in recognition among adults. Adults, often living at home with parents, may be undiagnosed until long after childhood. Some may qualify for benefits such as severe disablement benefit. The Minister has talked of flexibility, and the Government must ensure that conditions misdiagnosed, or not diagnosed at all, are recognised in the benefits system through the gateway. For an adult who has never worked, a situation affecting many, the simple physical discipline of holding down a full-time job can be difficult. Has the Minister considered such people? If they were successfully interviewed and it was thought that supported help could be given, the best first stage might not be a paid job, but a process of working towards paid employment through voluntary work. That would certainly mean supported help; we cannot send people with autism out into the wide world. Many would have difficulty in finding their way to the benefits office for the interview on their own and on public transport. Such problems compound their difficulties with getting into work. As a former Minister, I fully understand why Ministers are reluctant to make exceptions on the face of a Bill. However, the Minister has an excellent opportunity tonight to reconsider, on the basis of the information that he has heard about specific groups for whom the scheme could have a detrimental outcome despite its overall good intentions. He could consider how to adapt his scheme to accommodate people such as those with either developed mental disorders or mental health problems. Those two groups are not, of course, exclusive. One difficulty that faces people with developed mental disorders is that they often have mental health problems on top of the disorders as they become adults. The nature of their conditions may lead to difficulties in adapting to adult life. This is a complex area, especially for those without specialist knowledge who will be asked to make judgments about whether the person sitting in front of them is behaving or reacting as he or she is because he or she has a developed mental disorder or an overlying mental health problem. In adulthood, the two often go together. Considerable expertise is required to unravel the suitable way to take such people forward.

Lynne Jones (Labour, Birmingham, Selly Oak)

This morning, I had the pleasure of a visit to Sandwell to see the pilot scheme for the new deal for disabled people. Despite the coincidence of its occurring today, the visit had been fixed up some time ago, and I met a group of people highly committed to helping disabled people not only to get back to work but to make progress towards a life in which they can feel they participate in the community. I had a strong feeling that they were doing an excellent job under the current arrangements, and I urge my Front-Bench colleagues who are devising schemes for the new gateway to listen to the experience of those people. I was told that about 4,000 letters had been sent out, and around 400 phone calls came back. Those who sent the letters were at pains to ensure that there was no mention of any Government Department. The logo refers only to the new deal. For disabled people, receiving a letter from a Department is distressing and stressful. Many phone calls came from people who said, "Thank you very much for writing, and the scheme sounds very interesting. If only it had been available 10 years ago, it might have been useful to me, but I do not think that I am able to participate now." The people who have responded did so voluntarily, and they are receiving an excellent service. Even so, interviewing people with disabilities such as mental health problems is stressful for staff. I asked one of the team, an occupational psychologist, what her work was. Most of it, she said, was in assisting the team dealing with disabled people. Sometimes it can be extremely stressful if a person who suffers a mental illness needs a lot of time. I am concerned that we could, if we are not careful, throw out the baby with the bath water in this new scheme. If teams who interview people have to spend much of their time on enforcement rather than offering a good service, the scheme could prove counter-productive. I believe that Ministers are well aware of that fact, and they have talked to the team that I met and to people who have experience on the ground. A briefing sent to Labour Members in 1995 pointed out the insecurity that compulsion causes among disabled people. It said that changes from invalidity benefit to incapacity benefit meant more insecurity—both for existing claimants who might become ineligible for any benefit, and for anyone concerned about their long term security should they fall ill. It referred also to the difficulty of having one test intended to cope with complex disabilities, particularly mental health disabilities. My Front-Bench colleagues are aware of those issues. I shall vote with the Government tonight, largely because of the answer that I received to a recent parliamentary question about compulsion. My hon. Friend the Minister of State, Department of Social Security wrote that the requirement for compulsion will initially affect only the 12 Single Work-Focused Gateway pilot areas and will be introduced in ways that take account of individual circumstances. The evaluation of the pilots will enable us to consider whether to extend this approach more widely."—[Official Report, 31 March 1999;Vol. 328,c.840.] The Government are aware of the pitfalls and they will go about the process carefully. In so doing, I urge them to listen to the staff who will have to implement their policies and ensure that they are comfortable with having to implement whatever element of compulsion is eventually decided upon.

Andrew Smith (Labour, Oxford East)

We have had a wide-ranging debate. At one point, I wondered whether some Conservative Members were trying to spin it out a little, but that would have been an unworthy thought. The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) spoke for a long time about matters that were tangential to the gateway, but which are none the less important to the economy and, as he said, to the supply of jobs. He did not mention the fact that we now have record levels of employment and, what is more, record levels of vacancies for this stage of the economic cycle. He referred to vacancies, however, and should accept that their number is not totally unrelated to the tough decisions that this Government took in their early months in office—the fact that we made Bank of England operations independent, got the public finances under control, invested wisely in public services and set about raising training and education standards and introducing initiatives such as the new deal. All those have helped to get record numbers into employment. Therefore, the House will take with a large pinch of salt the hon. Gentleman's propaganda that somehow there cannot be any jobs out there or that we are damaging prospects for people on the other side of the gateway. Nothing could be further from the truth. After all that, we heard that the hon. Member for Chingford and Woodford Green not only supports the single work-focused gateway in principle, but concedes that it does not impose burdens on business. As for his attempted arguments about variation in the Bill and his worry that regulations would apply differently in some areas from others, let me assure him that the only reason for that variation between local authorities, which the Opposition amendment would strike out of the Bill, is to operate the single work-focused gateway in the pilot areas without imposing the same requirements on the rest of the country. That is plain common sense for any initiative that is being piloted. It is absurd for the hon. Gentleman to claim that that variation should be struck out of the Bill. The hon. Gentleman also went on about the fact that variations between areas would allow greater discretion in some—it was difficult to follow his argument—but that is not the case. There is consistency throughout the pilots. Amendments Nos. 88 to 90 would not deal with that problem, but would merely cut local authorities out of the single gateway, which would be contrary to its central purpose and to the principle that the hon. Gentleman said he supported.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I do not intend to delay the right hon. Gentleman, but in answer to my arguments all that he has offered so far is that he can assure me—just as he assured my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) in Committee. That does not rub. When individuals are taking decisions and, therefore, varying their decisions on the ground, how much notice will they take of the right hon. Gentleman's assurances? They will have no idea what they mean—they do not mean anything, other than what he thought at the time.

Andrew Smith (Labour, Oxford East)

The Bill means what the Bill means and the amendments and the new clause mean what they mean. In attempting to strike out the different provision in some local authority areas, the hon. Gentleman is either asking us not to run the pilots in a number of pilot areas, or he is saying that it somehow makes sense for every local authority member of staff who is operating the single gateway interviews or registration and orientation to refer on to the Employment Service, the Benefits Agency or the Secretary of State. The hon. Gentleman would erect a great mountain of bureaucracy and rigidity around the operation of the single work-focused gateway, which would make it respond less flexibly, sensitively and efficiently to the needs of clients. Therefore, we can dismiss those arguments. The hon. Member for Newbury (Mr. Rendel) spoke cogently about why the Conservative amendments did not make sense and why new clause 10 did, so I thank him for his support. However, I cannot go along with his arguments, which amounted to saying that we should simply make the gateway voluntary. Of course, many people would volunteer to take part, but it shows extraordinary naivety about how some people approach the benefits system if he imagines that one could simply leave it to that voluntary principle. Apart from anything else, claimants themselves would not see it as fair and neither would it be so. In the Bill, we are effecting a shift of culture—we believe that it is reasonable to do so—so that having an interview will become a normally accepted part of making a claim on the benefits system. The majority of the British public will think that eminently reasonable. Many of them would be staggered if they knew that so many people access the benefits system at the moment without an interview. Most people would see this as a straightforward, reasonable and commonsense measure, which indeed it is. I listened carefully to the hon. Member for West Chelmsford (Mr. Burns), who argued with great feeling about the difficulties facing people who suffer from mental illness and schizophrenia. I wholly share his views and those of his hon. Friends, including the hon. Member for Tiverton and Honiton (Mrs. Browning), who spoke on the same subject. Of course, we must be sensitive to the needs of disabled people and those suffering from schizophrenia. The difference between the hon. Members and me is that the Conservative amendment suggests that we can sensibly enshrine exceptions in regulations. The consequences of the amendments would be less flexibility and less ability to respond to individual need. If Conservative Members honestly believe that more regulation—the top-down approach, which the hon. Member for Tiverton and Honiton said that she did not want—is the right way to deal with a situation that calls for such professional sensitivity, they are the ones who need to think again.

Simon Burns (Conservative, West Chelmsford)

If the right hon. Gentleman accepts the argument and agrees with it, but feels that the amendments are defective and would not achieve the aim, surely he could table his own amendments or, if that is not procedurally possible at this stage, do it through guidelines.

Andrew Smith (Labour, Oxford East)

If we felt that the Bill needed an amendment, we would have tabled one. The way to get a responsive, flexible and sensitive system is not to attempt rigidly to define exceptions in regulations; it is to offer proper training and sensible and sensitive guidance to those who are working at the front line, and that is what we are doing. The bodies that are advising us on the training of personal advisers include not only the Royal National Institute for the Blind and the Royal National Institute for Deaf People but the Mental Health Foundation. Of course, we will take close note of what they say. Like the hon. Gentleman, I have a high regard for the National Schizophrenia Fellowship and other similar bodies that have made representations on the subject. I can assure him and the House that I will make it my business to speak further with those organisations on the way in which guidance is given to front-line staff. We want the legislation to help vulnerable people and not to form some sort of barrier that could worsen their medical condition.

