Welfare Reform and Pensions Bill

House of Commons, 3 November 1999.

Betty Boothroyd (Speaker, West Bromwich West)

I must draw the House's attention to the fact that privilege is involved in Lords amendments Nos. 1, 20, 33, 34, 40, 42 to 44, 46, 137 and 156, which are to be considered today. If the House agrees to any of these Lords amendments, I shall ensure that the appropriate entry is made in the Journal.

INCAPACITY BENEFIT: RESTRICTION TO RECENT CONTRIBUTORS

Alistair Darling (Labour, Edinburgh Central)

I beg to move, That this House disagrees with the Lords in the said amendment.

Betty Boothroyd (Speaker, West Bromwich West)

With this, it will be convenient to take Government amendments (c), (a), (b) and (d) related thereto, Lords amendment No. 43 and Government amendments (c), (a), (b), (d) and (e) related thereto, Lords amendments Nos. 44 and 45, Lords amendment No. 46 and amendments (a) to (d) in lieu thereof, and Lords amendment No. 183.

Alistair Darling (Labour, Edinburgh Central)

This part of the debate covers our proposed reforms of incapacity benefit and severe disablement allowance. The proposals, originally made by the Government and now amended by the House of Lords, are part of a wider package of support for disabled people. I want to set our proposed amendments in lieu of the Lords amendments in their proper context. They are part of a wider package that will provide more help for disabled children through increased benefits, with an extra £37 for severely disabled three and four-year-olds; and up to £26.40 more for people disabled at birth, or from an early age. Both those increases are made possible by the Bill. The new disability income guarantee will provide £5 more a week for single people and £8 for a couple. The disabled persons tax credit is worth at least £155 a week, underpinned by the new deal for disabled people. We are also providing £140 million to help carers and introducing new pension rights. As my right hon. Friend the Prime Minister said earlier this afternoon, the Disability Discrimination Act 1995 has now been implemented and the Disability Rights Commission set up to secure civil rights for disabled people. That has all been delivered by this Labour Government and opposed by the Conservative party. In two years, we have done more to help disabled people than the Tories did in 18, and we have a lot more to do. It is important for the House to understand that there are two principles underpinning our approach and our reforms. The first is that we need to do more for people who need help most and the second is that we need to build a welfare state that reflects both the world of today and the needs of tomorrow, promoting work for those who can—including the 1 million disabled people who want to work—and providing far more security than in the past for those who cannot.

Steve Webb (Liberal Democrat, Northavon)

Of those 1 million disabled people who want to work, how many will receive the disabled persons tax credit?

Alistair Darling (Labour, Edinburgh Central)

That of course depends on the take-up. Let me tell the hon. Gentleman in the nicest possible way that if he had had his way there would not be a new deal for disabled people. He opposed the new deal. He cannot have it both ways. We are providing help that has never been there before; it would certainly not have been there under a Conservative Government, and the Liberals have also opposed the key measures that we have taken. I want to deal with our proposals on severe disablement allowance. The existing SDA is inefficient and poorly targeted at those whom it was originally meant to help. It is worth remembering that nearly 70 per cent. of people on SDA are on income support. The allowance was meant to help various groups, and children in particular, but I do not believe that it does so. The first thing that our reforms will achieve is to do more for people who need help most. Right now the system is not doing enough, but this Bill starts to put that right. We want to do more for the many people disabled from birth, and in childhood, who have had no chance to work and no chance to make national insurance contributions. Today, those children get so little—£54.40 a week—that they need income support for the rest of their lives. No decent Government can tolerate that and certainly no Labour Government can tolerate it. We are reforming SDA and providing more help for disabled young people by giving them incapacity benefit without asking them to satisfy the usual conditions. That will mean that they will get nearly £27 more every week. That is the right, decent and fair thing to do and it will mean that 175,000 people will be better off. The reform is long overdue and should be supported. I urge my hon. Friends to support it.

Dafydd Wigley (Plaid Cymru, Caernarfon)

I accept without reservation the need for those young people to get additional help, but why has that to be at the expense of other disabled people? Should not the reform be funded from the 1p that the Chancellor took off income tax instead?

Alistair Darling (Labour, Edinburgh Central)

The right hon. Gentleman should remember two points. First, as I have said, severe disability allowance is so low that nearly 70 per cent. of those in receipt of it rely on income support and only a minority see any benefit from it. I am glad that the right hon. Gentleman welcomes the additional help that we are providing for young children. The second point concerns spending, and many of my hon. Friends have also asked about that. It is true that the measures before the House today will, in the long term, achieve savings. That is of necessity, because of the way that the system works. However, as a result of measures that the Government have taken in the past two years, we are spending £195 million on the new deal for disabled people; £79 million on the new ONE service, which gives better help and guidance through the benefits system; £30 million on rehabilitation and retention pilots; £15 million on disabled children; and £40 million on the disabled person's tax credit. We have also introduced new linking rules to help people try out work and not lose their benefit entitlement. We have introduced the disability income guarantee and are spending £140 million on the carers strategy. In the long term, £7 billion will be credited to disabled people and carers through the new state second pension. The Government are happy to spend more money on disabled people. That is the right thing to do. It is what the public expect us to do, but they also expect us to examine the social security system from time to time and ask whether it is up to date and reflects modern conditions, so that we make sure that all the money we spend goes to those whom the public want to be supported. They want the new deal and they want carers and the severely disabled to be helped. We are doing that, and I am proud of the fact that a Labour Government will spend more this Parliament, and more in years to come, on disabled people. That is what people elected us to do, but they also asked us not to shrink from examining the system and bringing it up to date.

Eric Pickles (Conservative, Brentwood and Ongar)

Is the right hon. Gentleman saying that people with incomes above income support levels are wealthy? Is not it true that if someone with 80 per cent. disability has £3,000 of savings, £8,000 of capital or a spouse who works, he or she will not receive anything?

Alistair Darling (Labour, Edinburgh Central)

I am certainly not saying that people on income support are wealthy. The hon. Gentleman mentioned the capital limits, about which he made no protest for some 12 years during the Tory Government. In our pensions Green Paper, published last December, we said that we wanted to do something about the capital limits, because we want to encourage people to save and to be better off. It is far better to ensure that we provide real help, properly directed, to those children who lost out.

Eric Pickles (Conservative, Brentwood and Ongar)

Will the Secretary of State give way?

Alistair Darling (Labour, Edinburgh Central)

No, I shall not let the hon. Gentleman back in, as he knows that this debate is timetabled. However, if he is so bothered about people who are disabled or on low incomes, he must ask himself why he was part of a Government who, for years, did nothing about that problem. I give way to the one member of the Conservative party who is sitting on the Opposition Back Benches.

Julian Brazier (Conservative, Canterbury)

As the Secretary of State knows, I served all the way through the Standing Committee considering the Bill. He has made the point about achieving value for money in welfare spending, but does he accept that there is no surer way to boost welfare spending unproductively than through the introduction of more and more means tests, which discourage people from helping themselves and from saving?

Alistair Darling (Labour, Edinburgh Central)

The Tories doubled means testing in their 18 years in power, and the hon. Gentleman did not object once. Another way to boost welfare spending without achieving any sense of direction is through the tabling of amendments in another place that would cost £4 billion. That is what the Tories have done, even though they cannot fund the costs incurred and cannot explain how those amendments would be paid for. The Government are ensuring that help is directed to those people who need it most. At the same time, we are ensuring that the benefits system is up to date. I turn now to the two changes that we are introducing to incapacity benefit. The first thing to emphasise—and I shall do so repeatedly, as it is so important—is that the proposed changes are for the future. No existing beneficiary at the time when the changes are introduced—probably in 2001—will be affected by anything that we propose today. Our proposal is that some of the early retirement income—the occupational pensions—that people on incapacity benefit draw down should be taken into account. Anyone designing a benefit system today would make sure that it provided most help for those most in need. I do not believe that we can ignore the fact that times have changed. Fifty years ago, only a minority of people had private pension cover: today, the majority have. The result is that many people now leave the labour market early with good incomes from private cover. As I said earlier, it is right that the Government should examine the social security system to make sure that it reflects such changes. That is what will happen in the future. People have occupational pensions—good pensions, in many cases—and draw down on them to replace income in precisely the same way that people took up the original incapacity benefit. It is right that the cost of that early retirement should be shared and that account be taken of the income that those people receive. I have listened to the concerns about the threshold that have been raised by hon. Members of all parties, and I have paid particular attention to what has been said by Labour Members. I said that I would reflect on what hon. Members had to say after the Bill left this House in May. I have done that, and have tabled further proposals. However, I remind the House of what we have already done, and of what we now propose. We are already exempting people with the severest disabilities—the group for whom disability income guarantee is intended, and to whom the rules simply will not apply. However, we are going further than that. We are raising the threshold that I originally proposed from £50 to £85. What will be the effect of that? It will mean that an occupational pension drawn down early will not be taken into account until all income—that is, incapacity benefit and income from a private pension—exceeds £151 a week. People will not lose all their incapacity benefit until their pension income reaches nearly £220 a week. For couples, the figure will be about £15,000 a year; for people with two children, it will be about £18,000. The House should remember that some of the people involved, depending on their condition, will get non-means tested disability living allowance on top of that. That allowance is worth up to £72 a week. By raising that threshold to £85 a week, a further 100,000 people will be exempted from my original proposal. I believe that this measure ought to be supported by hon. Members of all parties. It is a significant change, and it is the right thing to do. It is important to remember that about one third of people receiving incapacity benefit have occupational pensions, and that half of them are in the top half of the income bracket. It is right to take that change into account. The majority of people on IB will not be affected as they do not have occupational pensions, and not many of them have pensions of more than £85 a week. Because we want to spend far more on people who have lost out in the past, we need to examine the system to see whether it reflects modern conditions. The Government should not ignore the fact that half the people receiving IB who have occupational pensions are in the top half of the income bracket. However, I repeat that people who do not have income from a private pension of £85 a week or more will not be affected.

Frank Field (Labour, Birkenhead)

When my right hon. Friend says that the majority of people are in the top half of the income scale, is that before or after they are paid benefit? Will the means test be based on households or on individual earnings?

Alistair Darling (Labour, Edinburgh Central)

I am talking about individuals, and about their total income. I should like to say a word about the amendment originally tabled in the other place by Lord Ashley.

Alan Williams (Labour, Swansea West)

We very much appreciate all that is being done to help disabled people. But if the £85 is a set figure, it will reduce in value by 25 per cent. over 10 years, and by 50 per cent. over 20 years. Therefore, progressively fewer people will benefit from it. Can my right hon. Friend explain what the then Under-Secretary—now the Financial Secretary to the Treasury—could not at the last vote? Why do we think it impossible for a millionaire to pay more than 40 per cent. of his income in taxation, while it is all right for a retired disabled person to lose 50 per cent. of the value of his income and then to pay tax on the remainder?

Alistair Darling (Labour, Edinburgh Central)

Let me deal first with my right hon. Friend's comment about the taper. I do not think that it is right to compare the tax rates with the tapers in the benefit system. As my right hon. Friend well knows, the tapers operated in the benefit system are generally much higher than 50 per cent. The housing benefit taper is 65 per cent., and the taper of 50 per cent. proposed in this measure is one of the lowest in the system. Even the working families tax credit which is, quite rightly, very generous, has a taper of 55 per cent. My right hon. Friend also raised a very important point about the figure of £85. Let me repeat what I said about the original proposal of £50 when the matter was last before the House. The figure of £85 is provided for in the Bill—that is the minimum. The Government will review that figure every year to ensure that it does not steadily erode the value of people's occupational pensions, as my right hon. Friend suggests. I believe that the Government's proposed increase from £50 to £85 is right—it is about the level of an average occupational pension. I give the House a clear, unequivocal commitment that we will keep that figure under review to ensure that it is increased and does not erode the value of people's savings.

Alan Williams (Labour, Swansea West)

I am grateful to my right hon. Friend, and accept the sincerity of his offer. However, future Secretaries of State of other denominations may not be as kindly disposed. To achieve his objective, could he not provide for this most readily by including in the Bill the indexation of this sum?

Alistair Darling (Labour, Edinburgh Central)

My right hon. Friend raises a pretty fundamental point, and I am sorry that I do not have an answer. I do not know any way of putting in legislation a provision that cannot be tampered with by succeeding Governments. If there were any way of doing that, many Governments would have done it. The Conservatives are pledged to slash social security spending if they get back into office. Given their commitment to reducing everybody's income tax and corporation tax every year, it does not take much imagination to realise that they will have to cut social security spending with a vengeance. Our proposal is better than indexation, which might make only a small difference to the figure of £85. I assure my right hon. Friend on behalf of the Government and those of my successors that I can bind, that we shall keep the figure under review to ensure that its value does not erode and thus adversely affect people's savings. Indexation would mean that the increase might be a lot less than that which the Government might want to introduce in future. Therefore, I give my right hon. Friend an undertaking to review the figure, but I cannot go further.

Lynne Jones (Labour, Birmingham, Selly Oak)

The Bill will not be implemented until 2001. Will my right hon. Friend give a commitment to review the figure of £85 upwards to take account of increases in earnings or prices between now and 2001? Will he also give a commitment at least to annual uprating to take account of price movements?

Alistair Darling (Labour, Edinburgh Central)

I cannot add anything to my previous reply that I shall review the figure annually to ascertain whether we should raise it to avoid eroding the value of people's increased savings. I did not realise that my hon. Friend was a fan of price uprating only. If she is, she tempts me to follow her. She probably expects us to do something better than that from time to time, but, if she will settle for price rating, I may one day follow her down that road—if not any other.

Lynne Jones (Labour, Birmingham, Selly Oak)

Will my right hon. Friend answer my question about uprating between now and 2001, when the Bill is introduced? The sum of £85 will not be worth as much in 2001 as it is today.

Alistair Darling (Labour, Edinburgh Central)

I have answered that question. The Government will keep the figure of £85 under review. The increase that we have made from £50 to £85 is right, but we will review the figure every year. We do not promise to uprate it every year, but we will review it to ensure that it does not adversely affect people's savings. I want to comment briefly on the amendment that was tabled in another place by Lord Ashley. I want to focus on those in greatest need, and give them the most help. If the amendment were accepted, people who took early retirement and claimed incapacity benefit would continue to receive it until their private pensions reached £435 a week. The Government's proposals are sensible and right, and they should be supported. The second change is our proposal to restore the link between incapacity benefit and work. We shall make two significant changes to our original proposals. First, we shall take account of the problems of people who suffer from degenerative conditions, such as multiple sclerosis or Parkinson's disease, which steadily reduce the ability to work. Both Houses expressed the fear that people in that position might lose entitlement to incapacity benefit. Our proposals will ensure that people who get the disabled person's tax credit and earn below the lower earnings limit will be able to get credits into the national insurance system and receive incapacity benefit. We have already done that for carers who receive invalid care allowance. Both groups will get incapacity benefit even if it is more than three years since they contributed. I tabled the second change to our original proposals on Monday. It provides that contributions in the previous three—not only the previous two—tax years will count. Both changes will make a great difference to cases that have been raised with me in the House and elsewhere. For example, if the provision were in place now, someone who claimed incapacity benefit next month could receive it on the basis of contributions paid in April 1995. The contributions would be satisfied by 12 weeks of work for someone on the national minimum wage and a mere four weeks for someone on average earnings. We have also introduced new linking rules, which mean that people who have received incapacity benefit, try out a job and find that it does not work, will not lose their entitlement to incapacity benefit. The one-year linking rule—two years for those receiving the disabled persons tax credit—ensures that.

Tam Dalyell (Labour, Linlithgow)

Is it true that the mechanics of operating the Government's scheme will be markedly more expensive than the proposals put forward by Lord Ashley? Can my right hon. Friend provide to the House the technical advice that he has received from actuaries and others about the sheer cost of the mechanics of operating the Government's proposals?

Alistair Darling (Labour, Edinburgh Central)

No, I do not think that the operation of our scheme will be more expensive. The mechanics of operating the system are the same no matter what the monetary limits happen to be. I am more than happy to allow my hon. Friend to speak to Government actuaries. I am sure that they would relish the opportunity to engage him for many hours, if he so wished, on the subject, although the Benefits Agency will probably have to implement the proposals. If he wants further information on that, I shall provide it. I do not think that it makes any difference whether the monetary limits are £85, £95 or £120; the mechanics of implementing the system are exactly the same.

John Swinney (Scottish National Party, North Tayside)

I do not wish to interrupt the dialogue on the faculty of actuaries' next consideration of these issues, but may I return the Secretary of State to his point about the concessions that he announced on Monday night? Will he share with the House what persuaded him of the merits of moving to include the last three years, and not the last two years, of contributions? Why did his proposal not go further?

Alistair Darling (Labour, Edinburgh Central)

On the move from two to three years, my objective when I published the proposals about 12 months ago was to ensure that there was a recent connection between someone working and his claiming incapacity benefit. Incapacity benefit was originally designed to replace income for people who were out of work. There is no exact science behind the choice of two years or three years, but I believe that three years is a sensible link. As I said, the period between someone having worked and his claiming incapacity benefit might effectively be four and a half years. There is another important point. The Tories' only answer to long-term unemployment was incapacity benefit. There was no other help. Too often, people who came out of work were left to languish on the dole queues. The conditions of many of them deteriorated and they went on to incapacity benefit. This Government have introduced a large range of measures to help people who lose their jobs to get back into work. We have not only introduced tax and benefits changes, but provided help through the new deal and through the new ONE service. That help was never available in the past. We do not believe that, if people lose their jobs because their employer closes down or because of structural changes, that should be it and they should left high and dry with only one option available to them. They should not have to become sick so that they can get enough money to make ends meet. That can never be a humane policy response to the problems that they face.

Alan Simpson (Labour, Nottingham South)

My right hon. Friend the Secretary of State will remember the briefing notes that he sent out about how the new proposals would work. In them, he cited several examples of the way in which welfare reforms would affect different people. One of the examples in the original briefing referred to Dave, an unemployed binman who had been made redundant six years earlier and then suffered a stroke. However, Dave disappeared from the corrected version that was published later. Will the circumstances of someone with an intermittent employment record be covered by the proposed framework that my right hon. Friend now intends to put in place?

Alistair Darling (Labour, Edinburgh Central)

I shall set about a search for Dave as soon as I sit down, but I do not think that he has disappeared. I shall try to answer my hon. Friend's point—if not for Dave, then for Dave's mates or his replacement. As I said to the House a few moments ago, the contribution conditions can be satisfied by someone on average earnings having completed four weeks' work in the preceding three years. The period is 12 weeks for someone on the minimum wage. I have also said that, when someone is trying out work after perhaps having been on benefit, he will be able to be credited back into the system through the credits that we are offering. In addition, people with degenerative conditions will also be helped because of the changes that we are making through the disabled persons tax credit. Our objective is to ensure that, as far as possible, people who can work are helped to do so through a variety of means. We also want to ensure that when a person is working intermittently, the contribution conditions are such that if. eventually, they cannot continue to work, they are not stopped from receiving incapacity benefit. The reforms are part of a wider package of support for disabled people. The disability income guarantee, the disabled person's tax credit and the Disability Rights Commission are all welcomed by most people—although they are all, of course, opposed by the Tory party. The reforms are also part of a wider welfare reform Bill before the House. We are introducing new measures to help people to get back to work because we are not prepared to put up with people being left with absolutely no help, through no fault of their own, because they have lost their job. The Bill also introduces stakeholder pensions, which will help people with an intermittent work record. It delivers pension rights on divorce. It delivers new help for bereaved families with young children. It is worth noting that about 175,000 people disabled from birth or a young age will gain, and that nearly 175,000 other people will gain from the disability income guarantee. About 40,000 women will gain from the proposed bereavement changes. About 25,000 women will benefit from the extension of statutory maternity pay to low-paid women, and 960,000 people—nearly 1 million—on low pay will benefit from the changes that we are making in national insurance contributions. Some millions will benefit from the stakeholder changes. The Bill delivers real help for disabled children, and others who have never had help. It is part of a package that delivers real reform, real help, all of it delivered for the first time ever by this Labour Government, all of it opposed by the Tories. Their opposition tonight is based, not on principle, but on naked opportunism of a sort that we have not seen for many years. I believe that the Government should be supported. We have a record to be proud of. The Bill should be supported, and the amendments that I put before the House should be supported. I commend them to the House.

David Willetts (Conservative, Havant)

The Secretary of State has spoken as though he is bravely reforming an Attlee welfare state that has not been touched or reviewed or reformed for 50 years. That may be why he is so dismissive of the rebels on his own side and of the position that we, in the Conservative party, have adopted. He was pretty rude about his own rebels. He was quoted in The Guardian as saying: There are some in the Labour party who would vote against four sheets of blank paper.

Alistair Darling (Labour, Edinburgh Central)

I am used to good old-fashioned political knockabout, but what the hon. Gentleman just said is not true.

David Willetts (Conservative, Havant)

If the right hon. Gentleman is denying the quote that appeared in The Guardian, I am happy to accept that correction. The rebels can speak for themselves. I shall keep my remarks short so that as many as possible of them have an opportunity to speak. I want to tackle head on what the Secretary of State said at the end of his speech about what he described as the "naked opportunism" of our approach. I remind the Secretary of State that we constructed incapacity benefit. The benefit that he is messing around with tonight was introduced in 1995. That benefit was introduced while my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) was Secretary of State for Social Security. Conservative Members are perfectly entitled to defend a benefit that we constructed. The Secretary of State is not suddenly examining disability benefits that have not been touched for 50 years: he is undermining a benefit that was introduced in the House and implemented only a few years ago. As a result of the changes that we introduced when we were in office, both the number of incapacity benefit claimants and expenditure on incapacity benefit are falling. When the benefit was introduced, the right hon. Gentleman and his hon. Friends attacked us for cutting expenditure, but we deliberately and carefully constructed a benefit that we thought correctly balanced the control of expenditure and fairness to disabled people.

Terry Rooney (Labour, Bradford North)

Will the hon. Gentleman confirm that, in fact, the Disability Discrimination Act 1995 enacted a change of name and up to a 50 per cent. reduction in benefit? He did not construct a benefit; he destructed a benefit system.

