Orders of the Day — Welfare Reform and Pensions Bill

House of Commons, 20 May 1999.

INCAPACITY BENEFIT: RESTRICTION TO RECENT CONTRIBUTORS

Roger Berry (Labour, Kingswood)

I beg to move amendment No. 12, in page 52, line 18, leave out Clauses 53 and 54.

Michael Martin (Deputy Speaker, Glasgow Springburn)

With this, it will be convenient to discuss the following amendments: No. 5, in page 52, line 18, leave out Clause 53.

Roger Berry (Labour, Kingswood)

Before I explain what the amendment does and why we have tabled it, I must make two comments. First, I entirely support the Government's curtailing debate at a ridiculous hour on Tuesday morning and I entirely support the guillotine motion. Timetabled debates are a credit to the House, and what happened in the early hours of Tuesday morning was a discredit to the House. Secondly, I do not want the political party that, when in government in 1995, inflicted the biggest ever cuts in benefits for disabled people who were unable to work to start attacking this side of the House. It is true that one or two Conservative Members hold views about incapacity benefit that are the same as my own. I respect their views and the lobbying that they have taken as fellow members of the all-party disablement group. However, the Conservative Government's policy in 1995, when they cut literally billions of pounds off benefit for disabled people who were unable to work, does not give them great moral authority in the Chamber this afternoon. My right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) made a very important point about the occasions when those who support this Government passionately might find themselves in the same position as several of my colleagues and I this afternoon. I will not weary the House with a long defence. I simply say this: the first rumours of possible cuts to incapacity benefit appeared in the media 18 months ago. My right hon. and hon. Friends on the Front Bench will acknowledge that many Labour Members requested meetings with Ministers—I am grateful that our requests were granted—and expressed our concerns. There may be a difference of opinion at the end of the day, and I do not demand that Ministers change their view. However, it must be recognised that our concerns about clauses 53 and 54 have not appeared suddenly in recent weeks. Many of us expressed concern when rumours first appeared in the media 18 months ago. Some of us have made a regular trek—in my case, from my office in Millbank—to the Department of Social Security. This is not a Johnny—come—lately concern. Disagree we may, but let nobody say that attempts were not made to avoid the situation that we face today. I would have given almost anything to avoid it. The problem is, of course, that clauses 53 and 54 will do so much damage. 2 pm I regret that discussions have, unfortunately, brought about no change, but I feel regret also because my colleagues and I have consistently applauded the Government's very great achievements in securing a better deal, fairness and more equal opportunities for disabled people. In the new deal, progress on civil rights and a range of other policies, the Government's performance contrasts dramatically with that of the previous Government. I last spoke in a debate in the House three or four weeks ago to express the strongest possible enthusiasm for the Disability Rights Commission Bill. The Government care about a fair deal for disabled people, which is why I regret having to stand here today and say that clauses 53 and 54 are, sadly, in sharp contrast to their commendable policies elsewhere, including many in the Bill. I welcome many of the Bill's measures—not least the increased benefits for severely disabled young people—because they will help disabled people. Why, then, is there such concern about clauses 53 and 54? Clause 53 will withdraw entitlement to incapacity benefit from new claimants who have been unable to make national insurance contributions in the previous two years. Clause 54 proposes to means-test incapacity benefit. One might ask, "What is the problem?" The problem is that the two clauses would reduce benefit for disabled people who are unable to work. In the first year, 45,000 disabled people who cannot work would be worse off, and that figure would rise to 335,000 after 10 years. That is equivalent to more than one in five of those who currently receive incapacity benefit. Those figures are not mine or those of the disability movement; they are the figures in the regulatory impact assessment produced by the Department of Social Security. The plan is that the long-term effect should be that more than a third of a million disabled people who are unable to work will be worse off. The average net cost to those people in the first year will be £28 a week, and the cost will rise thereafter. Of course, many will be worse off even than that. That cost allows for tax and benefit changes, as set down in the regulatory impact assessment. Clause 53 will deny 170,000 people entitlement to any incapacity benefit. That is the figure in the Green Paper. The media have quoted that figure as if disability organisations have plucked it from the air, but they have not. Those people will not be entitled to incapacity benefit because they have not paid sufficient contributions in the previous two years. They will not suddenly be fit for work. In the strange language of disability benefits, they will have "passed" the all-work test, or whatever replaces it. They will be unable to work, due to long-term illness or disability, not because their GP or their disability organisation says so, but because the Benefits Agency's own doctors say so. Such people might have made national insurance contributions for 20 or 30 years, but if they have not made enough contributions in the last two years—perhaps because they lost their job and have been unemployed—they will be denied incapacity benefit. We are told that the measure restores the original intention of incapacity benefit. Incapacity benefit was introduced by the previous Government in 1995. I had thought that the benefit was intended to provide financial support for disabled people who were unable to work. I assumed that if, in 1995, there had been any doubt about the intention of the benefit, the contribution conditions would have been changed to take that into account. I assume that those who were in this place in 1995 knew what contribution conditions were set down in that legislation, and I cannot imagine for a moment that anyone inserted contribution conditions that did not reflect the purpose of the benefit. With the greatest respect, I find it difficult to understand the argument that the Bill restores the original intention of incapacity benefit. Clause 54 proposes that, for those who do qualify for incapacity benefit in future, that benefit—which is, rightly, taxable—will also be means-tested. In other words, anyone with a personal or occupational pension of more than £50 a week will lose 50p of incapacity benefit for every extra £1 of pension. As soon as the pension of a disabled person who is unable to work reaches £2,652 a year, they will start to lose incapacity benefit. People who are unable to work, who have made personal provision for their future financial security, would face an effective marginal tax rate of 50 per cent.—greater than that of the highest-income earners in the country, and of Members of Parliament. I believe that people who have put aside money for their security in later life—who have put money into a personal pension or an occupational pension—will feel that they have been misled. I believe that they understood that if they made personal provision, it would top up incapacity benefit, should they ever be unable to work. I have many friends who fall into that category. Many of them have a deteriorating condition. They are currently in work. They are planning for the future, when—perhaps at the age of 50—they will be physically unable to work. They will not slip into incapacity benefit; they will be judged by Benefits Agency doctors to be physically unable to work. They have a condition that makes that probable. Therefore they do what all Governments say that they should do—they save. They put money into a personal pension or make other arrangements, in order to top up the incapacity benefit that they believe that they would be entitled to. They will feel aggrieved because they will feel that, whereas they have fulfilled their part of the contract, the Government are modifying their version of what constitutes the Government's part of the contract. Inevitably, apart from causing great hardship, the measure will discourage saving. How could it be otherwise? And yet we all want to encourage people to extend personal provision for later life. Incapacity benefit will start to be lost when those people's pension reaches the princely sum of £2,652 a year. Why are the Government doing this? I have been asked that question frequently in recent days, and my answer has always been that I do not know; and I genuinely do not know, because this is not a necessary part of the welfare reform programme, which I passionately support. I do not believe that the arguments suggesting that it is necessary are entirely convincing. My right hon. Friend the Member for Gorton referred earlier to the growth in the number of people in receipt of incapacity benefit. At Prime Minister's questions yesterday afternoon, a question, which was entirely right and which has clarified things enormously, was asked about people currently in receipt of incapacity benefit who might or might not have ended up on incapacity benefit because of the policies of the previous Government. I have no quarrel at all with that question or with what my right hon. Friend the Member for Gorton said earlier, but we need to recognise that clauses 53 and 54 have nothing whatever to do with existing claimants; they relate to future claimants. It is therefore a fact that whatever the Tories did or did not do to encourage people on to incapacity benefit and off unemployment benefit is totally irrelevant to the clauses that are giving rise to contention today. Although it seems obvious—the point has been made many times by disability organisations, and I made it on Second Reading, with all humility, as did many others—I repeat that there cannot possibly be a justification for clauses 53 and 54, which cut incapacity benefit for future claimants, that rests on what the Tories might or might not have done. If the Government believe that, in the future, people who are not entitled to incapacity benefit may receive it, the solution is simple: look at the gateway to the benefit, look at the eligibility criteria, look at the all-work test and give different guidance to the Benefits Agency doctors.

Tom Levitt (Labour, High Peak)

That is being done.

Roger Berry (Labour, Kingswood)

From a sedentary position, my hon. Friend makes the point that that is being done. He is entirely right, but it is also right to say that that has nothing whatever to do with the amendment, which would delete clauses 53 and 54. I do not want to be ruled out of order; I want to stick to a discussion of those clauses, but can we please recognise that that argument is not relevant? We are told that something must be done about incapacity benefit—there is a "something must be done" school of thought—because the number of people in receipt of it has tripled and so on. I do not want to detain the House by discussing why that might have happened. Governments are spending more on supporting disabled people; most of the time we take credit for that, but if we are now supposed to be embarrassed, okay. With the greatest respect, comparing the present situation with that of 20 years ago is not relevant. The last time incapacity benefit was examined—indeed, the year in which it was introduced to replace invalidity benefit—was not 20 years ago, but 1995. I have referred to 1995 once before this afternoon. It seems to be the year that has been Snopaked from history in the debate on these matters in recent weeks—it is as if 1995 never occurred. However, that was the year when the Conservatives scrapped invalidity benefit and replaced it with the far less generous incapacity benefit. Since then, spending on incapacity benefit has fallen. It is currently about £7.4 billion a year; four years ago, it was nearer £9 billion a year—and it is falling as a result of the latest changes that are feeding through the system. The idea that further cuts to incapacity benefit are necessary because of escalating spending is simply wrong. If we look at the latest Department of Social Security figures on the number of claimants for incapacity benefit, we see that, since 1995, there has been a fall in the number of people in receipt of it. The figure is 5 per cent. down on that for 1995, and benefit rates have of course fallen in value. That is why spending on incapacity benefit is falling; that is what the previous Government were trying to achieve in 1995. The previous Government did not go through all the problems of revising benefits for disabled people who are unable to work for any reason other than to reduce spending. That is what they did, and they did it by reducing benefit rates and the number of claimants. Let us be perfectly clear: as of today, spending is falling and the number of claimants is falling, and their policies are the reason for that. I doubt very much that Labour Members would want to worsen that situation. 2.15 pm We are told that we should means-test incapacity benefit because more people have occupational or personal pensions than when it—or, more correctly, its predecessor—was introduced. That was the justification for the 1995 cuts. It is interesting to re-read those debates, although I shall not quote from them so that I do not get into even more trouble. The reason given by the Government of the day for the change was that more people had personal or occupational pensions. For example, that was the justification for the specific policy of removing the earnings-related element of the benefit. The growth in occupational pensions was taken into account four years ago. With the greatest respect, that argument has already been used to cut incapacity benefit. What on earth could be the justification for doing so again? I do not know; perhaps the Tories did not cut enough. [Interruption.] Yes, it is a shame, given the situation that we have inherited, that we should be considering further cuts. The argument could be made that, because the basic state pension is a contributory benefit and many pensioners have occupational pensions, we ought to means-test it. The Government are quite rightly steadfastly opposed to that, as we all are. I simply make the point that the same argument could be made for incapacity benefit. Both are contributory benefits, both are rightly taxable, and in both cases we want to encourage people to make personal provision. We are told that some incapacity benefit claimants have a high income, and that that justifies the means-testing. Again, the same argument could be made to means-test the basic state pension. Quite rightly, the Government are strongly opposed to that. Disabled people who are unable to work and who have a pension income of £2,652 are hardly well off, but, on that pension income, they will start losing incapacity benefit. It has been said that we need clauses 53 and 54 to help severely disabled people. I do not believe that that can be justified. The clauses save the Government, in the long term, £700 million. The changes to severe disablement allowance will save £100 million in total. That is more than the cost of the disability income guarantee and the improvement in disability allowance for three and four-year-olds. It is therefore not the case that the £700 million saving resulting from these proposals is being recycled to help severely disabled people. It is not clear, either, that, if that were the case, the most equitable way of helping severely disabled people would be to redistribute not from the general population, but from less severely disabled people. Moreover, severely disabled people will be hit by the cuts in incapacity benefit envisaged in the clauses. There are severely disabled people who have not been able to pay national insurance contributions for the previous two years. There are severely disabled people who will be means-tested. There is no reallocation of money to assist severely disabled people. I shall bring my comments to a close, because many hon. Members want to speak. At the beginning of my speech, I said that there had been meetings between the all-party disablement group, of which I have the honour to be the secretary, and Ministers over the months. I place on record my gratitude to my right hon. Friend the Secretary of State and his ministerial colleagues—and, indeed, to his predecessor and her ministerial colleagues—for a series of extremely courteous and helpful meetings. While, obviously, I regret the outcome of the meetings, that constitutes no criticism. The openness that they featured should be applauded. I am more concerned about the fact that disability organisations which know a lot about disability benefits, the way in which people are affected from day to day and the effect that the proposals might have feel that their views have been cast aside. Sadly, last week 12 organisations resigned from the disability benefits forum that the Government rightly set up to advise on disability benefits, including the Carers National Association, the Royal National Institute for the Blind, the Royal National Institute for Deaf People and the Royal Association for Disability and Rehabilitation. Those organisations do not make decisions in haste. Their chief executives are not people who rush to criticise anyone; they have a job to do, and they want to get on with it. They support 99 per cent. of what the Bill is doing to help disabled people—as, indeed, do I, and as do my colleagues who have joined me in tabling the amendment. They felt, however, that they had something important to say. They were and are aggrieved, and, in fairness, the House should take that into consideration. Clauses 53 and 54 are unfair. Hundreds of thousands of disabled people who are unable to work will be worse off as a result of them. The Government's commitment to welfare reform, which I strongly share, does not depend on those clauses. I believe that they should be removed, and that is what amendment No. 12 would achieve. I therefore urge my right hon. and hon. Friends to support it.

Edward Leigh (Conservative, Gainsborough)

I shall speak for only a short time, because I suspect that the House would rather hear from Labour Members. Some of them nod; I shall not disappoint them. The House wishes to hear from Labour Members because the time has come for the posturing to end, and for Labour to govern. The time has come for Labour to learn the hard lessons of government. Occasionally, Governments must do unpopular things and disappoint their supporters. Labour Members must either have the courage of their convictions and do what they know in their hearts is right, thus disappointing their natural constituency, or support the Government. There has been enormous criticism of what the Conservative Government tried to achieve in regard to social security. There has been criticism of so-called salami-slicing government. That, however, is precisely what this Government are doing today, in an attempt—no doubt orchestrated by the Treasury—to save money. As the proposal has been designed by new Labour, it will of course affect people in the future; but that will not soften the row that is already brewing. This attempt to save £750 million is not part of the grand strategy for welfare reform. It is a mean measure—and it is, above all, a means-testing measure. The two clauses are so wrong not because the social security budget is too large, although it is too large; not because the social security budget must be cut, although it must be cut; not because some groups in society will suffer, although, sadly, they will. They are wrong because they target people who are neither very rich nor very poor, but who have made a modest attempt to save for their old age. It is appalling to assume that someone with a modest pension who has not sustained his or her contributions over the past two years should be denied an ever-increasing amount of incapacity benefit. So many conditions gradually catch up on people. So many people in future will not be able to maintain their contributions—people who have saved a little, and who will suffer if these clauses are agreed to. I hope that all hon. Members will look to their consciences, and vote against the clauses in four hours' time.

Tom Levitt (Labour, High Peak)

I oppose amendment No. 12, and support the Bill as drafted. I do so with some regret. My hon. Friend the Member for Kingswood (Mr. Berry) and I have worked together on a number of disability issues for many years, even before I was a Member of Parliament, and I am sorry that our views differ in this instance. Let me explain why that is. Some of my colleagues find the whole concept of what they call means-testing distasteful. I understand their reasons, but I think that ensuring that money goes to those who need it most is what government is all about. Clauses 53 and 54 will enable resources to be targeted at those who are most in need: disabled people and their carers, and others on low incomes. Clause 54 is, I feel, the more significant of the two. It creates a link between occupational pensions and incapacity benefit. Occupational pensions are deferred income: there is a tax advantage for those who contribute to them at the time of their contribution. It behoves us to examine the treatment of occupational pensions in other parts of the benefits system. A person receiving a jobseeker's allowance who also has an occupational pension loses his or her jobseeker's allowance pound for pound against the occupational pension. Those who move to old age pensions from incapacity benefit lose their incapacity benefit completely, and some who make such a move do so by taking a cut in income. I do not necessarily defend those two states of play; I am saying that the Bill's proposals are much more generous to those who will be on incapacity benefit in the future than we are now to those receiving jobseeker's allowance, or experiencing the transition to old age pensions. Incapacity benefit is not strictly a disability benefit. It is there to compensate people for the loss of income caused by incapacity; it does not address the disability itself. There has been no mention in the debate of disability living allowance, the principal benefit for disabled people, which deals with the actual costs of disability. The Bill makes no change to that allowance. It will not be means-tested, and, in that sense, it is true to say that the Bill does not provide for a general means test for disability benefits, despite the way in which it has been portrayed.

Steve Webb (Liberal Democrat, Northavon)

Will the hon. Gentleman give way?

Tom Levitt (Labour, High Peak)

I will not, because plenty of hon. Members want to make their case, and I want as many as possible to be able to do so—as I am sure the hon. Gentleman does as well. What will be the position of new claimants? Those in receipt of incapacity benefit plus an occupational pension of up to £50 a week will not be affected by the Bill. That applies to four out of five people receiving incapacity benefit who either have no occupational pension, or have an occupational pension of less than £50 a week. Only those with incomes of £10,000 a year or more consisting of a combination of incapacity benefit and occupational pensions will have their incapacity benefit withdrawn. Moreover, we should consider the effect of the measure on those people's guaranteed income—bearing in mind that the Government are guaranteeing income to certain parts of the population. The income that those at the top of the taper on occupational pensions will receive is higher than the pensioners income guarantee that we have introduced, higher than the disabled persons income guarantee and considerably higher than the national minimum wage, in the case of someone working a 40-hour week. It is more or less equivalent to the working families tax credit. Thus even at the top of the taper, it is still the highest guaranteed income for any group for which the Government are undertaking to guarantee an income.

Steve Webb (Liberal Democrat, Northavon)

Will the hon. Gentleman give way?

Tom Levitt (Labour, High Peak)

I have already explained to the hon. Gentleman that I am sure he will get his chance. Other Labour Members have expressed the view that the £50 limit—the £50 cut-in—of the occupational pensions taper is too small. It may be, but the £50 is not in the Bill. Indeed, the Bill provides the mechanism for changing the level; it gives the Secretary of State the power to change that level. That ability must be there, but the £50 itself is not in the Bill. Others object for reasons—which my hon. Friend the Member for Kingswood rightly mentioned—to do with the deficiencies in the way in which the Benefits Agency's medical and tribunal services operate. Those are good points, but they too are being addressed through other measures, many of which do not require legislation. It is therefore not necessary to have them in the Bill. It has been said that there is a disincentive to save, but let us look at another clause in the Bill: the one to introduce stakeholder pensions. It ensures that anyone whose income is less than £9,000 per year, which will include a lot of disabled people, will receive stakeholder pension credits as though they were receiving £9,000 a year. It would not be possible to fund that measure without the funding made available by clauses 53 and 54. That stakeholder pension element, from which many disabled people will benefit, has to be factored into the equation when people assess whether it is a cuts Bill. The measures will lead to an extra £1 billion being spent on disabled people's benefits during the current Parliament. If we take into account the changes to the stakeholder pension, to the carers allowance and to the disability income guarantee—which, again, is not in the Bill because it is a Treasury measure—we will find not a deficit of £750 million in 10 years' time, but a net increase resulting in extra funding going to that wider group of people. I ask my colleagues on the Labour Benches to consider the following situation. At their next advice surgery, they may have in front of them a three-year-old girl who has been born with no legs, and her parents; a 17-year-old boy who has been a promising student, but is now paraplegic after a road accident; a disabled adult on a low income who is never likely to be able to save for a pension; and a bank manager who has taken early retirement with a back problem. He has £70,000 in savings, a £150,000 house, an occupational pension worth £25,000 or £35,000, and £3,500 a year of incapacity benefit on top of that. The Bill will, for the first time, give that three-year-old girl access to disability benefits. It will give that 17-year-old boy the highest level of non-contributory benefits—higher than incapacity benefit—to meet the needs of his severe disability. As I have already explained, it will give that disabled person a stake in a stakeholder pension. It will allow that bank manager to keep his £3,500 incapacity benefit because he is an existing claimant, but it says that the incapacity benefit of the tiny minority of people who have such an occupational pension, some of whom are on the highest rate of taxation, is better spent on the other people who will benefit from the Bill. As someone who has been involved with the disability world for a long time, my dream is that everyone who has to leave work early because of incapacity or disability—perhaps through failing eyesight, hearing, dexterity or mobility—will be helped to stay in work for an average of five more years through educating employers about their needs, providing technology for them and other support at work, and preventing discrimination against them in employment. Those measures will retain skills in the work force, and maintain the dignity and income levels of disabled people. They will have the knock-on effect of reducing the amount that the state pays out in benefit. All those measures are in train. Those on the new deal and access to work are up and running. We should be celebrating because, this morning, the Disability Rights Commission Bill completed its Committee stage with helpful amendments that were asked for by the disability lobby. The Bill will outlaw, and give teeth to the outlawing of, discrimination, but the third leg of that stool is the Welfare Reform and Pensions Bill. That addresses the real needs of disabled people and finances the measures by redirecting some of the funds from some relatively wealthy people to those who have nothing. Amendment No. 12 does not help the people at the bottom in any way. I oppose the amendment and support the Bill.