Angela Browning (Conservative, Tiverton and Honiton)

Will the Minister agree to take advice from the National Autistic Society as well?

Andrew Smith (Labour, Oxford East)

Yes, I will.

Theresa May (Conservative, Maidenhead)

The Minister talked about responsiveness and sensitivity. He said earlier that if in the middle of an interview, it became clear that the interviewee was overstressed, the interview would be stopped. For some people, including those in the groups mentioned by my hon. Friends the Members for West Chelmsford (Mr. Burns) and for Tiverton and Honiton (Mrs. Browning) and by the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), the stress of attending the interview, having it stopped and being shown the door could be devastating. What support will be available to such people in that situation? What training will personal advisers be given to deal with such circumstances? He said that the individual needs of the interviewee will be taken into account, but the extent to which that is possible will depend on the length of interviews. What targets will personal advisers be set for the number of interviews that they have to hold?

Andrew Smith (Labour, Oxford East)

Training for personal advisers and front-line staff will go through all the difficult situations that we can possibly anticipate. We are being guided in this not only by expert opinion in the Department for Education and Employment and Department of Social Security, and by the considerable expertise of staff in the Benefits Agency and the Employment Service in catering for the needs of clients with difficulties, but by outside expertise and recommendations based on that. If the hon. Lady wants to suggest further bodies with evidence, views or experience that we should consider, we will be pleased to hear from them. It has been said that it could be stressful for people to get a letter or have an interview but it is not as though people do not encounter that in the present system. An advantage of the single work-focused gateway is that it involves a personal adviser who will have had more training and experience and who will act as a constant point of support. At present, when people with mental illness or other problems inquire about their benefit, they talk to several different people. The new system will offer a constancy of personal support that Opposition Members should recognise as a positive gain over the anonymous, fragmented methods of the past. My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) asked who would give evidence of state of mind. We do not expect or require people to turn up with or send medical certificates in respect of why they cannot turn up. A judgment must be made by the personal adviser. Account will be taken of medical evidence where it is supplied, but let us not forget that for most people who claim sickness and incapacity benefits, medical evidence is already supplied. We will have to allow for fluctuating conditions. As my hon. Friend the Member for Crewe and Nantwich said, some people will be sufficiently stable to arrange an appointment at the registration and orientation stage, but will be not be up to attending the interview or will attend, but not be capable of rational participation. In such cases, we expect benefit to go into payment and not be suspended until an interview can be undertaken.

Gwyneth Dunwoody (Labour, Crewe and Nantwich)

My right hon. Friend said that training will be given to civil servants to deal with those problems. Well-trained young social workers have been asked to undertake interviews at home. In one case, a young woman was killed. Will he be careful before sending civil servants into situations of personal risk?

Andrew Smith (Labour, Oxford East)

Indeed we shall. I assure the House that close attention is being given to security in the design, organisation and delivery of pilots. That is particularly important where people visit other people's homes or go outside the normal interview location. Equally, security must be a prime consideration in offices in the interests not only of staff, but of other clients. We are talking about pilots. As far as possible, we want interviews to take place in a much more welcoming environment than that which characterises many Benefits Agency offices. All the experience in the Employment Service since jobcentres started operating in an unscreened environment is that it reduces aggression and tension and the number of incidents. Working in an unscreened environment in the single work-focused gateway requires good security arrangements. I am making it my business to ensure that they are in place so that there is a better experience for all concerned. I thank my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) for her remarks. She spoke warmly of the new deal for disabled people pilot that she visited. I echo her commendation of the energy, commitment and sensitivity of staff in the pilots. Not only are we listening to them now, but as we put the single work-focused gateway into operation, we will continue to listen to that experience as we carry the pilots forward. We have heard no good reasons for accepting the Opposition's amendments. I imagine that they were intended to allow a debate, but they would seriously damage the flexibility, sensitivity and effectiveness of the single work-focused gateway. They should be withdrawn or voted down because the single work-focused gateway, as provided for in the Bill, is the way to provide the quality, sensitivity and responsiveness in the access point to the benefit system that the country has needed for a long time. I guarantee that when the pilots start on 28 June, the system will give a much better service to claimants.

EXCESSIVE PENSION CONTRIBUTIONS MADE BY PERSONS WHO HAVE BECOME INSOLVENT

Stephen Timms (Labour, East Ham)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this, it will be convenient to discuss the following: Government new clause 12—Excessive pension contributions made by persons who have become insolvent: Scotland. Government amendments Nos. 29, 53 to 62 and 66 to 77.

Stephen Timms (Labour, East Ham)

One of the main themes of our programme for welfare reform is that people should be encouraged to save for retirement if they can. However, when a person is made bankrupt, any pension arrangements that he has may be jeopardised. In some cases, pension rights can be seized by a trustee in bankruptcy and all the pension savings lost. The existing clause 11 will ensure that in future, if a person becomes bankrupt, any rights that he has in approved pension arrangements will be protected. The protection will apply to occupational pensions, personal pensions and in due course to stakeholder pensions. I acknowledge the support that Opposition Members gave to that principle in Committee. However, we cannot give absolute protection to pension savings. There needs to be some safeguard to prevent people who are falling into bankruptcy—[Interruption.]

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Conversations are breaking out throughout the Chamber. The House ought to listen to the Minister who is addressing the House.

Stephen Timms (Labour, East Ham)

Thank you, Mr. Deputy Speaker. There must be safeguards to prevent people who are falling into bankruptcy from deliberately seeking to put assets into their pension in order to avoid their legitimate obligations to creditors. We need to strike a balance between safeguarding pension savings and the rights of creditors. New clauses 11 and 12 provide that safeguard. Their purpose is to prevent people from using an approved pension arrangement deliberately to put money beyond the reach of creditors. Under the provisions in the new clauses, if a trustee in bankruptcy believes that excessive contributions have been made to a pension, he will be able to apply to a court for an order to recover the amount of those excessive contributions.

Nick Hawkins (Conservative, Surrey Heath)

Will the Minister explain why "excessive" is not defined?

Stephen Timms (Labour, East Ham)

What is or is not excessive will be for a court to determine. I shall set out in a moment the issues that the court will have to address. If the application is successful, the pension scheme will be required to pay a sum to the trustee in bankruptcy. That sum will then form part of the bankrupt's estate so that it can be used for the benefit of creditors. The question that the court will have to address in considering whether there have been any excessive contributions is whether the making of any of those contributions has unfairly prejudiced the creditors. In coming to a view on that question, the court will be directed by the clauses to consider two matters in particular: first, whether any of the contributions were made for the purpose of putting assets beyond the reach of creditors; and secondly, whether the total amount of contributions was excessive in view of the individual's circumstances when they were made. As the House will know, we have consulted on these proposals. A number of the responses were concerned about how a court would decide on excessive contributions, and it might be useful if I deal with some of those points. One particular concern was whether ordinary, standard contributions to a pension required by the rules of the scheme could ever be regarded as excessive. In the vast majority of cases, we would not expect a court to rule that they were excessive. I can assure the House that the measure is designed as a deterrent, and is aimed at that small group of people who might try to defeat their creditors. We would expect only a handful of cases each year to be taken to court. In addition to the new clauses, there are various related amendments. The most important is amendment No. 68, which is a further amendment to the Insolvency Act 1986. As I said, new clauses 11 and 12 allow for excessive contributions to a pension to be recovered for the benefit of creditors. However, the legislation also needs to deal with the situation when the pension is shared, under other provisions contained in the Bill. If a couple divorce, they will be able to share the pension as a result of the pension-sharing measures in the Bill. Following the pension share, the pension scheme member may become bankrupt. Under the new clauses, a court could find that the bankrupt's pension is to some extent made up of excessive contributions, moneys that properly ought to have been available for creditors. Normally the court would make an order to recover the full amount of the excessive contributions from the pension rights of the bankrupt, but that may not be possible because of the pension-sharing arrangement, and insufficient resources remain in the bankrupt's fund for that purpose. Where a bankrupt's pension has been shared between the divorcing spouses, amendment No. 68 sets out how the provisions on the recovery of excessive contributions from the former spouse's pension share of the bankrupt's pension will apply. Let me make a few general remarks. First, like the new clauses, the amendment is intended as a deterrent. Without it, some couples who are going through a divorce may be tempted to manipulate the system. Some link between the measures in the Bill on pension sharing and the protection of pensions on bankruptcy is therefore necessary. Secondly, however, we anticipate that the number of cases falling under the amendment will be pretty small.

Steve Webb (Liberal Democrat, Northavon)

The Minister has just described how the pension-sharing rules and the rules on pensions in bankruptcy will interact. I understand from the Secretary of State's private office that the notes on the new clauses are being prepared by the Department and will be available for their lordships' consideration, but not for this House. As someone who knows little of these matters, I think that it would have been helpful if those notes had been available before today's debate.