David Willetts (Conservative, Havant)

Over time, reductions in entitlement to benefit were introduced and, certainly, one of our biggest single changes was to remove the earnings-related supplement to the previous invalidity benefit. The reason why we did that—it was explicitly set out at the time—was that there was an increasing shift towards pension provision among people who left work early as a result of their growing disability. My predecessors—Secretaries of State in the previous Conservative Government—explicitly put that argument before the House. The justification for the measure was precisely that it would be part of a mixed economy in which there would be increasing access to pension savings. We oppose what the Secretary of State is doing because he is attacking part of our vision of the development of the social security system. We are defending exactly the argument that we used when we introduced the benefit only a few years ago.

Tom Levitt (Labour, High Peak)

The hon. Gentleman is defending a system that left some disabled people too poor to qualify for incapacity benefit.

David Willetts (Conservative, Havant)

I will not say that the system in 1997 was ideal. I am explaining that there was a logic to my right hon. and hon. Friends' construction of the benefit—consciously aiming at a mixture of occupational and personal pension provision and benefit. I thought that the vision of people increasingly having access to savings from pensions alongside benefit was one of the Government's principles too. I have a copy of the Government's so-called "key messages on welfare reform". What does it say on the very front page? One of the bullet points refers to Providing for the future with new stakeholder pensions and encouragement for those who can save to do so. I should like to hear the Secretary of State explain how the measures before the House are consistent with that statement from him of the Government's commitment to encouraging savings. It is simply inconsistent.

Alistair Darling (Labour, Edinburgh Central)

rose—

David Willetts (Conservative, Havant)

If the right hon. Gentleman wants to intervene to explain how penalising people for having an occupational pension is compatible with encouraging savings, I shall be very interested to hear him.

Alistair Darling (Labour, Edinburgh Central)

Of course it is the Government's objective to encourage saving for pensions and other eventualities in later life. However, it has always been a principle of the social security system that there comes a point at which we take into account people's means. It is a bit rich for a member of a party that vastly extended the way in which the Government take into account people's savings to criticise such an eminently sensible proposal. When people draw down good early-retirement pensions, we should take some of them—over a threshold—into account.

David Willetts (Conservative, Havant)

I remind the Secretary of State of what he said in "A New Contract for Welfare". I know that the document causes him considerable embarrassment, as his actions are increasingly departing from the principles that he set out in it, but principle 2 is as follows: The public and private sector should work in partnership to ensure that, wherever possible, people are insured against foreseeable risks and make provision for their retirement. That is the argument for people who are on incapacity benefit not being penalised for their entitlement to a retirement pension.

John Bercow (Conservative, Buckingham)

The Secretary of State's last intervention was woefully inadequate to meet the needs of the case. Does my hon. Friend agree that, in view of the more than halving of the savings ratio—from 10.6 per cent. to under 5 per cent—in the first quarter of 1999, as a direct consequence of the Government's policy decisions, the Secretary of State at least owes the House an explanation of what assessment he has made of the likely impact of the incapacity benefit changes on the savings ratio which he has been busily running down?

David Willetts (Conservative, Havant)

My hon. Friend is right. We have not heard from the Secretary of State any assessment of the long-term impact on behaviour of measures such as the one proposed. We have all learned from the right hon. Member for Birkenhead (Mr. Field) that long-term implications for behaviour must be considered, as well as short-term apparent expenditure savings. It is highly unlikely that the provisions will save the Secretary of State money. They will merely affect the way in which occupational pensions are provided and the terms on which people are entitled to them. My hon. Friend the Member for Buckingham (Mr. Bercow) is right. The measure will deter people from occupational pension provision. I shall risk another quotation from The Guardian. The Secretary of State may not disagree with it. It is from a document that was apparently circulating during our term in office. Clearly, ideas such as the one proposed by the Secretary of State were circulating under the previous Government. I shall quote from The Guardian the response of my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the then Secretary of State for Social Security: I do not favour this approach. Apart from the disincentives to make private provision it would introduce, I think it would raise some very difficult questions about the future of the contributory benefit system before we have fully thought through the direction we want to take. The then Secretary of State for Social Security was saying that measures such as the present Secretary of State is introducing were wrong because they would attack private occupational pension provision and undermine the contributory principle. My right hon. Friend was right then, which is why he won the argument then. The Secretary of State is not engaged in some bold Blairite reform of the welfare state. He is taking the tired old options from the Treasury cutting room floor of five years ago, and recycling them as though they were part of some bold vision for the future of social security. They are not. They are the options that were rejected then. We deliberately and consciously rejected them. They were not part of the model of incapacity benefit as we introduced it. We were right to reject them then, and that is why we shall vote against them again tonight.

Sir Nicholas Lyell (Conservative, North East Bedfordshire)

I have just joined the debate, but I heard my hon. Friend refer to bold Blairite options in social security. Does he know of any such thing?

David Willetts (Conservative, Havant)

The gap between the rhetoric in the document and the tired and desperate measures before the House lead one to doubt whether there is any such thing. Let me scrutinise in more detail the means test proposed by the Secretary of State to penalise people for their occupational pensions. It is a means test hitherto unknown in the social security system. It does not take account of people's income in general. It simply takes account of one form of income. It penalises people only if they have an occupational or personal pension. They can have as much money as they like in a building society account and they can have PEPs, TESSAs and other financial savings. The one thing that they must not have is an occupational pension. That is a bizarre route for a Government who claim that they want to encourage occupational pension provision.

James Plaskitt (Labour, Warwick and Leamington)

There is a gap in the hon. Gentleman's argument. If he is arguing that the measures are an attack on savings and occupational pensions, why did he support his right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) in 1994, when the legislation introducing the benefit was going through? The right hon. Member for Hitchin and Harpenden said: Too many people regard invalidity benefit as a readily available supplement to their occupational pensions when they take early retirement."—[Official Report, 24 January 1994; Vol. 236, c. 37.] If that was an argument for reform then, why does not the hon. Gentleman support the argument for reform now?

David Willetts (Conservative, Havant)

That was the argument for removing the earnings-related supplement. That is precisely the point. The argument was that people could not have the earnings-related supplement plus occupational pension provision. That is why we moved to a benefit that has a flat rate rather than an earnings-related element. That is precisely the reason for the benefit as it is currently constructed, as I tried to explain to the House a moment ago.

Terry Rooney (Labour, Bradford North)

rose—

David Willetts (Conservative, Havant)

I have already accepted an intervention from the hon. Gentleman. [Interruption.] The Secretary of State's Parliamentary Private Secretary, the hon. Member for Stockport (Ms Coffey), is urging me to accept the hon. Gentleman's intervention because she does not want any of her colleagues to speak in the debate. The fact that she wants me to accept the hon. Gentleman's intervention is another argument against doing so. I referred briefly to the means test. I shall refer to two other pernicious aspects of the Government's proposals—the combined impact of the 50 per cent. rate of withdrawal, and the fact that the benefit is taxable. We accept that the benefit is taxable, of course. We regard as unacceptable the combined rate of 73 per cent. It will impose much higher rates of combined benefit withdrawal and taxation on people on low incomes than the Government say they are prepared to accept for people on high incomes. The attack on the contributory principle is unacceptable. No private insurance company or private pension scheme could get away with changing the conditions for entitlement in the way that the Government propose. They would probably be breaking the law and would certainly be named and shamed by Ministers. People have a legitimate expectation, on the basis of their national insurance contributions, which the Government are undermining with no clear assessment of the distributional impact. There is no targeting or focusing on people with low incomes. They are simply changing the contributions test for receipt of the benefit in order to save money and, despite what the Secretary of State said, there is no assessment of the overall distributional impact of their measures. We have made it clear that we are willing to look at ways in which further savings can be achieved in incapacity benefit—even though the measures that we introduced are already reducing the amount of expenditure on it. That should be done by properly policing the entitlement to benefit in the first place. That is what the all work test is supposed to do. The Disability Benefits Consortium is right to say: If the Government believes that there are people on IB who are not sick or disabled then the way to deal with this is through the design and operation of the All Work Test. That would have been the right way to set about achieving what the Secretary of State claims is his objective. These random measures, plucked from the cutting room floor of the Treasury, will have a distributional impact that he cannot defend. They will have a long-term effect on behaviour that will be perverse and damaging. They will undermine people's confidence in the contributory principle in which the Secretary of State claims he believes. They are measures that the House should reject.

Roger Berry (Labour, Kingswood)

I would love to spend some time attacking the Tories' record on disability issues, but I am here to speak in support of amendments in my name and those of my right hon. and hon. Friends. Should the opportunity arise, which I am pretty certain it will not, I should like to press them to a Division later. I ask myself why the Government are pursuing this course of action on incapacity benefit. What are the problems? The first problem is that the Government's proposals will reduce benefit for disabled people who are unable to work. Those disabled people, as future claimants, will have paid the existing national insurance contributions and been judged unfit for work according to a medical test with criteria set down by the Government of the day. Why should future claimants who have paid the current contributions and satisfied that medical test be worse off? For the life of me, I cannot answer that question. I can say how many people will be affected. Even under my right hon. Friend's revised threshold, 310,000 disabled people who are unable to work will be worse off as a result of the proposals. A total of 110,000 will be worse off because of the restriction on the entitlement conditions whereby contribution has to have been made in the past three years, and 200,000 will be worse off because of the means test on those who are able to access incapacity benefit. That is my first problem with the proposals. Why are we making disabled people who are unable to work worse off? I cannot understand it. The second reason why I cannot understand the proposal is that it is distracting attention from the path-breaking and progressive policies of this Government in support of disabled people. No Government have been as radical and progressive on rights for disabled people as this Government have been. The new Disability Rights Commission provides support, through the new deal and the disabled persons tax credit to enable disabled people to get back to work, and measures in the Bill provide increased benefits for severely disabled people. Those and many other measures show that this is the most progressive, ground-breaking Government on the rights of disabled people. I cannot for the life of me understand why they have allowed all that to be cast in the shadow of these cuts in social security benefits. 4.45 pm Like many of my colleagues, I spent the summer attending meetings to promote the Disability Rights Commission. Within 20 seconds of my sitting down, people asked me why cuts were being made in invalidity benefit. I am concerned that those cuts are damaging the Government's wider programme. I have not received a letter, a fax, a telephone call or an e-mail in support of the proposals. I do not know of an organisation of or for disabled people that supports them; indeed, I do not know of any organisation that supports them. I cannot find a member of the Government's disability rights task force who supports them. I have had some difficulty finding hon. Friends who honestly support these proposals. [HON. MEMBERS: "Oh."] Until today perhaps. It has been said that those of us who feel strongly about this matter reject the notion of welfare reform. That is not true. I am a passionate supporter of welfare reform, including most of the measures that the Government have introduced. I checked my dictionary about the meaning of the word "reform", and it says that to reform is to improve. Parliamentary reform and reform of the House of Lords is an improvement in the way in which Parliament and the House of Lords reflect the wider community in which we live. I cannot see how reducing benefit entitlement to disabled people who are unable to work can be described as an improvement. It is not an improvement for them. Let us be clear: we are talking about incapacity benefit of £66.75 a week. We are not debating the case for a higher level of benefit. It is a debate about retaining the benefit for people who have paid contributions under the current system and are judged unfit for work according to criteria set down by the Government. What reasons have been given for the measures? We were told that the previous Government used incapacity benefit to disguise unemployment, and that is why something must be done about it. That is an irrelevant point, because the Bill relates to future claimants. It does not matter what the previous Government did. We were then told that spending on incapacity benefit was increasing. It is not: it is decreasing. It has been falling consistently since the benefit was introduced in 1995. We were told that we should means-test incapacity benefit because more people now have occupational or personal pensions. That was the justification used in 1995 when the previous Government removed the earnings-related component. That is a matter of public record. The same argument could be made about the basic state pension. Many pensioners have occupational or personal pensions, not least because all Governments rightly encourage people to make personal provision for their retirement. The Government are opposed to means-testing the basic state pension. Why? Because that would penalise those who have saved for retirement, it would discourage future saving, and it is a contributory benefit. The same is true of incapacity benefit. More means testing further reduces the incentive to save. It reduces benefit take-up, encourages dishonesty, and is costly to administer.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I have been listening carefully to what my hon. Friend has been saying, and I think that it should be knocked on the head at an early stage. He erred in this respect: at Question Time the Prime Minister gave an unambiguous answer, making it clear that there was no thin end of the wedge, and that there was no thought that the retirement pension would be means tested through the taking into account of occupational pensions.

Roger Berry (Labour, Kingswood)

I did not mean to suggest that. Indeed, I did not suggest that. I specifically said that the Government were entirely opposed to means testing of the basic state pension, and expressed my strong support for their opposition. I raised the matter in order to suggest that the principles involved in not means-testing the basic state pension were the same as those involved in not means-testing incapacity benefit. We are told that incapacity benefit was never intended for people who have been unemployed. In fact, it has always been the case that people can move from unemployment benefit to incapacity benefit, provided that they meet the contribution conditions and have the relevant medical test. The benefit was intended specifically to protect those whose health deteriorated while they were unemployed. If the benefit was never intended for those who had been unemployed, why did the contribution conditions never reflect that fact? The present contribution conditions are the same as those for invalidity benefit, which preceded incapacity benefit, and the same as those for sickness benefit, which was introduced in 1948. Finally—this is not the final point that I want to make, but I know that others wish to speak—we are told that the proposal is all about helping those in the greatest need; that it is about helping the most severely disabled. On 20 April, however, the Under—Secretary of State for Social Security, my hon. Friend the Member for City of York (Mr. Bayley), said: We are not introducing the changes because we want to make savings to pay for improvement of other benefits for disabled people. We are introducing the changes because we believe that each one is right and proper and will improve the welfare of disabled people."—[Official Report, Standing Committee D, 20 April 1999; c. 874-75.] Both those arguments cannot be correct, but one of them must be, and I think that my hon. Friend the Under-Secretary of State is right. The argument that savings in incapacity benefit are needed for help to be concentrated on the most severely disabled does not stand up. There will still be about £450 million worth of savings in incapacity benefit as a result of the most recent proposals—far more than the very welcome extra spending on disabled children and young people. In any event, what would be the moral justification for increasing help for disabled children and young people, and reducing the benefits of other disabled people on low incomes to pay for it? Does not the whole of society have that responsibility?

Alistair Darling (Labour, Edinburgh Central)

My hon. Friend must not persist in the argument that, by increasing spending on the most vulnerable, we are somehow removing money from other disabled people. We are not. The savings that we shall make by this means are long-term. As I said earlier—I am sure that my hon. Friend was present—we are spending more money now to help the very people whom he and I want to help. That is extra money, new to the system.

Roger Berry (Labour, Kingswood)

I was referring to provisions in the Bill. Of course I acknowledge the extra spending that the Government are undertaking elsewhere. The Secretary of State has indicated that he will raise the means-test threshold from £50 to £85 a week, but that the taper will remain at 50p. I think that that will leave many disabled people who are unable to work on very low incomes—they will be significantly worse off. The means test would begin with a total income of less than £8,000 a year, and all incapacity benefit would be lost at a little over £11,000. Pensioners paying the standard rate of income tax would lose not 50p but 73p in the pound.

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

May I make a purely mathematical point? I agree with the drift of what my hon. Friend is saying. The clawback is high, but with a 22 per cent. tax rate the figure would be 61p, while with a 23 per cent. rate it would be 61.5p. One would have to do a bit of double accounting to arrive at 73p.

Roger Berry (Labour, Kingswood)

My understanding of the Bill is that the 50 per cent. relates to gross pension income. I am prepared to re-read the Bill; perhaps I have misunderstood it. Whichever figure it is, however, those people will effectively pay more marginal tax than a millionaire: they will effectively pay far more tax than people on much higher incomes. As the House will have gathered, I am not happy about the principle of means-testing incapacity benefit. I am deeply unhappy about it, but, like Lord Ashley and others in the other place, I have supported a compromise position, which is on the Order Paper. Its purpose was to reduce the impact on disabled people and to bring the matter to an end. Our threshold would be the level of the disability income guarantee—£128—which would provide a mechanism for uprating and safeguard the income of any disabled person with an income of less than £195 per week. I do not believe that, in this day and age, that is too generous. Reducing the taper to the standard income tax rate is not too generous, either. It has been said that the proposal would exempt nearly everyone. That is not true. About 400,000 incapacity benefit recipients have a pension of over £50 a week—the original threshold level. The compromise would have rescued the poorest two thirds of those incapacity benefit recipients, while halving the Government's original savings. It was an honest attempt to meet the Government halfway. I am sorry that the Government have felt unable to support that compromise, or anything near it. The Bill will return to the other place. I feel that, unfortunately, the best way for Members to show that they would like the Government to think again is to vote against the Government's motion to disagree with the Lords amendment. I feel that I have no alternative but, with very great regret, to vote against the Government's motion. I urge other right hon. and hon. Members to do the same.

Steve Webb (Liberal Democrat, Northavon)

It is a privilege to follow the hon. Member for Kingswood (Mr. Berry), who has a reputation for fighting on behalf of disabled people. Tonight, he is doing the same again and deserves to be listened to. On a recent BBC radio programme, he and I were bracketed together by the Secretary of State as "the forces of conservatism", which is news to both of us. I will not lavish any further praise on the hon. Gentleman lest I undermine his position. The hon. Member for Havant (Mr. Willetts) discussed the history of the attempt to means-test incapacity benefit and rightly pointed out that it was considered and rejected by the previous Secretary of State, the right hon. Member for Hitchin and Harpenden (Mr. Lilley). Given what happened yesterday, the hon. Gentleman coyly failed to mention which person tried to foist on the previous Secretary of State the means-testing of incapacity benefit: one M. X. Portillo. In the circumstances, perhaps the hon. Member for Havant does not want to remind the House that Mr. Portillo, who hopes to re-enter the House shortly, tried to persuade the right hon. Member for Hitchin and Harpenden to means-test incapacity benefit. All I can say is that the Secretary of State is doing what Michael Portillo wanted to do and the right hon. Member for Hitchin and Harpenden dared not do. It is a sad day when the Labour party has to deliver Michael Portillo's agenda. We have discussed the marginal tax rates under the means test. The hon. Member for Kingswood was right. We clarified the position with the Library yesterday. It rang the Department of Social Security, which said that the 50 per cent. rate will apply to gross occupational pension income. If I am wrong, I will be happy to be interrupted by the Secretary of State. That 50 per cent. is on top of the income tax rate of 23 per cent., so, for every pound above the threshold, whatever it should be, someone who has saved through an occupational pension will lose 73p. The Secretary of State told us that the taper of 50 per cent. was low for the benefits system—the Department of Social Security could be much nastier in means-testing. It set one of 50 per cent. or more on the working families tax credit and 60 per cent. on housing benefit. It is set one of 73 per cent. for people who save through company pensions—[Interruption.] The Minister of State says that the taper could be 100. Yes—if the price is right, and the Department really puts its mind to it—it could be 100. 5 pm Does the hon. Gentleman, who has responsibility for pensions, really think that a 73 per cent. taper gives people an incentive to make more occupational savings? If he were in his 50s—

Angela Eagle (Labour, Wallasey)

He is.

Steve Webb (Liberal Democrat, Northavon)

I was not going to speculate on that. However, given that he is in his 50s, if he anticipated that early retirement might at some point be forced on him—who knows—does he think that, faced with a 73 per cent. marginal rate, it would be sensible for him to put extra money into an occupation pension? Clearly, it would not be sensible to contribute more, as the marginal rate is undoubtedly a disincentive to save. Modernisation has been the Secretary of State's principal defence of the policy, which the Government say is designed to reform the welfare state and bring it up to date. What is the central tenet of that reform, as we march confidently into the new millennium? It is means testing. The Secretary of State has discovered a new strategy for a new millennium, to build a new welfare state, founded on a bright new vision for dealing with today's realities. That vision and that strategy is means testing. How can means testing be modernisation? I thought that one of Labour's proudest boasts was about the post-war Labour Government and their role in establishing the welfare state, of which contributory social insurance was an integral part. There is no doubt that the Secretary of State is playing an instrumental role in dismantling the welfare state.

Julian Brazier (Conservative, Canterbury)

I am listening very carefully to the hon. Gentleman's speech. Every time a Conservative Member makes a point on the principle of means testing, we hear, "That's what you did", but receive no coherent answer about the Government's policy. It will be very interesting to see whether the hon. Gentlemen receives a proper answer from the Government to his excellent question.

Steve Webb (Liberal Democrat, Northavon)

I should be most grateful for an answer to the question. Although the Government could easily point out that the Tories doubled means testing—which is true, but regrettable—what is the Secretary of State's answer to my question? In a modern welfare state, why is it desirable to force more people on to the means test by limiting the contribution rules, means-testing occupational pensions and phasing out severe disablement allowance? How can that be the face of a modern welfare state? Is that the shape of things to come? We hear no answer. The hon. Member for Kingswood raised the issue of means-testing the retirement pension. We all heard the Prime Minister say that he would not means-test the retirement pension, and I entirely welcome that assurance. However, once the principle has been breached, his successors, and those of the Secretary of State, will be able to tell the House, "We already means-test contributory benefits". All the arguments that the Secretary of State has used on incapacity benefit will be true in spades when applied to the retirement pension.

Angela Eagle (Labour, Wallasey)

What about the jobseeker's allowance?

Steve Webb (Liberal Democrat, Northavon)

I am not sure why the Minister raises that, but assume that she does so because that was an example of the previous Government weakening the contributory principle. I expect that she opposed that change. Now, however, Ministers are engaged in a further undermining of the contributory principle. I am sure that, in this Parliament, the Government will not means-test the retirement pension.

Lynne Jones (Labour, Birmingham, Selly Oak)

I might be able to enlighten the hon. Gentleman on that point. In 1987, in a debate on the Social Security Act 1988, my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs, in opposing the means-testing of contributory unemployment benefits, said that those affected had shown thrift and foresight in providing for themselves"—[Official Report, 2 November 1987; Vol. 121, c. 671.] and that he opposed the means-testing of unemployment benefit.

Steve Webb (Liberal Democrat, Northavon)

I am grateful to the hon. Lady for drawing the House's attention to a previous comment by a leading member of the Government. The comment was true then, and it is true now. My concern is not that the Government will means-test the retirement pension in this Parliament—we have the Prime Minister's assurance on that. However, what might happen in 10 or 15 years? The Minister of State has said that people retiring on the retirement pension will be living in penury. It is difficult enough to justify the current level of the retirement pension, but, after 10 or 15 years of price indexation, it will have fallen so far below the poverty line that there will be huge political pressure to put more money into it. At that point, a future Government may well say, "We will put money into the retirement pension, but do not want to do so for people with occupational pensions of £30,000 a year." If we give in to the principle today, we shall be laying the future open to means-testing the retirement pension. The Secretary of State has defended his attack on disabled people who have occupational pensions or dodgy contribution records by referring to the good things that the Government are doing for some other disabled people. More times than I care to remember he has mentioned the disabled persons tax credit, which was an afterthought of Government policy. Disability working allowance—its predecessor—went to just 16,000 people. The bright, shiny new disabled persons tax credit, which is the Government's in-work strategy for disabled people, will go to an extra 6,000. If anyone wants to intervene and correct me on that, I shall be happy to give way.