David Rendel (Liberal Democrat, Newbury)

I am pleased to have the chance to talk a little about the amendments because they are critical to the whole of the Bill. I should like to follow through some of the Government's arguments and then talk a little about what their aims are. I hope to demonstrate thereby that their arguments are illogical and contain internal inconsistencies, and that their aims will not be met by the measures that they seek to introduce. When the Government started to talk about welfare reform, they said that the cuts that they planned to introduce were perhaps needed to meet the requirement to reduce the welfare bill—welfare costs in total. They said that those costs had been going up over a period, that they looked like continuing to go up in the foreseeable future, and that it was important to bring them down. However, when we discussed clauses 53 and 54 in Committee, the Under-Secretary of State for Social Security, the hon. Member for City of York (Mr. Bayley), made it clear that, on the contrary, the clauses were not Treasury driven and that the amount of money that was due to be saved was incidental: it just happened that there would be savings, but that was not the point of the clauses. The previous Secretary of State for Social Security had made it clear that, if there were to be any cuts in benefits for disabled people, they would be given back to those people in some other way; there would be no net cut in their benefits. Clearly, therefore, although there may be a need to reduce the welfare bill overall, the intention of clauses 53 and 54 cannot be to achieve that. Another reason that the Government gave for introducing the clauses was that the Tory party and the previous Government had moved people off the unemployment register on to incapacity benefit, and that that was the wrong thing to do. They said that that policy had to be reversed, yet when we questioned them in Committee on the point, they said, "it is not true to say that anyone receiving incapacity benefit does not deserve it, or is not truly incapacitated." The Government said that all the doctors who had been doing the tests to decide whether those people were really due incapacity benefit had been doing a good job, and that everyone who was currently getting incapacity benefit was due it. What is more, they told us that they did not intend to change the tests, or to give the doctors concerned any other advice. They are changing the name of the test, but they told us clearly that they had no intention of making it more severe, or more difficult to get through; they have no intention of making it more difficult to receive incapacity benefit following changes in relation to the tests. Their argument that, in some way, what they are doing now will reduce the number on incapacity benefit and push up the unemployment register—which they appear to think is the right thing to do—is inconsistent and illogical. The Government have said that, wherever possible, they want to encourage people with disabilities to get back into work. My hon. Friends and I share that view and there is probably not a Member in the House who does not believe that, when it is possible for people with disabilities to get back to work, they should be encouraged and enabled to do so. Yet the Government have to answer the question that they failed to answer in Committee, which is how restricting incapacity benefit to people who have worked recently, and restricting the amount of incapacity benefit for people with occupational pensions, will help disabled people to get back into work. It is likely to have the opposite effect. Those who are becoming more disabled through some progressive illness will be tempted to get out of work as quickly as possible because they will need to do so at a time when they have recently paid contributions and will be eligible for incapacity benefit. The Government say that it is all part of a package. The hon. Member for High Peak (Mr. Levitt) made that point too. In fact, it is not a necessary part of the package. We were told just now that we cannot have the other things in the Bill, such as the increase in severe disablement allowance for some young people, unless we have these two clauses. Yet, as I said already, the Government have made it clear that the savings that they are introducing in these two clauses are peripheral and are not a necessary part of the package. It is therefore illogical to pretend that we cannot have the other parts of the package, which may be welcome, unless we have these two clauses. What have the Government said about their aims? They have said that their aim is to help the most vulnerable and there are things in the Bill which help to do that. There are things which my hon. Friends and I have not hesitated to welcome. Only a small part of the cuts being introduced in this Bill is going back to the most vulnerable. In these two clauses we see a net cut in the long term of £700 million a year. That is not giving help to the most vulnerable. Had the Government come here today and said that they needed the cuts because the money was needed to help the most vulnerable, that would have reassured many Labour as well as Opposition Members. They would have believed that that was the right way to spread the available money. Liberal Democrats have no intention of saying that we suddenly want to increase the welfare bill by a huge amount in order to help the most vulnerable. We accept that there is only a certain amount of money available and that, where possible, it should be spread to the most vulnerable. In that sense, we approve of the Government's aim, but we disapprove of the fact that they are not achieving that aim by means of these two clauses. The Government want to encourage work. We, too, want to see work encouraged where possible. After all, for those who have some incapacity, work is often a means of increasing self-confidence and self-worth. For that reason alone, apart from the financial incentive, it is worth trying to encourage people back to work where possible. Clause 53 restricts those who will receive incapacity benefit. In the future, it will not go to those who have worked for a long time and been able to make their national insurance contributions over some years. Instead, there will be an arbitrary cut-off which says that if one has not done the right amount of work within the past two years, one cannot get incapacity benefit. Surely, if the Government were really out to encourage work, they would be trying to encourage those who have been working the longest by giving them the most help when they become incapable of working. The Government said that they want to encourage saving—so do we, because it is a good aim. The Government are introducing disincentives to saving by increasing the amount of means-tested benefits for those with disabilities. In practice, although the Government's aim of encouraging saving is one of which we approve, once again, they are failing to achieve it by what they are doing. There is one aim that the Government will achieve, however, and that is their aim to reduce welfare spending. They will do so by cutting benefits at the expense of some of the poorest and most vulnerable people in our society, including some who have severe disablement and perhaps have never been able to work or make national insurance contributions. The Government have invented for themselves a new slogan: work for those who can, cuts for those who cannot.

Tom Clarke (Labour, Coatbridge and Chryston)

I support amendment No. 12. I fear that, for the first time in 16 years in this Parliament, I may not be in a position to support the Government if, as I see it, they remain intransigent on this matter. It will be the first time that I have not supported my party in all my time here, and I say that of the party I love. Many of my remarks will echo those of my hon. Friend the Member for Kingswood (Mr. Berry) and the all-party disablement group, including Lord Ashley, who leads it, Alf Morris, Brian Rix and many others. I thank them for the help they have given me in seeking to make some sense of this debate and the various views expressed in it. I also thank my right hon. Friend the Secretary of State for Social Security, who has been unfailingly courteous to me. I do not join those of my colleagues who think that, in the society in which we live and with the pluralism that we enjoy, it is wrong of a member of the Government or someone from the Whips Office to give us their views. Our job is to win the debate and get this Government of ours on the right lines. Like me, many of my colleagues have been pleased to be part of a Government who, in two short years, have done so much to benefit the lives of millions of our disabled fellow citizens, honouring the commitment I gave on behalf of the shadow Cabinet at the party conference before the last election. Of course, I warmly support the new deal for disabled people and the disabled persons tax credit. I welcome what my right hon. Friend the Secretary of State has been able to do for children and those under 25. However, it is against that backdrop that I argue for this amendment, largely because I proudly endorse the Government's initiatives, particularly on disability and employment. There is no difference between my right hon. Friend the Secretary of State and me when he argues that replacing benefits with paid work is common sense for any person, disabled or not. It restores dignity and self-esteem. In the autumn of 1998 the then Secretary of State for Social Security and the all-party disablement group, together, said: future savings would come from helping disabled people to get jobs rather than reducing benefit entitlement. That commitment is the inspiration behind amendment No. 12. I have been surprised that it is proposed in the future to remove the benefit entitlement of tens of thousands of people who are unable to work. More in sorrow than in anger, I say that the Government have failed to recognise in clause 53 that not all disabled people are able to work. Indeed—according figures recently published by the Government, not me—170,000 people will suffer from the provisions. They will be excluded from incapacity benefit, but will not be provided with a safety net. It cannot be right to exclude those people from benefit if we are genuinely pursuing social justice. It cannot be right to exclude them if our test really is to respond to the needs of the many, not the few. What is the purpose of clause 53? What will it accomplish? If it is being suggested that, now or in the future, people on incapacity benefit are not sick or disabled, the way of dealing with the problem is by using the entitlement test. Very clearly, the issue should be one of whether those people are able to pass the gateway-to-benefit test, rather than—as many people believe the Bill would do—moving the goal posts without changing the eligibility criteria. Given the reforms of the all-work test, on which I have pressed my right hon. Friend the Secretary of State before—and which we must assume go a long way towards meeting the Government's objectives; otherwise, why did we make them?—I fail to see why it is necessary to go even further by abolishing entitlement to incapacity benefit for so many people. It is especially difficult to understand why abolition is necessary when we hear that the Bill is not cuts driven. The evidence from my own surgeries—like that, I suspect, from the surgeries of hon. Members on both sides of the House—tells me that it is not easy to get incapacity benefit. The tests are very stringent and, for many people, require great effort. The reforms of 1995—as recently as that—made the all-work test even more rigid. Extravagant claims of huge abuses—of many disabled people lying idle and receiving benefit—are quite simply wrong. Although I want disabled people to find work, I fail to understand how denying benefits to those who have not made contributions in the past two years, as they have not able to work in those years, will help to achieve that objective. In fact, denying benefit to those disabled people could have the perverse effect of deterring them from seeking work. Many people believe that, if they return to work but again fall ill, they may not be able to receive benefit. For many people, that is a disincentive to find work—which is the complete opposite of all that we want to achieve. I do not fall for the argument that everyone who is unemployed does not want a job. The argument does not hold true of the people who come to my constituency surgeries, and does not accord with the evidence and observations of which I am told weekly by other hon. Members. I cannot believe, and will not accept, that the argument is true in the cases of people who have to be helped into my surgeries—and who tell me that, after the shortest medical tests, they are being cut off completely from benefit. That is wrong and must be corrected. Clause 53 proposes taking money from disabled people who cannot work, and giving it to those who can. Therefore, effectively, those who are unable to work will be subsidising those who can. Where is the fairness in that? It is fine that those who are currently receiving incapacity benefit will not be made any worse off by the provisions, but protecting the benefits of today's disabled people cannot justify penalising tomorrow's disabled people. Quite simply, it would be wrong to do that. Some argue that certain people currently receiving incapacity benefit should not be doing so. The argument has been made by my hon. and dear Friend the Member for High Peak (Mr. Levitt), whom I helped in the previous two general elections. I offer to help him in the next election—although, after this speech, the offer may not be quite so welcome. I also tell him that the Bill will not address the issue of people wrongly receiving incapacity benefit. They will continue to receive the benefit, but it will be denied to those who should qualify for it after passing the most rigid tests ever created. There is absolutely no justification for denying those people benefit. As the consultation document said, many people have access to occupational and personal pensions—but those are their nest eggs, not luxuries. Many of them pay a high proportion of a relatively low income into a private pension scheme. They are likely to feel deeply betrayed when they discover that—yet again, as under the previous Government—they are being penalised for their action by a reduction in incapacity benefit. If people are receiving benefit that they do not need, the problem will have to be tackled—I accept that—but we must do so in a manner that does not undermine those who are on low incomes. We cannot redress the perception that many wealthy people are receiving benefit—although, as it happens, they made their contributions over the years—by seeking to take funds from those who are in lower-income brackets. I am glad that—according to the lunchtime news bulletins—my right hon. Friend the Secretary of State for Social Security will be giving us further information on that matter. It would not have been acceptable if people receiving as little as £50 a week were effectively to be taxed at a rate of 50 per cent. It would not be possible for me to defend taking from those people 50p out of each pound. That was not the policy that I offered in the three years when I had the privilege of being the shadow Cabinet spokesperson on disability. We understand the Government's concern about the rising costs of welfare spending. However, we shall not reduce those costs if—because of the provisions of clause 54, which may adversely affect their benefits entitlement, making them feel cheated—people feel less inclined to invest in a pension for their latter years. Again more in sorrow than in anger, I say that it would be a tragedy if the Government, by not accepting amendment No. 12, were to tarnish what has so far been an excellent record of protecting disabled people's interests. I am sincerely convinced that the clauses would lead to hardship for many of our constituents who will become disabled. In that spirit, and in all honesty, I cannot support a policy that is logically flawed and, in the eyes of many, morally without justification. Even now, at the 11th hour, I plead with the Government to think again.

Angela Browning (Conservative, Tiverton and Honiton)

I shall speak briefly to amendment No. 86. The debate so far has focused primarily on the means-testing of incapacity benefit and the changes to it. Amendment No. 86 would delete clauses 55 and 56. Clause 55 deals with incapacity in youth and clause 56 contains the Government's proposal to abolish severe disablement allowance. The right hon. Member for Coatbridge and Chryston (Mr. Clarke) rightly drew attention to the fact that there are many people who will never work, however much we may wish to make available to them the facilities of supported employment. Many young people currently qualify for SDA on the ground that they are born with a disability. The Government have made the concession of broadening the contributions rule to exempt those up to the age of 25, rather than their original proposal of 19. We all recognise that for someone with a lifelong severe disability, education or training can go on well into their 20s. Even after that, the chances of paid employment may be limited or may require a protracted process. They may be required to do voluntary work or get into the world of work through the therapeutics earning rule to begin with. I am concerned that those young people who currently qualify for severe disablement allowance on the ground of their disability once they have come through the education system will now come within the catch-all of the new rules for incapacity benefit. The hon. Member for High Peak (Mr. Levitt) said that incapacity benefit was not necessarily regarded as a disability benefit, but as a benefit that gave substitution for income. I hope that I have not misrepresented him. Those currently qualifying for severe disablement allowance who have never worked and who realistically will never hold down full-time or well-paid part-time employment do not have to fulfil the criteria for an income replacement benefit; they get SDA on a medical assessment of the severity of their disability. That is to change and they are to come within the remit of the incapacity benefit rules. I ask the Government to look again at that. The more we debate the issue, the more the Government's repeated lectures about the many and the few ring in my ears. The weakness throughout the Bill is that the few are ignored—those with specific disabilities or groups of disabilities whom the Government have not recognised or who will be adversely affected. The abolition of SDA will adversely affect people who were born with disabilities and for whom full-time paid employment is not a realistic possibility or can be achieved only in modified form.

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

Does the hon. Lady accept that the change allows the people she is talking about to move to incapacity benefit, which is more generous than severe disablement allowance?

Angela Browning (Conservative, Tiverton and Honiton)

Incapacity benefit is means-tested and departs from the non-contributory nature of SDA. I have already acknowledged that the Government have increased the age limit to 25, but others over 25 will come within that remit for many of the reasons that I have given, but will for the first time fall foul of the contributory rule. I do not want to repeat what I have already said, but for some people with a lifelong disability, often one present from birth, it is appropriate to extend education and training for as long as possible, perhaps well beyond 25, not necessarily because there is a great expectation of them fulfilling a role in paid employment, but because it is a therapeutic programme that may be in their best interests, depending on the type and severity of their disability. I ask the Government to look again at the detail for the few who will be affected by the abolition of SDA, particularly the typical programme for some of the very young people for whom education and training will go on for a very long time in their own best interests.

Frank Field (Labour, Birkenhead)

I wish to bring the House back to the chilling speech of my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman). He was assuredly right to say that Labour Members have much to congratulate the Government on in welfare reform and other areas. Because he was so conscious of the time available, he failed to remind us that he was a member of the previous Labour Government. I shall come back to that point at the end of my speech. I hope that there are few who are keener than I am on new Labour. For long years I sat on the Opposition Benches as a member of a party that found it difficult to keep its core vote, let alone take the argument beyond that to win elections. However, we have to remember that parties have histories. We are new Labour, but we were the Opposition. That helped to form our character and led us to present ourselves to the electorate in a certain light. When the Tories attacked the national insurance fund a dozen times or so, we did not oppose them for fun. When we stayed up all night, it was not because it was our only weapon, because we did not need sleep, or because we were ideologically driven by an opposition to means tests; we did it because we saw what Tory policies were doing to our communities. The Tories' endless attack on the welfare state that they inherited and their endless push to means-test were undermining decent working-class morality in our constituencies. They used the power of the state machine to teach people not to work, not to save and not to tell the truth. When we are taken through the looking glass, like Alice, in our constituencies, knowing that people trust what we say, we can see how deeply corrupting that form of welfare has been. We had to attack what the Conservatives did to our communities, denying people jobs in shipyards and steel mills and throwing them on to means-tested benefits, mocking their every decent instinct. People were penalised if they saved or if they told the truth, and woe betide them and their chances of getting help if they found employment. New Labour comes with a history, which has helped to form us. Our opposition was not theoretical, but one that represented the heartlands of our communities. It was a plea that we should have welfare reform which would make difficult decisions, but would build with the grain of human nature and exhort the most decent aspects of mankind—not denigrate or undermine them. My right hon. Friend the Member for Gorton—perhaps without knowing it—gave vent to why the Bill concerns some of us so much. Whichever way we vote tonight, most will do so with heavy hearts and, at some stage, the Bill will come back to us. If one of the reasons for reform is what the Conservatives—that gang over there—did to manipulate unemployment figures and to push people on to incapacity benefit, the solution is to deal with that evil. The solution is not to say, "Never mind who you are. Never mind what your circumstances are. Never mind what your contribution is. We will get some of you later to get the bill down." Maybe hon. Members on both sides have not been as careful as we should have been when raising individual points about people being treated badly under the benefit integrity project. Perhaps there has been a loss of nerve. The job of policing benefits remains to be done, and is wholly separate from what the Bill is about. I want to speak to amendment No.12, because clause 53 is an attack on what the Green Paper on welfare reform said and what the Prime Minister has told the country that welfare reform is all about. The Green Paper said that we would move slowly but carefully to a system of contract welfare. We would make sure that it was transparent, that people would build up their entitlements, that they would rely on them and that they would be rewarded for doing so. Clause 53 strikes at the very heart of that concept. Clause 53 also strikes at the Prime Minister's comments about wishing to move us from a something-for-nothing society to a something-for-something society. How can we justify the two clauses that we are debating if we take seriously, as I do, what the Prime Minister has said and continues to say? My right hon. Friend the Member for Gorton referred to the duty that we have as Labour Back Benchers to sustain our Government and to help direct our Government. He talked of some of the difficulties that previous Labour Governments got into with House of Lords reform. I must remind him of the anguish that some of us feel at this stage of the debate. The 1974 Labour Government were committed to introducing child benefit but, for certain reasons, decided that it would be best to put that commitment aside. There was a leak of Cabinet papers, and some hon. Members faced action under the Official Secrets Act. Some who were in the House then—they are listening to the debate now—bravely spoke in favour of Labour reasserting that promise. They must have felt the anguish that those of us debating the clauses today feel. They had to go through the fire. I had the privilege to fight the first election that I won in Birkenhead on a platform stressing that one of the great promises that we had delivered was on child benefit. It was pressure from the Back Benches that delivered that promise, which I found to be so much of a vote winner in Birkenhead. It remains so today. 3.15 pm There is no case for us to behave irresponsibly. As my right hon. Friend the Member for Gorton said, the Whips should have done their job. That is their duty—to get the Government's business through today. Unfortunately, we as Back Benchers have two duties to balance. One is to sustain, with pride, our Government. The other is that when we look back on our stewardship, we do so with real pride in what the Government have achieved. On the new deal and so many other matters, the Government have made such a clear difference from those characters in the Conservative party who used to occupy the Government Benches. Their policy was to drive people off the rolls, to strengthen the hands of staff, to harass claimants and to push them out. We have not done that. We have provided a £5 billion budget, and people have to behave responsibly, carefully and maturely. However, there are real options. There was clear, red water between our reform programme and what the Conservatives did in power. In looking back at the Conservatives' dozen attacks on the national insurance fund—which we so opposed—what is the difference from what we are proposing in clauses 53 and 54? Where is the clear water between both sides? It is marvellous to see the Conservative Moonies who have had a mass conversion to national insurance. The Unification church would blush at the way in which the Conservatives have taken to their new roles. If I were not so nervous, I would be able to remember the high priest of the Unification church. We could choose which Opposition Member fulfils that role. This day will pass and, whatever difficulties we have, we are part of this great party that will deliver the reform programme. Of course, we must bear in mind—as my right hon. Friend the Member for Gorton said—what happened to the last Labour Government. However, we must look also at what Back Benchers have managed do to in sustaining and directing the Government. I am sure that we will be successful in that. I make this plea to Ministers. They will win their vote tonight, given the size of the majority. Many who support them will do so easily, but many others will do so with heavy hearts, and they will be looking for real changes when the Bill comes back from the other place.

Theresa May (Conservative, Maidenhead)

In his comprehensive and measured speech, the hon. Member for Kingswood (Mr. Berry) referred to the delegations taken by the all-party disablement group to meet Ministers over the past two years to discuss the issue of disability benefits, particularly when there were reports in the press that such benefits were under threat. When I was the joint chairman of the all-party group, I was able to be a member of a number of those delegations, alongside the hon. Gentleman. What was noticeable about Ministers' reaction to our concerns about the threat to disability benefits was their consistent insistence that there was no Treasury-led intention to cut the amount of money that was being paid in disability benefits, and that any savings would come from disabled people being helped back into the workplace. That intention was repeated by the right hon. Member for Coatbridge and Chryston (Mr. Clarke), when he referred to the joint statement by the then Secretary of State and the all-party disablement group in March 1998, which said: There was agreement that future savings would come from helping disabled people to get jobs rather than reducing benefit entitlement. That theme was repeated in the Green Paper where, on page 54, the Government said that, over time, less money would be spent on incapacity benefit as more people make a successful return to work and fewer people remain on benefit. Sadly, clauses 53 and 54 break that commitment. The Government have said that the changes to incapacity benefit in clauses 53 and 54 are necessary because an awful lot of people are currently in receipt of incapacity benefit who, frankly, are not eligible for it; but they have produced no concrete evidence to support that argument. They make the political assertion—it has been repeated today by several hon. Members—that it was all the fault of the previous Government, who used incapacity benefit to get people off the unemployment figures; again, I have seen no hard evidence for that. As some Labour Back Benchers have said, if the Government really believe that people are incorrectly receiving incapacity benefit now, the solution is not to prevent disabled people from receiving it in future. The Government argue that something must be done about incapacity benefit because of the increasing numbers of people claiming it. The hon. Member for Kingswood set out the statistics on both the number of claimants and the amount that is being spent, showing that argument to be wrong. Even if his figures are wrong, the Government have failed to appreciate the fact that many people—especially women—are now in the work force and can qualify for receipt of incapacity benefit, whereas in the past they would not have been able to do so. The answer to the problems that the Government have identified is not what is proposed in clauses 53 and 54. Those proposals will hit genuinely disabled people who deserve to receive incapacity benefit because they are incapable of work. Disabled people with progressive and deteriorating conditions will be especially badly hit. People with multiple sclerosis, for example, may work full-time for many years and contribute to national insurance and then become unable to work full-time as their condition progresses but, wanting to remain as long as possible in the workplace, they may move into part-time work, eventually falling below the lower earnings limit. Such people may then work for a period without paying the national insurance contributions necessary to qualify for incapacity benefit. When they become completely incapable of working, they will be disqualified from claiming the benefit. Women will also be badly affected. Women may work for some years and then leave the workplace to look after a family. To meet their family responsibilities, they may return to work, perhaps in two part-time jobs that pay below the lower earnings limit. Women in that position who develop an illness or disability that prevents them from working will not qualify for incapacity benefit. Such people should not be written off as ineligible, or as scroungers. They would genuinely be in need of the benefit and should qualify for it. This is not about redistributing benefits to severely disabled people; it is about cutting the amount of benefit available to disabled people. As such, it is a clear breach of commitments given by Ministers to Members of Parliament. It is nothing less than a betrayal of disabled people.