Stephen Timms (Labour, East Ham)

I entirely accept the hon. Gentleman's point. I hope the explanation that I am giving, which is fairly detailed, will be helpful to the House and will clarify the position. Thirdly, current bankruptcy law contains a longstanding provision to allow a divorce settlement to be overturned when there is evidence that the settlement deprives creditors of assets to which they should be entitled. I understand that those matters are referred to in insolvency law as transactions at undervalue or preferences. The amendment follows that approach by providing that excessive contributions can be recovered from the pension share of the former spouse, but only when there is evidence that the pension-sharing order or agreement was at undervalue or amounted to a preference, unfairly depriving creditors of assets. It builds on existing provisions in insolvency law allowing divorce settlements to be reviewed. I shall set out how the amendment will work. Let us assume that a couple divorce and, as part of the settlement, share the pension. A year later, the pension scheme member becomes bankrupt. The trustee in bankruptcy will use the provisions in the new clauses to ask the court to examine the contributions made to the pension of the person who has become bankrupt. The court will come to a view about any excessive contributions and, if appropriate, will issue an order for an amount of excessive contributions to be recovered, for the benefit of the creditors. However, as a result of the pension share, there might be insufficient rights in the bankrupt's pension to recover the full amount of the excessive contributions. At that point, the provisions in the amendment come into play. Under the amendment, the trustee in bankruptcy will be able to apply to a court for an order to make a recovery of the balance of the excessive contributions from the former spouse's pension share. As a first step, the court will have to consider whether there is evidence that the divorce settlement generally has the effect of putting assets beyond the reach of creditors. If it finds that there is no evidence of that, the matter can go no further. First call for excessive contributions will always be on the bankrupt's share of the pension. Only if there is a balance of excessive contributions not covered by the bankrupt's share will any recovery be made from the share of the former spouse. If a court finds that all the conditions are met and that it is appropriate that some excessive contributions should be recovered from the former spouse's pension share, it will be able to make an order under the amendment. It will make such an order as it thinks fit for restoring the position to what it would have been if the bankrupt had not transferred those excessive contributions to the former spouse's pension share. The likely outcome is that the court will order that a sum representing the excessive contributions should be paid by the former spouse's pension scheme to the trustee in bankruptcy. Hon. Members may have noticed that the amendment extends only to England and Wales and that there is no equivalent for Scotland. The policy is that the provision should apply equally to Scotland, and we shall table an amendment to deal with that at a later date. The amendments I mentioned at the beginning of my remarks are minor changes, consequential on those I have described.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

Will the Minister clarify why the Government were unable to introduce the legislation for Scotland so that the House of Commons could have debated it?

Stephen Timms (Labour, East Ham)

It was simply a question of preparing the drafting and getting the work done in time, but we will shortly introduce the appropriate measures. I have no doubt that they will receive thorough scrutiny.

Clifford Forsythe (UUP, South Antrim)

I did not hear the Minister mention Northern Ireland. Will he tell the House the position in that regard?

Stephen Timms (Labour, East Ham)

I think that the provisions I have described refer to Northern Ireland as well, but I shall check and come back to the hon. Gentleman if I am not correct. He is absolutely right to raise that point with me. The purpose of amendments Nos. 66, 73, 76 and 77 is to ensure that income payment orders can still be made, despite the provisions in clauses 11 and 12. I apologise for this being a little confusing, but I am referring to clauses 11 and 12, which are already part of the Bill. My earlier remarks were about new clauses 11 and 12. The numbering is coincidental. The amendments make it clear that there is a distinction between pension rights and the income deriving from those rights. Although pension rights are to be protected, the income deriving from such rights may be subject to an income payment order, but only for the period of the bankruptcy, which is normally three years. 7.45 pm The purpose of amendments Nos. 54 to 60 is to specify in more detail how unapproved pension rights would be protected from seizure by the trustee in bankruptcy. In other words, the bankrupt will need to make the application, and it will be for the courts to decide whether rights in an unapproved pension arrangement should be treated as if they were rights in an approved arrangement, and so protected. The amendments include provision for the trustee in bankruptcy and the bankrupt to reach an out-of-court agreement that unapproved rights should fall outside the bankrupt's estate—a practical measure, designed to reduce court costs. Amendments Nos. 53, 61 and 62 deal with another aspect of pensions and bankruptcy—the position of pensions which have been shared following divorce. These technical amendments are necessary to ensure that the provisions we are making for pension sharing on divorce work in harmony with those for pensions on bankruptcy.

Anne McIntosh (Conservative, Vale of York)

Can the Minister explain at what stage of divorce proceedings a party should put in a bid for pension sharing under the new provisions?

Stephen Timms (Labour, East Ham)

These provisions concern what happens if bankruptcy occurs after a pension share; they do not concern the procedure for pension sharing itself. A number of new clauses and amendments, which we shall come to later, deal with the Bill's pension-sharing provisions. These matters concern bankruptcy subsequent to a pension share being arranged, when the question whether excessive contributions have been made—and what can be done if they have—arises. The amendments make it clear that, in the period between the making of a pension-sharing order or agreement and the discharge of the resulting liability by the trustees of the pension scheme, the pension credits awarded to a former spouse are to be treated as if they were rights held by a former spouse. Where the trustees of a pension scheme have discharged a pension-sharing order, the pension credit will have become pension rights belonging to the former spouse. The amendments will ensure that, for the purposes of the bankruptcy provisions, a pension credit which the trustees have not yet discharged will be treated in the same way. The bankruptcy provisions refer to the protection of pension rights, and these amendments are necessary to make it clear that a pension credit, once awarded, is a right. Finally on this large group of amendments, in Committee we agreed to look into a point that was raised by Conservative Members. My hon. Friend the Under-Secretary agreed to take it away for consideration, in response to the hon. Member for Grantham and Stamford (Mr. Davies), and amendment No. 29 arises out of that. As currently drafted, clause 11(9) safeguards the trustees when they have taken decisions before the date of the Inland Revenue's decision on tax approval, but will not know what decision the Inland Revenue has made until they receive notification of it. As such, it is quite possible that the trustees may have made a decision about the bankrupt's pension in the interim. For example, they may have bought him an annuity. It was never our intention that trustees could be held liable for decisions made in good faith during that interim period. The amendment, therefore, will extend the protection afforded to trustees until the date on which they receive the notification from the Inland Revenue. I return to the question that was asked about Northern Ireland, and I can give the hon. Member for South Antrim (Mr. Forsythe) an answer. Although there is separate legislation for Northern Ireland, it normally follows the legislation applying to Great Britain, but it will be for the Northern Ireland Assembly to decide what to do on this particular matter. The protection and enhancement of pension savings is a key part of our policy. In cases of bankruptcy, though, we must also have regard to the rights of creditors. It would be wrong if people who become bankrupt could use pensions deliberately to put money beyond the reach of creditors. There must be some form of protection against that, which is what these measures seek to achieve. Necessarily, too, there needs to be some linkage with the new measures on pension sharing in the Bill. I believe that the arrangements we are proposing are fair, building as they do on existing arrangements, and I commend them to the House.

Quentin Davies (Conservative, Grantham and Stamford)

It would be churlish not to acknowledge that the Government have adopted an amendment that I put forward in Committee. They did not tell me that they would do so, but I am glad that they have. It is represented in amendment No. 29. We must be grateful for that—it is a rare event when the Government accept that anybody else may have a useful contribution to make to a piece of legislation. It is only fair to give them credit where it is due, however rare such occasions are. However, if the Minister thought that that concession would spike my guns and that I would be terribly nice to him for the rest of the proceedings, I must disappoint him. Although the bulk of the amendments are of a routine, technical nature, three substantive issues arise out of the long list of new clauses and amendments. They arise in relation to amendment No. 68 and new clauses 11 and 12, and they reflect a sorry state of affairs. All this is a pretty bad business. The Minister did not tell us that amendment No. 68 drives a coach and horses through a principle of which I thought the Government were proud. We might discuss that principle later this evening when we deal with pension sharing. It is that, once a pension share has been effected, it becomes the unconditional property of the beneficiary of that share—of the recipient of the pension credit, to use the terms in the Bill. Clearly, that provision has now been modified substantially by the amendment on insolvency. If it can be altered in this context, perhaps it can be altered in others, too, and it will be possible for courts subsequently to review pension sharing and make retrospective changes. That fundamentally alters the whole concept that has been sold to the House. I find it thoroughly unsatisfactory that the Minister should bring forward this provision in relation to England, but not to Scotland. He simply says that the provision in relation to Scotland can be dealt with in another place. We know how these things work out. In practice, when the Bill comes back to this place the provision in relation to Scotland will not have been given proper scrutiny. It will not have gone through a Committee stage in this place. After all, the House of Commons is supposed to be the primary legislature in this country. The provision will be debated in detail only, if at all, in the other place—a Chamber which the Government say is thoroughly unsatisfactory and undemocratic. It is contemptuous to treat Scotland in that way. The people of Scotland are entitled to feel more than a little aggrieved at the frivolity with which they have been treated. That stricture applies to the whole treatment of pension sharing and insolvency in relation to pensions, as they are dealt with in the Bill. It is absurd that the Government should sell the Scottish people the idea that they now have, for the first time since 1707, a legislature of their own. The Scots have always had a fine legal system. It is one of the oldest systems of Roman law in constant, steady existence, yet the Scottish Parliament will not be allowed to discuss those matters. Scots law is different from ours. Scotland has its own company and family law, yet it will be unable to take decisions on pension sharing and insolvency as they apply to pensions because, those matters will be dealt with in Westminster in the way that we have just discovered—they will not be brought before this House at the same time as the corresponding English legislation. The reality that we now see emerging explodes the fact that, for their own slightly squalid reasons, the Labour party has decided to sell a pup to the Scottish people. Now that it is confident of having become the largest party in the Scottish Parliament, although it did not achieve the absolute majority that it wanted, we are seeing how genuine is the Government's commitment to the idea of Scottish legislative devolution, and how thin, superficial and bogus are the concerns expressed by the Government for the Scottish people' s right to have a greater and more direct say in their own legislation. That brings me to the two new clauses, which are the substantive elements in this string of new clauses and amendments—new clauses 11 and 12. New clause 12 is the Scottish counterpart to new clause 11, and what I just said in relation to the Scottish Parliament's rights in this area applies very much to that. I shall say no more about that, but will focus on new clause 11, which is the heart of the matter. What is so unsatisfactory about this evening's proceedings is that there is a double insult to Parliament in how the Government have dealt with this issue. As the Liberals pointed out, the new clause has been introduced with no explanatory notes. It is a significant new addition to the Bill and it has been introduced at the last minute with no explanations and minimum opportunity for anybody in the House to understand what the Government's contentions are, to consult outside bodies, to take legal advice, and to do the job that we are all sent here to do, which is to ensure that legislation is scrutinised properly. The Government obviously do not want us to do that and are trying to undercut Parliament's responsibility and diminish its role. It should be clearly recorded that that is the effect of the procedure that they have adopted this evening. The second abuse is that the new clause is in no sense a technical strengthening of the Bill. It is in no sense incremental, building on what is already in the Bill. It is not explanatory, making it clear to citizens what the changes in the law are about. All such changes can be made after the Committee stage. This new clause is a thoroughly new approach, negating the substance of clauses 11 and 12 as they stand in the existing Bill, which passed Second Reading and its Committee stage. The Government had neither the courtesy nor the straightforwardness to admit that. They are trying to smuggle through a substantial and substantive change in the Bill by introducing it the very last moment, with a minimum of fanfare, in the hope that the Opposition would not notice. They badly miscalculated there.