Tom Levitt (Labour, High Peak)

The hon. Gentleman will be aware that there are 2 million disabled people in employment and a further 1 million who are not in employment but would like to be. It is certain that a significant proportion will qualify for the disabled persons tax credit—far more than for the DWA.

Steve Webb (Liberal Democrat, Northavon)

The Government's projections for spending on the tax credit assume 22,000 recipients. Even if the figure were 30,000 or 50,000, what is that compared with the 1 million whom the Government say want to work and cannot? It is a drop in the ocean—a fig leaf to cover the huge cuts that the Government are making for people who are unfit to work. The spurious argument about the situation being a form of hidden unemployment has been raised yet again. If there are people on incapacity benefit who should not be, why not stop them claiming it in the first place rather than introducing measures that affect not just those who should not be claiming, but those who have every right to claim? There is a fundamental principle of universality involved. When someone turns up at an NHS hospital, we do not tell them to go away because they are well off or have BUPA cover. Everyone is in the system. They have paid their taxes and their contributions, so they have a right to treatment on the NHS. That principle underlies social insurance. People make contributions during their working life and when they need help it is there for them. The rules do not change at the end of the game. The Government cannot say afterwards that someone is not entitled because they have made extra provision for themselves. Either provision is universal or it is not. The Government say that they do not accept universality. They are moving towards mass means testing. If it was wrong of the Tories to double means testing, why is it right for the Government to extend it further?

Alistair Darling (Labour, Edinburgh Central)

I have been listening to this nonsense for some time. The hon. Gentleman will be aware that the Government's proposals for the reform of the state second pension, which is a contributory pension, will mean that more people will get an increased amount. We are doubling the amount of money that people on £9,000 or below will get from that contributory benefit. We have a mixed social security system involving means-tested and contributory benefits. I have given an example of a contributory benefit that we are increasing. If the hon. Gentleman's argument was right, contributory benefits could never be changed or improved. When he sits down and thinks about that he must realise that it is nonsense.

Steve Webb (Liberal Democrat, Northavon)

I am sure that you will not allow me to stray too far in talking about the state second pension, Mr. Deputy Speaker, but I should like to address that point. For the next 20 years, contributory pension expenditure on the state second pension plus the state earnings-related pension will be lower because of the Government's policies. In 2050 or after another total eclipse they will be spending more, but, within 20 years, there will probably be no state second pension because some other Government will have ripped up the unfunded promise. It is the coming years that are relevant to people currently in their 50s and 60s. By 2050, plenty of us here, let alone today's pensioners, will be dead. In the next 20 years, the Government will be spending less on the contributory retirement pension than would have been the case without their reforms. The Secretary of State mentioned benefits for carers under the state second pension. It will be 50 years before people can get a full state second pension. That is how long the reform will take, yet the Secretary of State justifies cuts to invalids over the coming five to 10 years on a promise 20 or 30 years down the line.

Alistair Darling (Labour, Edinburgh Central)

Utter rubbish.

Steve Webb (Liberal Democrat, Northavon)

Does the Secretary of State have the arguments to back that up? Heckling is easy, but has he brought an argument to the House? Many Labour Members have difficult points to make—no one enjoys voting against their own party—and they deserve to be heard. The Secretary of State can easily dismiss the Tories because of their record, and he can choose to dismiss us. However, he has said that he will listen to his own Back Benchers who, I believe, are deeply dissatisfied with the direction of the Government. Means testing is not the future, it is the past. It is time that the Secretary of State thought again.

Kali Mountford (Labour, Colne Valley)

We have heard some outright nonsense this afternoon, and I cannot resist addressing much of it. The welfare state was created 50 years ago, and times have changed. We are asked why it is right to look at this matter—it is right because the conditions are different. [Interruption.] The hon. Member for Havant (Mr. Willetts) says—from a sedentary position—that the system was introduced in 1995. He is trying to mislead the House. We are looking at the whole benefits system, and the Tory reforms merely tinkered and renamed the system. We must look back to the system in 1991 and, prior to that, at sickness benefit, which was the precursor to the proposals that we are debating. Sickness benefit is an income-replacement benefit. We are debating today—in a changed world—what we mean by that, and how we focus benefits. I support the proposals because I think that they are right. I do not do so because I wish to eke out some meagre resources, but because the proposals make sense. They make sense in terms of the national insurance contributory principle and in terms of how we use that principle now and in the future. We must look at the link between the contribution and sickness benefit. We talk about national insurance contributions as if they pay only for that benefit, but we pay national insurance contributions for a range of things, and we get a great deal out of it. Some people get more out of it than others, but that is part of the redistribution within the system. People talk as if we all had an individual fund. One of the problems is that there never was a fund. There is no state pension fund from which we get our pension. We have no fund for our hospital care. We have no personal fund if we become sick, disabled or unemployed. We pay today for today's recipients. To talk about a fund that does not exist is misleading, and to suggest that no one gets anything from his national insurance contributions is not true. We get a great deal. On incapacity benefit, we must look at the poorest recipients, who are on income support. The debate has dismissed people on income support as if they were invisible. That is nonsense—they do exist. For the purposes of accounting we cannot simply act as though they do not exist, when clearly they do. We must look at how we focus resources. Do we focus them on the most disabled, or the worst off? The Government's proposals contain an element of both. The most severely disabled are exempt from the measures and are protected. Consideration has been given to degenerative conditions, so that people need not have concerns about such a condition while they are in work. As their condition worsens and they can work less, credits will be made available. The national insurance system is being upheld yet again. There is also the linked period between work and the receipt of a benefit—a reasonable period of three years which, depending on when one works and then makes a claim, can run to four to five years in some circumstances. To act as though the Government are introducing an onerous qualifying period is ridiculous. The tight link between the period of work and the receipt of benefit makes more sense.

Eric Pickles (Conservative, Brentwood and Ongar)

Will the hon. Lady give way?

Kali Mountford (Labour, Colne Valley)

I cannot resist the hon. Gentleman.

Eric Pickles (Conservative, Brentwood and Ongar)

I have to tell the hon. Lady that she is not alone in that thought. [Laughter.] I am enjoying her speech, in which she has said that the three-year period is perfect. In Committee, she gave the same speech, but said that a two year period was perfect. Why is two years now wrong and three years better?

Kali Mountford (Labour, Colne Valley)

The hon. Gentleman will recall that I did not use the word "perfect"—I said that it was reasonable. The proposal is all the more reasonable now because we are witnessing—the hon. Gentleman may not be used to this—a Government who have listened and responded. I will try to resist him from now on. Another problem with the debate has been the constant reference to the all work test. Some colleagues have not been watching what has gone on. I recall that people have been dissatisfied with the all work test, which was anathema to many—including those who have been lobbying for disabled people. The all work test took no account of people's abilities, and that must be wrong. We have to change the system to one that recognises that people with disabilities also have abilities. In the past, we have had a national insurance contribution system from which benefits have developed. We must look to the future and at how we want society to be. We do not want a society that says that if someone becomes ill or disabled, we will simply write them off. Opposition Members may have heard me say that in Committee, but I say it because I believe it. It cannot be right to have a system that discourages people from developing their full potential. We must look at this measure in the context of all the other measures that relate to it. People are applauding the new disability tax credit—it is a method by which we can support people who are getting back to work. If anyone thinks that a life on benefits—be it incapacity benefit at its slightly higher rate than jobseeker's allowance—is a joy for anybody, they have not lived on benefits.

Lynne Jones (Labour, Birmingham, Selly Oak)

Is living on £160 a week any great joy?

Kali Mountford (Labour, Colne Valley)

My hon. Friend is not considering the full implications of the proposals. We must look at the disability income guarantee and at how we get people back to work. People working for only 16 hours a week will now be able to get the disability tax credit. Does someone on income support deserve less consideration than someone with an occupational pension? My answer is no. It has been said that people have made provision through their occupational pension for such circumstances. Lots of us have done so—not because we think that we will retire at 50, 55 or 60, but because we want to make provision for our old age. People are pretending about what has gone on in the workplace, where there have been actions that we cannot condone. Employers have been looking at incapacity benefit and others as a top-up to get people out of the system altogether.

Julian Brazier (Conservative, Canterbury)

If the hon. Lady's allegation is true—I believe it has some truth—surely the answer is to tighten the medical criteria, as we suggested in Committee, rather than to take it out on perfectly legitimate disabled people who have saved or earned a little more than the limits proposed by the Government.

Kali Mountford (Labour, Colne Valley)

The hon. Gentleman obviously was not listening to my arguments about the all work test. We have to consider how we can accommodate people who have medical conditions or disabilities and allow them to move into work and off benefits. The Conservative proposals could even trap them into benefit for much longer than any of us would have envisaged. I do not want to make allegations about people cheating the system. People with genuine problems would be better off staying in their jobs with support rather than being told that we will find a way of getting them out because it would be more convenient. The fact that they have a genuine condition does not mean that it is right for them to rely solely on benefits. We should try to help people to stay in work if they are employed and to find work if they are not. No one would try to pretend, however, that that is the solution for everyone. We will never have a perfect economy with 100 per cent. employment, but we should aim for it. People currently claiming incapacity benefit have a right to be part of the new economy and the growth that we expect to arise from other marvellous measures introduced by the Government. I could not resist saying that. I want to challenge the Opposition on the notion that, because a declining number of people are in receipt of benefit and the expenditure is declining, it would not be right to consider changing the benefit. It is right to change the benefit and the conditions to tighten the link between qualifying for the benefit and the period of work, which consolidates the contributory principle of national insurance and focuses help on those who need it most, providing more help for the most disabled. The Opposition suggest that we should change benefits only when they are too costly to the state. To take that to its logical conclusion begs the question whether they are suggesting that if expenditure on incapacity benefit rose, they would cut it.

Eric Pickles (Conservative, Brentwood and Ongar)

Not really.

Kali Mountford (Labour, Colne Valley)

I heard only a few moments ago the argument that expenditure on incapacity benefit was dropping, so it was not right to cut it. That sounds ridiculous to me.

Eric Pickles (Conservative, Brentwood and Ongar)

It was him over there who said it.

Kali Mountford (Labour, Colne Valley)

It was not my hon. Friend the Member for Kingswood (Mr. Berry) who said it; it was the hon. Member for Havant (Mr. Willetts). He said that we were changing the benefit because its cost was rising, but that is simply not the case. We are changing it because to do so strengthens the system and provides proper protection for those who need it. I shall certainly oppose the Lords amendment tonight.

Edward Leigh (Conservative, Gainsborough)

I wish that the hon. Member for Colne Valley (Kali Mountford) had been at the meeting of the Social Security Committee this morning, where she could have heard an impassioned two-hour defence of the contributory principle by the right hon. Member for Birkenhead (Mr. Field), whose face during the last few minutes of her speech was a delight to watch. I hesitate to take part in this debate. I understand that at the Labour party conference—I could not be there, as I was not invited—Bill Morris said: Reform cannot be a private conversation between the few at the expense of the many. I hesitate, because this debate is really between the Labour party establishment and those who feel passionately about poverty. I realise that I do not have the record of the hon. Member for Kingswood (Mr. Berry) in standing up for disabled people, but it is important for some of us to take part in the debate to show that we, too, feel passionately about the contributory principle. I agree with the right hon. Member for Birkenhead that it is the bedrock of society. I sympathise with the Government's position, because they promised at the general election to reduce the costs of social failure, yet they find that the welfare budget is set to rise by more than £38 billion over the next three years. I do not criticise them for that, because all Governments have had to face the same problem. Until we have the courage to return to the contributory principle, we will not get any long-term reduction in the welfare budget. The Government have to find savings. I also understand the Government's argument on incapacity benefit. To be fair, they are supported by recent research published by Sheffield Hallam university, arguing that three quarters of the 1.7 million people on incapacity benefit, costing £7.8 billion a year, are capable of work. Labour Members have often argued that incapacity benefit and its predecessors have been used to disguise the true level of unemployment. We know that to be true and that there is a scandal of many people who could work using the benefit; but is not the solution not to attack the contributory principle but to have a harder test and ensure that the all work test—or whatever it is renamed—identifies those who are capable of working, which does not happen at present? Many have spoken of the position of those who have not paid their full national insurance contributions in one of the previous two or three years. I cannot understand the argument about whether it should be two, three, four or five years. It is a principle. Why is it right that people can pay full contributions for 30 years and be denied incapacity benefit if they stop paying them for one, two, three or four years? I cannot for the life of me see the logic. If one believes in the contributory principle, one believes that it confers a right. There must be many cases in which people are afflicted with a gradually worsening condition, desperately try to stay in work and do not maintain their full contributions. They have contributed to society but the reform discriminates against them. Is that fair or right? There is a fundamental principle at stake.

Tom Levitt (Labour, High Peak)

Those are exactly the circumstances in which the disabled persons tax credit would click in and assist the person involved.

Edward Leigh (Conservative, Gainsborough)

The hon. Gentleman reinforces our point. The mechanisms are simply churning the money around and increasing means testing. I am not suggesting that the Government are increasing poverty. I respect the fact that Labour Members are concerned about poverty and the disabled. Our concern is that the Government are increasing means testing, which cannot be right. Why, too, are we penalising people with very modest occupational or personal pensions? Why are the Government telling people in occupational pension schemes that may bring in a modest remuneration—be it £50 or £80 a week—that they will be penalised? That cannot make sense. I hope that as many hon. Members as possible will lay aside for the moment their party loyalties and come to the conclusion that if we truly aspire, as I hope we do, to create a society in which everybody is encouraged to save for their retirement, for sickness and for the various vicissitudes of life, we must vote down the Government's so-called reforms.

Tom Clarke (Labour, Coatbridge and Chryston)

On one major point, my right hon. Friend the Secretary of State and I agree—that our debate in May was excellent. I worried a little today at the beginning of the debate whether that quality would continue, until I heard from more of my right hon. and hon. Friends and, to be fair, from the Liberal Democrats. It has continued, but, with great regret, I have to tell the hon. Member for Havant (Mr. Willetts) and his colleagues that I cannot find it in my heart to respond to their contributions or to take lectures from them, in the knowledge that I sat year after year watching Conservative Members talk out civil rights Bill after civil rights Bill, including those introduced by my hon. Friend the Member for Kingswood (Mr. Berry)—who made an excellent speech today—by my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) and by Alf Morris, who is now in the other place. I therefore address my remarks to you, Mr. Deputy Speaker, and to the House, but in particular to my hon. Friends as this important debate continues. 5.30 pm I have been proud to be supportive 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 general election. Of course, I warmly support many of the measures that the Government have introduced to help disabled people, many of which have been mentioned by my right hon. and hon. Friends. I welcome those measures, because it is right that those disabled people who can work should be given the opportunity and the help so to do. Like so many others, I have campaigned for years for those very principles and I am glad to see them being applied. That said, it is important to establish that the measures we are discussing today concern some hundreds of thousands of disabled people who are incapable of working. That is the issue and the challenge. A job for them is a distant, elusive dream. If the Bill is passed tonight as it stands, all the evidence is that those people will be significantly poorer. I shall explain why. Under the proposals, disabled people start to lose their weekly incapacity benefit when their annual income is less than £8,000 a year, which is below even the poverty line of half average income. Worse still, the benefit would be withdrawn at a penal rate—I respect the views of my right hon. Friend the Secretary of State, but that it is the only way to describe it—of 50p in the pound. We are talking about people's incomes so it would be, in effect, a tax rate; but no other person in the land—not even the richest millionaire—is asked to pay such a rate. The hon. Member for Northavon (Mr. Webb) made an excellent speech, but if we genuinely believe that the present system is exploited, is it right to give a guarantee of continued income to those who we claim are only on the benefit because the Tories were massaging the unemployment figures, but to withhold the payments from new claimants? Given the problems of the all work test presented to me in surgery after surgery—I cannot believe that I am alone in that—it is not easy to qualify for that benefit, and I am not persuaded that the medical profession are so devious as to mislead the House of Commons or those whom they refer for the benefit. Those who expected more from our Government are likely to feel deeply betrayed when they realise that people will be penalised for putting aside money to help build a nest egg over many years. The disincentive to save is so obvious that Conservative Members have pointed it out. My constituents have also asked me about it. People are bound to ask why they should save when it will mean that the benefits to which they are entitled will be cut. This goes against everything the Government are trying to encourage and will lead to more people than ever relying on state handouts, which I thought we were trying to avoid. Where is the logic in that? I have also to ask the Government why they have made no proposals in the Bill for uprating the £85 threshold. By the time April 2001 comes around, the value of that figure is bound to have been substantially reduced by inflation. I did not get the impression from my right hon. Friend the Secretary of State that he intends to change the level this side of April 2001. In my view, it is essential that a formula for uprating be built into the Bill, similar to the commitment commendably given to uprate the disability income guarantee annually. The House is at its best when we discuss issues that our constituents are following, including perhaps some even now in their living rooms. That is how they judge us and why I wish to put to my right hon. Friend the Secretary of State—I give him credit for listening—the views of MIND. In its briefing to all hon. Members, MIND says: People with a mental illness experience fluctuations in their symptoms, often preventing them from sustained employment. Labour market flexibility for this group means the ability to move in and out of work, as their mental health allows, with the minimum of financial penalty. This cannot be achieved if entitlement to National Insurance benefits is restricted. Mind also described an individual case: John worked for ten years before developing a mental illness. When recovered he found it difficult to find another job, and three years later became ill again. Under the Government's proposals, John would not be entitled to Incapacity Benefit, despite his years of contributions. That cannot be fair, but John is not alone. I suffered from ME, but I was fortunate that it was only for 20 months. Many people suffer from it for eight, nine, 10 or more years. Those people may have worked for 10, 20 or more years in transport, in local government, in the civil service or in education, but they would be excluded from incapacity benefit. I cannot find that fair.

Lynne Jones (Labour, Birmingham, Selly Oak)

Does my right hon. Friend agree that people who suffer from mental illness find it difficult to get a job because of the stigma associated with that problem?

Tom Clarke (Labour, Coatbridge and Chryston)

My hon. Friend is right, and Mind makes that point elsewhere in its briefing. I make these points in the knowledge that my right hon. and hon. Friends on the Front Bench are listening, and all of them have been helpful to me on constituency cases in the past. My right hon. Friend the Secretary of State and all my hon. Friends on the Front Bench have responded commendably on individual constituency cases. However, that does not mean that we should not get the Bill absolutely right before we send it back to another place. That is also the view of the National Association of Citizens Advice Bureaux. Before the election, I was proud to campaign up and down the country, in my shadow role, on the Labour party's manifesto pledges to Britain's 8 million disabled people. Today, I have to say in all candour that I am worried about the gulf that has developed between disability organisations and a Government whom I am happy to support. That development could have been avoided, and I am convinced that it is still not too late to bring both sides together in partnership, as they have been on almost every other issue to do with disability over the past two years. That would benefit the Government and disabled people. What are the disability organisations saying today? I take no pleasure in reading the view of the Royal National Institute for Deaf People, which has stated: Unless the Government goes significantly further in its concessions to this Bill, its overall record towards disabled people will be permanently tarnished. The Disability Benefits Consortium, which represents more than 250 disability organisations covering our 8 million disabled people, has called the Government's position on these narrow issues "morally repugnant". I find that deeply saddening. It is easy to dismiss newspapers, and especially leading articles in The Guardian, but in the light of all the Government's other splendid achievements on disability it is genuinely worrying when that newspaper can say that Ministers should not be robbing the poor to help the very poor". I know that that view is widely shared. This debate is not about bringing down the Government, nor is it about defeating the Bill. The Government will still get the Bill through in time for its implementation date, which I understand is still April 2001. The worst scenario would be that, as happened with the Bill that became the European Parliamentary Elections Act 1999, the measure would go straight into the next Session of Parliament in a matter of weeks, and be given Royal Assent under the Parliament Act 1911. However, we plead with the Government to take our concerns on board.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I hope that I did not misunderstand, but my right hon. Friend mentioned the Parliament Act 1911. That legislation can be used to push a Bill through the House on a fast-track basis only if the Bill takes the same form as it took when it was introduced originally. Therefore, if that mechanism were used, none of the changes that we propose today—nor any of the amendments that have been accepted in Committee, on Report or in another place—would be included. We must knock on the head the idea that anything can be fast-tracked through and recognise that, in the eventuality to which my right hon. Friend refers, stakeholder pensions would not be in place before the next election. The Parliament Act does not work in the way described by my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke). The proof of that, as he will know, is that the War Crimes Bill had to go through the House in 1991 without any amendment. The reality, as the Clerks will confirm, is that the Parliament Act cannot be used to push through the amended Bill.

Tom Clarke (Labour, Coatbridge and Chryston)

As I said earlier, I have enormous respect for my hon. Friend, but I spent most of the afternoon with the Clerks. The advice that they gave to me is the same as that which I am giving the House. If my hon. Friend will forgive me for the moment, I shall stand by the advice that the Clerks gave me. However, there is no need for the Bill to spill over into the next Session. The Government are the managers of their own business. They can get the Bill through if, as I recommend, they involve themselves in dialogue with those Labour party members—our Friends—who are in another place. This debate is about asking Parliament to accept that it is not beyond the wit of modern, sophisticated, inclusive Government to reach agreement in another place with rebels such as Lords Ashley, Morris and Barnett. Jack Ashley, Alf Morris and Joel Barnett are hardly three closet militants determined to wreck everything that the Government set out to achieve. There is no reason why a reasonable outcome to the debate—which is surely what we all seek—cannot be achieved. I regret to have to say it, but the truth is that there is no popular support for the Government's position on these particular issues. There is, however, support for the rest of the Bill and for the Government's many achievements on disability. It is not as though we are in a dispute about a crucial manifesto commitment. No pledge was made about incapacity benefit. That benefit is worth £66.75 a week, but for poor people that amount represents a fortune, a fact to which many of my constituents will attest. Our decision is therefore absolutely crucial to them. Even now, I plead with the Government and the House to give serious thought to the amendments tabled by my hon. Friend the Member for Kingswood (Mr. Berry). I sincerely believe that they offer a real chance of a solution that could so easily unite the Labour party and restore the confidence of our people in the role of Parliament and in the democratic process.