Kali Mountford (Labour, Colne Valley)

I rise in pride to support and sustain the Government. I was one of those who spent 65 hours in Committee, not as a nodding donkey, as some Opposition Members have said, but taking a full part in the debate. Conservative Members who served with me in Committee could assure the House that that is true. I am proud of the fact that we worked on the Bill, in its entirety, including clauses 53 and 54. The Bill hangs together extremely well. It is cogent. It makes sense of national insurance contributions and of how we pay benefit and deal with people in extreme poverty. It tackles some of the inequities in the current system. Both Government and Opposition Members have spoken of problems that we have had in the past that have nothing to do with the Bill and have already been dealt with. I agree entirely that the benefit integrity project caused incredible pain and harm and I am glad that our Ministers abolished it; we should be proud of that. The House should be aware, though, that it is no longer a problem. If people want to look for a problem to deal with, let it be the Benefits Agency medical service. I have been aware of that problem for some time, but we should recognise that it has nothing to do with the Bill, and that the Government are considering doctors' qualifications and the criteria to which they will have to work to ensure that the system works better than it has in the past. The all-work test was an abomination, but if hon. Members are concerned about what new regulations are to take its place, let them lobby on that issue in the right place. Clauses 53 and 54 contain no reference to the all-work test. This is the wrong place and the wrong time to raise those objections. I am sure that the Government's plans for checking the gateway into benefits are the right way of dealing with the problem. It is right to consider what people's abilities—rather than disabilities—are now and will be in the future. It has been mentioned that the Bill does not address the fact that the previous Government took people off unemployment benefit and put them on incapacity benefit. That is entirely true, but it is not the point of what I want to say. I was a member of the Employment Service when there were loads of changes to forms and regulations, taking people off unemployment benefit and putting them on to a range of other benefits, including invalidity benefit and then incapacity benefit. Civil servants were told that if the questions about people's health and capabilities were answered in a certain way, they should advise the claimant to go elsewhere and claim a different benefit. The effect of that is important in the context of clauses 53 and 54. Anyone who knows about the psychological effects of unemployment and what happens to people who spend a long time without work will know that despair begins to set in after about two years. People on incapacity benefit are very likely to remain on it for at least that long, away from the workplace and with no future opportunity to reintroduce themselves to the labour market, simply by virtue of the fact that they have been away from it for far too long. Confidence is sapped and they become dependent on the benefit, because all other opportunities seem closed. I do not want people to live that life. A life on benefits is no joke; it is no fun. People on benefits are not well off. We have a duty to consider whether the qualification for incapacity benefit makes sense. It is an income-related benefit, designed to replace the income that people had when they were fit for employment. It seems sensible to ask what is the link between the period of employment and the period of receipt of benefit. There must come a time at which we can argue that the benefit is no longer an income-replacement benefit. The Government's proposals make sense. It is not as though the qualification is onerous and difficult. Let us consider someone on average male earnings. It would take that person only four weeks to qualify. Even somebody on the minimum wage would qualify after 12 weeks of employment. That is not an onerous requirement, but it is sensible. It maintains the link between work and the benefit and is not too difficult to achieve. Therefore, I do not find that a mean measure. 3.30 pm It certainly is not a mean proposal, if we consider it in the context of other benefits to which people are entitled. I am most concerned about those entitled to income support, and the Bill will add £5.70 to the premium for disability paid to those claiming income support. That is a generous increase and takes account of the fact that people who are likely to suffer ill health for some time face extra costs. However, it does not make sense to argue that those costs should be covered by a national insurance contributory benefit. It is right not to leave people floating on a sea of despair, and I would not support any measure that did so. However, the Bill would introduce stability into the system and people would know exactly where they stood in relation to work and their incapacity. The impression has been given this afternoon that people on incapacity benefit are permanently disabled. That is not always the case and some people will improve. It would be wrong for the House to leave the impression that we have been talking about all disabled people in all circumstances, because that is not the case. I have been concerned to hear people talking about income support in the way that it has been talked about in the past, which—when I worked in the benefits system and for a welfare rights organisation—caused me great despair. Income support is sometimes stigmatised, but that does a great disservice to all recipients of income support. All people should be treated with dignity, including those who have to claim income support. Income support is claimed because an individual has no other income. That is the whole point. When I considered the issues before the House today, I looked at their impact on the very worst off, but the amendments do not address that issue. Nothing in the amendments would redistribute funds to the worst-off. The only redistribution would be the redistribution of the £5.70 increase in the disabled premium on income support. I started my speech by saying that I was proud to have supported the Government on the Bill. My view has not changed during the debate, although I have listened with interest to the various contributions. I urge those hon. Members to reconsider their remarks in the light of the totality of the Bill and all that it can achieve. It would be easy to support all the wonderful measures that have been discussed this afternoon, but hon. Members have been cherry-picking with gay abandon. They have walked through the cherry orchard with their baskets and enjoyed every minute. However, the baskets need to be filled by the Bill and all its clauses.

Howard Flight (Conservative, Arundel and South Downs)

The hon. Member for Kingswood (Mr. Berry) presented an argument that all fair-minded hon. Members must surely accept. The arrangements proposed in clauses 53 and 54 would not just means-test the benefit against pensions but would affect whether someone could take a pension early. If people can take their pensions early, they would be disqualified from incapacity benefit. That is morally wrong. If people take their pensions—for which they have saved during their lives—early, the price they pay is a substantially lower pension for the rest of their lives. Under the Bill, if people choose not to take their pensions early so that they can look after themselves in old age, they will not be entitled to incapacity benefit. That is unacceptable, even for those who can stomach the concept of means-testing pensions per se. Other hon. Members have drawn attention to the fact that the changes in the national insurance contribution rules will have perverse effects. The changes are likely to hit people who have debilitating diseases, and spouses—both male and female—who stop work, whether to care for children or an ill spouse. The changes will encourage anyone who may be vulnerable to leave work and get the benefit before they are at risk. The proposals would not even achieve the objective that the Government claim they are seeking to achieve. I attended Prime Minister's Question Time on Wednesday and the Prime Minister made the point that it was outrageous that one in four retired men draws incapacity benefit. He made the party political point about unemployment benefit versus incapacity benefit, but he also suggested that the system of medical examination could not be working if it delivered that figure. If the Government's primary objective is to stop wrong assessments or people milking the system, the proposals would not achieve that. They will create a different regime for the future, but they will not tidy up what is wrong today. To justify clauses 53 and 54 on those grounds is a travesty of the argument. It is not acceptable for anyone who seeks to take a fair approach to camouflage what is a cut of £570 million—which will be achieved by imposing harsh and probably perverse tests on qualifying for incapacity benefit—with all the other arguments. I cannot see how Labour Members can support this measure, given the commitments they made when the Conservative party made certain mistakes on the issue of means-testing.

Audrey Wise (Labour, Preston)

The social security system has three components which are contributory benefits, such as pensions; non-contributory benefits, which are paid for a particular circumstance, such as child benefit or, at the moment, severe disablement allowance; and means-tested benefits which the Labour party have always regarded as a safety net. All three components are necessary and important. The current proposals to which we object would materially alter the balance between the three components. We have been told that clause 53, which reduces eligibility for incapacity benefit by changing contribution record rules, is being introduced because people should be recently in touch with the labour market. However, contributions records are a poor guide to whether people are in touch with the labour market, or even in it at all. Many people, particularly women, work part-time below the contributions threshold. There are many reasons for part-time work. Women may take it because of child care or it may be all that they can get. They be unwell but want to keep on working as much as they can. Although those people are below the contributions threshold, they are in the labour market. However, the Bill rules them out. Some 180,000 women have two part-time jobs, both of which fall beneath the contributions threshold. Are we telling them that they are ineligible because they are not in touch with the labour market? Can they have two jobs and still not qualify? Contributions records are a poor guide. Why should a recent record be required in any case? Someone may have paid for 20 years and still be rendered ineligible by clause 54. Someone else may have paid only one year's contributions, but still be eligible. Where is the fairness in that? Where is the relationship between benefits and contributions? The clause makes nonsense of the contributory principle. Some people may be unwell, but continue to work to the best of their ability. What advice should we give to constituents in that case? If the clause is enacted, we should benefit them by suggesting that it would be safer to cease work while they qualify. 1 do not want to give people that advice. I do not have to do so now. I can tell people to keep on working, and I believe that it is best for people to work if they can. We have heard some extraordinary statements about incapacity benefit, implying that loads of people are on it just because they decided that it would be nice. We are told that people take early retirement and go on incapacity benefit. We are told that there are so many people on the benefit because it is a substitute for unemployment benefit. In fact, the big problem of social security is how complicated it is. There are many different benefits and qualifications, and names of benefits change. It is true that the Tories tried to get people off the unemployment register and on to sick benefits, but incapacity benefit did not then exist. Invalidity benefit was created for that purpose. Incapacity benefit came into being in 1995 because the Tories wanted to reverse the position. We opposed it vigorously in 1995, deploring the fact that many people who qualified for sick pay would no longer qualify. In a Labour party briefing we said: There will be a new and more stringent functional test of incapacity under which many people will lose entitlement to benefit. We did not say that people could go on to the benefit just because they fancied it or wanted to retire early. We said that a new and harsh rule was being introduced by the Conservatives. It was not me who said so, but a brief from Labour's economic secretariat, red rose and all. Labour Members were all encouraged to think those things, because they were true. Now, we are told that people are on incapacity benefit because they have taken early retirement. In 1995, we said: There is growing evidence that concerns about the new benefit will mean that many people will choose to take out private insurance, at considerable personal expense, rather than risk the uncertainties attached to the new eligibility test. We were saying that incapacity benefit would force people to take out private occupational insurance to gain themselves a pension because they would be deprived of benefits. Over the years, a lot of people, encouraged by the trade union movement, have taken occupational pensions. Trades unions have demanded proper superannuation benefits and so on. The private part of the retired person's income has gradually increased. We said that that process would be hastened for the wrong reason by Tory cuts. Now, however, we say that everyone who has taken out private insurance or who has a good occupational pension that will give them something decent when they retire, even if it is early, will be too well off. Never mind that they have paid through national insurance for many years. Having between £5,000 and £9,000 is defined as being too well off. Some of us say that we could do with a bit of redistribution, but we do not mean redistribution from some disabled people to some other disabled people. We want redistribution from those who are really well off, but we are told that that is politically unacceptable. All sorts of arguments and non-arguments are used, but that is a no-go area for us. If there is to be redistribution, it should be through the tax and contributions system, not by taking money from some allegedly less-deserving chronically sick or disabled people and giving it to chronically sick or disabled people whose conditions are even worse. That is not the sort of redistribution that I want, and nor do I think that the population wants it. 3.45 pm Restrictions, the 50 per cent. tax on occupational pensions over £50 and matter of the contributions records are dealt with in amendment No. 12, to which 68 of my hon. Friends have put their names. I do not know whether amendment No. 7, which amends clause 56, will be pressed to a vote, but I should certainly vote for it. If it is not divided on, I shall regard my vote on amendment No. 12 as standing as a proxy for that amendment because clause 56 is also objectionable. I know that the youngest people are passported on to incapacity benefit. That is great, and I am all in favour of it. I do not even ask that the same should be done for the rest. All I ask is that we preserve the status quo for the rest. Mark my words: the amendments are not about making improvements; they simply preserve benefits that people have at present, and I think that no one receives excessive benefits. One problem with benefits is that their names change. I have been around a fair time, and I was here when the precursor of severe disablement allowance was introduced by the last Labour Government—we could talk about pride in Government then—on 21 November 1974. Barbara Castle said that it will provide new, non-means-tested help for those of working age who are deprived of the opportunity to earn their living and who have no rights under existing contributory insurance schemes. It was, she said, a brand new benefit. She said: This is quite an historic moment. We have made an important breakthrough here. These are only the first steps towards a new policy for the disabled over a wide field. These first steps bring a new non-means-tested security to nearly 250.000 people whose needs we have neglected for too long."—[Official Report, 21 November 1974; Vol. 881, c. 1555.] I do not want to be in this House at another historic moment—when that benefit, which was so proudly introduced, is removed by this Labour Government. I do not think that that was what was meant when it was said that this was the first step in a new deal for disabled people—not at all. We hear that the amount spent on disabled and chronically sick people has increased. It is a lot more than it was in 1974. It has gone up and so it should have, because it used to be disgraceful. The activities of Labour Members, who increased eligibility and introduced new benefits, paved the way for it to increase. That is not a cause for complaint. It has given people a new dignity and new rights. It is part of the reason why so many disabled people are now in a position to assert themselves, and they do so. They claim their full humanity. I do not want to be a part of any backtracking. It is not enough to say that we are improving the situation for some people. Of course, I welcome that and our amendment would not destroy that. At the moment, we will be spending rather more than we were, which is good, but we will gradually be saving at the expense of some of the disabled and the chronically sick and I object to that. It seems extraordinary that we are told that we cannot cherry-pick. I do not see this Bill as a cherry orchard in any case. Surely, the purpose of the parliamentary process is to consider legislation and, if one decides that it is good, to support it, but if one decides that it is a terrible error, to say so and act on it. One acts on that, even if it is against one's own Government. My right hon. Friend the Member for Birkenhead (Mr. Field) reminisced about the time shortly before we came to the House when child benefit was in prospect. I remember that vividly. I have looked round and tried to see a fellow face who was here at that time, who would share my memories. I will share my memories with all my right hon. and hon. Friends. Child benefit was the brainchild of Barbara Castle, who originally tagged it with the name child endowment, which then became the prospect of child benefit. However, we were told that there was a snag and that the trade unionists did not like the measure because it would transfer money from the wallet to the handbag, so it would be dangerous. We were told that some of our supporters might not support us if we introduced child benefit because we were abolishing the child tax allowance. We were told that it was, "dangerous." Talk about pressure—we were a very tight House then and at a meeting of the parliamentary Labour party in 1976, those of us who were campaigning for the rapid introduction of child benefit were told by the then Prime Minister, Jim Callaghan, that if we persisted, he would resign and there would be a general election three weeks hence. Compare that with the pressure today. We stuck and child benefit was introduced. The Prime Minister did not resign and there was not a general election in three weeks—it was another three years and then, as my right hon. Friend the Member for Birkenhead said, all the candidates were able to stand with pride on a platform of improvement for children. I do not want my hon. Friends to feel that the only way to be loyal to our Labour Government is to accept without question everything that comes from those on the Front Bench. It is also our duty to try to improve our Government's legislation. When all is said and done, we are here to represent our constituents. I do not ask those hon. Members who do not agree with the amendments to support them. Those who do not agree and who feel that they have a legitimate argument, such as my hon. Friend the Member for Colne Valley (Kali Mountford), should vote the amendments down by all means—that is their duty. However, I suggest to all those who feel uneasy about stepping back and removing existing rights that the best way to feel at ease with oneself in these circumstances is to support our amendment. I hope that quite a lot of my hon. Friends will be in that Lobby tonight.

Oliver Letwin (Conservative, West Dorset)

This afternoon's debate is similar to the debate that we had at a similar time, but in the morning and not the afternoon, a few days ago. In great part, it has been illuminating to those of us who care about the history of political parties. We have heard from Labour Members passionate and powerful speeches about the Labour party discovering itself. The right hon. Member for Birkenhead (Mr. Field) also said something about the Conservative party; he accused us of being the Unification church. I for one would remind him that the religion of which he is one of the prime advocates in this country also believes in the road to Damascus. The Conservative party has gone through that sort of conversion. [Interruption.] Yes, we have, because we made an honourable, and dreadful, series of errors. They were honourable and those on the Treasury Bench should not pout too much at this point because they are susceptible to a similar error today. The error that we made was to suppose that we could endlessly target, that the result of targeting and means-testing would be that we would deliver a smaller amount of taxpayers' money to a smaller group of people who most needed it and that by those means, we would better distribute income with a lower call on the taxpayers' funds. We were abundantly wrong: we increased dependency and the social security budget, thus increasing the call on the taxpayer. That is the history of the matter. Today, as on Monday night, we are talking about the direction of change. No one imagines that the measure, the clauses and the amendments will suddenly transform the whole of social security. We all know that it is a question of incremental change of direction. What will be decided when hon. Members from both sides of the House, I hope, go through the same Lobby later this afternoon is whether we are to announce that as a collectivity—all of us in the House—we believe that we have to change direction and move to a position in which instead of increasing continually the amount of means-testing and dependency, we increase instead the incentive for people responsibly to look after their own affairs so that they do not need to depend so much on benefit. I merely wish to say that I entered the House two years ago with one great hope above all others—that this would be the Parliament in which we would find, and this phrase is more popular on the Labour than the Conservative Benches, a consensus on this matter, which is of the greatest possible long-term national significance. 1 thought that we had come to a moment when, because we had learned from our mistakes and the Labour party had benefited from the wise advice of the right hon. Member for Birkenhead and others, we would be able to agree on a change of direction in social security. This afternoon, we will find out whether there is a sufficient consensus to persuade the Government to live up to those high hopes, which Conservative Members now have of the Government, many Labour Members have and, what is much more important, both of our electorates share—the electorate who vote Conservative and the electorate who vote Labour. That is a national hope. This afternoon, there is a chance that it will be fulfilled or dashed. It is up to Labour as much as to Conservative Members to ensure that it is fulfilled.

Chris Pond (Labour, Gravesham)

The hon. Member for West Dorset (Mr. Letwin) invited Labour Members to join him in the Lobby. One of the main reasons why I will support the Bill as its stands and oppose the amendments is that, after working for 20 years for the poverty lobby and seeing what the Conservatives did to the poorest and most vulnerable, under no circumstances could 1 join them in the Lobby. The Conservatives say that perhaps they were wrong. A moment ago, the hon. Member for West Dorset was on the Damascus bypass. In the early hours of Tuesday morning, the hon. Member for Brentwood and Ongar (Mr. Pickles) offered to slip into a hair shirt, albeit one designed in Savile row. Despite what they are now saying, for 18 years they supported a Government who did much damage to the living standards, hopes and aspirations of the poorest. They were all looking the other way. It was the longest lapse of concentration that we have seen. For 18 years, they did not notice what they were doing. They did not notice their doubling and trebling of the extent of means-testing or their attack on national insurance benefits and the national insurance principle. However much synthetic compassion they can manufacture in this debate for party political purposes, I will not join them in the Lobby. We must ensure that no one forgets what they did in government and what they would do again to the poorest, if they ever had the chance. What the Conservatives did in those 18 years shapes the welfare reform debate. They created a climate of fear. It is not only the cuts throughout the 18 years; one of the most cynical cuts was the benefit integrity project, introduced only three days before the general election with the explicit purpose of cutting the benefits of the most severely disabled. I am proud that our Government have changed that and are ensuring that people get the benefits to which they are entitled, no more and no less. I know that few people are listening to the debate, so I can quietly divulge that the Select Committee on Social Security recently went on a junket—to Loughborough. We get some privileges in this House. We heard about some research carried out by the specialist social policy research unit at the university. We found that currently, disabled three and four-year-old children get only half their mobility costs covered. The Bill will ensure that about 80 per cent. of those costs are covered. It will help children and their families.

Gwyneth Dunwoody (Labour, Crewe and Nantwich)

Does it occur to my hon. Friend that those of us who tabled the amendment, which does not relate to the clause to which he refers, do not follow the logic of telling Labour Members who are concerned about this aspect of the Bill that because we want to do something about disabled four-year-olds, it is necessary to bring in cuts that will affect others who may be older?

Chris Pond (Labour, Gravesham)

I thank my hon. Friend. I hope that she will allow me to develop my argument. I do not suggest that those who support the amendment against clauses 53 and 54 are unconcerned about disabled three and four-year-olds. Nor do I suggest that they are unconcerned about the fact that the Bill will help younger disabled people up to the age of 25. However, the debate about the Bill has been shaped by the assumption that all welfare reform is about cuts. That is not the case. Much of the debate on clauses 53 and 54 has been useful, but it has turned into a discussion of the contributory national insurance principle. It has become a debate about contributory benefits, universal benefits and means-testing. It is a helpful debate which we should pursue, but it does not throw much light on the two clauses. In some ways, one could argue that clause 53 strengthens the insurance principle by ensuring that contributions are much more closely related to benefit entitlement. It may be that other aspects of the Bill go in different directions, but it is a sensible debate which we have to have, and I am pleased to say that the Social Security Committee will have it. Perhaps that can feed into future discussion.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman had some sport at the Tories' expense, which is always good fun and we enjoyed it, but the hon. Member for Kingswood (Mr. Berry) asked the most pertinent question. If is wrong to means-test the basic state pension—I believe that it is, and I think that the hon. Gentleman does too—why is it right to means-test incapacity benefit?