Steve Webb (Liberal Democrat, Northavon)

As I have already said, I regard myself as ignorant in these matters. I have been trying to weigh how to advise my colleagues to vote. My concern about the hon. Gentleman's opposition to the new clause is whether he has an alternative strategy for preventing people from putting money into pension funds to avoid their creditors. Is there another way of doing this?

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Gentleman asks a reasonable question. Yes, we do have an alternative strategy. It is the one in the Bill, which has already been read and which we went through in Committee and with which we agreed. That is what happens if we do a deal with the Government. We debate a legislative proposal made by the Government in good faith and agree that it is a sensible proposal to recommend to Parliament. Then what happens? We find a few weeks later that a surreptitious attempt has been made at the last minute, in the hope that no one will notice, fundamentally to change the essence of the agreed Bill. I wonder what is the point of having a Committee stage at all. Bills are thoroughly debated, we come out with an agreed text and then, after the Committee stage, the Government make a fundamental change. I shall explain to those who have had no chance to mug up on these matters exactly where the differences lie. Clauses 11 and 12 provide for a separate treatment of approved and unapproved pension schemes. That distinction is absolutely key, for a reason that I shall explain later. The former have been approved by the Inland Revenue in accordance with section 14 of the taxes legislation, which means that the amounts to be put into those pension schemes, whether they are occupational, personal, money purchase or final salary schemes, are limited by Revenue rules. However, any amount of money can be put into unapproved schemes, because the Revenue has not approved them so there are no constraints. There is much greater scope for putting in large amounts of money, so the issue of excess contributions may arise. 8 pm The Bill as drafted, as debated in Committee, and as agreed between the Government and the Opposition, made a clear distinction, for the purposes of insolvency, between approved and unapproved pension schemes. The new clause abolishes that distinction and provides that both approved and unapproved schemes should be subject to the same regime. That is a fundamental difference. Secondly, clause 11 of the Bill as originally drafted makes it clear that there is absolute protection for approved schemes in the event of bankruptcy, as there always has been for occupational schemes that are set up under trusts. In trust law, assets held in the trust to the benefit of the pensioner are not deemed to be the assets of the individual, so they have always been protected. That is an old canon of English law, which was continued for approved schemes in the Bill as it was passed in Committee. That is no longer the case, because approved schemes are now to be open to clawback from trustees in bankruptcy, and I presume that that includes occupational pension schemes which previously always had absolute protection. In the new clause, the Government are surreptitiously, without having the straightforwardness to tell the House what they are doing, not only failing to give greater protection to pension schemes in the event of bankruptcy, which was their announced intention when they introduced the Bill, but are withdrawing an existing protection. They cannot do much more of a U-turn than that, and doing it surreptitiously does not make it more attractive. Thirdly, under clause 12 as originally drafted and agreed in Committee, there was an assumption that there would be protection for unapproved schemes. The formula was that if there were any doubt, the court would take a view on what would be reasonably required to meet the needs of the pensioner and his family—I am quoting the Bill almost verbatim—and would balance that against what sums in the unapproved scheme would be available for seizure by the trustee in bankruptcy. There was a presumption that there was at least a hard core of protection for an unapproved scheme, but that protection has also gone. The House deserves an explanation of this U-turn. It is unsatisfactory to go through the legislative process and to find that the Government are doing a somersault and changing substantially or reversing the whole thrust of the Bill—which has been debated in good faith and has gone through Committee stage—without telling us why they have changed their mind. The Minister, far from being straightforward and telling us why they have changed their mind, has pretended that the Government's actions have been on a continuum and there has not been a clear break with the Bill as originally drafted. The Minister will have to concede that there has been a change, so perhaps he will tell us what pressure the Government were under to change their mind. What high-powered lobbying has taken place behind the scenes? Why have they changed their mind, or do they legislate with such frivolity that they do not know what is in their mind from one moment to the next? In March, by the simple turn of the kaleidoscope, they are likely to give us one answer to our question, and then in May, they will give us another. No doubt, in June or July, when the Bill goes to the other place, they will have a third answer. That is a hopeless way to legislate, and the Government's behaviour is a disgrace to the House of Commons. The Government's behaviour places the Opposition in a quandary. What do we do about this? We thought that we had an agreement on these two clauses, but the Government, without consulting us and without having the honesty to tell us straightforwardly what they are doing, have run away from that agreement and have done something completely different. That is not the way in which the Conservative party behaves. We think through proposals carefully, and as the Opposition we make an effort to take our legislative tasks seriously. We try to ensure that we consider legislation with basic thoroughness, and that our statements have a modicum of consistency from one stage to the next. We would ill serve Parliament if we behaved in accordance with any other principles. I am sad that the Government do not share our principles. Our position is exactly as I set out in Committee a few weeks ago: we must address this anomaly. At present, before any of these provisions have been enacted, occupational pension schemes are protected from bankruptcy because they are set up under trust law. Following the Landau case, there was considerable doubt whether other forms of pension arrangement—approved or unapproved—were so protected. We consider it a thoroughly unsatisfactory state of affairs for there to be legal discrimination between a particular category of pension—occupational pension schemes—and other types of pension scheme, including personal pensions, the Government's proposed stakeholder pensions, their new proposals for leases, or any other sensible scheme that may come up with. If they use their majority to introduce less than sensible schemes, no doubt such schemes would also be included. We should not discriminate between different forms of pension scheme in the matter of their protection from bankruptcy. That anomaly needed to be removed, and we thought that we had agreed in Committee a method of removing it: that is, the original provision in the Bill. The Government are now running away from that without telling the country or the House. That is the salient point, and if I repeat it often enough, perhaps I shall shame the Minister into explaining why the Government have changed their mind, because they owe the House an explanation. There is a logic for some degree of protection for pensions in the event of insolvency. It is in the interests of taxpayers, because if someone's total assets are taken away, including those on which his livelihood in retirement may depend, the taxpayer may become the bearer of the residual liability to keep him. That is not a desirable state of affairs. If pension contributions have been made in good faith, within the Revenue rules, out of past earnings that are not the cause of the bankruptcy, it is reasonable to protect them. Our position is exactly the same as the one we took in Committee, and it will be exactly the same next week, next month and next year. We do not believe in somersaults: that is no way in which to legislate. It is particularly worrying when it is a reflection of such an arrogant Government who think that they can get away with anything and do not need to think through their legislative proposals properly. The Government should go back to the original clauses 11 and 12. New clause 11 is entirely superfluous and extremely dangerous. It removes the important distinction between approved and unapproved schemes. As a result, it makes a nonsense of the new phrase that enters our legal vocabulary for the first time: the concept of "excessive contributions". That is absurd because, by definition, if a pension scheme is approved by the Revenue, contributions cannot be excessive. That is what approval means.

Hugh Bayley (Labour, City of York)

indicated assent.