Andrew George (Liberal Democrat, St Ives)

I shall be brief, given the large number of hon. Members who wish to speak in the little time that remains. I shall confine my remarks to our concern about the Government's response to Lords amendment No. 46, which would continue severe disablement allowance. The existence of a safety net for the most vulnerable is a matter of fundamental principle for Liberal Democrat Members. We sought and failed to find justification for the proposals in the Bill in the Labour party's pledge card or in its election manifesto. In the Government's much-trumpeted and proper commitment to challenge the causes of social exclusion we were unable to find any justification for the abolition of severe disablement allowance. The proposal does not modernise the benefit system. It removes an essential safety net for a small but significant number of people. I am sure that Ministers are aware that, although income support will cover many people who will be unable to take up severe disablement allowance when it is abolished, many people will fall through the net. Women and carers will be especially hard hit, as they often are unable to build up the level of contributions necessary to secure incapacity benefit. If the Government are concerned about low-income groups, benefits should be aimed at those groups. We need to recognise that women, carers and people in part-time work will find themselves in difficulty as a result of the proposals. People who become disabled and who previously worked as lollipop men or women, or who work at the supermarket checkout or as part-time caretakers at the local school, are often unable to achieve sufficient insurance contributions to secure incapacity benefit. At least in those cases the safety net of severe disablement allowance still applies. The Government, thankfully, take the view that young people under 20 who are entitled to SDA now and in the future will have that support passported into incapacity benefit come their 20th birthday. Young carers looking after elderly or disabled relatives or anyone else who receives invalid care allowance will not be treated in the same way as those who have paid national insurance contributions and are also receiving the allowance. Young people who were previously entitled to SDA when they were under 20 are entitled to receive incapacity benefit when they get older but young carers are not. That anomaly must be ironed out. Such examples have been brought to the Government's attention throughout the passage of the Bill, but they have failed to respond. Either the Government do not believe that such cases exist, or they do not care. We believe that there should be a safety net, but there are still gaps in it. The Government must sort out which side of the line they are on. This is a fundamental principle. Many severely disabled people—who have to be 80 per cent. disabled—will fall through the net and be considerably worse off. We are told that adults receiving SDA will not be affected. Well, not yet—the Government will deal with them individually. Many people on SDA are worried by the Bill's message. Given the experience of the all work test and the other hurdles that they will no doubt have to overcome, they fear that their SDA will be taken away from them. Ministers may well shake their heads and say that that is not the intention. However, disabled people believe that the Government want to do away with SDA as quickly as possible, and that individual cases will be dealt with later. It seems prophetic. First the Government came for the asylum seekers; then the Home Secretary sought to make scapegoats of the travellers, and now we fear that the Government will go for disabled people. We look forward to hearing the voice of conscience in this debate. Ministers may consider that their Back Benchers are an electoral liability, but they will be an electoral asset in future. On this issue, the Government need to be saved from themselves.

Sam Galbraith (Labour, Strathkelvin and Bearsden)

With regard to the closing remarks of the hon. Member for St. Ives (Mr. George), every time I hear a politician talk about conscience, I run for my sick bag. We are all trying to act for the best, and no one has a monopoly on conscience. This is a highly emotional subject and hon. Members on both sides of the House have made detailed contributions. The arguments seem to be a cross between metaphysics and statistics and, as I know little about either subject, I shall stick to the principles involved. My right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) said that if the benefit were related to a pension it would somehow stop people having a pension and make them claim benefit. Nothing could be further from the truth. I agree that facts are not available to prove the case, so we must stick to opinions. I do not usually use myself as an example, but I should like to tell the House something from my own experience. I do so because the hon. Member for Northavon (Mr. Webb) asked what a 54-year-old man with a disability would do if he had to give up his job. There is no need to hypothesise—I am that man. I have lived with a disability for 10 years since I had a lung transplant for respiratory problems. The idea that my pension may be taken into account when considering this benefit and that I would reduce my pension contribution is utter nonsense. On the contrary, I would increase my contributions to accommodate my disability. I say that from my experience, as a person who fulfils the hypothetical case, and I am only one. The hon. Gentleman was trying to make a principle fit a hypothetical case, but I am a real case.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman speaks from experience, which I respect. Might I suggest, however, that he sacks his personal financial adviser? He should be putting his money into a vehicle that is not means tested by the Government—any form of saving other than a pension. As people realise that that is how the system works, it will create a distortion. Is that desirable?

Sam Galbraith (Labour, Strathkelvin and Bearsden)

As my friends know, I know absolutely nothing about money or finance. The Prime Minister said that he never considered me for a Treasury job, and that was probably a good idea. So the point about my pension being taken into account when considering such a benefit must be nonsense. The idea that the contributory principle is inviolate and must never be touched is no longer true, although it may have been true in the early days of the welfare state.

Lynne Jones (Labour, Birmingham, Selly Oak)

I respect what my hon. Friend has told us from his experience and his proposals to deal with it. If he does not accept that means testing changes behaviour, I suggest that he reads the report of the social justice commission. It explains that means testing is not the way to ensure that people in need get the benefit they need.

Sam Galbraith (Labour, Strathkelvin and Bearsden)

That is another issue. We are discussing whether consideration should be given to other factors when making decisions on benefit. Let me knock on the head once and for all the idea that pensions should not be taken into consideration, and that if they are, people will reduce their contributions. Nothing could be further from the truth, so let me lay that ghost once and for all. I have another area of expertise to bring to the debate. It has been said that the all work test, which involves medical criteria, should be used as a better policing gateway, and I agree with that. But the tests are not rocket science; they are not even purely objective. I have done many such tests and they are quite subjective. We must consider all the possible mechanisms, without regarding the doctors' criteria as the only or final ones. Finally, I wish to deal with the issue of years without work. My right hon. Friend the Member for Coatbridge and Chryston gave some examples, but I can come at them from the opposite direction. Are people who worked for 10 years but not for the past 20 entitled to the benefit? According to my hon. Friend they are, according to me surely they are not. We have to make a judgment. Those are difficult calls to make and I agree that we do not always get them right. It is not an exact science, but we have to make a judgment and set the dividing lines. We are confronted by dividing lines throughout our lives, and it is difficult for those who fall on the wrong side of them. It seems unfair because they are close to those who fall on the other side of the line. However, we have to make such judgments. I ask all hon. Members to consider that when they make their decisions tonight, and to not get lost in a fog of principle that does not apply. I am grateful to the Government for their concessions on three years and the significant increase from £50 to £85, which is more than I expected. Therefore, I am happy to support the Government in the Lobby tonight.

Julie Kirkbride (Conservative, Bromsgrove)

I shall speak briefly, because I suspect that Ministers are more likely to listen to the arguments—with which I agree—of Labour Members who oppose the Government's proposal than to those of Conservative Members. Many of us find it astonishing that the Government's welfare reform proposals will cut the benefits of disabled people and widows. People who voted in a Labour Government at the last election did not suspect that those categories would be the target of the Government's welfare reform proposals. The Government spend more on social security than on health and education combined, but the increase in spending does not benefit those whom many people would consider to be the most deserving—the disabled and widows. My hon. Friend the Member for Havant (Mr. Willetts) set out our reasons for opposing the Government's so-called reform of incapacity benefit, in contrast to a few months ago when, in a similar debate, we supported the Government's measures on lone parent benefit. My hon. Friend pointed out that, when we introduced incapacity benefit in 1995, we considered means testing but rejected it because we believed it to be unfair. We continue to believe that. We would all hate to retire before retirement age—some years hence for some of us, not so far away for others—and have to rely on incapacity benefit. Our future is part of the great lottery of life, but none of us wants that to happen. The insurance principle of making a contribution and benefiting from it is important and should be maintained in incapacity benefit. With due deference to the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith), the Government's proposals will damage the principle of saving for a pension because those who make provision for themselves will be less eligible for state benefits. When I bang on doors in Bromsgrove, I am confronted by people who feel resentful because they have saved and receive little or nothing, while their neighbours, who did not make the same provision for themselves, receive all the state benefits. They represent a further tranche of seething resentment, which is felt by many whom the Government do not benefit. While I sympathise with the hon. Member for Strathkelvin and Bearsden for what happened to him, Members of Parliament retire on considerably more than the £8,000 a year for which the Government are introducing a means test. That makes a great difference to our financial status in later life. It is different for those who retire on very little. The right hon. Member for Coatbridge and Chryston (Mr. Clarke) quoted an article in The Guardian, which stated that the Government's welfare cuts made the poor pay for the very poor. That is true of the proposals that we are considering tonight. People who are forced, through disability, to retire early on a pension with many years of life—albeit disabled life—ahead will have their right to incapacity benefit truncated by the means test. That is unfair because they live on modest incomes, if the £8,000 a year trigger for the means test is correct. Even if the figure is a few thousand pounds out, it is a low income on which to retire for a long time. Although we approve of the Government's promise not to raise the top rate of income tax, if I were a Labour Member, I would find it galling that relatively poor people are being made to pay for very poor people's benefits while the richer members of the community are not being asked to increase their contribution. That happens because the Government are increasing the social security bill. The reforms are unnecessary, as is increasing the social security budget. If I were a Labour Member, I would consider disgraceful the Government's method of introducing benefit cuts for some people.

Nigel Evans (Conservative, Ribble Valley)

The Labour party fought the last election on the slogan, "Things can only get better". Does my hon. Friend agree that many disabled people, whose benefits will be removed, will be aghast at what is happening this evening? At the next election, disabled people, who have been so badly let down, will give Labour Members short shrift. Things can only get better unless one happens to be disabled.

Julie Kirkbride (Conservative, Bromsgrove)

My hon. Friend makes a valid point. I shall underline it by telling the House about a telephone call that I received recently from a lady in Bromsgrove who worked for 30 years and is now on incapacity benefit. I was glad to be able to reassure her that the Government's iniquitous proposals will not affect her because they do not apply to existing claimants. [HON. MEMBERS: "Tell the truth."] Conservative Members tell the truth, unlike the Government. Many other ladies and gentlemen will retire in the same condition as my constituent, who is obliged to sell her house because she can no longer afford to live there on her reduced income after being forced to retire on incapacity benefit. Others in her condition will find the Government's policies deeply offensive. I am equally offended by Government proposals to cut entitlement to incapacity benefit for those who have contributed for only three years as opposed to a lifetime. I think of my constituents who suffer from multiple sclerosis and who are desperate to continue working but do not receive beta interferon despite promises that a new Labour Government would fund the drug and enable sufferers to work for longer. They will be offended by the Government's proposals. Their entitlement will be much reduced because the qualifying period will be only three years. [Interruption.] Labour Members can protest as much as they like, but that will happen.

Audrey Wise (Labour, Preston)

I want to speak mainly about severe disablement allowance. I agree with the remarks of my hon. Friend the Member for Kingswood (Mr. Berry) and of my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) about incapacity benefit. They made a good case. Severe disablement allowance is under attack. That is a paradox, because the allowance was introduced under a different name by the last Labour Government. My right hon. Friend the Secretary of State said that it was poorly targeted, but Barbara Castle described the target when she introduced the allowance. She said that the benefit 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 … schemes. That was the target and it has been met. She described it as a brand new benefit and added: This is quite an historic moment. We have made an important breakthrough here. She also referred to the fact that it would bring a new non-means-tested security to nearly 250,000 people whose needs we have neglected for far too long".—[Official Report, 21 November 1974; Vol. 881, c. 1555.] Disabled people needed that benefit—it is now the severe disablement allowance—when it was introduced, and they still need it. My right hon. Friend the Secretary of State said that many of them are on income support despite receiving SDA. That is an argument for increasing SDA, not abolishing it. We have not even asked for an increase. Our aims have been so modest that we simply say, "Let's preserve it." However, as long as a benefit exists, there is the potential for increasing it, and as my right hon. Friend clearly recognises that the allowance is inadequate, he should go down that road—keep it and increase it. Barbara Castle was right—it was an historic moment. I am glad I was present in the House at the time. I am not glad to have to defend the allowance against this Labour Government now. In 1974, I would have been astonished had such a development been forecast. Of course, I am glad that the Government are passporting those aged under 20, and sometimes under 25, on to incapacity benefit, which is worth more. We are all glad about that. However, that is no excuse for taking SDA away from the rest. My hon. Friends and I have tabled an amendment that would somewhat mitigate that action by increasing the categories of exemption. However, there is no realistic prospect of that amendment being called to a vote, and I have to admit that by far the simplest and best action would be to keep SDA for those over 20. That is exactly what Lords amendment No. 46 would achieve. No case for abolition has been made. There has been much discussion about whether the Government's proposals will pay for improvements for others. I do not understand what the motivation is, and I am not imputing bad motives. However, I know that, if one increases benefits for some disabled people and decreases benefits for others, conclusions will be drawn. It is, in fact, a redistribution—whether it is intended to be so or not. I believe very strongly that we who are able bodied and healthy should pay the whole cost of funding improvements for disabled people. I do not believe that there is any disabled person who is in too good a position in our country now, and that argument still applies even if savings are made and redistribution is carried out in the long term. I do not want to put the cuts into an order of ranking. In some ways, however, the abolition of SDA is even worse than some of the other proposals. Certainly, the minority of people who are fortunate enough to be above the breadline should not have their benefits means tested. Those who at present qualify for the non-contributory benefit, SDA, and who have 80 per cent. long-term disablement should not be told that, if they are hard up, they might receive means-tested income support. That point was made in May when the Bill was before the House. Of course, married women with working husbands do not qualify for income support anyway, so their only independent income will be removed by the Bill. It might not be a good enough income, but it is their only independent income. One of the reasons for introducing the allowance was to give disabled people the dignity of an independent income by right. 6.15 pm We are twitted that we shall be in the same Lobby as the Tories. As a Conservative Member helpfully pointed out, that applied on 10 December 1997 when the Government, the Leader of the Opposition and some Labour Members went into the same Lobby in the vote on lone parents. Some of us were in the other Lobby. Tonight, okay, our Lobby will be made impure by the presence of some Opposition Members. However, I remind hon. Friends, and especially the Minister of State, my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), that we have some experience of that. He will remember that vividly, because it was quite an experience. My hon. Friend and I stood out alone—we did not receive the comfort of our hon. Friends—in a Finance Bill Committee against the massed weight of those on the Government Front Bench. Remember, it was a very tight House and threats to bring down the Government perhaps carried more weight. However, we did not bring down the Government, but argued that we were improving the Chancellor's Budget—and the population agreed with us. Our proposal become mainstream, because no one could argue against increasing tax thresholds at least in line with inflation. I commend to my right hon. Friend the Secretary of State the words "at least". As my hon. Friend the Member for Perry Barr will tell him, if he does not already know, that was the phrase that we used to improve the position of taxpayers in 1977 and for many more years to come. After the issue received the exposure that we gave it, no Chancellor dared do other than raise the tax thresholds. [Interruption.]

Jeff Rooker (Labour, Birmingham, Perry Barr)

Conservative Members may joke, but my hon. Friend and I have no regrets and do not need to apologise for any action that we took in Committee Room 9 on 14 June 1977. We intended to defeat the Government not just as a token and with a bleeding heart on our sleeve, but because the Government had flatly refused to move or listen at any time during our discussions with them. That does not apply to this Bill.

Audrey Wise (Labour, Preston)

My hon. Friend has vindicated what some Labour Members did on 20 May this year. Would the Government have made any movement—even a minuscule one—had there not been 67 Labour Members in the Lobby? My hon. Friend is encouraging people to have the courage of their convictions, so that we can achieve more concessions. There is still time for more movement. As we have managed to obtain a slight advance for disabled people by what we have done so far, why not continue? Why do we not encourage the Government to do as my right hon. Friend the Member for Coatbridge and Chryston suggested and reach an accommodation with such well-known rebels as Jack Ashley, Alf Morris and Joel Barnett. Joel Barnett, for goodness sake, was one of the heavy mob against Jeff—I mean my hon. Friend the Member for Perry Barr—and me. The position is so clear that those noble Friends have taken the same view, and we have formed a very broad alliance that has been informed entirely by our concern for people with disabilities. I encourage my right hon. and hon. Friends to join us in the Lobby and vote against the motion to disagree, because on this occasion the Lords amendment protects the interests of disabled people who are under attack. My hon. Friends should take courage from the experience of my hon. Friend the Member for Perry Barr and me. My hon. Friend says that he has no regrets; I certainly have none. We can do it. We can improve the Government's policies and we can live perfectly happily with a clear conscience ever after.

John Swinney (Scottish National Party, North Tayside)

I find it difficult to follow that speech, which was as stimulating as every other contribution that the hon. Member for Preston (Audrey Wise) makes to debates in which the House wrestles with difficult issues on welfare reform. Many of the arguments that I intended to make were eloquently made by the right hon. Member for Coatbridge and Chryston (Mr. Clarke). I shall focus on the arguments made by the hon. Member for Preston in relation to the Government's concessions and whether those concessions really have been—in the words of the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith)—generous and substantial. The right hon. Member for Swansea, West (Mr. Williams) intervened on the Secretary of State to ask for firmer commitments in relation to the uprating of the £85 threshold for incapacity benefit, and for a commitment that, as a minimum, the threshold would be uprated to the year 2001 when the provisions come into effect, but ideally for a longer period. Understandably, the Secretary of State said that he was not in a position to commit other Governments to protecting that threshold. However, he could certainly have said that he could amend the Bill to provide for some indexation. Countless measures that pass through the House provide for the indexation of specific figures on the face of a Bill. It is not a new measure that has been invented for the purposes of the debate, to cause discomfort to the Government, but an integral part of the way in which we legislate. As a minimum, the Secretary of State should have been able to give the right hon. Member for Swansea, West a more substantial answer, and to give a commitment that the Government would index that figure at least to 2001, and perhaps thereafter. That commitment was not there, so I suggest that the points made by the Government on what has been trumpeted as a major concession do not amount to much. The Government could have gone further, and they could have advanced further toward the position that was arrived at in the other place. The second concession on which I want to focus relates to the extension from two to three years that is implicit in the proposal announced by the Secretary of State the other day. In an intervention, I asked the Secretary of State why he had decided to move from two to three years, not from two to four years; why the period of two years was originally chosen; and why the period could not be extended from two to seven years, as envisaged in amendment (a), tabled by the hon. Member for Kingswood (Mr. Berry). The Secretary of State said that one just has to arrive at a position, and that no particular science is involved. The hon. Member for Strathkelvin and Bearsden said that there must be dividing lines. Of course there must, but if the Government were genuinely trying to bridge some of the gaps which have developed between them and the disability campaign organisations in this debate, they would have moved a great deal further to close the gap between the three years in their proposals and the seven years envisaged in the proposals from the House of Lords. The hon. Member for Kingswood has tabled reasonable amendments to the Government's proposals—amendments on which the Government could have engaged in a better and more considered debate. As we have heard, the Government have arrived at a position that is not rooted in the history of this Labour Government—not rooted in the way in which the Government found and obtained their mandate from the people of the United Kingdom. It is a position that has been invented during the development of the Bill, and the development of a Government strategy that does not have its roots in the mandate that they sought from the United Kingdom electorate. I said that I wanted to make a short speech on the substance of the concessions that the Government have made. The Government's proposals do not go nearly far enough to address the genuine concerns that exist in our community, so they should be rejected.

Tom Levitt (Labour, High Peak)

Like many hon. Members, I believe that the debate has been of high quality. However, that has not been true of all the debate that has taken place outside the Chamber in the past few months. I am afraid that, in many cases, it has produced more heat than light. For example, people in the country have been led to believe that, if they are now claiming benefits, there is a risk that they will lose them under the proposals in the Bill. That is not the case, although those fears have been cynically manipulated by Conservative Members who do not even have the decency to stay for the last few minutes of the debate.

Kali Mountford (Labour, Colne Valley)

More of them have just arrived.

Tom Levitt (Labour, High Peak)

Indeed; there are as many Members on the Conservative Benches now as there have been at any time in the debate. Outside this Chamber it has been said that the Bill is a "cuts" Bill—which it is not. Thankfully, no one has said that in tonight's debate, because, as has been said from time to time today, there may be changes to different budgets but the overall effect of the package, of which the incapacity element is only part, is to increase spending on people with disabilities in the years to come, to increase spending on welfare reform and, generally, to improve the lot of the worst-off, especially those with disabilities. I believe that welfare reform, when looked at in its simplest form, should involve a debate about how we use the available resources to bring most help to the people who most need it. Of course we can talk about generating more help, and about having a bigger pot from which to draw—we shall do so, and we are doing so—but we have been led into a debate about the philosophy underlying the national insurance contribution system. That debate has not been especially helpful. It has drawn attention to a great many difficulties, inconsistencies and anomalies in the national insurance contribution system. I was surprised but pleased that my hon. Friend the Member for Preston (Audrey Wise) alluded to some of the inconsistencies in that system. I take one good example. As a result of the contributory system, some women whose income is too low have not qualified for maternity benefits. We put that right in the Bill and, by doing so, we flew in the face of the contributory system. We set that system to one side, by giving maternity benefits to women who would not previously have qualified. There has been no outrage about that.

Angela Eagle (Labour, Wallasey)

The Conservatives voted against it.

Tom Levitt (Labour, High Peak)

Indeed they did. Is that a sell-out of the national insurance contribution system? In the past few months, the debate has become bogged down in such minutiae instead of encompassing all the Bill, which covers a range of Government policies.

Oliver Letwin (Conservative, West Dorset)

I have been listening to the hon. Gentleman with increasing astonishment. Is he entirely unaware of the work of his right hon. Friend the Member for Birkenhead (Mr. Field)? Is he entirely unaware of the importance of trying to shift social security towards a system of contributions and away from a system of means testing?