Chris Pond (Labour, Gravesham)

If the hon. Gentleman will bear with me, I will deal with that point when I come to clause 54. Much heat has been generated, understandably, by both clauses. I want to shed a little light by citing research published last year by the Policy Studies Institute and carried out in early 1997. It considered a group of people who left incapacity benefit, voluntarily or because they had been disqualified under the all-work test, which the Bill also reforms. The largest group—one in three—of IB leavers went into full-time jobs. The second group—about a quarter—went back on to IB a few months later. The linking rules in the Bill and the regulations allow that. A smaller group relied on other benefits, such as jobseeker's allowance and income support The importance of that research is that it helps us to assess the impact of the clauses. It found that IB recipients fell into two main groups. The first was those who saw incapacity benefit as a bridge between work and retirement. The second was those who saw incapacity benefit as a short-term earnings replacement. The majority left incapacity benefit to go into employment, normally with an income much higher than IB. The people in the first group were predominantly those who had been on IB for a considerable period. They had been written off, lacked hope and found it much more difficult to go into employment afterwards. The second group tended to be newer claimants. That is relevant because clause 53 applies to new claimants, the group who, with, I hope, the assistance of the new deal, the single work-focused gateway, the tax credit for the disabled and other Government measures, will he assisted to get into employment. As many hon. Members have said, the Bill applies to new claimants in that respect. That is the group that the Policy Studies Institute says should be given every assistance to make the transition back into work. Perhaps as a result of that research, that is what the Government are doing. The hon. Member for Northavon (Mr. Webb) asked about means-testing the basic state pension and incapacity benefit in relation to occupational pensions. Let us consider the treatment of both. As my hon. Friend the hon. Member for High Peak (Mr. Levitt) pointed out, clause 54 proposes the withdrawal, above a certain level, of incapacity benefit for those with an occupational or personal pension. The Green Paper suggested a £50 disregard and a 50 per cent. withdrawal rate. Those figures are not in the Bill, as the Secretary of State said. It may be sensible to consider them in the context of the review of capping and savings limits in social security generally. However, let us take those figures as read for the moment—a £50 disregard and a 50 per cent. withdrawal rate. Hon. Members will note that, once one starts to receive the state pension, there is a 100 per cent. withdrawal rate of incapacity benefit and no disregard whatever.

Frank Field (Labour, Birkenhead)

Is not my hon. Friend confusing two things? The first is that people should not receive two benefits for the same cause—therefore, they can draw only one. The second relates to the question put by the hon. Member for Northavon (Mr. Webb): if it is right to withdraw incapacity benefit, why is it not right to withdraw the retirement pension?

Chris Pond (Labour, Gravesham)

I thank my right hon. Friend for that intervention. I have enjoyed working with him over the years; no doubt I shall continue to do so during these debates. My point is that, if the benefit were now being devised, given the number of people who now receive occupational pensions and the fact that a considerable proportion of them—about a quarter—draw those pensions before retirement age, I suspect that, although the situation was different in 1971, a measure of this sort would have been built into those earlier provisions.

Simon Burns (Conservative, West Chelmsford)

Rubbish.

Chris Pond (Labour, Gravesham)

From a sedentary position, the hon. Gentleman suggests that that is rubbish.

Oliver Letwin (Conservative, West Dorset)

I have a genuine question. Does the hon. Gentleman believe that there is no disincentive to save, if benefits are so constructed that those who save receive fewer benefits?

Chris Pond (Labour, Gravesham)

Several hon. Members have made the point that if we are to offset occupational or personal pensions against incapacity benefit, presumably some years in advance of that—in some cases, some decades in advance—people would have to make judgments about whether it was worth saving because, if they did so, their national insurance contributions would buy less. I suggest that most people who make decisions about saving for an occupational or personal pension are planning to save for their retirement—something that they can predict will happen. They do not insure themselves against the possibility that they will become disabled or incapacitated a few years before they reach retirement age. As other hon. Members have pointed out—it was certainly made clear by my hon. Friend the Member for High Peak—only about a third of incapacity benefit recipients receive non-state pensions. Of those, four in 10 would be unaffected by clause 54. That means that eight out of 10 of those recipients will not be affected at all.

Roger Berry (Labour, Kingswood)

Given that the possibility of becoming unable to work is uncertain—as my hon. Friend points out—is not that an even greater reason for not means-testing a benefit that arises due to unforeseen circumstances?

Chris Pond (Labour, Gravesham)

The point is that, when people are saving for their retirement in the form of an occupational or personal pension, that element of savings is not there to offset the possibility of becoming incapacitated. There may be many other ways of saving to meet that risk and other reasons for saving, but that is not one of them.

Norman Godman (Labour, Greenock and Inverclyde)

Will my hon. Friend give way?

Lynne Jones (Labour, Birmingham, Selly Oak)

Will my hon. Friend give way?

Chris Pond (Labour, Gravesham)

No, I want to finish my remarks. I have made some specific points on the clauses and I know that other Members want to speak. For many years, I have argued for welfare reform. I defy any Member of the House to tell us that the social security system, as it currently operates, works perfectly in every respect. None of us believe that to be the case. All of us believe that some changes should be made. If we are committed to the idea of welfare reform, we cannot simply leave the current system in place and add a few bolt-on extras. We shall have to make some difficult decisions; we must modernise the system and put right some of the mistakes of the past. I believe that the clauses and the Bill will do so.

Mark Oaten (Liberal Democrat, Winchester)

I speak in favour of amendments Nos. 5, 3, 6 and 7, tabled in my name and the names of my hon. Friends. I want to make it clear that the Liberal Democrats have strong objections to clauses 53, 54 and 56. I am surprised that we are holding this debate. When the rumours of these changes were growing—sadly, in the national press—about 18 months ago, I could not believe that there would not be some form of concession from the Government. Even at the 11th hour, during the past 10 days or so, I have been surprised that the Government have not chosen to grant some moderate concessions. I do not want make great play of Monday night's events, but the Government have shown almost a pleasure in driving through some of their policies without being prepared to listen to the many arguments that have been put forward. I do not want to be too harsh on the Government. One of the good things that has come from the debate is that Members on both sides of the House have not chosen to make a cheap football out of issues relating to disabled people. The quality of the debate has been excellent. However, I point out to the Government that there is a sense of arrogance: although I can understand that they want to reject the arguments of the Opposition parties, I find it strange that they have chosen to ignore the arguments that have been put forward by some 68 of their own Back Benchers. In that connection, I praise the hon. Member for Kingswood (Mr. Berry) for the superb and excellent speech with which he introduced the amendments. I praise also the integrity of the Members who signed those amendments; many of them have a record in the House of fighting hard on disability issues. They have shown that they put those issues almost above party politics. They should be commended for that action. I can understand that the Government might even reject the calls of some those Members. However, I am surprised that although they are prepared to listen to and to work so closely with organisations such as the Royal National Institute for the Blind, the Royal National Institute for Deaf People, Scope and the Royal Association for Disability and Rehabilitation—RADAR—when it does not suit them to listen, they turn down the requests that were put so strongly by those groups. Much that is in the clauses goes against the Government's own thinking. I and other hon. Members spent Tuesday morning and this morning attending the final Committee sittings on the Disability Rights Commission Bill. I warmly praise what the Government have been doing to enhance the rights of disabled people. The Government should be praised for that; they have taken action fast—within two years of coming into power. However, there is a contradiction. On one hand, they have made good progress, but, on the benefits side, they are not able to be consistent with their principles of working for disabled people. Disabled people tell me that it is all very well to have enhanced rights, but, if one does not have enough money to live on each week, some of those rights are pretty hollow. Against that backdrop of organisations saying that the Government are wrong, we must examine why they persist in going ahead with these changes. The Government's argument is that welfare spending is out of control and that far too many people have been taking up incapacity benefit. However, is it not the case that, in recent years, that trend has declined? Perhaps we are beginning to see the kicking in of reforms made by previous Governments. We are left with the conclusion that the reason for the changes is not the welfare of disabled people and that the only reason is to try to save money, even though the problem may not necessarily exist. What disappoints me about the debates that have taken place during the past 18 months is that we might not have spent as much time as we should have done in examining whether there is a problem. We have assumed that the problem exists. We have certainly not spent as much time as we should have done in examining the gateway for those benefits. The all-work test is a bad test; it is rightly being replaced with a different test. However, perhaps that new test is also wrong and we should put some more work into examining it. There is a contradiction: the Government claim that individuals are trying it on—trying to get a benefit to which they are not entitled—but, on the other hand, the Under-Secretary of State for Social Security clearly stated in Committee that he did not envisage that, under the new test, there would be any change in those who would be entitled to the benefit. We should do more work on that matter. I was interested in the point developed by the right hon. Member for Birkenhead (Mr. Field). He said that although the benefit integrity project had been flawed, perhaps the policing of benefits and of the gateway was not yet right. I hope that the replacement for the benefit integrity project will go some way to address that point. I draw the conclusion that it would have been wiser for the Government to have waited for a few years so that some of the changes could bed down. They should have waited to see whether the trends that were identified would decline, whether the new capability test would make a difference and whether the problem that they sought to solve through these measures existed in the first place. Clause 54 goes to the heart of the means-testing principle that concerns many hon. Members. The Government are in a ridiculous situation. On the one hand, they are trying to create a society in which individuals are thrifty and put money aside. Yet, on the other hand—despite the comments of the hon. Member for Gravesham (Mr. Pond)—they are sending a clear signal through these changes that there is no incentive to save. As a result of the changes, a couple on a combined income of £10,000 will not be entitled to receive benefit. That seems strange given that that income figure falls below the poverty line. The Government surely did not intend to put such a couple in that position. If the Government insist on going down this route, we call on them, at this eleventh hour, to change the threshold at which the changes will kick in. The hon. Member for High Peak (Mr. Levitt) said that the £50 figure is not on the face of the Bill. May I derive some hope from that comment? When the Secretary of State responds to the debate, will he compromise for the first time and change the figure? I heard the Secretary of State say via various media outlets that he did not have to decide on a figure until 2001. Let us hope that he will say today that the £50 figure is wrong, and that a higher threshold will ensure that the burden is easier and fairer. Clause 53 introduces a double standard. If new Labour made one thing clear, it was their desire to try to change the benefit culture, and to introduce a contract between the citizen and the state that said, "You will get something out if you put something in". These changes clearly contradict that approach. As the hon. Member for Preston (Audrey Wise) said, it must be wrong that someone's contributions spanning 10, 15 or 20 years will be wiped out and ignored. Why did such people bother to contribute at all? What was the point, if they will not receive benefit because they have not applied two years before they claim? That makes a nonsense of the years of making contributions. I do not believe that that measure was in the Labour manifesto. I certainly do not believe that Labour Members and the many millions of people who voted for them could have envisaged the introduction of this major change to contributions so early in a Labour Administration. It is disappointing that the Government were not prepared to accept in Committee some sensible amendments that would have at least reduced the impact of the changes. During 64 hours of consideration in Committee, the Government did not make a single concession. It is the first time that I have served in Committee, and two months into the process, I wondered why I was wasting my time. The Minister and the Under-Secretary of State for Social Security, the hon. Member for City of York (Mr. Bayley), could not have been more reasonable, but they did not move an inch. Perhaps that is the Committee's fault. It might have been more constructive if the Committee's membership had reflected more clearly the opinion within the Labour party. We could then have had a healthier debate in Committee.

Norman Godman (Labour, Greenock and Inverclyde)

The hon. Gentleman mentioned a threshold figure of £50. What kind of threshold would be acceptable to his party: £100, £150 or £200?

Mark Oaten (Liberal Democrat, Winchester)

The hon. Gentleman is tempting me to suggest a figure. That would imply that I am in favour of the proposal; I am not. I would not want to suggest any figure because I think that the measure is wrong. We offered the Government a compromise on a bad system, and any revised figure should not see individuals with an income of £10,000 who are on the poverty line fall short of benefit. The Government should at least increase the figure above that point. Amendment No. 3 suggests that, rather than stating that contributions must be made in one of the two years before the benefit kicks in, the Government should allow at least one year in the 10 previous years. That is a simple amendment which would reduce the negative impact of the changes. I hope that the Secretary of State will address the important issue of carers raised by the hon. Member for Preston. While we welcome the fact that the Government have acknowledged that it will be difficult for carers to build up national insurance contributions and have provided a linkage with the carers allowance, it is estimated that only 400,000 out of 5 million carers in this country receive carers allowance. What will happen to the carers who do not have that link? How will they access incapacity benefit? Amendment No. 7 offers the House the opportunity to reverse the decision to abolish the severe disablement allowance. That is an essential safety net, and the Government's proposed changes will mean that 16,000 people will lose out each year. Time is short, and the hon. Member for Preston developed that point very clearly. Other hon. Members may wish to catch your eye, Mr. Deputy Speaker, to emphasise that point. We will push the matter to the vote. We feel strongly that the Government have not thought through the proposals. They have tried to solve a problem that I suggest is not there. The Government have missed good opportunities to develop the welfare state in new ways and they have broken some important principles in relation to contributions and means testing. In doing so, their actions have been extremely unfair. My party and I are left with the sad conclusion that this Bill is about the interests of the Treasury, not the welfare of disabled people.

Lynne Jones (Labour, Birmingham, Selly Oak)

Few Labour Members—including me—would argue against the need for substantial reform of the social security system, given our inheritance from the Conservative party. The previous Government reduced the system to a means-tested, low-grade safety net for the poor. That reform option was specifically ruled out in the Green Paper, and rightly so. Yet, as many of those who responded to the consultation process—including Age Concern—pointed out, the Government failed to review the welfare state comprehensively. Instead, they advanced proposals without discussing alternative principles. Those groups said that the Green Paper failed to discuss clearly the role of social insurance, universal benefits and means-testing within the social security system. Much of today's debate has focused on the social insurance principle and means-testing. Labour Members have fought hard for years to preserve the contributory principle, so I am saddened to see that we have abandoned that principle today. Far from criticising support for the amendment as cherry-picking, I argue that the amendment will act to support the Government's aim of providing work for those who can and security for those who cannot. We welcome the new deal that encourages people to enter work and to save. That is an essential part of a welfare reform package. We welcome also the additional assistance for young people who are severely disabled, and I acknowledge that the linking law will ameliorate some of the effects of these changes. They are good measures. However, it is counter-productive to their fundamental aims for the Government to alter the contribution requirements and to means-test incapacity benefit. 4.30 pm We argue that our aim is to modernise the social security system, and we should modernise a system that was set up at a time when families had one breadwinner—usually the man—and wives stayed at home and looked after the children. However, one income is no longer adequate, and very few people are fortunate enough to stay in one type of employment for most of their lives, which was commonplace when the Beveridge reforms were introduced. Instead, we have so-called flexible working, job insecurity and many part-time jobs. We must not forget that even people who are being paid the minimum wage and are working 16 hours a week—that is classed as full-time work for the purposes of means-tested social security benefits—still do not earn enough to meet the lower earnings limit and do not, therefore, pay national insurance contributions. We have insecurity, or flexibility, yet far from modernising the system to create a contribution requirement that would reflect that flexibility, we are introducing rigidities for contribution requirements. We are doing exactly the opposite of modernising the system to reflect the modern-day experiences of people in the workplace. We also want to encourage people to be self-sufficient and thrifty and to save for the future. How can means-testing incapacity benefit help to achieve that? The majority of disabled people do not have pensions. Surely we want to encourage them to take out pensions. If we do not, they may, when they retire, receive some incapacity benefit, but they will have failed to provide additional resources, so they are likely to depend on other means-tested benefits, which will cost the state more. Under the Tories and their salami-slicing policies, we learned that the more means-testing—which allegedly targets those most in need—is introduced, the more expensive the system becomes. That is not only my opinion, but that of many people, including representatives from the private sector. It is interesting that, in its submission to the Green Paper, the Association of British Insurers said: The interrelationship between state benefits and what insurance companies can offer needs to be properly understood by government, by insurance companies and by the public. A stable framework is needed in which people can make plans which will not be disrupted by a subsequent change of government policy. People naturally are resentful if, for example, having saved for a specific welfare need, they then discover that they have been wasting their money and that they would have obtained the same benefit from the state for nothing. Conversely, if people have reasonably expected that the state will provide, they are aggrieved if suddenly the state decides not to provide. The private sector, which wants to encourage people to save, recognises the disincentives that are created in the social security system. That point was made time and again in submissions to the consultation paper. The Department of Social Security's summary of the 340 responses to the disability benefits consultation paper said that the issue most frequently raised was the perceived unfairness of taking into account income for which people have already contributed against a benefit that is also earned through the payment of contributions. Contrary to the impression that my hon. Friend the Member for High Peak (Mr. Levitt) tried to give, the people who will be affected by the measures are not rich people with enormous pensions. If they have pensions, those pensions are relatively small, and although the Secretary of State correctly stated that 44 per cent. of people on incapacity benefit are in the top two quintiles of the earnings table, that does not take account of the fact that their income includes disability living allowance, which is supposed to reflect the additional costs of being disabled. That benefit pushes people higher up the earnings table. That applies only to people who already have occupational pensions. The majority of people on incapacity benefit have below-average incomes; only 25 per cent. are in the upper 40 per cent. of the income range. That demonstrates that, on the whole, people who have disabilities have a shorter working life and one in which they are able to earn less than other people. Such people, who do not have savings and who perhaps have a progressive illness and know that their working life will be curtailed, will be listening to the debate. Many have in the past responded to exhortations to save for the future and today will be wondering why they should bother. That is why I argue that targeting does not, in the long run, save money in benefits, but costs more. Last week, the Prime Minister, in his tribute to John Smith, said: One of the first acts of his leadership was to establish the Social Justice Commission on healing the divisions of the Conservative years". It is interesting to read the social justice commission's comments about welfare reform. It said: In our view, the Social Security system should be built upon the foundation of social insurance. It considered the arguments of some of my hon. Friends that it is best to target benefits on those who most need them, but said: It is often argued … that a simpler and cheaper solution to the problems of the Welfare State would be to means-test all benefits so that they go only to the people who 'really need them'". It went on to say that the strategy is fatally flawed". It then said that means-tested benefits, which cannot prevent poverty are also remarkably inefficient at relieving it … Moreover, these benefits are extremely expensive to administer … a further disadvantage of means-testing is that it penalises savings … instead of providing a predictable and stable financial base from which people can deal with change, means-tested benefits create further insecurity". That echoes the comments of the Association of British Insurers. The commission said also that means-tested benefits deepen the problem of social exclusion that this Government are committed to eradicating. I appeal to Ministers to listen to those arguments. If we are aiming to deal with dependency and trying to bring people who were excluded during the Tory years back into the mainstream of society, we should think again about the measures in clauses 53 and 54.

Michael Connarty (Labour, Falkirk East)

I have been listening with interest to my hon. Friend, and I have been reading as much as I can on this subject in the past week. I noted that, following the publication of the Crossman paper, it was said that people were willing to pay through the contributory system because they felt that they were storing up something for their family for the future, but they would not want to pay through direct taxation. Clause 53 clearly breaks the link between benefits and the contributions that people make over their lifetime, and is likely to make people wonder whether the contributory system has anything to offer them.

Lynne Jones (Labour, Birmingham, Selly Oak)

My hon. Friend is exactly right. I wish that the Secretary of State and Ministers would consider not only the consultation on the Green Paper, to which I have referred, but the results of their research on public attitudes to the welfare state and the response to reform, which clearly demonstrates that there is considerable public support for the social insurance principle. There is a strong feeling that those who have paid into the national insurance system should be able to gain from it when the need arises, regardless of circumstances. In that research, members of the public pointed out to the Government that means-testing was not only expensive for the state, but intrusive for individuals. The public regard means-testing as unfair, because the low thresholds might have the effect of arbitrarily excluding people who are in genuine need, but who narrowly fail to qualify. Many pensioners feel that way about the failure of the state pension to keep up with means-tested benefits. They resent the fact that, if they have a small occupational pension, they are deprived of the benefits received by people who have not saved. The research showed that the majority of people considered that, if there was to be means-testing, it should take place on the way in, by requiring higher earners to pay higher contributions, instead of on the way out, by limiting payouts to those on low incomes and with low savings. The research that was carried out for the Department of Social Security acknowledged that some people would like benefits to be targeted on those with a low income and low savings, but the overwhelming majority—69 per cent.—consider that a person's contribution record is more important than their means in determining entitlement to benefits. The social justice commission also considered disability benefits. Its report says that the requirements for a comprehensive disability income are twofold. First, it should compensate disabled people for the additional expense of being disabled, by offering a tax-free benefit based on up-to-date evidence of living costs, including the additional costs that disabled people must meet. Disability living allowance is such a benefit, although the social justice commission commented on its many inadequacies. Secondly, as disabled people are much more likely than others to be unemployed or only partially employed, a comprehensive disability income should offer some compensation, in the form of a taxable benefit, for the loss of earnings potential. That is precisely what incapacity benefit was designed to do. It is a taxable benefit, so, rightly, people on a high income are already taxed on it. However, it is designed to reflect the fact that the working years—and often the earnings potential—of people who are disabled are much curtailed. That is exactly what my hon. Friend the Member for High Peak said that the benefit was about. It is about income maintenance. It is about trying to bring disabled people up to the level of the rest of us. A measure of the success of that policy should be whether disabled people have the same range of income as non-disabled people. I put it to my right hon. and hon. Friends that if we are to end discrimination against disabled people, we should ensure that they have the potential to earn an income similar to that of people who are not disabled but in the same type of job. I fear that the Government are out of touch with public opinion on the issue. For the sake of saving, ostensibly, £700 million in the long run, they will greatly damage the social insurance principle. They will discourage saving. The advice that the Government are giving those people who might qualify for incapacity benefit, but who are struggling to continue to work and perhaps retraining, is, "Give up work and go on benefit now; because if you do not, you may lose out in future." I urge my right hon. and hon. Friends to think again. Reform is needed, and there is a great opportunity to achieve consensus on the way forward. Surely that consensus must be based on what is nationally popular, and that is the social insurance principle, whereby there are contributory benefits for people who contribute while in work, encouraging them to save, to be thrifty and to work hard for the future.