Quentin Davies (Conservative, Grantham and Stamford)

The Minister is nodding. If contributions to an approved scheme cannot, by definition, be excessive, they cannot be subject to clawback on the ground that they have been excessive. I therefore feel that clause 11 should remain, as should the distinction between approved and unapproved schemes. If the Minister still wants to introduce the idea that there can be excessive contributions in the case of an approved scheme, as suggested in new clause 11, he must tell us why the Inland Revenue's rules allow excessive contributions to be made in the first place. As we know, over the years the Inland Revenue has examined with enormous care what constitutes reasonable pension provisions that people might make in relation to their salaries, or that employers might make on their behalf. There is a limit to the amount that an employer can contribute to a pension scheme—15 per cent.—and age-related limits to the amount that an individual can contribute to his personal pension. Indeed, the Government are considering further limits in the context of stakeholder pensions—a flat-rate allowance per annum. Presumably, the new clauses and amendments were tabled because, by definition, they were reasonable and not excessive. When changes have needed to be made, they have been made. The last Conservative Government, for example, decided that it was a good idea to cap the amount that could be paid into a pension scheme at a certain level of earnings, so that the proportion of earnings that could be tax-sheltered, and subject to a tax credit when paid into a pension scheme, would come to an end—at, if I remember rightly, an income of around £90,000 a year at present. That amount is indexed, and will rise year by year. Then there is the issue of carry-back. It is possible for people to catch up on years when they have made no contribution—no pension provision—and are unable to do so, up to a period of six years. Again, the Revenue has considered what is reasonable in such circumstances. It would certainly not be reasonable to say that there could be no such provision, and that all pension provision must be made in the current period. For one thing, that is not the way in which individuals work—especially the self-employed, whose earnings fluctuate from year to year. Furthermore, it would not be reasonable if the aim of new clause 11 is to protect creditors in bankruptcy. The Minister may be about to use the carry-back rules as an example of the way in which so-called excess contributions can be accumulated in the case of an approved scheme. If so, I must tell him that that is one of the perversities and foolishnesses into which he has a habit of falling through not thinking the issues through enough. He should consider what would happen if the principle were applied, and trustees were able to claw back amounts that had been paid into a pension scheme relating to previous years under the carry-back provisions. In fact, it would be necessary to ensure that everyone made the maximum pension contributions in the current year—which would mean that they would have to take more cash out of their businesses at the point in the cycle when their earnings were relatively lower than they would be at the present time. At present, the great advantage of the carry-back proposal is that it enables people to smooth the cashflow that they have in their businesses so that in difficult times, they need make no pension provision, knowing that they can make such provision subsequently. By smoothing their cashflow in that way, they reduce the likelihood of going broke in bad times. If the Minister creates a major deterrent for anyone wishing to use the carry-back proposal by forcing all business men who want to make pension provisions to do so in the current year, he will create a perverse effect by depriving businesses of cashflow that they would otherwise have in difficult times. He will make them more vulnerable to failure. A provision that is being sold on the basis that it will protect creditors in bankruptcy will, in fact, cause more bankruptcies. That is pretty stupid. It is not the stupidest thing that the Government are doing, or even the stupidest thing that they are doing in this Bill; but it is pretty far down the scale of stupidity.

Steve Webb (Liberal Democrat, Northavon)

Surely we are dealing here with priorities. Who will have the prior claim on the assets of a firm that has gone bankrupt? The hon. Gentleman seems to be saying that firms that are about to go bankrupt should be able to salt away what little money is left in years of retrospective pension contributions, rather than the creditors, who may themselves be small businesses on the brink of bankruptcy, having a prior claim.

Quentin Davies (Conservative, Grantham and Stamford)

No; I am saying that if people are given an opportunity to make tax-sheltered contributions to a pension scheme, which we have always had in this country—or, at least, have had for so long that we cannot remember when we did not—they will do so as far as they can. Let us suppose that they are told that they need not do that every year on a regular basis: that they can still make full contributions up to the Revenue limits, and can smooth those contributions over time. If they find that at certain junctures they do not have the necessary cashflow to make the requisite contributions, they can do so later out of greater earnings. Otherwise, self-employed people might be liable for a fixed charge on their cashflow. They would say to themselves every year, "If I want to receive the benefit, I must take the money out now and put it in my pension scheme. I cannot leave it in the company; if I do, I shall have lost the chance of tax relief for ever." People would bring forward their pension contributions, and businesses would be deprived of cashflow, at times when it would be more logical to defer such contributions, in the interests of the health of business and thus in the interests of creditors. I do not know whether that will be one of the Government's excuses. I have racked my brains wondering how such a stupid proposal could be presented, and racked my brains again wondering why the Government are doing so in a way that I have already described as insulting to the House of Commons. It breaches what I would like to think of as elementary good faith between Government and Opposition in Committee. I like to think that, in Committee, the Government do not have in their back pocket, and will not subsequently produce, a proposal that negates everything implied in the clauses that are being dealt with. Surely, if we are to create a sensible balance, we must first ensure that no distinctions are made between different sorts of pension schemes in relation to tax and insolvency rules. The same rules should operate for everyone. As we agreed in Committee, the original Bill removed the anomaly created by the Landau case. Secondly, we must make a clear distinction between approved and unapproved schemes. Where the Revenue has determined that a level of pension contribution is reasonable, by definition it must be reasonable; otherwise, Parliament made a mistake in authorising the rules in the first place. Thirdly—this is in clause 12 of the Bill, as passed in Committee—we should exercise more scepticism in relation to unapproved schemes, which may well provide opportunities for excessive amounts to be salted away. In those instances, there should be a provision for clawback, where necessary. Fourthly, we should ensure that there is a clear formula for determining the extent to which the clawback can take place, or the criteria by which the excess can be defined. Clause 12 says, basically, that a man may keep what is necessary for his own upkeep and that of his family; beyond that, the court may look to any excess contributions. That criterion, however, is missing from the new clause, which is open-ended. One of the many unfortunate consequences of accepting the new clause—which I hope the House will not do tonight—would be the creation of considerable uncertainty in an area in which I thought we were moving towards greater clarity.

Steve Webb (Liberal Democrat, Northavon)

As I have said, I did not have the privilege of serving on the Committee that considered the Bill, so I apologise in advance for not having followed the detailed discussion on clauses 11 and 12 in the original Bill. However, my understanding is that those clauses provided for pension funds to be more secure in the event of bankruptcy, which seems, obviously, a step in the right direction. What appears to be represented in new clauses 11 and 12 is a recognition that that provision could be abused by excessive sheltering within pension funds immediately in anticipation of bankruptcy. It seems that a balance has to be struck between providing the protection that we would want for someone's pension assets when that person becomes bankrupt, and allowing that to become abused, so a lot hinges on the definition of "excess contributions". I may not have been paying full attention, but the Minister said that he was going to indicate what the criteria for excess contributions to be used by the courts were going to be. I did not emerge with a clear understanding of what those were. The hon. Member for Grantham and Stamford (Mr. Davies) queried whether contributions up to Inland Revenue limits, for example, could ever be regarded as excessive, either for a given year, or retrospectively. I should be grateful if the Minister would deal with that specific point. Indeed, the hon. Member for Surrey Heath (Mr. Hawkins) asked precisely that question and, I believe, wants to develop that point. I have some sympathy with the hon. Member for Grantham and Stamford with regard to the process by which we have arrived at new clauses 11 and 12. It is unacceptable that the Minister has been forced into a position of saying. "We did not have time to do the Scottish bits." That is not an acceptable way in which to put legislation before the Houses of Parliament. To be frank, it is worrying that we find ourselves in this situation in the first place. The new clauses that we are about to discuss relate to another last-minute Government attempt to close a tax loophole. My concern with all measures introduced in haste is that they are not good legislation. Fast legislation is seldom good legislation, particularly in complex sectors such as pensions, taxation and insolvency. Therefore, I seek some reassurance from the Minister. 1 should be interested to know the parentage of the new clauses. How long have they been thought about? Where did they come from, essentially? Did the Government publish clause 11 and 12, receive representations from the people whose job it is to get round such clauses that they could get round, and realise that they needed to plug the loophole? How do they manage to find people whose job it is to get round such clauses who are willing to tell them that they have found a loophole, so that the Government can close it? I am intrigued to know the process by which we arrived at the new clauses. I hope that the Minister will be up-front with us, as he was in admitting that the Government had not got round to writing the Scottish bits. I hope that he will tell us how we came to have what is a sticking-plaster clause, which was put on so late in the process. On balance, we are reassured by the Minister's comment that, each year, only a handful of cases would fall foul of the new clause. Again, it will be interesting to know the basis of his belief that it will be a minority sport. He asserted that that was his estimate, but did not provide us with any basis for believing that.

Quentin Davies (Conservative, Grantham and Stamford)

On experience, I think that the hon. Gentleman is wrong and is rash to rely on the assurances that he has just quoted. On the contrary, the open-endedness of new clause 11 could result in an enormous amount of litigation and avoidable gratuitous legal costs.

Steve Webb (Liberal Democrat, Northavon)

I am grateful to the hon. Gentleman. I seek robust assurances from the Minister, which he will be held to, no doubt, by the electorate, among others, that vast swathes of legislation and litigation will not arise from the new clause. We understand the principle that the Minister clearly and simply expressed, but we have reservations about the definition of "excess", about whether contributions up to the limit would ever be regarded as excessive, and about whether the measure blows a hole in the protection that is being put around pension funds. In particular, Liberal Democrats are keen to know where the new clause comes from, and why the Government had not thought of it in advance; I presume that the matter was not raised in Committee. Therefore, I hope that the Minister can assure the House that the measure is carefully thought through, not rushed, and does not blow a hole in the principle that my hon. Friends have already accepted.