Tom Levitt (Labour, High Peak)

The contributory system accounts for only about 40 per cent. of the benefit system, and I am aware that there are varying views about how it should develop. I want to say a quick word about some of the debate on incapacity benefit that has been taking place outside the House, because I believe that some of the issues are of interest only in the House, in the other place or to the higher echelons of some groups outside. Pressure groups exist to get the best that they can for their members. That is the job of the disability movement. That is the job of pressure groups. It is absolutely right that they should push the Government for more and more concessions in their interests, and they have won such concessions. But our job as a Government is different from that of pressure groups. Our job is to balance the needs of different groups and different individuals with the resources that are available to us, and to ensure that we target those resources, as we have done in the past week with the disabled person's tax credit, where they will give the most help—where they will be the most efficient in relieving poverty and improving welfare. On the occupational pension link with incapacity benefit and the clawback, incapacity benefit is, undeniably, not the principal disability benefit that people claim. From time to time, it has been said outside this place that disability benefits are under attack. Disability living allowance is the main disability benefit. It is not changing at all, except that there will be some improvements for people on DLA in relation to the rest of the system. We must therefore ask what is the purpose of incapacity benefit. It is to compensate, on a more or less flat rate, for the loss of income that is caused by having to leave the work force early owing to incapacity. 6.30 pm Some people—increasing numbers over the years—have catered for such an eventuality by taking matters into their own hands and investing in occupational pensions. Some of them—a tiny number, I admit—receive occupational pension incomes that are higher than the salary of Back-Bench Members of Parliament. I do not begrudge them that. [HON. MEMBERS: "How many?"] It is a tiny number. When we are guaranteeing to our pensioners a minimum income of £75 a week, to a disabled person in work a minimum income of £132 a week, to a person on the national minimum wage who works a 40-hour week a wage of £144 a week, and to a working family—by definition, a minimum of two people—an income of £200 a week, through the working families tax credit, why on earth should we top up with replacement benefits the incomes of single people who have no dependants and who receive incomes that are already in excess of £150 a week and, often, considerably more than that? The minimum guaranteed income for a person with an occupational pension of £85 a week who receives £66.75 a week incapacity benefit is £151.75. That assumes that the person is on short-term incapacity benefit—it is bigger if he is on the long-term benefit—has no dependants and does not receive the age allowance. Let us consider how that compares to all other guaranteed incomes. It is the most generous of all. I am not particularly worried about how many people have incomes of £20,000, £30,000 or more from occupational pensions and are claiming incapacity benefit, because it is not our job as a Labour Government to look after them when we are not guaranteeing the same income to people in the other groups that I have mentioned.

Roger Berry (Labour, Kingswood)

Would my hon. Friend remove all benefits from people on those incomes?

Tom Levitt (Labour, High Peak)

We are talking about an income-replacement benefit. We have also mentioned the disability living allowance, which is not related to income. If such people qualified for DLA, they would get it.

Gordon Prentice (Labour, Pendle)

My hon. Friend and I disagree about numbers. I have in my hand a letter from the National Association of Citizens Advice Bureaux, which has been circulated to all hon. Members, which reminds us that only 2.3 per cent. of incapacity benefit recipients have an occupational pension of more than £200 a week. A tiny number of people receive these allegedly super-generous occupational pensions.

Tom Levitt (Labour, High Peak)

That is the figure for now, not for the future. Also, we are guaranteeing to people with an occupational pension of £85 a week a top-up to a basic income of more than £150. We are talking not only about people who have an income of more than £200 or £300 a week, but about those who receive more than £150-odd a week, which is higher than the income which we guarantee to any other group in the population. I remind the House that the proposed taper for occupational pensions in the Government's amendment is the second most generous in the entire benefits system. Housing benefit tapers at 65 per cent., working families tax credit and disabled persons tax credit at 55 per cent., and jobseeker's allowance, and even the old-age pension, at 100 per cent.—one loses pound for pound on those. Only council tax benefit, which tapers at 20 per cent, is more generous. Although I shall not ask now, because I am running short of time, I should like to know whether my hon. Friend the Member for Kingswood (Mr. Berry) thinks that the 23 per cent. taper that he is advocating for incapacity benefit should be applied to all benefits. If so, has that proposal been costed, and would it be a justified use of resources in helping people who need such help most? At a meeting on Monday night, my right hon. Friend the Member for Chesterfield (Mr. Benn) asked what else would be lost if the Bill were to fall on the incapacity benefit issue. The answer is very simple: we would lose the highest rate of disability benefit ever paid to young people who have severe disabilities; DLA for three and four-year-old children; the stakeholder pension, with its protection for those on low pay and with broken contribution records; bereavement benefits for widows; maternity benefits for women on low pay; and the single gateway. All those proposals are in the Bill, and if we play ping-pong with the Lords over the next few days on tiny issues surrounding the so-called principle of national insurance contributions and whether one supports the contributory system or thinks that there are alternatives—that is what we are talking about—we shall do a disservice to all those who would benefit. The Government will win this vote and the issue will return to the Lords. I hope that that will be the end of the matter for now; however, there must be a constructive debate—in our party especially—about the role of the contributory system in benefits provision.

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

Order. The hon. Member must address the Chair.

Tom Levitt (Labour, High Peak)

I beg your pardon, Mr. Deputy Speaker. My hon. Friends must accept that there are people such as me who are cynical about the value of the contributory system. Our views need to be heard as well. I make a special plea to Lord Ashley—a man whom I have admired throughout my political life and who has generated in me a concern for deafness that has led to our sitting together as trustees of a major organisation that works in the interests of deaf people in this country. Because of his position, and the respect for him in another place and in this one, he has the power to inflict considerable damage—perhaps even fatal damage—on the Bill. If Lord Ashley did that, there would be a cost. There would be a cost to disabled people, who will genuinely benefit from the Bill; a cost to the political credibility of the Government whom both he and I support; and a cost to the entire legislative programme. If this Bill has to be reintroduced in its original form, and its passage in the next Session takes up the time that it occupied in this one, it will certainly impact on other issues on which the Government will be wanting to legislate. It would be profoundly wrong to take this issue further and to play ping-pong with the other place. That will not achieve anything. We have aired the issues; there have been compromises and some progress on ensuring realistic levels relating to the contribution period and for occupational pension rules. I commend the Government's position to the House, and I hope that this is the last debate on the Bill in this Session.

Eric Pickles (Conservative, Brentwood and Ongar)

It is a great pleasure to follow the hon. Member for High Peak (Mr. Levitt), who served on the Committee that considered the Bill. I have great respect for his views, but to speak of the Parliament Act 1911 and ping-pong with the Lords, when we should be talking about disabled persons, is amazing. Frankly, I am not very impressed by the macho treatment of the other place. If the Government are prepared to listen, we shall be a long way away from such action. If they listen, ping-pong will not be necessary. The hon. Member for High Peak is right that this has been a good debate of a high standard. I am thinking not least of the marvellous teaching of the hon. Member for Preston (Audrey Wise) that the best way in which an ambitious Back Bencher can become a Minister is to rebel, and of the Minister's dawning realisation that, after facing Lord Barnett after the 1977 rebellion, it is probably pay-back time. One Labour Member said that he knew nothing about pensions or finance. That strikes me as a prerequisite for voting for the measure today. I am not impressed with the negotiations that seem to be taking place on the Floor of the House with regard to the other place, nor with the teachings about the Parliament Act, particularly as Ministers seem to be wrong. We heard good speeches from my hon. Friends the Members for Gainsborough (Mr. Leigh) and for Bromsgrove (Miss Kirkbride), who spoke of the experience of constituents. The hon. Members for St. Ives (Mr. George) and for Preston dealt with severe disablement allowance. At the last Social Security questions, the Secretary of State produced a rather innocuous letter from me, which had been leaked to him. It seems that leaking occurs both ways, as I have received a copy of his briefing to Back Benchers. In response to the question why the Government are reforming severe disablement allowance, the answer given is that SDA is not targeted at the most severely disabled, but is a non-contributory version of incapacity benefit that is paid at a lower level. The briefing goes on to state that SDA is ineffective, and for 70 per cent. of recipients must be topped up with income support. Severe disablement allowance is supposed to be non-contributory. It was designed specifically to meet the needs of housewives who, through no fault of their own, were unable to pay national insurance contributions. It was a unique benefit to be paid solely on the grounds of disability.

Audrey Wise (Labour, Preston)

No.

Eric Pickles (Conservative, Brentwood and Ongar)

The hon. Lady disagrees, but I believe that I am right. SDA was to be paid in cases of at least 80 per cent. disability. The Government have made a concession to allow young people with no chance of employment and no prospect of paying national insurance contributions to receive it.

Audrey Wise (Labour, Preston)

I intervene in the interests of accuracy. The hon. Gentleman is wrong when he suggests that the primary target of SDA was housewives. Initially, it was made more difficult for housewives than for men and single women to receive SDA. It affected everyone. After a bit of push, the benefit was extended to housewives on an equal basis. Recipients would qualify without a means test.

Eric Pickles (Conservative, Brentwood and Ongar)

I stand corrected, but I was paraphrasing Lord Ashley, who made the point in another place. The Government tell us that to pay for the concession to young people, SDA must be abolished. They propose to take away from one disabled group to give to another disabled group. They will remove one inequality by creating another. In another place, the Minister, Lady Hollis, said: I believe that that is the right focusing of the benefit—not continuing to give it to people who have chosen not to build up a contributory record, as in the case of some married women, or who would not need access to means-tested benefits because they have sufficient finances coming into the household."—[Official Report, House of Lords, 13 October 1999; Vol. 605, c. 461.] The principal losers will be women. There are 2.4 million women who earn less than the national insurance threshold and cannot build up contributions. Lord Morris said in another place that the proposal represented not so much the reform of the benefit system as an attempt to put the clock back. He gave a number of moving examples to show how people would be affected. I raised the matter with the Secretary of State. A disabled person who has £8,000-worth of capital or £3,000-worth of savings or a spouse who is earning will receive nothing, yet the purpose of the measure was to give disabled people some financial independence. When the point was put to the Secretary of State, all that he could do was bluster. The Government's argument is that everyone above income support level is well off and should not receive SDA. The suggestion is that people with savings of more than £3,000 or capital of £8,000 or a spouse in employment should not receive it. If a wife who has taken time off to look after children becomes disabled during that period, she will receive nothing under the Government's proposals. The Government say that if people do not make contributions, they are not entitled to receive benefit, yet the Government also say that if people make contributions, they are not entitled to benefit. The Government are predetermining according to their whim the level of benefit that people should receive. The Secretary of State told us this afternoon that he intended to ensure that the Tories would be prevented from cutting social security benefit. There was a time not long ago, before the general election, when it was the proud boast of the Labour party that the Tories would cut benefits. In a few moments the House will be asked to vote on a measure that the Tory party considered too harsh. If that is new Labour, good luck to it.

Jeff Rooker (Labour, Birmingham, Perry Barr)

It is traditional to say that we have had an interesting debate. We have, but it has not been entirely accurate. For obvious reasons, the detailed history of the Bill is much better known to many of my hon. Friends than it is to me. However, as I made clear earlier, this is not the Bill that was originally introduced or which left the House after Third Reading, and the Government are entitled to take some credit for that. There has hardly been a period when the Government have not been listening. Colleagues on both sides of the House could claim that we have not listened enough to meet all their demands, but no one will be able to vote against the Government tonight and claim that we have not listened. That would simply not be true. I shall repeat another point, now that the hare is running. It ran for me first on Monday evening, secondly on the letters page of The Guardian today, and thirdly with one of my hon. Friends today when the issue of the retirement pension was raised. I repeat without apology that my right hon. Friend the Prime Minister made it unambiguously clear at Question Time today that the retirement pension is not in anyone's sights. It is not an intellectually honest argument to say that the changes in incapacity benefit are the thin end of the wedge, and that the retirement pension will be next in line. There is no possibility of that happening under a Labour Government, irrespective of who the Prime Minister is. It is not part of our agenda, and we have made that clear. To set that hare running causes untold worry and unnecessary concern to those outside the House who watch or listen to our proceedings. To make claims that everyone knows are not true adds nothing to the argument about welfare reform. That point must be made again on the record. There has been constant reference to cuts in benefit. It must be repeated that no cuts in benefit are planned. When hon. Members face the electorate, whatever arguments they may have in respect of future changes, the people whom they meet will be on the same benefit or will receive more under the Bill. That is the reality. As my hon. Friend the Member for High Peak (Mr. Levitt) said when he read out the list of measures in the Bill, there will be extra money for many people. That is at risk if the Bill falls. It is not true to say that the Bill is only about changes to incapacity benefit and that that is where the concentration is. I must tell my right hon. and hon. Friends that nobody needs to apologise for raising these important issues. No one can gainsay the fact that there was concern in the original debates; we are not saying that there was not. That is proved by the fact that my right hon. Friend the Secretary of State made it clear at the time—I was not in this Department, but I was in the House—that he would listen, take the matter away and rethink some points in the Bill. That is what happened during the parliamentary recess, and the same is true of the debates in the other place. Therefore, it is wholly reasonable for us to say that we have made changes. Some of my hon. Friends might say that they are not enough and that there is no rigid formula for how we arrived at the figure of £85. That is true; there is no formula because it was not possible to use one. There was an original figure of £50, which is not in the Bill, and I understand that there were demands for it to be £105. We looked at the good trade union principle of splitting the difference, but £75 was not enough because it did not protect enough people. That is why we went to £85; it is as simple as that. There is no magic formula. We looked at all the issues and decided that with £85 being as near as dammit to the average occupational pension received by someone on incapacity benefit, more people would gain than under the median figure of £75. In order to reinforce that, we have put the figure in the Bill. I will not be able to respond to all the detailed points raised in the debate, but I ought to try to respond to some of them, if only for the sake of accuracy. My right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke), in an interesting and powerful speech, talked about people with intermittent illness. If what he said was true, we would have cause for concern, but it is not. I want to put this on the record. Since last October—I remind my hon. Friends that there was a Labour Government then—when we extended the linking rules for incapacity benefit from eight to 52 weeks, disabled people have been assured that they can try for work for periods of up to one year with a guarantee of being able to return to the same level of benefit should they fall ill again. The same rules also mean that they will be able to meet the new contribution test. For people who receive the new disabled persons tax credit, the linking period is extended to two years. Rather than making it harder for people to try for work, we are making it easier. For those not covered by the linking rules, we are making general provision for people to requalify without paying further national insurance contributions if they were on incapacity benefit in the last tax year. Nobody has to be continuously in work to qualify for IB. Someone on the minimum wage would pay the necessary contributions in 12 weeks, and on average earnings, four weeks would be enough. Someone in the circumstances described by my right hon. Friend the Member for Coatbridge and Chryston would not be covered by the changes in the Bill. Such a person would still be protected. During the first 20 minutes of this debate there was only one Conservative Member on the Back Benches and I see that the hon. Member for Gainsborough (Mr. Leigh) has not returned to his seat. However, he did raise a point that has been laboured by many others. He talked about people who have made contributions for 30 years missing one year and being unable to claim. So many myths have built up over the years about the national insurance system that we have all come to believe them. We believe that it is a piggy bank, that there is a personal fund and that if stamps are paid over a number of years, there is entitlement to benefit. That has never been the case. Contributions or credits have been required in both the last two tax years for people to be able to qualify, no matter how many years they have paid. If they do not have those contributions or credits from the last two tax years, they fail to qualify for incapacity benefit. The Bill does not change that. The Bill puts a time limit on the use of credits when someone is unemployed because they have pulled out of the job market completely and claimed their occupational pension. There was a letter in one of the newspapers today asking what would be the incentive for people in such a position to go on retraining programmes or to get back into work. It looks for all the world as if we are talking about people who are not in receipt of an occupational pension. We are talking about people who have withdrawn from the labour market under the retirement age for their own reasons. The myth that that includes all disabled people is nonsense. The hare gets out and starts to run simply because of a misunderstanding about the national insurance rules. There is nothing new about this. The hon. Member for St. Ives (Mr. George) said that some people believe that SDA will be taken away through the all work test. The existing SDA recipient will be receiving the allowance on the basis of being 80 per cent. disabled. Those who are 80 per cent. disabled are exempt from the all work test. These myths are suggested in letters from pressure groups with a legitimate axe to grind because they are in the business of getting more for a particular client group. Hon. Members come to the House and repeat those myths to strengthen their argument, without checking whether they are true. That devalues their contribution. My hon. Friend the Member for Preston (Audrey Wise) made a contribution, but I do not have time to go into it now, except to say that, in 1977, the Government had not listened and were not intending to listen. There were no procedures for listening and my hon. Friend knows that because we both met my right hon. Friend the Member for Ashton- under-Lyne (Mr. Sheldon) and Lord Barnett at the Treasury. The junior Whip on that Finance Bill is now the Chief Whip and she is well aware of the fact that the Government were not moving. This Government have moved. It is true that no one political party owns the Lobbies in this place. There is not a Lobby for the Labour party and a Lobby for the Tory party. I must tell my right hon. and hon. Friends however, that they cannot go into the Lobby to vote against the Government saying that the Government have not listened. That is not true. The Government have moved. If my right hon. and hon. Friends do not want to support the Government, I hope that they will think twice before voting against. That would send the wrong signals to the other place and it is important to take that into account given the time limits under which we are operating. If a sufficient number of hon. Members vote against the Government, the other place might start playing ping-pong. There is no doubt that the Bill is under threat. That is not an idle point. If the Bill is lost, all the good points, which were mentioned by my hon. Friend the Member for High Peak, will be lost. I stand by what I said about the Parliament Act. Confusing the Parliament Act with carry-over motions might be a common occurrence, but I will not do it because I know the rules we used for the War Crimes Bill.

Andrew Robathan (Conservative, Blaby)

Will the hon. Gentleman give way?

Jeff Rooker (Labour, Birmingham, Perry Barr)

No; the hon. Gentleman should not be stupid, I am not giving way with two minutes to go. We are on a guillotine. The loss of the Bill would be highly damaging to the Government, to future pensioners, and to 5 million people currently at work who have no second pension provision and who are earning modest incomes of between £9,000 and £20,000 a year. We want to get them into a pension fund as quickly as possible under the stakeholder pension scheme. These measures cannot be brought back at a stroke and within a few short weeks because this House and the other place do not work like that. The debates have been interesting, but I hope that my right hon. and hon. Friends will ask themselves whether, to their certain knowledge, everything that has been said is 100 per cent. accurate. They will know that, in Committee, on Report and here today, not all arguments adduced against the Government have been based on the facts of the Bill. We are making laws for our constituents, and we must get them right. The Government are entitled to ask hon. Members to judge us on what is in the Bill, not on what they want to be in the Bill, what they think is in the Bill, or what they have been told is in the Bill by someone outside with an axe to grind. The Bill provides massive increases for hundreds of thousands of our fellow citizens. It does not cut a single benefit from anyone currently receiving benefit. It is simply not true that it is based on cuts. It is based on reform, and I ask my hon. Friends to support the Government.

ADDITIONAL PENSION

PART ZI ADDITIONAL PENSION ADDITIONAL PENSION FOR WIDOWS OR WIDOWERS

Jeff Rooker (Labour, Birmingham, Perry Barr)

I beg to move, That this House disagrees with the Lords in the said amendment.

Jeff Rooker (Labour, Birmingham, Perry Barr)

This part of the Bill deals with inherited SERPS and the mis-selling by the previous Government of the changes to the scheme that were legislated for many years ago. In 1986 the previous Government made substantial changes to the state earnings-related pension scheme and gave a considerable period of notice before the change was to be made—it is due in April next year. That notice was intended to allow people who might be affected plenty of time to alter their financial arrangements. The then Government promised wide publicity, but it was never delivered. As in other cases, Ministers in the present Government are not allowed to see the papers of the previous Government, but I would give my right arm—metaphorically and politically—to see those papers, because they must have had some discussions about deliberately—

Eric Pickles (Conservative, Brentwood and Ongar)

rose—

Jeff Rooker (Labour, Birmingham, Perry Barr)

I have not made the allegation yet, but I shall give way.

Eric Pickles (Conservative, Brentwood and Ongar)

Perhaps I can anticipate the Minister. Why was the Benefits Agency still giving out duff information on 14 April this year?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I shall come to that. I am simply saying that there must have been a policy of not carrying through the promised publicity campaign. On 25 February 1986, the then Minister of State, Department of Social Security, our former colleague Tony Newton, now in the other place, said: We have every intention of mounting a major publicity campaign to herald the pension changes contained in the present Bill, should it become an Act, as we expect that it will."—[Official Report, Standing Committee B, 25 February 1986; c. 451.] Two days later, on 27 February 1986, the then Parliamentary Under-Secretary of State for Social Security, our colleague the right hon. Member for Huntingdon (Mr. Major), said: The provision diminishing the amount of SERPS which may be inherited from the year 2000 by a surviving spouse to half of the deceased's entitlement instead of, as at present, the whole sum, corrects what has widely been felt as an over-generous provision indeed. I point out to the hon. Lady that because of the projected position that exists until the year 2000, people will have plenty of time and ample warning. There will be no sudden, overnight, dramatic change in their position and they will have plenty of time in which to seek to make major alternative provision for survivors if they wish."—[Official Report, Standing Committee B, 27 February 1986; c. 463.] The previous Government were legislating well in advance, in 1986. Similarly, changes to the retirement age for men and women over 10 years will be phased in from 2010 to 2020. It was right to give plenty of warning, but people have to be told. 7.45 pm We cannot hide behind the fact that we live in a parliamentary democracy and say that no decisions here are made behind closed doors and people should take account of what happens in Parliament. The press stopped reporting what happens here years ago. There was no great beanfeast over the change. It is regretted that no publicity campaign ever took place, to the extent that, as the hon. Member for Brentwood and Ongar (Mr. Pickles) rightly said, earlier this year the Benefits Agency was still giving out incorrect information. The Government have a responsibility to put right the difficulties. We are responsible for only part of the delay. We could have done it in the first year, but we did not. We could have done it in the second year, but we did not. We are certainly dealing with it before our third anniversary.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Have the Government commissioned an audit to ascertain whether there are any other changes to regulations or legislation that have not been publicised which could cause similar problems?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I understand that Ministers did that long before I arrived at the Department. It is a frequent problem. At the Ministry of Agriculture, Fisheries and Food I found little matters hidden away that had been decided a long time ago but which suddenly came up and bit my ankles without warning. We are not aware of anything else in the Department remotely on the scale of this problem. I shall make clear the amounts of money involved. I admit that wrong information was still being given out at the beginning of this year, but as soon as we knew, we took immediate steps to ensure that Benefits Agency staff were able to provide correct advice. We have made a full check on the accuracy of all our leaflets. When I go to benefit offices—I have not done so as often as I would like in the past few weeks, but I have been to a few, not all in my region—I make a point of looking at the leaflets on display to ensure that information on the age change for retirement, particularly as it affects women, is on display. The Government have been pressed at every stage of the Bill to resolve the issue from next year. Preventing the problem in April 2000 requires a change in primary legislation. This is our opportunity. Individuals who have acted to their detriment as a result of bad advice would have a reasonable case for redress in the courts. Some hon. Members have complained to the Parliamentary Commissioner about the issue. I have answered many letters from Members of Parliament about it during my three months at the Department. I do not remember anyone raising the case with me as a constituency Member, so I have not had to write a letter to myself—but that day may come. Large numbers of people who could be affected are already pensioners. We do not want to leave them with the worry of seeking legal redress. That would not be good government anyway. A range of solutions have been suggested during the passage of the Bill. The scale of the likely cost is well known. We have answered parliamentary questions on that. One option put to us was to delay the whole thing for 10 years. That would cost about £5.5 billion, plus about £1 billion a year for some time following that, because it would not get us out of the whole difficulty. That burden would be borne by today's contributors because of the nature of SERPS. We have explored all the options thoroughly. During my 13 weeks at the Department I have been involved in more meetings and discussions on this issue than on any other single subject. That is partly because of the timetable that we are up against. We have tried to find a precise solution to put in the Bill. We have not been able to do that, for reasons that I shall explain. That is why we have the amendment. We do not intend to overturn the policy by changing legislation retrospectively. Before anyone reminds me, I know that we opposed the change at the time, but it is not sensible to get into that debate. Millions of people out there are worried about changes in SERPS and what is coming next April, and we need to reassure them. The change will bring the state provision clearly into line with private pension schemes. In the Green Paper last year, we made clear that we wanted to reverse the current position, in which 60 per cent. of spending on pensions is state expenditure and 40 per cent. is private. It is our long-term policy to reverse that over 50 years. We cannot do that by sitting back and waiting for things to happen. The policy simplifies one element of people's decision about which pension option to choose. However, dealing with the mess we have been landed with is not straightforward, and we do not want to announce a decision until we are absolutely sure. We will make an announcement as soon as possible. I cannot say when, but by implication, before next April would be our intention. The amendment says that if we have not come up with a solution of either a delay or a protected rights scheme, the trigger is in the Bill to stop the change occurring next April, so that the situation will not arise.