Anne McIntosh (Conservative, Vale of York)

I congratulate the hon. Member for Birmingham, Selly Oak (Dr. Jones) on a well-constructed and informative speech.

James Gray (Conservative, North Wiltshire)

It was courageous.

Anne McIntosh (Conservative, Vale of York)

As my hon. Friend says, it was a courageous speech. I, too, support amendment No. 86 and reject clauses 55 and 56. This is a very sad day for the House, and more particularly for the vulnerable people in society, especially the disabled, whom the welfare state, set up all those years ago by the Beveridge reforms, was most specifically designed to help. I regret that the allocation of time motion has been carried. I suppose that we should be grateful for the presence this afternoon of the Secretary of State, and benefit from his presence. However, I believe that my constituents will find his comments insulting. On Monday evening, I spoke on two separate occasions: first, on the dismantling of the bereavement allowance and, secondly, on the companies that have set up consultancies in the Vale of York as limited companies, especially in the information technology sector, and had written to ask me to intervene in that debate so that their voice could be heard. I know that they will especially resent allegations of a filibuster on Monday evening, coming from a Secretary of State who, for the greater part of the evening, was not even in the Chamber. The words of the hon. Member for Selly Oak especially struck a chord with me on two counts. The changes to the entitlement to incapacity benefit will penalise those who have saved, and they will constitute an attack on the contributory principle. As I said on Monday evening—I shall develop this theme in relation to incapacity benefit—I believe that the Government's proposals are an attack on the Beveridge system. They mark a step towards the dismantling of that system, which was set up precisely to help the most vulnerable in society. I emphasise the fact that the piecemeal reform that the Government are undertaking will not bring the social security bill down. The savings will be pitiful. On the severe disablement allowance, savings in the first year will be only £10 million. Over the whole period of the Parliament, they will rise to only £80 million. On incapacity benefit, savings in the first year will be only £70 million, rising after 10 years to only £700 million. In support of what the hon. Member for Selly Oak said, could the Government not have come before us with a comprehensive reform, or at least the start of one, rather than the piecemeal reform that they have presented to us this evening? Changing the entitlement to incapacity benefit is simply another extension of the Government's means-testing agenda. Instead of encouraging people to save, they will penalise the very people who are doing so. I particularly want to associate myself with the remarks of the hon. Member for Kingswood (Mr. Berry), who said that the measure is a breach of contract. For that reason, I simply cannot support clauses 55 and 56. I support amendment No. 86. The Government have no right to breach the contract between the state and the individuals who have paid their contributions over a number of years. On the grounds that the changes to the entitlement to incapacity benefit will penalise those who have saved and are an attack on the contributory principle, I support amendment No. 86.

George Turner (Labour, North West Norfolk)

While I agree with much of what is being said by those on both sides of the argument, I find that Labour Members have run into a conflict of principles. As was pointed out from the Conservative Benches early in the debate, a conflict of principles is one of the real difficulties of being in government rather than in opposition. I am pleased that there has at least been a good element of listening by those on both sides of the argument during the debate on how we should resolve our conflict of principles. When the Government are under attack, Back Benchers taking my position—I shall vote with the Government tonight—find that it has a built-in difficulty: if we do not speak as well as vote, it is because we are assumed to be secretly opposed to the Government and not willing to stand our ground; if we speak in support of the Government, we are assumed to be currying favour with the Whips Office. We are damned either way. During 20 years in local government, I learned that people need to face up to the issues. Those Members who were here in opposition for many years benefited from the fact that every penny could be spent not once or twice, but in every debate. The Liberal Democrats have shown me that for the past two years. The problem with being in government is that we can spend money only once and I believe that that is the core of the difficulty faced by my right hon. and hon. Friends this afternoon. I do not like means-tested benefits, but I have regularly supported them and so have other hon. Members who are opposing them today. Faced with the problems of the pensioners in my constituency, I have had to accept that, until our economy permits us to do more for all pensioners, we have to offer a minimum income guarantee to pensioners. We have had to say that we will try to identify those most in need and help them. I do not like means-tested benefits, but as a practical politician who is trying to help Ministers to make difficult decisions, I have to say that if I were to pick a group for which I would relax that principle, it would be the pensioners in my constituency. My difficulty with my hon. Friends who have so ably put the case for those who have been incapacitated—those of my constituents to whom that has happened are often late on in their lives, perhaps over 55—is that, if I am honest, that group would not be my priority. I understand the case being made for that group, and I understand the case for its being the next to which we look to give largesse, but I have to say that, as many of my hon. Friends have recognised in the debate, the Government have addressed some more pressing needs and areas where Exchequer help is urgently needed to tackle the real problems of major disability, among the young in particular. My hon. Friend the Member for Colne Valley (Kali Mountford) rightly talked about cherry-picking and I believe that Back Benchers must assess where they stand on a Bill, as they do on our manifesto. Who on earth could agree with everything in his party's manifesto? It is not human nature to do so, and I certainly did not do so, but I accepted the manifesto as a package. I accept that, in the democratic process, we arrive at a conclusion and, to be broad brush, I accept that other people's opinions have sometimes outweighed my individual preferences. In government, we do not have the ability to be always on the side of the angels. As an agnostic, I do not believe in angels. From my experience in local government, I know that people decide to modernise. Their group agrees with them, they look at new issues to be addressed in government, they identify the growth areas and then agree and vote on them. They then ask, "How will we fund those areas? How shall we address these new priorities?" Only people in opposition can oppose every single means by which people address the big problem. The problem of local government remains that it is always easy to address new need, but difficult to address the base budget. It is difficult for people who fought for needs to be addressed in the society of a decade ago to accept that those needs may no longer be the priority of the day. I believe that the Government have set about tackling that. Some difficult decisions will have to be made, but I believe that, ultimately, we owe it to the people whom we represent to make those decisions. If there is one group of people who can tell me about the need for welfare reform, it is a group whom our party has traditionally represented—people on council estates. As part of my constituency work, I regularly visit the homes of those who are too disabled to come to my surgeries. Those are the people whom I want to help–but my goodness, there are "experts" on those estates who specify those whose need for state benefits is, in their view, less than meritorious . The Conservatives were in government for 18 years because, all too often, Labour supporters did not believe that we were fit to govern. I feel that facing up to some of the difficult decisions that we must make in government gives us the best opportunity that we shall ever have to benefit those whom we seek to represent—to benefit them in the long term—through the improvements in the economy that we are delivering. The package in the Bill is one that I, along with other hon. Members, can support with honour.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

The hon. Member for North-West Norfolk (Dr. Turner) said that he did not agree with everything in his party's manifesto. Did he tell the electorate that, or is he going to allow it to emerge as a disclosed secret later?

George Turner (Labour, North West Norfolk)

Will the hon. Gentleman give way?

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

No.

George Turner (Labour, North West Norfolk)

rose—

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

All right, I will give way.

George Turner (Labour, North West Norfolk)

I told the electorate that I would support the manifesto and vote for measures specified in it, and that is what I shall do.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

With respect, I suggest that the hon. Gentleman should not make claims that have no basis in reality. I suggest that, when people want to be bold and brave and to make decisions about what they consider to be right and proper, they should work on that, but not claim subsequently that that is what they did. This is likely to be our most important debate on the Bill, because it creates the greatest difficulty and generates the greatest interest. I congratulate the hon. Member for Kingswood (Mr. Berry) on tabling his amendment, and on speaking to it so well; but the whole debate should be seen in the context of what the Government have been doing throughout the realm of what they call welfare reform. According to all the latest figures, including the Government's own figures, the social security budget is set to rise faster than the one that the Government inherited, and faster than was predicted in the context of the changes that would render an increase necessary. If it is rising by an average of about 3.3 per cent. a year, that will mean a total increase of £38 billion over the next three years. That is what the Government have done to the social security budget, and that is the most important backdrop to the debate. We should understand why some of the decisions that are being made now are having to be made, and what characterises them. Let me say something about incapacity benefit, and the changes that are proposed. The rationale that has led the Government, and the Secretary of State, to believe that through means-testing they can reduce overall costs is driven by a short-term need to find the savings that they have apparently failed to find elsewhere. The Government's rhetoric in the run-up to the election suggested that they would cut social security costs so that they could spend more on health and education. In fact, they are doing both—and that is the problem. What the Government fail to realise in looking at the short term is that the constant extension of the means test is not really the solution at all; indeed, it will be part of the problem. If the application of means test upon means test were the solution, surely it would have worked by now. Successive Governments, of whatever hue—both Labour and Conservative—have tried that approach from various angles. Each time, there has been a growth in social security spending. Therefore, the policy has not worked. I do not know what makes the Government think that, in the narrow case of those on incapacity benefit, it will work. In essence, the process deals with the symptoms, and those are short term. It does not deal with the cause. 5 pm The Government have decided to impose the means test anyway, which is a bad principle. They have chosen to do it for what they may believe are necessary reasons, but why have they done it in such a perverse way? Why attack, for example, someone who is on a modest income, has made an effort to save, and has tried to take himself out of the position of being dependent on handouts, as he would see it? Why attack that individual when the Government, the Secretary of State and Prime Minister have said that they wanted to encourage people to save? They wanted to ensure that people lifted themselves out of dependency through saving and providing for their future, but the Government's measures are a direct attack on their own words, their own principles and on the very type of person whom they hold up as a model. Are people on £2,600 a year from their pension fund, rising to £9,000 a year, the wealthy people who now have to be struck out? Are they less incapacitated than the person standing next to them who did not make any effort to save? They are going to lose. That, in essence, is what the issue is about. It is not about an across-the-board, fair measure to find a solution. The Government now seem confused. At first, in Committee, the purpose was not to save money but to be fair. Now, in the briefings to the press and in what we hear from the media, the Government's line is that the measure is to save money, so they have decided to save money by targeting a narrow group. That is why they are so confused. Surely it cannot be right that people who do not need to save for a pension, who can manage to save in their own way because they are wealthy enough—perhaps through an individual savings account or some shares; at any rate something that is not identifiable as a pension fund, private or occupational—are okay and will have no problem; that people who have made no effort over all the years to save any money, who used to be described perhaps as feckless, who perhaps could not be bothered because they thought that the key thing was to ensure that they could never get caught with enough money to get themselves locked out of benefits, are okay; but that the people who made the effort are not okay. Then there is the whole business of the two-year rule. I find that utterly perverse. It is a way of suggesting to people who have serious worries about whether they will have a progressive illness that will one day render them incapable of working that they had better make an early decision, because the last thing they want is a broken record of employment in the two-year period. Out go those people as well—not people who want to be out of work, but people who apparently may, through reasons beyond their control, be deposited out of work. Hence the selective and targeted process of the means test is incredibly short term and narrow minded. Before the Secretary of State and other Labour Members crow about how they are taking the tough decisions and how their solution is the way ahead, I pray in aid two people who agree with me and who the Government believe—or at least they did yesterday—are the key men that they should listen to. The first is the Chancellor of the Exchequer. At the 1993 Labour conference, he said: I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved—the end of the means test". As recently as 1998 the Prime Minister said: There are problems if you move to too much means testing. To which group of people could he possibly have been speaking? Clearly, it was not the Secretary of State or his colleagues because they have taken a different view. If reform of the welfare state is required—and it is—it must be about finding the characteristics that drive dependency and focusing on them. Before the Secretary of State says, "The Opposition are in favour of reform but do not support us on the tough decisions," I remind him of what happened when the Government decided to cut the lone parent benefit. It was Conservative Members who went into the Lobby to support the Government, so the Secretary of State should be careful about using that argument. We are prepared to take the tough decisions as long as they deal with the issues relating to serious dependency. The Government are in a mess of their own making and they will not get out of it by claiming that they will solve the problem by improving pensions. That is not the case. They will simply deliver yet another means test into the pension arrangements. The minimum income guarantee is nothing more than a massive disincentive to saving for someone on a modest income. Anybody on a lower level of income will now end up with a fund that will deliver them less income in retirement than somebody on income support. That is the result of the Government's reform and that is why they will end up with greater dependency. All that has happened when that process has been employed in the past is that more and more people have found more and more ways to get round it. More of the lobby groups cry out with cases of hardship, and successive Governments have found more and more ways of increasing the benefit. It is a shrill set of rhetoric that will lead to more and more intervention in the future. The Government's big argument is that there is a serious problem and that some people, apparently, should not be on incapacity benefit. This measure does not deal with that; it leaves those people on the benefit and deals only with those who might receive it in the future. Worse, the Government are failing in their attack on fraud. Each target has been undershot. They may talk about fraud, but they are failing to deal with it. They talk about people who should not be on incapacity benefit, but they are leaving them on it—if they know who they are—and telling everybody else that it would be wrong for them to be on it. If the Government's answer is means-testing and more means-testing, clearly they have asked the wrong questions. No matter what the outcome or whether Labour Members decide to support the Government, abstain or vote against them, the Government have lost the argument. I will recommend that in another place every effort be made to return the matter to us.

Alistair Darling (Labour, Edinburgh Central)

I have no intention of following the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) very far down the road he took. His arguments against the means test might just have a little more substance if it were not for the fact that the Conservatives doubled means-testing during their 18 years in office. The only thing that I found interesting in the hon. Gentleman's speech is that he has confirmed that the Conservative party is against the minimum income guarantee for pensioners. That means that 1.5 million poor pensioners would lose out if the Conservatives were ever to get back into power. I should first speak briefly to Government amendment No. 31—which is a drafting amendment to clause 54, removing an unnecessary cross-reference to the definition of personal pensions. I shall not say anything more about it, as no one else has. I should like to set the debate in context, deal with all the points that have been made and, of course, deal with the points that have been made on our proposed reform of incapacity benefit. However, I should first make the preliminary point—especially for those outside the House who will read reports of our proceedings—that the debate has, on both sides of the House, been very good natured. I realise that right hon. and hon. Members hold different opinions on these matters, but they have very temperately expressed those opinions. It has been a very good quality debate. The proposals that we published last October, and which essentially are made in the Bill, have two overriding objectives. First, we want to ensure that we provide every possible help to enable those who can work to do so. Work on a decent wage—which we are ensuring through the national minimum wage—is the best way of combating poverty, the causes of poverty, and especially persistent poverty, which is one of the main problems that we have inherited. Disabled people want to work—2 million already do, and 1 million more on benefits say that they want to work. We want to help them to do that. Our second overriding objective is to provide far greater security than we have provided in the past for some of the most vulnerable people in society who will never work in their lives. The proposals in the Bill are a key part of that strategy and mark a radical change of direction from what the Tories did in their 18 years in office. I do not want to say much about the Tories. However, I find it very hard to take when they parade before us as the party of the dispossessed, the poor and the disabled, an advocacy that they masked particularly well in their 18 years in office, and when the hon. Member for West Dorset (Mr. Letwin) tells us that they have all been to Damascus—it is just as well that it is not in Europe, or they could not have gone there at all—and tries to tell us that he now stands shoulder to shoulder with my hon. Friend the Member for Preston (Audrey Wise).

Oliver Letwin (Conservative, West Dorset)

Will the right hon. Gentleman give way?

Alistair Darling (Labour, Edinburgh Central)

Let us hear about Damascus.

Oliver Letwin (Conservative, West Dorset)

Is the right hon. Gentleman advancing the argument that two wrongs make a right?

Alistair Darling (Labour, Edinburgh Central)

The hon. Gentleman was wrong for 18 years, and he is wrong again today. We remember how the Tories filibustered and tried to block the Bill sponsored by my hon. Friend the Member for Kingswood (Mr. Berry) to give rights to disabled people. It is this Government who introduced legislation—which was recently given a Second Reading—establishing the Disability Rights Commission. For the Tories, it did not really matter whether someone was unemployed, sick or disabled. Indeed, for them unemployment and sickness were completely interchangeable—it did not matter. That is why they cynically moved people—a whole generation of people—from unemployment on to incapacity benefit. That is why one quarter of men—double the number of 20 years ago—over 60 are now on incapacity benefit. Those people were only statistics to the Tories, whose record speaks for itself. Therefore, some of us find it very hard to take the Tories' protestations and invitation to some of my hon. Friends to stand shoulder to shoulder with them in the Lobby today. I do take seriously many of the concerns expressed, both inside and outside the Chamber, by many of my hon. Friends, and I realise the sincerity with which my hon. Friend the Member for Kingswood and, particularly, my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) expressed their views. However, I profoundly disagree with them, for reasons that I shall explain later. I also realise that many of the concerns expressed in the House today stem from the effects of long-term structural unemployment—people have low skills and low expectations; a second generation of people are growing up who really do not expect any better for themselves or their children; and children do not expect to do any better than their parents. The Tories saw that as the natural order of things—[HoN. MEMBERS: "No."] Yes, they did. No one should be left to languish on benefits for years. 5.15 pm We are changing the culture of the system. The hon. Member for Winchester (Mr. Oaten) said that we needed a change of culture. I hope that he has noticed the single gateway, which will ensure for the first time that everyone of working age gets the help that they need, with a personal adviser to help them improve their skills, get into work if they can and get the benefits and assistance to which they are entitled. That is an important change of culture. In our welfare reforms across the board, we are tackling poverty and the causes of poverty in every way possible through the help that we give and the benefits that we provide.

Julian Brazier (Conservative, Canterbury)

Will the right hon. Gentleman give way?

Alistair Darling (Labour, Edinburgh Central)

The hon. Gentleman has not been here for most of the afternoon. I should like to make a little more progress, because I anticipate that there will be interventions on other matters that I want to deal with. I shall set out what the Government are doing to help people get into work. We introduced the new deal. It was opposed by the Conservatives and the funding was opposed by the Liberal Democrats. In 15 areas we are piloting—

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

Get on to the amendments.

Alistair Darling (Labour, Edinburgh Central)

The Conservatives do not want to hear this. We are helping disabled people get into work. We are making work pay. The minimum wage will bring 700,000 women into the national insurance system. The disabled persons tax credit—[Interruption.]

Michael Martin (Deputy Speaker, Glasgow Springburn)

Order. There should be silence, with the exception of the Secretary of State.

Alistair Darling (Labour, Edinburgh Central)

The disabled persons tax credit is worth £155 a week. As my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) said, we have extended the linking rules that allow people to try out work before they lose their entitlement to benefit. Under the Tories, they had only eight weeks. Under the arrangements that we have introduced, disabled people can try out work for up to two years without losing their original benefit. This week we have extended the disabled persons tax credit. Someone who has left work because of a disability or an injury and returns to work earning 20 per cent. less than they would have done otherwise will have access to the disabled persons tax credit. The Tories did none of that. All the measures that I have mentioned are new and show the qualitative difference between our approach and that of the Conservatives. Our second objective is to provide security, because we recognise that there are some who cannot work. The system clearly does not do enough for the most severely disabled people. We are increasing child benefit for everyone. We have invested £2 billion in the new state second pension for carers and for disabled people with broken work records. Costs have been referred to a lot this afternoon. That measure alone represents a £2 billion investment that has not been made before. It is not true that our reforms for disabled people are driven by a desire to save money. We shall save unnecessary expenditure and concentrate help where it is needed. We have a new £22 child credit for children of disabled parents. The disability income guarantee will benefit 175,000 people. The extension of disability living allowance to three and four-year-olds is worth another £35 a week. Our reforms to the severe disablement allowance give more help to severely disabled young people by up to £26 a week. Our approach to SDA—

Alistair Darling (Labour, Edinburgh Central)

The subject is covered by amendments Nos. 7 and 86. Just sit back and listen. Severe disablement allowance is paid at the rate of £54.40 a week. It is so low that 70 per cent. of people on it have to claim income support. Their SDA does not help them, because every penny of it is taken into account in calculating their income support. The original purpose of the benefit was to help people who never had a chance to work because they were disabled at birth or early in life. That is why we are increasing the benefit for young people from £54 to more than £80 a week. That is an example of looking at benefits, asking whether they serve the purpose for which they were intended and increasing them. Some 175,000 people will gain from that. They also have access to the universal, non-means-tested DLA, which is worth up to £89.95 for the most severely disabled people. We wanted to provide more security for people who, by any view, need our help, and we are doing that. I wish to refer to the amendments that we are making in relation to incapacity benefit and, in so doing, deal with amendment No. 12 and the others that have been mentioned. While we are providing more help for severely disabled people and more help to get people into work, we want to ensure that the system is brought up to date to reflect changing conditions. As in all of our reforms, none of the changes that we are making will affect people currently getting incapacity benefit. Unfortunately, the newspapers sometimes forget to mention that, but I hope that people will bear it in mind. We intend to restore the benefit to its original intention, which was to replace income that people lost as a result of sickness and disability. I want to set out how, under the new rules, people will qualify, because there seems to be some misunderstanding—certainly among the Opposition. Under our proposals, people will still be eligible for incapacity benefit after two years—or, in some circumstances, for as much as three and a half years after becoming unemployed. I believe that the conditions are fair. Someone on average earnings can work for as little as four weeks in all during a two-year period prior to a claim, or 12 weeks for someone earning the national minimum wage. It is right to link eligibility for incapacity benefit to recent work. There are thousands of people now who satisfy the medical tests for incapacity benefit, but not the contribution conditions—I will return to them shortly—who are on income support, which can, in some circumstances, provide £73 a week, more than the £66 a week for incapacity benefit. The most severely disabled people on income support would also get help from the new disability income guarantee and disability living allowance, which can provide help of up to £90 a week, as my hon. Friend the Member for High Peak (Mr. Levitt) said. The hon. Member for Maidenhead (Mrs. May) referred to the medical test, as have one or two of my hon. Friends. Throughout this afternoon, there has been much talk of a perceived lack of consultation. One of the things that I considered was whether we ought to amend the medical test. We are doing so in one way, to which I shall refer in a moment. If anyone thinks that there is some unrest about what we are doing, I can assure them-this was made clear to me by the disability organisations to whom I talked—that if those organisations had thought for one minute that we would try to solve a perceived problem by ratcheting up the medical test to make it more difficult to qualify medically, there would have been just as much trouble. That is not the right thing to do. We know that there are problems with the all-work test, which is patently subjective. I do not think that the option of ratcheting it up would be right. As part of our reforms in the Bill, we are introducing a new personal capability assessment. What was wrong with the all-work test—a bit of a misnomer—was that it concentrated on what one could not do, rather than on what one could do. Surely our proposal is the sensible way to go. The hon. Member for Maidenhead referred to someone suffering from multiple sclerosis or a similar degenerative condition. Because of the way in which the contribution conditions are structured, anyone knowing that they were slowly going to come out of the labour market—given what I have said about the number of contributions that would have to be made in the preceding two years—could easily manage their departure from the labour market. The disabled persons tax credit and the national minimum wage mean that somebody coming out of the labour market that way has more purchasing power and more national insurance contributions than otherwise. Of course, the Conservatives are against the national minimum wage and the disabled persons tax credit—both of which are helping people. Many hon. Members today have spoken about one of the difficulties, in that people on low wages or with low national insurance contributions will not qualify. Of course, part of the problem is that they do not qualify now. In many ways, this comes to the crux of the problem with the contributory system, which excludes many people who earn low wages. I made it clear in the welfare reform Green Paper—as did my right hon. Friend the Chancellor in the Red Book—that we want to look at the relationship between pay and contributions and entitlement to benefit. I can confirm that that study has been going on for some time, because we have to look at the link between low, part-time earnings and benefits in that context. We have already given young women on low earnings access to maternity allowance; it was one of the changes included in the Budget earlier this year. I want to do more, because we should certainly help those who deserve to be rewarded for doing a little bit of work. I have in mind people who have retired because they are not well, but continue to do a little work. I am not in a position to make an announcement today, but we are certainly considering the problem.