Clifford Forsythe (UUP, South Antrim)

I seek a little clarification from the Minister following what he said about including Northern Ireland in the Bill. The Bill refers specifically to Northern Ireland in a number of places. In clause 78(4), paragraphs (a) to (j) refer to Northern Ireland. In clause 78(5), paragraphs (a) to (d) do so. At the end of the Bill, where we have items that are to be deleted, a part refers to it. I do not wish to go out of order but, speaking on the general principle of the question and about whether the measure applied to Northern Ireland, the Minister gave a general answer, which I understood that he would take advice about, that the Assembly would deal with the matter. I know that Scotland has not been included in the measure, and that has a devolved Administration in place. The same thing applies to Wales. Leaving aside the merits, or otherwise, of the discussion, as Northern Ireland does not yet have an Assembly in place to be able to bring laws in, I ask the Minister to think again. Perhaps he would take advice again about how the measure would apply to Northern Ireland, and why only some parts would apply.

Nick Hawkins (Conservative, Surrey Heath)

I am glad to have the opportunity to raise some particular concerns about the new clauses and amendments. The hon. Member for Northavon (Mr. Webb) referred to my intervention on the Minister. As well as adopting the sensible concerns that were expressed by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), the Front-Bench spokesman, I say that my concern about the new clauses is that they get away from certainty, particularly where a marriage breaks down. I hope that the Minister will take seriously the concern of those who have conducted ancillary relief cases in the courts, that anything that removes the opportunity for the court to bring certainty at the conclusion of the litigation arising from a marriage is a dangerous matter. As well as having conducted family law cases in the courts for a number of years, I am deputy chairman of the all-party group on insurance and financial services. I am concerned at anything that waters down the distinction between approved and unapproved pension schemes, which is what my hon. Friend the Member for Grantham and Stamford suggested was happening. He posed the question how that came about: how it was that the Government should introduce and apparently agree in Committee the original clauses 11 and 12, and suddenly try to row back from them. The hon. Member for Northavon said that he wanted to know about the provenance of the new clause. The Minister will tell us in his reply whether he knows the answer to that question. However, my guess is that a bureaucrat somewhere in the Inland Revenue, at a very late stage, woke up to the implications of the original, and agreed, clauses 11 and 12, and suddenly said, "This is an opportunity for us to water down the distinction between approved and unapproved pension schemes." I guess, and fear, that that is the provenance of the sudden and undiscussed new clauses, which are undermining the original agreement in Committee. I think that it would be very unwise for the Government to pursue passage of new clauses 11 and 12 and their consequential amendments. If they do pursue them, they will be creating a time-bomb for courts dealing with ancillary relief cases when they have to deal with the sometimes very complex financial arrangements arising from a divorce. The Minister tried very quickly to gloss over the fact that, in certain cases, the trustee in bankruptcy will be able to go back to the spouse who did not originally have the pension scheme—in most cases, the wife—and perhaps to claw back, even from the wife, pension contributions for the trustee in bankruptcy if it is deemed by an ex post facto judgment that those pre-divorce pension scheme contributions were in some way excessive. 8.30 pm Unless the Minister is prepared to give the courts some guidance on how excessive contributions are to be defined, how are courts to decide the matter? The decision will not be at all easy for the courts, who are always anxious to protect the rights of both spouses after a divorce. Perhaps not many other hon. Members have dealt with very complex ancillary relief cases, as I did for a number of years. I am well aware that anything to do with the unscrambling of pension relief in ancillary relief cases arising from a divorce is already an exceptionally complex task for courts to perform. The one thing that courts always attempt to do is to provide certainty. As Hon. Members on both sides of the House will know, and as we have always said, when there is a divorce, the objective should be to achieve a clean break. The Government are now opening the scope for the trustee in bankruptcy, after all the pension contributions have been assessed, to come back and say, "I want to claw back some contributions that I think are excessive." The trustee may even be able, on divorce, to claw back some of the pension contributions made—in the typical case—by the husband from the wife's share of the estate. That may serve the objectives of some minor pettifogging official in the Revenue, but it is not the type of thing that courts want to be wrestling with. The Government, exceptionally unwisely, are opening a whole new can of worms. As my hon. Friend the Member for Grantham and Stamford said, the Government should have left intact the clear, understood and long-established distinction between approved and unapproved schemes, not try to water down the distinction or row back from what was agreed in Committee, simply to satisfy the desire of some official in the Revenue.

Stephen Timms (Labour, East Ham)

I am pleased to assure the House that there has been no U-turn or somersault. Consequently, some of the strictures that we have heard have been inappropriate. I should like first to answer the question of the hon. Member for Northavon (Mr. Webb) on how the new clauses arose. As we have heard, the Pensions Act 1995 contained a statutory protection for occupational pensions in the event of bankruptcy. However, as a safeguard against abuse, section 95 of that Act provided that a court could order that contributions should be recovered from the pension fund if it could be shown that they were excessive. Therefore, that approach was a feature of the 1995 Act. However, the section was never commenced because it was technically defective. Subsequently, along came the Landau judgment—which we have heard about—highlighting the disparity between occupational and personal pensions. In its judgment, the High Court found that, in bankruptcy, pension rights in a retirement annuity contract vested in the trustee, thereby calling into question the security of rights in personal pensions. It is, indeed, the case that very many personal pensions are being seized in bankruptcy—hence the need for the original clauses 11 and 12, which were welcomed by Opposition Members. Therefore, since 1995, the intention has been that there should be such protection from abuse. The hon. Member for Grantham and Stamford (Mr. Davies) sometimes demonstrated a rather loose grasp on some of the Green Paper's detail. Nevertheless, I do not think that it would be unkind to draw his attention to paragraph 49, on page 74 of the Green Paper, which states: At the same time we need to prevent people from using a pension scheme to put money deliberately beyond the reach of their creditors. There will therefore be a mechanism to allow a court to order that excessive contributions paid into the scheme can be recovered from the pension fund". The Government have, therefore, always intended that there should be such a provision. The Green Paper made it clear that we would attempt to make such provision, and our intention was restated in the consultation document "Strengthening the Pensions Framework", which was published the day after publication of the Green Paper.

Quentin Davies (Conservative, Grantham and Stamford)

Does the hon. Gentleman remember paragraph 48, on page 74—which he has just quoted—of the Green Paper, which states: We therefore propose that all tax-approved private pension rights"— which, of course, means approved schemes— should be exempt from the bankruptcy process, thus falling outside the jurisdiction of the trustee in bankruptcy"? That intention was duly enshrined in clause 11—which is now being reversed by new clause 11. The Minister can hardly deny that that is a somersault or a U-turn; he may choose whichever term he likes.

Stephen Timms (Labour, East Ham)

It is neither. The following paragraph says that there needs to be a safeguard, as there was in the 1995 Act. The consultation period began on 16 December and concluded on 12 February. We have taken account of the results of that consultation in the new clauses and amendments. I assure the hon. Member for Northavon that we have pursued the issue carefully. Our intention has been clear since the publication of the Green Paper. We have consulted carefully and taken account of what was said to us. The new clauses and amendments are the result of that careful process.

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Gentleman talks about representations. Were the decisive representations—no doubt powerful, clever, effective lobbying—from lawyers and accountants specialising in insolvency? Insolvency practitioners are the only category of humanity to be greatly advantaged by the Government's U-turn this evening. Without the new clauses and amendments, the Bill would give complete security to members of approved schemes. There would be no ambiguity about their protection. Now all pensions—approved and unapproved—are up for grabs. The Government seem to have fallen for the representations—no doubt the biggest ones—from those with a direct commercial interest in such confusion in the legal system.

Stephen Timms (Labour, East Ham)

The hon. Gentleman still has not grasped the point that I am urging on him. The 1995 Act contained a provision to safeguard against the same problem. We all agree that pensions should be protected from bankruptcy, but there has always been a requirement to guard against the possibility of people abusing that protection by making unduly large contributions to keep the money out of reach of their creditors. That would be a clear abuse. The previous Government introduced legislation to deal with that, although sadly it was technically defective. We have followed along the same lines, but we are doing it properly.

David Rendel (Liberal Democrat, Newbury)

I am getting a bit confused about the timing. We have heard time and again of the Government producing legislation before the end of the consultation period. In this case, the Government announced what they were going to do in a Green Paper and went through a consultation process that finished as early as February, yet in May we still do not have the legislation for Scotland before us even on Report. What on earth has gone wrong?