Eric Pickles (Conservative, Brentwood and Ongar)

The Minister is being most reasonable, and I am not saying this to be difficult. However, the Minister's noble Friend Baroness Hollis said that the Government would make an announcement before the end of deliberations. Also—and with great respect—I must remind the Minister that he said two weeks ago that the Government would come to a decision within three weeks. He is now saying that this has slipped, perhaps until April. Could he tell us why?

Jeff Rooker (Labour, Birmingham, Perry Barr)

In effect, we are making an announcement with the publication of the amendment. That is not the solution, but it gives us two options. We have not yet come to a conclusion. I realise that the hon. Gentleman is quoting Baroness Hollis, and we are amending Lord Rix's amendment. I pay tribute to Lord Rix for his work and his contribution to the debates in the other place. We owe him our thanks for providing us with a legislative way forward—albeit one that does not provide a solution. The amendment provides the power to introduce regulations and will allow the Government to do one or more of the following: to vary the percentage rate of inherited SERPS for some or all of the widows and widowers; to postpone the change to 50 per cent. to a specified later date, and I have given an example of the cost if that were to be in 10 years' time; or to run a protected rights scheme. If none of those powers is exercised, the clause will ensure that the 100 per cent. inheritance of SERPS continues to apply after April 2000 until regulations are in force. It would be untenable to leave people in a situation where regulations could come in overnight, without warning, and we will give a reasonable warning of changes. It would not be in the spirit of good government to say, "In six months' time, there will be new rules." Whatever we do will have to be phased in. If it is a protected rights scheme, it will take a lot of careful planning to ensure that the millions of potential beneficiaries can be dealt with individually, as citizens. We cannot do this on the back of an envelope. We have lost a decade or more since the legislation was put on the statute book, but it will not be that long again if the amendment and the Bill are passed tonight. The regulations will be subject to the affirmative procedure, and both Houses will have ample opportunity to debate the changes. That may be on the Floor, in Committee or even in the new Chamber. As Ministers, we will not shy away from explaining the way forward that we choose, as potentially 30 million people—those who have paid national insurance, existing pensioners and people who will not retire for 10 years or so—are involved. Not all of them will be able to claim that they were mis-sold pensions, but that is not the issue. We are dealing with our fellow citizens, and we must be as open as possible.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The Minister is being constructive, and it would be helpful if he could give the House more details. Does he envisage making an announcement before or after the work of the ombudsman?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I cannot give an answer to that. The matter was referred to the Parliamentary Commissioner by right hon. and hon. Members, and we are co-operating. The amendment contains a lot of detail and once we have decided, we will come back and report to the House.

Jim Cousins (Labour, Newcastle upon Tyne Central)

My hon. Friend is being frank and fair, and all of us accept the Government's real difficulties. Could he indicate whether in whatever scheme he comes up with any route that will require claims for compensation to be made on an individual basis will be as limited as possible?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I am not sure that I caught the thrust of my hon. Friend's question. If we have a protected rights scheme, we will want to ensure that everyone with a rightful claim is able to make it. There will be issues about eligibility, but millions of people who are currently still working might have a say, as might current pensioners. The handling of this matter in the past was unfortunate and I appreciate the distress that has been caused. I appreciate also the massive media attention, which has come a bit late in the day. If the media had reported the changes over the years, we would not be in this position today. [Interruption.] That is a legitimate point. We do not require our proceedings to be reported. We know that, years ago, the press and media generally—the BBC included—decided to stop reporting proceedings in this House. Most of those involved—who were probably contracted out, in well-heeled occupational schemes, which is fine—were not bothered about SERPS and national insurance. "That's for the workers," they said. "We are not reporting that." I am aware, too, that the Liberal Democrats tabled amendments to our new proposal to provide for a 10-year delay. I have set out the cost of that, and such a delay would not catch everyone who may be involved. It catches a large number, of course, but one might need to go beyond 10 years. That is why it has been difficult to arrive at a decision. Whatever we do will have a possible cost of billions of pounds—money that is not planned for in terms of public expenditure, and which must be found by today's taxpayers and today's national insurance contributors. I therefore hope that the House will give fair wind to the Government amendment in lieu of the Lords amendment.

Eric Pickles (Conservative, Brentwood and Ongar)

The Minister made a reasoned speech and we will certainly support the Government's amendment in lieu. I recognise the problems involved in finding an ideal solution. The Liberal Democrats' amendment (a) to the Government's amendment in lieu has the potential to cause injustice and fail to catch all the people we would want to catch, and I hope that they will not press it to a vote, because we should give the Government a chance to come up with a final solution, to use the Minister's phrase. There was a small element of partisanship in what the Minister said. It is about time that someone, from whichever Dispatch Box, said sorry. Some people should accept responsibility for what happened, because there has been considerable injustice. I said in Committee that I accept my share of responsibility. It matters not a jot that I was chairman of Bradford education committee at the time when the measure went through. We are all responsible, because we clearly came to a view in 1986 that would have a fundamental effect on people's eventual pension, and nothing happened. It is too easy to shrug off that responsibility. Ultimately, such decisions are for the Chamber. It is our job to ensure that Departments do not simply ignore the legislation that we pass. The Minister was very fair in saying that the Government now accept what they opposed in opposition. It is right to get the provisions into line with occupational pensions. We cannot go back to the position that provisionally exists now. We should ensure that the scheme is generally accepted. It is right to allow considerable time for people to make appropriate decisions according to their needs. Unfortunately, we completely wasted 16 years. There was no publicity campaign. The present Leader of the House said at the time: If the Government are going to release ample publicity warning people that their pensions and the widows' pensions will be halved, not only will we welcome it, but we shall help the Minister to distribute it."—[Official Report, Standing Committee B, 27 February 1986; c. 471.] That is all very fine, although no one would have expected Labour Opposition Members, or indeed Ministers, to go out on the streets to hand out leaflets; one might reasonably have expected the Department to do it, though. We have done people a great injustice. People wrote to and telephoned the Benefits Agency and its predecessor for advice and made investment decisions on the basis of the wrong advice that they were given. In Committee, we considered the way in which people contacted the agency. There is a record of the letters but not of the telephone calls. The Minister's predecessor made considerable progress on the quality of proof that people acted on wrong information. What is the Government's current thinking on that? I learned in Committee that on the very day in January on which a memo was sent out to instruct Benefits Agency officers how to deal with the problem, the agency issued a letter giving an incorrect figure to a member of the public. In that memo, which the Minister supplied to me, no reference was made to sending out corrections to incorrect information. I hope that he will bear that in mind before he talks about mis-selling in future. I am glad that the Minister has done an audit, but there is still a muddle. It has been suggested that the first indication of when changes were made was in February 1996, but my hon. Friend the Member for Havant (Mr. Willetts) has discovered that that is not so. Some people collect first editions of interesting works and he collects Benefits Agency guides from previous years. That probably says something about my boss. The agency's information guide of May 1995, on page 221, says: Changes to SERPS … Widows and widowers over 65 will be able to inherit up to half their partner's SERPS pension, instead of the full amount. This particular change will not happen until the year 2000. That was on the desk of everybody who worked for the agency.

Howard Flight (Conservative, Arundel and South Downs)

Will my hon. Friend comment on the contrast between those in the private sector who failed to know and implement the rules correctly and who are being fined and often driven out of business, and those in the public sector who have done the same thing and for whom there seems to be no penalty whatever?

Eric Pickles (Conservative, Brentwood and Ongar)

That is a valid point. My hon. Friend was the first to elicit the original date, in a question to the Financial Secretary to the Treasury, and here we have something dated a year earlier. The guide was on every desk in the Benefits Agency in 1995, yet agency staff paid not a jot or tittle of attention to it, even when it was all over the newspapers. That is deeply worrying. I hope that the Minister will come up with a solution. He was not quite right to say that the Government amendment in lieu honours the promise made by Lady Hollis, because it is essentially Lord Rix's amendment with a few bells on. I am willing to give the Minister the benefit of the doubt, to give him time and to promise him our co-operation, but I hope that we will have a known and agreed solution to this very difficult problem before April 2000.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I echo the final point made by the hon. Member for Brentwood and Ongar (Mr. Pickles). We must find the right solution to the issue of misinformation on inheritance rights in respect of SERPS, even if that takes a bit of time, and I warmly welcome the Minister's constructive approach in explaining what the Government are doing to try to resolve a problem that they inherited and that they wish they could halve now, rather than facing the possibility of people's entitlements being halved. When the other place debated the failure to publicise the 1986 changes that halved widows' entitlement to inherit SERPS pensions after April next year, Earl Russell made a telling point. He said that the issue was not necessarily a question of a failing of a political party—although I can understand why the Minister would wish to suggest that—but of the failure of government as an organisation to deliver. We will not know if that carries political overtones for many years to come, until the papers are revealed and some interested journalist digs out the necessary details of incompetence or whatever it was. It is important to deal with the practicalities of how we move on from the current position. There has been a fundamental breakdown in communications between the policy part of the Department of Social Security and its implementation part on this issue. That is why I asked the Minister in an intervention a few moments ago whether similar breakdowns have occurred in other aspects of legislation in the past or since 1986. It is clear that, as a consequence of that fundamental breakdown, the relevant advice leaflets were not properly updated, despite the references that have been made to the handbook this evening. Many of the basic advice leaflets available in Benefits Agency offices were not updated for 10 years. Many hon. Members have received correspondence from constituents who feel aggrieved by the situation, and I have passed on several examples from my constituency. Incorrect advice was provided in correspondence, on the telephone and over the counter at Benefits Agency offices. As we have heard already, even in April this year after the issue was well publicised, the public were still being given incorrect information and being misinformed about their entitlement. I pay tribute to the work that has been done by my hon. Friend the Member for Newbury (Mr. Rendel) to raise the profile of the issue and to reach a solution. Over the past year, he has written three times on the issue of compensation and he has been instrumental in approaching the Parliamentary Commissioner to begin the investigation into whether the Department of Social Security is guilty of maladministration. Together with a representative from The Sun—I cannot think of a more unusual alliance—my hon. Friend also presented a petition to No. 10 to highlight the concerns on the issue. So far we have had many announcements that there will be an announcement. The Minister moved further tonight by adding some more bells and whistles to the amendment passed in the Lords, but we still do not have a definitive announcement. I speak for many of my constituents and others who feel that the sooner a concrete set of recommendations and proposals is in the public domain, so that everyone knows where they stand, the better. When the scandal of private pension mis-selling came to light, the Government were right to insist that companies paid compensation and wrote to everyone who might be affected. That has not happened in this case and it is a shame that the Government did not apply to themselves the same rules that applied to the private sector. If they had, we would not be debating the issue again this evening. If action had already been taken, hundreds of people who have been, or who expect to be, affected by the changes would not be agonising about how they can afford to replace the income that their wives stand to lose. In Committee, my hon. Friends tabled amendments that set out three options to try to address the issue. The first was that widows should continue to receive the full SERPS entitlement after April 2000. The second was that a gradual reduction should be phased in—for example, a 10 per cent. reduction could be made each year over five years, to try to ease the transition. The third option was a postponement to 2010. Lords amendment No. 1 was tabled by Lord Rix to try to sort out the mess. It attempted to incorporate the various options that had been put forward in this House and in the other place. It was welcome news for many outside Parliament that the Government accepted the amendment as a first step, and tonight we have a longer and more detailed amendment from the Government that puts more flesh on the bones by spelling out the matters on which the Secretary of State may prescribe regulations for a compensation scheme. It was interesting to read the Government's amendment, because it gives much more detail about the process of a compensation scheme and I wonder whether we can take clues about the Government's thinking from the amendment. Have they decided that it is the way ahead? If the Minister could confirm that, it would be both helpful and informative. 8.15 pm The Government have already said that any compensation scheme would need to take account of misleading written communications and also advice given by telephone. That was accepted in an exchange in the House on 24 June, during a Supply-day debate initiated by the Liberal Democrats. The Liberal Democrat amendment would provide a minimum period of 10 years for any delay in implementing the SERPS reduction. If the Government opt for the postponement option to solve the problem, 10 years would offer people a reasonable time—we have already debated the meaning of the word reasonable tonight—to make other arrangements. The House originally intended, when it debated the issue in 1986, to give people 14 years' notice of the changes, but people will have had just four years' notice since the Benefits Agency woke up to the fact that it had failed to amend its leaflets. Therefore, it seems only fair to give people the 10 years' notice that they never had. The gross cost of a 10-year postponement, according to a recent written answer, would be £60 million in the first year, with a peak of £1.16 billion in 2010. The Minister also gave a net cost figure of some £5 billion. Another written answer revealed that the projected surpluses on the national insurance fund for each of the next three years are between £1.4 billion and £1.6 billion. In other words, the money to pay for a postponement is available in the national insurance fund and, therefore, a postponement of 10 years is affordable. It has been speculated that the Government are considering a five-year postponement, but such a short delay would leave the Government open to further claims for compensation through the courts. Our amendment seeks to rule out any postponement for less than 10 years, because that would assist the Government by reducing the likely numbers of compensation claims and the consequential administration costs of any compensation scheme that would still be necessary, and would perhaps give greater certainty to those many people who are concerned about their SERPS entitlement in the future. The clock is ticking and we have only six months until the April deadline when the changes would have been introduced. The Government amendment puts that on hold until they can come up with a scheme, but it is never satisfactory to leave something in limbo and that is especially true of people's pension provision. I hope that the Government will give people information at the earliest opportunity so that their minds can be put at rest.

Edward O'Hara (Labour, Knowsley South)

It is refreshing to have such an honest and forthright Minister fronting such a difficult debate. My hon. Friend has been straight with the House and we should give him credit for that. It is also refreshing to have a Government who are prepared to hold up their hands and accept responsibility, even though the mistake was made by their predecessors. There are two types of responsibility—responsibility for the mistake, and responsibility to the people affected by it. The Government accept that it has the latter type of responsibility. It is absolutely necessary to introduce some corrective measure to overcome the fiasco facing us in connection with SERPS. SERPS is not quite the same as the national insurance contributions scheme. Because it is an insurance against possible illness or incapacity that can occur at any time, payments into the NIC scheme can be redeemed at any time. People who are lucky do not need them, and I have always been very fortunate in that I have never had to redeem much of my national insurance contributions. SERPS is more akin to an annuity or an endowment. Under that scheme, extra payments are made that are intended to be redeemed on retirement or at the death of a spouse. Alternative annuity and endowment schemes are available in the market, of which the people affected by the proposal might have preferred to take advantage. The enormous amount of work that has gone into the new clause seems to point the way towards a possible compensation scheme. My hon. Friend the Minister honestly believes that a compensation scheme is better than deferment, mainly on grounds of cost. He gave the gross figures to prove it, although out of those gross figures can be taken tax payments incurred as people's income rises above tax thresholds, and also the benefits that people forfeit as their income rises as a result of SERPS. My hon. Friend also said that a scheme of deferment, although it would catch a lot of people, would not be perfect and would therefore not be fair. However, would a scheme of compensation be perfect or fair? I suggest that it would not, and that it would be expensive. No figures have been given, but I would guess that administering a scheme such as that foreshadowed in the new clause would be horrendously expensive. A scheme of compensation would open up a can of worms. People who received incorrect advice would have to be distinguished from people who did not seek advice in the first place. People who did not seek advice may have thought that they already knew the rules: they may have seen how the system worked for their brothers and sisters and for the friends with whom they have grown old, and decided that they did not need to seek advice. Would it be fair to distinguish between those who did not seek advice and those who did not think that they needed it? A problem remains even when people seek advice. The question would arise whether that advice was given in writing, or by telephone. How does one prove that advice was given by telephone? A telephone call cannot be photocopied or put in an envelope. The problems would be horrendous. Anyone with a good lawyer and accountant would be able to cope with such a compensation scheme, but we must be realistic: we are talking about people who do not employ lawyers and accountants. My hon. Friend himself said that we are talking about the millions, rather than the privileged few. They will not be able to find their way around a scheme that demands that they be well versed in matters of finance. It would be impossible for a scheme of compensation to operate fairly and adequately. If one can say that about a scheme of deferment, one can say it with knobs on about a scheme of compensation. It would also be horrendously expensive to operate, with most of the money going on administration instead of to claimants. The advantages of a scheme of compensation, in terms of cost to the Treasury, could only accrue as a result of massive lack of take-up. If ever a scheme were designed for massive non-take-up it would be a scheme of compensation for a mess such as the one that the Government have inherited.

David Rendel (Liberal Democrat, Newbury)

Does the hon. Gentleman agree that, given what happened with the mis-selling of private pensions, the introduction of a compensation scheme such as has been described would leave the Government morally bound to write to everyone who could possibly be affected to advise them that they might be eligible for compensation? In that case, the Government might not be able to restrict the numbers of people who took it up.

Edward O'Hara (Labour, Knowsley South)

That is a helpful remark, but I would not go so far: my hope is that I will convince my hon. Friend to consider introducing a scheme that might be fairer to the people involved. In conclusion, I do not believe that a scheme of compensation can be fair. It can only make sense to the bean counters of the Treasury. Deferment may not be perfect, but it would be far better. I suggest that any costs incurred in a deferment would compare favourably with the costs of a scheme of compensation, in terms both of the total amount and of how well the money would be spent.

Desmond Swayne (Conservative, New Forest West)

On a point of order, Mr. Deputy Speaker. The focus so far has been almost exclusively on amendment No. 1. Would I be in order if I moved the debate on to amendment No. 33?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I was under the impression that we were still dealing with amendment No. 1. The debate involves a big issue but is narrow in that sense. I am grateful to all the hon. Members who have contributed. There is a general understanding of how difficult it is to achieve a solution to this problem, and I understand how important it is to resolve the matter as quickly as possible. Naturally, I have a preferred approach to this matter, which I have discussed with colleagues in the Government. However, I hope that I have not given the House a clue about my preferred approach: my intention is to support the Government's solution, given that one day my right hon. Friend the Secretary of State and I might have to present it to the House in detail. A balance has to be struck in these matters. My hon. Friend the Member for Knowsley, South (Mr. O'Hara) summed up exactly the problems that could be encountered with a compensation scheme. He asked whether all the people involved would be caught, or whether too much public money would be spent on lawyers and accountants and administration, rather than being used for the greatest good. On the other hand, of course, there would be similar pitfalls with a scheme of deferment. The Government have considered various options with the intention of trying to get a protected rights scheme—my legal advice is that that term is preferable to what my hon. Friend the Member for Knowsley, South called a compensation scheme—up and running by April next year. It was simply not possible to do that. We cannot afford to have a scheme that does not work when millions of people are involved. 8.30 pm The hon. Member for Brentwood and Ongar (Mr. Pickles) asked about the Benefits Agency guide. It is not training material, and it would not be used to advise staff. The hon. Member for Sutton and Cheam (Mr. Burstow) highlighted the key point that misinformation was provided to the public for 10 years. I do not equivocate about that. When I spoke about £5.5 billion, I was using shorthand; the figure for 10 years would be £5.5 billion with some add-ons, and the figure is not net but cumulative over the first 10 years. The figures bandied about for a protected rights scheme are much more diffuse, and that is one reason why reaching a conclusion is difficult. We are not short-changing people. That would be totally wrong. We will identify a solution as soon as possible. Points were made about the national insurance fund surplus, although, frankly, hon. Members who have spoken tonight have spent it about five times over. We cannot use a projected surplus for the current year or for any short-term period to make very long-term expenditure decisions. If the decision is delayed for 10 years, or if we create a protected rights scheme, there will be enormous consequences for years to come. The national insurance fund surplus could not be used in that way. That is not to say, however, that it will not be used. Current taxpayers will have to fund whatever decision we make. There is a hole in the finances from next year. The Treasury works years ahead and the legislative framework is there. Whatever solution we come up with will have to be paid for.

Eric Pickles (Conservative, Brentwood and Ongar)

rose—

Jeff Rooker (Labour, Birmingham, Perry Barr)

If the hon. Gentleman wants to ask what I think he wants to ask, I probably do not have the answer.

Eric Pickles (Conservative, Brentwood and Ongar)

It might not be that. I asked specifically about proof. The Minister's predecessor made some promises about compensation for those who had suffered a loss, and made some progress on what standard of proof would be expected. What is the state of the Minister's thinking on that? As my question is clearly not the question he feared, would he also answer whatever it was he thought I was going to ask?