Joan Walley (Labour, Stoke-on-Trent North)

Will my right hon. Friend take account of the fact that in some of our manufacturing heartlands there is greater unemployment? In my area, we have lost 2,300 jobs in the past 12 months. Will the study take account of the people who are out of work and cannot qualify for IB, although they may be unfit and could be eligible in other parts of the country? Will the Government consider linking the benefit to jobseeker's allowance?

Alistair Darling (Labour, Edinburgh Central)

My hon. Friend has taken the trouble to send me some very detailed proposals and I repeat that I will certainly consider them, but I do not want to give undertakings that I cannot deliver. My point was that we need to consider the cases in which people do a very limited amount of work for which they get no credit whatever. The clear message must be that if people are able to work and make that effort, we should be able to reward them. The fact that we intend to take some account of occupational pensions when considering claims for incapacity benefit is the change that has been the subject of the most attention today. When I have explained the background, I will be happy to answer questions from right hon. and hon. Members. In 1953, 28 per cent. of people had occupational pensions; now the figure for men is 86 per cent. and for women working full-time about 77 per cent. We have to bear in mind that nearly half the people who retire early on IB, with an occupational pension, are in the higher income bracket—in the top 40 per cent. It is right in principle that there should be a partnership between individuals and the state to share in providing for early retirement because of sickness or injury. There must be an insurance against such early retirement. We should take account of the changed circumstances and create that partnership. If one were designing a system today, one could not and would not ignore the fact that, for example, almost 100,000 people on IB have an average pension of £230 a week, with incapacity benefit of £66 on top. I do not regard those as the most vulnerable people, as the hon. Member for Newbury (Mr. Rendel) said. We are taking account of the fact that people are making their own provision for the eventuality. The principle of partnership, allowing us to direct more resources to people who need the help, seems right to me. The change will affect only a minority, who will, after all still be £50 a week better off than if they were getting IB alone. I believe that that approach is right. During the debate, many hon. Members expressed concern about the £50 threshold and its taper.

Lynne Jones (Labour, Birmingham, Selly Oak)

My right hon. Friend omitted to mention that 140,000 people on IB have a pension of between £50 and £100 a week. They will be penalised by the changes. He also did not mention that only a third of disabled people—much lower than the average—have occupational pensions. He talks about people being in the higher income bracket. Will he confirm that that includes disability living allowance, which is supposed to recognise such people's additional costs? if we took off that amount, they would be unrepresented in the higher income bracket.

Alistair Darling (Labour, Edinburgh Central)

I am grateful to my hon. Friend, but possibly not in the way that she intended. She was leafleting us in the Lobby last night, and I was handed a copy of the leaflet by a well wisher. The figures I have quoted do take account of the DLA. When the Government consulted on the figure of £50, we took account of the fact that 80 per cent. of people on IB have incomes of less than £50. The vast majority will therefore not be affected by the proposal. The Bill will not come into force until April 2001, and it was with that in mind that I told the House earlier this year that the £50 threshold will be kept under review".—[Official Report, 23 February 1999: Vol. 326, c. 222.] When the Bill was drafted in January, I wanted to ensure that the £50 level, and the taper, could be kept under review, and that is why the numbers do not appear in the Bill. I was determined to ensure that the principle of partnership was clearly established.

Chris Mullin (Labour, Sunderland South)

My right hon. Friend rightly identifies this issue as one on which Labour Members feel much unease, including those of us who feel we can live with targeting. What assurance can he give us today that the concern expressed in the House has been listened to?

Alistair Darling (Labour, Edinburgh Central)

Concern has been expressed, which is why I said in February that I would keep the issue under review. I will have to lay regulations bringing in an appropriate figure towards the end of next year. I assure my hon. Friend that I shall listen to what people have to say. I am bound to consult on the matter and I shall propose a number to the House that I believe is fair and reasonable. I have no hesitation in giving my hon. Friend the assurance he seeks.

Chris Mullin (Labour, Sunderland South)

For the avoidance of doubt, I wish to confirm that my right hon. Friend is saying that the £50 that is presently proposed—and the rate of clawback—could be adjusted when he brings the regulations to the House in around a year's time?

Alistair Darling (Labour, Edinburgh Central)

I said that on 23 February. The number does not appear in the Bill because it was always within my contemplation that it would have to be increased on occasion—[Interruption.] Conservative Members complain about that, but if the number stayed stuck at the same level it would start to cut into people's incomes. I confirm that my hon. Friend's understanding of the position is correct. The principle of partnership and sharing is what is important. The Government will make proposals on the actual amount and the rate of the taper in the second part of next year and the House will have ample time to debate them.

Nick Palmer (Labour, Broxtowe)

rose—

Norman Godman (Labour, Greenock and Inverclyde)

rose—

Desmond Turner (Labour, Brighton, Kemptown)

rose—

Alistair Darling (Labour, Edinburgh Central)

I shall give way to my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) and then I must make some progress, because my hon. Friend the Member for Kingswood needs to reply.

Desmond Turner (Labour, Brighton, Kemptown)

I am glad to hear that my right hon. Friend has plans to be flexible about the level and the tapers, but will he explain why the only income that will be taken into account for means-testing purposes is pension income to which the person has contributed?

Alistair Darling (Labour, Edinburgh Central)

It is because people contribute to their pensions and other such savings precisely to make provision for such contingencies. I repeat that it is right that there should be a partnership between individuals and the state to make provision in such cases, although I recognise that some of my hon. Friends disagree with me—[Interruption.]

Michael Martin (Deputy Speaker, Glasgow Springburn)

Order. The Secretary of State would assist me if he faced the Chair. Interventions are not helpful at this stage [HON. MEMBERS: "Oh!] I am talking about sedentary interventions. I request some quiet while the right hon. Gentleman is delivering his speech.

Michael Connarty (Labour, Falkirk East)

rose—

Alistair Darling (Labour, Edinburgh Central)

I would dearly love to give way to my hon. Friend, without any knowledge of what he is going to say, but as I refused to take an intervention from two of my hon. Friends earlier, I cannot give way to him. I want to cover one further point, spending—[Interruption.] Conservative Members do not like that one bit, and that is why they are heckling. Let me put the Bill in context. This year, we will spend £25 billion on benefits for the sick and disabled. The sum will increase by about £2 billion during this Parliament, mainly because of the growth of disability living allowance. I ask the House to consider our proposals in the round, including the proposal to give carers and disabled people with broken work records access to the new state second pension, which will be of great benefit to low-paid people. Someone earning £;6,000 a year at present who is on the state earnings-related pension scheme would receive only £13 a week as a pension. Under our proposal, that person would receive £46 a week. That is just one example of how the Government, unlike our predecessor, are helping people who need it most. Our pension proposals will cost a further £2 billion over the years. The whole package that we are proposing and all that the Government are doing for the disabled are, on any view, fair, balanced and right things to do. They are right in principle and they are right in practice. No matter what the Tories say today, they told us at the weekend that they would pay for their tax cuts by slashing welfare handouts, as they call them. We know that there is a £6 billion black hole in their sums. Nearly 80 per cent. of DSS spending goes on pensioners, disabled people and children. Before the Tories try to share a Lobby with some of my hon. Friends, they ought to tell us which benefit they intend to cut. Their pretence that they are on the side of the disabled—or anyone else—rings hollow. The Labour party built the welfare state just after the second world war. It was one of our proudest achievements. One reason why the Government were elected was our determination to safeguard the future of the welfare state. We believe in it. We believe in helping people who have a disadvantage to overcome that disadvantage. We believe in doing more to help them. Hon. Members must look at the whole package in the Bill and at everything that we are doing to help people—the Disability Rights Commission, the disabled persons tax credit, help to stay in the workplace, more money for the severely disabled—[Interruption.]

Michael Martin (Deputy Speaker, Glasgow Springburn)

Order. There is far too much noise in the Chamber. The House must come to order.

Alistair Darling (Labour, Edinburgh Central)

The Tories do not like what I am saying. No matter what the reservations of some of my hon. Friends, they know that when it comes to the test, the Government will do more for people with disabilities than the Tories would ever do. What we propose is fair and reasonable. It does more for the young severely disabled. It does more to help people into work. It brings the benefits system up to date. Such action can be difficult, but it is essential that we do it if we are to maintain people's confidence in and support for the welfare state. I acknowledge that many of my colleagues have specific concerns. I have tried to deal with some of them today. I shall try to deal with others in the future. The process of reform takes time, but the amendments, which strike out a substantial part of the Bill, cannot be justified. I ask my hon. Friends to think very carefully before supporting them. Labour Members—even those who support the amendments—have acknowledged all the good that the Government are doing. It is important that the country should understand the good that we are doing, not only for disabled people but for others. To my colleagues and to the House as a whole, I can say only this: judge us in the round and support our approach today.

Roger Berry (Labour, Kingswood)

I thank my right hon. Friend for his remarks. He said that the debate had been good natured. That is true, but there are honestly and passionately held differences of opinion on both sides of the debate. I will depart from being good natured only to repeat a point that I made earlier. I will take no lectures from Conservative Members of Parliament about the Government's policy on disabled people. This Government have done far more than any other for disabled people and they deserve our support. They have the support of all hon. Members who signed amendment No. 12. Indeed, many of us have spent day after day expressing support for the new deal, the Disability Rights Commission, and similar initiatives. I do not want the excellent work that our Government are doing to support equal rights and equal opportunities for disabled people to be cast aside by the public, who will look at clauses 53 and 54 and wonder why a Government who are delivering so well on everything else are planning to cut incapacity benefit for disabled people who are unable to work. The one thing that we have agreed this afternoon is that this is a debate about benefits for disabled people who are unable to work. What the Tories might or might not have done to shuffle people on to incapacity benefit is totally irrelevant to this debate and has been recognised as such for the simple reason that the clauses are about future, not past, claimants. If there is an issue about entitlement to incapacity benefit in the sense of whether people are capable of work or not, we should be looking at the all-work test or its successor. I say to my right hon. Friend the Secretary of State that disability organisations—through the Disability Benefits Consortium, for example—have consistently said to me and in public, "If your worry is about people swinging the lead, or whatever expression you want to use, then let's discuss that gateway." However, a concern about that is no reason for taking the right to claim benefit away from 170,000 people who are disabled and cannot work because they have not paid contributions in the past two years. It is no case for means-testing either.

Dafydd Wigley (Plaid Cymru, Caernarfon)

rose—

Roger Berry (Labour, Kingswood)

With respect, I do not have time to give way. According to the Department's figures, a total of 335,000 disabled people who are unable to work will lose out. I appreciate the Secretary of State's reference to possible further consideration of the threshold. I would simply say this to right hon. and hon. Members. The Bill now has to go to the other place, where there will be an opportunity for further debate. I hope that it will be as constructive a debate as we have had this afternoon. I earnestly desire—this is the wish of all those who signed amendment No. 12 and other supporters who did not sign it—that when the Bill returns from the other place, we will be 100 per cent. proud of it and not merely 98 per cent. I earnestly believe that the best way of ensuring—that is too strong a term—or of helping bring that about is to support amendment No. 12 in the Lobby and I urge my right hon. and hon. Friends to do so.

Iain Duncan Smith (Conservative, Chingford and Woodford Green)

On a point of order, Mr. Deputy Speaker. We have today witnessed a most significant disaffection in the House. The governing party is split over an important issue affecting severely disabled people. Is it not right that the Secretary of State should come to the Dispatch Box to explain what he will do to change the legislation?

Michael Martin (Deputy Speaker, Glasgow Springburn)

The Chair has no views about such matters.

DUTY AS AN EMPLOYER TO OFFER PAYROLL DEDUCTION FACILITY

Quentin Davies (Conservative, Grantham and Stamford)

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

Michael Martin (Deputy Speaker, Glasgow Springburn)

With this, it will be convenient to discuss the following amendments: No. 83, in clause 1, page 2, line 20, at end add — '(10) Approved Group Personal Pensions shall be deemed to be stakeholder pensions for the purposes of this Part.'. Government amendments Nos. 42 and 43. No. 80, in clause 3, page 3, line 41, at end insert — '(5A) The fifth requirement is that the employer shall require a certificate from the designated scheme to the effect that none of his employees will be admitted to membership of that scheme without evidence that that employee has taken independent advice in relation to his pension provision.'. No. 81, in page 3, line 41, at end insert — '(5B) The sixth requirement is that, for the purpose of calculating the income tax payable to the Inland Revenue under PAYE in respect of an employee exercising his option under subsection (5) above the employer shall disregard — (i) the first £5,000 per annum of any pensions payments made under this section, or (ii) such amounts as shall be calculated by reference to age-related tables supplied by the Inland Revenue showing the percentage of earnings which may be claimed as tax-deductible contributions to personal pensions schemes, provided that the employee shall be given the right to choose between £5,000 per annum and the relevant age X2013;related percentage of earnings.'. Government amendments Nos. 44, 28 and 46.

Quentin Davies (Conservative, Grantham and Stamford)

It has been a very dramatic afternoon. Almost anything that occurred — [Interruption.]

Michael Martin (Deputy Speaker, Glasgow Springburn)

Order. The business of the House is continuing. Hon. Members should leave the Chamber quietly.

Quentin Davies (Conservative, Grantham and Stamford)

Almost anything that occurred after this afternoon's events would be an anticlimax. Indeed, the events of this afternoon are without precedent in this Parliament —and for quite a long time before that. The Government have tried to muzzle Parliament using a disgraceful guillotine motion, which denies the House the right to vote individually on Government amendments. We are not allowed to take issue with Government amendments, to select between them or to move our own amendments. If the many countries around the world that so admire British democracy were to learn of the way in which we conduct our proceedings in this place —a Government with a substantial majority have forced through an obnoxious measure affecting disabled people by the use of a guillotine —they would be quite shocked. They would wonder what kind of Parliament we have. Nevertheless, the voice of Parliament has been heard. It is clear that there is grave concern on both sides of the House about the damage the Government are doing to our welfare system, our national insurance system and to the interests of some very vulnerable people in this country. We have the good fortune to have a two-Chamber legislature in this country, and we all hope that the business that this House has so unfortunately and dramatically left unfinished this afternoon will be taken up in another place and that the right decisions will be made. 6 pm It now falls to me to speak to new clause 13 and amendments Nos. 83, 80 and 81 in my name and those of my hon. Friends. New clause 13 is in some ways a summation of the Conservative Opposition's views on the Government's stakeholder pension proposals, so it might be sensible if I were to address that last, and proceed to it by dealing first with the other amendments. Amendment No. 80 deals with the vital matter of the advice that people need when they make the decision, which is crucial to their future, as to whether they should invest in a pension, and if so, what kind of pension. The Government have clearly effected an amusing U-turn on that matter.

John Bercow (Conservative, Buckingham)

Does my hon. Friend agree that it is unfortunate that, as he begins to address a series of important matters, the Secretary of State has left the Chamber? Does my hon. Friend think that the right hon. Gentleman has done so in something of a huff?

Quentin Davies (Conservative, Grantham and Stamford)

If the right hon. Gentleman has any human feelings —I am sure that he has —he must be feeling intensely embarrassed. As my hon. Friend knows, when one feels intensely embarrassed and one has got oneself and one's party into a terrible mess, one tends to avoid other human company, particularly in places as public as the Chamber. [Interruption.]

Michael Martin (Deputy Speaker, Glasgow Springburn)

Order. We cannot have all this arguing and shouting across the Floor of the Chamber.

Quentin Davies (Conservative, Grantham and Stamford)

We can all feel some sympathy for the Secretary of State's wish to hide his face at this juncture.

Kali Mountford (Labour, Colne Valley)

Will the hon. Gentleman give way?

Andrew Bennett (Labour, Denton and Reddish)

rose—

Quentin Davies (Conservative, Grantham and Stamford)

I shall be happy to give way to the hon. Gentleman in a moment, but the hon. Lady, who played such a charming part in our Committee proceedings, caught my eye first.

Kali Mountford (Labour, Colne Valley)

I am grateful to the hon. Gentleman for giving way —he is always courteous. Will he describe to the House the embarrassment that the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), the shadow Secretary of State, must also be suffering?

Quentin Davies (Conservative, Grantham and Stamford)

I have no idea to what the hon. Lady is referring. No Conservative Member is suffering embarrassment about this afternoon's proceedings; far from it. There is no gloating, because this is an important matter and we have not succeeded in securing the necessary protection for the interests of disabled people, but our attitude is clearly far from being one of embarrassment. I will now give way to the hon. Member for Denton and Reddish (Mr. Bennett) if he still wants to intervene.

Andrew Bennett (Labour, Denton and Reddish)

It seems odd that Conservative Members are making a fuss about my right hon. Friend the Secretary of State leaving the Chamber when the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) did exactly the same. Obviously, he had decided that this is not a key issue.

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Gentleman not only gives me the opportunity but almost obliges me to make a point that I did not intend to make because I do not want to add to the Secretary of State's discomfort at a difficult moment for him. However, in the light of the hon. Gentleman's intervention, I must remind the House —we were all here and witnessed it —that my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) was here throughout the proceedings that lasted from Monday night until Tuesday morning. He may have left, as I did, for a few minutes at a time for particular reasons, but he was here for almost 14 hours, as many of us were. The Secretary of State managed four minutes in the Chamber, so embarrassed was he already at the growing storm created by his clumsy and insensitive handling of the matter. I must return to the important issue of advice. Labour Members sprung up to try to intervene on my speech and divert me from my course because, as I said, the Government have performed a hilarious U-turn on the matter. I would be the last person to try to take advantage of someone who had honestly changed their mind, provided they had the straightforwardness and honesty to say so and, if carrying out public responsibilities —as the Government self-evidently are —to explain to the House and the public why they have changed their mind. Instead, we have had a 180 deg U-turn on advice, with the Government pretending that it has not been a U-turn. I shall read one or two quotations to make it absolutely plain how the Government's position on advice has changed so much. I shall start with the Green Paper, "A New Contract for Welfare: Partnership in Pensions", which the Government produced as recently as December 1998 —the document that we have had occasion to refer to in our proceedings several times, and which I do not doubt that we shall have to refer to again. On page 56, at paragraph 48, it says: We intend to reduce, as far as possible, the need for individuals to seek financial advice when they consider joining a stakeholder pension scheme. That was very plain, and it is clear that the Minister of State continued in that frame of mind for at least another few months because, on 30 January, he was quoted in The Daily Telegraph as saying: we can enable more people to make a reasonable decision about joining a pension scheme without the need for detailed individual advice. Once we got into Committee, I made it plain to the Minister that it was thoroughly irresponsible to think of people taking a decision on a matter as important as their pension without detailed individual financial advice. I also made it plain to him that the Government, by their ham-handedness and incompetence, had introduced into pensions a degree of gratuitous complexity, fragmentation and detail, which made it even more necessary for people to seek advice. The Minister obviously took notice of those points, because he started subtly to nuance his position and then began to do a complete volte-face. For example, in Committee he said exactly the opposite of what he had told The Daily Telegraph only two months before. He said: It is vital that people can seek financial advice when they consider joining a pension scheme and that they will receive good and accurate advice." —[Official Report, Standing Committee D, 9 March 1999; c. 113.] I quite agree with him about that. By 27 April, his boss, the Secretary of State, whom I mentioned just now in a different context, said: Certainly on something like a pension, which is more important than buying a house," — he is right about that — there has got to be some provision for advice". Recently, the Minister of State gave a written answer to my hon. Friend the shadow Secretary of State for Social Security, in which he said: Appropriate information and advice for those who need it will be an important part of the decision-making process for individuals considering a stakeholder pension scheme." —[Official Report, 10 May 1999; Vol. 331, c. 53.] Therefore it is absolutely plain that the Government have fundamentally changed their mind. I am glad that they have changed their mind, but I wish that they had had the straightforwardness, and perhaps the modesty —not a quality that has been pre-eminent in the present Government —to admit that they were wrong in the first place, and that they have come round. I emphasise, as I did in Committee —causing the Government to change their mind —that it is now much more problematic than it ever has been for people on modest or small earnings to decide whether they should save for a pension at all. 1 have previously set out in the House, my calculation that one needs to save at least £80,000 in one's pension scheme before the annuity that one would get at the age of 60 will equal the minimum income guarantee that the Government have introduced for pensioners —which is means-tested —plus the other means-tested benefits: housing benefit, council tax relief and so on. If one did have —80,000, one would have an annuity exactly equal to what one would have got if one had never saved at all, and one would have lost —80,000 of consumption in the course of one's life. That means that one's family and oneself would have gone without a lot of things that everyone might have enjoyed. The threshold is much higher than £80,000 and is growing all the time as it is bound to, not least because of the Government's foolish decision to promise that the minimum income guarantee will be indexed to earnings and will rise with them. The state retirement pension rises in line with prices. That is another thoroughly irresponsible decision and one which is deeply destructive of the principle of national insurance. The Government are basically saying that they will review and revalue a means-tested payment for which no one has contributed at a higher rate than payments for which people have contributed through the national insurance system.