Stephen Timms (Labour, East Ham)

This is a technically complex matter and it has taken us some time to finalise the details. However, I assure the hon. Gentleman that our proposals fully reflect our very careful consultation. The hon. Member for Northavon asked for some assurances about the number of cases likely to arise. The experience of the Insolvency Service in dealing with bankruptcies shows that, in the stages before bankruptcy, most people do not have the money available to put into pension funds. Cases in which bankrupts seek to defeat their creditors in the period leading up to bankruptcy are the exception. There is clear evidence that the measures will not be needed in a large number of cases, but there will be some, so we need safeguards. The purpose of the measures is to deter. The hon. Members for Northavon and for Grantham and Stamford asked whether contributions could be regarded by a court as excessive if they were within the Inland Revenue rules. The answer is yes, that is possible. Clearly, someone making pension contributions must have regard to other debts and duties to creditors. It is possible—although not very likely—that a court could take the view that contributions were excessive if bankruptcy was approaching. I hope that that has clarified the point. The hon. Member for Grantham and Stamford asked for further clarification of the circumstances in which a court would regard contributions as excessive. As I have said, a court would need to take a view, first, on whether any contributions were made for the purpose of putting assets beyond the reach of creditors, and, secondly, on whether the total amount of contributions was excessive in view of the individual's circumstances when they were made. Again, the court would need to take a view on that. We are happy to leave the matter to the courts. The hon. Member for South Antrim (Mr. Forsythe) asked about the scope of the legislation in Northern Ireland. As he said, there are a number of references to Northern Ireland in the Bill. The majority of measures apply throughout Great Britain because they mainly deal with social security and pensions matters. Northern Ireland has a separate body of social security legislation and, in future, will be able to legislate separately on most social security and pensions matters. It will be for the new Assembly to decide whether to replicate the measures in the Bill to achieve parity in Northern Ireland. Our expectation is that the measures will be mirrored in Northern Ireland, but that will be a matter for the Assembly to decide. Some matters covered in the Bill are not dealt with separately in Northern Ireland because they do not come under the heading of social security legislation, and the hon. Member for South Antrim referred to some. However, it will be within the ability of the Assembly to amend those that do. My right hon. Friend the Secretary of State for Northern Ireland was here when the hon. Gentleman raised that matter. I was pleased that she came in at that moment, and she will have heard his points. The amendments make the distinction between approved and unapproved schemes, and we are not blurring those distinctions. Given that we all agree that pensions savings should be protected in the event of bankruptcy—no one, either today or in Committee, has challenged that view—the question is whether there should be protection, and safeguards against the abuse of that protection. If people make large contributions into their pension scheme specifically to avoid and defeat their creditors when they know that bankruptcy is coming, should the legislation provide safeguards against such abuse? The previous Government took the view in the Pensions Act 1995 that it should—we take that view also. I would have thought that there would be consensus on that matter. On that basis, I commend the new clauses to the House.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

I do not intend to detain the House, and I shall make a couple of brief points. I have never heard such a lot of nonsense from a Minister since coming to this House. We have a ridiculous position, with the Government including this measure late in the Bill. It was not proposed in Committee, but suddenly they have said that they must put it in as a matter of urgency. We have heard that the consultation was over by February, and now the Minister has admitted to the hon. Member for Newbury (Mr. Rendel) that excessive contributions might have been made under the Inland Revenue rules. There is confusion, and the Minister has hardly resolved anything. He admits that the Government have not had time to produce provisions for Scotland. I do not know what they have been doing all this time. It is an absolute outrage that the Bill is in a mess on Report and the Government cannot answer the questions, when the measures could have been included and properly discussed in Committee. That failure by the Government is an outrage.

EXCESSIVE PENSION CONTRIBUTIONS MADE BY PERSONS WHO HAVE BECOME INSOLVENT: SCOTLAND

EARNINGS OF WORKERS SUPPLIED BY SERVICE COMPANIES ETC.

Stephen Timms (Labour, East Ham)

I beg to move, That the clause be read a Second time.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, it will be convenient to discuss the following: Government new clause 16—Earnings of workers supplied by service companies etc: Northern Ireland. Government amendments Nos. 108, 109, 111, 112, 107 and 110.

Stephen Timms (Labour, East Ham)

Where businesses hire workers through an intermediary, such as a service company, rather than employing them directly, it is possible to disguise what would otherwise be treated as employment. In that way, they can reduce the national insurance that they would otherwise pay, or even eliminate it entirely. That is clearly wrong. The service companies are given an unfair advantage over businesses who have their staff on the payroll, and there is a growing loss of revenue to the national insurance fund, which has to be made good by workers and employers who pay their fair share. There are around 50,000 service companies, and their numbers are increasing. That is why, in his Budget statement this year, my right hon. Friend the Chancellor of the Exchequer announced that he would close the loophole, and that the national insurance and tax rules would be changed from April 2000. New clause 15, and the amendments that go with it, will make the necessary change to national insurance legislation. The clause gives the Inland Revenue the powers to make sure that those who disguise employment will pay the same contributions as if they employed their workers direct. New clause 16 provides the same powers for Northern Ireland. Parallel changes will be made to tax law in next year's Finance Act to ensure that businesses will also be required to operate pay-as-you-earn. However, we need to ensure that the appropriate revenue is collected with the least burden to business. In April, the Inland Revenue sent draft guidance on how the proposal will work to all who had expressed interest in the Budget announcement and to their representative associations. The Revenue will shortly meet representatives of those bodies. Their feedback will be valuable in finalising the regulations that result from this clause. In the meantime, I will explain how we intend the power to work. The new clause will allow the Revenue to draw up tests, set out in regulations, which it can use to examine the relationship between a business and a hired worker. The key element of the test will be the degree of control the employer has over the worker. This uses the control test already successfully used to determine whether an employment agency should be treated as the employer for the purposes of liability to pay class 1 N1Cs. The question to be asked is: Has the employer ongoing control over what tasks the worker does or how they are carried out? If the answer is yes, the arrangement will be caught by the new rules and any earnings will be subject to class 1 contributions. Alternatively, where a worker is engaged to complete a job and has total control over the manner in which the task is undertaken and the way in which it is achieved, the relationship will be outside the scope of the new rules. It may be helpful if I give two examples illustrating the scope of these new rules. First, a doctor comes to work in the United Kingdom for two years. She is engaged by a hospital through a UK service company. The consultant in charge directs the doctor as to what work she should do, has ultimate clinical responsibility for the patients and can supervise the doctor in the performance of her duties. This arrangement should be caught by the new rules. Responsibility for paying class 1 NICs and introducing PAYE would lie with the hospital. In the second example, an information technology engineer employed by a medium-sized manufacturing company decides to go it alone, leaving employment to set up his own IT consultancy. A few weeks later, the former employer engages the consultant to undertake a millennium bug health check on all the computer company's systems. The consultant negotiates a fixed fee providing a specified service to a pre-determined deadline. The company has no on-going right of control over exactly what is done by the consultant or how it is done. The new rules will not apply in that case. The measure is intended to remove a significant fiscal disadvantage faced by businesses that employ their workers directly. The clause will ensure that where a worker is engaged by a business through a third party, such as a service company, and that relationship has the characteristics of employment, any payments made by the business to the third party for the worker's services will be regarded as the worker's earnings for national insurance purposes.

Christopher Chope (Conservative, Christchurch)

In the first example, would the hospital be responsible for sickness pay for that worker in the event that he or she fell sick?

Stephen Timms (Labour, East Ham)

The hospital will certainly be responsible for paying national insurance for the worker. My assumption is that the answer to the hon. Gentleman's question is yes. If, on further reflection, that turns out not to be the case, I will return to the matter. The new clause is not intended to remove the benefits that many businesses derive from the use of employment agencies for a supply of labour. Demands for workers can fluctuate, depending on the order book. Employment agencies have a crucial role in helping business cover such fluctuations. Under existing legislation, the agency that supplies the worker, and not the client, is liable for any tax and national insurance payable on the worker's earnings. The worker is regarded as an employee of the agency, which must set up a pay-as-you-earn arrangement and ensure that the necessary class 1 contributions are deducted for any earnings, as well as paying those secondary class 1 contributions as an employer. We have no wish to reverse that arrangement and the clause will not do so. Indeed, subsection (3) allows exemptions from the provision to deal with that issue. For example, if the worker is regarded for income tax purposes as employed by a "certified" agency, and the services are performed by the worker in the course of that employment, the clause does not bite. A business need seek confirmation only that a worker is supplied from a certified agency to be assured that it is not liable for any tax and national insurance on that worker' s earnings. The Inland Revenue will be responsible for running the certification scheme.

Desmond Swayne (Conservative, New Forest West)

What confidence can the House have that the regulations will work in the way in which the Minister described, given that new clause 15 (9) states that any change to income tax provisions may trigger the complete rewriting of the new clause?

Stephen Timms (Labour, East Ham)

We need to ensure that the tax and national insurance rules are in line. The subsection to which the hon. Gentleman referred would allow us to ensure that the two are absolutely aligned. The reduction of burdens on business, and ensuring that we have one system rather than two for businesses to deal with, have been our objectives in changing the way in which national insurance is administered. The essence of the certification scheme is that the agency that supplies the worker will take responsibility for setting up pay-as-you-earn arrangements and paying class 1 national insurance contributions for all the workers on its books. As well as established agencies, other providers of labour are likely to wish to seek certification through the new Inland Revenue scheme. I have already mentioned that similar provisions are being introduced in the next Finance Bill. It is crucial that from next April both tax and national insurance be aligned on this issue; otherwise business will face the burden of operating two systems.