Jeff Rooker (Labour, Birmingham, Perry Barr)

That was not the question that I was expecting, so I shall not answer the hypothetical one. I cannot go further on proof. If and when we produce regulations, we shall have to cover proof, but how can one prove that someone made a phone inquiry to the Benefits Agency eight or nine years ago? What record would there be? In addition, the massive interest of the mass media in these matters might lead the press to publish a quick checklist of what a claimant would have to say about what he had or had not done or asked when he made his phone call all those years ago. I am not saying that the mass media would encourage people to tell fibs, but one can work out what might happen. I cannot go further at present, but we will do so when regulations are introduced. The House should give the message tonight that Parliament and the Government are working together to get things right. We apologise for leaving people in the situation in which they find themselves today.

MEANING OF "STAKEHOLDER PENSION SCHEME"

Jeff Rooker (Labour, Birmingham, Perry Barr)

I beg to move, That this House agrees with the Lords in the said amendment.

Jeff Rooker (Labour, Birmingham, Perry Barr)

The Government disagree with Lords amendment No. 3. We agree with the others. I am not sure what issues the House may wish me to discuss in relation to these amendments. The key issue is probably the purchase of annuities before the age of 75, a matter on which the other place spent some time. I shall concentrate on that matter, but, given the constraints of the guillotine, I shall be happy to deal with any points to do with the other amendments, some of which are technical. I hope that the House will be able to make quick progress so that we may move on to deal with bankruptcy, war widows, pension sharing and bereavement allowances before the guillotine comes down. Lords amendment No. 3 removed the need for annuity purchase under a stakeholder pension scheme. I hate to say so, because when in opposition I always used to think that it was a lame excuse, but we disagree with the amendment because it is technically flawed. Tax legislation requiring annuity purchase before 75 is unaffected by Lords amendment No. 3. There is no mechanism by which a member can draw benefits beyond the age of 75 from a tax-approved pension scheme or stakeholder scheme other than through an annuity purchased before he or she has reached that age. The amendment refers to the wrong area of the law. Nevertheless, I sense the mood of the House. During one of my brief visits to the House of Lords during the passage of the Bill, the noble Lords were discussing this very point. The primary purpose of a pension scheme is to provide a secure income in retirement. Valuable tax privileges are accorded to pension arrangements. The grand total of tax relief—which is essentially the Government's contribution to pension schemes in this country—stands at £11 billion a year. That is the Government's contribution to the pension scheme kitty and it makes the general public value saving for a pension. [Interruption.] I do not agree with the hon. Member for Havant (Mr. Willetts), who can make his point from the Opposition Front Bench. These valuable tax privileges are not available to people who are not contributing to pension schemes.

David Willetts (Conservative, Havant)

The Minister refers to "valuable tax privileges". Contributions to people's pensions are, admittedly, tax exempt as they come from pre-tax income. However, that income is taxed on receipt—the right point at which to tax it, since any other arrangement would lead to double taxation. The regime is perfectly fair and symmetrical; it is not a special tax break.

Jeff Rooker (Labour, Birmingham, Perry Barr)

One reason why it is tax free is that the income stream is taxed. I do not seek to hide the fact that a balance is struck during a person's lifetime. However, the tax reliefs are conditional on the fund being used for pensions. That is the key issue. Annuities provide a reliable lifelong income. There have been many debates about annuities, and I will share with the House an article about annuities that I read the other day—I have read a considerable amount about annuities in the past three months. I refer hon. Members to an excellent report from the Association of Unit Trusts and Investment Funds written by my friend and one-time colleague in this place, Dr Oonagh McDonald. I have met Oonagh to discuss the matter—I know that she has also talked to the Treasury—and she makes a valuable contribution to the debate. One paragraph caught my eye recently. It states: Imagine the scene: a man in a sharp suit asks you to save regular amounts for 30 years so that you can build up a nice big pot of money for your retirement. It sounds hugely sensible, so you follow his advice. But when you retire he insists that you give him all of the lump sum you have saved. You get back a very small part of your savings, he pockets the rest and pays you a pitifully low income to compensate. When you die, he keeps the pot of money for himself and your family gets nothing. That quote comes from the first paragraph on page 49 of the September 1999 edition of Sainsbury's magazine. The article is headlined "Twilight Robbery", and it was drawn to my attention by a family member who said, "You've been talking about annuities and reading up about them, so you had better read this". You will be pleased to know that I am not about to launch into a general debate about annuities, Mr. Deputy Speaker. However, many questions must be asked about that system. The fact remains that there is an age limit of 75. When I first came to the Department, I asked naively, "If a person finishes work at 65, what does he or she live on until age 75?" I was told that such people would have capital or other investments. I do not claim that it is about fat cats and the rich only; this is a serious issue about people's future pension provision and I intend to consider it seriously during my time with the Department. In the meantime, I ask the House to assist me in reversing the Lords amendment regarding stakeholder pension schemes. I have read—and people have argued—that annuities are a bad deal. That is what the paragraph I quoted implies, but it is not necessarily always the case. Current annuity rates are somewhat less than their previous levels. However, if we can assure the public that we are entering a period of long-term low inflation, the purchasing power of annuities will be maintained far better than occurred during the 1970s and 1980s when there was fairly high inflation under Governments of both political persuasions. Inflation reached 16 per cent. or so under the previous Government and—before anyone corrects me-25 per cent. under the previous Labour Government. It is best to get such matters out of the way at the start. If there is a period of long-term, reliable, low inflation, annuities will maintain their purchasing power far better. The income draw-down facility provides some flexibility for those who wish to defer annuity purchases. The danger is—this is not a nanny state—that, if income draw-down increases with age, the pot might be dissipated, leaving no money and recourse to state funds. That is why there is an age limit of 75: people are forced to acquire a secure income for the rest of their lives. We continue to monitor the position. The Inland Revenue is engaged in an exercise to assess how the income draw-down arrangements are working in practice, and Dr. McDonald's contribution in that regard has been extremely helpful to the Government. We will assess in the round whether there is a need to change the rules on income draw-down in light of the current exercise. At this stage, however, bearing in mind that the Bill introduces the new stakeholder pensions, it would be wholly premature to make that change only for stakeholder pensions. As I said, the amendment is, in any event, defective. The change would bring about two sets of rules for different money purchase schemes, and I therefore ask the House to disagree with Lords amendment No. 3. If necessary, I will be happy to explain our position on any of the other amendments.

Lewis Moonie (Labour/Co-operative, Kirkcaldy)

I did not expect to speak quite so early in the debate, so I am all the more grateful to you for calling me, Mr. Deputy Speaker. I am sure that my hon. Friend the Minister of State will be pleased to know that I do not intend to oppose him on Lords amendment No. 3—I note the look of relief on his face—but I want to speak briefly in favour of the important principle enshrined in the amendment, and I urge him to take careful note of that principle. My hon. Friend said that the money from a pension scheme must be used to fund a pension. To be exact, in this country the money from a pension scheme must be used to fund a pension by the purchase of an annuity. That is not the case in other countries. There are plenty of examples available, and it is not beyond the wit of this country to devise alternative methods of providing for secure income draw-down so that funds are not dissipated by wasteful excess and people are not a burden on the state in later life. I know that the Minister and his Department are sympathetic to the idea of reform, and in the Inland Revenue there is at least now the will to make that change, however defective amendment No. 3 may be. I want to draw the Minister's attention in particular to the position of thousands of members of the Christian Brethren in this country who are debarred, by their sincerely held beliefs, from taking out an annuity. What recourse do they have? They cannot receive the tax advantages that everybody else receives by saving for a pension, because they cannot take out an annuity. They do not believe in doing that because it is a gamble on their life. Those people work hard, pay their taxes, and honour their duty to the Government and the country, but they are given rights inferior to those that the rest of us have to provide for old age. That position is grossly unfair, and the fact that it applies only to a minority of people in this country does not alter the fact that they are being discriminated against. I therefore urge the Minister to consider their case sympathetically and to add his voice to the clamour that is now arising in the press for the annuity system to be made much fairer.

Michael Trend (Conservative, Windsor)

If amendment No. 3, which was introduced in the Lords by the Government, is defective, I wonder whether amendment (a) in my name is doubly defective. However, I shall seek to persuade the Minister that the age-75 rule should be abolished for all money purchase pensions, and not only stakeholder pensions, as the Lords amendment suggests. I was pleased to hear the Minister mention Dr. Oonagh McDonald, because her report agrees with that view. The campaign that has been led in this House by my hon. Friend the Member for Arundel and South Downs (Mr. Flight), which has received considerable press attention, has highlighted the difficult position faced by people who are coming up to age 75, when they will be forced to take out an annuity. The House knows that our amendment seeks to abolish the rule whereby those with money purchase pension schemes are obliged to convert their savings at age 75, and Lords amendment No. 3 would abolish that rule solely for stakeholder pensions. We have campaigned for some time for the extension of that change to all money purchase schemes. Such a change would not break new ground. In 1995, the previous Government raised from 65 to 75 the age at which an annuity had to be taken out. We believe that the policy should be developed and the age-75 rule abolished. The Minister made the good point that we would not want pension pots to be whittled down to the point at which people were forced to rely on state assistance, and I am happy for there to remain a requirement to ensure that nobody deliberately spends, spends, spends and becomes a burden on the taxpayer. However, that would be extremely unlikely because the people whom we are discussing are almost by definition some of the most responsible and conscientious in the country and of all levels of wealth. They will have forgone some of the pleasures of life to save for old age, and they are highly unlikely to break the habit of a lifetime in retirement. Those coming up to the moment in their life when annuities must be purchased face a bleaker prospect than they have for some time. Owing to plummeting annuity rates and to the famine of long-term gilts, a person annuitising a pension scheme in the recent past could expect roughly half the income that would have been commonplace a few years ago. Once one has struck a deal on an annuity, it is for life; and if interest rates change and prospects for annuities get better, people will feel that they have had a very rough deal. People are living longer. Naturally, those who are today buying into a low income as a reward for lifetime saving feel aggrieved. I have received letters from many constituents on the subject, as, I am sure, have all hon. Members. It seems only just to allow people the prospect of waiting a little longer and seeing whether they can get a slightly better deal later. Yes, we want people to have a secure income in old age. We are saying that they should be given greater flexibility as to the moment when they secure it. I urge the Government to treat the problem with great attention. The Minister forbore to mention the review that he has up his sleeve—which is the usual response to our arguments in debates on the subject—and to suggest that the matter was being dealt with. However, with every week that passes, more and more people fall into the tough trap that is the 75-year rule. Once they have fallen into it, they have fallen into it for good. I wonder what effect the current bad publicity about the annuity question might be having on stakeholder pensions. They are money purchase schemes, and the reputation of all money purchase schemes is surely tarnished to some extent if there are serious problems over the expected returns of annuities, as there are at the moment. I agree with the Minister on one point. This is not an attack an annuities. They remain popular. They are reliable, and there are now many different ways in which one may take out one's annuity; but the 75-year rule is causing distress, and should go. I know that the Minister is looking at other ways—there are many—in which to increase flexibility, but the 75-year rule is causing more distress than anything else. Owing to the extraordinary way in which we are doing business tonight, I shall not seek to divide the House on this matter, important though it is; but the Government should be in no doubt that this is a battle to which we shall return again and again.

Steve Webb (Liberal Democrat, Northavon)

I shall not detain the House long. I simply support the spirit of Lords amendment No. 3, while accepting what the Minister says about its technical deficiencies. The hon. Member for Windsor (Mr. Trend) is right to cite his hon. Friend the Member for Arundel and South Downs (Mr. Flight), who has pursued the issue doggedly. Some months ago, he took part in an Adjournment debate that I initiated on the subject—a full 90-minute orgy of discussion on annuities. It was a memorable way of spending a morning. I was interested in the comments of the hon. Member for Kirkcaldy (Dr. Moonie). I, too, have been approached by Christian Brethren who are worried about this issue. Although one might argue with their interpretation of scripture, it is a sincerely held belief, and it would be unfortunate if Government policy forced them into something against their will or precluded them from making sensible pension choices. I echo what the hon. Gentleman said on that point. The pensions Minister has mentioned several times that he is relatively new in his post. He seems to have acquired the desirable qualities of his previous boss: the Minister of Agriculture, Fisheries and Food has a knack of disarming his critics by agreeing with them. Now that we have got through the fevered atmosphere of the debate leading up to 7 o'clock, the pensions Minister has agreed with us twice in the past hour, much to our surprise and encouragement. We were encouraged by what he said on the state earnings-related pension scheme. I hope that I do not misrepresent him when I say that it is encouraging that he appears so open-minded on the 75-year rule. There appear to be only two objections to relaxing that rule. One is that people might become a burden on the state. There are plenty of ways to safeguard against that. The other is that such flexibility could be used as a form of tax avoidance. Rules already exist about the taxation of pots of money passed on to dependants, and surely those rules could be tightened. Although the Minister's predecessor argued against my case in an Adjournment debate six months ago, that was necessary because that was the Government line then. I sense that it may not be for much longer, and welcome that development.

Jim Cousins (Labour, Newcastle upon Tyne Central)

I support the comments of my hon. Friend the Member for Kirkcaldy (Dr. Moonie). This debate may ultimately prove to be one of the most important and significant in welfare reform. Although I take the point of Opposition Members about the general nature of money purchase schemes, it is of particular meaning to raise the issue in the context of stakeholder pensions, which will extend the money purchase principle to new categories of savers who might be ill prepared and much more poorly advised than many of those who are currently taking out money purchase schemes over long periods. This is an opportunity to rethink the issue. Some of the short-term measures that could be advised, such as extending the date on which annuities need to be taken out, could be considered. Looking at income draw-down might be another possibility. However, for people who may have very small pension savings pots, the income draw-down route could be quite dangerous and risky. We must consider a new kind of savings instrument that might combine some of the benefits of individual savings accounts with those of stakeholder pensions, allow flexibility between the two, and possibly in future also take into consideration the Government's proposals on long-term care. In short, there must be something rather more like an American 401K plan than the present money purchase schemes that current British tax law allow. I hope that my hon. Friend the Minister will consider the matter and that proposals will be made so that stakeholder pensions, from the very beginning, will have new characteristics that are free of some of the rigidities of money purchase schemes, which small savers cannot afford.

Howard Flight (Conservative, Arundel and South Downs)

I thank my hon. Friend the Member for Windsor (Mr. Trend) and the hon. Member for Northavon (Mr. Webb) for their kind comments. Now that we have a Minister responsible for pensions who is full of such common sense, I urge him to spend more time with Dr. Oonagh McDonald and to hasten the Government's addressing of the issue. I shall cover three key points. First, the annuity is mostly taken out as a guaranteed annuity, which must invest in gilts. People are now retired for a long time. Even if a pension were drawn at age 75, it is quite likely that one partner would live for another 15 to 20 years. Any investment adviser who recommended putting all one's money in gilts for a 20-year investment would be done by the Financial Services Authority for bad advice. That is exactly what the guaranteed annuity does. It is simply not the right investment medium for a pot of capital—albeit one that is being run down—that is needed to provide an income over 15 to 20 years. The second crucial point is that stakeholder pensions—assuming that they get off the ground—will greatly increase the volume of money purchase pensions that are building up. The guaranteed annuity depends on adequate gilts to operate at all. If we are to have continuing fiscal virtue and Government surpluses—or at least no Government deficits—where on earth will those new long gilts come from? The Minister may have seen advice to the Government to fund themselves less at the long end in order to save money. If there is rising demand and nil new supply, or even a reduction in supply, it is not surprising that real interest rates at the long end fall, not just nominal ones. A great increase in money purchase pensions and a balanced budget just do not make sense from an investment point of view. My third point is one that Dr. Oonagh McDonald has made very strongly. It may be a no-brainer for those with generous money purchase provision to limit what has to be an annuity to an amount such that they would never need to prevail on the state. The many people who need to be freed, particularly hundreds of thousands of women, are those who may have £30,000 or £40,000 in a pension scheme and may build up no more than that in today's money in a stakeholder scheme. I find it patronising to suggest that they will do better with a paltry annuity that they are forced to buy than they would by looking after the capital themselves. They will look after it much better. It will be the great nest egg for them against old age and nursing homes. I conclude by asking the Minister to get stuck into the subject and to come up with changes quickly. The subject has been well aired and most of the arguments have been won in most forums. I am sure that Dr. Oonagh McDonald will be able to fill him in with any details that he requires.

Jeff Rooker (Labour, Birmingham, Perry Barr)

Hon. Members commented on the requirement to purchase annuities by the age of 75. I always have an open approach—I even had one before 7 pm, so I have not changed my attitude. The age of 75 struck a balance at the time when it was chosen. I have already said that the Inland Revenue has the matter under review, in the time-honoured phrase. My hon. Friend the Member for Kirkcaldy (Dr. Moonie) made an important point. Although private pension arrangements are voluntary and one does not have to enter into them, some private pension arrangements are perceived to be a gamble on one's life, so that people of a certain religious disposition are prevented from entering into them. I am not fully assured that there are pension arrangements suitable for such people, whereby they would still obtain the benefit of the tax advantages. It is no good suggesting that they put their money in a building society. It is possible that new financial savings vehicles that are available, such as ISAs, would be suitable. I could have suggested PEPs, but those are no longer. If one is saving for a pension, one must know that the system will continue to exist for many decades, while one builds up a pot. The matter had not been drawn to my attention until my hon. Friend recently raised it with me privately. I shall be happy to look into it. I am taking on extra burdens every half an hour as I speak, but these are important issues and it is the Government's job to find a solution. That is what government is about. We shall try to do that. If my hon. Friend wants to come and see me or writes to me with the details, I shall get the Department of Social Security and the Treasury to look into the matter with regard to people of a certain religious disposition who cannot take up existing schemes, although I need to be reassured that suitable schemes are available. The hon. Member for Windsor (Mr. Trend) mentioned the bad publicity, which could cause problems. We must get the legislation on the statute book for stakeholder pensions and ensure that the Government do their job of advertising, selling and educating, while the industry promotes particular schemes to a population whom, by and large, the pensions industry has passed by on the other side of the road. People with moderate earnings of £9,000 to £20,000—the target group—may only remember headlines about mis-selling and misinformation, so it is important that such schemes are not affected by a bad press. That point was made also by the hon. Member for Arundel and South Downs (Mr. Flight). I pay tribute to the efforts that he and others have made. As a late incomer, I claim no credit for the debate. That is a result of our system of government. I have picked up the fact that an important issue is involved, arising from the Government's legislation for stakeholder pensions. There is a target group of 5 million people who, by and large, in view of their salaries, are not big savers. We have to create a system to sell them the concept of a money purchase pension scheme, which is something those people would never have contemplated previously, so the Government are obliged to get it right. We have to change the target group's perception, because we want to get as many of them as possible into stakeholder schemes as soon as possible. At the same time, we have to be careful of knock-on effects on the rest of the industry—we do not want bad publicity blowing up around specific problems with money purchase schemes to undermine stakeholder pensions. As my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said, it is important to be flexible. To the extent that I am allowed an open mind as a Minister, I have one. I have already said that I am making my own inquiries and asking my own questions. The issue did not come from the Box, but arose from debates in the House of Lords and from Dr. McDonald's contacting my predecessor. I shall be happy to take the matter further. That being so, and knowing that the issue will not go away, I trust that the House will agree, in this interim period, to reject Lords amendment No. 3.

MONITORING OF EMPLOYERS' PAYMENTS TO PERSONAL PENSION SCHEMES

Hugh Bayley (Labour, City of York)

I beg to move, That this House agrees with the Lords in the said amendment.

Michael Martin (Deputy Speaker, Glasgow Springburn)

With this, it will be convenient to discuss Lords amendments Nos. 18, 19, 82, 102 and 163 to 175.

Hugh Bayley (Labour, City of York)

In view of the time constraints, I shall be brief. To set out the background, the Bill provides that, in the event of bankruptcy, pension rights in a tax-approved pension scheme will be protected from seizure by the trustee in bankruptcy. However, to prevent people from using pensions deliberately to put money beyond the reach of creditors, a mechanism is needed to allow the courts to order recovery of excessive contributions. In deciding whether contributions were excessive, courts will have to consider whether the person's creditors have been unfairly prejudiced by the making of contributions and, in particular, whether any of the contributions were made for the purpose of putting assets beyond the reach of creditors and whether the total amount of contributions was excessive, in view of the bankrupt's circumstances at the time they were made. The Lords amendments deal with the interaction of two provisions in the Bill: the pension entitlement on bankruptcy and pension splitting on divorce. The amendments do three things. First, they insert provisions for dealing with the recovery of excessive contributions in Scottish cases where the bankrupt's pension rights have been shared on divorce. Schedule 12 already contained provisions for England and Wales. Secondly, the amendments provide more detail about the way in which the provisions will work in cases where pension sharing has occurred. Thirdly, they make technical changes to clarify the drafting. In summary, the amendments do not affect policy, but improve the way in which the measure is drafted. They are necessary to make the provisions work properly.

New Clause

Jeff Rooker (Labour, Birmingham, Perry Barr)

I beg to move, That this House disagrees with the Lords in the said amendment. The amendment relates to the situation of war widows. My right hon. Friend the Secretary of State for Defence, who leads on these issues, has asked me to put the case to the House, and I hope that hon. Members will find that acceptable. We recognise, as everyone does, the importance of ensuring that the dependants of those who are killed as a result of their service careers are properly looked after. The Government greatly value the contribution that those people have made for their country. Amendment No. 20 seeks to retain for life a widow's attributable pension awarded under the Ministry of Defence's armed forces pension scheme. It would not affect payments under the DSS war pension scheme. Such pensions would continue to be withdrawn if the widow remarried or cohabited with a man, as would pensions paid to widows under the MOD's occupational pension scheme if their spouse's death was not attributable to service. It is quite a narrow amendment. Introducing special arrangements for widows who receive the attributable pension would be anomalous, and might be seen as unfair by other service widows, because that would ring-fence that particular group of widows. That may be stating the obvious, but it is important to put it on the record. Other public service widows may also think it unfair. Under the schemes for the emergency services—the police and the fire service, in which men and women put their lives at risk during their public duty—occupational pensions are withdrawn on remarriage or cohabitation. We could create a festering sore among widows in many walks of life, and we do not think that that is the way to go. The Government have had to consider the implications of the amendment for all public service schemes. It cannot be treated in isolation. Making widows pensions available for life would be very costly if applied across the public service as a whole. However, the Secretary of State for Defence is conducting a major review of the armed forces pension scheme. As a new Government, we are entitled to review these issues. Widows pensions are being examined as part of that review, including the issue of withdrawal on remarriage. We expect the report by next summer—we have put a target date on it: it will not get lost in the ether—and I cannot speculate about the outcome of that review. The concerns expressed in the other place, which will be reiterated here, are fully understood and are not dismissed lightly. I cannot say more than that, because this is a sensitive issue. I will not go over the arguments about the reference in the amendment to the armed forces pension scheme. There are three different schemes, and the amendment affects only those widows in receipt of an attributable pension: it does not cover all service widows. It would be premature to make a decision on this matter now without the benefit of the in-depth inquiry and review that is taking place to enable the House to come to a conclusion. The review will enable us to take into account the effect on other widows in other services.