Steve Webb (Liberal Democrat, Northavon)

I bring the hon. Gentleman back t) amendment No. 80, which he started to describe. I accept that it is desirable for advice to be available and that the giving of advice should be encouraged, but, as 1 read it, amendment No. 80 makes it compulsory to take advice. Is that his intention and should people be forced to take advice, even if they are well informed and do not need it?

Quentin Davies (Conservative, Grantham and Stamford)

Amendment No. 80 makes taking advice compulsory in the sense that, as at present, anyone who is selling a pension must make sure that the sale is appropriate, that the purchaser has received advice and that someone has taken a view on whether the pension is appropriate. People can simply walk into a life office and buy a pension, as long as the office is convinced that they have taken independent advice. However, it is up to those who are selling pensions to know their customers and to determine that what they are selling is appropriate. That is the basis of the rules applied by the financial regulators.

Stephen Timms (Labour, East Ham)

The hon. Gentleman is making an interesting case, and I look forward to responding to it. Does he take the view that people joining occupational pension schemes should also take advice?

Quentin Davies (Conservative, Grantham and Stamford)

I take the view that trustees of occupational pension schemes must get it quite clear in their own minds, as part of their fiduciary responsibility to their pensioners, that the product that is being sold is appropriate. By definition, an employer-only contribution scheme is a good deal for the pensioner because it involves him receiving something that he would not otherwise receive. If an employee is also making contributions, the trustees clearly have a fundamental duty to make sure that the scheme is a good deal for the pensioners involved. There is protection, and we want to make sure that exactly the same kind of protection exists in stakeholder pension schemes. We want to make sure that that fundamental principle is safeguarded when employers provide a pension facility or when the pensions industry provides a pension, in the stakeholder context or in any other context.

Angela Browning (Conservative, Tiverton and Honiton)

Will my hon. Friend give way?

Quentin Davies (Conservative, Grantham and Stamford)

Yes, but we have little time at our disposal. This is the last intervention that I will take.

Angela Browning (Conservative, Tiverton and Honiton)

People on lower incomes, who the Government say are their targets for such pensions, could have earnings from more than one part-time job. Is not it crucial that they receive the right advice about their pension input?

Quentin Davies (Conservative, Grantham and Stamford)

It is indeed important that those people receive advice about pension input. Even if the earnings from their individual jobs are below the lower earnings limit, the sum of their earnings may be such that it would not make sense, in the light of this extension of means-testing, for them to make any provision for themselves at all. That position is sad and ironic —it is not one that we would have wanted to get into, but, unfortunately, it is one into which the Government are putting an ever-wider range of our citizens. That is the great problem —they still have not seen that one, even though they appear to have accepted the arguments about advice in principle. I set out a number of other specific cases in our pensions debate last week. People obviously need complex, individual, targeted and tailored advice. For example, someone earning £9,000, who would be on the borderline for the proposed state second pension, would need advice on whether to stay in that scheme. People earning slightly more than £9,000 would also need advice on whether to stay with that scheme and on where the cut-off point comes. They would need advice on whether to join an occupational pension scheme or whether to take a personal or a stakeholder pension. These are complicated issues and the specifics of the individual must be taken into account. Generalised answers cannot be given. A young person expecting to change jobs or to become self-employed might well do much better to opt for a money purchase scheme rather than a final salary scheme, while someone expecting to stay for a long time might do better to opt for a final salary scheme. 6.15 pm Higher up the income scale —the scale from, say, £9,000 to £20,000, £25,000 or £30,000, which has been targeted for the purpose of stakeholder pensions —complicated individual decisions must still be made. People must ask themselves whether they should take out a personal pension or a stakeholder pension. They may already have a personal pension with costs that are apparently higher —but those costs may have been paid at the outset. In terms of the marginal, or incremental, costs, a personal pension may be a much better option than a stakeholder pension. All those decisions require professional advice —actuarial advice. It is monstrous of the Government to suggest, as they have in a number of recent statements, that it is satisfactory for people to be left to pay for that advice themselves. It is cruel and cynical to tell someone with an income of £9,000 a year to consult an actuary or accountant: the cost of such professional advice would almost certainly enter into the equation, and influence the decision about whether the person should save for a pension at all. If the advice is not given, however, two things will happen. The person concerned may well be wasting his or her money —and it is particularly sad if someone with low earnings is led by the Government into wasting his or her hard-earned money. Moreover, employers who, if the Bill ever becomes law, may be forced to designate a pension scheme, and the pension companies that might provide the schemes, may be open to a charge of mis-selling unless the advice is provided. Amendment No.80 proposes that, before a pension is sold, the employer must ensure that the person concerned has been properly advised. Employers may sometimes be able to discharge the responsibility themselves by ensuring that independent advice is available, but such a responsibility would impose an unreasonable burden and an unreasonable cost on smaller employers. Trade unions and similar bodies might be able to help, and we would welcome that; but we insist that advice should be given, and that the principle currently applying in the pensions market should apply in this instance. The purpose of those rules in the pensions market is to prevent further mis-selling. As we all recognise, we had a bad mis-selling scandal in the 1980s, and I hope that we have learned some lessons from it. Until a couple of months ago, the Government did not appear to have learned any lessons, but they have learned one lesson now: they know that there will be terrible mis-selling —mis-selling on an unprecedented scale —unless the issue of advice is dealt with properly. They say that they now accept the need for advice, but they still have not told anyone how they will pay for it. Let me now deal with amendment No.81, which concerns tax. One of the stupidest things that the Government have done has been to introduce, unnecessarily and gratuitously, a second tax regime for pensions —a second set of rules determining tax deductibility in the case of those who join stakeholder schemes. The Government say that those who join such schemes will be able to deduct £3,600 from their income by way of a tax credit, whereas the existing Inland Revenue sliding scale —involving a percentage of earnings increasing with age —will continue to apply to those who opt for personal pension schemes. The Government are so incompetent that they do not seem to have taken into account what will result from the mere fact of having two different tax regimes. I shall say more shortly about the merits or otherwise of their proposed regimes, but the existence of two regimes in itself will increase the uncertainty and the complexity of the calculations that will need to be made, and will make it even more difficult for people to decide whether to opt for particular pension schemes. I trust that the Minister has finally understood the point about advice. Perhaps he will now understand the point about tax. He is certainly not a foolish individual, and he has a good business record himself. Perhaps his hands are tied — and his feet, and his mouth —by his bosses, or by the Treasury. In that case, I hope that he will be a bit more vigorous in persuading them to be more sensible. Let us look at the case of someone who is considering going into a pension scheme and is thinking of a stakeholder or a personal pension. If his income is £20,000 or less, he has decided that he needs a funded individual pension and he never expects to earn more than that in real terms, no doubt, the £3,600 is totally adequate. However, he may hope to get promotion, a pay increase or bonuses for good performance. We want a society and economy where people have a chance to increase their earnings, particularly through higher performance. We want people to be able to use their bonuses to fund a pension, savings and so forth. At least I think we do; Conservative Members certainly do. In that case, clearly, he should not go into a scheme where the tax deductibility of pension contributions is limited to £3,600 a year. He might want to make contributions that will give him greater tax deductibility and tax relief on the Inland Revenue sliding scale. That would be a reason to take out not a stakeholder, but a personal pension. The worse scenario would be to take out a stakeholder pension, to meet the costs of setting up that scheme and, a few years later, to have to close that, to move into a personal pension and to pay a whole lot of new transactional costs to set up a new scheme. That would not make any sense. Again, it is deplorable that the Government have not been able to work that one out themselves. Amendment No. 83 deals with group personal pensions. [Interruption.] Someone took away my copy of the Green Paper. That took my breath away, at least for a moment or two. On group personal pensions, another wonderful U-turn is in process; at least I hope it is because the Government's initial proposals were deeply damaging. Page 53, paragraph 29 of the Green Paper makes it plain —it could not be plainer in the English language: Existing personal pensions will not therefore be able to describe themselves as stakeholder pension schemes. Personal pensions will not be able to be passported into, in the modern jargon, the stakeholder system. People who have a personal pension of any type could not treat that as their stakeholder pension. Employers who had set up a group personal pension scheme could not treat that as the discharge of the obligation, which is placed on them in clause 3, to set up a stakeholder scheme. That is extremely regrettable because it will mean that many good pension schemes, including group personal pensions, which invariably, in every example known to me, involve an employer contribution, will have to be wound down. Employers would then have to set up another stakeholder scheme, which does not require an employer contribution at all. Therefore, if employers are feeling slightly less generous, or are simply exasperated by the Government forcing them to run down one good pension scheme for their employees and to set up another, they might take the opportunity either to reduce, or to eliminate their contribution altogether. That would be terrible for the employees concerned and a great blow to pensions. That is thoughtlessness at best. At worst, it would have been a deliberate attempt to destroy at a stroke a valuable part of our pension structure, but I think that the Government are guilty more of ignorance and incompetence than deliberate destructiveness. You will note, Mr. Deputy Speaker, that I am capable of being very kind to the Government.

Eric Pickles (Conservative, Brentwood and Ongar)

My hon. Friend is a generous man.

Quentin Davies (Conservative, Grantham and Stamford)

As my hon. Friend kindly says, I am a generous man. I hope that that characterisation is always justified by my conduct in the House and, indeed, elsewhere. The U-turn, which is perhaps now taking place, has not been announced to the House. Such things are announced in the press or the media, but never to the House. On 28 April, the Secretary of State gave an interview to the Financial Times and said: Some group personal pensions may be allowed to label themselves as stakeholder pensions. Alistair Darling, the Social Security Secretary has said. That could remove the need for employers to separate stakeholder pensions to their employees". In a written answer to my hon. Friend the Member for Chingford and Woodford Green, the Minister of State said: Group personal pensions will be able to register as stakeholder pension schemes provided they meet the required conditions for such schemes." —[Official Report, 10 May 1999; Vol. 331, c. 53.] That is an even stronger move sin the direction of allowing personal pensions to count as stakeholder pensions. That is a 180 deg contrast with the statement in the Green Paper. We have tabled our amendments because of all the U-turns by the Government. There has been no explicit acknowledgement by the Government that they have got it wrong. I do not want to labour that because, if they are not big enough to admit that they occasionally make mistakes, that is too bad for them. They should at least come to the House to make these announcements plainly and unambiguously because they are creating great uncertainty outside. People in the pensions industry look at the Green Paper, which they are entitled to believe represents Government policy until it is changed, and they then see newspaper articles and remarks attributed to Ministers, and they do not know where they are. It is contributing to an unfortunate crisis which is paralysing our pensions market. Employers and pension funds are frightened to move forward and sell stakeholder pensions because of the danger of mis-selling, to which I have already referred, and the absence of any assurance that there will be independent advice. They do not know what the rules of the scheme will be because they do not know what the Government mean with their confusing proposals such as stakeholders, LISAs —lifelong individual savings accounts —and so on. Also, individuals are rightly and reasonably confused and hesitate to make decisions in the absence of advice. We are tabling our amendment to remove the uncertainty, at least in relation to group personal pensions, to give companies the confidence to continue with these schemes and, I hope, to encourage companies who do not have existing provisions for their employees to start them. The amendment would make the regime clear within the Bill. If we achieve some clarity after six months of debate that will be an achievement of some kind. I described new clause 13 as a summation of our views on stakeholder pensions. It incorporates many of the lessons learned from the Government's extraordinarily shambolic treatment of the matter over the past few months. We do not start on a completely blank sheet of paper, nor should we. However regrettable and unfortunate it may be for many people from the pensions industry right through to the disabled, the Labour Government are in power. They have a democratic mandate and have produced a Bill to set up a stakeholder pension system. We are looking positively to see whether there is something that we can save from the wreck or on which we can build a constructive and worthwhile structure. We are perfectly happy with the idea of employer obligations to set up a payroll deduction facility. In the pensions debate last week, the Government asked my hon. Friends and myself, perfectly reasonably, about the Conservative party's policy on pensions. They now have it in black and white in new clause 13 and I hope that they will accept it. It is a stakeholder pension scheme based on the employer obligation to provide a free payroll deduction facility for payments into any approved pension vehicle. 6.30 pm Hon. Members should note that the new clause would oblige employers to establish a specific payment facility on a payroll-deduction basis, as they currently administer the pay-as-you-earn and national insurance systems. It would not replicate the obligation, imposed in clause 3 of the Bill, on employers to designate a scheme. As I said, that would be an unreasonably onerous task to impose on small employers —or on any employer. I do not believe that it is an employer's function to take charge of his or her employee's private life or financial affairs. We therefore do not propose designation, but simply to establish the facility, which will be available for payment into any approved pension scheme — as defined by the Inland Revenue under chapter 14 of the Income and Corporation Taxes Act 1988 and by the Occupational Pensions Regulatory Authority. In our new clause, we get away entirely from fragmentation. We are not saying, for example, that people may pay only into schemes established on the basis of trust law. We should be equally happy with personal and other pensions that are set up on a deed-poll basis. The facility could be used to invest in a personal pension; a stakeholder pension, as the Government are suggesting; or in a lifetime individual savings account —the rival Treasury product —which we think has considerable merit and attraction.

Steve Webb (Liberal Democrat, Northavon)

Will the hon. Gentleman give way?

Quentin Davies (Conservative, Grantham and Stamford)

I cannot give way now, as I am trying to bring my remarks to a close. I have already taken a number of interventions, including one from the hon. Gentleman, as he will remember. The essence of our proposal is that it would avoid all gratuitous fragmentation and include a unified tax regime. The regime would be unified in that employees benefiting from the facility would be able to take an annual deduction of £5,000— we are a little more generous than the Government, and choose a round figure— without any questions being asked about how it might relate to his or her income or, if he or she prefers, to apply the current Inland Revenue sliding scale of income percentage rising with age. Clearly, employees will choose whatever suits them best in any one year, and there will be no difficulty about employees whose circumstance might change in future, when they will be able to make higher contributions. We want them to be able to do that, and therefore to receive the corresponding tax deductions. However, to achieve that goal, we shall have to avoid the creation of unnecessary barriers and fragmentation. In a few words, we are offering a single, unified and coherent structure that really will advance the cause of United Kingdom pensions — to which we have been, and always will be, most sincerely committed.

Howard Flight (Conservative, Arundel and South Downs)

I should like to stress two specific points, on the necessity of advice. The first point—to which my hon. Friend the Member for Grantham and Stamford (Mr. Davies) alludedc—is that 8 million people currently have personal pension schemes and have already paid for the up-front marketing costs, whatever those might have been. As Ministers will know— with the introduction of the Green Paper and the great white hope of the new stakeholder schemes — the number of people dropping out of personal pension schemes is increasing substantially, probably very much to their detriment. It is, therefore, crucial that people should receive very clear quantitative advice when deciding whether to participate in a new stakeholder scheme or to remain in their current pension scheme. The second point has not yet been made in the debate. There is a very high probability that — because of the CAT-marking arrangements to keep charges low — most stakeholder schemes offered by companies will invest in index trackers. Although I do not want to get into a debate on the merits of active versus index tracker management, individuals will have to make the important decision on which they should opt for. The pension assets in index tracker schemes will go up and down with markets. Those with a personal pension scheme usually have a choice of different funds to invest in, and can make their scheme more or less cautious and change according to circumstances. It is important that people should know and get advice when choosing between their existing personal scheme and the new stakeholder. They should know the significance of the likely index tracker investment versus active investment management. As I understand it, the tax deductible sum for stakeholder schemes is not a simple £ 3,600 per annum, but the lesser of that figure or 100 per cent. of salary. I do not understand the reason for the second part of the formula. Working out which is the lesser and keeping records of people's salaries to no apparent end will be a waste of time and money, resulting in unnecessary extra charges for stakeholders. I support our proposal for a tax regime that would be the same for all pension schemes irrespective of their category. The stakeholder proposals simply add costs. Those are some specific points on the two key areas that we are advancing.

Steve Webb (Liberal Democrat, Northavon)

The hon. Member for Grantham and Stamford (Mr. Davies) mentioned four issues: advice, tax relief, the treatment of group personal pensions and access through employers to all pension schemes. Perhaps it will be helpful if I address those four points in the sequence in which he raised them. We all agree that pensions are complicated and it is important that people are well informed when they make choices. To that extent, I have common ground with the hon. Gentleman. All the quotes that he read out were about the importance of access to good advice — I have no problem with that — but the substance of his proposals, as I think that he more or less accepted, is that people should be compelled to take advice. Amendment No. 80 says that the employer should ask the person running the stakeholder scheme to issue a certificate saying that he will not let any employees into the scheme unless they prove that they have taken independent advice.

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Gentleman should not misrepresent my words to imply that we suggest that the law should place a charge on people to seek advice regardless of whether they want a pension. We are simply saying that when a pension is sold, the responsibility must lie with the seller — or the employer if they are designating or sponsoring the scheme — to make sure that the individual concerned has been properly advised before taking out the pension. Without that provision, there would be a recipe for the most appalling mis-selling. That would be particularly cruel for people on lower incomes, whom we are most concerned about.

Steve Webb (Liberal Democrat, Northavon)

That may be the hon. Gentleman's intention, but it is not the effect of his amendments. Amendment No. 80 says that an employee will not be admitted to the stakeholder scheme that the employer is associated with unless the scheme provider can prove that independent advice has been taken by each person who goes into the scheme. That is appropriate for some people, but for others who are well informed and for whom the stakeholder scheme provided by the employer is self-evidently the right scheme, particularly if there is an employer contribution, there is no reason for a legal obligation. It seems a very un-Conservative proposal— although that is not a reason for opposing it — to require even the well informed to take advice. I understand what the hon. Gentleman is trying to achieve, but amendment No. 80 clearly does not do that. The same is true of amendment No. 81 about tax relief. The amendment raises two issues. The first is whether the £ 3,600 figure is high enough. I have some interest in the hon. Gentleman's point that it may not be. However, the amendment goes on to propose not a simple £ 5,000, but £ 5,000 or the amount allowed under the age-related rebate scheme provided that the employee shall be given the right to choose". The hon. Gentleman said that he wanted to simplify the tax regime, but that he wanted people to choose which tax regime they preferred. The tax regime for stakeholder schemes will be different from that for occupational schemes, which appear not to be covered by the amendment.

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Gentleman is having great difficulty in understanding something very simple. If the employee chooses, there is no fragmentation of the market from the employee's point of view. It does not matter which tax regime he chooses this year, because he can choose another next year if that is more appropriate to his circumstances. Therefore, we are reducing the complexity of choice and the danger of a mis-choice or a mis-sell.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman is introducing a new choice. If I take out a pension at the moment, I have no choice about the tax regime that applies to my contributions. The amendment introduces a choice of whether I want the lump sum cap on my contributions to get tax relief or some percentage of my salary. That seems to create greater complexity. My colleagues and I would like a single annual amount, allowable against tax, for all sorts of pension savings — not choices between different schemes. I fear that that would introduce new complexity, contrary to what is intended. On group personal pensions, the issues are more difficult. The hon. Member for Grantham and Stamford and his party want to allow group personal pensions to be eligible for stakeholder status. Amendment No. 83 says: Approved Group Personal Pensions shall be deemed to be stakeholder pensions for the purposes of this Part. It does not say, "some shall, provided they satisfy the standards of stakeholder schemes." One wonders what the point of the first 40-odd clauses of the Bill is if an existing form of pension provision will automatically come under the new category. Clearly, some existing group personal pensions may or may not be good value for money for their members, and the charging structure may be unfavourable to those who are likely to leave early, for example. Simply to say that they will come under the stakeholder scheme and get all the associated advantages is rather difficult. If the amendment were more extensive, and said that they can count as stakeholder schemes if they meet the relevant criteria, we might have had more sympathy. However, as it stands, I am afraid that we do not. The first time I saw new clause 13 I thought that it was eminently sensible. However, when the hon. Member for Grantham and Stamford explained it, 1 went off the idea. I wanted some clarification from the hon. Gentleman during his speech, and perhaps he will intervene on me in a moment to explain the point — briefly, I hope. Under new clause 13, an employer with 3,000 employees would be obliged to provide free of charge a facility to every employee to deduct at source a pension contribution, and to pay that contribution to the pension scheme of the employee's choosing. The Government are proposing one scheme — that the employer would provide access to one stakeholder scheme. It is reasonable to suppose that the employer would then take all the contributions in one go and pass them in one envelope, metaphorically, to the scheme. As I understand it, the hon. Member for Grantham and Stamford is saying that the employer, at his own cost, will have to pay contributions to every different scheme of which any individual employee is a member. Clearly, individual employees can be members of dozens of different schemes — particularly if there is no company scheme. At a medium-sized firm with no company scheme, individuals could be members of dozens of different pensions schemes.