Angela Browning (Conservative, Tiverton and Honiton)

Will the Minister clarify one of his examples? He mentioned that one test of whether someone was under the control of the contracting company or organisation was that it set out exactly the work to be done, which was carried out entirely according to its criteria. Let us suppose that a company carried out a series of short-term contracts in any one financial year—perhaps, two, three, four or five weeks at a time. Realistically, it could be expected to carry out only one contract at a time, but in the course of a year several contracting companies might be used. I should have thought that although the worker concerned might be conforming with the stipulations of a contract, if he or she worked for a variety of employers, for want of a better word, in one financial year, a good case could be made with the Inland Revenue under existing rules. Does this rule affect every case or apply only when employees can prove within a financial year that they have worked for a series of people?

Stephen Timms (Labour, East Ham)

The judgment would need to be made for each separate employment. Where one person works for a series of different employers, the judgment would need to be made about each employment. If it was a series of contracts with a single employer, I think that it would be necessary to consider the whole period of work and judge the nature of the relationship over that time. We need to ensure fair treatment for those engaged directly and those engaged on otherwise equivalent but indirect terms.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

New clause 15 gives power to make regulations. Has the Minister published the draft regulations so that we can judge whether he needs the powers? If they do not make sense, there is no point in having the powers.

Stephen Timms (Labour, East Ham)

There is no question but that we need the powers. This is a serious loophole. [HON. MEMBERS: "Ah."] The Conservative party was never interested in loopholes and did nothing to plug them. This loophole needs plugging. Large sums of money are at stake, so we need the power. We have not published the regulations yet, but there will be extensive discussion between the Inland Revenue, those who responded to the document and representative organisations. We need extensive discussions to ensure that the regulations are framed correctly and to avoid difficulties. There will be a meeting shortly to take that process forward. We need to stop the increasing drain on the national insurance fund by people who disguise the nature of their employment. The growth of such avoidance requires Government action both to ensure fairness, so that those who employ people directly are not disadvantaged as sometimes happens now, and to halt the loss of revenue. My answer to the hon. Member for Christchurch (Mr. Chope) was wrong. For a doctor supplied by a service company, the arrangements for paying statutory sick or maternity pay, where the worker is paid by a certified agency, remain unchanged. The agency will be responsible for such payments.

Andrew Tyrie (Conservative, Chichester)

The Minister said that the Government were plugging a loophole of nearly half a billion pounds. It is a cheek to call that a loophole. What is the Government's estimate of the employment consequences of raising that sum in revenue? What reduction in employment will result from that increase in taxation?

Stephen Timms (Labour, East Ham)

Did the hon. Gentleman say half a million? The sum involved is much greater.

Andrew Tyrie (Conservative, Chichester)

I said half a billion; it is £475 million.

Stephen Timms (Labour, East Ham)

I do not think that the sum is quite so large. In the long term, we anticipate additional revenue to the national insurance fund of around £200 million. I do not believe that adverse employment results from people obeying the law and behaving properly. That is what we want to ensure. Companies are damaged by this abuse because they are disadvantaged. We want a level playing field and our measures will achieve that.

John Burnett (Liberal Democrat, Torridge and West Devon)

Will the Minister give way?

Stephen Timms (Labour, East Ham)

I shall give way one more time.

John Burnett (Liberal Democrat, Torridge and West Devon)

Are the Government proposing the lifting of the veil of incorporation while the existing tests of whether the contract is one of service or for services will still apply? Is that basically what the Government are doing in the new clause?

Stephen Timms (Labour, East Ham)

We are sticking with the existing tests. However, I am describing a rather new circumstance where people are avoiding national insurance payments through establishing service companies. That is the loophole that we will block.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

Has the Minister carried out a cost-benefit analysis within the Department? If so, will he publish it so it is available to us all? Secondly, what estimate has been made of what it will cost to enforce the Government's proposals on the businesses to which he is referring?

Stephen Timms (Labour, East Ham)

We have certainly considered the additional revenue that will be gained to the national insurance fund. In the long term, it will run to £216 million a year. The cost to the Inland Revenue of this and of the parallel income tax measure will be £175,000 in the current year and £55,000 a year in the long term. Our proposals meet the aims that I have set out. They will ensure that the correct national insurance contributions are paid. I urge the House to support the new clause.

Jacqui Lait (Conservative, Beckenham)

I have been horrified by the Minister's contribution and by the lack of clarity in his thinking when responding to my hon. Friends' questions. The hon. Gentleman has demonstrated a complete inability to answer sensibly any of the questions put to him. It is another example of desperation and of the Government requiring any amendments to be introduced now to try to ensure that a later debate, which causes the Government embarrassment, is put off for as long as possible. In effect, they are saying, "Let us bang anything we can think of into the Bill without thinking through the consequences." The new clause is a classic example of not thinking through the consequences. The measure was foreshadowed in the Budget, as the Minister said. It produced an instant reaction from people who have their own service companies. Indeed, I referred to it in the Finance Bill on Second Reading. Consultation is still taking place. That is palpably clear from the Minister's inability to answer any questions. The Inland Revenue press release, which was put out at the time of the Budget, stated that the Inland Revenue will over the next few months be working with representative bodies on aspects of the practical application of the new rules and on the production of guidance. It is clear that none of that has hit the Minister yet. There is absolute confusion everywhere as to what precisely the Minister is trying to do. The Minister said that he thought that 50,000 people would be affected by the Government's proposal. I understand that it will affect 50,000 people in London alone, and 80,000 in the United Kingdom. The impracticalities of what he is proposing are emerging. What seemed to be a fairly simple new clause, although we do not agree with it, has been widened to include what appears to be an attack on the construction industry and the way in which it supplies workers to companies. I shall be happy if the Minister is prepared to tell me that I am wrong. It seems that there will be an attack on the health service by increasing the cost of employment to the NHS. The Minister quoted an overseas doctor. Originally, if I heard him aright, he talked about a doctor employed by a service company, which was then changed on advice to an employment agency. The overseas doctor suddenly became someone who was an employee of the NHS, as opposed to someone who was contracting his services to the health service as an independent contractor. It is interesting that the Minister's example involved an overseas doctor. In so far as anyone has been able to make any sense of what the Revenue is proposing, it seems that the circumstances in which people try to dodge tax—we do not condone anyone behaving illegally and evading taxation—are mainly when they take their earnings overseas at the end of a contract.

Anne McIntosh (Conservative, Vale of York)

Public sector workers are not the only ones who will be affected. The many businesses that run IT services and which are, by definition, consultancy services will also be affected. I have just signed out a letter to a constituent in the Vale of York who is deeply concerned about the measure. The details of it were buried in an Inland Revenue press release—IR35. Is it standard practice for such detail to be announced in a press release that we cannot debate on the Floor of the House?

Jacqui Lait (Conservative, Beckenham)

It is certainly standard practice on the part of the Government for such information to be buried in press releases. That produced an instant response. My hon. Friend was not the only person who received irate e-mails within 24 hours of the measure being announced. I, too, had an irate constituent. The industries most affected are the modern industries that provide the UK with its flexible work force who make us competitive in the rest of the world. Information technology is just one of those industries. To ensure that we remain competitive in world conditions, industries contract out various projects. To use their skills most effectively, many people are taking the sensible decision to leave a company's employment and to act as a consultant to a range of bodies. If the Minister is suggesting that people who set up a consultancy company and work on contract for several employers should be treated as employees of those companies, the complaints that we have received from many people who have their own service companies are justified. We must make sure that the proposal is defeated. If a person's right to set up his own service company is taken away and he cannot contract out his skills, not only will our businesses become less competitive, but modern and flexible work patterns will disappear, and we will return to the old Labour-controlled labour situation that it took us 18 years to get rid of.

Graham Brady (Conservative, Altrincham and Sale West)

I have received many letters from concerned constituents. Many of those companies may work expressly for one client for a certain period, which may be quite long. They may then work for a series of other clients for short periods. I find it impossible to see how the Government envisage devising a test that will establish whether the business is a bona fide consultancy business, and how the test will take account of long periods with a single client. My hon. Friend may wish to pursue the matter further.

Jacqui Lait (Conservative, Beckenham)

My hon. Friend highlights another of the practical problems that clearly have not been thought through by the Government. My constituent works to precisely that pattern and has been out of work for only 10 weeks in the past five or six years. He has a private limited company. It is a simple company consisting of himself, one director and a company secretary. He uses a limited company because that is the only type that agencies and large corporate firms will deal with. That is necessary to protect all concerned in the event of an error at a client's site. That is one of the difficulties that the Government have failed to consider. Money that goes into the company of my constituent, Andrew Jarrod, is paid as pay-as-you-earn. He says: twice yearly I pay dividends if there is money remaining. My accountant manages my PAYE, and advises me on tax rights and wrongs. Since the company was set up (over 5 years ago) I have had six separate contracts for entirely unrelated large companies which have ranged from 6 weeks to 2 years. All contracts have been for 6 months or less and those that have continued longer were always through extensions that had to be negotiated. All contracts have a 1 month get-out clause which the client can invoke at any time. The problem is that, in trying to get rid of such service companies, the Government have come slap-bang up against the potential for litigation between a large company and an individual, quite apart from the fact that people who are running such companies properly will provide for themselves the national insurance and national insurance-equivalent benefits that the Government are so keen to get their hands on. They will also provide their own health insurance and pension scheme. They take pressure off state provision; they do not apply pressure by not contributing to the full, because most of them are paying their share. We have found that the consultation has not been in any way extensive and has been based on a knee-jerk reaction from the Government.

The rest of the debate is in Hansard.