George Turner (Labour, North West Norfolk)

I understand that the review is already behind schedule, as is common with such matters. If cases arise between the time when the review was launched and the decisions it makes, will the Minister consider any difficult individual cases, or will that be within the ambit of the review body?

Jeff Rooker (Labour, Birmingham, Perry Barr)

I am not sure of the details of why the process has been delayed, but, according to the best information I have, the review is being conducted and a report is due by next summer. I do not know what the original timetable was or the reason for the delay, but I think that the House would be wise to await the results of the review before legislating, so that we can take into account service widows whose pensions are not attributable and, perhaps, other public sector widows in the circumstances that I have described.

Michael Trend (Conservative, Windsor)

The Opposition agree with the Lords amendment. Those who follow these matters in detail will realise that it represents a change in our policy—indeed, a change since the proposal was debated, very recently, in another place. I am quietly proud to be able to tell the House of that change, but well aware that mere good fortune has enabled me to voice what many Conservatives, on both Front and Back Benches, have for so long felt to be right and thoughtful. This is an issue that commands support throughout the House; it has only ever been a problem for Front-Bench Members, and it is now only a problem for Ministers. The Government will have been told by civil servants—as we were when we were in government—that to concede this point will be to open the floodgates. That is what the Minister told us today. The Government may even have been persuaded to accept the red herring that some 68,000 widows are involved in the proposal. Both claims are simply untrue. It would be entirely possible to accept this modest proposal, strictly ring-fenced to post-1973 war widows, without further repercussions, and we are assured that there is no technical or legal reason why that could not be done. The Government are quite able to put their powerful shoulders against all sorts of floodgates if they are determined to do so; what is unfair in this instance is that a small group of people are unjustly on the wrong side of the Government's stubbornness. I suspect that, when the phrase "war widows" is used in this context, most people conjure up a picture of women getting on in years whose husbands fought courageously in the second world war. That is far from the truth of what we are talking about. We are talking specifically about post-1973 war widows, and the total number of people in that group—those in receipt of attributable armed forces family pensions—is thought to be 2,650. At present, along with the AFFP, they receive DSS war widows pensions; if they remarry, they lose both. The widows in question, ably represented by the War Widows Association of Great Britain—believe that to be grossly unfair, and a serious and understandable disincentive for them to remarry. Under the Government's current proposals for pension splitting on divorce, those women would be able to retain a share in their former husbands' occupational pension schemes, which is what the AFFP is; but the Government say that those who are separated from their spouses by death must lose both their DSS and their MOD occupational pensions if they remarry. That is a monstrous injustice. The great majority of private pension schemes, and an increasing number of public pension schemes, now pay bereaved spouses pensions for life, and it is surely a good thing for pension schemes to be regarded increasingly as the assets and the property of individuals rather than as a handout from a grudging Government. The armed forces are different from any and all other public services. Service men and women are the only group in our society who are asked as a condition of their work to be ready to lay down their lives for the rest of us. They are not paid overtime; they cannot join a trade union; their contracts are totally different from contracts in the other public services. Their wives and families are posted anywhere throughout the globe. It is impossible for service men's wives to take up careers of their own. I know that from personal experience, as I represent Windsor, a town with two barracks. In fact, 806 of those widows are under 50 and 1,542 are under 60. It is not an enormous problem for the Government. Young women are involved, too. In particular, it is the children who suffer from the injustice of their late father's occupational pension being stopped if their mother remarries. Recently, a large group of young children went to Downing street, where they were courteously received by the Prime Minister. Who could fail to be struck by the predicament in which those families find themselves? I am sure that the right hon. Gentleman was. I ask the Minister to consider accepting the amendment, even at this late stage. We are talking specifically about post-1973 widows of service men who die, or are killed in the line of duty while still serving. Only about 2,500 individual cases are involved. A tough ring fence will be placed around that group of people. Those who choose to remarry—it may be only a modest number—will, of course, stop receiving their Department of Social Security pensions, thereby allowing, I guess, the proposal roughly to pay for itself. We are talking about a tiny step for the Government, but a giant leap forward for war widows. It is an issue of simple human decency and justice.

Harry Barnes (Labour, North East Derbyshire)

I wanted to speak on the issue to show that, on the Labour Benches, there are some concerns about the matter and that there is some sympathy for the view of the hon. Member for Windsor (Mr. Trend). I accept that a review will take place. Much will depend on how seriously the matter is taken in that review. Obviously, what has been discussed in another place and here is relevant material, which the review should examine. The arguments have been put forward clearly. The Minister said, "Why should the Army, Navy and Air Force be different from other public services?" The hon. Member for Windsor has responded to some of those points. I reiterate them a little and add some more. Life in the forces is different from that in many other sectors. Many people place themselves in considerable danger in other public services—we are aware of that—but people serving in Kosovo and Northern Ireland face death continually. That may not be the case in other public services, although some terrible incidents occur in those services. However, as people in the forces face the problem day by day, some special consideration should be given. The position of widows needs to be taken into account. They cannot develop careers readily and easily to provide for themselves later in life because of the nature of the service in which they are involved. They may move a dozen or more times during their life married to someone in the services, and will not have had an opportunity to build a stable career. They might even have great difficulty in finding employment in the areas to which they move. Often, life in the services is such that they will be expected to be involved in many unpaid activities around the camps, providing welfare services. They assist their husband's career, so theirs is a special case, which needs to be looked at. Many of the arguments that have been presented by the War Widows Association of Great Britain make those points. We should consider them seriously. Whatever happens in the Divisions, I hope that the Government will take the matter on board seriously. I hope that they will not say just that the review can consider the matter. The review must take the matter seriously into account and issue a quick report that is based on the principles that have been discussed tonight.

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Member for Windsor (Mr. Trend) said that he was very proud that the Conservative party had changed its position on the matter since discussions were held in another place. I am very proud that the Liberal Democrats have not changed our position, and that we have been entirely consistent in our support for the Lords amendment. I very much hope that we shall have the opportunity to demonstrate that support at the end of the debate. As has been said, we are talking about an anomaly—a fairly small anomaly affecting relatively few people. It is also a matter that we very rarely have the opportunity to debate, simply because it falls within the province of the Ministry of Defence and prerogative powers. This debate is one of the rare opportunities that we have had to explore the case on behalf of post-1973 war widows. The current regulations are quintessentially archaic, as they treat the woman—the surviving spouse is usually a woman, but could be either gender—as a chattel and as someone who is dependent on their relationship with a partner, rather than as an independent person who has contributed equally to a partnership that has ended in the most tragic circumstances, in a death in service. Yesterday, some of us were privileged to hear a lucid and extremely helpful briefing on the subject, and I was particularly struck by one statement made by the lady who gave the briefing. She said that the only real options available to a young war widow who wishes to retain the pension are to be single, celibate, promiscuous or homosexual. If she wants to preserve her pension entitlement on behalf of her family, the one thing that she cannot have is a stable relationship. There are essentially three elements to the Government's position. The first is cost—which has already been dealt with by the hon. Member for Windsor. Implementing the change would not be a costly exercise. Indeed, a perfectly logical argument maintains that the Government would find themselves rather better off with the change. The effects of precedent are the second element of the Government's position. However, I reject that argument, too. I do not believe that changing the provision for approximately 2,650 individuals will necessitate changes in other parts of the public service, or that there will be any clamour for such change. The third element is the fact that a review is in process, and the Government maintain that we must await its completion. I reject that, too. This is an opportunity to correct a wrong that has continued for far too long. Children are being been deprived of the opportunity to grow up in what should be stable families simply because of pension rules. We have the opportunity not only to be fair to those widows, but to improve the terms of service of those serving in our armed services. Hon. Members who participate in defence debates will know how difficult it is to recruit and retain people in the services, but, today, we have the opportunity to make a significant change for the better. Most of all, we should support those young wives and families who, through no fault of their own, find themselves in the most tragic circumstances, deprived of a partner. The issue is not concerned only with the past—it arises every year. Every year, young people in our armed services are losing their lives in service. Often, they leave behind young spouses and families. The House would do well to reflect on that fact, and to take a rare opportunity to put right a rather small anomaly.

Tam Dalyell (Labour, Linlithgow)

Given that the hon. Member for Somerton and Frome (Mr. Heath) is almost certainly anecdotally right in suggesting that there is a built-in financial disincentive either to marriage or to a stable relationship, I simply ask Ministers what advice they have had from their departmental experts on the costs if the Lords amendment were passed.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I am all for giving as much information as possible. On its own, the amendment would cost the Ministry of Defence less than £15 million annually.

Tam Dalyell (Labour, Linlithgow)

That was the factual answer that I wanted. I thank the Minister.

Julian Brazier (Conservative, Canterbury)

The school that I attended was set up for the sons of dead Army officers. The foundation for the sons of deceased service personnel continues to this day and there were several such children at school with me. I should like to add two points to the excellent speeches that have been made already. First, it is a sad fact that today 40 per cent. of marriages end in divorce. It is a further sad fact that if one of the parties to the marriage comes in with children from a previous marriage, whether as a widow or as a divorcee, the chances of a divorce are even greater. If a member of the armed forces with children dies in action and his widow chooses to remarry, giving their children another father, she puts those children at serious financial risk. We must be clear about that. I do not want to repeat the arguments that have been put so well already. My second point is that every hon. Member present tonight should ask themselves what sort of message we are sending to members of the armed forces, who risk their lives for us in so many uncomfortable and dangerous parts of the world, if we tell them that we are determined once again to save a relatively small sum of money by putting their widows and children in such a position if anything should happen to them.

George Turner (Labour, North West Norfolk)

I shall be brief. I am willing to accept that this may not be the moment, but at some point we must take a positive attitude to try to find a way round the difficulties that seem to have prevented natural justice from being done for constituents who have written to me. Many Labour Members cannot support the attitudes, particularly to young women, that we have inherited. People should not be discouraged from entering into new relationships by a financial penalty, particularly if there are young children. I accept the need to consider small cases in the round to ensure that we do not create one anomaly after another. I should like some reassurance that the Government will take a positive look at the issue and that the House will return to it before too long.

Crispin Blunt (Conservative, Reigate)

This is an opportunity to make a small gesture for war widows. The Minister has told us that the cost to the Ministry of Defence would be £15 million. What would the saving be to the Department of Social Security, caused by the widows surrendering their DSS pension when they got married? Let us have some joined-up government. I want to know the net cost to the Government, not just the cost to the Ministry of Defence. I should like to illustrate one of the manifest absurdities of the situation. Consider two identical families in the services. We are introducing pension splitting on divorce. The wife of one service man chooses to get divorced. She will get her share of the pension and can go on to remarry as many times as she likes—as my noble Friend Lord MacKay of Ardbrecknish said, consecutively, not concurrently. However, if the other service man flies his aircraft into the side of a mountain or gets killed on active service in Kosovo or while training for active service and his wife chooses to remarry, she will have to surrender her pension. That is a manifest absurdity that we can put right this evening. We have heard the Government's arguments about the difficulty of drawing a line, and the fact that 68,000 other service widows would feel aggrieved. I do not believe that to be the case. We have an opportunity to move the line microscopically. Enough is enough. The issue has been reviewed to death. It is time for the House to make a move. I do not know how Members of Parliament can sit here wearing their poppies, remembering the sacrifice of those who gave their lives, and then pass up an opportunity to make a minute gesture to help the widows and children of those who made a sacrifice for their country to rebuild their lives as they would wish. We should agree with their lordships.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I welcome all the contributions to this brief debate, and a powerful case for change has been made. I do not mean this in a demeaning way, but the case is so powerful that the Opposition have changed their policy, and announced that this evening. I respect that, and I presume that it was not done lightly. We are entitled to give the matter some thought, and one cannot demean the Ministry of Defence's review. I can assure everyone that I will metaphorically hotfoot it from this debate to the MOD to say what has been said here and in the other place, and ensure that that is properly addressed in the review. To expand on my answer to my hon. Friend the Member for Linlithgow (Mr. Dalyell), the amendment on its own would cost the MOD less than £15 million a year extra. That £15 million would cover the cost of paying all service widows pensions for life, irrespective of whether the service was attributable or not. [Interruption.] I do not have a breakdown of the figures—my point is that the figure that I gave is larger than the figure for attributable service. However, one must balance that. The hon. Member for Somerton and Frome (Mr. Heath) said that there would be no clamour from any other quarter. However, we live in the real world, and there will be clamour from other quarters. I am not saying that that is a reason not to make the change. If similar pressure was put on the other public sector pension schemes to pay widows pensions for life, the total cost across the public sector for lifetime spouses' pensions would be roughly £150 million for each year of future service. If the change was made retrospective to cover all past service for current serving employees, the capital cost for the public service pensions schemes would be approximately £1.5 billion. If it included those who had been awarded a preserved pension, that would double to £3 billion. I am putting those figures on record so the House has all the information that I have.

Robert Key (Conservative, Salisbury)

We are grateful for the Minister's positive attitude. One point that has not been made about comparability is that the fire service and the police service have a provision for a gratuity on death in service which does not exist in this case. That is yet another reason for saying that this can be tightly ring fenced.

Jeff Rooker (Labour, Birmingham, Perry Barr)

Yes, and the review must look at this matter. The MOD is duty bound to come forward with the results of the review, in which the war widows association is playing a leading role. These points must be made to the satisfaction of all the Departments involved. There will be a clamour, and we must try to provide a secure ring fence. There is no saving to the DSS, as the DSS war widows pension is withdrawn on remarriage. We are talking about attributable service, covering the DSS war pension scheme. That is not part of the amendment, which relates to the MOD schemes. It is a separate issue.

Harry Barnes (Labour, North East Derbyshire)

There might be a slight saving in the DSS pension provision if more women were able to marry because of the removal of the constraint.

Jeff Rooker (Labour, Birmingham, Perry Barr)

I do not want to disagree with my hon. Friend, but the Lords amendment is specific to the MOD scheme. In response to the hon. Member for Salisbury (Mr. Key): there is a gratuity in the armed forces pension scheme, which comprises three separate elements—I do not want to get into the details of the technical defects arising from that fact.

David Heath (Liberal Democrat, Somerton and Frome)

The Minister is doing a good job of acknowledging the strength of feeling in the House and perhaps communicating it to other quarters, but I must press him again on the idea that there is no saving to the DSS. Logic suggests that if women remarry and therefore qualify for the change in the attributable forces family pension scheme, which is the substance of the Lords amendment, they must forgo the DSS pension that they would otherwise have been claiming. That is a countervailing saving.

Jeff Rooker (Labour, Birmingham, Perry Barr)

That happens already. The hon. Gentleman is effectively saying that to the extent that more widows would remarry because of the attributable MOD pension being kept for life, the DSS would make a saving. I cannot possibly give an answer to that hypothetical question. It would be preposterous for me to try to estimate how many widows would remarry because, and only because, there was a change in the MOD scheme. The only answer that I can give is that the saving to the DSS would depend on the numbers.

Crispin Blunt (Conservative, Reigate)

Where does the £15 million come from if it is not based on an estimate that could equally be used for the DSS figure? I commend to the Minister the words of Lord Mackay of Ardbrecknish, who was trying to deal with the issue in the DSS. When challenged on why he did not do anything about it, he said: That is a perfectly fair point. I did try—it is my only defence—but not very successfully. I sent letters to my noble Friend Lord Howe. I chased my civil servants across to the MoD. My noble Friend Lord Howe and I totally"—

Jeff Rooker (Labour, Birmingham, Perry Barr)

Perhaps I have answered the debate inadequately. The point is that the MOD can be precise about what the cost to its budget of paying widows for the whole of their lives would be, because it knows how many of them are being paid its attributable pension. One cannot know the change in behaviour that would come about if the policy were extended to other budgets. The MOD can give a precise figure that covered all service widows, because it is paying them now, but it is not possible to put a figure on the knock-on effect on the DSS and our thousands of different benefits, which have all grown like Topsy over the years. The Government have got the message both from this debate and from the one in the other place. I ask right hon. and hon. Members to trust to the review; to put the maximum pressure on the MOD so that there is no undue delay; and to ensure—I give my commitment to this as a DSS Minister—that I make urgent representations to my right hon. Friend as a result of what has been said tonight. In that spirit, I ask the House to accept the Government's motion to disagree with the Lords amendment.

NEW ALLOWANCES FOR BEREAVED SPOUSES

WORK-FOCUSED INTERVIEWS

Tessa Jowell (Labour, Dulwich and West Norwood)

I beg to move, That this House agrees with the Lords in the said amendment.

Tessa Jowell (Labour, Dulwich and West Norwood)

This large group of Government amendments makes two main sets of changes. First, it implements the recommendations of the Select Committee on Delegated Powers and Deregulation. Secondly, it clarifies that all claimants have the right to appeal against, or ask for a review of, a personal adviser's decision that they have failed to take part in an interview. It also makes a minor technical change to support joined-up government in the ONE service. All those—[Interruption.]

Tessa Jowell (Labour, Dulwich and West Norwood)

All the amendments are technical. They do not change the ONE policy in any way. Amendments Nos. 35 to 38, 78, 88, 176 and 179 implement the recommendations of the Select Committee. Amendments Nos. 35 to 38 are intended to exclude men and women aged 60 and over from having to take part in the mandatory aspects of the ONE service. Originally, we had planned to exempt that group through regulations, although we are now happy to accept the Committee's recommendations and to include the exception in the Bill. As state retirement age gradually equalises over the next two decades, there is likely to be a need to amend the Bill to include all claimants who are below the age of 65. In the meantime, however, men and women aged 60 and over will still voluntarily be able to access support through the ONE service. We are also happy to accept the Committee's recommendation that the first set of regulations under the clause should be subject to the affirmative procedure. Amendment No. 39 clarifies that the clause gives all claimants the right to launch an appeal against, or ask for a review of, a personal adviser's decision that they have failed to take part in a work-focused interview. We have consistently made it clear that, where a personal adviser makes a decision on non-participation, the claimant should be able to challenge that decision. In addition, we have always made it clear that claimants should also have a right of appeal against a decision that they have failed to participate. However, the original drafting of the provision failed to give effect to that policy intention. For example, a claimant who received a negative decision from a local authority personal adviser would not have had recourse to the disputes resolution procedures. Local authority personal advisers would not be able to revise their own or others' decisions, even where they were clearly incorrect. The amendment corrects that, making it clear that the disputes resolution procedure and rights of appeal should apply in all cases.

David Willetts (Conservative, Havant)

May I help the Minister? So far as I am aware, the amendments to which she is speaking are not controversial. They are accepted in all parts of the House. As we have a guillotine, I assure her that the Opposition have no problem and are satisfied with the explanation that she has offered.

Tessa Jowell (Labour, Dulwich and West Norwood)

I am enormously grateful for the courtesy, but I am sure that the hon. Gentleman would like to hear the important clarification provided by amendment No. 180, ensuring that a claimant has a right of appeal against a decision that he or she has failed to take part in an interview. Amendments Nos. 52, 59, 124 and 125 make necessary changes to support closer working. They give local authority staff working in the ONE service the same powers as the Employment Service and Benefits Agency to require jobseeker's allowance claimants to attend for interview. They also allow local authority staff to obtain the information that they need. With that explanation, I hope that the House will accept the amendments.

SPECIAL SCHEMES FOR CLAIMANTS FOR JOBSEEKER'S ALLOWANCE

Tessa Jowell (Labour, Dulwich and West Norwood)

I beg to move, That this House agrees with the Lords in the said amendment.

Tessa Jowell (Labour, Dulwich and West Norwood)

I hope that it will be possible to deliver the short version of the speech, rather than the longer version. The principle behind the creation of employment zones is to allow for the pooling of various funding streams currently available to help long-term unemployed people. It is straightforward to pool the funding in England, but more difficult for employment zones in Wales. Without the amendment, the money that the Welsh Assembly holds for training could not be used for employment zones in Wales. There is also a small consequential amendment involving some renumbering in clause 55 as a result of amendment No. 40. I urge the House to support the amendments.

CERTAIN OVERPAYMENTS OF BENEFIT NOT TO BE RECOVERABLE

Hugh Bayley (Labour, City of York)

I beg to move, That this House agrees with the Lords in the said amendment.

Hugh Bayley (Labour, City of York)

These are technical amendments to clarify the power in clause 63. They do not affect the meaning of the clause and were agreed without debate in another place. I therefore commend them to the House.

SHARING OF FUNCTIONS AS REGARDS CLAIMS AND INFORMATION

Hugh Bayley (Labour, City of York)

I beg to move, That this House agrees with the Lords in the said amendment.

Hugh Bayley (Labour, City of York)

These amendments ensure the effective operation of provisions to enable closer working between central and local government, an essential element of the Government's plans to provide customers with an integrated social security claims service. That requires provisions for information exchange to support integrated claiming.

EARNINGS OF WORKERS SUPPLIED BY SERVICE COMPANIES ETC.

Stephen Timms (Labour, East Ham)

I beg to move, That this House disagrees with the Lords in the said amendment.

Stephen Timms (Labour, East Ham)

The amendments restore to the Bill the clauses dealing with the avoidance of national insurance contributions through the use of personal service companies and similar intermediaries. There are also consequential amendments to ensure that the clauses are covered by the commencement powers provided in the Bill. In the March Budget, my right hon. Friend the Chancellor announced his intention to tackle tax and national insurance avoidance through the use of intermediaries such as service companies. In such cases, a worker sets up a company to provide his or her services to a client in circumstances where, were it not for the service company, the worker would be an employee of the client. That allows the client to make payments to the company rather than the individual without deducting PAYE or national insurance. The worker can then take the money out of the service company in the form of dividends instead of salary; dividends are not liable to national insurance. Therefore, it is possible for a highly paid office worker earning perhaps £1,800 a week to pay no national insurance contributions at all, while a nurse earning £300 a week pays £23.45 and her employer pays £26.53 in national insurance. A self-employed accountant making £480 a week would pay about £35 in national insurance, whereas people using service companies can pay nothing at all. That is obviously not right and we are sorting it out.

The rest of the debate is in Hansard.