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Gentleman ought to know that employers already must have the software set up to enable them to make such payments under earnings attachment orders and so forth, and these may go in different directions. That is not the great burden — of costs on an employer. The great burden — which our amendment avoids, but the Government's formulation unfortunately involves employers in — is the burden of designating the right scheme. That is an enormous responsibility, and involves spending money on actuaries and advisers, and receiving bids from different pension groups, and then on making a choice between them. That is what we want to avoid. It is an unreasonable burden on the employer, and a dangerous situation in which an employer can find himself.

Steve Webb (Liberal Democrat, Northavon)

With respect to the hon. Gentleman, I do not feel that that is what his amendment is about or would achieve.

Angela Browning (Conservative, Tiverton and Honiton)

Is not it the case that members of staff of Members of Parliament have, at present, a scheme through the Fees Office where they elect to go into a personal pension with a variety of companies, and on which they are responsible for taking financial advice about whether the scheme to which they are signing up is in their best interests? Surely in terms of administration on the employer — in this case, the Fees Office of the House of Commons — that is complex, when one thinks that there are 650 Members of Parliament. However, it does it. Surely it would simply be a matter of putting the money into a stakeholder scheme rather than into a personal pension as at present. I do not understand the hon. Gentleman's argument about the complexity of administration.

Steve Webb (Liberal Democrat, Northavon)

That is an interesting parallel and I accept that each hon. Member could have one or more employees, each choosing a different personal pension, which could place a considerable administrative burden on the Fees Office.

Angela Browning (Conservative, Tiverton and Honiton)

That happens now.

Steve Webb (Liberal Democrat, Northavon)

Indeed, but is it a considerable administrative burden? I suspect that it may well be. Do we know how many people the Fees Office employs to administer those payments? Some Conservative Members here today served with me in Committee on the Tax Credits Bill, where we argued against the burden on business of employers having to pass on tax credits. Under the new clause, employers would have to pass on not only one payment from the Inland Revenue to their employees; they might have to make dozens of payments to dozens of different companies. I accept that there is a parallel, but we do not how much work is created or what it costs.

Howard Flight (Conservative, Arundel and South Downs)

Surely all that is required is for the employer to give a list of instructions to his bank to make regular standing order payments to the various banks of the recipients' pension schemes. Once that was done, there would be no more work involved. That is what the Fees Office does.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman wants to have it both ways. He and I have both attacked the working families tax credit, which is a single payment from the Inland Revenue through the employer to the employee, regarding it as a burden on business. We are now talking about a system that involves as many employees as there are in the firm and as many pension companies as there are in the land. Contrary to what he said, the payments need not be the same every month: people might want to increase their payments following a pay rise or to contribute a lump sum. We have to form a judgment about the burden placed on business. Intriguingly, Conservative Members do not think that there will be a burden; strangely, I think that there will. We certainly want to facilitate access to pension saving. The Government have got it right in using the mechanism of employers — there are many fewer employers than employees — to deliver to a specified scheme. In my judgment, that is much less of a burden.

Julian Brazier (Conservative, Canterbury)

I served in Committee on the Bill, and we are nearing the end of a process that has gone on for two and a half months. Following the emotionally charged and important debate on incapacity benefit, we can see once again how wrong it was to cram so many different subjects into one Bill, as hon. Members of various parties said on Second Reading. The new clause and the amendments grouped with it are very important, dealing with pension arrangements for people who can only just afford to provide for themselves, but we have a small turnout because this discussion follows a mass of other important subjects. We are suffering once again from the fact that, because the Government are trying to cram a gallon into a pint pot, there is far too much reliance on regulation. We are trying to pin down what should be done, but much is unclear because of the excessive use of regulation. The regulations and the ideas behind them stem from several different consultations, including the consultation on this part of the Bill, which was not even completed when we began our proceedings in Committee. In other parts of the Bill, Labour party manifesto commitments — on means-testing and on the contributory principle, for example — were abandoned. The Government's refusal to accept the new clause and associated amendments represents the abandonment of another good principle: that we should seek to simplify the social security and pensions system. Absurdly, with the stakeholder plan, the Government are trying to start again with a completely new edifice which is separate from the Treasury's edifice. That is not completely new, but builds on existing plans, and for that reason, it is mostly welcomed by the Opposition. The hon. Member for Northavon (Mr. Webb) missed the point of the interventions by my hon. Friends. The point about the working families tax credit, on which we stood shoulder to shoulder with the Liberal Democrats, is that it is potentially adjustable twice a year on the basis of a complicated calculation. However, as my hon. Friend the Member for Arundel and South Downs (Mr. Flight) pointed out, the arrangements suggested in new clause 13 would be in place for good once a simple standing order had been set up. In the case of the House of Commons scheme, it would be pegged to 10 per cent. of salary. The arrangements would not involve the complexities to which we objected in another context. By trying to set up such a complicated system, which contained the germ of a good idea when the right hon. Member for Birkenhead (Mr. Field) first proposed it, the Government are setting themselves against the pensions industry and against those who would like to provide better for those at the bottom end of the earnings scale, who will be specifically targeted by the measure. I suspect that the rival Treasury product will be much more successful. My final point is really a Third Reading point, but I hope that you will forgive me, Mr. Deputy Speaker, because it looks unlikely that we will get to Third Reading. It is very sad that we should be debating all these amendments at the end of proceedings on this Bill. We are dancing round on the head of a pin while the entire debate on pensions policy is crushed between two halves of a nutcracker — one being the devastating blow that was wreaked upon ordinary company, personal and other pensions by the shameful removal of tax credits, and the other being the knowledge that among the low paid, people who do not provide for themselves may end up doing better. That point was eloquently made by my hon. Friend the Member for Grantham and Stamford (Mr. Davies). I strongly support new clause 13 which would go a long way towards improving a rotten, muddled and confused scheme.

Anne McIntosh (Conservative, Vale of York)

I strongly associate myself with new clause 13, which was eloquently moved by my hon. Friend the Member for Grantham and Stamford (Mr. Davies). I wish to address two situations. The first is where an employer already operates an occupational pension scheme. Some employers may be tempted to close their occupational pension scheme to new entrants and simply offer access to stakeholder schemes. Small and large employers alike believe that that would be a regrettable move and I hope that the Minister, when he replies, will address that point. The second situation is where an employer does not already operate an occupational pension scheme. Most employers without such a scheme would admit that they lack the financial skills necessary to choose such a scheme. If they choose the wrong scheme, many fear adverse consequences for themselves and their employees. I hope that the Minister supports the suggestion that employers should be required to provide access only via a pensions clearing house.

Theresa May (Conservative, Maidenhead)

For the record, I should declare that I have placed in the Register of Members' Interests a non-registerable shareholding in the Prudential corporation. Before I make a couple of points about the amendments and the stakeholder scheme, I want to pick up on the comments of the hon. Member for Northavon (Mr. Webb). I am sorry that I was inadvertently out of the Chamber when he began to speak, but I came in as he was taking interventions on the extent to which proposals for employee payroll deduction facilities in new clause 13 would be a burden on business and difficult to operate. As a former employee of the Association for Payment Clearing Services, I suggest that if the hon. Gentleman thinks that providing that sort of facility is beyond the scope of the banking sector, he should take a trip to the former de Havilland aircraft site at Edgware to visit BACS — formerly the Bankers Automated Clearing Services company — and see the number of deductions and payments that pass through the system every day. The banking sector is well able to cope with the proposal contained in new clause 13.

Steve Webb (Liberal Democrat, Northavon)

I have absolutely no doubt that the banking sector can cope. My question was what would be the cost to employers of accessing the services.

Julian Brazier (Conservative, Canterbury)

Will my hon. Friend the Member for Maidenhead (Mrs. May) give way?

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

Order. It is not possible for the hon. Gentleman to intervene on an intervention.

Theresa May (Conservative, Maidenhead)

I assume that my hon. Friend the Member for Canterbury (Mr. Brazier) wanted to intervene before I answered the intervention. I am happy to give way to him.

Julian Brazier (Conservative, Canterbury)

I am grateful to my hon. Friend for being as courteous as ever. The point that I tried to make earlier to the hon. Member for Northavon (Mr. Webb) perhaps needs to be reiterated. The cost and complexity arises not from making a payment, but from having to do the calculation every six months for people whose earnings vary from week to week.

Theresa May (Conservative, Maidenhead)

I am grateful to my hon. Friend for clarifying the point that he made earlier. My point is that the banking sector can cope. Businesses produce tapes or telecoms data for banks to put to BACS. Significant numbers of such payments are being made, and if the hon. Member for Northavon is suggesting that new clause 13 should be cast aside on such a technical point, he should visit BACS to see how companies input such information and deal with such payments. I have two points to make about stakeholders which relate to amendment No. 80. I share the concerns expressed by my hon. Friend the Member for Vale of York (Miss McIntosh), and by pension providers and bodies that represent employers. The Government's stakeholder pension schemes may result in the closure of some occupational pension schemes to new members. Employers will tell employees that they are not carrying on with occupational pension scheme provision, providing instead for the stakeholder pension because that is what the Government say is good. The way in which we have built up our occupational pension scheme funds is one of the jewels in this country's crown. It places us in a far better position than many other countries to deal with future pension provision. We should not attack that position. I accept that the Government do not intend to attack occupational pension schemes, but I fear that the law of unintended consequences could very well bring about that result. Finally, I want to reiterate a point that I made in the Chamber last week on pensions. I am particularly concerned about the impact of the Government's proposals on women. Women are just getting a foot on the ladder of occupational pension schemes, and some schemes may be taken from them. Secondly, many women are concerned already that they do not receive adequate advice about pension proposals. If no advice is provided on stakeholder pension schemes, many women will be disadvantaged in future. I support amendment No. 80 because independent pensions advice is important for all employees, but particularly for women.

Angela Browning (Conservative, Tiverton and Honiton)

I contribute to this section of the debate with some sadness. Although I was not a member of the Standing Committee, I followed the Hansard record of those deliberations. On the one hand, I must welcome the fact that the new Labour Government have undergone a conversion in respect of personal pensions and pension input per se. Many of us remember how, in the 1980s, every time the Conservatives introduced a Budget to give tax breaks to individuals to encourage them to input into pensions, whether personal or corporate, the Labour party consistently voted against those provisions, which have made Britain one of the strongest countries in Europe for pension funds and provision for old age. Notwithstanding that, the Labour party said time after time before the Labour Government were elected that if it came to office it would make fundamental changes to increase the scope of pension provision for a wider range of individuals and to tighten up aspects where it felt there needed to be more security for the person investing in a pension. The Committee deliberated and we waited a long while to get proper confirmation from the Government about what they were proposing. Even though we now have a Bill in front of us, the Government still seem unable to answer many questions. I will raise some different issues from those raised by my hon. Friends, and perhaps we will hear one or two answers from the Government. Given some of the problems, such as pensions mis-selling and the Maxwell scandal, many people may well be concerned about being a part of a group pension of whatever denomination. The Government therefore said that they want to enhance the role of trustees. That is important. However, as the Bill has proceeded, the Government have not been clear about their intentions for trustees. The Minister of State was adamant in Committee, saying: We want member-nominated trustees to be appointed to the board of stakeholder pension schemes."— [Official Report, Standing Committee D, 4 March 1999; c. 52 Despite persistent questioning by my Conservative colleagues, the Government failed to explain who will be the trustees and how they will be chosen. That question seems fundamental. If the Government's new stakeholder pensions are to be widely welcomed and, more important, taken up — particularly if they are to receive the support of employers in the workplace — it is extremely important for that sort of detail to be available. It is not the sort of detail that should be left to secondary legislation. if we have learned one thing in the past two years it is that many major Bills have been ill thought out — almost cobbled together on the hoof as they progress through Committee. Later, when we are faced with statutory instruments and secondary legislation that put the detail into the Bill, we find that the Government are doing something quite different from what they said in Committee. I tell the Government and the Minister, who was adamant about trustees in stakeholder pensions, that if they want those pensions to be successful, they should tonight give the House the details of how those trustees will be appointed and take their place on the board.

Stephen Timms (Labour, East Ham)

The hon. Member for Grantham and Stamford (Mr. Davies) demonstrated again this evening his remarkable ability to make material that is worth five minutes last for 35. The House will have enjoyed that, although why it was necessary for him to do it on this occasion, I am not sure. Stakeholder pension schemes are at the heart of our plans to modernise the pension system. They will provide — for many people for the first time — affordable funded pensions so that they can look forward to a secure income in retirement. There has been wide support for their introduction from those who responded to the Green Paper and others, both for the aims of the policy and for the structure that we have put in place to achieve them. We are working closely with the industry to ensure their success. The hon. Member for Tiverton and Honiton (Mrs. Browning) asked about trustees. The Bill provides for stakeholder pensions to be run in a way that puts members' interests first. Trust-based schemes run by a board of trustees will do exactly that. We will consult between now and the summer on the details of how the trustee arrangements will work. If I understood her correctly, she supports the involvement of trustees in the schemes. I agree, but, as I said in Committee, we want to retain flexibility. That is why we have not ruled out possible alternative governance structures if they can deliver comparable protection. In the Labour party manifesto, we promised to introduce a framework for stakeholder pensions to meet the needs of those who could not join a good-value second pension. We said that schemes would be approved to receive people's savings only if they met high standards and provided value for money, flexibility and security. The framework in the Bill fulfils that commitment. Contrary to what Conservative Members said, there have been no U-turns. Our position on group personal pensions is the one set out in the Green Paper; we asked for views on it on page 59. We are listening to those views and will reach a conclusion on that basis. That is what we always said that we would do, and we will do it.

Lewis Moonie (Labour/Co-operative, Kirkcaldy)

My hon. Friend knows that I want to raise the issue of Christian conscience. He is aware that many Christians cannot take up pension plans under existing or proposed legislation. Many hon. Members on both sides of the House have taken the matter up with the Treasury. Can he reassure me that any regulations under the Bill will take account of Christian conscience regarding the appropriate pension offered, contributions to a scheme and the rights of employees to refuse on Christian conscience grounds any scheme offered?

Stephen Timms (Labour, East Ham)

I am well aware of those issues. My hon. Friend put one of his constituents in touch with me. A group from the Plymouth Brethren came to discuss those points with me. Nothing in the Bill or any of our proposals would require employers to contribute to pension schemes on behalf of their employees. We are consulting on the possibility of making it a condition of employment that people should join their occupational scheme, if there is one. That would need to be subject to opt-out arrangements. We will carefully consider my hon. Friend's point in deciding them. I think that the people who have been in touch with him and me will feel generally content about our way forward on this.

Edward Leigh (Conservative, Gainsborough)

I am sorry to labour the point, but the Plymouth Brethren are a tiny group. No one in the House supports their views, which is all the more reason why we should be careful to ensure that their conscience is protected. They cannot join any existing pension scheme, except the basic state pension, because of their religious belief. The Minister must reassure them that they will not be forced into a stakeholder pension against their conscience.

Stephen Timms (Labour, East Ham)

I can categorically assure the hon. Gentleman that no one will be forced into a stakeholder pension if they do not wish to join one. The Plymouth Brethren are not that small a group. I much enjoyed the meeting that took place on the initiative of my hon. Friend the Member for Kirkcaldy (Dr. Moonie). Let me briefly deal with some of the points raised in the debate. New clause 13 would compel employers to offer payroll deduction facilities for almost all pension arrangements. Conservative Members appear to believe that that would provide an adequate replacement for stakeholder pensions. In reality, providing access to other sorts of scheme would not be a substitute for the benefits that we expect for members from stakeholder pension schemes. The hon. Member for Northavon (Mr. Webb) is right to say that the proposals would place a substantial, additional burden on business. Businesses would have to send out regular payments to an unlimited number of pension schemes — depending on how many people work in the organisation. That is not sensible. The hon. Member for Vale of York (Miss McIntosh) made a much more interesting suggestion. I commend her for raising the point because it seems to have eluded her hon. Friends. There is a possibility of making a clearing-house arrangement under which employers would make a single payment to a clearing house. The clearing house would then sort out which company the payments should be passed on to. That proposal is favoured by the Confederation of British Industry, for example. It is one of the possibilities on which we shall consult between now and the summer. Amendment No. 83 would enable existing group personal pensions to qualify as stakeholder pension schemes. Again, we have been absolutely consistent on that point. We do not want to undermine good-value existing provision, but personal pensions do not have many of the features that will make stakeholder pension schemes a good deal for their members. Stakeholder pension schemes will provide a better-value, more flexible alternative for many of those who cannot join an occupational scheme. The proposed governance structure is an important part of that; we are determined that stakeholder schemes will be run in their members' interests. It is here that personal pension schemes often fall short of the high standards that we want for stakeholder pension schemes. We are keen not to discourage high-quality provision and will be consulting further on our specific proposals as to how we could best incorporate into the new regime arrangements that meet our high standards and offer good-quality provision. Amendment No. 80 deals with advice. It is right that people considering joining any pension scheme should have access to good, accurate financial information and advice. We have said that throughout, and our commitment to that should not be in doubt. Since we came to office, one of our priorities has been to ensure that pension companies and advisers clear up the mis-selling scandal that we inherited from the previous Government. The arrangements instituted by the Conservative Government created an enormous number of problems — not least by, wrongly, inducing many people to leave good occupational schemes of the kind referred to by the hon. Member for Maidenhead (Mrs. May) and to enter personal schemes that were much less advantageous. The amendment would require stakeholder pension schemes to certify that all applicants who want to join their employer's designated scheme have received independent financial advice. That goes much too far. Individual advice has a cost. In many cases, that cost is worth paying, but, given the right information, many potential members will be perfectly capable of making an appropriate choice for themselves. We expect that significant numbers of those joining stakeholder schemes will do so through their employers. To require all those applicants to receive independent advice would impose excessive costs on schemes if they had to meet the costs of its provision — as they will in many cases. Amendment No. 81 would require a higher limit on contributions to stakeholder pension schemes than the £ 3,600 that we proposed, and proposes that, as an alternative, the limit could be set by reference to the relevant personal pension limit. Our proposal is intended to provide a simple, clear system. I can assure hon. Members that contribution limits are one of the aspects of the schemes on which we shall be carrying out further detailed consultation between now and the summer, in the light of the representations that we have received to date. Following that consultation, all aspects of the tax regime — including the maximum level of contributions — will, as is normal, be set out in a Finance Bill or tax regulations as appropriate, but they will not be included in this Bill.

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

Order.

REGISTRATION OF STAKEHOLDER PENSION SCHEMES

MONITORING OF EMPLOYERS' PAYMENTS TO PERSONAL PENSION SCHEMES

LATE PAYMENTS BY EMPLOYERS TO OCCUPATIONAL PENSION SCHEMES

EFFECT OF PERSON'S INSOLVENCY ON HIS PENSION RIGHTS

EFFECT OF INSOLVENCY ON UNAPPROVED PENSION RIGHTS

FORFEITURE OF RIGHTS UNDER PENSION ARRANGEMENTS

PENSIONS: MISCELLANEOUS AMENDMENTS

PENSION SHARING ORDERS: ENGLAND AND WALES

AMENDMENTS OF SECTIONS 25B TO 25D OF THE MATRIMONIAL CAUSES ACT 1973

ACTIVATION OF PENSION SHARING

POWER TO EXTEND JUDICIAL PENSION SCHEMES

ACTIVATION OF BENEFIT SHARING

ENTITLEMENTS TO CATEGORY B RETIREMENT PENSION BY REFERENCE TO NEW ALLOWANCES

CLAIM OR FULL ENTITLEMENT TO CERTAIN BENEFITS CONDITIONAL ON WORK-FOCUSED INTERVIEW

JOINT CLAIM FOR JOBSEEKER'S ALLOWANCE

SPECIAL SCHEMES FOR CLAIMANTS FOR JOBSEEKER'S ALLOWANCE

CERTAIN OVERPAYMENTS OF BENEFIT NOT TO BE RECOVERABLE

WELFARE BENEFITS: MINOR AND CONSEQUENTIAL AMENDMENTS

MATERNITY ALLOWANCE

SUPPLY OF INFORMATION FOR CERTAIN PURPOSES

CONSEQUENTIAL AMENDMENTS

'Insolvency Act 1986 (c.45)

TRANSITIONAL PROVISIONS

REPEALS

COMMENCEMENT

EXTENT

David Davis (Conservative, Haltemprice and Howden)

On a point of order, Mr. Deputy Speaker. The convention in the House is that Finance Bills are not guillotined—

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

Order. I understand that the microphones are not on. They will be put on as quickly as possible.

David Davis (Conservative, Haltemprice and Howden)

The effect of today's guillotine is that amendment No. 27, which would have removed clause 71 from the Bill, was incapable of being debated. Clause 71 has an effect greater than any Finance Bill, in that it removes the requirement for primary legislation prior to major expenditure by the lead Department today. Can you give me some assistance, Mr. Deputy Speaker, so that the House can be protected from that mechanism in the future? Is it possible for the substantive point within the amendment to be dealt with by the Government at some point? I see that there is a Minister on the Treasury Bench who may be able to help us.

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

I understand the right hon. Gentleman's point, but the House has agreed the guillotine motion and things have simply have transpired in the way that he has described.

Stephen Timms (Labour, East Ham)

Further to that point of order, Mr. Deputy Speaker. This is an important power which allows us to proceed with investment in new computer systems for changes to the benefit system. I understand that it would be helpful to the right hon. Member for Haltemprice and Howden (Mr. Davis), who chairs the Public Accounts Committee, and to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who chairs the Select Committee on Social Security, if we could agree an arrangement whereby the report, which will be submitted to the House to permit the expenditure to go ahead could, in normal circumstances, be looked at by those Committees before the House reaches a decision. Subject to discussion between us, I am sure that we could come up with a mechanism to ensure that that happens in normal circumstances.

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

I am grateful to the Minister for his response.